10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number: 001-14471

MEDICIS PHARMACEUTICAL CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	52-1574808
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

7720 North Dobson Road

Scottsdale, Arizona 85256-2740

(Address of principal executive offices)

(602) 808-8800

(Registrant’s telephone number,

including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]  No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]	Accelerated filer [  ]
Non-accelerated filer [  ] (do not check if a smaller reporting  company)	Smaller reporting company [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 4, 2011
Class A Common Stock $.014 Par Value	63,092,598 (a)
	(a) includes 1,923,292 shares of unvested restricted stock awards

MEDICIS PHARMACEUTICAL CORPORATION

Table of Contents

PART I.	FINANCIAL INFORMATION		Page
	Item 1	Financial Statements
		Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010	1
		Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2011 and 2010	3
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010	4
		Notes to the Condensed Consolidated Financial Statements	5
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	54
	Item 4	Controls and Procedures	54
PART II.	OTHER INFORMATION
	Item 1	Legal Proceedings	56
	Item 1A	Risk Factors	62
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	64
	Item 6	Exhibits	65
SIGNATURES			66

Part I.  Financial Information

Item 1.  Financial Statements

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30, 2011		December 31, 2010
Assets		(unaudited)
Current assets:
Cash and cash equivalents	$	184,047	$	218,362
Short-term investments		589,963		485,192
Accounts receivable, net		153,033		130,622
Inventories, net		30,872		35,282
Deferred tax assets, net		28,735		70,461
Other current assets		20,287		15,268
Assets held for sale from discontinued operations		8,103		13,127
Total current assets		1,015,040		968,314
Property and equipment, net		23,150		24,435
Intangible assets, net		189,752		195,308
Goodwill		92,398		92,398
Deferred tax assets, net		92,234		36,898
Long-term investments		45,734		21,480
Other assets		12,878		2,991
	$	1,471,186	$	1,341,824

See accompanying notes to condensed consolidated financial statements.

1

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS, Continued

(in thousands, except share amounts)

	September 30, 2011			December 31, 2010
Liabilities		(unaudited)
Current liabilities:
Accounts payable	$	47,318		$	41,015
Current portion of contingent convertible senior notes		169,145			-
Reserve for sales returns		72,680			60,692
Accrued consumer rebates and loyalty programs		132,432			101,678
Managed care and Medicaid reserves		59,421			49,375
Income taxes payable		-			4,628
Other current liabilities		73,908			75,228
Liabilities held for sale from discontinued operations		6,335			7,276
Total current liabilities		561,239			339,892
Long-term liabilities:
Contingent convertible senior notes		181			169,326
Other liabilities		39,565			5,084
Stockholders’ Equity
Preferred stock, $0.01 par value; shares authorized: 5,000,000; issued and outstanding: none		-			-
Class A common stock, $0.014 par value; shares authorized: 150,000,000; issued and outstanding: 74,732,033 and 71,863,191 at September 30, 2011 and December 31, 2010, respectively		1,029			995
Class B common stock, $0.014 par value; shares authorized: 1,000,000; issued and outstanding: none		-			-
Additional paid-in capital		743,367			715,651
Accumulated other comprehensive loss		(23,567	)		(2,149)
Accumulated earnings		513,316			460,716
Less: Treasury stock, 13,354,705 and 12,897,610 shares at cost at September 30, 2011 and December 31, 2010, respectively		(363,944	)		(347,691)
Total stockholders’ equity		870,201			827,522
	$	1,471,186		$	1,341,824

See accompanying notes to condensed consolidated financial statements.

2

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,     2011			September 30,     2010			September 30,     2011			September 30,     2010
Net product revenues	$	183,456		$	174,581		$	537,171		$	509,907
Net contract revenues		1,212			2,515			3,237			6,327
Net revenues		184,668			177,096			540,408			516,234
Cost of product revenues (1)		17,169			17,778			49,737			49,215
Gross profit		167,499			159,318			490,671			467,019
Operating expenses:
Selling, general and administrative (2)		93,228			78,089			268,251			227,464
Research and development (3)		28,733			8,673			58,202			22,652
Depreciation and amortization		7,254			6,926			21,688			20,575
Impairment of intangible assets		2,259			2,293			2,259			2,293
Operating income		36,025			63,337			140,271			194,035
Interest and investment income		(1,283	)		(1,061	)		(3,796	)		(3,001)
Interest expense		1,267			1,058			3,467			3,177
Other expense, net		-			-			-			257
Income from continuing operations before income tax expense		36,041			63,340			140,600			193,602
Income tax expense		13,091			29,834			56,454			79,150
Net income from continuing operations		22,950			33,506			84,146			114,452
Loss from discontinued operations, net of income tax benefit		3,498			5,928			16,551			15,005
Net income	$	19,452		$	27,578		$	67,595		$	99,447
Basic net income per share - continuing operations	$	0.36		$	0.56		$	1.35		$	1.90
Basic net loss per share - discontinued operations	$	(0.06	)	$	(0.10	)	$	(0.27	)	$	(0.26)
Basic net income per share	$	0.31		$	0.46		$	1.09		$	1.65
Diluted net income per share - continuing operations	$	0.34		$	0.51		$	1.25		$	1.75
Diluted net loss per share - discontinued operations	$	(0.06	)	$	(0.10	)	$	(0.27	)	$	(0.26)
Diluted net income per share	$	0.29		$	0.42		$	1.01		$	1.52
Cash dividend declared per common share	$	0.08		$	0.06		$	0.24		$	0.18
Common shares used in calculating:
Basic net income per share		61,336			58,509			60,264			58,278
Diluted net income per share		67,914			64,687			66,960			64,437
(1) amounts exclude amortization of intangible assets related to acquired products	$	5,266		$	5,184		$	15,984		$	15,551
(2) amounts include share-based compensation expense	$	4,343		$	7,534		$	19,331		$	12,491
(3) amounts include share-based compensation expense	$	95		$	412		$	1,114		$	512

See accompanying notes to condensed consolidated financial statements.

3

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Nine Months Ended
	September 30, 2011		September 30, 2010
Operating Activities:
Net income	$	67,595	$	99,447
Loss from discontinued operations, net of income tax benefit		16,551		15,005
Net income from continuing operations		84,146		114,452
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation and amortization		21,688		20,575
Impairment of intangible assets		2,259		2,293
Amortization of prior service costs, supplemental executive retirement plan		1,599		-
Adjustment of impairment of available-for-sale investments		-		260
(Gain) loss on sale of available-for-sale investments, net		(105)		910
Unrealized gain on supplemental executive retirement plan investments		(47)		-
Share-based compensation expense		20,445		13,003
Deferred income tax (benefit) expense		(1,821)		16,708
Tax benefit (expense) from exercise of stock options and vesting of restricted stock awards		2,265		(869)
Excess tax benefits from share-based payment arrangements		(3,403)		(369)
Increase in provision for sales discounts and chargebacks		996		1,221
Accretion of premium on investments		3,774		2,833
Changes in operating assets and liabilities:
Accounts receivable		(23,407)		(49,847)
Inventories		4,410		(11,055)
Other current assets		(5,019)		(5,916)
Accounts payable		6,303		5,063
Reserve for sales returns		11,988		9,345
Accrued consumer rebates and loyalty programs		30,754		25,129
Managed care and Medicaid reserves		10,046		3,510
Income taxes payable		(4,628)		(12,656)
Other current liabilities		(13,929)		916
Other liabilities		710		(2,879)
Net cash provided by operating activities from continuing operations		149,024		132,627
Net cash used in operating activities from discontinued operations		(12,287)		(8,332)
Net cash provided by operating activities		136,737		124,295
Investing Activities:
Purchase of property and equipment		(4,225)		(5,272)
Payments for purchase of product rights		(12,880)		715
Purchase of investments for supplemental executive retirement plan		(9,840)		-
Purchase of available-for-sale investments		(602,765)		(315,023)
Sale of available-for-sale investments		199,574		104,135
Maturity of available-for-sale investments		269,830		94,475
Net cash used in investing activities from continuing operations		(160,306)		(120,970)
Net cash used in investing activities from discontinued operations		-		(1,224)
Net cash used in investing activities		(160,306)		(122,194)
Financing Activities:
Payment of dividends		(13,568)		(9,588)
Purchase of treasury stock		(1,775)		-
Cash paid in advance under structured share repurchase arrangements		(50,000)		-
Withholding of common shares for tax obligations on vested restricted stock awards		(6,508)		(3,426)
Excess tax benefits from share-based payment arrangements		3,403		369
Proceeds from the exercise of stock options		58,071		13,114
Net cash (used in) provided by financing activities		(10,377)		469
Effect of exchange rate on cash and cash equivalents		(369)		102
Net (decrease) increase in cash and cash equivalents		(34,315)		2,672
Cash and cash equivalents at beginning of period		218,362		207,941
Cash and cash equivalents at end of period	$	184,047	$	210,613

See accompanying notes to condensed consolidated financial statements.

4

MEDICIS PHARMACEUTICAL CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(unaudited)

1. NATURE OF BUSINESS

Medicis Pharmaceutical Corporation (“Medicis” or the “Company”) is a leading specialty pharmaceutical company focusing primarily on the development and marketing of products in the United States (“U.S.”) for the treatment of dermatological and aesthetic conditions. Medicis also markets products in Canada for the treatment of dermatological and aesthetic conditions and began commercial efforts in Europe with the Company’s acquisition of LipoSonix, Inc. (“LipoSonix”) in July 2008.

The Company offers a broad range of products addressing various conditions or aesthetic improvements including facial wrinkles, glabellar lines, acne, fungal infections, hyperpigmentation, photoaging, psoriasis, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin). Medicis currently offers 12 branded products. Its primary brands are DYSPORT^®, PERLANE^®, RESTYLANE^®, SOLODYN^®, VANOS^® and ZIANA^®. Medicis entered the non-invasive body contouring market with its acquisition of LipoSonix in July 2008. Beginning in the first quarter of 2011, the Company classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes. See Note 2.

The consolidated financial statements include the accounts of Medicis and its wholly owned subsidiaries. The Company does not have any subsidiaries in which it does not own 100% of the outstanding stock. All of the Company’s subsidiaries are included in the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements of Medicis have been prepared in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The financial information is unaudited, but reflects all adjustments, consisting only of normal recurring adjustments and accruals, which are, in the opinion of the Company’s management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

2. DISCONTINUED OPERATIONS

On February 25, 2011, the Company announced that as a result of the Company’s strategic planning process and the current regulatory and commercial capital equipment environment, the Company determined to explore strategic alternatives for its LipoSonix business including, but not limited to, the sale of the stand-alone business. As a result of this decision, the Company now classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes, including comparable period results. The Company engaged an investment banking firm to assist the Company in its exploration of strategic alternatives for LipoSonix. On November 1, 2011, the Company sold LipoSonix to Solta Medical, Inc. See Note 21.

Intangible assets and property and equipment related to LipoSonix were determined to be impaired as of December 31, 2010, based on the Company’s analysis of the long-lived assets’ carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of approximately $7.7 million related to LipoSonix intangible assets and $2.1 million related to LipoSonix property and equipment during the three months ended December 31, 2010. The write-down of intangible assets and property and equipment related to LipoSonix represented the full carrying value of the respective assets as of December 31, 2010. Therefore, no depreciation or amortization expense was recognized during the nine months ended September 30, 2011 related to the discontinued operations, as the long-lived assets of the discontinued operations were written down to $0 as of December 31, 2010.

5

The following is a summary of loss from discontinued operations, net of income tax benefit, for the three and nine months ended September 30, 2011 and 2010 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Net revenues	$	157	$	218	$	513	$	1,615
Cost of revenues		87		251		2,543		1,097
Gross profit		70		(33)		(2,030)		518
Operating expenses:
Selling, general and administrative		3,478		5,351		15,072		12,892
Research and development		1,788		3,589		8,436		10,191
Depreciation and amortization		-		322		-		965
Loss from discontinued operations before income tax benefit		(5,196)		(9,295)		(25,538)		(23,530)
Income tax benefit		(1,698)		(3,367)		(8,987)		(8,525)
Loss from discontinued operations, net of income tax benefit	$	(3,498)	$	(5,928)	$	(16,551)	$	(15,005)

The Company includes only revenues and costs directly attributable to the discontinued operations, and not those attributable to the ongoing entity. Accordingly, no interest expense or general corporate overhead costs have been allocated to the LipoSonix discontinued operations. Included in cost of revenues for the nine months ended September 30, 2011 was a $1.9 million charge related to an increase in the valuation reserve for LipoSonix inventory that is not expected to be sold.

The following is a summary of assets and liabilities held for sale associated with the LipoSonix discontinued operations as of September 30, 2011 and December 31, 2010 (in thousands):

	September 30, 2011		December 31, 2010
Cash and cash equivalents	$	572	$	629
Accounts receivable, net		65		129
Inventories, net		4,050		4,495
Deferred tax assets, net		3,162		7,328
Other assets		254		546
Assets held for sale from discontinued operations	$	8,103	$	13,127
Accounts payable	$	1,694	$	1,802
Other liabilities		4,641		5,474
Liabilities held for sale from discontinued operations	$	6,335	$	7,276

6

The following is a summary of net cash used in operating activities from discontinued operations for the nine months ended September 30, 2011 and 2010 (in thousands):

	Nine Months Ended
	September 30,		September 30,
	2011		2010
Loss from discontinued operations, net of income tax benefit	$	(16,551)	$	(15,005)
Depreciation and amortization		-		965
Share-based compensation expense		(129)		1,116
Decrease in assets held for sale from discontinued operations		5,024		1,774
(Decrease) increase in liabilities held for sale from discontinued operations		(631)		2,818
Net cash used in operating activities from discontinued operations	$	(12,287)	$	(8,332)

Net cash used in investing activities from discontinued operations of $1.2 million for the nine months ended September 30, 2010 represents purchases of property and equipment.

3. SHARE-BASED COMPENSATION

At September 30, 2011, the Company had seven active share-based employee compensation plans. Of these seven share-based compensation plans, only the 2006 Incentive Award Plan is eligible for the granting of future awards.

Stock Option Awards

Stock option awards are granted at the fair market value on the date of grant. The option awards vest over a period determined at the time the options are granted, ranging from one to five years, and generally have a maximum term of ten years. Certain options provide for accelerated vesting if there is a change in control (as defined in the plans). When options are exercised, new shares of the Company’s Class A common stock are issued.

The total value of the stock option awards is expensed ratably over the service period of the employees receiving the awards. As of September 30, 2011, total unrecognized compensation cost related to stock option awards, to be recognized as expense subsequent to September 30, 2011, was approximately $1.2 million and the related weighted average period over which it is expected to be recognized is approximately 2.5 years. All of the unrecognized compensation cost related to stock option awards relates to continuing operations.

A summary of stock option activity within the Company’s stock-based compensation plans and changes for the nine months ended September 30, 2011, is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance at December 31, 2010		6,491,353	$	30.01
Granted		79,933	$	34.30
Exercised		(2,385,326)	$	27.69
Terminated/expired		(80,705)	$	36.82
Balance at September 30, 2011		4,105,255	$	31.31		2.7		$      24,374,272

7

The intrinsic value of options exercised during the nine months ended September 30, 2011 was $20,534,415. Options exercisable under the Company’s share-based compensation plans at September 30, 2011 were 3,951,443, with a weighted average exercise price of $31.51, a weighted average remaining contractual term of 2.5 years, and an aggregate intrinsic value of $22,784,758.

A summary of outstanding and exercisable stock options that are fully vested and are expected to vest, based on historical forfeiture rates, as of September 30, 2011, is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, net of expected forfeitures		3,843,409	$	31.54		2.7	$	21,951,973
Exercisable, net of expected forfeitures		3,730,281	$	31.64		2.5	$	21,021,472

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	Nine Months Ended
	September 30, 2011	September 30, 2010
Expected dividend yield	0.77% to 0.88%	1.02% to 1.06%
Expected stock price volatility	0.33	0.33
Risk-free interest rate	2.47% to 2.81%	2.82% to 3.04%
Expected life of options	7.0 Years	7.0 Years

The expected dividend yield is based on expected annual dividends to be paid by the Company as a percentage of the market value of the Company’s stock as of the date of grant. The Company determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company.

The weighted average fair value of stock options granted during the nine months ended September 30, 2011 and 2010, was $12.25 and $8.28, respectively.

Restricted Stock Awards

The Company also grants restricted stock awards to certain employees. Restricted stock awards are valued at the closing market value of the Company’s Class A common stock on the date of grant, and the total value of the award is expensed ratably over the service period of the employees receiving the grants. As of September 30, 2011, the total amount of unrecognized compensation cost related to nonvested restricted stock awards, to be recognized as expense subsequent to September 30, 2011, was approximately $34.8 million, and the related weighted average period over which it is expected to be recognized is approximately 3.2 years. All of the unrecognized compensation cost related to nonvested restricted stock awards relates to continuing operations.

8

A summary of restricted stock activity within the Company’s share-based compensation plans and changes for the nine months ended September 30, 2011, is as follows:

Nonvested Shares	Shares		Weighted Average Grant-Date     Fair  Value
Nonvested at December 31, 2010		1,794,445	$	17.94
Granted		758,457	$	31.48
Vested		(485,030)	$	19.19
Forfeited		(29,619)	$	24.00
Nonvested at September 30, 2011		2,038,253	$	22.59

The total fair value of restricted shares vested during the nine months ended September 30, 2011 and 2010 was approximately $9.3 million and $7.8 million, respectively.

Stock Appreciation Rights

During 2009, the Company began granting cash-settled stock appreciation rights (“SARs”) to many of its employees. SARs generally vest over a graduated five-year period and expire seven years from the date of grant, unless such expiration occurs sooner due to the employee’s termination of employment, as provided in the applicable SAR award agreement. SARs allow the holder to receive cash (less applicable tax withholding) upon the holder’s exercise, equal to the excess, if any, of the market price of the Company’s Class A common stock on the exercise date over the exercise price, multiplied by the number of shares relating to the SAR with respect to which the SAR is exercised. The exercise price of the SAR is the fair market value of a share of the Company’s Class A common stock relating to the SAR on the date of grant. The total value of the SAR is expensed over the service period of the employee receiving the grant, and a liability is recognized in the Company’s condensed consolidated balance sheets until settled. The fair value of SARs is required to be remeasured at the end of each reporting period until the award is settled, and changes in fair value must be recognized as compensation expense to the extent of vesting each reporting period based on the new fair value. As of September 30, 2011, the total measured amount of unrecognized compensation cost related to outstanding SARs, to be recognized as expense subsequent to September 30, 2011, based on the remeasurement at September 30, 2011, was approximately $31.2 million, and the related weighted average period over which it is expected to be recognized is approximately 3.0 years. All of the unrecognized compensation cost related to outstanding SARs relates to continuing operations.

The fair value of each SAR was estimated on the date of the grant, and was remeasured at quarter-end, using the Black-Scholes option pricing model with the following assumptions:

	SARs Granted During the Nine Months Ended September 30, 2011	SARs Granted During the Nine Months Ended September 30, 2010	Remeasurement as of     September 30, 2011
Expected dividend yield	0.87%	0.89% to 1.06%	0.88%
Expected stock price volatility	0.32	0.32 to 0.33	0.36
Risk-free interest rate	3.12%	2.06% to 3.07%	0.96% to 1.43%
Expected life of SARs	7.0 Years	7.0 Years	4.4 to 6.5 Years

The weighted average fair value of SARs granted during the nine months ended September 30, 2011 and 2010, as of the respective grant dates, was $9.90 and $8.16, respectively. The weighted average fair value of all SARs outstanding as of the remeasurement date of September 30, 2011 was $20.66.

9

A summary of SARs activity for the nine months ended September 30, 2011 is as follows:

	Number     of SARs		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic     Value
Balance at December 31, 2010		3,030,142	$	16.99
Granted		64,135	$	27.56
Exercised		(279,852)	$	15.54
Terminated/expired		(191,284)	$	16.21
Balance at September 30, 2011		2,623,141	$	17.46		5.0	$	49,884,864

The intrinsic value of SARs exercised during the nine months ended September 30, 2011 was $5,701,172.

As of September 30, 2011, 88,268 SARs were exercisable, with a weighted average exercise price of $17.35, a weighted average remaining contractual term of 5.0 years, and an aggregate intrinsic value of $1,688,693.

Total share-based compensation expense related to continuing operations recognized during the three months and nine months ended September 30, 2011 and 2010 was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,     2011		September 30,     2010		September 30,     2011		September 30,     2010
Stock options	$	187	$	307	$	670	$	1,145
Restricted stock awards		2,794		2,401		8,593		5,577
Stock appreciation rights		1,457		5,238		11,182		6,281
Total share-based compensation expense	$	4,438	$	7,946	$	20,445	$	13,003

4. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

On June 24, 2011, the Company’s Compensation Committee adopted the Medicis Pharmaceutical Supplemental Executive Retirement Plan, as such plan may be amended from time to time (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including the Company’s named executive officers. The SERP is effective as of June 1, 2011. Retirement benefits are calculated based on a SERP participant’s (1) years of service and (2) average earnings (base salary plus cash bonus or incentive payments) during any three calendar years of service (regardless of whether the years are consecutive), beginning with the 2009 calendar year. The SERP retirement benefit is intended to be paid to participants who reach the “normal retirement date,” which is age 65, or age 59  ¹/2 with twenty years of service, subject to certain exceptions.

A SERP participant vests in 1/6th of his or her retirement benefit per plan year, (which runs from June 1 to May 31), effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant’s normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant’s separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant’s employment agreement, or in the absence of such employment agreement or definitions, in the Company’s Executive Retention Plan), or (3) a “change in control” of the Company. A SERP participant accrues his or her retirement benefit based on (x) the participant’s number of years of service with the Company (including

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prior years of service), divided by (y) the number of years designated for such participant’s tier (which ranges from five to twenty years).

Participants in the SERP received credit for prior service with the Company. The prior service accrued benefit of approximately $33.8 million was recorded during the three months ended June 30, 2011 as other comprehensive income within stockholders’ equity, and is amortized as compensation expense over the remaining service years of each participant. The Company also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income. Amortization of prior service costs recognized as compensation expense during the three and nine months ended September 30, 2011, was approximately $1.2 million and $1.6 million, respectively.

Compensation expense recognized during the three months ended September 30, 2011 related to current service costs was approximately $0.3 million. Interest cost accrued related to prior and current service costs during the three months ended September 30, 2011 was approximately $0.4 million. The total present value of accrued benefits for the SERP as of September 30, 2011 was approximately $34.5 million, which is included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of September 30, 2011.

During the three months ended September 30, 2011, the Company purchased life insurance policy investments of approximately $9.8 million to fund the SERP. The life insurance policies cover the SERP participants. The Company intends to make similar annual purchases during each of the next four years. A net gain on the investments of approximately $0.1 million was recognized during the three months ended September 30, 2011. The Company’s expected return on the plan assets is 4%. The total investment related to the SERP of $9.9 million is included in other assets in the Company’s condensed consolidated balance sheets as of September 30, 2011, and is the cash surrender value of the life insurance policies, representing the fair value of the plan assets.

5. SHORT-TERM AND LONG-TERM INVESTMENTS

The Company’s policy for its short-term and long-term investments is to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations and delivers an appropriate yield in relationship to the Company’s investment guidelines and market conditions. Short-term and long-term investments consist of corporate and various government agency and municipal debt securities. The Company’s investments in auction rate floating securities consist of investments in student loans. Management classifies the Company’s short-term and long-term investments as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in stockholders’ equity. Realized gains and losses and declines in value judged to be other than temporary, if any, are included in other expense in the condensed consolidated statement of operations. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary, results in impairment of the fair value of the investment. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security. Dividends and interest income are recognized when earned. The cost of securities sold is calculated using the specific identification method. At September 30, 2011, the Company has recorded the estimated fair value of available-for-sale securities in short-term and long-term investments of approximately $590.0 million and $45.7 million, respectively.

Available-for-sale securities consist of the following at September 30, 2011 (in thousands):

	September 30, 2011
	Cost		Gross Unrealized     Gains		Gross Unrealized Losses		Other-Than- Temporary Impairment     Losses		Fair     Value
Corporate notes and bonds	$	345,409	$	211	$	(949)	$	-	$	344,671
Federal agency notes and bonds		239,360		532		(56)		-		239,836
Auction rate floating securities		24,300		-		(6,232)		-		18,068
Asset-backed securities		33,114		13		(5)		-		33,122
Total securities	$	642,183	$	756	$	(7,242)	$	-	$	635,697

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During the three and nine months ended September 30, 2011, gross realized gains on sales of available-for-sale securities totaled $0.1 million. During the three and nine months ended September 30, 2011, there were no significant gross realized losses on sales of available-for-sale securities. Gross unrealized gains and losses are determined based on the specific identification method. The net adjustment to unrealized losses during the nine months ended September 30, 2011, on available-for-sale securities included in stockholders’ equity totaled $0.4 million. The amortized cost and estimated fair value of the available-for-sale securities at September 30, 2011, by maturity, are shown below (in thousands):

	September 30, 2011
	Cost		Estimated         Fair Value
Available-for-sale
Due in one year or less		$     296,177		$     296,406
Due after one year through five years		321,706		321,223
Due after 10 years		24,300		18,068
		$     642,183		$     635,697

Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties, and the Company views its available-for-sale securities as available for current operations. At September 30, 2011, approximately $45.7 million in estimated fair value expected to mature greater than one year has been classified as long-term investments since these investments are in an unrealized loss position, and management has both the ability and intent to hold these investments until recovery of fair value, which may be maturity.

As of September 30, 2011, the Company’s investments included auction rate floating securities with a fair value of $18.1 million. The Company’s auction rate floating securities are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals through auctions. The negative conditions in the credit markets from 2008 through the first nine months of 2011 have prevented some investors from liquidating their holdings, including their holdings of auction rate floating securities. During the three months ended March 31, 2008, the Company was informed that there was insufficient demand at auction for the auction rate floating securities. As a result, these affected auction rate floating securities are now considered illiquid, and the Company could be required to hold them until they are redeemed by the holder at maturity. The Company may not be able to liquidate the securities until a future auction on these investments is successful.

During the three months ended March 31, 2010, the Company became aware of new circumstances that directly impacted the valuation of an asset-backed security that is owned by the Company. An unrealized loss on the asset-backed security, based on the Company’s intent to hold the security until recovery of the fair value, had previously been recorded in stockholders’ equity. Based on the new circumstances related to the investment, the Company determined that the impairment of the asset-backed security was other-than-temporary, as the Company believed it would not recover its investment even if the asset were held to maturity. A $0.3 million impairment charge was therefore recorded in other expense, net, during the three months ended March 31, 2010 related to the asset-backed security. The asset-backed security was sold in April 2010.

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The following table shows the gross unrealized losses and the fair value of the Company’s investments, with unrealized losses that are not deemed to be other-than-temporarily impaired aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2011 (in thousands):

	Less Than 12 Months				Greater Than 12 Months
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Corporate notes and bonds	$	208,222	$	948	$	-	$	-
Federal agency notes and bonds		71,824		56		-		-
Auction rate floating securities		-		-		18,068		6,232
Asset-backed securities		9,322		5		-		-
Total securities	$	289,368	$	1,009	$	18,068	$	6,232

As of September 30, 2011, the Company has concluded that the unrealized losses on its investment securities are temporary in nature and are caused by changes in credit spreads and liquidity issues in the marketplace. Available-for-sale securities are reviewed quarterly for possible other-than-temporary impairment. This review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance and the creditworthiness of the issuer. Additionally, the Company does not intend to sell and it is not more-likely-than-not that the Company will be required to sell any of the securities before the recovery of their amortized cost basis.

6. FAIR VALUE MEASUREMENTS

As of September 30, 2011, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included certain of the Company’s short-term and long-term investments, including investments in auction rate floating securities.

The Company has invested in auction rate floating securities, which are classified as available-for-sale securities and reflected at fair value. Due to events in credit markets, the auction events for some of these instruments held by the Company failed during the three months ended March 31, 2008 (See Note 5). Therefore, the fair values of these auction rate floating securities, which are primarily rated AAA, are estimated utilizing a discounted cash flow analysis as of September 30, 2011. These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction. These investments were also compared, when possible, to other observable market data with similar characteristics to the securities held by the Company. Changes to these assumptions in future periods could result in additional declines in fair value of the auction rate floating securities.

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The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820, Fair Value Measurements and Disclosures, at September 30, 2011, were as follows (in thousands):

			Fair Value Measurement at Reporting Date Using
	Sept. 30, 2011		Quoted Prices in Active Markets     (Level 1)		Significant Other Observable Inputs     (Level 2)		Significant Unobservable Inputs     (Level 3)
Corporate notes and bonds	$	344,671	$	344,671	$	-	$	-
Federal agency notes and bonds		239,836		239,836		-		-
Auction rate floating securities		18,068		-		-		18,068
Asset-backed securities		33,122		33,122		-		-
Total assets measured at fair value	$	635,697	$	617,629	$	-	$	18,068

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The following tables present the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2011 (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Auction Rate Floating Securities
Balance at June 30, 2011	$	19,884
Transfers to (from) Level 3		-
Total gains (losses) included in other (income) expense, net		-
Total gains included in other comprehensive income		459
Purchases		-
Settlements		(2,275)
Balance at September 30, 2011	$	18,068
	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Auction Rate Floating Securities
Balance at December 31, 2010	$	21,480
Transfers to (from) Level 3		-
Total gains (losses) included in other (income) expense, net		-
Total gains included in other comprehensive income		863
Purchases		-
Settlements		(4,275)
Balance at September 30, 2011	$	18,068

7. RESEARCH AND DEVELOPMENT

All research and development costs, including payments related to products under development and research consulting agreements, are expensed as incurred. The Company may continue to make non-refundable payments to third parties for new technologies and for research and development work that has been completed. These payments may be expensed at the time of payment depending on the nature of the payment made.

The Company’s policy on accounting for costs of strategic collaborations determines the timing of the recognition of certain development costs. In addition, this policy determines whether the cost is classified as development expense or capitalized as an asset. Management is required to form judgments with respect to the commercial status of such products in determining whether development costs meet the criteria for immediate expense or capitalization. For example, when the Company acquires certain products for which there is already an

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Abbreviated New Drug Application (“ANDA”) or a New Drug Application (“NDA”) approval related directly to the product, and there is net realizable value based on projected sales for these products, the Company capitalizes the amount paid as an intangible asset. If the Company acquires product rights which are in the development phase and to which the Company has no assurance that the third party will successfully complete its development milestones, the Company expenses such payments.

Research and development expense for the three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Ongoing research and development costs	$	7,638	$	3,261	$	21,588	$	17,141
Payments related to strategic collaborations		21,000		5,000		35,500		5,000
Share-based compensation expense		95		412		1,114		511
Total research and development	$	28,733	$	8,673	$	58,202	$	22,652

8. STRATEGIC COLLABORATIONS

Joint Development Agreement with Lupin

On July 21, 2011, the Company entered into a Joint Development Agreement (the “Joint Development Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to in this paragraph as “Lupin”), whereby the Company and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Joint Development Agreement, subject to the terms and conditions contained therein, the Company made an up-front $20.0 million payment to Lupin and will make additional payments to Lupin of up to $38.0 million upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the agreement. In addition, the Company will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Joint Development Agreement. The $20.0 million up-front payment was recognized as research and development expense during the three months ended September 30, 2011.

Collaboration with a privately-held U.S. biotechnology company

On September 10, 2010, the Company and a privately-held U.S. biotechnology company entered into a sublicense and development agreement to develop an agent for specific dermatological conditions in the Americas and Europe and a purchase option to acquire the privately-held U.S. biotechnology company.

Under the terms of the agreements, the Company paid the privately-held U.S. biotechnology company $5.0 million in connection with the execution of the agreement, and will pay additional potential milestone payments totaling approximately $100.5 million upon successful completion of certain clinical, regulatory and commercial milestones.

During the three months ended December 31, 2010 and June 30, 2011, development milestones were achieved, and the Company made a $10.0 million and a $5.5 million payment, respectively, pursuant to the agreements. The initial $5.0 million payment, the $10.0 million milestone payment and the $5.5 million milestone payment were recognized as research and development expense during the three months ended September 30, 2010, December 31, 2010 and June 30, 2011, respectively.

Research and Development Agreement with Anacor

On February 9, 2011, the Company entered into a research and development agreement with Anacor Pharmaceuticals, Inc. (“Anacor”) for the discovery and development of boron-based small molecule compounds directed against a target for the potential treatment of acne. Under the terms of the agreement, the Company paid Anacor $7.0 million in connection with the execution of the agreement, and will pay up to $153.0 million upon the achievement of certain research, development, regulatory and commercial milestones, as well as royalties on sales by the Company. Anacor will be responsible for discovering and conducting the early development of product

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candidates which utilize Anacor’s proprietary boron chemistry platform, while the Company will have an option to obtain an exclusive license for products covered by the agreement. The initial $7.0 million payment was recognized as research and development expense during the three months ended March 31, 2011.

9. IMPAIRMENT OF INTANGIBLE ASSETS

The Company assesses the potential impairment of long-lived assets when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant under-performance of a product line in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the Company’s use of the assets. Recoverability of assets that will continue to be used in the Company’s operations is measured by comparing the carrying amount of the asset grouping to the Company’s estimate of the related total future net cash flows. If an asset carrying value is not recoverable through the related cash flows, the asset is considered to be impaired. The impairment is measured by the difference between the asset grouping’s carrying amount and its fair value, based on the best information available, including market prices or discounted cash flow analysis. If the assets determined to be impaired are to be held and used, the Company recognizes an impairment loss through a charge to operating results to the extent the present value of anticipated net cash flows attributable to the asset are less than the asset’s carrying value. When it is determined that the useful life of assets are shorter than originally estimated, and there are sufficient cash flows to support the carrying value of the assets, the Company will accelerate the rate of amortization charges in order to fully amortize the assets over their new shorter useful lives.

During the quarter ended September 30, 2011, an intangible asset related to an authorized generic product from which the Company receives contract revenue was determined to be impaired based on the Company’s analysis of the intangible asset’s carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the contract revenue related to the authorized generic product included projected net revenues for the authorized generic product for which the Company receives contract revenue being less than originally anticipated.

During the quarter ended September 30, 2010, an intangible asset related to certain of the Company’s non-primary products was determined to be impaired based on the Company’s analysis of the intangible asset’s carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of approximately $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the non-primary products related to the intangible asset include the planned discontinuation of the products, which are not significant components of the Company’s operations. In addition, as a result of the impairment analysis, the remaining amortizable life of the intangible asset was reduced to five months. The intangible asset became fully amortized on February 28, 2011.

10. SEGMENT AND PRODUCT INFORMATION

The Company operates in one business segment: pharmaceuticals. The Company’s current pharmaceutical franchises are divided between the dermatological and non-dermatological fields. The dermatological field represents products for the treatment of acne and acne-related dermatological conditions and non-acne dermatological conditions. The non-dermatological field represents products for the treatment of urea cycle disorder and contract revenue. The acne and acne-related dermatological product lines include SOLODYN^® and ZIANA^®. During early 2011, the Company discontinued its TRIAZ^® branded products and decided to no longer promote its PLEXION^® branded products. The non-acne dermatological product lines include DYSPORT^®, LOPROX^®, PERLANE^®, RESTYLANE^® and VANOS^®. The non-dermatological product lines include AMMONUL^® and BUPHENYL^®. The non-dermatological field also includes contract revenues associated with licensing agreements and authorized generics.

The Company’s pharmaceutical products, with the exception of AMMONUL^® and BUPHENYL^®, are promoted to dermatologists and plastic surgeons. Such products are often prescribed by physicians outside these two specialties, including family practitioners, general practitioners, primary-care physicians and OB/GYNs, as well as hospitals, government agencies, and others. Currently, the Company’s products are sold primarily to wholesalers and retail chain drug stores.

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Net revenues and the percentage of net revenues for each of the product categories are as follows (amounts in thousands):

	Three Months Ended						Nine Months Ended
	September 30,     2011			September 30,     2010			September 30,     2011			September 30,     2010
Acne and acne-related dermatological products	$	119,119		$	118,506		$	345,711		$	363,483
Non-acne dermatological products		55,659			49,499			165,599			124,767
Non-dermatological products		9,890			9,091			29,098			27,984
Total net revenues	$	184,668		$	177,096		$	540,408		$	516,234
	Three Months Ended						Nine Months Ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
Acne and acne-related dermatological products		65	%		67	%		64	%		70	%
Non-acne dermatological products		30			28			31			24
Non-dermatological products		5			5			5			6
Total net revenues		100	%		100	%		100	%		100	%

11. INVENTORIES

The Company primarily utilizes third parties to manufacture and package inventories held for sale, takes title to certain inventories once manufactured, and warehouses such goods until packaged for final distribution and sale. Inventories consist of salable products held at the Company’s warehouses, as well as raw materials and components at the manufacturers’ facilities, and are valued at the lower of cost or market using the first-in, first-out method. The Company provides valuation reserves for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

Inventory costs associated with products that have not yet received regulatory approval are capitalized if, in the view of the Company’s management, there is probable future commercial use and future economic benefit. If future commercial use and future economic benefit are not considered probable, then costs associated with pre-launch inventory that has not yet received regulatory approval are expensed as research and development expense during the period the costs are incurred. As of September 30, 2011 and December 31, 2010, there were no costs capitalized into inventory for products that had not yet received regulatory approval.

Inventories are as follows (in thousands):

	September 30, 2011			December 31, 2010
Raw materials	$	11,251		$	15,801
Work-in-process		3,343			3,236
Finished goods		19,837			24,838
Valuation reserve		(3,559	)		(8,593	)
Total inventories	$	30,872		$	35,282

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12. OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in thousands):

	September 30, 2011		December 31, 2010
Accrued incentives, including SARs liability	$	38,022	$	33,923
Deferred revenue		9,094		16,422
Other accrued expenses		26,792		24,883
	$	73,908	$	75,228

Deferred revenue is comprised of the following (in thousands):

	September 30, 2011		December 31, 2010
Deferred revenue - aesthetics products, net of cost of revenue	$	8,155	$	10,334
Deferred contract revenue		662		3,014
Deferred revenue - sales into distribution channel in excess of eight weeks of projected demand		198		582
Other deferred revenue		79		2,492
	$	9,094	$	16,422

The Company defers revenue, and the related cost of revenue, of its aesthetics products, including DYSPORT^®, PERLANE^® and RESTYLANE^®, until its exclusive U.S. distributor ships the product to physicians. Deferred contract revenue primarily relates to the Company’s strategic collaboration with Hyperion Therapeutics, Inc. The Company also defers the recognition of revenue for certain sales of inventory into the distribution channel that are in excess of eight (8) weeks of projected demand.

13. CONTINGENT CONVERTIBLE SENIOR NOTES

In June 2002, the Company sold $400.0 million aggregate principal amount of its 2.5% Contingent Convertible Senior Notes Due 2032 (the “Old Notes”) in private transactions. As discussed below, approximately $230.8 million in principal amount of the Old Notes was exchanged for New Notes on August 14, 2003. The Old Notes bear interest at a rate of 2.5% per annum, which is payable on June 4 and December 4 of each year, beginning on December 4, 2002. The Company also agreed to pay contingent interest at a rate equal to 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2007, if the average trading price of the Old Notes reaches certain thresholds. Contingent interest of $0.3 million was payable at September 30, 2011. No contingent interest related to the Old Notes was payable at December 31, 2010. The Old Notes will mature on June 4, 2032.

The Company may redeem some or all of the Old Notes at any time on or after June 11, 2007, at a redemption price, payable in cash, of 100% of the principal amount of the Old Notes, plus accrued and unpaid interest, including contingent interest, if any. Holders of the Old Notes may require the Company to repurchase all or a portion of their Old Notes on June 4, 2012 and June 4, 2017, or upon a change in control, as defined in the indenture governing the Old Notes, at 100% of the principal amount of the Old Notes, plus accrued and unpaid interest to the date of the repurchase, payable in cash. Under GAAP, if an obligation is due on demand or will be due on demand within one year from the balance sheet date, even though liquidation may not be expected within that period, it should be classified as a current liability. Accordingly, the outstanding balance of Old Notes along with the deferred tax liability associated with accelerated interest deductions on the Old Notes will be classified as a current liability during the respective twelve month periods prior to June 4, 2012 and June 4, 2017. As of September 30, 2011, $169.1 million of the Old Notes and $60.3 million of deferred tax liabilities were classified as current liabilities in the Company’s condensed consolidated balance sheets. The $60.3 million of deferred tax liabilities were included within current deferred tax assets, net. If all of the Old Notes are put back to the Company on June 4,

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2012, the Company would be required to pay $169.1 million in outstanding principal, plus accrued interest. The Company would also be required to pay the accumulated deferred tax liability related to the Old Notes.

The Old Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances:

• during any quarter commencing after June 30, 2002, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 110% of the conversion price of the Old Notes, or $31.96. The Old Notes are initially convertible at a conversion price of $29.05 per share, which is equal to a conversion rate of approximately 34.4234 shares per $1,000 principal amount of Old Notes, subject to adjustment;

• if the Company has called the Old Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the Old Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the Old Notes; or

• upon the occurrence of specified corporate transactions.

The Old Notes, which are unsecured, do not contain any restrictions on the payment of dividends, the incurrence of additional indebtedness or the repurchase of the Company’s securities and do not contain any financial covenants.

The Company incurred $12.6 million of fees and other origination costs related to the issuance of the Old Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2007.

On August 14, 2003, the Company exchanged approximately $230.8 million in principal amount of its Old Notes for approximately $283.9 million in principal amount of its 1.5% Contingent Convertible Senior Notes Due 2033 (the “New Notes”). Holders of Old Notes that accepted the Company’s exchange offer received $1,230 in principal amount of New Notes for each $1,000 in principal amount of Old Notes. The terms of the New Notes are similar to the terms of the Old Notes, but have a different interest rate, conversion rate and maturity date. Holders of Old Notes that chose not to exchange continue to be subject to the terms of the Old Notes.

The New Notes bear interest at a rate of 1.5% per annum, which is payable on June 4 and December 4 of each year, beginning December 4, 2003. The Company will also pay contingent interest at a rate of 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes reaches certain thresholds. No contingent interest related to the New Notes was payable at September 30, 2011 or December 31, 2010. The New Notes mature on June 4, 2033.

As a result of the exchange, the outstanding principal amounts of the Old Notes and the New Notes were $169.2 million and $283.9 million, respectively. The Company incurred approximately $5.1 million of fees and other origination costs related to the issuance of the New Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2008.

Holders of the New Notes were able to require the Company to repurchase all or a portion of their New Notes on June 4, 2008, at 100% of the principal amount of the New Notes, plus accrued and unpaid interest, including contingent interest, if any, to the date of the repurchase, payable in cash. Holders of approximately $283.7 million of New Notes elected to require the Company to repurchase their New Notes on June 4, 2008. The Company paid $283.7 million, plus accrued and unpaid interest of approximately $2.2 million, to the holders of New Notes that elected to require the Company to repurchase their New Notes. The Company was also required to pay an accumulated deferred tax liability of approximately $34.9 million related to the repurchased New Notes. This $34.9 million deferred tax liability was paid during the second half of 2008. Following the repurchase of these New Notes, $181,000 of principal amount of New Notes remained outstanding as of September 30, 2011 and December 31, 2010.

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The remaining New Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances:

• during any quarter commencing after September 30, 2003, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 120% of the conversion price of the New Notes, or $46.51. The New Notes are initially convertible at a conversion price of $38.76 per share, which is equal to a conversion rate of approximately 25.7998 shares per $1,000 principal amount of New Notes, subject to adjustment;

• if the Company has called the New Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the New Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the New Notes; or

• upon the occurrence of specified corporate transactions.

The remaining New Notes, which are unsecured, do not contain any restrictions on the incurrence of additional indebtedness or the repurchase of the Company’s securities and do not contain any financial covenants. The New Notes require an adjustment to the conversion price if the cumulative aggregate of all current and prior dividend increases above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold has not been reached and no adjustment to the conversion price has been made.

During the quarters ended June 30, 2011 and September 30, 2011, the Old Notes met the criteria for the right of conversion into shares of the Company’s Class A common stock. This right of conversion of the holders of Old Notes was triggered by the stock closing above $31.96 on 20 of the last 30 trading days and the last trading day of the quarters ended June 30, 2011 and September 30, 2011. During the quarter ended September 30, 2011, no holders of Old Notes converted their Old Notes into shares of the Company’s Class A common stock. The holders of Old Notes have this conversion right only until December 31, 2011. At the end of each future quarter, the conversion rights will be reassessed in accordance with the bond indenture agreement to determine if the conversion trigger rights have been achieved. During the quarter ended September 30, 2011, the New Notes did not meet the criteria for the right of conversion.

14. INCOME TAXES

Income taxes are determined using an annual effective tax rate, which generally differs from the U.S. Federal statutory rate, primarily because of state and local income taxes, enhanced charitable contribution deductions for inventory, tax credits available in the U.S., the treatment of certain share-based payments that are not designed to normally result in tax deductions, various expenses that are not deductible for tax purposes, changes in valuation allowances against deferred tax assets and differences in tax rates in certain non-U.S. jurisdictions. The Company’s effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions it uses to estimate its annual effective tax rate, including factors such as its mix of pre-tax earnings in the various tax jurisdictions in which it operates, changes in valuation allowances against deferred tax assets, reserves for tax audit issues and settlements, utilization of tax credits and changes in tax laws in jurisdictions where the Company conducts operations. The Company recognizes tax benefits only if the tax position is more likely than not of being sustained. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities, along with net operating losses and credit carryforwards. The Company records valuation allowances against its deferred tax assets to reduce the net carrying value to amounts that management believes is more likely than not to be realized.

At September 30, 2011, the Company has an unrealized tax loss of $21.0 million related to the Company’s option to acquire Revance or license Revance’s topical product that is under development. The Company will not be able to determine the character of the loss until the Company exercises or fails to exercise its option. A realized loss characterized as a capital loss can only be utilized to offset capital gains. At September 30, 2011, the Company has recorded a valuation allowance of $7.6 million against the deferred tax asset associated with this unrealized tax

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loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

At September 30, 2011, the Company has an unrealized tax loss of $21.9 million related to the Company’s option to acquire a privately-held U.S. biotechnology company. If the Company fails to exercise its option, a capital loss will be recognized. A loss characterized as a capital loss can only be used to offset capital gains. At September 30, 2011, the Company has recorded a valuation allowance of $7.9 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

During the three months ended September 30, 2011, the Company recognized a deferred tax asset of $31.9 million related to the excess of tax basis in the common stock of Medicis Technologies Corporation over the carrying amount for financial reporting purposes. The deferred tax asset was recognized due to the expected reversal of this basis upon the sale by the Company of the common stock of Medicis Technologies Corporation. The Company closed its sale of Medicis Technologies Corporation to Solta Medical, Inc., on November 1, 2011 (See Note 21). A capital loss will be recognized on the sale of the common stock of Medicis Technologies Corporation to Solta Medical, Inc. during the three months ended December 31, 2011. As a capital loss can only be used to offset capital gains, the Company has recorded at September 30, 2011, a valuation allowance of $31.9 million against the deferred tax asset associated with this basis difference in order to reduce the carrying value of the deferred tax asset to $0.

During the three months ended September 30, 2011 and September 30, 2010, the Company made net tax payments of $13.0 million and $14.7 million, respectively. During the nine months ended September 30, 2011 and September 30, 2010, the Company made net tax payments of $51.0 million and $62.4 million, respectively.

The Company operates in multiple tax jurisdictions and is periodically subject to audit in these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. The Company and its domestic subsidiaries file a consolidated U.S. federal income tax return. Such returns have either been audited or settled through statute expiration through 2007. The state of California conducted an examination of the Company’s tax returns for the periods ending June 30, 2005, December 31, 2005, December 31, 2006 and December 31, 2007. During the three months ended March 31, 2011, the Company reached a settlement for all periods with the state of California and paid approximately $0.5 million. The state of California has also notified the Company of an upcoming examination of the Company’s tax returns for the periods ending December 31, 2008 and December 31, 2009.

The Company owns two subsidiaries that file corporate tax returns in Sweden. The Swedish tax authorities examined the tax return of one of the subsidiaries for fiscal 2004. The examiners issued a no change letter, and the examination is complete. The Company’s other subsidiary in Sweden has not been examined by the Swedish tax authorities. The Swedish statute of limitations may be open for up to five years from the date the tax return was filed. Thus, all returns filed for periods ending December 31, 2006 forward are open under the statute of limitations.

At September 30, 2011 and December 31, 2010, the Company had unrecognized tax benefits of $1.0 million and $1.4 million, respectively. The amount of unrecognized tax benefits which, if ultimately recognized, could favorably affect the Company’s effective tax rate in a future period is $0.6 million and $0.9 million as of September 30, 2011 and December 31, 2010, respectively. During the next twelve months, the Company estimates that it is reasonably possible that the amount of unrecognized tax benefits will decrease by $0.7 million.

The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. The Company had approximately $0.5 million for the payment of interest and penalties accrued (net of tax benefit) at September 30, 2011 and December 31, 2010.

15. DIVIDENDS DECLARED ON COMMON STOCK

On September 14, 2011, the Company announced that its Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of the Company’s Class A common stock, which was paid on October 31, 2011, to stockholders of record at the close of business on October 3, 2011. The $5.1 million dividend was recorded as a reduction of accumulated earnings and is included in other current liabilities in the accompanying condensed consolidated balance sheets as of September 30, 2011. The Company has not adopted a dividend policy.

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16. COMPREHENSIVE INCOME

Total comprehensive income includes net income and other comprehensive income (loss), which consists of foreign currency translation adjustments, unrealized gains and losses on available-for-sale investments and unamortized prior service costs related to the Company’s supplemental executive retirement plan, net of income tax effects. Total comprehensive income for the three months ended September 30, 2011 and 2010, was $19.2 million and $28.4 million, respectively. Total comprehensive income for the nine months ended September 30, 2011 and 2010, was $46.2 million and $101.3 million, respectively. Included as a reduction of total comprehensive income for the nine months ended September 30, 2011 is $21.4 million related to the establishment of prior service costs related to the Company’s supplemental executive retirement plan, net of income tax benefit.

17. STOCK REPURCHASE

On August 8, 2011, the Company announced that its Board of Directors approved a Stock Repurchase Plan to purchase up to $200 million in aggregate value of shares of Medicis Class A common stock. Any repurchases will be made in compliance with the Securities and Exchange Commission’s Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions.

The number of shares to be repurchased and the timing of repurchases will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. It is intended that any repurchases will be funded by existing general corporate funds. The plan does not obligate the Company to repurchase any common stock. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the purchase limit is reached, but may be suspended or terminated at any time at the Company’s discretion without prior notice.

In accordance with this plan, the Company purchased 49,264 shares of its Class A common stock in the open market at a weighted average cost of $36.03 per share during the three months ended September 30, 2011.

As part of its stock repurchase program, the Company may from time to time enter into structured share repurchase agreements with financial institutions. These agreements generally require the Company to make one or more cash payments in exchange for the right to receive shares of its common stock and/or cash at the expiration of the agreement and/or at various times during the term of the agreement, generally based on the market price of the Company’s common stock during the relevant valuation period or periods, but the Company may enter into structured share repurchase agreements with different features.

In August 2011, the Company entered into structured share repurchase arrangements and purchased from a financial institution over the counter “in-the-money” capped call options for an aggregate premium of $50.0 million. The capped call options have various scheduled expiration dates within the month of November 2011. An option will be automatically exercised if the market price of the Company’s Class A common stock on the relevant expiration date is greater than the applicable lower strike price (i.e. the options are “in-the-money”). If the market price of the Company’s Class A common stock on the relevant expiration date is below the applicable lower strike price, the relevant option will expire with no value. If the market price of the Company’s Class A common stock on the relevant expiration date is between the applicable lower and upper strike prices, the value per option to the Company will be the then-current market price less that lower strike price and the relevant options will be physically settled. If the market price of the Company’s Class A common stock is above the applicable upper strike price, the value per option to the Company will be the difference between the applicable upper strike price and lower strike price and the default settlement method for the relevant options will be cash settlement, although the Company may elect physical settlement subject to certain conditions. Under these arrangements, any prepayments made or cash payments received at settlement are recorded as a component of additional paid-in capital in the Company’s condensed consolidated balance sheets.

After giving effect to the purchases during the three months ended September 30, 2011 and the purchase of the capped call options, the remaining authorized amount under the plan is approximately $148.2 million.

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18. NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):

	Three Months Ended
	September 30, 2011						September 30, 2010
	Continuing Operations		Discontinued Operations		Net Income		Continuing Operations		Discontinued Operations		Net Income
BASIC
Net income (loss)	$	22,950	$	(3,498)	$	19,452	$	33,506	$	(5,928)	$	27,578
Less: income (loss) allocated to participating securities		702		-		583		980		-		802
Net income (loss) available to common stockholders		22,248		(3,498)		18,869		32,526		(5,928)		26,776
Weighted average number of common shares outstanding		61,336		61,336		61,336		58,509		58,509		58,509
Basic net income (loss) per common share	$	0.36	$	(0.06)	$	0.31	$	0.56	$	(0.10)	$	0.46
DILUTED
Net income (loss)	$	22,950	$	(3,498)	$	19,452	$	33,506	$	(5,928)	$	27,578
Less: income (loss) allocated to participating securities		702		-		583		980		-		802
Net income (loss) available to common stockholders		22,248		(3,498)		18,869		32,526		(5,928)		26,776
Less:
Undistributed earnings allocated to unvested stockholders		(579)		-		(466)		(899)		-		(721)
Add:
Undistributed earnings re-allocated to unvested stockholders		572		-		460		894		-		717
Add:
Tax-effected interest expense related to Old Notes		799		-		799		666		-		666
Net income (loss) assuming dilution	$	23,040	$	(3,498)	$	19,662	$	33,187	$	(5,928)	$	27,438
Weighted average number of common shares outstanding		61,336		61,336		61,336		58,509		58,509		58,509
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		751		-		751		351		-		351
Weighted average number of common shares assuming dilution		67,914		61,336		67,914		64,687		58,509		64,687
Diluted net income (loss) per common share	$	0.34	$	(0.06)	$	0.29	$	0.51	$	(0.10)	$	0.42

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	Nine Months Ended
	September 30, 2011						September 30, 2010
	Continuing Operations		Discontinued Operations		Net Income		Continuing Operations		Discontinued Operations		Net Income
BASIC
Net income (loss)	$	84,146	$	(16,551)	$	67,595	$	114,452	$	(15,005)	$	99,447
Less: income (loss) allocated to participating securities		2,645		-		2,097		3,698		-		3,204
Net income (loss) available to common stockholders		81,501		(16,551)		65,498		110,754		(15,005)		96,243
Weighted average number of common shares outstanding		60,264		60,264		60,264		58,278		58,278		58,278
Basic net income (loss) per common share	$	1.35	$	(0.27)	$	1.09	$	1.90	$	(0.26)	$	1.65
DILUTED
Net income (loss)	$	84,146	$	(16,551)	$	67,595	$	114,452	$	(15,005)	$	99,447
Less: income (loss) allocated to participating securities		2,645		-		2,097		3,698		-		3,204
Net income (loss) available to common stockholders		81,501		(16,551)		65,498		110,754		(15,005)		96,243
Less:
Undistributed earnings allocated to unvested stockholders		(2,244)		-		(1,709)		(3,413)		-		(2,919)
Add:
Undistributed earnings re-allocated to unvested stockholders		2,213		-		1,685		3,395		-		2,903
Add:
Tax-effected interest expense related to Old Notes		2,175		-		2,175		1,998		-		1,998
Tax-effected interest expense related to New Notes		1		-		1		1		-		1
Net income (loss) assuming dilution	$	83,646	$	(16,551)	$	67,650	$	112,735	$	(15,005)	$	98,226
Weighted average number of common shares outstanding		60,264		60,264		60,264		58,278		58,278		58,278
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		869		-		869		332		-		332
Weighted average number of common shares assuming dilution		66,960		60,264		66,960		64,437		58,278		64,437
Diluted net income (loss) per common share	$	1.25	$	(0.27)	$	1.01	$	1.75	$	(0.26)	$	1.52

Diluted net income per common share must be calculated using the “if-converted” method. Diluted net income per share using the “if-converted” method is calculated by adjusting net income for tax-effected net interest on the Old Notes and New Notes, divided by the weighted average number of common shares outstanding assuming conversion.

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Unvested share-based payment awards that contain rights to receive nonforfeitable dividends or dividend equivalents (whether paid or unpaid) are participating securities, and thus, are included in the two-class method of computing earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Restricted stock granted to certain employees by the Company (see Note 3) participate in dividends on the same basis as common shares, and these dividends are not forfeitable by the holders of the restricted stock. As a result, the restricted stock grants meet the definition of a participating security.

The diluted net income per common share computation for the three months ended September 30, 2011 and 2010 excludes 1,695,545 and 7,511,980 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive. The diluted net income per common share computation for the nine months ended September 30, 2011 and 2010 excludes 2,581,316 and 9,969,349 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive.

Due to the net loss from discontinued operations during the three and nine months ended September 30, 2011 and 2010, diluted earnings per share and basic earnings per share from discontinued operations are the same, as the effect of potentially dilutive securities would be anti-dilutive.

19. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is currently party to various legal proceedings, including those noted in this section. Unless specifically noted below, any possible range of loss associated with the legal proceedings described below is not reasonably estimable at this time. The Company is engaged in numerous other legal actions not described below arising in the ordinary course of its business and, while there can be no assurance, the Company believes that the ultimate outcome of these actions will not have a material adverse effect on its operating results, liquidity or financial position.

From time to time the Company may conclude it is in the best interests of its stockholders, employees, and customers to settle one or more litigation matters, and any such settlement could include substantial payments; however, other than as noted below, the Company has not reached this conclusion with respect to any particular matter at this time. There are a variety of factors that influence the Company’s decisions to settle and the amount the Company may choose to pay, including the strength of its case, developments in the litigation, the behavior of other interested parties, the demand on management time and the possible distraction of the Company’s employees associated with the case and/or the possibility that the Company may be subject to an injunction or other equitable remedy. It is difficult to predict whether a settlement is possible, the amount of an appropriate settlement or when is the opportune time to settle a matter in light of the numerous factors that go into the settlement decision. Unless otherwise specified below, any settlement payment made pursuant to any of the completed settlement agreements described below is immaterial to the Company for financial reporting purposes.

Stockholder Class Action Litigation

On October 3, 10 and 27, 2008, purported stockholder class action lawsuits styled Andrew Hall v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01821-MHB); Steamfitters Local 449 Pension Fund v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01870-DKD); and Darlene Oliver v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01964-JAT) were filed in the United States District Court for the District of Arizona on behalf of stockholders who purchased securities of the Company during the period between October 30, 2003 and approximately September 24, 2008. The Court consolidated these actions into a single proceeding and on May 18, 2009 an amended complaint was filed alleging violations of the federal securities laws arising out of the Company’s restatement of its consolidated financial statements in 2008. On December 2, 2009, the Court granted the Company’s and other defendants’ dismissal motions and dismissed the consolidated amended complaint without prejudice. On January 18, 2010 the lead plaintiff filed a second amended complaint, and on or about August 9, 2010, the Court denied the Company’s and other defendants’ related dismissal motions. On December 17, 2010, the lead plaintiff filed a motion for class certification, and the defendants filed an opposition to the motion on March 8, 2011.

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On June 6, 2011, the Company, certain of its current officers who are named in the complaint, and the Company’s outside auditors entered into a Memorandum of Understanding with the plaintiffs’ representatives to memorialize an agreement in principle to settle the pending action. On September 21, 2011, the parties filed with the Court a motion for preliminary approval of a Settlement Stipulation (the “Class Action Stipulation”) setting forth the terms of the settlement. The Court granted the motion for preliminary approval on November 2, 2011, ordered that notice be given to class participants and set a hearing for final approval for February 23, 2012. Under the terms of the Class Action Stipulation, the Company’s portion of the settlement will be paid entirely by insurance. The Company’s outside auditors will contribute to the settlement. The Company itself is not required to make any payments to fund the settlement, and the Class Action Stipulation contains no admission of liability by the Company or the named individuals in the action, the allegations of which are expressly denied therein. The Class Action Stipulation remains subject to notice to the class participants and final approval by the Court. In the event the settlement is not finally approved by the Court, the Company will continue to vigorously defend the claims in the class action lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company’s financial position and results of operations in the period in which the lawsuits are resolved.

Stockholder Derivative Lawsuits

On January 21, 2009, the Company received a letter from an alleged stockholder demanding that its Board of Directors take certain actions, including potentially legal action, in connection with the restatement of its consolidated financial statements in 2008. The letter stated that, if the Board of Directors did not take the demanded action, the alleged stockholder would commence a derivative action on behalf of the Company. The Company’s Board of Directors reviewed the letter during the course of 2009 and established a special committee of the Board of Directors, comprised of directors who are independent and disinterested with respect to the allegations in the letter, to assess the allegations contained in the letter. The special committee engaged outside counsel to assist with the investigation. The special committee completed its investigation, and on or about February 16, 2010, the Board of Directors, pursuant to the report and recommendation of the special committee, resolved to decline the derivative demand. On February 26, 2010, Company counsel sent a declination letter to opposing counsel. On or about October 21, 2010, the stockholder filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa, alleging that such individuals breached their fiduciary duties to the Company in connection with the restatement. The stockholder seeks to recover unspecified damages and costs, including counsel and expert fees.

On or about October 20, 2010, a second alleged stockholder of the Company filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa. The complaint alleges, among other things, that such individuals breached their fiduciary duties to the Company in connection with the restatement. The complaint further alleges that a demand upon the Board of Directors to institute an action in the Company’s name would be futile and that the stockholder is therefore excused under Delaware law from making such a demand prior to filing the complaint. The stockholder seeks, among other things, to recover unspecified damages and costs, including counsel and expert fees.

On June 6, 2011, the Company and certain of its current officers and directors who are named in the complaints entered into a Memorandum of Understanding with the plaintiffs’ representatives to memorialize an agreement in principle to settle the pending actions. On October 7, 2011, the parties filed with the Court a motion for preliminary approval of a settlement stipulation (the “Derivative Lawsuits Stipulation”) setting forth the terms of the settlement. The Court granted the motion for preliminary approval on November 3, 2011, ordered that notice be given to stockholders and set a hearing for final approval for December 14, 2011. The only financial component under the Derivative Lawsuits Stipulation, which remains subject to final Court approval among other customary conditions, involves payment of plaintiffs’ attorneys’ fees, which will be paid entirely by insurance. The Company itself is not required to make any payments to fund the settlement. The settlement also reflects certain control and other enhancements taken by the Company in connection with and subsequent to the restatement of its consolidated financial statements in 2008. The Derivative Lawsuits Stipulation contains no admission of liability by the Company or the named individuals in the lawsuits, the allegations of which are expressly denied therein. In the event the Derivative Lawsuits Stipulation is not finally approved by the Court, the Company will continue to vigorously defend the claims in the derivative lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the

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lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company’s financial position and results of operations in the period in which the lawsuits are resolved.

Hyperion Arbitration

On June 23, 2011, Hyperion Therapeutics, Inc. (“Hyperion”) filed a demand for arbitration before the American Arbitration Association for a determination of the rights and obligations of Hyperion and Ucyclyd Pharma, Inc., a subsidiary of the Company (“Ucyclyd”), under a collaboration agreement between the parties, dated August 23, 2007, as amended (the “Collaboration Agreement”). Pursuant to the terms of the Collaboration Agreement, Hyperion is responsible for the ongoing research and development of a compound referred to as HPN-100 (formerly known as GT4P) for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. In addition, if certain specified conditions are satisfied, then Hyperion will have certain purchase rights under the Collaboration Agreement with respect to HPN-100, as well as Ucyclyd’s existing on-market products, AMMONUL^® and BUPHENYL^®, and will be required to pay Ucyclyd royalties and regulatory and sales milestone payments in connection with certain licenses that will be granted to Hyperion upon exercise of the purchase rights. In its demand for arbitration, Hyperion requested a judgment regarding the rights of the parties in connection with the development activities relating to HPN-100, including relating to the submission of a NDA to the FDA for HPN-100 for the treatment of urea cycle disorder. The Company responded to the demand for arbitration on July 28, 2011. In its response, the Company denied the allegations of Hyperion and requested the arbitration panel deny Hyperion’s requested declaratory relief. Additionally, the Company brought counterclaims against Hyperion and sought a declaration of rights in the Company’s favor and an award of damages. On August 16, 2011, Hyperion responded to the Company’s counterclaims and asserted new claims for relief. On September 15, 2011, the Company responded to Hyperion’s supplemental claims. Pleadings are now closed and the parties are currently engaged in discovery, including depositions. Arbitration hearings are currently scheduled to be held in January of 2012.

In addition to the matters discussed above, in the ordinary course of business, the Company is involved in a number of legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them. Although the outcome of these actions is not presently determinable, it is the opinion of the Company’s management, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations, financial condition or cash flows of the Company.

20. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) – Fair Value Measurement, to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU No. 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU No. 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and must be applied prospectively. The Company is currently assessing what impact, if any, the revised guidance will have on its results of operations and financial condition.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The updated guidance amends the FASB Accounting Standards Codification (“Codification”) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both alternatives, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU No. 2011-05 will be applied retrospectively. ASU No. 2011-05 is effective for annual reporting periods beginning after December 15, 2011, with early adoption permitted, and will be applied retrospectively. It is expected

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that the adoption of this amendment will only impact the presentation of comprehensive income within the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The updated guidance permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed in annual reporting periods beginning after December 15, 2011, with early adoption permitted. The Company is currently assessing what impact, if any, the revised guidance will have on its results of operations and financial condition.

21. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of issuance of its financial statements.

On November 1, 2011, the Company closed its sale of all issued and outstanding shares of common stock of Medicis Technologies Corporation (f/k/a LipoSonix, Inc.) (“LipoSonix”) to Solta Medical, Inc., a Delaware corporation (“Solta”), pursuant to the previously announced stock purchase agreement, dated September 12, 2011, by and between the Company and Solta (the “Agreement”). In connection therewith, on November 1, 2011, a separate subsidiary of the Company transferred to Solta certain assets and assigned to Solta certain agreements, in each case related to LipoSonix. Solta paid to the Company at the closing $15.5 million in cash, consisting of the initial purchase price of $15 million and a preliminary working capital adjustment, which remains subject to a customary post-closing review based on the amount of working capital of LipoSonix at the closing. In addition, Solta has agreed to pay to the Company the following contingent payments after the closing, subject to the terms and conditions of the Agreement:

(i) a one-time cash payment of up to $20 million upon approval by the U.S. Food and Drug Administration (“FDA”) of a specified LipoSonix product prior to October 1, 2012 (the FDA approval was obtained in late October 2011, as a result of which Solta is required to make the $20 million payment to the Company on or prior to November 19, 2011); and

(ii) additional contingent cash and milestone payments, which will expire after approximately seven years, based upon, among other things, the achievement of year-to-year increases and specified targets in the adjusted net sales and adjusted gross profits of such LipoSonix products.

At the closing, Solta also assumed the contingent payment obligations of the Company with respect to the former shareholders of LipoSonix, Inc. pursuant to the Agreement and Plan of Merger among the Company, LipoSonix, Inc. and the other parties thereto dated as of June 16, 2008.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

We are a leading independent specialty pharmaceutical company focused primarily on helping patients attain a healthy and youthful appearance and self-image through the development and marketing in the U.S. of products for the treatment of dermatological and aesthetic conditions. We also market products in Canada for the treatment of dermatological and aesthetic conditions and began commercial efforts in Europe with our acquisition of LipoSonix in July 2008. We offer a broad range of products addressing various conditions or aesthetics improvements, including facial wrinkles, acne, fungal infections, hyperpigmentation, photoaging, psoriasis, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin).

Our current product lines are divided between the dermatological and non-dermatological fields. The dermatological field represents products for the treatment of acne and acne-related dermatological conditions and non-acne dermatological conditions. The non-dermatological field represents products for the treatment of urea cycle disorder and contract revenue. Our acne and acne-related dermatological product lines include SOLODYN^® and ZIANA^®. During early 2011, we discontinued our TRIAZ^® branded products and decided to no longer promote our PLEXION^® branded products. Our non-acne dermatological product lines include DYSPORT^®, LOPROX^®, PERLANE^®, RESTYLANE^® and VANOS^®. Our non-dermatological product lines include AMMONUL^® and BUPHENYL^®. Our non-dermatological field also includes contract revenues associated with licensing agreements and authorized generic agreements.

Financial Information About Segments

We operate in one business segment: pharmaceuticals. Our current pharmaceutical franchises are divided between the dermatological and non-dermatological fields. Information on revenues, operating income, identifiable assets and supplemental revenue of our business franchises appears in the condensed consolidated financial statements included in Item 1 hereof.

Key Aspects of Our Business

We derive a majority of our revenue from our primary products: DYSPORT^®, PERLANE^®, RESTYLANE^®, SOLODYN^®, VANOS^® and ZIANA^®. We believe that sales of our primary products will constitute a significant portion of our revenue for 2011.

We have built our business by executing a four-part growth strategy: promoting existing brands, developing new products and important product line extensions, entering into strategic collaborations and acquiring complementary products, technologies and businesses. Our core philosophy is to cultivate high integrity relationships of trust and confidence with the foremost dermatologists and the leading plastic surgeons in the U.S. We rely on third parties to manufacture our products (except for the LIPOSONIX^® system).

We estimate customer demand for our prescription products primarily through use of third party syndicated data sources which track prescriptions written by health care providers and dispensed by licensed pharmacies. The data represents extrapolations from information provided only by certain pharmacies and are estimates of historical demand levels. We estimate customer demand for our non-prescription products primarily through internal data that we compile. We observe trends from these data and, coupled with certain proprietary information, prepare demand forecasts that are the basis for purchase orders for finished and component inventory from our third party manufacturers and suppliers. Our forecasts may fail to accurately anticipate ultimate customer demand for our products. Overestimates of demand and sudden changes in market conditions may result in excessive inventory production and underestimates may result in inadequate supply of our products in channels of distribution.

We schedule our inventory purchases to meet anticipated customer demand. As a result, miscalculation of customer demand or relatively small delays in our receipt of manufactured products could result in revenues being deferred or lost. Our operating expenses are based upon anticipated sales levels, and a high percentage of our operating expenses are relatively fixed in the short term.

We sell our products primarily to major wholesalers and retail pharmacy chains. Approximately 75-80% of our gross revenues are typically derived from two major drug wholesale concerns. Depending on the customer, we recognize revenue at the time of shipment to the customer, or at the time of receipt by the customer, net of estimated

30

provisions. We recognize revenue on our aesthetics products DYSPORT^®, PERLANE^® and RESTYLANE^® upon shipment from McKesson, our exclusive U.S. distributor of these products, to physicians. Consequently, variations in the timing of revenue recognition could cause significant fluctuations in operating results from period to period and may result in unanticipated periodic earnings shortfalls or losses. We have distribution services agreements with our two largest wholesale customers. We review the supply levels of our significant products sold to major wholesalers by reviewing periodic inventory reports that are supplied to us by our major wholesalers in accordance with the distribution services agreements. We rely wholly upon our wholesale and retail chain drugstore customers to effect the distribution allocation of substantially all of our prescription products. We believe our estimates of trade inventory levels of our products, based on our review of the periodic inventory reports supplied by our major wholesalers and the estimated demand for our products based on prescription and other data, are reasonable. We further believe that inventories of our products among wholesale customers, taken as a whole, are similar to those of other specialty pharmaceutical companies, and that our trade practices, which periodically involve volume discounts and early payment discounts, are typical of the industry.

We periodically offer promotions to wholesale and retail chain drugstore customers to encourage dispensing of our prescription products, consistent with prescriptions written by licensed health care providers. Because many of our prescription products compete in multi-source markets, it is important that licensed health care providers’ dispensing instructions are fulfilled with our branded products and are not improperly substituted with a generic product or another therapeutic alternative product which may be contrary to the licensed health care providers’ recommended and prescribed Medicis brand. We believe that a critical component of our brand protection program is maintenance of full product availability at wholesale and drugstore customers. We believe such availability reduces the probability of local and regional product substitutions, shortages and backorders, which could result in lost sales. We expect to continue providing favorable terms to wholesale and retail chain drugstore customers as may be necessary to ensure the fullest possible distribution of our branded products within the pharmaceutical chain of commerce. From time to time we may enter into business arrangements (e.g., loans or investments) involving our customers and those arrangements may be reviewed by federal and state regulators.

Purchases by any given customer, during any given period, may be above or below actual prescription volumes of any of our products during the same period, resulting in fluctuations of product inventory in the distribution channel. In addition, we consistently assess our product mix and portfolio to promote a high level of profitability and revenues and to ensure that our products are responsive to consumer tastes and changes to regulatory classifications. During early 2011, we discontinued our TRIAZ^® branded products and decided to no longer promote our PLEXION^® branded products.

Recent Developments

As described in more detail below, the following significant events and transactions occurred during the nine months ended September 30, 2011, and affected our results of operations, our cash flows and our financial condition:

- Research and development agreement with Anacor;

- Settlement agreement with Teva;

- Classification of LipoSonix as a discontinued operation;

- Increase of our quarterly dividend from $0.06 per share to $0.08 per share;

- Development milestone payment related to our collaboration with a privately-held U.S. biotechnology company;

- Issuance of new patent covering SOLODYN^®;

- Settlement of class action and derivative lawsuits;

- Establishment of a Supplemental Executive Retirement Plan;

- License and settlement agreement with Lupin;

- License and settlement agreement with Nycomed;

- Approval of stock repurchase plan; and

- License and settlement agreement with Aurobindo.

Research and development agreement with Anacor

On February 9, 2011, we entered into a research and development agreement with Anacor Pharmaceuticals, Inc. (“Anacor”) for the discovery and development of boron-based small molecule compounds directed against a

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target for the potential treatment of acne. Under the terms of the agreement, we paid Anacor $7.0 million in connection with the execution of the agreement, and will pay up to $153.0 million upon the achievement of certain research, development, regulatory and commercial milestones, as well as royalties on sales by us. Anacor will be responsible for discovering and conducting the early development of product candidates which utilize Anacor’s proprietary boron chemistry platform, while we will have an option to obtain an exclusive license for products covered by the agreement. The initial $7.0 million payment was recognized as research and development expense during the three months ended March 31, 2011.

Settlement agreement with Teva

On February 24, 2011, we entered into a settlement agreement (“Teva Settlement Agreement”) with Barr Laboratories, Inc., a subsidiary of Teva Pharmaceuticals USA, Inc., on behalf of itself and certain of its affiliates, including Teva Pharmaceuticals USA, Inc. (collectively, “Teva”). Under the terms of the Teva Settlement Agreement, we agreed to grant to Teva a future license to make and sell our generic versions of SOLODYN^® in 65mg and 115mg strengths under the SOLODYN^® intellectual property rights belonging to us, with the license grant effective in February 2018, or earlier under certain conditions. We also agreed to grant to Teva a future license to make and sell generic versions of SOLODYN^® in 55mg, 80mg and 105mg strengths under our SOLODYN^® intellectual property rights, with the license grant effective in February 2019, or earlier under certain conditions. The Teva Settlement Agreement provides that Teva will be required to pay us royalties based on sales of Teva’s generic SOLODYN^® products pursuant to the foregoing licenses. Pursuant to the Teva Settlement Agreement, the companies agreed to terminate all legal disputes between them relating to SOLODYN^®. In addition, Teva confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Teva’s activities relating to Teva’s generic SOLODYN^® products under ANDA No. 65-485 and any amendments and supplements thereto. Teva also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above. The United States District Court for the District of Maryland subsequently entered a permanent injunction against any infringement by Teva.

Classification of LipoSonix as a discontinued operation

On February 25, 2011, we announced that as a result of our strategic planning process and the current regulatory and commercial capital equipment environment, we determined to explore strategic alternatives for our LipoSonix business including, but not limited to, the sale of the stand-alone business. We engaged Deutsche Bank to assist us in our exploration of strategic alternatives for LipoSonix (see Subsequent Events below for additional information regarding the sale of the LipoSonix business). As a result of this decision, we now classify the LipoSonix business as a discontinued operation for financial statement reporting purposes.

Increase of our quarterly dividend from $0.06 per share to $0.08 per share

On March 22, 2011, we announced that our Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of our Class A common stock, which was paid on April 29, 2011, to stockholders of record at the close of business on April 1, 2011. This represented a 33% increase compared to our previous $0.06 dividend. Subsequent cash dividends announced in June and September 2011 were also at the rate of $0.08 per issued and outstanding share of our Class A common stock, and were paid on July 29, 2011, to stockholders of record at the close of business on July 1, 2011, and on October 31, 2011, to stockholders of record at the close of business on October 3, 2011, respectively.

Development milestone payment related to our collaboration with a privately-held U.S. biotechnology company

On September 10, 2010, we and a privately-held U.S. biotechnology company entered into a sublicense and development agreement to develop an agent for specific dermatological conditions in the Americas and Europe and a purchase option to acquire the privately-held U.S. biotechnology company. Under the terms of the agreements, we paid the privately-held U.S. biotechnology company $5.0 million in connection with the execution of the agreement, and will pay additional potential milestone payments totaling approximately $100.5 million upon successful completion of certain clinical, regulatory and commercial milestones.

During the three months ended June 30, 2011, a development milestone was achieved, and we made a $5.5 million payment pursuant to the agreements. The $5.5 million milestone payment was recognized as research and development expense during the three months ended June 30, 2011.

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Issuance of new patent covering SOLODYN^®

On April 5, 2011, the United States Patent and Trademark Office (“USPTO”) issued U.S. Patent No. 7,919,483, entitled “Method For The Treatment Of Acne” (the “’83 Patent”) to us. The ’483 Patent, which expires in February 2027, covers methods of using a controlled-release oral dosage form of minocycline to treat acne, including the use of our product SOLODYN^® in all eight currently available dosage forms. As previously reported, the USPTO issued a Notice of Allowance for U.S. Application No. 11/166,817, the patent application for the ‘483 Patent, in October 2009 and a second Notice of Allowance in April 2010 following the completion of a Request for Continued Examination which we filed with the USPTO in November 2009.

Settlement of class action and derivative lawsuits

On June 6, 2011, we, certain of our current officers and directors named in the class action and derivative lawsuits more fully described under “Legal Matters” in Note 19 in the notes to the condensed consolidated financial statements, included in Part I, Item I of this Report, and our outside auditors entered into Memoranda of Understanding with the plaintiffs’ representatives to memorialize an agreement in principle to settle the class action, as well as both stockholder derivative lawsuits. The Company and the respective plaintiffs’ representatives in the class action and derivative suits filed motions in the applicable courts on September 21, 2011 and October 7, 2011, respectively, for preliminary approval of the respective settlement agreements. Preliminary approval of the settlement agreement for the class action suit was granted on November 2, 2011, and preliminary approval of the settlement agreement for the derivative suits was approved on November 3, 2011. Under the terms of the settlement agreements, which remain subject to final approval by the applicable courts among other customary conditions, including certain notice requirements, our portion of the class action settlement will be paid entirely by insurance. Our outside auditors also will contribute to this settlement. The derivative lawsuits settlement, the only financial component of which involves payment of plaintiffs’ attorneys’ fees, also will be paid entirely by insurance. We are not required to make any payments to fund the settlements of the class action or the derivative lawsuits. The settlement of the derivative lawsuits reflects certain control and other enhancements undertaken by us in connection with and subsequent to the restatement of our consolidated financial statements in 2008. The settlement agreements contain no admission of liability by us or the named individuals in the respective actions, the allegations of which are expressly denied in the settlement agreements.

Establishment of a Supplemental Executive Retirement Plan

On June 24, 2011, our Compensation Committee adopted the Medicis Pharmaceutical Supplemental Executive Retirement Plan, as such plan may be amended from time to time (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including our named executive officers. The SERP is effective as of June 1, 2011. Retirement benefits are calculated based on a SERP participant’s (1) years of service and (2) average earnings (base salary plus cash bonus or incentive payments) during any three calendar years of service (regardless of whether the years are consecutive), beginning with the 2009 calendar year. The SERP retirement benefit is intended to be paid to participants who reach the “normal retirement date,” which is age 65, or age 59  ¹/2 with twenty years of service, subject to certain exceptions.

A SERP participant vests in 1/6th of his or her retirement benefit per plan year, (which runs from June 1 to May 31), effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant’s normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant’s separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant’s employment agreement, or in the absence of such employment agreement or definitions, in the Company’s Executive Retention Plan), or (3) a “change in control” of the Company. A SERP participant accrues his or her retirement benefit based on (x) the participant’s number of years of service with the Company (including prior years of service), divided by (y) the number of years designated for such participant’s tier (which ranges from five to twenty years).

Participants in the SERP received credit for prior service with us. The prior service accrued benefit of approximately $33.8 million was recorded during the three months ended June 30, 2011 as other comprehensive income within stockholders’ equity, and is amortized as compensation expense over the remaining service years of

33

each participant. We also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income. Amortization of prior service costs recognized as compensation expense during the three and nine months ended September 30, 2011, was approximately $1.2 million and $1.6 million, respectively.

Compensation expense recognized during the three months ended September 30, 2011 related to current service costs was approximately $0.3 million. Interest cost accrued related to prior and current service costs during the three months ended September 30, 2011 was approximately $0.4 million. The total present value of accrued benefits for the SERP as of September 30, 2011 was approximately $34.5 million, which is included in other long-term liabilities in our accompanying condensed consolidated balance sheets as of September 30, 2011.

During the three months ended September 30, 2011, we purchased life insurance policy investments of approximately $9.8 million to fund the SERP. The life insurance policies cover the SERP participants. We intend to make similar annual purchases during each of the next four years. A net gain on the investments of approximately $0.1 million was recognized during the three months ended September 30, 2011. The total investment related to the SERP of $9.9 million is included in other assets in our accompanying condensed consolidated balance sheets as of September 30, 2011, and is the cash surrender value of the life insurance policies, representing the fair value of the plan assets.

License and settlement agreement with Lupin

On July 21, 2011, we entered into a license and settlement agreement (the “Lupin Settlement Agreement”) with Lupin Limited and Lupin Pharmaceuticals, Inc. (together, “Lupin”). Under the terms of the Lupin Settlement Agreement, we agreed to grant to Lupin a future license to make and sell our generic versions of SOLODYN^® in 45mg, 90mg and 135mg strengths under the SOLODYN^® intellectual property rights belonging to us, with the license grant effective November 26, 2011, or earlier under certain conditions. We also agreed to grant to Lupin future licenses to make and sell our generic versions of SOLODYN^® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and our generic versions of SOLODYN^® in 55mg (against which Lupin’s Paragraph IV Patent Certification was the first received by us), 80mg and 105mg strengths effective in February 2019, or earlier under certain conditions. The Lupin Settlement Agreement provides that Lupin will be required to pay us royalties based on sales of Lupin’s generic SOLODYN^® products pursuant to the foregoing licenses.

Pursuant to the Lupin Settlement Agreement, Lupin and we agreed to terminate all legal disputes between us relating to SOLODYN^®. In addition, Lupin confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Lupin’s activities relating to Lupin’s generic SOLODYN^® products under an ANDA. Lupin also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above.

On July 21, 2011, we entered into a Joint Development Agreement (the “Joint Development Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to in this paragraph as “Lupin”), whereby Lupin and we will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Joint Development Agreement, subject to the terms and conditions contained therein, we will make an up-front $20.0 million payment to Lupin and will make additional payments to Lupin of up to $38.0 million upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the agreement. In addition, we will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Joint Development Agreement. The $20.0 million up-front payment was recognized as research and development expense during the three months ended September 30, 2011.

License and settlement agreement with Nycomed

On August 4, 2011, we entered into a license and settlement agreement (the “Nycomed Settlement Agreement”) with Nycomed US, Inc. (collectively with its affiliates, “Nycomed”). In connection with the Nycomed Settlement Agreement, Nycomed and we agreed to terminate all legal disputes between us relating to VANOS^®. In addition, Nycomed confirmed that certain of our patents relating to VANOS^® are valid and enforceable, and cover Nycomed’s activities relating to its generic products under its Abbreviated New Drug Application.

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Further, subject to the terms and conditions contained in the Nycomed Settlement Agreement, we agreed to grant to Nycomed, effective December 15, 2013, or earlier upon the occurrence of certain events, a license to make and sell generic versions of VANOS^® products. Upon commercialization by Nycomed of generic versions of VANOS^® products, Nycomed will pay us a royalty based on sales of such generic products.

Approval of stock repurchase plan

On August 8, 2011, we announced that our Board of Directors approved a Stock Repurchase Plan to purchase up to $200 million in aggregate value of shares of Medicis Class A common stock. Any repurchases will be made in compliance with the Securities and Exchange Commission’s Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions.

The number of shares to be repurchased and the timing of repurchases will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. Any repurchases will be funded by general corporate funds. The plan does not obligate us to repurchase any common stock. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the purchase limit is reached, but may be suspended or terminated at any time at our discretion without prior notice.

In accordance with this plan, we purchased 49,264 shares of our Class A common stock in the open market at a weighted average cost of $36.03 per share during the three months ended September 30, 2011.

As part of our stock repurchase program, we may from time to time enter into structured share repurchase agreements with financial institutions. These agreements generally require us to make one or more cash payments in exchange for the right to receive shares of our common stock and/or cash at the expiration of the agreement and/or at various times during the term of the agreement, generally based on the market price of our common stock during the relevant valuation period or periods, but we may enter into structured share repurchase agreements with different features.

In August 2011, we entered into structured share repurchase arrangements and purchased from a financial institution over the counter “in-the-money” capped call options for an aggregate premium of $50.0 million. The capped call options have various scheduled expiration dates within the month of November 2011. An option will be automatically exercised if the market price of our Class A common stock on the relevant expiration date is greater than the applicable lower strike price (i.e. the options are “in-the-money”). If the market price of our Class A common stock on the relevant expiration date is below the applicable lower strike price, the relevant option will expire with no value. If the market price of our Class A common stock on the relevant expiration date is between the applicable lower and upper strike prices, the value per option to us will be the then-current market price less that lower strike price and the relevant options will be physically settled. If the market price of our Class A common stock is above the applicable upper strike price, the value per option to us will be the difference between the applicable upper strike price and lower strike price and the default settlement method for the relevant options will be cash settlement, although we may elect physical settlement subject to certain conditions. Under these arrangements, any prepayments made or cash payments received at settlement are recorded as a component of additional paid-in capital in our accompanying condensed consolidated balance sheets.

After giving effect to the purchases during the three months ended September 30, 2011 and the purchase of the capped call options, the remaining authorized amount under the plan is approximately $148.2 million.

License and settlement agreement with Aurobindo

On September 13, 2011, we entered into a license and settlement agreement (the “Aurobindo Settlement Agreement”), dated as of September 6, 2011, with Aurobindo Pharma U.S.A., Inc. on behalf of itself and its affiliates (collectively, “Aurobindo”).

Under the terms of the Aurobindo Settlement Agreement, we agreed to grant to Aurobindo a future license to make and sell its generic versions of SOLODYN^® in 45mg, 90mg and 135mg strengths under the SOLODYN^® intellectual property rights belonging to us, with the license grant effective November 26, 2011, or earlier under certain conditions. We also agreed to grant to Aurobindo future licenses to make and sell its generic versions of SOLODYN^® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and its

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generic versions of SOLODYN^® in 55mg, 80mg and 105mg strengths effective in February 2019, or earlier under certain conditions. The Aurobindo Settlement Agreement provides that Aurobindo will be required to pay us royalties based on sales of Aurobindo’s generic SOLODYN^® products pursuant to the foregoing licenses.

Pursuant to the Aurobindo Settlement Agreement, Aurobindo and we agreed to terminate all legal disputes between us relating to SOLODYN^®. In addition, Aurobindo confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Aurobindo’s activities relating to Aurobindo’s generic SOLODYN^® products under its Abbreviated New Drug Application. Aurobindo also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above.

With this settlement, and as of the date of the Aurobindo Settlement Agreement, we no longer have any pending patent infringement litigation with respect to generic versions of SOLODYN^® (minocycline HCl, USP) Extended Release Tablets in any of our currently commercialized strengths.

Subsequent Events

FDA Approval of Lip Indication for RESTYLANE^®

On October 11, 2011, we announced that the U.S. Food and Drug Administration (“FDA”) approved our premarket approval application supplement to expand the approved use of RESTYLANE^® to include lip augmentation. RESTYLANE^® was previously approved for mid-to-deep dermal implantation for the correction of moderate to severe facial wrinkles and folds, such as the lines from the nose to the corners of the mouth (nasolabial folds). The new label will now include an indication for submucosal implantation for lip augmentation in patients over the age of 21.

Sale of LipoSonix to Solta Medical

On November 1, 2011, we closed our sale of all issued and outstanding shares of common stock of Medicis Technologies Corporation (f/k/a LipoSonix, Inc.) (“LipoSonix”) to Solta Medical, Inc., a Delaware corporation (“Solta”), pursuant to the previously announced stock purchase agreement, dated September 12, 2011, by and between us and Solta (the “Agreement”). In connection therewith, on November 1, 2011, a separate subsidiary of Medicis transferred to Solta certain assets and assigned to Solta certain agreements, in each case related to LipoSonix. Solta paid us at the closing $15.5 million in cash, consisting of the initial purchase price of $15 million and a preliminary working capital adjustment, which remains subject to a customary post-closing review based on the amount of working capital of LipoSonix at the closing. In addition, Solta has agreed to pay to us the following contingent payments, after the closing, subject to the terms and conditions of the Agreement:

(i) a one-time cash payment of up to $20 million upon approval by the FDA of a specified LipoSonix product prior to October 1, 2012 (the FDA approval was obtained in late October 2011, as a result of which Solta is required to make the $20 million payment to us on or prior to November 19, 2011); and

(ii) additional contingent cash and milestone payments, which will expire after approximately seven years, based upon, among other things, the achievement of year-to-year increases and specified targets in the adjusted net sales and adjusted gross profits of such LipoSonix products.

At the closing, Solta also assumed our contingent payment obligations with respect to the former shareholders of LipoSonix, Inc. pursuant to the Agreement and Plan of Merger among Medicis, LipoSonix, Inc. and the other parties thereto dated as of June 16, 2008.

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Results of Operations

The following table sets forth certain data as a percentage of net revenues for the periods indicated.

	Three Months Ended						Nine Months Ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
	(a)			(b)			(c)			(d)
Net revenues		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit (e)		90.7			90.0			90.8			90.5
Operating expenses		71.2			54.2			64.8			52.9
Operating income		19.5			35.8			26.0			37.6
Other expense, net		-			-			-			-
Interest and investment income (expense), net		-			-			0.1			-
Income from continuing operations before income tax expense		19.5			35.8			26.1			37.6
Income tax expense		(7.1)			(16.8)			(10.4)			(15.3)
Net income from continuing operations		12.4			19.0			15.7			22.3
Loss from discontinued operations, net of income tax benefit		(1.9)			(3.3)			(3.1)			(2.9)
Net income		10.5	%		15.7	%		12.6	%		19.4	%

(a) Included in operating expenses is $20.0 million (10.8% of net revenues) paid to Lupin related to a product development agreement, $2.5 million (1.4% of net revenues) of legal settlements paid related to intellectual property disputes, $2.3 million (1.2% of net revenues) related to the write-down of an intangible asset related to an authorized generic product for which we receive contract revenue and $4.4 million (2.4% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.

(b) Included in operating expenses is $5.0 million (2.8% of net revenues) paid to a privately-held U.S. biotechnology company related to a product development agreement, $2.3 million (1.3% of net revenues) related to the write-down of an intangible asset related to certain non-primary products and $7.9 million (4.5% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.

(c) Included in operating expenses is $20.0 million (3.7% of net revenues) paid to Lupin related to a product development agreement, $7.0 million (1.3% of net revenues) paid to Anacor related to a product development agreement, $5.5 million (1.0% of net revenues) paid related to a product development agreement with a privately-held U.S. biotechnology company, $2.0 million (0.4% of net revenues) paid to a Medicis partner related to a product development agreement, $2.5 million (0.5% of net revenues) of legal settlements paid related to intellectual property disputes, $2.3 million (0.4% of net revenues) related to the write-down of an intangible asset related to an authorized generic product for which we receive contract revenue and $20.4 million (3.8% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.

(d) Included in operating expenses is $5.0 million (1.0% of net revenues) paid to a privately-held U.S. biotechnology company related to a product development agreement, $2.3 million (0.4% of net revenues) related to the write-down of an intangible asset related to certain non-primary products and $13.0 million (2.5% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.

(e) Gross profit does not include amortization of the related intangibles as such expense is included in operating expenses.

37

Three Months Ended September 30, 2011 Compared to the Three Months Ended September 30, 2010

Net Revenues

The following table sets forth our net revenues for the three months ended September 30, 2011 (the “third quarter of 2011”) and September 30, 2010 (the “third quarter of 2010”), along with the percentage of net revenues and percentage point change for each of our product categories (dollar amounts in millions):

	Third Quarter 2011			Third Quarter 2010			$ Change			% Change
Net product revenues	$	183.5		$	174.6		$	8.9			5.1	%
Net contract revenues		1.2			2.5			(1.3	)		(52.0	) %
Total net revenues	$	184.7		$	177.1		$	7.6			4.3	%
	Third Quarter 2011			Third Quarter 2010			$ Change			% Change
Acne and acne-related dermatological products	$	119.1		$	118.5		$	0.6			0.5	%
Non-acne dermatological products		55.7			49.5			6.2			12.5	%
Non-dermatological products (including contract revenues)		9.9			9.1			0.8			8.8	%
Total net revenues	$	184.7		$	177.1		$	7.6			4.3	%
	Third Quarter 2011			Third Quarter 2010			Change
Acne and acne-related dermatological products		64.5	%		66.9	%		(2.4	) %
Non-acne dermatological products		30.1	%		28.0	%		2.1	%
Non-dermatological products (including contract revenues)		5.4	%		5.1	%		0.3	%
Total net revenues		100.0	%		100.0	%		-

Net revenues associated with our acne and acne-related dermatological products increased by $0.6 million, or 0.5%, during the third quarter of 2011 as compared to the third quarter of 2010, primarily due to an increase in sales of SOLODYN^®, partially offset by a decrease in sales of TRIAZ^®. The increase in net revenues of SOLODYN^® was primarily the result of an increase in gross sales of SOLODYN^® due to increased demand and the FDA approval of new 55mg, 80mg and 105mg strengths of SOLODYN^® on August 27, 2010. The decrease in net revenues of TRIAZ^® was primarily due to our early 2011 discontinuation of TRIAZ^® as a result of the FDA’s requirement that, effective March 4, 2011, prescription benzoyl peroxide products that are not approved through a New Drug Application, such as TRIAZ^®, not be sold as prescription products.

Net revenues associated with our non-acne dermatological products increased by $6.2 million, or 12.5%, during the third quarter of 2011 as compared to the third quarter of 2010 primarily due to increased sales of RESTYLANE^®, PERLANE^® and VANOS^®.

Net revenues associated with our non-dermatological products increased by $0.8 million, or 8.8%, during the third quarter of 2011 as compared to the third quarter of 2010 primarily due to an increase in sales of BUPHENYL^® and AMMONUL^®, partially offset by a decrease in contract revenues.

38

Gross Profit

Gross profit represents our net revenues less our cost of product revenue. Our cost of product revenue includes our acquisition cost for the products we purchase from our third party manufacturers and royalty payments made to third parties. Amortization of intangible assets related to products sold is not included in gross profit. Amortization expense related to these intangibles for the third quarter of 2011 and 2010 was approximately $5.3 million and $5.2 million, respectively. Product mix plays a significant role in our quarterly and annual gross profit as a percentage of net revenues. Different products generate different gross profit margins, and the relative sales mix of higher gross profit products and lower gross profit products can affect our total gross profit.

The following table sets forth our gross profit for the third quarter of 2011 and 2010, along with the percentage of net revenues represented by such gross profit (dollar amounts in millions):

	Third Quarter 2011			Third Quarter 2010			$ Change		% Change
Gross profit	$	167.5		$	159.3		$	8.2		5.1	%
% of net revenues		90.7	%		90.0	%

The increase in gross profit during the third quarter of 2011 as compared to the third quarter of 2010 is primarily due to the $7.6 million increase in net revenues.

Selling, General and Administrative Expenses

The following table sets forth our selling, general and administrative expenses for the third quarter of 2011 and 2010, along with the percentage of net revenues represented by selling, general and administrative expenses (dollar amounts in millions):

	Third Quarter 2011			Third Quarter 2010			$ Change			% Change
Selling, general and administrative	$	93.2		$	78.1		$	15.1			19.3	%
% of net revenues		50.5	%		44.1	%
Share-based compensation expense included in selling, general and administrative	$	4.3		$	7.5		$	(3.2	)		(42.7	) %

Selling, general and administrative expenses increased $15.1 million, or 19.3%, during the third quarter of 2011 as compared to the third quarter of 2010, and increased as a percentage of net revenues from 44.1% during the third quarter of 2010 to 50.5% during the third quarter of 2011. Included in this increase was a $3.7 million increase in personnel expenses, a $7.1 million increase in promotion costs, a $2.8 million increase in professional fees and costs, including $2.5 million of legal settlements paid related to intellectual property disputes, and an increase of $1.5 million of other selling, general and administrative costs.

Research and Development Expenses

The following table sets forth our research and development expenses for the third quarter of 2011 and 2010 (dollar amounts in millions):

	Third Quarter 2011		Third Quarter 2010		$ Change			% Change
Research and development	$	28.7	$	8.7	$	20.0			229.9	%
Charges included in research and development	$	21.0	$	5.0	$	16.0			320.0	%
Share-based compensation expense included in research and development	$	0.1	$	0.4	$	(0.3	)		(75.0	) %

39

Included in research and development expenses for the third quarter of 2011 was a $20.0 million payment related to a product development agreement with Lupin. Included in research and development expense for the third quarter of 2010 was $5.0 million paid to a privately-held U.S. biotechnology company related to a product development agreement. We expect research and development expenses to continue to fluctuate from quarter to quarter based on the timing of the achievement of development milestones under license and development agreements, as well as the timing of other development projects and the funds available to support these projects.

Depreciation and Amortization Expenses

Depreciation and amortization expenses during the third quarter of 2011 were $7.3 million, as compared to $6.9 million during the third quarter of 2010, primarily due to increased depreciation expense for property and equipment.

Impairment of Intangible Assets

During the quarter ended September 30, 2011, an intangible asset related to an authorized generic product from which the Company receives contract revenue was determined to be impaired based on our analysis of the intangible asset’s carrying value and projected future cash flows. As a result of the impairment analysis, we recorded a write-down of $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the contract revenue related to the authorized generic product included projected net revenues for the authorized generic product for which we receive contract revenue being less than originally anticipated.

During the quarter ended September 30, 2010, an intangible asset related to certain of our non-primary products was determined to be impaired based on our analysis of the intangible asset’s carrying value and projected future cash flows. As a result of the impairment analysis, we recorded a write-down of approximately $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the non-primary products related to the intangible asset include the planned discontinuation of the products, which are not significant components of our operations.

Interest and Investment Income

Interest and investment income during the third quarter of 2011 increased $0.2 million, or 21.0%, to $1.3 million from $1.1 million during the third quarter of 2010, due to an increase in the amount of funds available for investment during the third quarter of 2011.

Interest Expense

Interest expense during the third quarter of 2011 increased $0.2 million, or 19.8%, to $1.3 million from $1.1 million during the third quarter of 2010. Our interest expense during the third quarter of 2011 and 2010 consisted of interest expense on our Old Notes, which accrue interest at 2.5% per annum, and our New Notes, which accrue interest at 1.5% per annum. In addition, during the third quarter of 2011, approximately $0.2 million of contingent interest was accrued related to our Old Notes. See Note 13 in our accompanying condensed consolidated financial statements for further discussion on the Old Notes and New Notes.

Income Tax Expense

Our effective tax rate for continuing operations for the third quarter of 2011 was 36.3%, as compared to 47.1% for the third quarter of 2010. The effective rate for the third quarter of 2010 reflects the impact of the non-deductibility of payments associated with a product development agreement with a privately-held U.S. biotechnology company.

Loss from Discontinued Operations, Net of Income Tax Benefit

Loss from discontinued operations, net of income tax benefit, was $3.5 million during the third quarter of 2011, as compared to $5.9 million during the third quarter of 2010. See Note 2 in our accompanying condensed consolidated financial statements for further discussion.

40

Nine Months Ended September 30, 2011 Compared to the Nine Months Ended September 30, 2010

Net Revenues

The following table sets forth our net revenues for the nine months ended September 30, 2011 (the “2011 nine months”) and September 30, 2010 (the “2010 nine months”), along with the percentage of net revenues and percentage point change for each of our product categories (dollar amounts in millions):

	2011 Nine Months			2010 Nine Months			$ Change			% Change
Net product revenues	$	537.2		$	509.9		$	27.3			5.4	%
Net contract revenues		3.2			6.3			(3.1	)		(49.2	) %
Total net revenues	$	540.4		$	516.2		$	24.2			4.7	%
	2011 Nine Months			2010 Nine Months			$ Change			% Change
Acne and acne-related dermatological products	$	345.7		$	363.5		$	(17.8	)		(4.9	) %
Non-acne dermatological products		165.6			124.7			40.9			32.8	%
Non-dermatological products (including contract revenues)		29.1			28.0			1.1			3.9	%
Total net revenues	$	540.4		$	516.2		$	24.2			4.7	%
	2011 Nine Months			2010 Nine Months			Change
Acne and acne-related dermatological products		64.0	%		70.4	%		(6.4	) %
Non-acne dermatological products		30.6	%		24.2	%		6.4	%
Non-dermatological products (including contract revenues)		5.4	%		5.4	%		-	%
Total net revenues		100.0	%		100.0	%		-	%

Net revenues associated with our acne and acne-related dermatological products decreased by $17.8 million, or 4.9%, during the 2011 nine months as compared to the 2010 nine months primarily as a result of a decrease in net revenues of TRIAZ^®, partially offset by an increase in net revenues of SOLODYN^®. The decrease in net revenues of TRIAZ^® was primarily due to our early 2011 discontinuation of TRIAZ^® as a result of the FDA’s requirement that, effective March 4, 2011, prescription benzoyl peroxide products that are not approved through a New Drug Application, such as TRIAZ^®, not be sold as prescription products. The increase in net revenues of SOLODYN^® was primarily the result of an increase in gross sales of SOLODYN^® due to increased demand and the FDA approval of new 55mg, 80mg and 105mg strengths of SOLODYN^® on August 27, 2010.

Net revenues associated with our non-acne dermatological products increased by $40.9 million, or 32.8%, during the 2011 nine months as compared to the 2010 nine months, primarily due to increased sales of DYSPORT^®, RESTYLANE^®, PERLANE^® and VANOS^®.

41

Gross Profit

Gross profit represents our net revenues less our cost of product revenue. Our cost of product revenue includes our acquisition cost for the products we purchase from our third party manufacturers and royalty payments made to third parties. Amortization of intangible assets related to products sold is not included in gross profit. Amortization expense related to these intangibles for the 2011 nine months and 2010 nine months was approximately $16.0 million and $15.6 million, respectively. Product mix plays a significant role in our quarterly and annual gross profit as a percentage of net revenues. Different products generate different gross profit margins, and the relative sales mix of higher gross profit products and lower gross profit products can affect our total gross profit.

The following table sets forth our gross profit for the 2011 nine months and 2010 nine months, along with the percentage of net revenues represented by such gross profit (dollar amounts in millions):

	2011 Nine Months			2010 Nine Months			$ Change		% Change
Gross profit	$	490.7		$	467.0		$	23.7		5.1	%
% of net revenues		90.8	%		90.5	%

The increase in gross profit during the 2011 nine months as compared to the 2010 nine months is primarily due to the $24.2 million increase in net revenues.

Selling, General and Administrative Expenses

The following table sets forth our selling, general and administrative expenses for the 2011 nine months and 2010 nine months, along with the percentage of net revenues represented by selling, general and administrative expenses (dollar amounts in millions):

	2011 Nine Months			2010 Nine Months			$ Change		% Change
Selling, general and administrative	$	268.3		$	227.5		$	40.8		17.9	%
% of net revenues		49.6	%		44.1	%
Share-based compensation expense included in selling, general and administrative expense	$	19.3		$	12.5		$	6.8		54.4	%

Selling, general and administrative expenses increased $40.8 million, or 17.9%, during the 2011 nine months as compared to the 2010 nine months, and increased as a percentage of net revenues from 44.1% during the 2010 nine months to 49.6% during the 2011 nine months. Included in this increase was an $22.5 million increase in personnel expenses, including a $6.8 million increase in stock compensation expense, primarily related to the revaluation of SARs awards based on changes in the market price of our common stock, a $9.7 million increase in promotion costs, a $4.6 million increase in professional fees and costs, including $2.5 million of legal settlements paid related to intellectual property disputes, and an increase of $4.0 million of other selling, general and administrative costs.

42

Research and Development Expenses

The following table sets forth our research and development expenses for the 2011 nine months and 2010 nine months (dollar amounts in millions):

	2011 Nine Months		2010 Nine Months		$ Change		% Change
Research and development	$	58.2	$	22.7	$	35.5		156.4	%
Charges included in research and development	$	35.5	$	5.0	$	30.5		610.0	%
Share-based compensation expense included in research and development	$	1.1	$	0.5	$	0.6		120.0	%

Included in research and development expenses for the 2011 nine months was a $20.0 million payment related to a product development agreement with Lupin, a $7.0 million payment to Anacor related to a product development agreement, a $5.5 million payment related to a product development agreement with a privately-held U.S. biotechnology company and $2.0 million paid to a Medicis partner related to a product development agreement. Included in research and development expense for the 2010 nine months was $5.0 million paid to a privately-held U.S. biotechnology company related to a product development agreement. We expect research and development expenses to continue to fluctuate from quarter to quarter based on the timing of the achievement of development milestones under license and development agreements, as well as the timing of other development projects and the funds available to support these projects.

Depreciation and Amortization Expenses

Depreciation and amortization expenses during the 2011 nine months were $21.7 million, as compared to $20.6 million during the 2010 nine months, primarily due to increased depreciation expense for property and equipment.

Impairment of Intangible Assets

During the quarter ended September 30, 2011, an intangible asset related to an authorized generic product from which the Company receives contract revenue was determined to be impaired based on our analysis of the intangible asset’s carrying value and projected future cash flows. As a result of the impairment analysis, we recorded a write-down of $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the contract revenue related to the authorized generic product included projected net revenues for the authorized generic product for which we receive contract revenue being less than originally anticipated.

During the quarter ended September 30, 2010, an intangible asset related to certain of our non-primary products was determined to be impaired based on our analysis of the intangible asset’s carrying value and projected future cash flows. As a result of the impairment analysis, we recorded a write-down of approximately $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the non-primary products related to the intangible asset include the planned discontinuation of the products, which are not significant components of our operations.

Interest and Investment Income

Interest and investment income during the 2011 nine months increased $0.8 million, or 26.5%, to $3.8 million from $3.0 million during the 2010 nine months, due to an increase in the amount of funds available for investment during the first nine months of 2011.

43

Interest Expense

Interest expense during the 2011 nine months increased $0.3 million, or 9.1%, to $3.5 million from $3.2 million during the 2010 nine months. Our interest expense during the 2011 nine months and 2010 nine months consisted of interest expense on our Old Notes, which accrue interest at 2.5% per annum, and our New Notes, which accrue interest at 1.5% per annum. In addition, during the 2011 nine months, approximately $0.3 million of contingent interest was accrued related to our Old Notes. See Note 13 in our accompanying condensed consolidated financial statements for further discussion on the Old Notes and New Notes.

Other Expense, net

Other expense of $0.3 million recognized during the 2010 nine months represented an other-than-temporary impairment on an asset-backed security investment.

Income Tax Expense

Our effective tax rate for the 2011 nine months was 40.2%, as compared to 40.9% for the 2010 nine months. The effective tax rate for both the 2011 nine months and the 2010 nine months reflects the impact of the non-deductibility of payments associated with a product development agreement with a privately-held U.S. biotechnology company.

Loss from Discontinued Operations, Net of Income Tax Benefit

Loss from discontinued operations, net of income tax benefit, was $16.6 million during the 2011 nine months, as compared to $15.0 million during the 2010 nine months. See Note 2 in our accompanying condensed consolidated financial statements for further discussion.

44

Liquidity and Capital Resources

Overview

The following table highlights selected cash flow components for the 2011 nine months and 2010 nine months, and selected balance sheet components as of September 30, 2011 and December 31, 2010 (dollar amounts in millions):

		000000000		000000000		000000000		000000000
	2011 Nine Months		2010 Nine Months		$ Change		% Change
Cash provided by (used in):
Operating activities	$	136.7	$	124.3	$	12.4		10.0	%
Investing activities		(160.3)		(122.2)		(38.1)		(31.2)	%
Financing activities		(10.4)		0.5		(10.9)		(2,180.0)	%

		00000		00000		00000		00000
	Sept. 30, 2011		Dec. 31, 2010		$ Change		% Change
Cash, cash equivalents, and short-term investments	$	774.0	$	703.6	$	70.4		10.0	%
Working capital		453.8		628.4		(174.6)		(27.8)	%
Long-term investments		45.7		21.5		24.2		112.6	%
2.5% contingent convertible senior notes due 2032		169.1		169.1		-		-	%
1.5% contingent convertible senior notes due 2033		0.2		0.2		-		-	%

45

Working Capital

Working capital as of September 30, 2011 and December 31, 2010 consisted of the following (dollar amounts in millions):

	Sept.30, 2011		Dec.31, 2010		$ Change		% Change
Cash, cash equivalents, and short-term investments	$	774.0	$	703.6	$	70.4		10.0	%
Accounts receivable, net		153.0		130.6		22.4		17.2	%
Inventories, net		30.9		35.3		(4.4)		(12.5)	%
Deferred tax assets, net		28.7		70.5		(41.8)		(59.3)	%
Other current assets		20.3		15.2		5.1		33.6	%
Assets held for sale from discontinued operations		8.1		13.1		(5.0)		(38.2)	%
Total current assets		1,015.0		968.3		46.7		4.8	%
Accounts payable		47.3		41.0		6.3		15.4	%
Current portion of contingent convertible senior notes		169.1		-		169.1		100.0	%
Reserve for sales returns		72.7		60.7		12.0		19.8	%
Accrued consumer rebate and loyalty programs		132.5		101.7		30.8		30.3	%
Managed care and Medicaid reserves		59.4		49.4		10.0		20.2	%
Income taxes payable		-		4.6		(4.6)		(100.0)	%
Other current liabilities		73.9		75.2		(1.3)		(1.7)	%
Liabilities held for sale from discontinued operations		6.3		7.3		(1.0)		(13.7)	%
Total current liabilities		561.2		339.9		221.3		65.1	%
Working capital	$	453.8	$	628.4	$	(174.6)		(27.8)	%

We had cash, cash equivalents and short-term investments of $774.0 million and working capital of $453.8 million at September 30, 2011, as compared to $703.6 million and $628.4 million, respectively, at December 31, 2010. The increase in cash, cash equivalents and short-term investments was primarily due to the generation of $136.7 million of operating cash flow and $58.1 million of proceeds received from stock option exercises during the 2011 nine months, partially offset by $50.0 million of cash used related to a structured share repurchase arrangement. The decrease in working capital was primarily due to the classification of our Old Notes as a current liability as of September 30, 2011, as holders of the Old Notes may require us to offer to repurchase their Old Notes for cash on June 4, 2012.

Accounts receivable, net, increased $22.4 million, or 17.2%, from $130.6 million at December 31, 2010 to $153.0 million at September 30, 2011. The increase was primarily due to a $30.5 million increase in gross sales during the month of September 2011 as compared to the month of December 2010. As our standard payment terms are 30 days, orders that occur during the last month of a quarter are typically not due for payment until after the end of the quarter. Gross sales during the month of September 2011 were $170.9 million, or 49.4% of the total gross sales for the third quarter of 2011, as compared to gross sales during the month of December 2010 of $140.4 million, or 45.1% of total gross sales for the fourth quarter of 2010. Days’ sales outstanding, calculated as accounts receivable, net, as of the end of the reporting period, divided by total gross sales for the quarter, multiplied by the number of days in the quarter, was 41 days as of September 30, 2011 as compared to 39 days as of December 31, 2010. The increase in days’ sales outstanding was primarily due to the timing of orders placed by customers during the third quarter of 2011 as compared to the fourth quarter of 2010. Although more of the customers’ purchases during the third quarter of 2011 occurred during the last month of the quarter as compared to the last month of the fourth quarter of 2010, their total purchases for the third quarter of 2011 were consistent with previous quarters. We

46

sell our products primarily to major wholesalers and retail chain drugstores. We have distribution services agreements with our two largest wholesale customers. We review the supply levels of our significant products sold to major wholesalers by reviewing periodic inventory reports that are supplied to us by our major wholesalers in accordance with the distribution services agreements. We rely wholly upon our wholesale and retail chain drugstore customers to effect the distribution allocation of substantially all of our prescription products. We also defer the recognition of revenue for certain sales of inventory into the distribution channel that are in excess of eight (8) weeks of projected demand, and we defer the recognition of revenue of our aesthetics products DYSPORT^®, PERLANE^® and RESTYLANE^®, until our exclusive U.S. distributor, McKesson, ships these products to physicians. There has not been a significant change in inventories in the distribution channel during the quarter ended September 30, 2011.

Management believes existing cash and short-term investments, together with funds generated from operations, should be sufficient to meet operating requirements for the foreseeable future. Our cash and short-term investments are available for dividends, milestone payments related to our product development collaborations, strategic investments, acquisitions of companies or products complementary to our business, the repayment of outstanding indebtedness, repurchases of our outstanding securities and other potential large-scale needs. In addition, we may consider incurring additional indebtedness and issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to refinance existing debt or for general corporate purposes. If a material acquisition or investment is completed, our operating results and financial condition could change materially in future periods. However, no assurance can be given that additional funds will be available on satisfactory terms, or at all, to fund such activities.

As of September 30, 2011, our short-term investments included $18.1 million of auction rate floating securities. Our auction rate floating securities are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals through auctions. During the three months ended March 31, 2008, we were informed that there was insufficient demand at auction for the auction rate floating securities, and since that time we have been unable to liquidate our holdings in such securities. As a result, these affected auction rate floating securities are now considered illiquid, and we could be required to hold them until they are redeemed by the holder at maturity or until a future auction on these investments is successful. During the 2011 nine months, we liquidated $4.3 million of our auction rate floating securities at par.

Operating Activities

Net cash provided by operating activities during the 2011 nine months was approximately $136.7 million, compared to cash provided by operating activities of approximately $124.3 million during the 2010 nine months. The following is a summary of the primary components of cash provided by operating activities during the 2011 nine months and 2010 nine months (in millions):

	2011 Nine Months		2010 Nine Months
Income taxes paid	$	(51.0)	$	(62.4)
Payment made to Lupin related to development agreement		(20.0)		-
Payment made to Anacor related to development agreement		(7.0)		-
Payment made related to development agreement with a privately-held U.S. biotechnology company		(5.5)		(5.0)
Payment made to a Medicis partner related to a development agreement		(2.0)		-
Increase in accounts receivable		(23.4)		(49.8)
Increase in reserve for returns		12.0		9.3
Increase in accrued consumer rebates and loyalty programs		30.8		25.1
(Decrease) increase in other current liabilities		(13.9)		0.9
Cash used in operating activities from discontinued operations		(12.3)		(8.3)
Other cash provided by operating activities		229.0		214.5
Cash provided by operating activities	$	136.7	$	124.3

47

Investing Activities

Net cash used in investing activities during the 2011 nine months was approximately $160.3 million, compared to net cash used in investing activities during the 2010 nine months of $122.2 million. The change was primarily due to the net purchases and sales of our short-term and long-term investments during the respective periods.

Financing Activities

Net cash used in financing activities during the 2011 nine months was $10.4 million, compared to net cash provided by financing activities of $0.5 million during the 2010 nine months. Proceeds from the exercise of stock options were $58.1 million during the 2011 nine months compared to $13.1 million during the 2010 nine months. Dividends paid during the 2011 nine months were $ 13.6 million and dividends paid during the 2010 nine months were $ 9.6 million. Cash used for the repurchase of our common stock was $1.8 million during the 2011 nine months. During the 2011 nine months we paid $50.0 million as an up-front payment under a structured share repurchase arrangement.

Contingent Convertible Senior Notes and Other Long-Term Commitments

We have two outstanding series of Contingent Convertible Senior Notes, consisting of $169.1 million principal amount of 2.5% Contingent Convertible Senior Notes due 2032 (the “Old Notes”) and $0.2 million principal amount of 1.5% Contingent Convertible Senior Notes due 2033 (the “New Notes”). The New Notes and the Old Notes are unsecured and do not contain any restrictions on the incurrence of additional indebtedness or the repurchase of our securities, and do not contain any financial covenants. The Old Notes do not contain any restrictions on the payment of dividends. The New Notes require an adjustment to the conversion price if the cumulative aggregate of all current and prior dividend increases above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold has not been reached and no adjustment to the conversion price has been made.

On June 4, 2012 and 2017, or upon the occurrence of a change in control, holders of the Old Notes may require us to offer to repurchase their Old Notes for cash. On June 4, 2013 and 2018, or upon the occurrence of a change in control, holders of the New Notes may require us to offer to repurchase their New Notes for cash. Under GAAP, if an obligation is due on demand or will be due on demand within one year from the balance sheet date, even though liquidation may not be expected within that period, it should be classified as a current liability. Accordingly, the outstanding balance of Old Notes along with the deferred tax liability associated with accelerated interest deductions on the Old Notes will be classified as a current liability during the respective twelve month periods prior to June 4, 2012 and June 4, 2017. As of September 30, 2011, $169.1 million of the Old Notes and $60.3 million of deferred tax liabilities were classified as current liabilities in our condensed consolidated balance sheets. The $60.3 million of deferred tax liabilities were included within current deferred tax assets, net. If all of the Old Notes are put back to us on June 4, 2012, we would be required to pay $169.1 million in outstanding principal, plus accrued interest. We would also be required to pay the accumulated deferred tax liability related to the Old Notes.

During the quarters ended June 30, 2011 and September 30, 2011, the Old Notes met the criteria for the right of conversion into shares of our Class A common stock. This right of conversion of the holders of Old Notes was triggered by the stock closing above $31.96 on 20 of the last 30 trading days and the last trading day of the quarters ended June 30, 2011 and September 30, 2011. During the quarter ended September 30, 2011, no holders of Old Notes converted their Old Notes into shares of our Class A common stock. The holders of Old Notes have this conversion right only until December 31, 2011. At the end of each future quarter, the conversion rights will be reassessed in accordance with the bond indenture agreement to determine if the conversion trigger rights have been achieved. During the quarter ended September 30, 2011, the New Notes did not meet the criteria for the right of conversion.

Except for the New Notes, we had only $39.6 million of long-term liabilities at September 30, 2011, and, except for the Old Notes, we had $392.1 million of current liabilities at September 30, 2011. Our other commitments and planned expenditures consist principally of payments we will make in connection with strategic collaborations and research and development expenditures, and we will continue to invest in sales and marketing infrastructure.

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Dividends

We do not have a dividend policy. Prior to July 2003, we had not paid a cash dividend on our common stock. Since July 2003, we have paid quarterly cash dividends aggregating approximately $73.5 million on our common stock. In addition, on September 14, 2011, we announced that our Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of common stock, which was paid on October 31, 2011, to our stockholders of record at the close of business on October 3, 2011. Any future determinations to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, operating results, capital requirements and other factors that our Board of Directors deems relevant.

Fair Value Measurements

We utilize unobservable (Level 3) inputs in determining the fair value of our auction rate floating security investments, which totaled $18.1 million at September 30, 2011. These securities were included in long-term investments at September 30, 2011.

Our auction rate floating securities are classified as available-for-sale securities and are reflected at fair value. In prior periods, due to the auction process which took place every 30-35 days for most securities, quoted market prices were readily available, which would qualify as Level 1 under ASC 820, Fair Value Measurements and Disclosure. However, due to events in credit markets that began during the first quarter of 2008, the auction events for most of these instruments failed, and, therefore, we determined the estimated fair values of these securities, beginning in the first quarter of 2008, utilizing a discounted cash flow analysis. These analyses consider, among other items, the collateralization underlying the security investments, the expected future cash flows, including the final maturity, associated with the securities, and the expectation of the next time the security is expected to have a successful auction. These securities were also compared, when possible, to other observable market data with similar characteristics to the securities held by us. Due to these events, we reclassified these instruments as Level 3 during the first quarter of 2008.

Off-Balance Sheet Arrangements

As of September 30, 2011, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Securities and Exchange Commission (“SEC”) Regulation S-K.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates related to sales allowances, chargebacks, rebates, returns and other pricing adjustments, depreciation and amortization and other contingencies and litigation. We base our estimates on historical experience and various other factors related to each circumstance. Actual results could differ from those estimates based upon future events, which could include, among other risks, changes in the regulations governing the manner in which we sell our products, changes in the health care environment and managed care consumption patterns. Our significant accounting policies are described in Note 2 to the consolidated financial statements included in our Form 10-K for the year ended December 31, 2010. There were no new significant accounting estimates in the third quarter of 2011, nor were there any material changes to the critical accounting policies and estimates discussed in our Form 10-K for the year ended December 31, 2010.

Items Deducted From Gross Revenue

Our accounting policies for revenue recognition have a significant impact on our reported results and rely on certain estimates that require complex and subjective judgment on the part of our management. If the levels of product returns, inventory in the distribution channel, cash discounts, chargebacks, managed care and Medicaid rebates and consumer rebate and loyalty programs fluctuate significantly and/or if our estimates do not adequately reserve for these reductions of gross product revenues, our reported net product revenues could be negatively affected.

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The following table shows the activity of each reserve, associated with the various sales provisions that serve to reduce our accounts receivable balance or increase our accrued expenses or deferred revenue, for the three months ended September 30, 2011 and 2010 (in thousands):

	Reserve for Sales Returns			Deferred Revenue			Sales Discounts Reserve			Chargebacks Reserve			Managed Care & Medicaid Rebates Reserve			Consumer Rebate and Loyalty Programs			Total
Balance at June 30, 2011	$	78,220		$	2,441		$	3,655		$	1,489		$	51,239		$	124,922		$	261,966
Actual		(11,656	)		-			(7,045	)		(1,693	)		(22,462	)		(100,935	)		(143,791	)
Provision		6,116			(2,243	)		6,748			1,823			30,644			108,445			151,533
Balance at Sept. 30, 2011	$	72,680		$	198		$	3,358		$	1,619		$	59,421		$	132,432		$	269,708

		00000			00000		00000			00000			00000			00000			00000
	Reserve for Sales Returns			Deferred Revenue		Sales Discounts Reserve			Chargebacks Reserve			Managed Care & Medicaid Rebates Reserve			Consumer Rebate and Loyalty Programs			Total
Balance at June 30, 2010	$	49,194		$	1,307	$	2,958		$	921		$	44,410		$	90,364		$	189,154
Actual		(6,960	)		-		(5,878	)		(1,314	)		(24,926	)		(67,061	)		(106,139	)
Provision		15,173			1,948		5,995			1,387			31,104			75,137			130,744
Balance at Sept. 30, 2010	$	57,407		$	3,255	$	3,075		$	994		$	50,588		$	98,440		$	213,759

The provision for product returns was $6.1 million, or 1.8% of gross product sales, and $15.2 million, or 4.9% of gross product sales, for the three months ended September 30, 2011 and 2010, respectively. The reserve for product returns decreased $5.5 million, from $78.2 million as of June 30, 2011 to $72.7 million as of September 30, 2011. The decrease in the provision during the comparable periods and in the reserve during the three months ended September 30, 2011 was primarily related to a reduction in actual returns and a release of reserves for discontinued products as returns for those products are received during the three months ended September 30, 2011.

The provision for cash discounts was $6.7 million, or 2.0% of gross product sales, and $6.0 million, or 1.9% of gross product sales, for the three months ended September 30, 2011 and 2010, respectively. The reserve for cash discounts decreased $0.3 million, from $3.7 million as of June 30, 2011 to $3.4 million as of September 30, 2011. The increase in the provision during the comparable periods was due to an increase in gross product sales. The balance in the reserve for sales discounts at the end of a quarterly period is related to the amount of accounts receivable that is outstanding at that date that is still eligible for the cash discounts to be taken by the customers. The fluctuation in the reserve for sales discounts between periods is normally reflective of increases or decreases in the related eligible outstanding accounts receivable amounts at the comparable dates.

The provision for consumer rebates and loyalty programs was $108.4 million, or 31.4% of gross product sales, and $75.1 million, or 24.1% of gross product sales, for the three months ended September 30, 2011 and 2010, respectively. The reserve for consumer rebates and loyalty programs increased $7.5 million, from $124.9 million as

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of June 30, 2011 to $132.4 million as of September 30, 2011. The increase in the provision during the comparable periods and in the reserve during the three months ended September 30, 2011 was primarily due to the continued growth in consumer rebate programs related to our SOLODYN^® and ZIANA^® products.

The following table shows the activity of each reserve, associated with the various sales provisions that serve to reduce our accounts receivable balance or increase our accrued expenses or deferred revenue, for the nine months ended September 30, 2011 and 2010 (in thousands):

	Reserve for Sales Returns			Deferred Revenue			Sales Discounts Reserve			Chargebacks Reserve			Managed Care & Medicaid Rebates Reserve			Consumer Rebate and Loyalty Programs			Total
Balance at Dec. 31, 2010	$	60,692		$	582		$	2,830		$	1,151		$	49,375		$	101,678		$	216,308
Actual		(36,753	)		-			(19,769	)		(4,527	)		(69,901	)		(290,117	)		(421,067	)
Provision		48,741			(384	)		20,297			4,995			79,947			320,871			474,467
Balance at Sept. 30, 2011	$	72,680		$	198		$	3,358		$	1,619		$	59,421		$	132,432		$	269,708

	Reserve for Sales Returns			Deferred Revenue		Sales Discounts Reserve			Chargebacks Reserve			Managed Care & Medicaid Rebates Reserve			Consumer Rebate and Loyalty Programs			Total
Balance at Dec. 31, 2009	$	48,062		$	1,263	$	2,160		$	688		$	47,078		$	73,311		$	172,562
Actual		(19,969	)		-		(16,275	)		(3,495	)		(72,716	)		(197,042	)		(309,497	)
Provision		29,314			1,992		17,190			3,801			76,226			222,171			350,694
Balance at Sept. 30, 2010	$	57,407		$	3,255	$	3,075		$	994		$	50,588		$	98,440		$	213,759

The provision for product returns was $48.7 million, or 4.7% of gross product sales, and $29.3 million, or 3.3% of gross product sales, for the nine months ended September 30, 2011 and 2010, respectively. The reserve for product returns increased $12.0 million, from $60.7 million as of December 31, 2010 to $72.7 million as of September 30, 2011. The increase in the provision during the comparable periods and in the reserve during the nine months ended September 30, 2011 was primarily related to additional estimated required reserves for newly-launched products.

The provision for cash discounts was $20.3 million, or 2.0% of gross product sales, and $17.2 million, or 2.0% of gross product sales, for the nine months ended September 30, 2011 and 2010, respectively. The reserve for cash discounts increased $0.6 million, from $2.8 million as of December 31, 2010 to $3.4 million as of September 30, 2011. The increase in the provision during the comparable periods was due to an increase in gross product sales.

The provision for consumer rebates and loyalty programs was $320.9 million, or 31.0% of gross product sales, and $222.2 million, or 25.3% of gross product sales, for the nine months ended September 30, 2011 and 2010,

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respectively. The reserve for consumer rebates and loyalty programs increased $30.7 million, from $101.7 million as of December 31, 2010 to $132.4 million as of September 30, 2011. The increase in the provision during the comparable periods and in the reserve during the nine months ended September 30, 2011 was primarily due to the continued growth in consumer rebate programs related to our SOLODYN^®, ZIANA^® RESTYLANE^® and PERLANE^® products.

Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) – Fair Value Measurement, to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU No. 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU No. 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and must be applied prospectively. We are currently assessing what impact, if any, the revised guidance will have on our results of operations and financial condition.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The updated guidance amends the FASB Accounting Standards Codification (“Codification”) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both alternatives, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU No. 2011-05 will be applied retrospectively. ASU No. 2011-05 is effective for annual reporting periods beginning after December 15, 2011, with early adoption permitted, and will be applied retrospectively. It is expected that the adoption of this amendment will only impact the presentation of comprehensive income within our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The updated guidance permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed in annual reporting periods beginning after December 15, 2011, with early adoption permitted. We are currently assessing what impact, if any, the revised guidance will have on our results of operations and financial condition.

Forward Looking Statements

This Quarterly Report on Form 10-Q and other documents we file with the SEC include forward-looking statements. These include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales and marketing efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. From time to time, we also may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on certain assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. You can

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identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “outlook,” “could,” “target,” and other words and terms of similar meaning in connection with any discussion of future operations or financial performance. Among the factors that could cause actual results to differ materially from our forward-looking statements are the following:

• development and launch of new competitive products, including over-the-counter or generic competitor products;

• the ability to compete against generic and other branded products;

• increases or decreases in the expected costs to be incurred in connection with the research and development, clinical trials, regulatory approvals, commercialization and marketing of our products;

• the success of research and development activities, including the development of additional forms of SOLODYN^®, and our ability to obtain regulatory approvals;

• the speed with which regulatory authorizations and product launches may be achieved;

• changes in the FDA’s position on the safety or effectiveness of our products;

• changes in our product mix;

• the anticipated size of the markets and demand for our products;

• changes in prescription levels;

• the impact of acquisitions, divestitures and other significant corporate transactions, including the disposition of LipoSonix;

• the effect of economic changes generally and in hurricane-affected areas;

• manufacturing or supply interruptions;

• importation of other dermal filler or botulinum toxin products, including the unauthorized distribution of products approved in countries neighboring the U.S.;

• changes in the prescribing or procedural practices of dermatologists and/or plastic surgeons, including prescription levels;

• the ability to successfully market both new products and existing products;

• difficulties or delays in manufacturing and packaging of our products, including delays and quality control lapses of third party manufacturers and suppliers of our products;

• the availability of product supply or changes in the cost of raw materials;

• trends toward managed care and health care cost containment, including health care initiatives and other third-party cost-containment pressures that could impose financial burdens or cause us to sell our products at lower prices, resulting in decreased revenues;

• the Company’s strategy to negotiate new, multi-year contracts with targeted managed care organizations and pharmacy benefit managers, which may result in increased managed care rebates and have a negative impact on sales, reserves, profitability and the average selling price for affected products, such as SOLODYN^®;

• inadequate protection of our intellectual property or challenges to the validity or enforceability of our proprietary rights and our ability to secure patent protection from filed patent applications for our primary products, including SOLODYN^®;

• possible introduction of generic versions of our products, including SOLODYN^®;

• possible federal and/or state legislation or regulatory action affecting, among other things, the Company’s ability to enter into agreements with companies introducing generic versions of the Company’s products as well as pharmaceutical pricing, federal pharmaceutical contracts, mandatory discounts, and reimbursement, including under Medicaid and Medicare and involuntary approval of prescription medicines for over-the-counter use;

• legal defense costs, insurance expenses, settlement costs and the risk of an adverse decision or settlement related to product liability, patent protection, government investigations, and other legal proceedings (see Note 19 in our accompanying condensed consolidated financial statements and Part II, Item 1, Legal Proceedings);

• changes in U.S. generally accepted accounting principles;

• additional costs related to compliance with changing regulation of corporate governance and public financial disclosure;

• any changes in business, political and economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world;

• access to available and feasible financing on a timely basis;

• the availability of product acquisition or in-licensing opportunities;

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• the risks and uncertainties normally incident to the pharmaceutical and medical device industries, including product liability claims;

• the risks and uncertainties associated with obtaining necessary FDA approvals;

• the inability to obtain required regulatory approvals for any of our pipeline products;

• unexpected costs and expenses, or our ability to limit costs and expenses as our business continues to grow;

• decreases in revenues associated with the Company’s early 2011 discontinuation of TRIAZ^® and decision to no longer promote PLEXION^®;

• downturns in general economic conditions that negatively affect our dermal restorative and branded prescription products, and our ability to accurately forecast our financial performance as a result;

• changes in our stock price, economic or other market conditions or corporate or regulatory requirements affecting our ability to consummate repurchases under our Stock Repurchase Plan;

• failure to comply with our corporate integrity agreement, which could result in substantial civil or criminal penalties and our being excluded from government health care programs, which could materially reduce our sales and adversely affect our financial condition and results of operations; and

• the inability to successfully integrate newly-acquired entities.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to review any future disclosures contained in the reports that we file with the SEC. Our Annual Report on Form 10-K for the year ended December 31, 2010, and this Quarterly Report contain discussions of various risks relating to our business that could cause actual results to differ materially from expected and historical results, which you should review. You should understand that it is not possible to predict or identify all such risks. Consequently, you should not consider any such list or discussion to be a complete set of all potential risks or uncertainties.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2011, there were no material changes to the information previously reported under Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 4.    Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed in reports filed by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2011, and have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Although the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, believes that our disclosure controls and internal controls currently provide reasonable assurance that our desired control objectives have been met, management does not expect that our disclosure controls or internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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During the three months ended September 30, 2011, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II.  Other Information

Item 1.    Legal Proceedings

Lupin SOLODYN^® Litigation

On October 8, 2009, we received a Paragraph IV Patent Certification from Lupin Ltd. (“Lupin”) advising that Lupin had filed an Abbreviated New Drug Application (“ANDA”) with the U.S. Food and Drug Administration (“FDA”) for generic versions of SOLODYN^® in 45mg, 90mg, and 135mg strengths. Lupin did not advise us as to the timing or status of the FDA’s review of its filing, or whether it has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that our U.S. Patent No. 5,908,838 (the “’838 Patent”) is invalid. Lupin’s Paragraph IV Patent Certification also alleges that our U.S. Patent Nos. 7,541,347, (the “’347 Patent”) and 7,544,373 (the “’373 Patent”) are not infringed by Lupin’s manufacture, importation, use, sale and/or offer for sale of the products for which its ANDA was submitted. On November 17, 2009, we filed suit against Lupin in the United States District Court for the District of Maryland seeking an adjudication that Lupin has infringed one or more claims of the ’838 Patent by submitting to the FDA its ANDA for generic versions of SOLODYN^® in 45mg, 90mg and 135mg strengths. The relief we requested includes a request for a permanent injunction preventing Lupin from infringing the ’838 Patent by selling generic versions of SOLODYN^®. As a result of the filing of the suit, we believe that the ANDA cannot be approved by the FDA until after the expiration of a 30-month stay period or a court decision that the patent is invalid or not infringed.

On November 24, 2009, we received a Paragraph IV Patent Certification from Lupin, advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for a generic version of SOLODYN^® in 65mg strength. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that our ’838 Patent is invalid. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

On December 23, 2009, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for a generic version of SOLODYN^® in 115mg strength. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that the ’838 Patent is invalid. Lupin’s Paragraph IV Patent Certification also alleges that the ’347 Patent and ’373 Patent are not infringed by Lupin’s manufacture, importation, use, sale and/or offer for sale of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed. On December 28, 2009, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ’838 Patent by submitting its supplement or amendment to its ANDA for a generic version of SOLODYN^® in 65mg strength. On February 2, 2010, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ’838 Patent by submitting its supplement or amendment to its earlier filed ANDA for a generic version of SOLODYN^® in 115mg strength.

On July 1, 2010, we amended our complaint against Lupin in the United States District Court for the District of Maryland relating to Lupin’s filing of its ANDA, and amendments or supplements thereto, for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. We amended the complaint to assert new claims 19, 21, 23, 25 and 27-34 of the ’838 Patent included in an Ex Parte Reexamination Certificate we received from the U.S. Patent and Trademark Office (“USPTO”) on June 1, 2010 in connection with a reexamination of the ’838 Patent by the USPTO a the request of a third party. The complaint seeks an adjudication that Lupin has infringed one or more claims of the ’838 Patent, including the new claims, by submitting the ANDA, and amendments or supplements thereto, to the FDA.

On September 17, 2010, we received an additional Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. Lupin’s Paragraph IV Patent Certification alleges that our U.S. Patent No. 7,790,705 (the “’705 Patent”), which was issued to us by the

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USPTO on September 7, 2010, will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

On October 18, 2010, we amended our complaint against Lupin in the United States District Court for the District of Maryland relating to Lupin’s filing of its ANDA, and amendments or supplements thereto for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. We amended the complaint to allege that Lupin has infringed one or more claims of the ’705 Patent by submitting its ANDA, and amendments or supplements thereto, to the FDA to obtain approval for the commercial manufacture, use, offer for sale, sale, or distribution in and/or importation into the United States of its generic versions of SOLODYN^® before the expiration of the ’705 Patent.

On December 3, 2010, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for generic versions of SOLODYN^® in 55mg and 80mg strengths. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that the ’838 Patent is invalid. Lupin’s Paragraph IV Patent Certification also alleges that the ’705 Patent will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patents are invalid or not infringed. On January 10, 2011, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ’838 Patent and the ’705 Patent by filing the supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 for generic versions of SOLODYN^® in 55mg and 80mg strengths.

On January 24, 2011, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for a generic version of SOLODYN^® in 105mg strength. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that the ’838 Patent is invalid. Lupin’s Paragraph IV Patent Certification also alleges that the ’705 Patent will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patents are invalid or not infringed. On March 2, 2011, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ‘838 Patent and the ’705 Patent by filing the supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 for generic versions of SOLODYN^® in 105mg strength.

On February 2, 2011, the Maryland Court issued an Order staying the litigation through and including April 1, 2011, to permit us and Lupin to discuss settlement of the litigation. On March 24, 2011, we and Lupin jointly requested that the Court extend the stay for an additional period through and including May 16, 2011, which was subsequently approved by the Court. On June 20, 2011, the Court issued a further Order staying the litigation through and including July 18, 2011.

On April 19, 2011, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for generic versions of SOLODYN^® in 45mg, 55mg, 65mg, 80mg, 90mg, 105mg, 115mg and 135 mg strengths. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that our newly issued U.S. Patent No. 7,919,483 (the “‘483 Patent”), which was issued to us by the USPTO on April 5, 2011, will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. The expiration date for the ’483 Patent is in February 2027. We are evaluating the details of Lupin’s certification letter and considering our options. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

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On July 21, 2011, we entered into a license and settlement agreement (the “Lupin Settlement Agreement”) with Lupin and Lupin Pharmaceuticals, Inc. (together referred to as “Lupin” hereunder). Under the terms of the Lupin Settlement Agreement, we agreed to grant to Lupin a future license to make and sell its generic versions of SOLODYN^® in 45mg, 90mg, and 135mg strengths under the SOLODYN^® intellectual property rights belonging to us, with the license grant effective November 26, 2011, or earlier under certain conditions. We also agreed to grant to Lupin future licenses to make and sell its generic versions of SOLODYN^® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and its generic versions of SOLODYN^® in 55mg (against which Lupin’s Paragraph IV Patent Certification was the first received by us), 80mg and 105mg strengths effective in February 2019, or earlier under certain conditions. The Lupin Settlement Agreement provides that Lupin will be required to pay us royalties based on sales of Lupin’s generic SOLODYN^® products pursuant to the foregoing licenses. Pursuant to the Lupin Settlement Agreement, Lupin and we agreed to terminate all legal disputes between us relating to SOLODYN^®. In addition, Lupin confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Lupin’s activities relating to Lupin’s generic SOLODYN^® products under its ANDA. Lupin also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above.

Aurobindo SOLODYN^® Litigation

On October 26, 2010, we received a Paragraph IV Patent Certification from Aurobindo Pharma Limited (“Aurobindo Pharma”) advising that Aurobindo Pharma had filed an ANDA with the FDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. Aurobindo Pharma has not advised us as to the timing or status of the FDA’s review of its filing, or whether it has complied with FDA requirements for proving bioequivalence. Aurobindo Pharma’s Paragraph IV Patent Certification alleges that the ’838 Patent is invalid. Aurobindo Pharma’s Paragraph IV Patent Certification also alleges that the ’347 Patent, ’373 Patent and ’705 Patent are not infringed by Aurobindo Pharma’s manufacture, importation, use, sale and/or offer for sale of the products for which the ANDA was submitted.

On December 3, 2010, we filed suit against Aurobindo Pharma and Aurobindo Pharma USA, Inc. (together, “Aurobindo”) in the United States District Court for the District of Delaware. On December 6, 2010, we also filed suit against Aurobindo in the United States District Court for the District of New Jersey. The suits seek an adjudication that Aurobindo has infringed one or more claims of the ’838 Patent and the ’705 Patent by submitting to the FDA an ANDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. The relief we requested includes a request for a permanent injunction preventing Aurobindo from infringing the asserted claims of the ’838 Patent and the ’705 Patent by engaging in the manufacture, use, importation, offer to sell, sale or distribution of generic versions of SOLODYN^® before the expiration of the patents.

On June 1, 2011, we received a Paragraph IV Patent Certification from Aurobindo advising that Aurobindo had filed a supplement or amendment to its earlier filed ANDA with the FDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. Aurobindo has not advised us as to the timing or status of the FDA’s review of its filing, or whether Aurobindo has complied with FDA requirements for proving bioequivalence. Aurobindo’s Paragraph IV Patent Certification alleges that our newly issued U.S. Patent No. 7,919,483 (the “’483 Patent”), which was issued to us by the USPTO on April 15, 2011, will not be infringed by Aurobindo’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. The expiration date for the ’483 Patent is in February 2027. Aurobindo’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

On September 13, 2011, we entered into a license and settlement agreement (the “Aurobindo Settlement Agreement”), dated as of September 6, 2011, with Aurobindo Pharma U.S.A., Inc. on behalf of itself and its affiliates (collectively, hereunder, “Aurobindo”). Under the terms of the Aurobindo Settlement Agreement, we agreed to grant to Aurobindo a future license to make and sell its generic versions of SOLODYN^® in 45mg, 90mg and 135mg strengths under the SOLODYN^® intellectual property rights belonging to the Company, with the license grant effective November 26, 2011, or earlier under certain conditions. We also agreed to grant to Aurobindo future licenses to make and sell its generic versions of SOLODYN^® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and its generic versions of SOLODYN^® in 55mg, 80mg and 105mg strengths effective in February 2019, or earlier under certain conditions. The Aurobindo Settlement Agreement provides that Aurobindo will be required to pay us royalties based on sales of Aurobindo’s generic SOLODYN^® products pursuant to the foregoing licenses.

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Pursuant to the Aurobindo Settlement Agreement, Aurobindo and we agreed to terminate all legal disputes between us relating to SOLODYN^®. In addition, Aurobindo confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Aurobindo’s activities relating to Aurobindo’s generic SOLODYN^® products under its ANDA. Aurobindo also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above.

Nycomed VANOS^® Litigation

On April 7, 2010, we received a Paragraph IV Patent Certification from Nycomed US Inc. advising that Nycomed US Inc. had filed an ANDA with the FDA for a generic version of VANOS^®. Nycomed US Inc. has not advised us as to the timing or status of the FDA’s review of its filing, or whether it has complied with FDA requirements for proving bioequivalence. Nycomed US Inc.’s Paragraph IV Patent Certification alleges that our U.S. Patent Nos. 6,765,001 (the “’001 Patent”) and 7,220,424 (the “’424 Patent”) will not be infringed by Nycomed US Inc.’s manufacture, use, sale, offer for sale or importation of the product for which the ANDA was submitted.

On May 19, 2010, we filed suit against Nycomed US Inc. and Nycomed GmbH (together, hereunder “Nycomed”) in the United States District Court for the Southern District of New York and the United States District Court for the District of Delaware seeking an adjudication that Nycomed has infringed one or more claims of our ’001 Patent, ’424 Patent and U.S. Patent No. 7,217,422 (the “’422 Patent”) by submitting the ANDA to the FDA. The relief we requested includes a request for a permanent injunction preventing Nycomed from infringing the patents by selling a generic version of VANOS^® prior to the expiration of the asserted patents. On August 3, 2010, Nycomed responded in the New York action by filing an answer, affirmative defenses, and counterclaims alleging that the patents-in-suit are invalid, unenforceable, and will not be infringed by Nycomed’s proposed generic version of VANOS^®, and a motion to dismiss certain claims related to the patents-in-suit. On August 3, 2010, Nycomed responded in the Delaware action by filing a motion to transfer the Delaware action to New York and a motion to dismiss certain claims related to the patents-in-suit. We responded to Nycomed’s motions and pleadings on December 15, 2010.

On December 23, 2010, Nycomed filed an amended answer and counterclaims in the New York action alleging only invalidity and noninfringement of the patents-in-suit. On January 14, 2011, we filed an answer to Nycomed’s amended counterclaims in the New York action denying that any of the asserted patents are invalid or not infringed. On January 19, 2011 and January 24, 2011, the New York court endorsed the parties’ stipulations withdrawing all pending motions.

On January 19, 2011, the Delaware court endorsed the parties’ stipulation withdrawing Nycomed’s pending motion to dismiss and ordering Nycomed to answer or otherwise respond to the complaint. On February 2, 2011, Nycomed filed an answer with affirmative defenses alleging that the patents are invalid, unenforceable, and will not be infringed by Nycomed’s proposed generic version of VANOS^®. On March 31, 2011, the Delaware Court granted Nycomed’s motion to transfer the Delaware action to New York. On May 23, 2011, the New York Court consolidated the Delaware action with the New York action and entered a scheduling order. Pursuant to the Court’s schedule, discovery is set to close on May 4, 2012, and the parties are scheduled to submit a proposed Pretrial Order on June 1, 2012.

On December 15, 2010, we filed a new complaint for patent infringement against Nycomed US Inc. in the United States District Court for the District of Delaware. Our new complaint seeks an adjudication that Nycomed US’s filing of its ANDA for fluocinonide cream 0.1% infringes one or more claims of our U.S. Patent No. 7,794,738 (the “’738 Patent”). On February 15, 2011, Nycomed responded by filing a motion to transfer the new Delaware action to New York, as well as a motion to dismiss for failure to state a claim and lack of subject matter jurisdiction. Medicis opposed both motions on March 4, 2011, and Nycomed replied on April 12, 2011. On June 16, 2011, the Delaware Court granted Nycomed’s motion to transfer the case to New York. On July 19, 2011, Nycomed withdrew its motion to dismiss. On July 27, 2011, the New York Court consolidated this action with the other New York actions.

On August 4, 2011, we entered into a license and settlement agreement (the “Nycomed Settlement Agreement”) with Nycomed and its affiliates (collectively “Nycomed”). In connection with the Nycomed Settlement Agreement, we and Nycomed agreed to terminate all legal disputes between us relating to VANOS^®. In addition, Nycomed confirmed that certain of our patents relating to VANOS^® are valid and enforceable, and cover Nycomed’s activities relating to its generic products under its ANDA. Further, subject to the terms and conditions

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contained in the Nycomed Settlement Agreement, we agreed to grant to Nycomed, effective December 15, 2013, or earlier upon the occurrence of certain events, a license to make and sell generic versions of VANOS^® products. Upon commercialization by Nycomed of generic versions of VANOS^® products, Nycomed will pay us a royalty based on sales of such generic products.

On August 10, 2011, we received a Paragraph IV Patent Certification from Nycomed advising that Nycomed has filed a supplement or amendment to its earlier filed ANDA with the FDA for a generic version of VANOS^®. Nycomed’s Paragraph IV Patent Certification alleges that the ’738 Patent will not be infringed by Nycomed’s manufacture, use, sale, offer for sale, importation or offer to import the product for which the supplement or amendment was submitted due to the licensing agreement described above.

Stiefel VELTIN™ Litigation

On July 28, 2010, we filed suit against Stiefel Laboratories, Inc., a subsidiary of GlaxoSmithKline plc (“Stiefel”), in the United States District Court for the Western District of Texas – San Antonio Division seeking a declaratory judgment that the manufacture and sale of Stiefel’s acne product VELTIN™ Gel, which was approved by the FDA in 2010, will infringe one or more claims of our U.S. Patent No. RE41,134 (the “’134 Patent”) covering our product ZIANA^® Gel, a prescription topical gel indicated for the treatment of acne that was approved by the FDA in November 2006. The ’134 Patent is listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book) and expires in February 2015. We have rights to the ’134 Patent pursuant to an exclusive license agreement with the owner of the patent. The relief we requested in the lawsuit includes a request for a permanent injunction preventing Stiefel from infringing the ’134 Patent by engaging in the commercial manufacture, use, importation, offer to sell, or sale of any therapeutic composition or method of use covered by the ’134 Patent, including such activities relating to VELTIN™, and from inducing or contributing to any such activities. On October 8, 2010, we and the owner of the ’134 Patent filed a motion for a Preliminary Injunction seeking to enjoin sales of VELTIN™. The motion for Preliminary Injunction remains pending.

Actavis ZIANA^® Litigation

On March 30, 2011, we received a Paragraph IV Patent Certification from Actavis Mid Atlantic LLC (“Actavis”) advising that Actavis has filed an ANDA with the FDA for a generic version of ZIANA^® (clindamycin phosphate 1.2% and tretinoin 0.025%) Gel. Actavis has not advised us as to the timing or status of the FDA’s review of its filing, or whether Actavis has complied with FDA requirements for proving bioequivalence. Actavis’ Paragraph IV Patent Certification alleges that our U.S. Patent Nos. RE41,134 (the “’134 Patent”) and 6,387,383 (the “’383 Patent”) will not be infringed by Actavis’ manufacture, use and/or sale of the product for which the ANDA was submitted. The expiration date for the ’134 Patent is in 2015, and the expiration date for the ’383 Patent is in 2020. On May 11, 2011, we filed suit against Actavis in the United States District Court for the District of Delaware. The suit seeks an adjudication that Actavis has infringed one or more clams of the ’134 Patent and the ’383 Patent by submitting its ANDA to the FDA. The relief we requested includes a request for a permanent injunction preventing Actavis from infringing the asserted claims of the ’134 Patent and the ’383 Patent by engaging in the commercial manufacture, use, offer to sell, or sale within the U.S., or importation into the U.S., of any chemical entity, therapeutic composition, or method of use claimed by the ’134 Patent and the ’383 Patent, and from inducing or contributing to such activities, prior to the expiration of the patents-in-suit. As a result of the filing of the suit, we believe that the ANDA cannot be approved by the FDA until after the expiration of the 30-month stay period or a court decision that the patents-in-suit are invalid or not infringed.

Acella TRIAZ^® Litigation

On August 19, 2010, we filed suit against Acella Pharmaceuticals, Inc. (“Acella”) in the United States District Court for the District of Arizona based on Acella’s manufacture and offer for sale of benzoyl peroxide foaming cloths which we believe infringe one or more claims of our U.S. Patent No. 7,776,355 (the “’355 Patent”) covering certain of our products, including TRIAZ^® (benzoyl peroxide) 3%, 6% and 9% Foaming Cloths indicated for the topical treatment of acne vulgaris. The ’355 Patent was issued to us by the USPTO on August 17, 2010 and expires in June 2026. The relief we requested in the lawsuit includes a request for a Permanent Injunction preventing Acella from infringing the ’355 Patent by engaging in the manufacture, use, importation, offer to sell, or sale of any products covered by the ’355 Patent, including Acella’s benzoyl peroxide foaming cloths, and from inducing or contributing to any such activities. Acella filed with the USPTO a request for ex parte reexamination of the ’355 Patent, and filed with the Court a request that the litigation be stayed for the duration of the reexamination.

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Both the request for reexamination and the request for a stay were initially denied. Acella resubmitted its request for reexamination to the USPTO, which was granted on December 15, 2010. Acella again requested that the case be stayed pending reexamination, and the Court again denied Acella’s request. On August 12, 2011, the USPTO issued an initial action in the reexamination, confirming that several of the claims of the ’355 Patent are patentable, including several claims that we believe are infringed by Acella. The reexamination process is continuing. We filed a motion for a Preliminary Injunction on December 10, 2010. The hearing on the Preliminary Injunction motion was to be combined with a “Markman Hearing” that was also scheduled for February 23, 2011. At a Markman Hearing, a court determines the scope of the patent’s claims. The Court held only the Markman Hearing on February 23, 2011, and deferred the hearing on the Preliminary Injunction motion until March 29, 2011. At the Markman Hearing, the Court determined the scope of the patent’s claims. Due to the need to postpone the March 29, 2011 hearing on the Preliminary Injunction due to scheduled conflicts, we withdrew our motion for a Preliminary Injunction in favor of a motion for an expedited trial. In the meantime, Acella moved for summary judgment that the claims of the ’355 Patent are invalid, and that we are entitled only to a reasonable royalty, not lost profit damages. We opposed this motion. On November 3, 2011, the Court granted the motion with respect to validity, and dismissed the motion with respect to lost profits damages. We are reviewing the decision.

LOPROX^® Patent Litigation

We filed lawsuits against each of Perrigo Company, Inc. (“Perrigo”), Nycomed U.S., Inc. (hereunder “Nycomed”), and Taro Pharmaceuticals U.S.A., Inc. and Taro Pharmaceutical Industries, Ltd. (together, “Taro”) on July 19, 2011, and against Watson Pharmaceuticals, Inc. (“Watson,” and collectively with Perrigo, Nycomed, and Taro, the “Defendants”) on October 21, 2011, in the United States District Court for the Southern District of New York. Each of the lawsuits seeks an adjudication that the respective Defendant is infringing one or more claims of our U.S. Patent No. 7,981,909 (the “’909 Patent”) by making, using, offering for sale, selling in the U.S. or importing, without authority, a generic version of LOPROX^® Shampoo (ciclopirox) 1%. Perrigo, Nycomed and Taro received FDA approval for generic ciclopirox 1% shampoos on or about February 16, 2010, May 25, 2010 and February 23, 2011, respectively. Watson acquired rights to a generic ciclopirox 1% shampoo from Perrigo on or about July 26, 2011, which shampoo was approved by the FDA on November 24, 2009. The relief we requested in each of the lawsuits includes damages and a request for a permanent injunction preventing the respective Defendant from selling a generic version of LOPROX^® prior to the expiration of the ’909 Patent. We formally served each of defendants Perrigo, Nycomed, and Taro Pharmaceuticals U.S.A., Inc. with the complaints on October 13, 2011. Taro Pharmaceutical Industries, Ltd. was formally served on October 24, 2011. We have not yet effected formal service of process against Watson. The Court has scheduled an initial conference in the actions filed against Perrigo, Nycomed, and Taro for January 13, 2012.

The information set forth under “Legal Matters” in Note 19 in the notes to the condensed consolidated financial statements, included in Part I, Item I of this Report, is incorporated herein by reference. The pending proceedings described in this section and in “Legal Matters” in Note 19 in the notes to the condensed consolidated financial statements included in Part I, Item I of this Report involve complex questions of fact and law and will require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible. The resolution of intellectual property litigation may require us to pay damages for past infringement or to obtain a license under the other party’s intellectual property rights that could require one-time license fees or ongoing royalties, which could adversely impact our product gross margins in future periods, or could prevent us from manufacturing or selling some of our products or limit or restrict the type of work that employees involved in such litigation may perform for us. From time to time we may enter into confidential discussions regarding the potential settlement of pending litigation or other proceedings; however, there can be no assurance that any such discussions will occur or will result in a settlement. The settlement of any pending litigation or other proceeding could require us to incur substantial settlement payments and costs. In addition, the settlement of any intellectual property proceeding may require us to grant a license to certain of our intellectual property rights to the other party under a cross-license agreement. If any of those events were to occur, our business, financial condition and results of operations could be materially and adversely affected.

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Item 1A. Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows. For a detailed discussion of the risk factors that should be understood by any investor contemplating investment in our stock, please refer to Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.

Other than the additional risks set forth below, there are no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.

The growth of managed care organizations, other third-party reimbursement policies, state regulatory agencies and retailer fulfillment policies may harm our pricing, which may reduce our market share and margins.

Our operating results and business success depend in large part on the availability of adequate third-party payor reimbursement to patients for our prescription-brand products. These third-party payors include governmental entities such as Medicaid, private health insurers and managed care organizations. Because of the size of the patient population covered by managed care organizations, marketing of prescription drugs to them and the pharmacy benefit managers that serve many of these organizations has become important to our business.

The trend toward managed healthcare in the United States and the growth of managed care organizations could significantly influence the purchase of pharmaceutical products, resulting in lower prices and a reduction in demand for products such as SOLODYN^®. Managed care organizations and other third-party payors try to negotiate the pricing of medical services and products to control their costs. Managed care organizations and pharmacy benefit managers typically develop formularies to reduce their cost for medications. Formularies can be based on the prices and therapeutic benefits of the available products. Due to their lower costs, generic products are often favored. The breadth of the products covered by formularies varies considerably from one managed care organization to another, and many formularies include alternative and competitive products for treatment of particular medical conditions. Exclusion of a product from a formulary can lead to its sharply reduced usage in the managed care organization patient population. Payment or reimbursement of only a portion of the cost of our prescription products could make our products less attractive, from a net-cost perspective, to patients, suppliers and prescribing physicians. We cannot be certain that the reimbursement policies of these entities will be adequate for our pharmaceutical products to compete on a price basis. If our products are not included within an adequate number of formularies or adequate reimbursement levels are not provided, or if those policies increasingly favor generic products, our market share and gross margins could be harmed, as could our business, financial condition, results of operations and cash flows. We are actively engaged in a strategy to reduce our exposure to managed care restrictions for SOLODYN^® and our other therapeutic products. This strategy includes, among other things, negotiating new, multi-year contracts with targeted managed care organizations and pharmacy benefit managers. There can be no assurance that such negotiations will be successful or that the strategy will achieve its desired result. Even if such negotiations are successful, they may result in increased managed care rebates, which may have a negative impact on sales, reserves, profitability and the average selling price for affected products, such as SOLODYN^®, and result in a reduction in reimbursement amounts for such products from other third-party payors, including the Medicare and Medicaid programs.

In addition, healthcare reform could affect our ability to sell our products and may have a material adverse effect on our business, results of operations, financial condition and cash flows. In particular, the Affordable Care Act substantially changes the way healthcare is financed by both governmental and private insurers, subjects biologic products to potential competition by lower-cost “biosimilars,” and significantly impacts the U.S. pharmaceutical and medical device industries. Among other things, the Affordable Care Act:

• Establishes annual, non-deductible fees on any entity that manufactures or imports certain branded prescription drugs and biologics, beginning 2011;

• Establishes a deductible excise tax on any entity that manufactures or imports certain medical devices offered for sale in the United States, beginning 2013;

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• Increases minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1 percent and 13 percent of the AMP for branded and generic drugs, respectively;

• Redefines a number of terms used in determining Medicaid drug rebate liability, including average manufacturer price and retail community pharmacy, effective October 2010;

• Extends manufacturers’ Medicaid rebate liability to covered drugs dispensed to enrollees in certain Medicaid managed care organizations, effective March 23, 2010;

• Expands eligibility criteria for Medicaid programs by, among other things, permitting states to offer Medicaid coverage to additional individuals beginning April 2010 and by adding new mandatory eligibility categories for certain individuals with income at or below 133 percent of the Federal Poverty Level beginning 2014, thereby potentially increasing manufacturers’ Medicaid rebate liability;

• Establishes a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research;

• Requires manufacturers to participate in a coverage gap discount program, under which they must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period (also known as the “doughnut hole”), as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D, beginning 2011;

• Increases the number of entities eligible for the “Section 340B discounts” for outpatient drugs provided to hospitals meeting the qualification criteria under Section 340B of the Public Health Service Act of 1944, effective January 2010; and

• Establishes an abbreviated legal pathway to approve biosimilars (also referred to as “follow-on biologics”).

Title VII of the Affordable Care Act, the Biologics Price Competition and Innovation Act of 2009, or BPCIA, creates a new licensure framework for follow-on biologic products. Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” a referenced, branded biologic product. Prior to the BPCIA, there was no approval pathway for such a follow-on product. Innovator biologics are granted 12 years of data exclusivity, with a potential six-month pediatric extension. After the period of data exclusivity expires, the FDA could approve biosimilar versions of innovator biologic products. The regulatory implementation of these provisions is ongoing and is expected to take several years. Such implementation could ultimately subject our biologic product, DYSPORT^®, to competition by biosimilars.

Some of our products are not of a type generally eligible for reimbursement. It is possible that products manufactured by others could address the same effects as our products and be subject to reimbursement. If this were the case, some of our products may be unable to compete on a price basis. In addition, decisions by state regulatory agencies, including state pharmacy boards, and/or retail pharmacies may require substitution of generic for branded products, may prefer competitors’ products over our own, and may impair our pricing and thereby constrain our market share and growth.

Managed care initiatives to control costs have influenced primary-care physicians to refer fewer patients to dermatologists and other specialists. Further reductions in these referrals could reduce the size of our potential market, and harm our business, financial condition, results of operations and cash flows.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes our repurchases of equity securities for the three-month period ended September 30, 2011:

Period	Total Number of Shares Repurchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Repurchased Under the Plans or Programs (2) (3)
July 1, 2011 to July 31, 2011		-		-		-
August 1, 2011 to August 31, 2011		-		-		-
September 1, 2011 to September 30, 2011		49,264	$	36.03		49,264
Total		49,264	$	36.03		49,264	$	148,225,132

(1) Does not include shares deliverable, if any, upon expiration of the capped call options described above.

(2) On August 8, 2011, the Company announced that its Board of Directors approved a Stock Repurchase Plan to purchase up to $200 million in aggregate value of shares of Medicis Class A common stock. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the repurchase limit of $200 million is reached, but may be suspended or terminated at any time at the Company’s discretion without prior notice.

(3) As reduced by the $50.0 million aggregate premium to purchase the capped call options described above.

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Item 6.    Exhibits

Exhibit 10.1+*	License and Settlement Agreement, dated as of July 21, 2011, by and among the Company, Lupin Limited and Lupin Pharmaceuticals, Inc.
Exhibit 10.2+*	License and Settlement Agreement, dated as of August 4, 2011, by and between the Company and Nycomed US Inc.
Exhibit 10.3+*	License and Settlement Agreement, dated as of September 6, 2011, by and between the Company and Aurobindo Pharma U.S.A., Inc.
Exhibit 10.4+*	Stock Purchase Agreement, dated as of September 12, 2011, by and between the Company and Solta Medical, Inc.
Exhibit 10.5+	Amendment No. 1 to the Medicis Pharmaceutical Corporation Supplemental Executive Retirement Plan, dated October 6, 2011
Exhibit 31.1+	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2+	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1++	Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101++**	The following financial information from Medicis Pharmaceutical Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, (ii) the Condensed Consolidated Statements of Income for each of the three-month and nine-month periods ended September 30, 2011 and 2010, (iii) the Condensed Consolidated Statements of Cash Flows for each of the nine-month periods ended September 30, 2011 and 2010, and (iv) the Notes to the Condensed Consolidated Financial Statements.

+ Filed herewith

++ Furnished herewith

* Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

** Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MEDICIS PHARMACEUTICAL CORPORATION
Date: November 9, 2011	By:	/s/ Jonah Shacknai
		Jonah Shacknai
		Chairman of the Board and
		Chief Executive Officer
		(Principal Executive Officer)
Date: November 9, 2011	By:	/s/ Richard D. Peterson
		Richard D. Peterson
		Executive Vice President,
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting
		Officer)

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EX-10.1

Exhibit 10.1

*** INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

LICENSE AND SETTLEMENT AGREEMENT

THIS LICENSE AND SETTLEMENT AGREEMENT (this “Agreement”) dated as of July 21, 2011 (the “Effective Date”) is entered into among Medicis Pharmaceutical Corporation, a Delaware corporation with an address at 7720 North Dobson Road, Scottsdale, Arizona 85256, on behalf of itself and its Affiliates (collectively, “Medicis”), and Lupin Limited, a business entity organized under the laws of India with an address at Laxmi Towers, B Wing, Bandra Kurla Complex, Bandra (East), Mumbai, Maharashtra 400 051, India and Lupin Pharmaceuticals, Inc., a Virginia corporation with an address at 111 S. Calvert Street, 21st Floor, Baltimore, Maryland 21202, on behalf of themselves and their Affiliates (collectively “Lupin”).

WHEREAS, Medicis is the owner of the Patent Rights (as defined below) and has filed complaints against Lupin in actions captioned Medicis Pharmaceutical Corporation v. Lupin Ltd. & Lupin Pharmaceuticals Inc., Civil Action No. 09-3062 (JFM) ( the “Litigation”) which is pending in the United States District Court for the District of Maryland (the “Court”);

WHEREAS, to avoid the expense of further litigation the parties desire to settle the Litigation on the terms set forth herein; and

WHEREAS, the parties desire to settle the Litigation and Lupin desires to receive, and Medicis desires to grant to Lupin, a license under the Patent Rights to make, use, sell, offer for sale and import Original Generic Product and Newer Generic Product (as each term is defined below), all on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS.

1.1 “55/80/105 Strength Generic Product” means *** the 55mg, 80mg or 105mg strength Newer Solodyn Product.

1.2 “55/80/105 Strength Trigger Date” means, solely with respect to a particular 55/80/105 Strength Generic Product for which Lupin has an approved ANDA, the earliest of:

(a) February ***, 2019;

(b) ***;

(c) ***; and

(d) ***.

***.

***.

1.3 “65/115 Strength Generic Product” means *** the 65mg or 115mg strength Newer Solodyn Product.

1.4 “65/115 Strength Trigger Date” means, solely with respect to a particular 65/115 Strength Generic Product for which Lupin has an approved ANDA, the earlier of:

(a) February ***, 2018;

(b) ***;

(c) ***; and

(d) ***.

***.

***.

1.5 “Affiliate” means, with respect to any entity, any other entity that directly or indirectly controls, is controlled by, or is under common control with, such entity. An entity shall be regarded as in control of another entity if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other entity, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other entity by any means whatsoever. For the avoidance of doubt, references to each of Lupin and Medicis in this Agreement shall be deemed to include in each instance such party and its Affiliates unless otherwise expressly indicated.

1.6 “ANDA” means an Abbreviated New Drug Application any amendments and supplements thereto.

1.7 “Authorized Generic” means any Original Generic Product or Newer Generic Product that is sold in the United States pursuant to the Medicis NDA but not under the Solodyn or other product-specific trademark of Medicis.

1.8 “Business Day” means any day other than a Saturday, a Sunday or a day on which the state or federal courts located in the State of Delaware are authorized or obligated by law or executive order to be closed.

1.9 “Confidential Information” means all non-public materials, information and data concerning the disclosing party and its operations that is disclosed by the disclosing party to the receiving party pursuant to this Agreement, orally or in written, electronic or tangible form, or otherwise obtained by the receiving party through observation or examination of the disclosing party’s operations. Confidential Information includes, but is not limited to, information about the disclosing party’s financial condition and projections; business, marketing or strategic plans; sales information; customer lists; price lists; databases; trade secrets; product prototypes and designs; techniques, formulae, algorithms and other non-public process information. Notwithstanding the foregoing, Confidential Information of a party shall not include that portion of such materials, information and data that the recipient can establish by

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written documentation: (a) is known to the recipient or any of the recipient’s Affiliates as evidenced by its written records before receipt thereof from the disclosing party, (b) is disclosed to the recipient or any of the recipient’s Affiliates free of confidentiality obligations by a Third Party who has the right to make such disclosure without obligations of confidentiality, (c) is or becomes part of the public domain through no fault of the recipient, or (d) the recipient can reasonably establish is independently developed by persons on behalf of recipient or any of its Affiliates without the use of the information disclosed by the disclosing party.

1.10 “Cost of Goods” means ***.

1.11 “FDA” means the United States Food and Drug Administration or any successor entity thereto.

1.12 “Final Court Decision” means a decision of a United States Court from which no appeal has been or can be taken, other than any petition for a writ of certiorari or other proceedings before the United States Supreme Court. For the avoidance of doubt, a court of appeals’ judgment or order is not “final” until issuance of the mandate.

1.13 “Gross Profit” means ***.

1.14 “IFRS” means International Financial Reporting Standards in effect from time to time, as consistently applied by Lupin.

1.15 “Medicis NDA” means the New Drug Application #50-808 and any supplements or amendments thereto.

1.16 “Net Sales” means ***. Subsections (a) through (f) shall be collectively referred to as “Deductions”.

1.17 “Newer Generic Products” means, collectively, the 55/80/105 Strength Generic Products and the 65/115 Strength Generic Products.

1.18 “Newer Solodyn Products” means the 55mg, 65mg, 80mg, 105mg and 115mg dosage strengths of the Solodyn-branded minocycline products that were approved by the FDA under the Medicis NDA.

1.19 “Original Generic Product” means *** one of the Original Solodyn Products in 45mg, 90mg or 135mg dosage strengths.

1.20 “Original Solodyn Products” means the 45mg, 90mg and 135mg dosage strengths of the Solodyn-branded minocycline products that were approved by the FDA under the Medicis NDA.

1.21 “Original Strengths Trigger Date” means with respect to an Original Generic Product for which Lupin has an approved ANDA, on an Original Generic Product-by-Original Generic Product basis, the earliest of:

(a) November 26, 2011;

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(b) ***;

(c) ***; and

(d) ***.

***.

***.

1.22 “Patent Rights” means (a) the patents, the patent applications giving rise thereto and patent applications listed on Exhibit A to this Agreement, (b) all patents and patent applications issued or filed, respectively, in the United States that (i) claim or cover a product, composition, method, process or other patentable subject matter for an Original Solodyn Product or a Newer Solodyn Product, or the manufacture, use, offer for sale, sale or importation of such product and (ii) Medicis or its successors and assigns owns or controls as of the Effective Date or thereafter during the term of this Agreement; (c) all divisionals, continuations, continuations-in-part and reissues that claim priority to, or common priority with, the patent applications described in clauses (a) and (b) above or the patent applications that resulted in the patents described in clauses (a) and (b) above, and all patents granted thereon, and (d) all patents that have issued or in the future issue from any of the foregoing patent applications, together with any reexamination certificates, reissues or restorations by existing or future extension or restoration mechanisms, or additions thereto.

1.23 “Pharmaceutical Equivalent” means a product having the same active ingredient, the same dosage form, the same route of administration and the same strength or concentration as a given reference listed drug.

1.24 “Third Party” means any person or entity other than Medicis or Lupin.

1.25 “United States” means the United States of America ***.

1.26 “Valid Claim” means ***.

2. CONSENT JUDGMENT; MUTUAL RELEASE; COVENANTS.

2.1 Consent Judgment; Settlement Payment.

2.1.1 In consideration of the mutual benefits of entering into this Agreement, the parties shall enter into and cause to be filed with the Court, within *** of the Effective Date, a consent judgment dismissing, without prejudice, all claims, defenses and counterclaims as between Medicis and Lupin in the Litigation, substantially in the form attached hereto as Exhibit B (the “Consent Judgment”).

2.1.2 If the Court does not grant the Consent Judgment substantially in the form attached hereto as Exhibit B, or requires that the parties modify the Consent Judgment before it will enter it as an order of the Court, or if after *** the Court has otherwise failed to enter the Consent Judgment, the parties agree to confer promptly in good faith and to use reasonable

4

efforts to revise that document consistent with the requirements of the Court, or take such other action consistent with this Agreement as is required to secure entry of the Consent Judgment as drafted or with agreed-upon modifications; provided, however, that “reasonable efforts” shall not be deemed to require agreement to a modification of this Agreement or the Consent Judgment that materially affects the benefits to be obtained by, or burdens imposed upon, a party under this Agreement.

2.2 ***.

2.3 Mutual Release.

2.3.1 In settlement of disputed claims in the Litigation, and in consideration of the representations, warranties and covenants contained in this Agreement, Medicis and its predecessors, successors, assigns, agents, officers, employees and representatives, hereby fully, finally and irrevocably relinquishes, releases and discharges Lupin and its predecessors, successors, assigns, agents, directors, officers, employees and representatives from any and all claims, demands, damages, liabilities, obligations, and causes of action known or unknown, suspected or unsuspected, in law or equity, that were asserted, or that could have been asserted, by Medicis in connection with Lupin’s ANDA for any Original Generic Products or any Newer Generic Products or the Litigation and arising before the Effective Date of this Agreement.

2.3.2 In settlement of disputed claims in the Litigation, and in consideration of the representations, warranties and covenants contained in this Agreement, Lupin and its predecessors, successors, assigns, agents, officers, employees and representatives, hereby fully, finally and irrevocably relinquishes, releases and discharges Medicis and its predecessors, successors, assigns, agents, directors, officers, employees and representatives from any and all claims, demands, damages, liabilities, obligations, and causes of action known or unknown, suspected or unsuspected, in law or equity, that were asserted, or that could have been asserted, by Lupin in connection with the Litigation and arising before the Effective Date of this Agreement.

2.3.3 It is expressly understood and agreed that Medicis and Lupin hereby waive any statutes or common law doctrines under which a general release would not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, including but not limited to any and all rights and benefits conferred by §1542 of the California Civil Code (if and to the extent applicable). Each party has not heretofore assigned or transferred, and will not assign or otherwise transfer, to any person or entity any matters released by such party respectively in Sections 2.3.1 and 2.3.2 above.

2.4 Prior to Trigger Dates.

2.4.1 Commencing on the Effective Date and continuing until the occurrence of an Original Strengths Trigger Date, Lupin shall not, and shall not directly or indirectly encourage or assist any Third Party, on a voluntary basis, to develop, make, use, sell, offer for sale, or import into the United States such Original Generic Product, except as expressly permitted by the terms of this Agreement. ***.

5

2.4.2 Commencing on the Effective Date and continuing until the occurrence of the 55/80/105 Strength Trigger Date for a particular 55/80/105 Strength Generic Product, on a 55/80/105 Strength Generic Product-by-55/80/105 Strength Generic Product basis, Lupin shall not, and shall not directly or indirectly encourage or assist any Third Party, on a voluntary basis, to develop, make, use, sell, offer for sale, or import into the United States such 55/80/105 Strength Generic Product, except as expressly permitted by the terms of this Agreement. ***.

2.4.3 Commencing on the Effective Date and continuing until the occurrence of the 65/115 Strength Trigger Date for a particular 65/115 Strength Generic Product, on a 65/115 Strength Generic Product-by-65/115 Strength Generic Product basis, Lupin shall not, and shall not directly or indirectly encourage or assist any Third Party, on a voluntary basis, to develop, make, use, sell, offer for sale, or import into the United States such 65/115 Strength Generic Product, except as expressly permitted by the terms of this Agreement. ***.

2.4.4 By way of clarification and for the avoidance of doubt, ***.

2.5 Validity Representation; Covenant Not to Challenge Patent Rights. Lupin hereby admits that the claims of the Patent Rights asserted against Lupin in the Litigation are valid and enforceable. Lupin hereby admits that the making, using, offering to sell, selling, and/or importation in or into the United States of its Original Generic Product or a Newer Generic Product, in each case, are covered by one or more claims of the Patent Rights asserted against Lupin in the Litigation under 35 U.S.C. § 271. The foregoing admissions, and any consent judgment incorporating same, shall be binding on Lupin and admissible against Lupin in any dispute or litigation between the parties regarding the claims of the Patent Rights asserted against Lupin in the Litigation, and Lupin shall not challenge such admission. Lupin agrees that during the term of this Agreement, Lupin shall not with respect to the United States initiate itself, or assist any Third Party in, an action to invalidate or render unenforceable any Valid Claim, and Lupin shall not disclose to any Third Party any of its proprietary or confidential information relating to the validity or enforceability of any Valid Claim for such purpose, except to the extent required by court order or other applicable law. Notwithstanding the foregoing, nothing herein shall prevent Lupin (a) from maintaining its certification(s) pursuant to 21 U.S.C. §355(j)(2)(A)(vii)(IV) contained in its ANDA(s) for any Original Generic Product or Newer Generic Product, *** or (c) from assisting (including without limitation providing any information) to any Third Party with respect to the matters described in clause (b) above.

2.6 Regulatory Matters ***. No provision of this Agreement shall be affected by any delay in the approval of Lupin’s ANDA for any Original Generic Product or Newer Generic Product by the FDA. ***.

2.7 Limited Use of Agreement Outside United States. Medicis and Lupin agree that neither will use this Agreement or the Consent Judgment outside of the United States for any purpose except to enforce the Agreement.

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3. LICENSE.

3.1 License Grants.

3.1.1 Subject to the terms and conditions of this Agreement, and effective on the Original Strengths Trigger Date, Medicis hereby grants to Lupin a non-exclusive, non-transferable (except as provided in Section 9.5), non-sublicensable license under the Patents Rights (a) to make, have made, use, sell, offer for sale and import the applicable Original Generic Products in the United States and (b) to make and have made the applicable Original Generic Products outside the United States only for use, offer for sale, sale and importation in and into the United States.

3.1.2 Subject to the terms and conditions of this Agreement, and effective on the applicable 55/80/105 Strength Trigger Date for each applicable 55/80/105 Strength Generic Product for which Lupin has an approved ANDA, Medicis hereby grants to Lupin a non-exclusive, non-transferable (except as provided in Section 9.5), non-sublicensable license under the Patents Rights (a) to make, have made, use, sell, offer for sale and import in the United States the applicable 55/80/105 Strength Generic Products for which Lupin has an approved ANDA and (b) to make and have made the applicable 55/80/105 Strength Generic Product outside the United States only for use, offer for sale, sale and importation in and into the United States.

3.1.3 Subject to the terms and conditions of this Agreement, and effective on the applicable 65/115 Strength Trigger Date for each applicable 65/115 Strength Generic Product for which Lupin has an approved ANDA, Medicis hereby grants to Lupin a non-exclusive, non-transferable (except as provided in Section 9.5), non-sublicensable license under the Patents Rights (a) to make, have made, use, sell, offer for sale and import in the United States the applicable 65/115 Strength Generic Products for which Lupin has an approved ANDA and (b) to make and have made the applicable 65/115 Strength Generic Product outside the United States only for use, offer for sale, sale and importation in and into the United States.

3.2 No Implied Licenses. Except as otherwise provided herein, nothing in this Agreement shall be construed as: (a) an obligation to bring or prosecute actions or suits against Third Parties for infringement of any patent, whether within the Patent Rights or otherwise; (b) conferring a right to use in advertising, publicity, promotion or otherwise any trademark or trade name of Medicis; or (c) granting by implication, estoppel or otherwise, any licenses or rights under the Patent Rights or any other patents.

3.3 ***.

3.4 ***.

3.5 ***.

4. GROSS PROFIT SHARING.

4.1 Payment.

4.1.1 Subject to the terms and conditions of this Agreement, within *** following the end of each calendar quarter during the term of this Agreement, Lupin shall pay to Medicis in U.S. dollars an amount equal to (a) *** of the Gross Profit of the Original Generic Product that is covered by a Valid Claim and (b) *** of the Gross Profit of the Newer Generic Product that is covered by a Valid Claim, accrued during such calendar quarter and arising from

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Net Sales of such products during such calendar quarter. All payments shall be made by wire transfer in US Dollars to such bank account as may be designated by Medicis in writing to Lupin.

4.1.2 Each payment made under Section 4.1.1 shall be accompanied by a written report stating the number and description of all Original Generic Product and Newer Generic Product sold in the United States during the relevant calendar quarter; the Cost of Goods associated therewith; the gross sales associated therewith; the calculation of Net Sales thereon, including without limitation the amount of any Deductions; and the calculation of Gross Profit therefrom and the share of such Gross Profit payable to Medicis for such calendar quarter in accordance with Section 4.1.1.

4.1.3 In the event that any payment due hereunder is not made when due, such payment shall accrue interest beginning on the day following the due date thereof, calculated at the annual rate of the sum of (a) *** plus (b) *** on the first Business Day after said payment was due; provided, however, that in no event shall said annual interest rate exceed the maximum legal interest rate for corporations under applicable law. Each such payment when made shall be accompanied by all interest so accrued. Interest accrued and the payment and acceptance thereof shall not negate or waive any right of a party to seek other remedy, legal or equitable, to which such party may be entitled. In no event shall this Section 4.1.3 be construed as a grant or permission for any payment delay

4.2 Taxes. Lupin shall be responsible for and may withhold from payments made to Medicis under this Agreement any taxes required to be withheld by Lupin under applicable law. Accordingly, if any such taxes are levied on such payments due hereunder (“Withholding Taxes”), Lupin shall (i) deduct the Withholding Taxes from the payment amount, (ii) pay all applicable Withholding Taxes to the proper taxing authority, and (iii) send evidence of the obligation together with proof of tax payment to Medicis within *** following the applicable tax payment.

4.3 Audit Rights. Upon at least *** prior written notice from Medicis, Lupin shall make available for inspection during normal business hours by a nationally recognized certified public accounting firm, selected by Medicis and reasonably acceptable to Lupin, all records, books of account, information and data concerning the calculation of Cost of Goods, Net Sales and Gross Profit pursuant to this Agreement for the purpose of an audit to verify the accuracy of the reports delivered and amounts paid by Lupin pursuant to Section 4.1. Such audit shall occur not more than once in any calendar year and shall be limited to the books and records for any calendar year ending not more than *** prior the date of the request. Lupin may require the accounting firm to sign a standard non-disclosure agreement. Prior to disclosing the results of such audit, the accounting firm shall present Lupin with a preliminary report of its findings and provide Lupin with an opportunity to respond to any questions raised or issues identified. Within *** after completion of the audit, the accounting firm shall deliver to Lupin a detailed written accountants’ report (setting forth, among other things, the miscalculations, if any, identified by the audit). Concurrently, the accounting firm shall report to Medicis only the results of the audit. Medicis shall be solely responsible for the costs in making any such audit, unless the results of the audit identify a discrepancy in the calculation of Gross Profit and the share of Gross Profit paid to Medicis under this Agreement in any calendar year from those properly payable for that

8

calendar year indicating an underpayment of *** or greater, in which event Lupin shall be solely responsible for the reasonable cost of such audit and pay Medicis any such underpayment. ***. All Lupin information which is subject to review under this Section 4.3 shall be deemed to be Lupin’s Confidential Information subject to the provisions of Section 6. For the avoidance of doubt, it shall not be a discrepancy in the calculation of Gross Profit if Lupin has implemented its applicable accounting standard in a manner different from that of Medicis or its auditors, provided that such implementation is still within the scope of the applicable accounting standard.

5. TERM AND TERMINATION.

5.1 Term. Subject to Section 5.2, this Agreement shall expire on the expiration of the last to expire of the Valid Claims; provided, however, that if there are no Valid Claims but there are at such time pending patent applications within the Patent Rights, then subject to the terms of this Agreement, the term of this Agreement shall continue for the pendency of such pending patent applications. Upon expiration of this Agreement Section 3.3 shall survive.

5.2 Termination for Cause. Either party may terminate this Agreement upon written notice to the other party after the material breach of any material provision of this Agreement by the other party if the other party has not cured such breach within *** after receipt of express written notice thereof by the non-breaching party. Upon termination of this Agreement, Lupin shall not make, have made, use, sell, offer for sale, import or distribute any Original Generic Product or Newer Generic Product for which the making, using, offering to sell, selling, and/or importation in or into the United States would infringe any Valid Claim.

5.3 Effect of Expiration or Termination. Expiration or termination of this Agreement shall not relieve the parties of any obligation accruing prior to such expiration or termination, and the provisions of Sections 1, 2.5, 5.2, 5.3, 6, 7, 8 and 9 shall survive the expiration or termination of this Agreement. Except as set forth in Section 5.1, no other provisions shall survive expiration or termination of this Agreement.

6. CONFIDENTIALITY.

6.1 Confidentiality. Until the expiration or earlier termination of this Agreement, and for a period of *** following the expiration or earlier termination hereof or thereof, except with respect to any Confidential Information constituting a trade secret in which case the receiving party’s obligation continues in perpetuity, provided such receiving party has been informed as to the status of such Confidential Information as a trade secret, each party shall maintain in confidence all Confidential Information disclosed by the other party and the terms of this Agreement, and shall not use, grant the use of or disclose to any Third Party the Confidential Information of the other party other than as expressly permitted hereby. Each party shall notify the other promptly upon discovery of any unauthorized use or disclosure of the other party’s Confidential Information or the terms of this Agreement.

6.2 Permitted Disclosures. Either party may disclose Confidential Information of the disclosing party (a) on a need-to-know basis, to such party’s or such party’s Affiliate’s directors, officers and employees to the extent such disclosure is reasonably necessary in connection with such party’s activities as expressly authorized by this Agreement, and (b) to those agents and

9

consultants, and contract manufacturers thereof who need to know such information to accomplish the purposes of this Agreement (collectively, “Permitted Recipients”); provided such Permitted Recipients are bound to maintain such Confidential Information in confidence at least to the same extent as set forth in Section 6.1.

6.3 Litigation and Governmental Disclosure. Each party may disclose Confidential Information of the other party to the extent such disclosure is reasonably necessary for complying with a court order or applicable law, governmental regulations or investigation, provided that if a party is required by court order, law or regulation to make any such disclosure of the other party’s Confidential Information it will give reasonable advance notice to the other party of such disclosure requirement and will use good faith efforts to assist such other party to secure a protective order or confidential treatment of such Confidential Information required to be disclosed. Within ten (10) Business Days following the Effective Date, and pursuant to current statutory law, the parties shall file or cause to be filed this Agreement with the U.S. Federal Trade Commission Bureau of Competition (“FTC”) and the Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice (“DOJ”) and shall request that the FTC and DOJ treat this Agreement as confidential to the fullest extent permitted under the law. The parties shall use reasonable efforts to coordinate the foregoing filings and any responses thereto, to make such filings promptly and to respond promptly to any requests for additional information made by FTC or DOJ, and to coordinate any necessary or desirable joint presentations. Each party reserves the right to communicate with the FTC or DOJ regarding such filings as it believes appropriate. Each party shall keep the other informed of such communications (unless otherwise directed by FTC or DOJ) and shall not disclose any confidential information of the other party without that party’s consent, which shall not be unreasonably withheld.

6.4 Return of Confidential Information. Upon expiration or termination of this Agreement for any reason, the Receiving Party, upon receipt of a written request from the Disclosing Party, shall return to the Disclosing Party all copies of the Confidential Information received from the Disclosing Party hereunder, or, in its discretion, destroy all such copies and certify to such destruction, provided, however, that the Receiving Party’s legal counsel may retain one copy of such Confidential Information in a secure location solely for purposes of determining the Receiving Party’s continuing obligations under this Agreement.

6.5 Publicity. Except as expressly authorized hereunder, neither party shall make any publicity releases, interviews or other dissemination of information concerning this Agreement or its terms, or either party’s performance hereunder, to communication media, financial analysts or others without the prior written approval of the other party, which approval shall not be unreasonably withheld, delayed or conditioned. Notwithstanding anything to the contrary in this Agreement, the parties understand and agree that either party, may, if so required, disclose some or all of the information included in this Agreement (a) in order to comply with its obligations under the law, including the United States Securities Act of 1933 and the United States Securities Exchange Act of 1934 and The Drug Price Competition and Patent Term Restoration Act of 1984, as amended by The Medicare Prescription Drug, Improvement and Modernization Act of 2003; (b) in order to comply with the listing standards or agreements of any national or international securities exchange or The NASDAQ Stock Market or New York Stock Exchange or other similar laws of a governmental authority or listing body; (c) to respond to an inquiry of a

10

governmental authority or regulatory authority as required by law; or (d) in a judicial, administrative or arbitration proceeding. In any such event the party making such disclosure shall (i) provide the other party with as much advance notice as reasonably practicable of the required disclosure, (ii) cooperate with the other party in any attempt to prevent or limit the disclosure, and (iii) limit any disclosure to the specific purpose at issue. In connection with any filing of a copy of this Agreement with the Securities and Exchange Commission, the filing party shall endeavor to obtain confidential treatment of economic and trade secret information, and shall keep the other party informed as the planned filing (including, but not limited to providing the other party with the proposed filing reasonably in advance of making the planned filing) and consider the requests of the other party regarding such confidential treatment.

7. REPRESENTATIONS AND WARRANTIES.

7.1 Representations.

7.1.1 Each party hereby represents and warrants as of the Effective Date to the other party that (a) the person executing this Agreement is authorized to execute this Agreement; (b) this Agreement is legal and valid and the obligations binding upon such party are enforceable by their terms; and (c) the execution, delivery and performance of this Agreement does not conflict with any agreement, instrument or understanding, oral or written, to which such party may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

7.1.2 ***.

7.2 Disclaimer of Warranties. Except for those warranties set forth in Section 7.1, neither party makes any warranty, written, oral, express or implied, with respect to this Agreement. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE HEREBY ARE DISCLAIMED BY BOTH PARTIES.

7.3 Limitation of Liability. WITH THE EXCEPTION OF DAMAGES RESULTING FROM A PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER THIS AGREEMENT OR ITS INDEMNIFICATION OBLIGATIONS WITH RESPECT THIRD PARTY CLAIMS UNDER SECTION 8, OR A BREACH BY LUPIN OF SECTIONS 2.4 OR 2.5, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR LOSS OF USE OR PROFITS OR OTHER COLLATERAL, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT, WHETHER SUCH CLAIMS ARE FOUNDED IN TORT OR CONTRACT.

7.4 Equitable Relief. Lupin acknowledges and agrees that the obligations and undertakings of Lupin pursuant to Sections 2.4 and 2.5 of this Agreement are reasonable and necessary to protect the legitimate interests of Medicis, that Medicis would not have entered into this Agreement in the absence of such provisions, and that Lupin’s breach or threatened breach or failure to comply with Sections 2.4 and 2.5 shall cause Medicis significant and irreparable harm, the amount of which shall be extremely difficult to estimate and ascertain, and for which

11

money damages shall not be adequate. Lupin further acknowledges and agrees that Medicis shall have the right to apply to any court of competent jurisdiction for an injunction order restraining any breach or threatened breach of Sections 2.4 and 2.5 of this Agreement and specifically enforcing the terms and provisions of such Sections of this Agreement, without the necessity of posting any bond or security, in addition to seeking any other remedy available to Medicis in law or equity. Lupin agrees that it shall not challenge any of the foregoing acknowledgements and agreements concerning injunctive relief in any proceeding brought by Medicis.

8. INDEMNIFICATION.

8.1 Indemnification.

8.1.1 ***.

8.1.2 ***.

8.2 Obligations. The party seeking indemnification hereunder (the “Indemnified Party”) shall promptly notify the other party (the “Indemnitor”) in writing of any claim, demand, action, or other proceeding in respect of which the Indemnified Party intends to claim such indemnification; provided, however, that failure to provide such notice within a reasonable period of time shall not relieve the Indemnitor of any of its obligations hereunder except to the extent the Indemnitor is prejudiced by such failure. The Indemnified Party shall permit the Indemnitor, at its discretion, to settle any such action, claim or other matter. Notwithstanding the foregoing, the Indemnitor shall not enter into any settlement that would adversely affect the Indemnified Party’s rights hereunder, or impose any obligations on the Indemnified Party in addition to those set forth herein, in order for it to exercise such rights, without the Indemnified Party’s prior written consent, which shall not be unreasonably withheld or delayed. No such action, claim or other matter shall be settled without the prior written consent of the Indemnitor, which shall not be unreasonably withheld or delayed. The Indemnified Party shall reasonably cooperate with the Indemnitor and its legal representatives in the investigation and defense of any claim, demand, action, or other proceeding covered by the indemnification obligations of this Section 8. The Indemnified Party shall have the right, but not the obligation, to be represented in such defense by counsel of its own selection and at its own expense.

9. GENERAL PROVISIONS.

9.1 Notices. All notices hereunder shall be in writing and delivered by (a) hand delivery; (b) by certified mail prepaid, return receipt requested; or (c) internationally recognized courier service, to the following address of the respective parties:

If to Medicis:	Medicis Pharmaceutical Corporation
	7720 North Dobson Road
	Scottsdale, Arizona 85256
	Attn: Chief Executive Officer
	Facsimile: 480-291-5175

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with a copy to:	Medicis Pharmaceutical Corporation
	7720 North Dobson Road
	Scottsdale, Arizona 85256
	Attn: General Counsel
	Facsimile: 480-291-8508
If to Lupin:	Lupin Pharmaceuticals, Inc.
	111 S. Calvert Street, 21st Floor
	Baltimore, Maryland 21202
	Attn: Chief Executive Officer
	Facsimile: (410) 576-2221
With a copy to:	Lupin Limited
	Laxmi Towers, B Wing,
	Bandra Kurla Complex, Bandra (East),
	Mumbai, Maharashtra 400 051, India
	Attn: Managing Director
	Facsimile: 91 22 6640 2001
	and,
	Bingham McCutchen LLP
	600 Anton Blvd., 18th Floor
	Costa Mesa, CA 92626
	Telephone: (714) 830-0600
	Facsimile: (714) 830-0700
	Attn: Robert C. Funsten

Notices shall be effective on the day of receipt if receipt is confirmed in writing by the recipient or within five (5) Business Days of delivery confirmed in writing by the delivery services at the address specified in accordance with this Section 9.1. A party may change its address listed above by notice to the other party given in accordance with this Section 9.1.

9.2 Entire Agreement; Amendment. The parties hereto acknowledge that this Agreement and its Exhibits set forth the entire agreement and understanding of the parties and supersedes all prior written or oral agreements or understandings with respect to the subject matter hereof. No modification of any of the terms of this Agreement, or any amendments thereto, shall be deemed to be valid unless in writing and signed by an authorized agent or representative of both parties hereto. No course of dealing or usage of trade shall be used to modify the terms and conditions herein. This Agreement shall be binding on each of Lupin and Medicis and their respective permitted successors and assigns.

9.3 Waiver. None of the provisions of this Agreement shall be considered waived by any party hereto unless such waiver is agreed to, in writing, by authorized agents of such party. The failure of a party to insist upon strict conformance to any of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or by law shall not be deemed a waiver of any rights of any party hereto.

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9.4 Obligations to Third Parties. Each party warrants and represents that this Agreement does not conflict with any contractual obligations, expressed or implied, undertaken with any Third Party.

9.5 Assignment. Neither party shall assign this Agreement or any part hereof or any interest herein (whether by operation of law or otherwise) to any Third Party (or use any subcontractor) without the written approval of the other party; provided, however, that either party may assign this Agreement without such consent (i) to any Affiliate; and (ii) in the case of a merger, consolidation, change in control or sale of all or substantially all of the assets related to this Agreement, provided further that with respect to Lupin, any such Affiliate or Third Party agrees to be bound by the terms and conditions of this Agreement including, without limitation, the provisions of Sections 2.4 and 2.5. No assignment shall be valid unless the permitted assignee(s) assumes all obligations of its assignor under this Agreement. No assignment shall relieve any party of responsibility for the performance of its obligations hereunder. Any purported assignment in violation of this Section 9.5 shall be void.

9.6 Governing Law. In any action brought regarding the validity, construction and enforcement of this Agreement, it shall be governed in all respects by the laws of the State of Delaware, without regard to the principles of conflicts of laws. The federal and state courts in the State of Maryland shall have jurisdiction over the parties hereto in all matters arising hereunder and the parties hereto agree that the venue with respect to such matters will be a state or federal court in the State of Maryland, provided that the United States District Court for the District of Maryland shall retain jurisdiction for those matters described in Paragraph 8 of the Consent Judgment.

9.7 Severability. If any term or provision of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision hereof, and this Agreement shall be interpreted and construed as if such term or provision, to the extent the same shall have been held to be invalid, illegal or unenforceable, had never been contained herein.

9.8 Headings, Interpretation. The headings used in this Agreement are for convenience only and are not part of this Agreement.

9.9 Attorneys’ Fees. The prevailing party shall be entitled to attorneys’ fees and its litigation or related expenses in any suit or proceeding with respect to the interpretation or enforcement of this Agreement.

9.10 Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

9.11 Bankruptcy. The rights and licenses granted to Lupin under or pursuant to Section 3 of this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code (the “Bankruptcy Code”), licenses of “intellectual property” as defined under the Bankruptcy Code. The parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code.

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9.12 Independent Contractors. The relationship between Medicis and Lupin is that of independent contractors and nothing herein shall be deemed to constitute the relationship of partners, joint venturers nor of principal and agent between Medicis and Lupin. Neither party shall have any express or implied right or authority to assume or create any obligation on behalf of or in the name of the other party or to bind the other party to any contract, agreement or undertaking with any Third Party.

[Remainder of this page intentionally blank]

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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly-authorized representatives effective as of the Effective Date.

MEDICIS PHARMACEUTICAL CORPORATION		LUPIN PHARMACEUTICALS, INC.
By:	/s/ Richard D. Peterson	By:	/s/ Vinita Gupta
Name:	Richard D. Peterson	Name:	Vinita Gupta
Title:	Executive Vice President, Chief Financial Officer	Title:	CEO
		LUPIN LIMITED
		By:	/s/ Nilesh Gupta
		Name:	Nilesh Gupta
		Title:	Group President

EXHIBIT A

PATENT RIGHTS

Issued Patents (all U.S.)	Pending Applications (all U.S.)
***	***

EXHIBIT B

Consent Judgment

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

MEDICIS PHARMACEUTICAL CORP,	)
	)
Plaintiff,	)
	)
v.	)
	)	CIVIL ACTION NO. 09-3062 (JFM)
LUPIN LIMITED & LUPIN	)
PHARMACEUTICALS INC.,	)
	)
Defendants.	)
	)
	)
	)
	)

UNOPPOSED MOTION FOR ENTRY OF CONSENT JUDGMENT AND

PERMANENT INJUNCTION AS TO LUPIN LIMITED & LUPIN

PHARMACEUTICALS INC.

Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) and Defendants Lupin Limited & Lupin Pharmaceuticals Inc. (collectively “Defendants”) having met, conferred, and agreed to resolve their dispute upon execution of a separate Settlement Agreement (“Settlement Agreement”), Medicis respectfully moves for entry of the executed Consent Judgment and Permanent Injunction submitted herewith. Defendants do not oppose this motion.

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Agreed to:

  Herbert Better (#00320) hbetter@zuckerman.com ZUCKERMAN SPAEDER LLP 100 East Pratt Street Suite 2440 Baltimore, MD 21202-1031 Telephone: (410) 332-0444 Facsimile: (410) 659-0436   Elizabeth Stotland Weiswasser (pro hac vice) elizabeth.weiswasser@weil.com Jennifer H. Wu (pro hac vice) jennifer.wu@weil.com WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007   Attorneys for Plaintiff Medicis Pharmaceutical Corporation   Scott H. Phillips, #13244 Paul N. Farquharson, #06514 Semmes, Bowen & Semmes 25 S. Charles Street, Suite 1400 Baltimore, Maryland 21201 Telephone: (410) 539-5040 Facsimile: (410) 539-5223   Robert F. Green Christopher T. Griffith Salim A. Hasan Kate M. Lesciotto LEYDIG, VOlT & MAYER, LTD. 180 N. Stetson Ave. Two Prudential Plaza Chicago, 1L 60601 Telephone: (312) 616-5600 Facsimile: (312) 616-5700   Attorneys for Defendants Lupin Limited and Lupin
Pharmaceuticals, Inc.

3

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

MEDICIS PHARMACEUTICAL CORPORATION,	)
	)
	)
Plaintiff,	)
	)
v.	)	CIVIL ACTION NO. 09-3062 (JFM)
	)
LUPIN LIMITED & LUPIN	)
PHARMACEUTICALS INC.,	)
	)
Defendants.	)
	)
	)
	)

CONSENT JUDGMENT AND PERMANENT INJUNCTION AS TO

LUPIN LIMITED & LUPIN PHARMACEUTICALS INC.

This matter is before the Court on the unopposed motion of Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) and Defendants Lupin Limited & Lupin Pharmaceuticals Inc. collectively (“Defendants”).

WHEREAS, this Consent Judgment and Permanent Injunction as to Defendants concerns only Medicis’s claims against Defendants in this civil action no. 09-3062-JFM (referred to herein as the “Litigation”).

WHEREAS, Medicis requests that this Consent Judgment and Permanent Injunction as to Defendants be entered in the above-captioned case, and Defendants do not oppose Medicis’s request.

WHEREAS, Medicis owns United States Patent Nos. 5,908,838 (“the ‘838 patent”) as set forth in the duly issued Ex Parte Reexamination Certificate on June 1, 2010, and 7,790,705 (“the ‘705 patent”).

WHEREAS, Defendants submitted an Abbreviated New Drug Application No. 91-424 (the “Lupin ANDA”) to the FDA under 21 U.S.C. § 355(j) seeking to obtain approval to commercially manufacture and sell generic minocycline HCl extended release tablets in its 45 milligram (“mg”), 90 mg, and 135 mg strengths for the treatment of acne.

WHEREAS, Defendants submitted supplements or amendments to the Lupin ANDA (the “Lupin ANDA Supplements”) to the FDA under 21 U.S.C. § 355(j) seeking to obtain approval to commercially manufacture and sell generic minocycline HCl extended release tablets in its 55, 65, 80, 105, and 115 mg strengths for the treatment of acne.

WHEREAS, in the Litigation, Medicis alleged that Defendants infringed one or more of claims 3, 4, 12, 13, 19, 21, 23, 25, and 27-34 of the ‘838 patent and one or more claims of the ‘705 patent under 35 U.S.C. § 271(e)(2) by virtue of Defendants’ submission of the Lupin ANDA and Lupin ANDA Supplements to the FDA.

WHEREAS, in this Litigation, Medicis alleged that it would be irreparably harmed if Defendants are not enjoined from infringing or actively inducing or contributing to infringement of one or more of claims 3, 4, 12, 13, 19, 21, 23, 25, and 27-34 of the ‘838 patent and one or more claims of the ‘705 patent.

WHEREAS, in this Litigation, Medicis requested that this Court enter a permanent injunction enjoining Defendants from infringing the ‘838 and ‘705 patents.

WHEREAS, Medicis and Defendants have reached an agreement to finally settle the Litigation as set forth in this Consent Judgment and Permanent Injunction as to Defendants and a separate Settlement Agreement (“Settlement Agreement”) which is contemporaneously and separately being executed.

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WHEREAS, final settlement of the Litigation will help Medicis and Defendants avoid the substantial uncertainty and risks involved with prolonged litigation.

WHEREAS, final settlement of this Litigation will permit Medicis and Defendants to save litigation costs, as well as adhere to the judicially recognized mandate that encourages the settlement of litigation whenever possible.

WHEREAS, final settlement of the Litigation serves the public interest by saving judicial resources and avoiding the risks to each of Medicis and Defendants associated with infringement.

WHEREAS, Medicis and Defendants each consent to personal jurisdiction in Maryland for purposes of enforcing the Settlement Agreement.

IT IS HEREBY ORDERED, DECREED, and ADJUDGED as follows:

1. The Court has jurisdiction over Medicis and Defendants and the subject matter of this Litigation.

2. Defendants acknowledge Medicis’s ownership and standing to sue for infringement of the ‘838 patent and the ‘705 patent.

3. Defendants acknowledge that the ‘838 and ‘705 patents are valid and enforceable, as described more fully in the Settlement Agreement.

4. Defendants and its affiliates are permanently enjoined as of the date hereof from infringing the ‘838 or ‘705 patents by the manufacture, use, offer to sell, sale, importation, or distribution of any current products, or future products having the same strength and dosage form of the current Solodyn^® products, that are the subject of the Lupin ANDA and Lupin ANDA Supplements and that is not pursuant to the license granted by Medicis in accordance with the Settlement Agreement, and from inducing others to infringe the ‘838 and ‘705 patents

6

by inducing others to manufacture, use, offer to sell, sale, import, or distribute any current products, or future products having the same strength and dosage form of the current Solodyn^® products, that are the subject of the Lupin ANDA and Lupin ANDA Supplements and that is not pursuant to the license granted by Medicis in accordance with the Settlement Agreement.

5. All claims and counterclaims in this Litigation are hereby dismissed without prejudice.

6. The parties are hereby ordered to comply with the terms of the Settlement Agreement.

7. Each party shall bear its own costs and attorneys’ fees.

8. This Court shall retain jurisdiction over Defendants and Medicis for the purpose of enforcing the terms of this Consent Judgment and Permanent Injunction and over any matters related to or arising from the interpretation or enforcement of the Settlement Agreement or any legal or equitable claim concerning the Settlement Agreement by any third party.

IT IS SO ORDERED, DECREED AND ADJUDGED this     day of             , 2011 by:

The Honorable J. Frederick Motz

United States District Judge

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EX-10.2

Exhibit 10.2

*** INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

LICENSE AND SETTLEMENT AGREEMENT

THIS LICENSE AND SETTLEMENT AGREEMENT (this “Agreement”) dated as of August 4, 2011 (the “Effective Date”) is entered into between Medicis Pharmaceutical Corporation, a Delaware corporation with offices located at 7720 North Dobson Road, Scottsdale, Arizona 85256, U.S.A. (collectively with its Affiliates, “Medicis”), and Nycomed US Inc., a New York corporation with offices located at 60 Baylis Road, Melville, New York 11747 (collectively with its Affiliates, “Nycomed”). Medicis and Nycomed are each sometimes referred to herein individually as a “party” and are referred to collectively as the “parties.”

WHEREAS, Medicis has asserted various claims and causes of action against Nycomed in actions captioned Medicis Pharmaceutical Corporation v. Nycomed US Inc. and Nycomed GmbH, Civil Action No. 10-CV-4140 (S.D.N.Y.) (DLC), Medicis Pharmaceutical Corporation v. Nycomed US Inc. and Nycomed GmbH, Civil Action No. 11-CV-2630 (S.D.N.Y.) (DLC), and Medicis Pharmaceutical Corporation v. Nycomed US Inc., Civil Action No. 11-CV-4551 (S.D.N.Y.) (DLC) (the “Litigations”), which are pending in the United States District Court for the Southern District of New York (the “Court”).

WHEREAS, Medicis and Nycomed seek to resolve the Litigations without further litigation;

WHEREAS, Medicis is the owner of the Patent Rights (as defined below); and

WHEREAS, Nycomed desires to receive a license under the Patent Rights and Medicis desires to grant to Nycomed a license under the Patent Rights, all on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS.

1.1 “Affiliate” means, with respect to any entity, any other entity that directly or indirectly controls, is controlled by, or is under common control with, such entity. An entity shall be regarded as in control of another entity if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other entity, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other entity by any means whatsoever.

1.2 “ANDA” means an Abbreviated New Drug Application and any supplements thereto.

1.3 “Authorized Generic” means ***.

1.4 “Confidential Information” means all non-public materials, information and data concerning the disclosing party and its operations that is disclosed by the disclosing party to the receiving party pursuant to this Agreement, orally or in written, electronic or tangible form, or otherwise obtained by the receiving party through observation or examination of the disclosing party’s operations. Confidential Information includes, but is not limited to, information about the disclosing party’s financial condition and projections; business, marketing or strategic plans; sales information, customer lists; price lists; databases; trade secrets; product prototypes and designs; techniques, formulae, algorithms and other non-public process information. Notwithstanding the foregoing, Confidential Information of a party shall not include that portion of such materials, information and data that, and only to the extent, the receiving party can establish by written documentation: (a) is known to the receiving party as evidenced by its written records before receipt thereof from the disclosing party, (b) is disclosed to the receiving party free of confidentiality obligations by a Third Party who has the right to make such disclosure without obligations of confidentiality, (c) is or becomes part of the public domain or otherwise publicly known through no fault of the receiving party, or (d) the receiving party can reasonably establish is independently developed by persons on behalf of receiving party without the use of the Confidential Information disclosed by the disclosing party.

1.5 “FDA” means the United States Food and Drug Administration or any successor entity thereto.

1.6 “GAAP” means generally accepted accounting principles in effect in the United States from time to time, as consistently applied by the applicable party with regard to their own products and/or standards of the industry.

1.7 “Generic Equivalent” means ***.

1.8 “Generic Product” means ***.

1.9 “Grantback Patents” means (a) ***, (b) all divisions, continuations, continuations-in-part, that in whole or in part claim priority to, or common priority with, the patent applications described in clause (a) above or the patent applications that resulted in the patents described in clause (a) above, and (c) all patents that have issued or in the future issue from any of the foregoing patent applications, together with any reexamination certificates, reissues or restorations by existing or future extension or restoration mechanisms, or additions thereto.

1.10 “License Trigger” means, with respect to a Generic Equivalent to a Vanos Product, the earliest of the following dates:

(a) December 15, 2013;

(b) ***; and

(c) ***.

1.11 “Net Sales” means ***.

2

1.12 “Orange Book” means the publication, Approved Drug Products with Therapeutic Equivalence Evaluations, in electronic or hard copy form, maintained by the FDA, including all supplements thereto.

1.13 “Patents-in-Suit” means ***.

1.14 “Patent Rights” means (a) the patents and patent applications listed on Exhibit A to this Agreement, (b) all divisions, continuations, continuations-in-part that in whole or in part claim priority to, or common priority with, the patent applications described in clause (a) above or the patent applications that resulted in the patents described in clause (a) above, (c) all patents that have issued or in the future issue from any of the foregoing patent applications, and (d) any additional patents owned or controlled by Medicis covering a Generic Product or the manufacture or use of a Generic Product, together with any reexamination certificates, reissues or restorations by existing or future extension or restoration mechanisms, or additions thereto.

1.15 ***.

1.16 “Product” means any product for which the making, using, selling or importation is covered by one or more claims of the Patent Rights.

1.17 “Profit” means ***.

1.18 “Territory” means the United States of America, its territories and possessions ***.

1.19 “Third Party” means any person or entity other than Medicis or Nycomed or their respective Affiliates.

1.20 “Transfer Price” means ***. Such ***, as of the Effective Date, are set forth on Exhibit E ***.

1.21 “Valid Claim” means ***.

1.22 “Vanos Products” means the Vanos products listed on Exhibit B, as such products are marketed and sold by Medicis in the Territory.

2. LICENSES; RELEASES.

2.1 License Grant for Generic Product.

2.1.1 Effective only upon the occurrence of the License Trigger for a Generic Product, Medicis hereby grants to Nycomed a non-exclusive, non-transferable (except as permitted in Section 9.5) license (without the right to grant sublicenses except to have Generic Products made on behalf of Nycomed) under the Patent Rights (a) to make or have made such Generic Product in the Territory or outside the Territory solely for sale in the Territory, (b) to use, offer for sale and sell such Generic Product inside the Territory, and (c) to import such Generic Product into the Territory.

3

2.1.2 Until the occurrence of the applicable License Trigger, neither Nycomed nor its Affiliates shall, and neither shall directly or indirectly encourage or assist any Third Party to, develop, make, use and/or commercialize any Generic Products or Generic Equivalents in the Territory ***.

2.1.3 Except pursuant to the Distribution Agreement (defined in Section 3), nothing in this Agreement shall be construed as creating an obligation, express or implied, on Medicis to supply any Product to Nycomed and Nycomed shall be solely responsible for manufacturing, or having manufactured, its supply of Generic Product.

2.2 Grantback. Nycomed and its Affiliates hereby grant to Medicis a perpetual (subject to section 5.3), royalty-free, fully-paid up, non-transferable (except as provided in Section 9.5), non-exclusive license (with the right to grant sublicenses through multiple tiers) under the Grantback Patents to make, have made, use, offer for sale, sell and import Vanos Products or Generic Equivalents in the Territory.

2.3 Validity of Patent Rights.

2.3.1 Nycomed, on behalf of itself and its Affiliates, hereby acknowledges and agrees that the claims of the Patents-in-Suit are valid and enforceable in this and in any other or future cause of action, litigation or proceeding in the United States involving Generic Products or Generic Equivalents. The foregoing acknowledgement regarding validity and enforceability shall be binding upon Nycomed and its Affiliates and admissible against Nycomed and its Affiliates in any dispute or litigation between the parties regarding the Patents-in-Suit, and neither Nycomed nor its Affiliates will challenge any such acknowledgement.

2.3.2 Nycomed, on behalf of itself and its Affiliates, hereby also acknowledges and agrees that the making, using, offering to sell, selling, and/or importation into the Territory of a Generic Product is covered by one or more claims of the Patents-in-Suit under 35 U.S.C. § 271.

2.3.3 Nycomed shall not assist any Third Party in an action to, invalidate, amend or render unenforceable any of the Patent Rights, and Nycomed shall not disclose any of its proprietary or confidential information relating to the validity or enforceability of any of the Patent Rights, except to the extent required by court order or other applicable law.

2.3.4 Nycomed shall not receive any ownership rights in the Patent Rights under this Agreement, and Medicis shall retain the sole right, to prepare, prosecute, maintain and enforce the Patent Rights. Medicis shall not receive any ownership rights in the Grantback Patents under this Agreement, and Nycomed shall retain the sole right, to prepare, prosecute, maintain and enforce the Grantback Patents.

2.4 No Implied Licenses. Except as explicitly set forth in this Agreement, neither party grants to the other party under its patents or other intellectual property any license, express or implied. Nycomed shall not use Medicis’ name or any Medicis trademarks (including without limitation Vanos®) in connection with the marketing, promotion or sale of any products without the prior written consent of Medicis in each instance; provided, however, that Nycomed may use the Medicis tradename Vanos (but not any associated logo or artwork) for the sole purpose of identifying the Generic Product or Authorized Generic as being comparable to the applicable Vanos Product.

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2.5 Releases. In consideration of the mutual covenants herein and in the Joint Dismissal Agreements attached hereto as Exhibit C and incorporated herein by reference, and without limiting any remedies a party may have against the other party for a breach of this Agreement, Nycomed hereby releases and agrees to release Medicis and its predecessors, successors, assigns, agents, officers, directors, shareholders, employees and representatives, and Medicis hereby releases and agrees to release Nycomed and its predecessors, successors, assigns, agents, officers, directors, shareholders, employees and representatives, in each case, from any and all claims, damages, liabilities, obligations, and causes of action arising out of the Litigations. Upon the Effective Date, Nycomed and Medicis shall cause to be completed, executed and filed with the Court a stipulated dismissal with prejudice of the Litigations, in the form of the Joint Dismissal Agreements attached hereto as Exhibit C, and to seek entry of such order by the Court.

2.6 ***.

2.7 ***.

3. AUTHORIZED GENERIC DISTRIBUTION AGREEMENT.

3.1 Distribution Agreement. If, as of the License Trigger, Nycomed has not ***, then effective as of the License Trigger, Medicis hereby appoints Nycomed as its non-exclusive distributor of the Authorized Generic in the Territory and authorizes Nycomed to market and sell the Authorized Generic solely to ***, pursuant to a separate distribution and supply agreement (the “Distribution Agreement”) to be entered into between Nycomed and Medicis.

3.2 Terms. If Nycomed has not ***, then upon written notice by Nycomed at any time after the Effective Date the parties shall negotiate in good faith the terms of and enter into the Distribution Agreement, which will contain the following provisions:

• Unless earlier terminated by either party for cause or by Nycomed for convenience, the term of any such appointment of Nycomed as the non-exclusive distributor of the Authorized Generic shall extend from the License Trigger and remain in effect until such time as Nycomed has ***, but in no event longer than *** after the License Trigger (such term, the “Supply Term”);

• Medicis will supply (either itself or through its Third Party manufacturer) Nycomed *** in the Territory for the Authorized Generic in finished form; on such forecasting, invoicing, shipment, delivery, inspection and payment terms as are agreed upon by the parties and set forth in the Distribution Agreement;

• Medicis will sell the Authorized Generic to Nycomed at the Transfer Price;

• Nycomed shall retain *** of all Net Sales resulting from Nycomed’s sales of the Authorized Generic and shall pay the remaining *** of such Net Sales to Medicis, on a quarterly basis ***;

5

• ***;

• Nycomed shall have no minimum purchase obligations with respect to the Authorized Generic;

• Nycomed will have the right, at its expense and upon *** prior written notice, to audit Medicis’ books and records no more than once a year to confirm the Transfer Price and the rates paid by any Third Party with a distribution right in the Territory for a Generic Equivalent to the Vanos Product that is manufactured by or on behalf of Medicis;

• ***; and

• such other terms as the parties may agree and as are commercially reasonable and usual and customary for agreements of such type.

3.3 ***.

4. FINANCIAL CONSIDERATIONS.

4.1 Royalty.

4.1.1 Within *** following the end of each calendar quarter during the term of this Agreement after the License Trigger, Nycomed shall pay to Medicis a royalty equal to *** of all *** for Generic Product sold by Nycomed (or its designee) during such calendar quarter ***. Medicis’s right to receive a share of the *** of Generic Product under this Section 4.1.1 shall expire ***.

4.1.2 Within *** following the end of each calendar quarter during the term of this Agreement after the License Trigger, Nycomed shall provide to Medicis a written report stating the number and description of all Generic Products sold during the relevant calendar quarter; the gross sales associated therewith; the calculation of *** thereon, and the royalties that will be payable for such calendar quarter in accordance with Section 4.1.1.

4.2 Taxes. Nycomed shall be responsible for, and may withhold from payments made to Medicis under this Agreement, any taxes required to be withheld by Nycomed under applicable law. Accordingly, if any such taxes are levied on such payments due hereunder (“Withholding Taxes”), Nycomed shall (i) deduct the Withholding Taxes from the payment amount, (ii) pay all applicable Withholding Taxes to the proper taxing authority, and (iii) send evidence of the obligation together with proof of tax payment to Medicis within *** following that tax payment.

4.3 Audit Rights. Not more than once per calendar year during the portion of the term of this Agreement during which Nycomed shall pay Medicis royalties, on no less than thirty (30) business days notice from Medicis, Nycomed shall make all such records, books of account, information and data concerning (a) its sales of Generic Products pursuant to this Agreement; and (b) its calculation of Net Sales, in each case available for inspection during normal business hours by an independent auditor selected by Medicis and reasonably acceptable to Nycomed for the purpose of an audit to determine the accuracy of the reports delivered and

6

amounts paid by Nycomed pursuant to Section 4.1. Medicis shall be solely responsible for its costs in making any such audit, unless Medicis identifies a discrepancy in favor of Nycomed in the calculation of the royalty owing on *** in any calendar year from those properly payable for that calendar year of *** or greater, in which event Nycomed shall be solely responsible for the reasonable cost of such audit and pay Medicis any underpayment. ***.

5. TERM AND TERMINATION.

5.1 Term. Subject to Section 5.2, this Agreement shall expire on the date when there are no Valid Claims in the Territory

5.2 Termination for Cause. Either party may terminate this Agreement upon or after the material breach of any material provision of this Agreement by the other party if the other party has not cured such breach within *** after receipt of express written notice thereof by the non-breaching party.

5.3 Effect of Expiration or Termination. Expiration or termination of this Agreement shall not relieve the parties of any obligation accruing prior to such expiration or termination, and the provisions of Sections 2.2, 2.3, 2.4, 2.5, 4.3, 5.3, 6, 8 and 9 shall survive the expiration or termination of this Agreement, provided that Sections 2.2 and 2.3 shall not survive termination of this Agreement by Nycomed pursuant to Section 5.2. Section 7.3 shall survive the expiration of this Agreement. ***.

6. CONFIDENTIALITY.

6.1 Confidentiality. For a period of *** following the expiration or earlier termination of this Agreement, except with respect to any Confidential Information constituting a trade secret in which case the receiving party’s obligation continues in perpetuity, provided such receiving party has been informed as to the status of such Confidential Information as a trade secret, each party shall maintain in confidence all Confidential Information disclosed by the other party, and shall not use, grant the use of or disclose to any Third Party the Confidential Information of the other party other than as expressly permitted hereby. Each party shall notify the other promptly upon discovery of any unauthorized use or disclosure of the other party’s Confidential Information.

6.2 Permitted Disclosures. Either party may disclose Confidential Information of the disclosing party (a) on a need-to-know basis, to such party’s directors, officers and employees to the extent such disclosure is reasonably necessary in connection with such party’s activities as expressly authorized by this Agreement, and (b) to those agents and consultants, and contract manufacturers who need to know such information to accomplish the purposes of this Agreement (collectively, “Permitted Recipients”); provided such Permitted Recipients are bound to maintain such Confidential Information in confidence at least to the same extent as set forth in Section 6.

6.3 Litigation and Governmental Disclosure. Each party may disclose Confidential Information of the other party to the extent such disclosure is reasonably necessary for prosecuting or defending litigation, complying with a court order or applicable law, governmental regulations or investigation, provided that if a party is required by law or regulation

7

to make any such disclosure of the other party’s Confidential Information it will give reasonable advance notice to the other party of such disclosure requirement and will use good faith efforts to assist such other party to secure a protective order or confidential treatment of such Confidential Information required to be disclosed.

6.4 Limitation of Disclosure. The parties agree that, except as otherwise may be required by applicable laws, regulations, rules or orders, including without limitation the rules and regulations promulgated by the United States Securities and Exchange Commission, the Department of Justice and the Federal Trade Commission, or any regulations of any national securities exchange, and except as may be authorized in Section 6.6, no information concerning this Agreement and the transactions contemplated herein shall be made public by either party without the prior written consent of the other.

6.5 FTC/DOJ Filings. Within ten (10) business days following the Effective Date, the parties shall comply with the requirements of Title XI, Subtitle B of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173 (the “Act”), by filing or causing to be filed all necessary documents with the U.S. Federal Trade Commission (“FTC”) and the Antitrust Division of the U.S. Department of Justice (“DOJ”). The parties shall use all commercially reasonable efforts to coordinate the foregoing filings and any responses thereto, to make such filings promptly and to respond promptly to any requests for additional information made by either of the agencies, to coordinate any necessary or desirable joint presentations, or to overcome any objections raised by either of the agencies. Each party reserves the right to communicate with the agencies regarding such filings as it believes appropriate. Each party shall keep the other informed of such communications (unless otherwise directed by either of the agencies) and shall not disclose any Confidential Information of the other party without that party’s consent, which shall not be unreasonably withheld.

6.6 Publicity. Except for the press release attached hereto as Exhibit D, neither party shall make any publicity releases, interviews or other non-confidential dissemination of information concerning this Agreement or its terms, or either party’s performance hereunder, to communication media, financial analysts or others without the prior written approval of the other party, which approval shall not be unreasonably withheld, delayed or conditioned. Notwithstanding anything to the contrary in this Agreement, the parties understand and agree that either party, may, if so required, disclose some or all of the information included in this Agreement or other Confidential Information of the other party (a) in order to comply with its obligations under the law, including the United States Securities Act of 1933 and the United States Securities Exchange Act of 1934; (b) in order to comply with the listing standards or agreements of any national or international securities exchange or The NASDAQ Stock Market or New York Stock Exchange or other similar laws of a governmental authority; (c) to respond to an inquiry of a governmental authority or regulatory authority as required by law; or (d) in a judicial, administrative or arbitration proceeding. In any such event the party making such disclosure shall (i) provide the other party with as much advance notice as reasonably practicable of the required disclosure, (ii) cooperate with the other party in any attempt to prevent or limit the disclosure, and (iii) limit any disclosure to the specific purpose at issue. In connection with any filing of a copy of this Agreement with the Securities and Exchange Commission, the filing party shall endeavor to obtain confidential treatment of economic and trade secret information, and shall keep the other party informed as the planned filing (including, but not limited to providing the other party with the proposed filing reasonably in advance of making the planned filing) and consider the requests of the other party regarding such confidential treatment.

8

7. REPRESENTATIONS, WARRANTIES AND COVENANTS.

7.1 Representations. Each party hereby represents and warrants to the other party that (a) the person executing this Agreement is authorized to execute this Agreement; (b) this Agreement is legal and valid and the obligations binding upon such party are enforceable by their terms; (c) the execution, delivery and performance of this License and Settlement Agreement has been duly authorized by all necessary corporate or other organizational actions of the party and its Affiliates; and (d) the execution, delivery and performance of this Agreement does not conflict with any agreement, instrument or understanding, oral or written, to which such party may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

7.2 Compliance with Law. Nycomed shall comply with all applicable laws and regulations with respect to obtaining regulatory approval for the sale of Generic Products and its manufacture, sale and commercialization of Generic Products. Medicis shall comply with all applicable laws and regulations with respect to the manufacture of the Authorized Generic and sale thereof to Nycomed.

7.3 ***.

7.4 ***.

7.5 Disclaimer of Warranties. Except for those warranties expressly set forth in this Agreement, neither party makes any warranty, written, oral, express or implied, with respect to this Agreement. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT HEREBY ARE DISCLAIMED BY BOTH PARTIES.

7.6 Limitation of Liability. WITH THE EXCEPTION OF DAMAGES RESULTING FROM A PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER THIS AGREEMENT OR ITS OBLIGATIONS UNDER SECTION 8, OR A BREACH BY NYCOMED OF SECTIONS 2.1.2 OR 2.3, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR LOSS OF USE OR PROFITS OR OTHER COLLATERAL, SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR INDIRECT DAMAGES IN CONNECTION WITH THIS AGREEMENT, WHETHER SUCH CLAIMS ARE FOUNDED IN TORT OR CONTRACT OR OTHERWISE.

7.7 Equitable Relief. Nycomed acknowledges and agrees that its obligations and undertakings under this Agreement are reasonable and necessary to protect the legitimate interests of Medicis, that Medicis would not have entered into this Agreement in the absence of such provisions, and that Nycomed’s threatened breach or failure to comply with Sections 2.1.2 or 2.3 of this Agreement shall cause Medicis significant and irreparable harm, the amount of which shall be extremely difficult to estimate and ascertain, and for which money damages shall not be adequate. Nycomed and Medicis further acknowledge and agree that each shall have the right to

9

apply to any court of competent jurisdiction for an injunction order restraining any breach or threatened breach of this Agreement and specifically enforcing the terms and provisions of this Agreement, without the necessity of posting any bond or security, in addition to seeking any other remedy available in law or equity.

8. INDEMNIFICATION.

8.1 ***.

8.2 ***.

8.3 Obligations. A party which intends to claim indemnification under this Section 8 (the “Indemnified Party”) shall promptly notify the other party (the “Indemnifying Party”) in writing of any claim, demand, action, or other proceeding in respect of which the Indemnified Party intends to claim such indemnification; provided, however, that failure to provide such notice within a reasonable period of time shall not relieve the Indemnifying Party of any of its obligations hereunder except to the extent the Indemnifying Party is prejudiced by such failure. The Indemnified Party shall permit the Indemnifying Party, at its discretion, to settle any such action, claim or other matter. Notwithstanding the foregoing, the Indemnifying Party shall not enter into any settlement that would adversely affect the Indemnified Party’s rights hereunder, or impose any obligations on the Indemnified Party in addition to those set forth herein, in order for it to exercise such rights, without the Indemnified Party’s prior written consent, which shall not be unreasonably withheld or delayed. No such action, claim or other matter shall be settled without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld or delayed. The Indemnified Party shall reasonably cooperate with the Indemnifying Party and its legal representatives in the investigation and defense of any claim, demand, action, or other proceeding covered by the indemnification obligations of this Section 8. The Indemnified Party shall have the right, but not the obligation, to be represented in such defense by counsel of its own selection and at its own expense.

9. GENERAL PROVISIONS.

9.1 Notices. All notices hereunder shall be delivered by facsimile (confirmed by overnight delivery), or by overnight delivery with a reputable overnight delivery service, to the following address of the respective parties:

If to Medicis:	Medicis Pharmaceutical Corporation
	7720 North Dobson Road
	Scottsdale, Arizona 85256
	Attn: Chief Executive Officer
	Facsimile: 480-291-5175
with a copy to:	Medicis Pharmaceutical Corporation
	7720 North Dobson Road
	Scottsdale, Arizona 85256
	Attn: General Counsel
	Facsimile: 480-291-8508

10

If to Nycomed:	Nycomed US Inc.
	60 Baylis Road
	Melville, NY 11747
	Attention: Chief Executive Officer
	Facsimile: 631-454-6389
With a copy to:	Nycomed US Inc.
	60 Baylis Road
	Melville, NY 11747-0103, United States
	Attention: General Counsel
	Facsimile: 631-420-1572

Notices shall be effective on the day of receipt. A party may change its address listed above by notice to the other party given in accordance with this Section 9.1.

9.2 Entire Agreement. The parties hereto acknowledge that this Agreement sets forth the entire agreement and understanding of the parties and supersedes all prior written or oral agreements or understandings with respect to the subject matter hereof. No modification of any of the terms of this Agreement, or any amendments thereto, shall be deemed to be valid unless in writing and signed by an authorized agent or representative of both parties hereto. No course of dealing or usage of trade shall be used to modify the terms and conditions herein. This Agreement shall be binding on each of Nycomed and Medicis and their respective permitted successors and assigns.

9.3 Waiver. None of the provisions of this Agreement (including the Exhibits hereto) shall be considered waived by any party hereto unless such waiver is agreed to, in writing, by authorized agents of such party. The failure of a party to insist upon strict conformance to any of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or by law shall not be deemed a waiver of any rights of any party hereto.

9.4 Obligations to Third Parties. Each party warrants and represents that this Agreement does not conflict with any contractual obligations, expressed or implied, undertaken with any Third Party.

9.5 Assignment. Neither party shall assign this Agreement or any part hereof or any interest herein (whether by operation of law or otherwise) to any Third Party (or use any subcontractor) without the written approval of the other party; provided, however, that either party may assign this Agreement without such consent (i) to any Affiliate; and (ii) in the case of a merger, consolidation, change in control or sale of all or substantially all of the assets of the party relating to this Agreement and the resulting entity assumes all of the obligations under this Agreement. No assignment shall be valid unless the permitted assignee(s) assumes all obligations of its assignor under this Agreement. No assignment shall relieve any party of responsibility for the performance of its obligations hereunder. Any purported assignment in violation of this Section 9.5 shall be void.

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9.6 Independent Contractor. Nycomed and Medicis are acting under this Agreement as independent contractors and neither shall be considered an agent of, or joint venturer with, the other. Unless otherwise provided herein to the contrary, each party shall furnish all expertise, labor, supervision, machining and equipment necessary for the performance of its obligations hereunder and shall obtain and maintain all building and other permits and licenses required by public authorities.

9.7 Governing Law. In any action brought regarding the validity, construction and enforcement of this Agreement, it shall be governed in all respects by the laws of the State of Delaware, without regard to the principles of conflicts of laws.

9.8 Severability. If any term or provision of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision hereof, and this Agreement shall be interpreted and construed as if such term or provision, to the extent the same shall have been held to be invalid, illegal or unenforceable, had never been contained herein.

9.9 Headings, Interpretation. The headings used in this Agreement are for convenience only and are not part of this Agreement.

9.10 Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of this page intentionally blank]

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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly-authorized representatives effective as of the Effective Date.

NYCOMED US INC.		MEDICIS PHARMACEUTICAL CORPORATION
By:	/s/ Dave Klaum	By:	/s/ Richard D. Peterson
Name:	Dave Klaum	Name:	Richard D. Peterson
Title:	8/4/11	Title:	EVP, CFO & Treasurer

13

EXHIBIT A

Patent Rights

Patents	Pending Applications (all U.S.)
***	***

***

A-1

EXHIBIT B

Vanos Products

PRODUCT	NDC
Vanos (fluocinonide cream 0.1%) 30g	99207-0525-30
Vanos (fluocinonide cream 0.1%) 60g	99207-0525-60
Vanos (fluocinonide cream 0.1%) 120g	99207-0525-10

B-1

EXHIBIT C

Joint Dismissal Agreements

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

MEDICIS PHARMACEUTICAL	)
CORPORATION,	)
	)
Plaintiff,	)
	)
v.	)	C.A. No. 10-4140 (DLC)
	)
NYCOMED US INC. AND NYCOMED	)
GMBH,	)
	)
Defendants.	)
	)

STIPULATION AND ORDER OF DISMISSAL

WHEREAS Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) brought this action asserting infringement of United States Patent Nos. 6,765,001; 7,220,424; and 7,217,422 (the “Medicis Patents”);

WHEREAS Nycomed US Inc. submitted to the U.S. Food and Drug Administration Abbreviated New Drug Application (“ANDA”) No. 200735 (the “Nycomed ANDA”) seeking approval to market and sell a generic fluocinonide cream USP, 0.1%, (the “Nycomed Product”);

WHEREAS Nycomed US Inc.(“Nycomed”) and Medicis are parties to litigation in this Court relating to the Nycomed ANDA and the Medicis Patents (“the Litigations”);

WHEREAS Nycomed GmbH was named as a defendant, but never served with the Complaint in this action and Medicis intends by this Stipulation and Order of Dismissal to dismiss all claims in the Litigations against Nycomed GmbH with prejudice;

C-1

WHEREAS Medicis and Nycomed have entered into a License and Settlement Agreement pursuant to which they have resolved the Litigations;

WHEREAS the Court has made no factual or legal findings with regard to the Medicis Patents or the Nycomed Product;

WHEREAS final settlement of the Litigations serves the public interest by saving judicial resources and avoiding the risks and uncertainties to Medicis and Nycomed associated with litigation;

WHEREAS final settlement of the Litigations will permit Medicis and Nycomed to save litigation costs, as well as adhere to the judicially recognized mandate that encourages the settlement of litigation whenever possible;

NOW, THEREFORE, Medicis and Nycomed stipulate that:

1. Except as reserved and provided for in the License and Settlement Agreement, Nycomed, on behalf of itself and its subsidiaries and affiliates, acknowledges and agrees that the Nycomed Product that is the subject of the Nycomed ANDA would, in the absence of the license granted by Medicis in the License and Settlement Agreement, infringe the Medicis Patents.

2. Except as reserved and provided for in the License and Settlement Agreements, Nycomed, on behalf of itself and its subsidiaries and affiliates, acknowledges and agrees that the Medicis Patents are valid and enforceable with respect to the Nycomed Product.

3. All claims and counterclaims in this action are dismissed with prejudice.

4. Except as set forth in the License and Settlement Agreement, each party shall bear its own costs, expenses and attorneys’ fees in connection with this action.

5. The parties waive any right of appeal from this Stipulation and Order.

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6. This Court shall retain jurisdiction of this action and over Medicis and Nycomed for purposes of enforcement of the terms and obligations of this Stipulation and Order of Dismissal and the parties’ License and Settlement Agreement.

C-3

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

MEDICIS PHARMACEUTICAL	)
CORPORATION,	)
	)
Plaintiff,	)
	)
v.	)	C.A. No. 11-4551 (DLC)
	)
NYCOMED US INC.,	)
	)
	)
Defendant.	)
	)

STIPULATION AND ORDER OF DISMISSAL

WHEREAS Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) brought this action asserting infringement of United States Patent No. 7,794,738 (the “Medicis Patent”) in the United States District Court for the District of Delaware (the “Delaware Court”);

WHEREAS Nycomed US Inc. submitted to the U.S. Food and Drug Administration Abbreviated New Drug Application (“ANDA”) No. 200735 (the “Nycomed ANDA”) seeking approval to market and sell a generic fluocinonide cream USP, 0.1%, (the “Nycomed Product”);

WHEREAS the Delaware Court transferred this action to this Court on June 16, 2011;

WHEREAS Nycomed US Inc.(“Nycomed”) and Medicis are parties to litigation in this Court relating to the Nycomed ANDA and the Medicis Patent (“the Litigation”);

WHEREAS Medicis and Nycomed have entered into a License and Settlement Agreement pursuant to which they have resolved the Litigation;

WHEREAS the Court has made no factual or legal findings with regard to the Medicis Patents or the Nycomed Product;

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WHEREAS final settlement of the Litigation serves the public interest by saving judicial resources and avoiding the risks and uncertainties to Medicis and Nycomed associated with litigation;

WHEREAS final settlement of the Litigation will permit Medicis and Nycomed to save litigation costs, as well as adhere to the judicially recognized mandate that encourages the settlement of litigation whenever possible;

NOW, THEREFORE, Medicis and Nycomed stipulate that:

1. Except as reserved and provided for in the License and Settlement Agreement, Nycomed, on behalf of itself and its subsidiaries and affiliates, acknowledges and agrees that the Nycomed Product that is the subject of the Nycomed ANDA would, in the absence of the license granted by Medicis in the License and Settlement Agreement, infringe the Medicis Patent.

2. Except as reserved and provided for in the License and Settlement Agreement, Nycomed, on behalf of itself and its subsidiaries and affiliates, acknowledges and agrees that the Medicis Patent is valid and enforceable with respect to the Nycomed Product.

3. All claims and counterclaims in this action are dismissed with prejudice.

4. Except as set forth in the License and Settlement Agreement, each party shall bear its own costs, expenses and attorneys’ fees in connection with this action.

5. The parties waive any right of appeal from this Stipulation and Order.

6. This Court shall retain jurisdiction of this action and over Medicis and Nycomed for purposes of enforcement of the terms and obligations of this Stipulation and Order of Dismissal and the parties’ License and Settlement Agreement.

C-5

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

MEDICIS PHARMACEUTICAL	)
CORPORATION,	)
	)
Plaintiff,	)
	)
v.	)	C.A. No. 11-2630 (DLC)
	)
NYCOMED US INC. AND NYCOMED	)
GMBH,	)
	)
Defendants.	)
	)

STIPULATION AND ORDER OF DISMISSAL

WHEREAS Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) brought this action asserting infringement of United States Patent Nos. 6,765,001; 7,220,424; and 7,217,422 (the “Medicis Patents”) in the United States District Court for the District of Delaware (the “Delaware Court”);

WHEREAS Nycomed US Inc. submitted to the U.S. Food and Drug Administration Abbreviated New Drug Application (“ANDA”) No. 200735 (the “Nycomed ANDA”) seeking approval to market and sell a generic fluocinonide cream USP, 0.1%, (the “Nycomed Product”);

WHEREAS the Delaware Court transferred this action to this Court on April 15, 2011;

WHEREAS Nycomed US Inc. (“Nycomed”) and Medicis are parties to litigation in this Court relating to the Nycomed ANDA and the Medicis Patents (“the Litigations”);

WHEREAS Nycomed GmbH was named as a defendant, but never served with the Complaint in this action and Medicis intends by this Stipulation and Order of Dismissal to dismiss all claims in the Litigations against Nycomed GmbH with prejudice;

C-6

WHEREAS Medicis and Nycomed have entered into a License and Settlement Agreement pursuant to which they have resolved the Litigations;

WHEREAS the Court has made no factual or legal findings with regard to the Medicis Patents or the Nycomed Product;

WHEREAS final settlement of the Litigations serves the public interest by saving judicial resources and avoiding the risks and uncertainties to Medicis and Nycomed associated with litigation;

WHEREAS final settlement of the Litigations will permit Medicis and Nycomed to save litigation costs, as well as adhere to the judicially recognized mandate that encourages the settlement of litigation whenever possible;

NOW, THEREFORE, Medicis and Nycomed stipulate that:

1. Except as reserved and provided for in the License and Settlement Agreement, Nycomed, on behalf of itself and its subsidiaries and affiliates, acknowledges and agrees that the Nycomed Product that is the subject of the Nycomed ANDA would, in the absence of the license granted by Medicis in the License and Settlement Agreement, infringe the Medicis Patents.

2. Except as reserved and provided for in the License and Settlement Agreement, Nycomed, on behalf of itself and its subsidiaries and affiliates, acknowledges and agrees that the Medicis Patents are valid and enforceable with respect to the Nycomed Product.

3. All claims and counterclaims in this action are dismissed with prejudice.

4. Except as set forth in the License and Settlement Agreement, each party shall bear its own costs, expenses and attorneys’ fees in connection with this action.

5. The parties waive any right of appeal from this Stipulation and Order.

C-7

6. This Court shall retain jurisdiction of this action and over Medicis and Nycomed for purposes of enforcement of the terms and obligations of this Stipulation and Order of Dismissal and the parties’ License and Settlement Agreement.

C-8

EXHIBIT D

Press Release

Nycomed US Inc. announced today the settlement of all patent litigation with Medicis Pharmaceutical Corporation concerning fluocinonide cream, marketed by Medicis as Vanos®. Under the terms of the settlement, Nycomed US will be able to launch a generic version of Vanos® cream in December 2013, or earlier in certain circumstances.

C-9

EXHIBIT E

Vanos® ***

PRODUCT	***
Vanos (fluocinonide cream 0.1%) 30g	***/EACH
Vanos (fluocinonide cream 0.1%) 60g	***/EACH
Vanos (fluocinonide cream 0.1%) 120g	***/EACH

C-10

EXHIBIT F

***.

C-11

EX-10.3

Exhibit 10.3

*** INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

LICENSE AND SETTLEMENT AGREEMENT

THIS LICENSE AND SETTLEMENT AGREEMENT (this “Agreement”) dated as of September 6, 2011 (the “Effective Date”) is entered into between Medicis Pharmaceutical Corporation, a Delaware corporation with an address at 7720 North Dobson Road, Scottsdale, Arizona 85256, on behalf of itself and its Affiliates (collectively, “Medicis”), and Aurobindo Pharma U.S.A., Inc., a Delaware corporation with an address at 102 Melrich Road, Cranbury, New Jersey 08512, on behalf of itself and its Affiliates (collectively “Aurobindo”).

WHEREAS, Medicis is the owner of the Patent Rights (as defined below) and has filed complaints against Aurobindo in the action captioned 10-1050-LPS which is pending in the United States District Court, District of Delaware (the “Delaware Court”) and in the action captioned 3:10-cv-06318-MLC-LHG in the United States District Court, District of New Jersey (the “New Jersey Court” and together with the Delaware Court, the “Courts”) (collectively, the “Litigation”);

WHEREAS, to avoid the expense of further litigation the Parties desire to settle the Litigation on the terms set forth herein; and

WHEREAS, the parties desire to settle the Litigation and Aurobindo desires to receive, and Medicis desires to grant to Aurobindo, a royalty-bearing license under the Patent Rights to make, use, sell, offer for sale and import Current Generic Product and Future Generic Product (as each term is defined below), all on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS.

1.1 “55/80/105 Future Strengths Trigger Date” means, with respect to the 55/80/105 Future Generic Products only and for which Aurobindo has an approved ANDA, on a 55/80/105 Future Generic Product-by-55/80/105 Future Generic Product basis, the earliest of:

(a) February ***, 2019;

(b) ***; or

(c) ***.

***.

***.

1.2 “65/115 Future Strengths Trigger Date” means, with respect to the 65/115 Future Generic Products only and for which Aurobindo has an approved ANDA, on a 65/115 Future Generic Product-by-65/115 Future Generic Product basis, the earliest of:

(a) February ***, 2018;

(b) ***; or

(c) ***.

***.

***.

1.3 “Affiliate” means, with respect to any entity, any other entity that directly or indirectly controls, is controlled by, or is under common control with, such entity. An entity shall be regarded as in control of another entity if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other entity, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other entity by any means whatsoever.

1.4 “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which the state or federal courts located in the State of Delaware are authorized or obligated by law or executive order to be closed.

1.5 “Confidential Information” means all non-public materials, information and data concerning the disclosing party and its operations that is disclosed by the disclosing party to the receiving party pursuant to this Agreement, orally or in written, electronic or tangible form, or otherwise obtained by the receiving party through observation or examination of the disclosing party’s operations. Confidential Information includes, but is not limited to, information about the disclosing party’s financial condition and projections; business, marketing or strategic plans; sales information; customer lists; price lists; databases; trade secrets; product prototypes and designs; techniques, formulae, algorithms and other non-public process information. Notwithstanding the foregoing, Confidential Information of a party shall not include that portion of such materials, information and data that the recipient can establish by written documentation: (a) is known to the recipient or any of the recipient’s Affiliates as evidenced by its written records before receipt thereof from the disclosing party, (b) is disclosed to the recipient or any of the recipient’s Affiliates free of confidentiality obligations by a Third Party who has the right to make such disclosure without obligations of confidentiality, (c) is or becomes part of the public domain through no fault of the recipient, or (d) the recipient can reasonably establish is independently developed by persons on behalf of recipient or any of its Affiliates without the use of the information disclosed by the disclosing party.

1.6 “Current Generic Product” means *** in 45mg, 90mg or 135mg dosage strengths.

1.7 “Current Solodyn Products” means the Solodyn® products listed on Exhibit A.

1.8 “Current Strengths Trigger Date” means with respect to a Current Generic Product for which Aurobindo has an approved ANDA, on a Current Generic Product-by-Current Generic Product basis, the earliest of:

(a) November 26, 2011;

2

(b) ***; or

(c) ***.

***.

***.

1.9 “FDA” means the United States Food and Drug Administration or any successor entity thereto.

1.10 “Future Generic Product” means ***

1.11 “Future Solodyn Products” means the 55mg, 65mg, 80mg, 105mg and 115mg dosage strengths of the Solodyn-branded minocycline products that were approved by the FDA under the Medicis NDA.

1.12 “GAAP” means generally accepted accounting principles in effect in the United States from time to time, as consistently applied by Aurobindo.

1.13 “Medicis NDA” means the New Drug Application #50-808 and any supplements or amendments thereto.

1.14 “Net Sales” means ***. Subsections (a) through (d) shall be collectively referred to as “Deductions”.

1.15 “Orange Book” means the current edition (in electronic or hard copy form) of the FDA’s publication, Approved Drug Products with Therapeutic Equivalence Evaluations, as may be amended from time to time, and any successor publication thereto.

1.16 “Patent Rights” means (a) the patents, the patent applications giving rise thereto and patent applications listed on Exhibit B to this Agreement, (b) all patents and patent applications issued or filed, respectively, in the United States that (i) claim or cover a product, composition, method, process or other patentable subject matter for a Current Solodyn Product or a Future Solodyn Product, or the manufacture or use of such product and (ii) Medicis owns or controls as of the Effective Date or thereafter during the term of this Agreement; (c) all divisionals, continuations, continuations-in-part and reissues that claim priority to, or common priority with, the patent applications described in clauses (a) and (b) above or the patent applications that resulted in the patents described in clauses (a) and (b) above, and all patents granted thereon, and (d) all patents that have issued or in the future issue from any of the foregoing patent applications, together with any reexamination certificates, reissues or restorations by existing or future extension or restoration mechanisms, or additions thereto.

1.17 “Pharmaceutical Equivalent” means a product having the same active ingredient, the same dosage form, the same route of administration and the same strength or concentration as a given reference listed drug.

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1.18 “Third Party” means any person or entity other than Medicis or Aurobindo.

1.19 “United States” means the United States of America ***.

1.20 “Valid Claim” means ***.

2. RELEASE; PATENT RIGHTS.

2.1 Prior to Trigger Dates.

2.1.1 Commencing on the Effective Date and continuing until the occurrence of a Current Strengths Trigger Date, Aurobindo shall not, and shall not directly or indirectly encourage or assist any Third Party, on a voluntary basis, to develop, make, use, sell, offer for sale, or import into the United States such Current Generic Product, except as expressly permitted by the terms of this Agreement. ***.

2.1.2 Commencing on the Effective Date and continuing until the occurrence of the 55/80/105 Future Strengths Trigger Date for a 55/80/105 Future Generic Product, on a 55/80/105 Future Generic Product-by-55/80/105 Future Generic Product basis, Aurobindo shall not, and shall not directly or indirectly encourage or assist any Third Party, on a voluntary basis, to develop, make, use, sell, offer for sale, import or otherwise commercialize such 55/80/105 Future Generic Product, except as expressly permitted by the terms of this Agreement. ***.

2.1.3 Commencing on the Effective Date and continuing until the occurrence of the 65/115 Future Strengths Trigger Date for a 65/115 Future Generic Product, on a 65/115 Future Generic Product-by-65/115 Future Generic Product basis, Aurobindo shall not, and shall not directly or indirectly encourage or assist any Third Party, on a voluntary basis, to develop, make, use, sell, offer for sale, import or otherwise commercialize such 65/115 Future Generic Product, except as expressly permitted by the terms of this Agreement. ***.

2.2 Validity of the Patent Rights. Aurobindo hereby admits that the claims of the Patent Rights are valid and enforceable. Aurobindo hereby admits that the making, using, offering to sell, selling, and/or importation into the United States of a Current Generic Product or a Future Generic Product, in each case, are covered by one or more claims of the Patent Rights under 35 U.S.C. § 271. The foregoing admissions, and any consent judgment incorporating same, shall be binding on Aurobindo and admissible against Aurobindo in any dispute or litigation between the parties regarding the Patent Rights, and Aurobindo shall not challenge such admission. Aurobindo agrees that from the Effective Date forward, Aurobindo shall not assist any Third Party in an action to invalidate or render unenforceable any Valid Claim, and Aurobindo shall not disclose any of its proprietary or confidential information relating to the validity or enforceability of any Valid Claim, except to the extent required by court order or other applicable law.

2.3 Consent Judgment for Permanent Injunction & Stipulation and Order of Dismissal. Upon the Effective Date, (1) Medicis and Aurobindo shall cause to be completed, executed and filed with the Delaware Court a Consent Judgment and Permanent Injunction in the forms attached hereto as Exhibit C, and Medicis, with Aurobindo’s agreement, shall move for the entry of the Consent Judgment and Permanent Injunction by such Delaware Court, and (2) Medicis and Aurobindo shall cause to be completed, executed and filed with the NJ Court a Stipulation and Order of Dismissal in the form attached hereto as Exhibit D.

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3. LICENSE.

3.1 License Grants.

3.1.1 Subject to the terms and conditions of this Agreement, and effective on the Current Strengths Trigger Date, Medicis hereby grants to Aurobindo a non-exclusive, non-transferable, non-sublicensable, royalty-bearing license under the Patents Rights to (a) make, have made, use, sell, offer for sale and import the applicable Current Generic Products in the United States and (b) sell or offer for sale the applicable Current Generic Products in the United States to Aurobindo’s distributors including, without limitation, private label distributors and customers for ultimate resale by such distributors, including own label distributors and customers in the United States.

3.1.2 Subject to the terms and conditions of this Agreement, and effective on the applicable 55/80/105 Future Strengths Trigger Date for each applicable 55/80/105 Future Generic Product for which Aurobindo has an approved ANDA, Medicis hereby grants to Aurobindo a non-exclusive, non-transferable, non-sublicensable, royalty-bearing license under the Patents Rights to (a) make, have made, use, sell, offer for sale and import in the United States the applicable 55/80/105 Future Generic Products for which Aurobindo has an approved ANDA and (b) sell or offer for sale the applicable 55/80/105 Future Generic Products in the United States to Aurobindo’s distributors including, without limitation, private label distributors and customers for ultimate resale by such distributors, including own label distributors and customers in the United States.

3.1.3 Subject to the terms and conditions of this Agreement, and effective on the applicable 65/115 Future Strengths Trigger Date for each applicable 65/115 Future Generic Product for which Aurobindo has an approved ANDA, Medicis hereby grants to Aurobindo a non-exclusive, non-transferable, non-sublicensable, royalty-bearing license under the Patents Rights to (a) make, have made, use, sell, offer for sale and import in the United States the applicable 65/115 Future Generic Products for which Aurobindo has an approved ANDA and (b) sell or offer for sale the applicable 65/115 Future Generic Products in the United States to Aurobindo’s distributors including, without limitation, private label distributors and customers for ultimate resale by such distributors, including own label distributors and customers in the United States.

3.2 No Licenses. Except as otherwise provided herein, nothing in this Agreement shall be construed as: (a) an obligation to bring or prosecute actions or suits against Third Parties for infringement of any patent, whether within the Patent Rights or otherwise; (b) conferring a right to use in advertising, publicity, promotion or otherwise any trademark or trade name of Medicis; or (c) granting by implication, estoppel or otherwise, any licenses or rights under the Patent Rights or any other patents.

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4. ROYALTIES.

4.1 Payment.

4.1.1 Subject to the terms and conditions of this Agreement, within *** following the end of each calendar quarter during the term of this Agreement, Aurobindo shall pay to Medicis in U.S. dollars a royalty of (a) *** of Net Sales of the Current Generic Product and (b) *** of Net Sales of the Future Generic Product during such calendar quarter ***. All payments shall be made by wire transfer in US Dollars to such bank account as may be designated by Medicis in writing to Aurobindo.

4.1.2 Within *** following the end of each calendar quarter during the term of this Agreement, Aurobindo shall provide to Medicis a written estimate of the royalty amount that will be payable for each product for such calendar quarter in accordance with Section 4.1.1. Within *** following the end of each calendar quarter during the term of this Agreement, Aurobindo shall provide to Medicis a written report stating the number and description of all Current Generic Product and Future Generic Product sold during the relevant calendar quarter; the gross sales associated therewith; the calculation of Net Sales thereon, including without limitation the amount of any Deductions; and the royalties that will be payable for such calendar quarter in accordance with Section 4.1.1.

4.1.3 Any late payments shall bear interest at the lower of (a) *** per annum, or (b) the maximum rate allowed by law, commencing on the date payment is due.

4.2 Taxes. Aurobindo shall be responsible for and may withhold from payments made to Medicis under this Agreement any taxes required to be withheld by Aurobindo under applicable law. Accordingly, if any such taxes are levied on such payments due hereunder (“Withholding Taxes”), Aurobindo shall (i) deduct the Withholding Taxes from the payment amount, (ii) pay all applicable Withholding Taxes to the proper taxing authority, and (iii) send evidence of the obligation together with proof of tax payment to Medicis within *** following the applicable tax payment.

4.3 Audit Rights. Upon written notice from Medicis, Aurobindo shall make available for inspection during normal business hours by an independent auditor selected by Medicis and reasonably acceptable to Aurobindo all records, books of account, information and data concerning the calculation of Net Sales pursuant to this Agreement for the purpose of an audit to determine the accuracy of the reports delivered and amounts paid by Aurobindo pursuant to Section 4.1. Upon reasonable belief of discrepancy or dispute, Medicis’ external auditors shall be entitled to take copies or extracts from such records, books of account, information and data (but only to the extent related to the contractual obligations set out in this Agreement) during any review or audit. Medicis shall be solely responsible for its costs in making any such audit, unless Medicis identifies a discrepancy in favor of Aurobindo in the calculation of the Net Sales and royalties paid to Medicis under this Agreement in any calendar year from those properly payable for that calendar year of *** or greater, in which event Aurobindo shall be solely responsible for the reasonable cost of such audit and pay Medicis any underpayment.

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5. TERM AND TERMINATION.

5.1 Term. Subject to Sections 5.2 and 5.3, this Agreement shall expire on the expiration of the last to expire of the Patent Rights; provided, however, that if there are no issued patents within the Patent Rights, but there are at such time pending patent applications within the Patent Rights, then subject to the terms and conditions of this Agreement, the term of this Agreement shall continue for the pendency of such pending patent applications.

5.2 Termination for Cause. Either party may terminate this Agreement upon or after the material breach of any material provision of this Agreement by the other party if the other party has not cured such breach within *** after receipt of express written notice thereof by the non-breaching party. Upon termination of this Agreement, Aurobindo shall not make, have made, use, sell, offer for sale, import or distribute the applicable Current Generic Product or Future Generic Product.

5.3 Termination for Challenge. Medicis shall have the right to immediately terminate this Agreement at any time after the Effective Date in the event Aurobindo contests or challenges, or supports or assists any Third Party to contest or challenge, Medicis’ ownership of or rights in, or the validity, enforceability or scope of, any of the Patent Rights or seeks (directly or through any Third Party) to raise a substantial new question of patentability in respect thereof.

5.4 Effect of Expiration or Termination. Expiration or termination of this Agreement shall not relieve the parties of any obligation accruing prior to such expiration or termination, and the provisions of Sections 1, 2.2, 5.2, 5.4, 6, 7, 8 and 9 shall survive the expiration or termination of this Agreement. No other provisions shall survive expiration or termination of this Agreement.

6. CONFIDENTIALITY.

6.1 Confidentiality. Until the expiration or earlier termination of this Agreement, and for a period of *** following the expiration or earlier termination hereof or thereof, except with respect to any Confidential Information constituting a trade secret in which case the receiving party’s obligation continues in perpetuity, provided such receiving party has been informed as to the status of such Confidential Information as a trade secret, each party shall maintain in confidence all Confidential Information disclosed by the other party and the terms of this Agreement, and shall not use, grant the use of or disclose to any Third Party the Confidential Information of the other party other than as expressly permitted hereby. Each party shall notify the other promptly upon discovery of any unauthorized use or disclosure of the other party’s Confidential Information or the terms of this Agreement.

6.2 Permitted Disclosures. Either party may disclose Confidential Information of the disclosing party (a) on a need-to-know basis, to such party’s or such party’s Affiliate’s directors, officers and employees to the extent such disclosure is reasonably necessary in connection with such party’s activities as expressly authorized by this Agreement, and (b) to those agents and consultants, and contract manufacturers thereof who need to know such information to accomplish the purposes of this Agreement (collectively, “Permitted Recipients”); provided such Permitted Recipients are bound to maintain such Confidential Information in confidence at least to the same extent as set forth in Section 6.1.

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6.3 Litigation and Governmental Disclosure. Each party may disclose Confidential Information of the other party to the extent such disclosure is reasonably necessary for prosecuting or defending litigation or complying with a court order or applicable law, governmental regulations or investigation, provided that if a party is required by court order, law or regulation (except for disclosure requested or required by the I.R.S.) to make any such disclosure of the other party’s Confidential Information it will give reasonable advance notice to the other party of such disclosure requirement and will use good faith efforts to assist such other party to secure a protective order or confidential treatment of such Confidential Information required to be disclosed.

6.4 Return of Confidential Information. Upon expiration or termination of this Agreement for any reason, the Receiving Party, upon receipt of a written request from the Disclosing Party, shall return to the Disclosing Party all copies of the Confidential Information received from the Disclosing Party hereunder, or, in its discretion, destroy all such copies and certify to such destruction, provided, however, that the Receiving Party’s legal counsel may retain one copy of such Confidential Information in a secure location solely for purposes of determining the Receiving Party’s continuing obligations under this Agreement.

6.5 Publicity. Neither party shall make any publicity releases, interviews or other dissemination of information concerning this Agreement or its terms, or either party’s performance hereunder, to communication media, financial analysts or others without the prior written approval of the other party, which approval shall not be unreasonably withheld, delayed or conditioned. Notwithstanding anything to the contrary in this Agreement, the parties understand and agree that either party, may, if so required, disclose some or all of the information included in this Agreement or other Confidential Information of the other party (a) in order to comply with its obligations under the law, including the United States Securities Act of 1933 and the United States Securities Exchange Act of 1934 and The Drug Price Competition and Patent Term Restoration Act of 1984, as amended by The Medicare Prescription Drug, Improvement and Modernization Act of 2003; (b) in order to comply with the listing standards or agreements of any national or international securities exchange or The NASDAQ Stock Market or New York Stock Exchange or other similar laws of a governmental authority; (c) to respond to an inquiry of a governmental authority or regulatory authority as required by law; or (d) in a judicial, administrative or arbitration proceeding. In any such event the party making such disclosure shall (i) provide the other party with as much advance notice as reasonably practicable of the required disclosure, (ii) cooperate with the other party in any attempt to prevent or limit the disclosure, and (iii) limit any disclosure to the specific purpose at issue. In connection with any filing of a copy of this Agreement with the Securities and Exchange Commission, the filing party shall endeavor to obtain confidential treatment of economic and trade secret information, and shall keep the other party informed as the planned filing (including, but not limited to providing the other party with the proposed filing reasonably in advance of making the planned filing) and consider the requests of the other party regarding such confidential treatment.

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7. REPRESENTATIONS AND WARRANTIES.

7.1 Representations. Each party hereby represents and warrants as of the Effective Date to the other party that (a) the person executing this Agreement is authorized to execute this Agreement; (b) this Agreement is legal and valid and the obligations binding upon such party are enforceable by their terms; and (c) the execution, delivery and performance of this Agreement does not conflict with any agreement, instrument or understanding, oral or written, to which such party may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

7.2 Disclaimer of Warranties. Except for those warranties set forth in Section 7.1, neither party makes any warranty, written, oral, express or implied, with respect to this Agreement. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE HEREBY ARE DISCLAIMED BY BOTH PARTIES.

7.3 Limitation of Liability. WITH THE EXCEPTION OF DAMAGES RESULTING FROM A PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER THIS AGREEMENT OR ITS OBLIGATIONS UNDER SECTION 8 (INDEMNIFICATION), OR A BREACH BY AUROBINDO OF SECTIONS 2.1 OR 2.2, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR LOSS OF USE OR PROFITS OR OTHER COLLATERAL, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT, WHETHER SUCH CLAIMS ARE FOUNDED IN TORT OR CONTRACT.

7.4 Equitable Relief. Aurobindo acknowledges and agrees that the obligations and undertakings of Aurobindo pursuant to Sections 2.1 and 2.2 of this Agreement are reasonable and necessary to protect the legitimate interests of Medicis, that Medicis would not have entered into this Agreement in the absence of such provisions, and that Aurobindo’s breach or threatened breach or failure to comply with Sections 2.1 and 2.2 shall cause Medicis significant and irreparable harm, the amount of which shall be extremely difficult to estimate and ascertain, and for which money damages shall not be adequate. Aurobindo further acknowledges and agrees that Medicis shall have the right to apply to any court of competent jurisdiction for an injunction order restraining any breach or threatened breach of Sections 2.1 and 2.2 of this Agreement and specifically enforcing the terms and provisions of such Sections of this Agreement, without the necessity of posting any bond or security, in addition to seeking any other remedy available to Medicis in law or equity. Aurobindo agrees that it shall not challenge any of the foregoing acknowledgements and agreements concerning injunctive relief in any proceeding brought by Medicis.

8. INDEMNIFICATION.

8.1 ***.

8.2 Obligations. Medicis shall promptly notify Aurobindo in writing of any claim, demand, action, or other proceeding in respect of which Medicis intends to claim such

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indemnification; provided, however, that failure to provide such notice within a reasonable period of time shall not relieve Aurobindo of any of its obligations hereunder except to the extent Aurobindo is prejudiced by such failure. Medicis shall permit Aurobindo, at its discretion, to settle any such action, claim or other matter. Notwithstanding the foregoing, Aurobindo shall not enter into any settlement that would adversely affect Medicis’s rights hereunder, or impose any obligations on Medicis in addition to those set forth herein, in order for it to exercise such rights, without Medicis’s prior written consent, which shall not be unreasonably withheld or delayed. No such action, claim or other matter shall be settled without the prior written consent of Aurobindo, which shall not be unreasonably withheld or delayed. Medicis shall reasonably cooperate with Aurobindo and its legal representatives in the investigation and defense of any claim, demand, action, or other proceeding covered by the indemnification obligations of this Section 8. Medicis shall have the right, but not the obligation, to be represented in such defense by counsel of its own selection and at its own expense.

9. GENERAL PROVISIONS.

9.1 Notices. All notices hereunder shall be delivered by facsimile (confirmed by overnight delivery), or by overnight delivery with a reputable overnight delivery service, to the following address of the respective parties:

If to Medicis:	Medicis Pharmaceutical Corporation
	7720 North Dobson Road
	Scottsdale, Arizona 85256
	Attn: Chief Executive Officer
	Facsimile: 480-291-5175
with a copy to:	Medicis Pharmaceutical Corporation
	7720 North Dobson Road
	Scottsdale, Arizona 85256
	Attn: General Counsel
	Facsimile: 480-291-8655
If to Aurobindo:	Aurobindo Pharma U.S.A., Inc.
	102 Melrich Road
	Cranbury, New Jersey 08512
	Attn: Chief Executive Officer
	Facsimile: (732) 355-0312
With a copy to:	Aurobindo Pharma Ltd.
	Survey No. 313, Bachupally
	R. R. District, Hyderabad-500072
	Andhra Pradesh, India
	Attn: G. P. Prasad
	Facsimile: : +91 40 2304 4058

Notices shall be effective on the day of receipt. A party may change its address listed above by notice to the other party given in accordance with this Section 9.1.

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9.2 Entire Agreement. The parties hereto acknowledge that this Agreement sets forth the entire agreement and understanding of the parties and supersedes all prior written or oral agreements or understandings with respect to the subject matter hereof. No modification of any of the terms of this Agreement, or any amendments thereto, shall be deemed to be valid unless in writing and signed by an authorized agent or representative of both parties hereto. No course of dealing or usage of trade shall be used to modify the terms and conditions herein. This Agreement shall be binding on each of Aurobindo and Medicis and their respective permitted successors and assigns.

9.3 Waiver. None of the provisions of this Agreement shall be considered waived by any party hereto unless such waiver is agreed to, in writing, by authorized agents of such party. The failure of a party to insist upon strict conformance to any of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or by law shall not be deemed a waiver of any rights of any party hereto.

9.4 Obligations to Third Parties. Each party warrants and represents that this Agreement does not conflict with any contractual obligations, expressed or implied, undertaken with any Third Party.

9.5 Assignment. Neither party shall assign this Agreement or any part hereof or any interest herein (whether by operation of law or otherwise) to any Third Party (or use any subcontractor) without the written approval of the other party; provided, however, that either party may assign this Agreement without such consent (i) to any Affiliate; and (ii) in the case of a merger, consolidation, change in control or sale of all or substantially all of the assets related to this Agreement, provided further that with respect to Aurobindo, any such Affiliate or Third Party agrees to be bound by the terms and conditions of this Agreement including, without limitation, the provisions of Section 2.2. No assignment shall be valid unless the permitted assignee(s) assumes all obligations of its assignor under this Agreement. No assignment shall relieve any party of responsibility for the performance of its obligations hereunder. Any purported assignment in violation of this Section 9.5 shall be void.

9.6 Governing Law. In any action brought regarding the validity, construction and enforcement of this Agreement, it shall be governed in all respects by the laws of the State of Delaware, without regard to the principles of conflicts of laws. The federal and state courts in the State of Delaware shall have jurisdiction over the parties hereto in all matters arising hereunder and the parties hereto agree that the venue with respect to such matters will be a state or federal court in the State of Delaware.

9.7 Severability. If any term or provision of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision hereof, and this Agreement shall be interpreted and construed as if such term or provision, to the extent the same shall have been held to be invalid, illegal or unenforceable, had never been contained herein.

9.8 Headings, Interpretation. The headings used in this Agreement are for convenience only and are not part of this Agreement.

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9.9 Attorneys’ Fees. The prevailing party shall be entitled to attorneys’ fees and its litigation or related expenses in any suit or proceeding with respect to the interpretation or enforcement of this Agreement.

9.10 Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of this page intentionally blank]

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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly-authorized representatives effective as of the Effective Date.

AUROBINDO PHARMA U.S.A., INC.		MEDICIS PHARMACEUTICAL CORPORATION
By:	/s/ Scott J. White	By:	/s/ Jason D. Hanson
Name:	Scott J. White	Name:	Jason D. Hanson
Title:	Chief Executive Officer	Title:	Executive Vice President, Chief Operating Officer
AUROBINDO PHARMA LTD.
By:	/s/ G P Prasad
Name:	G P Prasad
Title:	VP Global Finance Operations

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EXHIBIT A

CURRENT SOLODYN PRODUCTS

PRODUCT	NDC
Solodyn 45mg	99207-0460-[All]
Solodyn 90mg	99207-0461-[All]
Solodyn 135mg	99207-0462-[All]

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EXHIBIT B

PATENT RIGHTS

Issued Patents (all U.S.)	Pending Applications (all U.S.)
***	***

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EXHIBIT C

Consent Judgment for Permanent Injunction in Delaware

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

MEDICIS PHARMACEUTICAL CORP,	)
	)
Plaintiff,	)
	)
v.	)
	)	Civil Action No. 10-1050-LPS
AUROBINDO PHARMA LTD. and	)
AUROBINDO PHARMA USA, INC.,	)
	)
Defendants.	)
	)

UNOPPOSED MOTION FOR ENTRY OF CONSENT JUDGMENT

AND PERMANENT INJUNCTION AS TO

AUROBINDO PHARMA LTD. AND AUROBINDO PHARMA USA, INC.

Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) and Defendants Aurobindo Pharma Ltd. and Aurobindo Pharma USA, Inc. (collectively “Defendants”) having met, conferred, and agreed to resolve their dispute upon execution of a separate License and Settlement Agreement (“Settlement Agreement”), Medicis respectfully moves for entry of the executed Consent Judgment and Permanent Injunction submitted herewith. Defendants do not oppose this motion.

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MORRIS, NICHOLS, ARSHT & TUNNELL LLP

Jack B. Blumenfeld (#1014)

Karen Jacobs Louden (#2881)

1201 North Market Street

Wilmington, DE 19899-1347

(302) 658-9200

Jblumenfeld@mnat.com

klouden@mnat.com

Attorneys for Plaintiff

Medicis Pharmaceutical Corporation

Dated: September 2, 2011

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

MEDICIS PHARMACEUTICAL CORP,	)
	)
Plaintiff,	)
	)
v.	)
	)	Civil Action No. 10-1050-LPS
AUROBINDO PHARMA LTD. and	)
AUROBINDO PHARMA USA, INC.,	)
	)
Defendants.	)
	)

CONSENT JUDGMENT AND PERMANENT INJUNCTION AS TO

AUROBINDO PHARMA LTD. AND AUROBINDO PHARMA USA, INC.

This matter is before the Court on the unopposed motion of Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) and Defendants Aurobindo Pharma Ltd. and Aurobindo Pharma USA, Inc., collectively (“Defendants”).

WHEREAS, this Consent Judgment and Permanent Injunction as to Defendants concerns only the claims between Medicis and Defendants in this Civil Action No. 10-1050-LPS (referred to herein as the “Litigation”).

WHEREAS, Medicis requests that this Consent Judgment and Permanent Injunction as to Defendants be entered in the above-captioned case, and Defendants do not oppose Medicis’s request.

WHEREAS, Medicis owns United States Patent Nos. 5,908,838 (“the ‘838 patent”) and 7,790,705 (“the ‘705 patent”).

WHEREAS, Defendants submitted Abbreviated New Drug Application No. 202-261 (“Aurobindo’s ANDA”) to the FDA under 21 U.S.C. § 355(j) seeking to obtain approval to commercially manufacture and sell generic minocycline HCl extended release tablets for the treatment of acne.

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WHEREAS, in the Litigation, Medicis alleged that Defendants infringed one or more of claims 3, 4, 12, 13, 19, 21, 23, 25, and 27-34 of the ‘838 patent and one or more claims of the ‘705 patent under 35 U.S.C. § 271(e)(2) by virtue of Defendants’ submission of Aurobindo’s ANDA to the FDA.

WHEREAS, in this Litigation, Medicis alleged that it would be irreparably harmed if Defendants are not enjoined from infringing or actively inducing or contributing to infringement of one or more of claims 3, 4, 12, 13, 19, 21, 23, 25, and 27-34 of the ‘838 patent and one or more claims of the ‘705 patent.

WHEREAS, in this Litigation, Medicis requested that this Court enter a permanent injunction enjoining Defendants from infringing the ‘838 and ‘705 patents.

WHEREAS, Medicis and Defendants have reached an agreement to finally settle the Litigation as set forth in this Consent Judgment and Permanent Injunction as to Defendants and a separate License and Settlement Agreement (“Settlement Agreement”) which is contemporaneously and separately being executed.

WHEREAS, final settlement of the Litigation will help Medicis and Defendants avoid the substantial uncertainty and risks involved with prolonged litigation.

WHEREAS, final settlement of this Litigation will permit Medicis and Defendants to save litigation costs, as well as adhere to the judicially recognized mandate that encourages the settlement of litigation whenever possible.

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WHEREAS, final settlement of the Litigation serves the public interest by saving judicial resources and avoiding the risks to each of Medicis and Defendants associated with infringement.

WHEREAS, Medicis and Defendants each consent to personal jurisdiction in Maryland for purposes of enforcing the Settlement Agreement.

IT IS HEREBY ORDERED, DECREED, and ADJUDGED as follows:

1. The Court has jurisdiction over Medicis and Defendants and the subject matter of this Litigation.

2. Defendants acknowledge Medicis’s ownership and standing to sue for infringement of United States Patent Nos. 5,908,838 (“the ‘838 patent”) and 7,790,705 (“the ‘705 patent”).

3. Defendants acknowledge that the ‘838 and ‘705 patents are valid and enforceable, as described more fully in the Settlement Agreement.

4. Defendants and its affiliates are permanently enjoined as of the date hereof from infringing the ‘838 or ‘705 patents by the manufacture, use, offer to sell, sale, importation, or distribution of any current products, or future products having the same strength and dosage form of the current Solodyn® products, that are the subject of Aurobindo’s ANDA that is not pursuant to a license granted by Medicis, and from inducing others to infringe the ‘838 and ‘705 patents by inducing others to manufacture, use, offer to sell, sale, import, or distribute any current products, or future products having the same strength and dosage form of the current Solodyn® products, that are the subject of Aurobindo’s ANDA that is not pursuant to a license granted by Medicis.

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5. All claims and counterclaims in this Litigation are hereby dismissed without prejudice.

6. The parties are hereby ordered to comply with the terms of the Settlement Agreement.

7. Each party shall bear its own costs and attorneys’ fees.

8. This Court shall retain jurisdiction over Defendants and Medicis for the purpose of enforcing the terms of this Consent Judgment and Permanent Injunction and over any matters related to or arising from the interpretation or enforcement of the Settlement Agreement or any legal or equitable claim concerning the Settlement Agreement by any third party.

IT IS SO ORDERED, DECREED AND ADJUDGED this      day of             , 2011 by:

The Honorable Leonard P. Stark

United States District Judge

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Agreed to:

MORRIS, NICHOLS, ARSHT & TUNNELL LLP   Jack B. Blumenfeld (#1014) Karen Jacobs Louden (#2881) MORRIS, NICHOLS, ARSHT & TUNNELL LLP 1201 North Market Street Wilmington, DE 19899-1347 (302) 658-9200 Jblumenfeld@mnat.com klouden@mnat.com   Attorneys for Medicis Pharmaceutical Corporation BAYARD, P.A.   Richard D. Kirk (#0922) Stephen B. Brauerman (sb4952) 222 Delaware Avenue, Suite 900 P.O. Box 25130 Wilmington, DE 19899-5130 (302) 655-5000 rkirk@bayardlaw.com sbrauerman@bayardlaw.com   Attorneys for Aurobindo Pharma Ltd. and Aurobindo Pharma USA, Inc.   OF COUNSEL:   Steven H. Sklar LEYDIG, VOIT & MAYER, LTD. Two Prudential Plaza, Suite 4900 Chicago, IL 60601-6780 Telephone: (312) 616-5600 Facsimile: (312) 616-5700

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EXHIBIT D

Stipulation and Order of Dismissal in New Jersey

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

MEDICIS PHARMACEUTICAL CORP.,	)	Civil Action No.10-6318(MLC/LGH)
	)
Plaintiff,	)
	)
v.	)
	)
AUROBINDO PHARMA LTD. and	)
AUROBINDO PHARMA USA, INC.,	)
	)
Defendants.	)
	)

STIPULATION AND ORDER OF DISMISSAL

Plaintiff Medicis Pharmaceutical Corporation (“Medicis”) and Defendants Aurobindo Pharma Ltd. and Aurobindo Pharma USA, Inc., collectively (“Defendants”), by and through their undersigned counsel, hereby stipulate as follows pursuant to Rule 41(a) of the Federal Rules of Civil Procedure:

1. All claims and any counterclaims asserted in this suit by and between Medicis and Defendants are dismissed without prejudice; and

2. Each party shall bear its own costs, expenses, and attorney fees.

SO STIPULATED:

CONNELL FOLEY LLP Attorneys for Medicis Pharmaceutical Corporation LEYDIG, VOIT & MAYER, LTD. Attorneys for Aurobindo Pharma Ltd. and Aurobindo Pharma USA, Inc.

BY:		BY:
	Liza M. Walsh Rukhsanah L. Lighari 85 Livingston Avenue Roseland, New Jersey 07068 (973) 535-0500		Steven H. Sklar Two Prudential Plaza, Suite 4900 Chicago, IL 60601-6780 (312) 616-5600
Dated: August     , 2011		Dated: August     , 2011

SO ORDERED this     day of             , 2011.

Honorable Mary L. Cooper, U.S.D.J.

EX-10.4

Exhibit 10.4

*** INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Execution Version

STOCK PURCHASE AGREEMENT

by and between

MEDICIS PHARMACEUTICAL CORPORATION (“Seller”)

and

SOLTA MEDICAL, INC. (“Buyer”)

dated as of

September 12, 2011

Table of Contents

		Page
ARTICLE 1 DEFINITIONS AND REFERENCES			2
ARTICLE 2 PURCHASE AND SALE OF THE SHARES; PURCHASE PRICE			2
Section 2.1	Purchase and Sale of the Shares.		2
Section 2.2	Purchase Price.		2
Section 2.3	Payment of the Purchase Price.		2
Section 2.4	Working Capital Adjustment.		2
Section 2.5	Assumption of Obligations under the LipoSonix Agreement.		4
Section 2.6	Seller Contingent Payments.		4
Section 2.7	Payment of Seller Contingent Payments.		12
Section 2.8	Consent Requirement.		20
ARTICLE 3 CLOSING			21
Section 3.1	Closing.		21
Section 3.2	Closing Deliveries.		21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER			22
Section 4.1	Organization and Qualification.		22
Section 4.2	Charter and Bylaws.		23
Section 4.3	Shares; Indebtedness.		23
Section 4.4	Authority; Enforceability.		23
Section 4.5	No Conflict; Required Filings and Consents.		24
Section 4.6	Material Contracts.		24
Section 4.7	Compliance.		27
Section 4.8	Absence of Certain Changes or Events.		28
Section 4.9	Liabilities.		29
Section 4.10	Absence of Litigation.		30
Section 4.11	Employee Benefit Plans.		30
Section 4.12	Employment and Labor Matters.		32
Section 4.13	Title to Assets; Leases; Sufficiency of Assets.		33
Section 4.14	Taxes.		34
Section 4.15	Environmental Matters.		36
Section 4.16	Intellectual Property.		37
Section 4.17	Insurance.		41
Section 4.18	Brokers.		42
Section 4.19	Certain Business Practices.		42
Section 4.20	Interested Party Transactions.		43
Section 4.21	Health Regulatory.		43
Section 4.22	FDA and International Regulatory and Related Matters.		44
Section 4.23	Product Liability; Product Warranties.		49
Section 4.24	Inventories.		49
Section 4.25	Trade Compliance Matters.		50

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Section 4.26	Manufacturing and Marketing Rights.	51
Section 4.27	Corporate Records.	51
Section 4.28	Financial Statements.	51
Section 4.29	LipoSonix Agreement.	51
Section 4.30	[Reserved].	52
Section 4.31	Exclusivity of Representations and Warranties.	52
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER		52
Section 5.1	Organization and Good Standing.	52
Section 5.2	Authority; Enforceability.	52
Section 5.3	No Conflict; Required Filings and Consents.	53
Section 5.4	Absence of Litigation.	53
Section 5.5	Available Funds.	53
Section 5.6	No Brokers.	54
Section 5.7	Investment Representation.	54
Section 5.8	Buyer Review.	54
Section 5.9	No Outside Reliance.	54
ARTICLE 6 COVENANTS		55
Section 6.1	Conduct of Business by the Company Pending the Closing.	55
Section 6.2	No Solicitation of Other Proposals.	58
Section 6.3	Access to Information; Confidentiality.	59
Section 6.4	Commercially Reasonable Efforts; Further Assurances.	60
Section 6.5	Employee Benefits.	62
Section 6.6	Notification of Certain Matters.	63
Section 6.7	Public Announcements.	64
Section 6.8	Claims.	64
Section 6.9	Delivery of Corporate Records.	64
Section 6.10	Certain Litigation Matters.	65
Section 6.11	Post-Closing Books and Records of the Company.	65
Section 6.12	FDA Approval Matters.	65
Section 6.13	Additional Covenants Regarding LipoSonix Agreement.	65
Section 6.14	Control of Business.	69
Section 6.15	Seller Marks.	69
Section 6.16	Audit and Preparation of Company Financial Statements.	69
Section 6.17	Buyer Financing.	70
Section 6.18	Transition Services Agreement.	70
Section 6.19	No Use of Corporate Name.	70
ARTICLE 7 CONDITIONS		70
Section 7.1	Conditions to Each Party’s Obligations.	70
Section 7.2	Additional Conditions to Obligations of Buyer.	71
Section 7.3	Additional Conditions to Obligations of Seller.	71

ii

ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER		72
Section 8.1	Termination.	72
Section 8.2	Effect of Termination.	73
Section 8.3	Amendment.	73
Section 8.4	Waiver.	73
ARTICLE 9 INDEMNIFICATION		74
Section 9.1	Survival; Time Limitation.	74
Section 9.2	Indemnification; Remedies.	74
Section 9.3	Calculation of Losses; Indemnification Limitations.	76
Section 9.4	Notice of Claims	78
Section 9.5	Third Party Claims.	78
Section 9.6	Other Matters.	80
Section 9.7	Exclusive Remedies.	80
Section 9.8	No Special, Punitive or Consequential Damages.	80
ARTICLE 10 TAX		80
Section 10.1	Tax Allocation.	80
Section 10.2	Returns and Payments.	81
Section 10.3	Contests.	81
Section 10.4	Cooperation and Exchange of Information.	82
Section 10.5	Characterization of Payments.	82
Section 10.6	Transfer Taxes.	83
ARTICLE 11 MISCELLANEOUS		83
Section 11.1	Fees and Expenses.	83
Section 11.2	Notices.	83
Section 11.3	Severability.	84
Section 11.4	Entire Agreement.	84
Section 11.5	Assignment.	84
Section 11.6	Parties in Interest.	85
Section 11.7	Failure or Indulgence Not Waiver; Remedies Cumulative.	85
Section 11.8	Governing Law; Jurisdiction.	85
Section 11.9	Waiver of July Trial.	86
Section 11.10	Enforcement of Agreement; Specific Performance.	86
Section 11.11	Counterparts.	86
Section 11.12	Due Diligence Materials; Seller Disclosure Schedule.	86
ANNEX I DEFINITIONS		I-1

iii

EXHIBITS

Exhibit A	Statement of Working Capital
Exhibit B	Form of Confidentiality Agreement

iv

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT, dated as of September 12, 2011, 2011 (this “Agreement”), is entered into by and between Medicis Pharmaceutical Corporation, a Delaware corporation (“Seller”), and Solta Medical, Inc., a Delaware corporation (“Buyer”). Buyer and Seller are sometimes referred to herein as the “Parties.”

WHEREAS, pursuant to that certain Agreement and Plan of Merger dated as of June 16, 2008 (the “LipoSonix Agreement”) by and among Seller, Donatello, Inc., a direct wholly owned subsidiary of Seller, LipoSonix, Inc., a Delaware corporation, Rebecca Robertson, as Equityholders’ Representative, and Wilfred Jaeger, as Alternate Equityholders’ Representative, Donatello, Inc. merged into LipoSonix, Inc., whereby LipoSonix, Inc. became a wholly-owned subsidiary of Seller and is now Medicis Technologies Corporation, a Delaware corporation (the “Company”);

WHEREAS, Seller owns one hundred percent (100%) of the issued and outstanding shares of capital stock (the “Shares”) of the Company;

WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from Seller, the Shares, for the consideration and on the terms and conditions set forth in this Agreement; and

WHEREAS, simultaneously with the execution and delivery of this Agreement, Medicis Aesthetics Canada Ltd. (“MAC”), a Subsidiary of Seller, and Buyer, have entered into an Asset Purchase Agreement of even date herewith (the “Asset Purchase Agreement”), pursuant to which Medicis Aesthetics Canada Ltd. will (i) sell to Buyer certain assets related to the business of the Company and (ii) assign to Buyer all of its right, title and interest in, to and under certain contracts, equipment, leases and rental contracts related to the business of the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, intending to be legally bound hereby, the Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS AND REFERENCES

Capitalized terms used herein without definition shall have the respective meanings assigned thereto in Annex I attached hereto and incorporated herein for all purposes of this Agreement (such definitions to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise specified, all references herein to “Articles,” “Sections,” “Exhibits,” “Annexes” or “Schedules” are to Articles, Sections, Exhibits, Annexes or Schedules of this Agreement. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE 2

PURCHASE AND SALE OF THE SHARES; PURCHASE PRICE

Section 2.1 Purchase and Sale of the Shares. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer the Shares owned by Seller, free and clear of all Liens, and Buyer shall deliver to Seller the portion of the Purchase Price to be paid to Seller for the Shares at the Closing as provided in this Article 2.

Section 2.2 Purchase Price. Upon the terms and subject to the conditions set forth in this Agreement, the aggregate purchase price to be paid for the Shares shall be (a) fourteen million five hundred fifty-eight thousand three hundred seventy-eight dollars and sixteen cents ($14,558,378.16) (the “Base Purchase Price”), plus (i) the amount, if any, by which the Final Working Capital exceeds the Target Working Capital, or minus (ii) the amount, if any, by which the Final Working Capital is less than the Target Working Capital (the Base Purchase Price, as adjusted in accordance with Section 2.4, the “Purchase Price”), and (b) the contingent payments to be paid by Buyer to Seller pursuant to the terms and conditions set forth in Sections 2.6 and 2.7 of this Agreement (collectively, the “Seller Contingent Payments”).

Section 2.3 Payment of the Purchase Price. At the Closing, upon the terms and subject to the conditions set forth in this Agreement, Buyer shall pay fourteen million five hundred fifty-eight thousand three hundred seventy-eight dollars and sixteen cents ($14,558,378.16) of the Purchase Price in cash to Seller or Seller’s designee in consideration for the Shares, by wire transfer of immediately available funds pursuant to the wire transfer instructions provided by Seller at least one (1) day prior to the Closing Date.

Section 2.4 Working Capital Adjustment.

(a) Not later than three (3) Business Days prior to the scheduled Closing Date, Seller shall deliver to Buyer a schedule (the “Estimated Working Capital Schedule”)

2

summarizing Seller’s good faith estimate of the Working Capital of the Company as of the Closing Date (such estimated Working Capital being the “Estimated Working Capital”). Seller shall prepare the Estimated Working Capital Schedule using the same accounting policies, methodologies, practices and assumptions as used in the preparation of the Statement of Working Capital as of August 31, 2011 attached hereto as Exhibit A (the “Statement of Working Capital”), which Seller (after reasonable consultation with Buyer or its designee) is delivering to Buyer concurrently with the execution and delivery of this Agreement. Seller shall provide Buyer with such information as Buyer may reasonably request to verify the Estimated Working Capital Schedule. The Base Purchase Price shall be adjusted either (i) upward by the amount the Estimated Working Capital is greater than the Target Working Capital or (ii) downward by the amount the Estimated Working Capital is less than the Target Working Capital.

(b) As promptly as practicable, and in any event within sixty (60) days, following the Closing Date, Buyer shall deliver to Seller a schedule (the “Final Working Capital Schedule”) with reasonable supporting detail summarizing Buyer’s calculation of the Working Capital of the Company as of the Closing Date (such Working Capital, subject to potential adjustments in accordance with this Section 2.4, being the “Final Working Capital”). Buyer shall prepare the Final Working Capital Schedule using the same accounting policies, methodologies, practices and assumptions as used in the preparation of the Statement of Working Capital. Buyer shall provide Seller with such information as Seller may reasonably request to verify the Final Working Capital Schedule. In the event that Buyer does not deliver the Final Working Capital Schedule within sixty (60) days following the Closing Date, Buyer shall be deemed to have accepted the Estimated Working Capital as the Final Working Capital and the Estimated Working Capital shall be the Final Working Capital.

(c) Seller may dispute any amounts reflected on the Final Working Capital Schedule; provided, however, that Seller shall have notified Buyer in writing of each disputed item, specifying the amount thereof in dispute and setting forth, in reasonable detail, the basis for such dispute, within thirty (30) days after Buyer’s delivery of the Final Working Capital Schedule to Seller. In the event of such a dispute, Seller and Buyer shall attempt to reconcile their differences, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on Seller and Buyer. If Seller and Buyer are unable to reach a resolution with such effect within fifteen (15) Business Days after receipt by Buyer of Seller’s written notice of dispute, either Seller or Buyer shall have the right, upon delivery of written notice to the other Party, to submit the items remaining in dispute for resolution by an independent accounting firm of nationally recognized standing which is reasonably acceptable to both Seller and Buyer (a “Qualified Accountant”), which shall, within thirty (30) days after such submission, deliver a report to Seller and Buyer setting forth the resolution of such disputed items and the adjustment, if any, to be made to the Final Working Capital, and such report shall be final, binding and conclusive on Seller and Buyer, absent fraud. The fees and expenses of the Qualified Accountant shall be borne by Seller, on the one hand, and Buyer, on the other hand, in inverse proportion as they may prevail on the matters resolved by the Qualified Accountant, which proportionate allocation will also be determined by the Qualified Accountant and be included in the Qualified Accountant’s report. In acting under this Agreement, the Qualified Accountant shall be entitled to the privileges and immunities of arbitrators.

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(d) After the Closing, Buyer shall, and shall cause its respective employees and agents to, provide Seller, its accountants and the Qualified Accountants access at reasonable times to the personnel, properties and books and records of the Company for the purpose of reviewing the Final Working Capital Schedule or in connection with any dispute under this Section 2.4.

(e) Within three (3) Business Days after the final determination of the Final Working Capital pursuant to this Section 2.4, (i) if the Final Working Capital exceeds the Estimated Working Capital, Buyer shall pay to Seller the aggregate amount of such excess, by wire transfer of immediately available funds to an account designated by Seller; and (ii) if the Final Working Capital is less than the Estimated Working Capital, Seller shall pay to Buyer the aggregate amount of such deficiency, by wire transfer of immediately available funds to an account designated by Buyer.

Section 2.5 Assumption of Obligations under the LipoSonix Agreement. In accordance with Section 3.12 of the LipoSonix Agreement, effective as of the Closing, Buyer hereby assumes the obligations set forth in the LipoSonix Agreement to make the Contingent Payments as set forth in the LipoSonix Agreement and hereby agrees to be bound by and to comply with the terms and conditions set forth in the LipoSonix Agreement and the applicable terms of Sections 3.9 through 3.11 of the LipoSonix Agreement. From and after the Closing, Seller shall have no further obligation to make any Contingent Payments pursuant to the LipoSonix Agreement. For the avoidance of doubt, the foregoing provision does not, and shall not be deemed to, constitute an assignment of the entire LipoSonix Agreement pursuant to Section 11.5 of the LipoSonix Agreement, rather it constitutes only an assignment of all rights and obligations with respect to Contingent Payments in accordance with Section 3.12(d) of the LipoSonix Agreement.

Section 2.6 Seller Contingent Payments.

(a) Certain Definitions. For purposes of this Agreement, the following definitions shall apply:

(i) “Additional LipoSonix Contingent Payment” means, for the period commencing on the first fiscal quarter immediately following the occurrence of the earliest of (A) December 31, 2019, (B) the date that is the last day of the “Seventh Contingent Payment Year” under the LipoSonix Agreement and (C) the date on which Buyer has made (or has been deemed to have made pursuant to Section 3.10 of the LipoSonix Agreement) the aggregate “Sales/Profit Contingent Payments” under the LipoSonix Agreement equal to ***, and ending on the Contingent Payment Termination Date, the amount that would otherwise be payable by Buyer pursuant to Section 2.5 of this Agreement (or its permitted assignee) under the LipoSonix Agreement in respect of the “Sales/Profit Contingent Payment Amount” (as defined in the LipoSonix Agreement) for the then applicable “Contingent Payment Year” (as defined in the LipoSonix Agreement) had none of the events described in clauses (A), (B) or (C) above occurred.

(ii) “Company Incremental Amount” means, with respect to any Contingent Payment Year, the amount equal to (x) the sum of (1) the amount of Worldwide Net

4

Sales for the Sales Payment Product for such Contingent Payment Year, (2) the amount of Worldwide Gross Profit for the Gross Profit Payment Product for such Contingent Payment Year and (3) the amount of Worldwide Ancillary Gross Profit for the Contingent Payment Products for such Contingent Payment Year, minus (y) the sum of (1) the amount of Worldwide Net Sales for the Sales Payment Product for the immediately completed previous Contingent Payment Year (or, with respect to the first Contingent Payment Year, the immediately completed previous twelve (12) consecutive calendar month period), (2) the amount of Worldwide Gross Profit for the Gross Profit Payment Product for the immediately completed previous Contingent Payment Year (or, with respect to the first Contingent Payment Year, the immediately completed previous twelve (12) consecutive calendar month period) and (3) the amount of Worldwide Ancillary Gross Profit for the Contingent Payment Products for the immediately completed previous Contingent Payment Year (or, with respect to the first Contingent Payment Year, the immediately completed previous twelve (12) consecutive calendar month period); provided, that if the amount otherwise determined in accordance with this definition for any Contingent Payment Year is not greater than zero, then the Company Incremental Amount for such Contingent Payment Year shall be deemed to be zero.

(iii) “Contingent Payment Commencement Date” means the first day of the fiscal quarter following the fiscal quarter in which, after the “FDA Milestone” (as defined in the LipoSonix Agreement) has been achieved, the LipoSonix Product is first sold commercially to unaffiliated parties in the United States.

(iv) “Contingent Payment Product” means either the Gross Profit Payment Product or the Sales Payment Product, as applicable.

(v) “Contingent Payment Termination Date” means the last day of the Contingent Payment Year that is the seventh full Contingent Payment Year after (A) the FDA Milestone has been achieved and (B) the Second Generation LipoSonix Product is first sold commercially to unaffiliated parties in the United States.

(vi) “Contingent Payment Year” means each of the successive twelve (12) consecutive calendar month periods beginning with the twelve (12) calendar month period commencing on the Contingent Payment Commencement Date and ending on the Contingent Payment Termination Date.

(vii) “FDA Milestone” shall be deemed to be achieved upon receipt by any member of the Buyer Group of written approval or clearance from the FDA, or a successor entity, allowing for the initiation of the marketing or sales of any version or derivative of the second generation of LipoSonix Product, part number P005700-01 and successor thereto (the “Second Generation LipoSonix Product”), in the United States; provided, that the FDA Milestone shall not be deemed to have been achieved until all conditions and limitations contained in the written approval or clearance from the FDA that preclude immediate marketing and commercialization of the LipoSonix Product have been satisfied or waived.

(viii) “FDA Milestone Payment Amount” means the amount of: (a) $20,000,000, if the FDA Milestone is achieved on or before April 2, 2012; (b) the difference between (i) $20,000,000, minus the product of (x) the number of full thirty (30) day periods

5

between April 2, 2012 and October 1, 2012 that has passed prior to achieving the FDA Milestone, times (y) $1,000,000, if the FDA Milestone is achieved after April 2, 2012, but on or before October 1, 2012; and (c) $0, if the FDA Milestone is achieved after October 1, 2012.

(ix) “Gross Profit Payment Product” means the LipoSonix Product, excluding the Sales Payment Product.

(x) “LipoSonix Product” means (A) the Company’s LipoSonix System, including the Sales Payment Product, which applies high intensity focused ultrasound for the purpose of using thermal lipolysis to treat adipose tissue, as it has been developed and commercialized by the Company prior to the Closing, and (B) following the Closing, any Product of the Company (including the Sales Payment Product), any modifications or enhancements of any Product of the Company and any product of the Buyer Group that applies high intensity focused ultrasound and that incorporates, uses, or is covered by the LipoSonix Technology.

(xi) “LipoSonix Technology” means any technology, including any methods, materials or products, that (i) was first disclosed in or is covered by (i.e., would infringe a claim of) any patents and patent applications owned by or exclusively licensed by the Company and is disclosed in Section 4.16(a) of the Seller Disclosure Schedule (including, without limitation, any continuation, divisional or reissue of any patent application or patent disclosed in Section 4.16(a) of the Seller Disclosure Schedule), or (ii) incorporates or uses any trade secret of the Company disclosed in Section 2.6(a)(x) of the Seller Disclosure Schedule.

(xii) “Sales Milestone” shall be deemed to be achieved upon the first occurrence in which, with respect to any Contingent Payment Year, the sum of Worldwide Net Sales for the Sales Payment Product, and Worldwide Gross Profit for the Gross Profit Payment Product and Worldwide Ancillary Gross Profit for the Contingent Payment Products recorded for such Contingent Payment Year exceeds $300,000,000.

(xiii) “Sales Milestone Payment Amount” means the amount of $30,000,000, less any amounts paid or payable (including any amounts that may become payable) as a “Sales Milestone Payment Amount” under the LipoSonix Agreement.

(xiv) “Sales Payment Product” means transducers for use as part of, or for use with, the LipoSonix Product, and any other disposable or limited life items sold for use with such transducers, including, but not limited to, treatment caps or cartridges.

(xv) “Sales/Profit Contingent Payment Amount” means, with respect to any Contingent Payment Year, an amount equal to the sum of (A) (x) the Sales/Profit Contingent Payment Percentage multiplied by (y) the Company Incremental Amount for such Contingent Payment Year and (B) the Additional LipoSonix Contingent Payment.

(xvi) “Sales/Profit Contingent Payment Percentage” means 25%.

(xvii) “Worldwide Ancillary Gross Profit” means (A) total gross revenues actually recognized from Contingent Payment Products, including, without limitation, (1) the leasing and servicing of Contingent Payment Products, (2) the use of Contingent Payment

6

Products by third parties (such as on a “fee for service basis”) and (3) licenses and similar arrangements pursuant to which a Person is granted the right to manufacture and/or market, lease, sell, service or otherwise obtain revenues from a Contingent Payment Product (but in each case excluding gross revenues that are included in Worldwide Gross Profit or Worldwide Net Sales) minus (B) the cost of such revenues, each as adjusted by any Worldwide Ancillary Gross Profit Adjustments (including amortization and depreciation) and all as recorded by Buyer (or any other applicable member of the Buyer Group if any such licensing, leasing or servicing contemplated hereby is recorded by such member of the Buyer Group but not by Buyer), all in accordance with standard allocation procedures, allowance methodologies and accounting methods consistently applied, which procedures, methodologies and methods shall be in accordance with GAAP. Notwithstanding anything to the contrary in this Agreement or in any financial statements prepared by Buyer with respect to any Contingent Payment Year or portion thereof, or to the extent it may otherwise be required pursuant to GAAP, the term “Worldwide Ancillary Gross Profit” shall not include: (A) any revenues or other value received for the lease or service of a specified Contingent Payment Product used for research, manufacturing or quality testing, clinical trials, compassionate or humanitarian purposes including expanded access programs (which provide access to therapies for no monetary consideration) or charitable donations; (B) any revenues or other value received (and related costs) by Buyer or any other member of the Buyer Group from the license of any Intellectual Property related to the Contingent Payment Products (other than for the right to manufacture and/or market, lease, sell, service or otherwise obtain revenues from any Contingent Payment Products); or (C) any amounts otherwise included in Worldwide Gross Profit or Worldwide Net Sales. For purposes of calculating “Worldwide Ancillary Gross Profit”, cost of revenues of any member of the Buyer Group shall exclude any payments, or amounts payable, to any other member of the Buyer Group, to the extent that such payments or amounts payable are in excess of actual costs incurred by such other member of the Buyer Group in connection with the applicable transaction.

(xviii) “Worldwide Ancillary Gross Profit Adjustments” means all adjustments, including the following items as applicable to each such Contingent Payment Product, to the extent such adjustments are customary under industry practices and are reflected as a reduction to gross revenue or an increase to cost of goods sold in the consolidated financial statements of Buyer in accordance with GAAP:

(A) credits or allowances granted upon returns, rejections or recalls (due to spoilage, damage, expiration of useful life), price reductions, or billing corrections;

(B) invoiced freight, postage, shipping and insurance, handling and other transportation costs;

(C) credits or allowances granted including quantity, cash, bad debt and other trade discounts;

(D) Taxes (excluding withholding Taxes and Taxes paid by Buyer on the net income derived from licensing for manufacture and leasing of and servicing the Contingent Payment Products), tariffs, customs duties, surcharges and other governmental charges incurred in connection with the production, lease, service, transportation, delivery, use,

7

exportation or importation of Contingent Payment Products that are incurred at the time of license for manufacture, lease or service or are directly related to the license for manufacture, lease or service and not otherwise previously deducted;

(E) discounts, refunds, rebates, returns, charge backs, fees, credits or allowances (including billing corrections, amounts incurred in connection with government-mandated rebate and discount programs, third party rebates and charge backs, hospital buying group/group purchasing or leasing organization administration fees and managed care organization rebates), distribution fees and sales and other similar commissions to third parties, actually paid or incurred and which effectively reduce gross revenue;

(F) warranties, guaranties and maintenance arrangements; and

(G) any other customary adjustments related to products licensed for manufacture, leased or serviced and reasonably allocated to such Contingent Payment Products as a portion of the gross revenue or related cost of goods sold, in accordance with GAAP.

(xix) “Worldwide Gross Profit” means the difference between (A) the Worldwide Net Sales of a specified Contingent Payment Product minus (B) the cost of goods sold (as adjusted by any Worldwide Net Sales Adjustments), for such specified Contingent Payment Product, each as recorded by Buyer (or any other applicable member of the Buyer Group if any sales contemplated hereby are recorded by such member of the Buyer Group but not by Buyer), all in accordance with standard allocation procedures, allowance methodologies and accounting methods consistently applied, which procedures, methodologies and methods shall be in accordance with GAAP, but excluding from cost of goods sold of any member of the Buyer Group any gross profit recorded by any member of the Buyer Group on any sales to any other member of the Buyer Group.

(xx) “Worldwide Net Sales” means the gross amounts invoiced for sales by Buyer (or any other applicable member of the Buyer Group if any sales contemplated hereby are recorded by such member of the Buyer Group but not by Buyer) from the sales of a specified Contingent Payment Product by a member of the Buyer Group or its authorized or licensed distributor after the Closing to unaffiliated third parties less the Worldwide Net Sales Adjustments, all in accordance with standard allocation procedures, allowance methodologies and accounting methods consistently applied, which procedures and methodologies shall be in accordance with GAAP. For purposes of clarification, when measuring the Worldwide Net Sales recorded in respect of sales of a specified Contingent Payment Product by any Person other than a member of the Buyer Group, only the revenue recorded by Buyer or another member of the Buyer Group shall be included (for example, the transfer price or other amount received by Buyer or such other member of the Buyer Group, in the event of any sales by an authorized or licensed distributor of the specified Contingent Payment Product manufactured by Buyer), and the amount of revenue that may be recorded or achieved by such other Person who is not a member of the Buyer Group shall be disregarded. Notwithstanding anything to the contrary in this Agreement or in any financial statements prepared by Buyer with respect to any Contingent Payment Year or portion thereof, or to the extent it may otherwise be required pursuant to GAAP, the term “Worldwide Net Sales” shall not include (A) gross amounts invoiced for sales

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by Buyer or any member of the Buyer Group from transactions with another member of the Buyer Group unless such other member of the Buyer Group is an end user of the specified Contingent Payment Product; provided, however, that “Worldwide Net Sales” shall in such event include the gross amounts invoiced for sales, if any, recorded upon the further resale of such specified Contingent Payment Product by such other member of the Buyer Group less the Worldwide Net Sales Adjustments or (B) distribution to a third party of a specified Contingent Payment Product for research, manufacturing or quality testing, clinical trials, compassionate or humanitarian purposes including expanded access programs (which provide access to therapies for no monetary consideration) or charitable donations.

In the event that Sales Payment Products are sold on a bundled basis with Gross Profit Payment Products, the gross amount invoiced for such bundled sale will be allocated for purposes of Sections 2.6(a)(xviii) and (xix) between the Sales Payment Product and the Gross Profit Payment Product in proportion to the list price that would generally apply to sales to the applicable purchaser.

(xxi) “Worldwide Net Sales Adjustments” means all adjustments, including the following items as applicable to each such Contingent Payment Product, to the extent such adjustments are customary under industry practices and are reflected as a reduction to net sales or, for purposes of determining Worldwide Gross Profit, an increase to cost of goods sold in the consolidated financial statements of Buyer in accordance with GAAP:

(A) credits or allowances granted upon returns, rejections or recalls (due to spoilage, damage, expiration of useful life), retroactive price reductions, or billing corrections;

(B) invoiced freight, postage, shipping and insurance, handling and other transportation costs;

(C) credits or allowances granted including quantity, cash, bad debt and other trade discounts;

(D) Taxes (including sales, value-added and excise Taxes, but excluding withholding Taxes and Taxes paid by Buyer on the net income derived from sales of the Contingent Payment Products), tariffs, customs duties, surcharges and other governmental charges incurred in connection with the production, sale, transportation, delivery, use, exportation or importation of Contingent Payment Products that are incurred at the time of sale or are directly related to the sale and not otherwise previously deducted;

(E) discounts, refunds, rebates, returns, charge backs, fees, credits or allowances (including billing corrections, amounts incurred in connection with government-mandated rebate and discount programs, third party rebates and charge backs, hospital buying group/group purchasing organization administration fees and managed care organization rebates), distribution fees and sales commissions to third parties, actually paid or incurred and which effectively reduce the selling price;

(F) warranties, guaranties and maintenance arrangements; and

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(G) any other customary adjustments related to products sold and reasonably allocated to such Contingent Payment Products as a portion of the total products sold or, for purposes of determining Worldwide Gross Profit, related cost of goods sold, in accordance with GAAP.

(b) Seller Contingent Payments. In the event that the Closing occurs, and subject to the set-off rights of Buyer pursuant to Section 2.7(h) and Article 9 hereof, after the Closing, but before the Contingent Payment Termination Date, Seller shall be entitled to receive the Seller Contingent Payments when and if required to be made in accordance with the provisions of this Section 2.6 and Section 2.7, and subject to the limitation on the Seller Contingent Payments set forth in this Section 2.6 and Section 2.7. The Seller Contingent Payments shall include the FDA Milestone Payment, the Sales Milestone Payment and the Sales/Profit Contingent Payments, as applicable, none of which Seller Contingent Payments shall bear interest.

(c) FDA Milestone Payment. Subject to the set-off rights of Buyer pursuant to Section 2.7(h) and Article 9 hereof, Buyer shall make a one-time Seller Contingent Payment equal to the FDA Milestone Payment Amount if and only if the FDA Milestone is achieved on or before October 1, 2012 (the “FDA Milestone Payment”).

(d) Sales Milestone Payment. Subject to the Contingent Payment Termination Date and the set-off rights of Buyer pursuant to Section 2.7(h) and Article 9 hereof, Buyer shall make a one-time Seller Contingent Payment (the “Sales Milestone Payment”) equal to the Sales Milestone Payment Amount following achievement of the Sales Milestone.

(e) Sales/Profit Contingent Payments. Subject to the Contingent Payment Termination Date and the set-off rights of Buyer pursuant to Section 2.7(h) and Article 9 hereof, Buyer shall make a Seller Contingent Payment, with respect to the Worldwide Net Sales for the Sales Payment Product, the Worldwide Gross Profit for the Gross Profit Payment Product, the Worldwide Ancillary Gross Profit for the Contingent Payment Products, the “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), the “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) and the “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement), equal to the Sales/Profit Contingent Payment Amount for each Contingent Payment Year (each, a “Sales/Profit Contingent Payment” and collectively, the “Sales/Profit Contingent Payments”), in accordance with Section 2.7.

(f) Contingent Payments Not Certain. Each of Buyer and Seller hereby acknowledge that the achievement of the FDA Milestone is uncertain and that Buyer and its Affiliates may not achieve the FDA Milestone prior to October 1, 2012 or at all, and it is therefore not assured that Buyer will be required to pay the FDA Milestone Payment at all. Each of Buyer and Seller hereby further acknowledge that the achievement of the Sales Milestone is uncertain and that Buyer and its Affiliates may not achieve the Sales Milestone prior to the Contingent Payment Termination Date or at all, and it is therefore not assured that Buyer will be required to pay the Sales Milestone Payment at all. Each of Buyer and Seller hereby further

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acknowledge that the amount of Worldwide Net Sales for the Sales Payment Product and Worldwide Gross Profit for the Gross Profit Payment Product and the Worldwide Ancillary Gross Profit for the Contingent Payment Products, if any, that Buyer and its Affiliates may generate during any one or more Contingent Payment Years is uncertain and that (i) Buyer and its Affiliates may not generate any Worldwide Net Sales, Worldwide Gross Profit or Worldwide Ancillary Gross Profit with respect to any Contingent Payment Product in any Contingent Payment Year, and (ii) it is therefore not assured that Buyer will be required to make any Sales/Profit Contingent Payments for any particular Contingent Payment Year, or at all.

(g) Commercially Reasonable Efforts.

(i) Commencing on the Closing Date and until the Contingent Payment Termination Date, Buyer shall use Commercially Reasonable Efforts to develop, market and sell the LipoSonix Product, and shall use all Commercially Reasonable Efforts to do so in a manner designed to achieve the overall growth and success (both in terms of Worldwide Net Sales, Worldwide Gross Profit and Worldwide Ancillary Gross Profit of the Contingent Payment Products) of such operations. In addition to the foregoing and not in limitation in anyway thereof, Buyer hereby agrees that, commencing on the Closing Date and until the Contingent Payment Termination Date, Buyer shall not, and shall cause its Subsidiaries and Affiliates (including the Company after the Closing) not to, take any actions or fail to take any actions concerning the operations of the Company (or any successor to the Company) with the intention of avoiding or reducing Buyer’s obligations under this Agreement with respect to the development, marketing and selling of the LipoSonix Product, including its obligations to make payment of any Seller Contingent Payments hereunder or the Contingent Payments under the LipoSonix Agreement.

(ii) For purposes of this Section 2.6(g) only, “Commercially Reasonable Efforts” means efforts reasonably used by Buyer for Buyer’s own products (including internally developed, acquired and in-licensed products) with similar commercial potential (assuming continuing development of such product), taking into consideration the competitiveness of the marketplace, the proprietary position of the product, the regulatory structure involved, issues of safety and efficacy, the profitability (not taking into account any payments payable under this Agreement), the extent of market exclusivity, the likely timing of the regulatory approval necessary to permit the product’s entry into the market, the then current level of market penetration, patent protection, cost to develop the product, promotable claims, health economic claims and other relevant factors, in each case, taking into account the facts and circumstances at the time such efforts are due.

(iii) In the event Seller asserts a Claim alleging that Buyer has failed to satisfy the Commercially Reasonable Efforts requirements set forth in Section 2.6(g)(i), any liability of Buyer under such Claim shall not exceed, and Seller shall not be entitled to recover any Losses in excess of, an amount equal to ***, which amount shall be reduced to *** after the FDA Milestone has been achieved and the FDA Milestone Payment has been paid to Buyer; provided, however, that no such limitation shall apply to the extent that Buyer (A) has failed to satisfy the Commercially Reasonable Efforts requirements in connection with the second sentence of Section 2.6(g)(i) or (B) has failed to satisfy the Commercially Reasonable Efforts requirements in connection in the first sentence of Section 2.6(g)(i) as a result of an Intentional

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Breach of the first sentence of Section 2.6(g)(i) by Buyer. Notwithstanding anything to the contrary herein, to the extent that any Additional LipoSonix Contingent Payments become payable to Seller, Buyer shall have no obligation to, and Seller shall have no right to make any Claim for Losses arising out of any obligation of Buyer to, use Commercially Reasonable Efforts or any other level of efforts to achieve overall growth and success with respect to the Additional LipoSonix Contingent Payment, but will have only the obligations set forth in the LipoSonix Agreement with respect thereto. The limitation in this Section 2.6(g)(iii) is a limitation on liability and not a statement of liquidated damages.

(h) Cooperation on FDA Milestone

(i) After the Closing and until the FDA Milestone is achieved, Buyer shall notify Seller of any material communications with any applicable Governmental Authority (including the FDA), whether written or oral, as soon as reasonably practicable, but in no event later than three (3) Business Days after the receipt of such communications, and within such same time period, Buyer shall provide Seller with copies of any such written communications and written summaries of any such oral communications. Buyer shall also provide to Seller monthly updates regarding the progress of the Company’s regulatory filings and strategy for achieving the FDA Milestone.

(ii) After the Closing and until the FDA Milestone is achieved, the Joint Steering Committee (the “JSC”) shall make recommendations with respect to the progress of the Company’s regulatory filings and strategy for achieving the FDA Milestone, including regulatory filings to the applicable Governmental Authority (including the FDA), and responding to any communications or requests for information from any applicable Governmental Authority (including the FDA). The JSC shall be composed of four members, two of which shall be appointed by Buyer and two by Seller. To the extent that the JSC is unable to reach agreement with respect to an issue or resolve a dispute for a period of fifteen (15) days, such matter shall be submitted to direct negotiation and shall be resolved between the Chief Executive Officers of Buyer and Seller. Notwithstanding the foregoing, all final determinations with respect to any filings and interactions of Buyer with any Governmental Authority shall be ultimately made by Buyer.

(iii) Notwithstanding the foregoing, Seller shall have no obligations whatsoever with respect to the achievement of the FDA Milestone and shall not be liable whatsoever to any Person for Buyer’s inability to achieve the FDA Milestone.

Section 2.7 Payment of Seller Contingent Payments.

(a) FDA Milestone Payment. On or prior to the thirtieth (30th) day following the achievement of the FDA Milestone, Buyer shall deliver to Seller the FDA Milestone Payment Amount; provided, however, that Buyer shall not be required to make, and Seller shall not be entitled to receive, the FDA Milestone Payment if the FDA Milestone is achieved after October 1, 2012.

(b) Sales/Profit Contingent Payment Amount Certificates.

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(i) On or prior to the twentieth (20th) day following the last day of each fiscal quarter during each Contingent Payment Year, Buyer shall deliver to Seller a certificate (each, a “Quarterly Contingent Payment Certificate”), setting forth for such fiscal quarter (A) (i) the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product and Worldwide Ancillary Gross Profit for the Contingent Payment Products, (ii) for the Gross Profit Payment Product, the number of units produced, the number of units sold, the average manufacturing cost per unit, and the average sales price per unit, (iii) for the Sales Payment Product, a detailed list of units produced, a detailed list of units sold, and the sales price per unit sold, (iv) the unconsolidated revenue and gross profit of each entity within the Buyer Group that is derived from the LipoSonix Product and (v) an allocation of Worldwide Net Sales for the Sales Payment Product and Worldwide Gross Profit for the Gross Profit Payment Product from sales and an allocation of Worldwide Ancillary Gross Profit for the Contingent Payment Products from licensing, leasing and provision of services (each identified separately) by each member of the Buyer Group, (B) if applicable, (i) the amount of “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) and “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement), (ii) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement), the number of units produced, the number of units sold, the average fully-loaded manufacturing cost per unit, and the average sales price per unit, (iii) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), a detailed list of units produced, a detailed list of units sold, and the sales price per unit sold, (iv) the unconsolidated revenue and gross profit of each entity within the Buyer Group that is derived from the “LipoSonix Product” (as defined in the LipoSonix Agreement) and (v) an allocation of “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement) and “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) from sales and an allocation of “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement) from licensing, leasing and provision of services (each identified separately) by each member of the Buyer Group, and (C) the amount, if any, to be set off by Buyer against the Seller Contingent Payments.

(ii) On or prior to the twentieth (20th) day following the last day of each Contingent Payment Year, Buyer shall deliver to Seller a certificate (each, a “Contingent Payment Certificate”), setting forth for such Contingent Payment Year (i) the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product and Worldwide Ancillary Gross Profit for the Contingent Payment Products, (ii) for the Gross Profit Payment Product, the number of units produced, the number of units sold, the average fully-loaded manufacturing cost per unit, and the average sales price per unit, (iii) for the Sales Payment Product, the number of units produced, the number of units sold, and the average sales price per unit, (iv) the unconsolidated revenue and gross profit of each entity within the Buyer Group that is derived from the LipoSonix Product and (v) an allocation of Worldwide Net Sales for the Sales Payment Product and Worldwide Gross Profit for the Gross Profit Payment Product from sales and an allocation of Worldwide Ancillary Gross Profit

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for the Contingent Payment Products from licensing, leasing and provision of services (each identified separately) by each member of the Buyer Group, (B) if applicable, (i) the amount of “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) and “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement), (ii) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement), the number of units produced, the number of units sold, the average fully-loaded manufacturing cost per unit, and the average sales price per unit, (iii) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), a detailed list of units produced, a detailed list of units sold, and the sales price per unit sold, (iv) the unconsolidated revenue and gross profit of each entity within the Buyer Group that is derived from the “LipoSonix Product” (as defined in the LipoSonix Agreement) and (v) an allocation of “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement) and “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) from sales and an allocation of “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement) from licensing, leasing and provision of services (each identified separately) by each member of the Buyer Group, and (C) (i) Buyer’s determination of the Sales/Profit Contingent Payment Amount, if any, for such Contingent Payment Year (including the calculation thereof, in reasonable detail) and (ii) the amount, if any, set off by Buyer against the Seller Contingent Payments.

(c) Seller Audit Rights. Buyer hereby grants, and shall cause the other members of the Buyer Group to grant, Seller and its representatives and advisers, at Seller’s sole expense, the right, exercisable no more than once during each thirty (30) day period following the receipt by Seller of a Contingent Payment Certificate, subject to the execution of, and compliance with, a confidentiality agreement with Buyer in substantially the form attached hereto as Exhibit B (which shall permit disclosure of information to Seller), to examine and have full access to the Buyer Group’s personnel, books of account and records of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product, Worldwide Ancillary Gross Profit for the Contingent Payment Products, “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) or “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement) for the applicable Contingent Payment Year with respect to which the most recent Contingent Payment Certificate has been delivered, as well as the immediately prior Contingent Payment Year (or, with respect to the first Contingent Payment Year after the Contingent Payment Commencement Date, the immediately completed previous twelve (12) consecutive calendar month period), at the location of such records on prior written notice of at least ten (10) days, for the purpose of verifying and assessing the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product, Worldwide Ancillary Gross Profit for the Contingent Payment Products, “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross

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Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) or “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement) for such Contingent Payment Years (each such review shall be referred to herein as a “Contingent Payment Audit”). Notwithstanding the foregoing, absent fraud, willful misconduct, or the discovery (following the completion of any Contingent Payment Audit) of a material fact in existence at the time of such Contingent Payment Audit and not disclosed by Buyer to Seller or its representatives in the course of conducting such Contingent Payment Audit, which material fact, if taken into account in the calculation of the applicable Sales/Profit Contingent Payment Amount, would have resulted in an increase in such Sales/Profit Contingent Payment Amount, Seller or its representatives shall not be permitted to review any records of Worldwide Net Sales, Worldwide Gross Profit or Worldwide Ancillary Gross Profit with respect to any Contingent Payment Product or of “Worldwide Net Sales” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) or “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) with respect to any “Contingent Payment Product” (as defined in the LipoSonix Agreement) for any Contingent Payment Year for which a Contingent Payment Audit has previously been performed. For the purpose of conducting a Contingent Payment Audit, Seller may hire, at its expense, one or more auditors or attorneys of Seller’s choosing to assist in such examination; provided, that such auditors or attorneys have entered into confidentiality agreements with Buyer in substantially the form attached hereto as Exhibit B (which shall permit disclosure of information to Seller). Seller and such representatives shall have access to all of the books, records and personnel required in the good faith judgment of the Seller to perform any Contingent Payment Audit for a thirty (30) day period, beginning on the date on which access to substantially all of such books and records is first given to Seller. Nothing in this Section 2.7(c) shall be deemed to require any member of the Buyer Group to keep any books of account or records other than those which they maintain in the ordinary course of business in its usual and customary practice, to retain any such books of account or records for any period in excess of the period for which they retain such records in the ordinary course of business in their usual and customary practice, or to provide access to any books and records other than that specified above, and no presumption shall be made against any member of the Buyer Group as a result of the absence of any such books and records as a result of the disposition of any such books and records in the ordinary course of business after such period as provided above; provided, however, that in no case shall any member of the Buyer Group dispose of such books of account or records with respect to a Contingent Payment Year earlier than the date one hundred eighty (180) days following the last day of the subsequent Contingent Payment Year or, if such Contingent Payment Year is the last Contingent Payment Year, one hundred eighty (180) days following the last day of such Contingent Payment Year; and, provided further, that once Seller gives notice of its intention to commence a Contingent Payment Audit with respect to a Contingent Payment Year or Contingent Payment Years, the Buyer Group shall keep and retain all books of account relating to Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product, Worldwide Ancillary Gross Profit for the Contingent Payment Products, “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) and “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment

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Products” (as defined in the LipoSonix Agreement) for the Contingent Payment Year or Contingent Payment Years for which such Contingent Payment Audit is being conducted that are identified in a request or requests from Seller with respect to the Sales/Profit Contingent Payment Amount for such Contingent Payment Year or Contingent Payment Years.

(d) Dispute Notice. In the event that Seller does not agree with the Sales/Profit Contingent Payment Amount set forth on any Contingent Payment Certificate, Seller shall be entitled, during the period following delivery of such Contingent Payment Certificate and ending on the later of (i) ninety (90) days after delivery of such Contingent Payment Certificate and (ii) thirty (30) days following the completion of a Contingent Payment Audit commenced in connection with the delivery of such Contingent Payment Certificate (the “Dispute Period”), to give Buyer written notice (a “Dispute Notice”) of such disagreement. In the event that Seller does not deliver a Dispute Notice during the Dispute Period, the Sales/Profit Contingent Payment Amount set forth on such Contingent Payment Certificate shall irrevocably be deemed to be the final Sales/Profit Contingent Payment Amount for such Contingent Payment Year and all purposes of this Agreement, absent fraud and willful misconduct.

(e) Agreed Contingent Payment. In the event that Seller delivers a Dispute Notice within the Dispute Period, Seller and Buyer shall for a period of not less than thirty (30) days after delivery of the Dispute Notice attempt in good faith to resolve the Sales/Profit Contingent Payment Amount that is in dispute (the “Disputed Contingent Payment Amount”), and mutually determine any adjustments to such Sales/Profit Contingent Payment Amount (the “Agreed Contingent Payment Amount”). Buyer and Seller shall, subject to the execution of a confidentiality agreement in substantially the form attached hereto as Exhibit B, provide each other with such information, records and material kept in the ordinary course of business in such Party’s possession and which such Party may disclose without violating confidentiality obligations to third parties, as is reasonably necessary and appropriate in attempting to resolve such Disputed Contingent Payment Amount, including the delivery of a copy to Seller of any such information, records and material, to the extent then available, that was used to calculate the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product, Worldwide Ancillary Gross Profit for the Contingent Payment Products, “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement) and the Sales/Profit Contingent Payment Amount set forth on each relevant Contingent Payment Certificate. If the final Agreed Contingent Payment Amount determined pursuant to this Section 2.7(e) is greater than the Sales/Profit Contingent Payment Amount set forth on the relevant Contingent Payment Certificate by an amount equal to more than $1,000,000, Buyer shall pay all of the reasonable out-of-pocket costs and expenses actually incurred by Seller in connection with such Contingent Payment Audit.

(f) Arbitration of Disputes. In the event that no agreement can be reached by Seller and Buyer as to the calculation of the Disputed Contingent Payment Amount within ninety (90) days after delivery of a Dispute Notice and such disagreement relates only to the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross

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Profit Payment Product, Worldwide Ancillary Gross Profit for the Contingent Payment Products, “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) or “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the LipoSonix Agreement), then, pursuant to this Section 2.7(f), either Party shall have the right to submit the Disputed Contingent Payment Amount to arbitration by the Los Angeles, California office of one (1) of the following entities or their respective successors, or such other accountants as Seller and Buyer may mutually agree, so long as such entity or its successors is not the principal regularly-engaged outside accountant to Buyer or the Company or any auditor that may have assisted Seller in any Contingent Payment Audit: Deloitte & Touche LLP, KPMG, Ernst & Young LLP, PricewaterhouseCoopers, BDO Seidman, LLP, Grant Thornton LLP, or any successor entity to the foregoing (individually, an “Accountant,” and collectively, the “Accountants”). Seller and Buyer shall jointly select which of the Accountants will perform the calculation within thirty (30) days after Seller and Buyer determine that they are unable to settle the amount independently; provided, that in the event that Seller and Buyer are unable to agree upon the Accountant to perform such calculation within such thirty (30) day period, then each of Seller and Buyer shall select one of the Accountants and such Accountants shall jointly select a third Accountant to perform such calculation; provided, further, that any Accountant consulted or selected in accordance with this sentence shall enter into a confidentiality agreement with Buyer in substantially the form attached hereto as Exhibit B. The Accountant selected in accordance with the foregoing sentence shall be responsible for the determination of the Disputed Contingent Payment Amount (the “Appraiser”). The engagement and charge of the Appraiser shall be limited to determining the Worldwide Net Sales, Worldwide Gross Profit, Worldwide Ancillary Gross Profit, “Worldwide Net Sales” (as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) and “Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) of any identified Contingent Payment Product for the applicable Contingent Payment Year used to calculate the Disputed Contingent Payment Amount, and the Appraiser shall not be entitled to determine whether any products sold by Buyer or its Affiliates are Gross Profit Payment Products, Sales Payment Products, “Gross Profit Payment Products” (as defined in the LipoSonix Agreement) or “Sales Payment Products” (as defined in the LipoSonix Agreement) for purposes of this Agreement or any other matter (and any dispute with respect thereto shall be resolved in accordance with Section 11.8). The Appraiser shall determine the Disputed Contingent Payment Amount within the limitations set forth above within ninety (90) days after the date of such Appraiser’s engagement and the Appraiser shall be provided with such information and records, which may include on-site access and access to personnel, relating to such dispute as it may reasonably request. Any Disputed Contingent Payment Amount determined by an Appraiser in accordance with this Section 2.7(f) shall be deemed to be the final Sales/Profit Contingent Payment Amount for the applicable Contingent Payment Year for all purposes of this Agreement. The fees and expenses of the Appraiser shall be paid by Seller, provided, that if the final Sales/Profit Contingent Payment Amount determined by the Appraiser in any examination conducted pursuant to this Section 2.7(f) is greater than the Sales/Profit Contingent Payment Amount set forth on the relevant Contingent Payment Certificate by an amount equal to more than $1,000,000, then Buyer shall pay all of the fees and expenses of the Appraiser and all reasonable out-of-pocket costs and expenses actually incurred by Seller in connection with any Contingent Payment Audit.

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(g) Final Calculation and Payment of Sales/Profit Contingent Payment and Sales Milestone Payment. With respect to any Sales/Profit Contingent Payment Amount for any Contingent Payment Year:

(i) In the event Seller does not deliver a Dispute Notice with respect to the Sales/Profit Contingent Payment Amount set forth on the Contingent Payment Certificate delivered for such Contingent Payment Year within the Dispute Period, or Seller delivers to Buyer a written notice informing Buyer of its agreement with the Sales/Profit Contingent Payment Amount set forth on such Contingent Payment Certificate, the Sales/Profit Contingent Payment Amount set forth in the relevant Contingent Payment Certificate shall irrevocably be deemed to be the final such Sales/Profit Contingent Payment Amount for such Contingent Payment Year for all purposes of this Agreement, absent fraud and willful misconduct, and Buyer shall, within ten (10) days after such determination, pay to Seller the amounts required to be paid based on such Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also been achieved during such Contingent Payment Year, the Sales Milestone Payment Amount, subject to Section 2.7(h) hereof.

(ii) In the event that Seller delivers a Dispute Notice pursuant to Section 2.7(d) with respect to a Sales/Profit Contingent Payment Amount, and Buyer and Seller shall mutually determine the Agreed Contingent Payment Amount, then the Agreed Contingent Payment Amount shall irrevocably be deemed to be the final such Sales/Profit Contingent Payment Amount for such Contingent Payment Year for all purposes of this Agreement, absent fraud and willful misconduct, and Buyer shall, within ten (10) days after such Agreed Contingent Payment Amount is determined, pay to Seller the amounts required to be paid based on such Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also been achieved during such Contingent Payment Year, the Sales Milestone Payment Amount, subject to Section 2.7(h) hereof.

(iii) In the event that the final Sales/Profit Contingent Payment Amount for such Contingent Payment Year is determined by an Appraiser pursuant to Section 2.7(f) above, then Buyer shall, within ten (10) days after such determination, pay to Seller the amounts required to be paid based on such Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also been achieved during such Contingent Payment Year, the Sales Milestone Payment Amount, subject to Section 2.7(h) hereof.

(iv) The determination of any Sales/Profit Contingent Payment Amount and Sales Milestone Payment pursuant to Sections 2.7(g)(i)-(iii) shall, in the absence of fraud and willful misconduct, be conclusive, and in the absence of fraud and willful misconduct, Buyer and its Affiliates and Subsidiaries, Seller and Appraiser shall each be free from any and all liability resultant from such determination except as expressly set forth herein. Furthermore, Buyer shall not be required to make, and Seller shall not be entitled to receive, the Sales Milestone Payment if the Sales Milestone is achieved after the Contingent Payment Termination Date.

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(h) Unilateral Right of Set-Off. Subject to the express limitations and procedures set forth in Article 9 and Section 6.13 hereof, the obligation of Buyer to make any Seller Contingent Payment shall be qualified by the right of Buyer to reduce the amount of any one or more of (i) the FDA Milestone Payment Amount, (ii) the Sales Milestone Payment Amount or (iii) the Sales/Profit Contingent Payment Amount for any Contingent Payment Year, by the amount of any Losses actually incurred or suffered, or more likely than not to be incurred or suffered, by Buyer for which Buyer is entitled to indemnification pursuant to Article 9, but, except for Claims based on fraud, in no event shall such Seller Contingent Payments be reduced by, (A) with respect to indemnification pursuant to Section 9.2(a)(i) (except in respect of the representations and warranties made under Sections 4.3, 4.4, 4.14, 4.18 and 4.29), Section 9.2(a)(ii) (except in respect of an Intentional Breach by Seller of the covenants or agreements described in such Section), Section 9.2(a)(iii) (except in respect of an Intentional Breach by Seller of the covenants or agreements described in such Section), Section 9.2(a)(vii) and Section 9.2(a)(viii), more than an amount equal to the sum of (x) *** of the sum of the Purchase Price and the FDA Milestone Payment (to the extent actually paid by Buyer to Seller) and (y) *** of the Seller Contingent Payments, other than the FDA Milestone Payment, actually paid by Buyer to Seller hereunder, and (B) with respect to indemnification pursuant to (1) Section 9.2(a)(i) with respect to the representations and warranties made under Sections 4.3(a), 4.4, 4.18 and 4.29 and (2) Section 9.2(a)(v), more than an amount equal to *** of the sum of (x) the Purchase Price and (y) the Seller Contingent Payments actually paid by Buyer to Seller hereunder; provided, that (x) the right of Buyer to reduce any Seller Contingent Payment pursuant to this Section 2.7(h) is subject to the limitations, notice requirements and procedures set forth in Article 9, including Sections 9.3 through 9.5; (y) with respect to Losses more likely than not to be incurred or suffered with respect to any Third Party Claim, the amount by which the Seller Contingent Payments are reduced shall not exceed the amount stated in any notice provided by Buyer of such Claim in accordance with Article 9 (if such amount is reasonably available); and (z) in the event that Buyer is entitled to indemnification pursuant to Article 9 and entitled to offset hereunder, but its recovery is limited by clause (A) or (B) of this sentence, Buyer shall be entitled to recover any unrecovered amount as to which Buyer is entitled to indemnification pursuant to Article 9 and entitled to offset hereunder from future Contingent Payments, subject to limitations set forth in clauses (A) and (B) of this sentence. In the event that (A) Buyer sets off the amount of any Seller Contingent Payment by the amount of any Losses that have not been, at the time such Seller Contingent Payment is made, incurred by Buyer or (B) Seller objects to a Claim as set forth in Section 9.4, and it is later finally determined that the full amount of such Losses will not be incurred by Buyer, or the applicable Buyer Indemnified Person is not entitled to indemnification pursuant to Article 9 with respect to any portion of such Losses, as the case may be, then, following such determination, Buyer shall pay to Seller, promptly after such determination, the amount of the prior reduction attributable to such Losses that will not be incurred by Buyer (or for which the applicable Buyer Indemnified Person is not entitled to indemnification). Any amounts paid to the Seller pursuant to the immediately preceding sentence shall be (i) increased by simple interest on such amount calculated at the Interest Rate to and including the date of payment based on a 365-day year, without compounding, (ii) made by wire transfer of immediately available funds to an account designated by Seller, and (iii) treated as an adjustment to the Purchase Price for tax reporting purposes. Subject to Section 9.7, Buyer shall have no right to set-off or reduce the amount of any Seller Contingent Payment otherwise required to be paid pursuant to this Section 2.7 except as is expressly set forth in this Section 2.7(h).

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(i) No Security. The Parties understand and agree that (a) the contingent rights to receive any Seller Contingent Payment will not be represented by any form of certificate, are not transferable, except by operation of Laws relating to descent and distribution, divorce and community property, and do not constitute an equity or ownership interest in Buyer, (b) Seller shall not have any rights as a security holder of the Company or Buyer as a result of such Seller’s contingent right to receive any Seller Contingent Payment hereunder and (c) no interest is payable with respect to any Seller Contingent Payment.

(j) Seller Contingent Payments Not Royalties. The Seller Contingent Payments provided for pursuant to this Article 2 are provided as a result of bona fide difficulties in determining the present value of the Company. The Seller Contingent Payments represent (and shall be reported by Buyer as) additional consideration for the Shares and are not intended to be royalty payments. Buyer agrees that the Seller Contingent Payments will be reported by Buyer as deferred payments subject to installment sale treatment under Section 453 of the Code (and will be reported by Buyer in part as payments of interest pursuant to Section 483 or Section 1274 of the Code).

Section 2.8 Consent Requirement. If, after the Closing and prior to the Contingent Payment Termination Date:

(a) Buyer (or a Subsidiary or Affiliate thereof) shall cease to own a majority of the outstanding voting securities of the Company (or of any other Subsidiary of Buyer that is engaged in developing, manufacturing, marketing or selling the LipoSonix Product (a “Successor Subsidiary”)); or

(b) Buyer or any of its Subsidiaries, including the Company, shall, in one or a series of transactions, sell, license or transfer to any Person all or substantially all of the Intellectual Property used in developing, manufacturing, marketing or selling the LipoSonix Product to any Person;

then, (i) Buyer, prior to entering into such transaction or transactions, shall obtain Seller’s written consent, which shall not be unreasonably withheld, and (ii) any Person acquiring a majority of the outstanding voting securities of the Company or a Successor Subsidiary after the Closing in a transaction described in Section 2.8(a) or acquiring all or substantially all of the Intellectual Property used in developing, marketing or selling the LipoSonix Product in a transaction described in Section 2.8(b), as the case may be (the “Acquiring Person”), shall explicitly assume in writing the obligations of Buyer to make the Seller Contingent Payments as set forth in this Agreement and shall agree in writing to be bound by and to comply with the terms and conditions set forth in this Agreement and the terms and conditions of Sections 2.6 and 2.7 of this Agreement (including but not limited to the requirements set forth in Section 2.6(g)). For purposes of this Section 2.8, Seller shall be deemed to have unreasonably withheld its consent if with respect to the transaction or transactions described in this Section 2.8, the Acquiring Person expressly assumes the obligations as set forth in clause (ii) of this Section 2.8 and if such Acquiring Person is a Qualified Acquiring Person. A “Qualified Acquiring Person”

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means a Person (i) who (A) is directly engaged in any business that develops, manufactures, sells, markets or distributes pharmaceutical, medical device or any other healthcare products or devices, and (B) has earnings before interest, taxes, depreciation and amortization (or EBITDA) of no less than $10,000,000 in each of the two fiscal years immediately preceding the transaction or transactions described in this Section 2.8 or (ii) that is an Affiliate of a financial sponsor, private equity firm or similar organization, which Affiliate (together with the Company or Successor Subsidiary), (A) immediately after the closing of such acquisition, has a consolidated ratio of total debt to EBITDA (as such term is defined in the Credit Agreement) for the 12-month period ended the date of such transaction that is no greater than 4.0 to 1(4.0x), and (B) has, on a pro forma basis, earnings before interest, taxes, depreciation and amortization (or EBITDA) of no less than $10,000,000 in each of the two fiscal years immediately preceding the transaction or transactions described in this Section 2.8. Upon and following Seller’s written consent and the express assumption and agreement by the Person referred to in this Section 2.8, Buyer shall have no further obligation to make any further Seller Contingent Payments pursuant to this Agreement. For the avoidance of doubt, this Section 2.8 shall not apply to an acquisition of a majority of the outstanding voting securities of Buyer or a change of control of Buyer that does not involve a separate transfer of the assets or equity securities of the Company; it being understood that, following any such transaction, this Section 2.8 shall continue to apply to any future transactions described under clauses (a) or (b) above.

ARTICLE 3

CLOSING

Section 3.1 Closing. Upon the terms and subject to the conditions set forth in this Agreement, the closing of the Contemplated Transactions (the “Closing”) shall take place at the Washington, DC offices of Hogan Lovells US LLP at 10:00 a.m. (local time), as soon as practicable, provided, that if all of the conditions set forth in Article 7 are not satisfied or waived on or before such date (other than those conditions which by their nature are intended to be fulfilled at the Closing), the Closing shall be held on the date which is five (5) Business Days after the date on which all such conditions shall have been satisfied or waived, or at such other time, date and place as the parties may agree (the date on which the Closing shall occur pursuant to this Section 3.1 is referred to herein as the “Closing Date”). The transfer of the Shares pursuant to Section 2.1 shall be deemed to become effective as of 12:01 a.m. on the Closing Date.

Section 3.2 Closing Deliveries. At the Closing:

(a) Buyer shall deliver to Seller evidence of the wire transfers referred to in Section 2.3;

(b) Seller shall deliver to Buyer one or more stock certificates evidencing the Shares being sold by Seller, which certificates shall be duly endorsed to Buyer or accompanied by dully executed stock powers; and

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(c) each Party shall deliver the certificates and other documents and instruments required to be delivered by or on behalf of such Party pursuant to Article 7 and the other provisions of this Agreement, as applicable.

ARTICLE 4

REPRESENTATIONS AND

WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows (it being understood that each representation and warranty contained in this Article 4 is subject to: (a) the exceptions and disclosures set forth in the section or subsection of the disclosure schedule delivered by Seller (the “Seller Disclosure Schedule”) corresponding to the particular section or subsection in this Article 4 in which such representation and warranty appears; (b) any exceptions or disclosures explicitly cross-referenced in such section or subsection of the Seller Disclosure Schedule by reference to another section or subsection of the Seller Disclosure Schedule); and (c) any exceptions or disclosures set forth in any other section of subsection of the Seller Disclosure Schedule to the extent it would be clear to a reasonable person that the disclosure contained in such section or subsection should qualify such non-referenced representation or warranty without the necessity of repetitive disclosure or cross-reference):

Section 4.1 Organization and Qualification.

(a) Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all the requisite corporate power and authority necessary to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. The Company is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, waivers, qualifications, certificates, Orders and approvals (collectively, “Approvals”) necessary to own, lease and operate its assets and properties and to carry on its business as it is now being conducted, except where the failure to possess any such Approval would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction (including any applicable non-U.S. jurisdiction) where the character of the assets or properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified or licensed does not have and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

(b) The Company has no Subsidiaries and does not control, directly or indirectly, or have any direct or indirect equity participation or similar interest (or right convertible into any such interest) in any corporation, partnership, limited liability company or other entity or business association. The Company is not a participant in any joint venture or similar arrangement.

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Section 4.2 Charter and Bylaws. Seller has heretofore provided to Buyer true and complete copies of the Charter and Bylaws, as modified, supplemented, amended or restated. Such Charter and Bylaws are in full force and effect, and no other organizational documents are applicable to or binding upon the Company.

Section 4.3 Shares; Indebtedness.

(a) The authorized capital stock of the Company consists of 100 shares of Common Stock, 100 shares of which are issued and outstanding as of the date of this Agreement and constitute the Shares. Seller is the sole beneficial and record owner of the Shares free and clear of all Liens. Except for the Shares, there are no other outstanding equity securities in the Company. Seller has, and shall have at the Closing, good and valid title, free and clear of all Liens, to the Shares, with full right and lawful authority to sell and transfer such Shares to Buyer pursuant to this Agreement. Except as set forth in this Agreement, there are no outstanding Contracts or other rights to subscribe for or purchase, or Contracts or other obligations to issue, sell or grant any rights to acquire, any Shares or other shares of capital stock of any class of the Company. All of the Shares are duly authorized, validly issued and outstanding and are fully paid, and were issued in all material respects in conformity with all applicable state and federal securities laws. There are no preemptive or similar rights (under Contract or otherwise) in respect of any of the Shares.

(b) As of the Closing, the Company will have no outstanding Indebtedness. As of the Closing, except for liabilities or obligations set forth in (i) the Unaudited Financial Statements or (ii) the Statement of Working Capital, the Company will have no liabilities or obligations of any nature (whether known or unknown, absolute or contingent, liquidated or unliquidated, due or to become due, accrued, fixed or otherwise) that are related to any business or operation of Seller (or a Subsidiary or Affiliate thereof, other than the business or operations of the Company).

Section 4.4 Authority; Enforceability. Seller has all necessary corporate power and authority to execute and deliver this Agreement and each other instrument and document required to be executed and delivered by it at or prior to the Closing, and to perform its obligations hereunder and thereunder and to consummate the Contemplated Transactions. The execution and delivery by Seller of this Agreement, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the Contemplated Transactions have been approved by Seller’s Board of Directors, duly and validly authorized by all necessary action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to perform Seller’s obligations hereunder or thereunder or to consummate the Contemplated Transactions. This Agreement has been duly and validly executed and delivered by Seller, or will be duly and validly executed and delivered by Seller at or prior to Closing, and assuming the due authorization, execution and delivery thereof by Buyer, constitutes a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

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Section 4.5 No Conflict; Required Filings and Consents.

(a) The execution and delivery by Seller of this Agreement and each other instrument and document required by this Agreement to be executed and delivered by Seller do not, and the performance of this Agreement and each other instrument and document required by this Agreement to be executed and delivered by Seller, shall not, (i) conflict with or violate the certificate of incorporation or the bylaws of Seller or the Charter or the By-Laws, (ii) subject to the filings and other matters referred to in Section 4.5(b), conflict with or violate in any respect any Law or Order, in each case applicable to Seller or the Company, or by which any of their respective properties, rights or assets is bound or affected, or (iii) except as set forth in Section 4.5(a) of the Seller Disclosure Schedule result in any material breach or material violation of or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or materially impair the Company’s rights or alter the rights or obligations of any party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the termination of any Material Contract or in the creation of a Lien on any of the properties, rights or assets of the Company pursuant to any bond, indenture, Contract, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or its properties, rights or assets is bound or affected.

(b) The execution and delivery by Seller of this Agreement and each other instrument and document required by this Agreement to be executed and delivered by Seller at or prior to the Closing do not, and the performance of this Agreement and any instrument required by this Agreement to be executed and delivered by Seller at or prior to the Closing, shall not, require Seller or the Company to obtain any Approval of any Person, observe any waiting period imposed by, or make any filing with or notification to, any Governmental Authority, except (i) for compliance with any applicable requirements of the pre-merger notification requirements of the HSR Act, and any applicable Foreign Competition Laws or (ii) as set forth in Section 4.5(b) of the Seller Disclosure Schedule.

Section 4.6 Material Contracts.

(a) Section 4.6(a) of the Seller Disclosure Schedule sets forth, as of the date of this Agreement, a true and complete list, and if oral, an accurate and complete summary, of all Contracts to which the Company is a party or by which its properties, rights or assets are bound which are material to the Company or the operation of its business as conducted or as planned by the Company to be conducted as of the date hereof (collectively, “Material Contracts;” provided, however, that the LipoSonix Agreement shall not be deemed a Material Contract), including, without limitation, the following Contracts:

(i) employment Contracts, consulting Contracts or sales and distributor Contracts with any employee, consultant, sales representative, distributor or other agent of the Company (other than offer letters with employees providing for “at will” employment with the Company with no obligation to pay severance), and all severance, change in control or similar Contracts with any current or former stockholder, director, officer, employee, consultant, sales representative, distributor or other agent, or any member of their immediate family or any Affiliate of the Company that would result in any obligation (absolute or contingent) of the Company to make any payment to any current or former stockholder,

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director, officer, employee, consultant, sales representative, distributor or other agent, or any member of their immediate family or any Affiliate of the Company following either the Contemplated Transactions, termination of employment (or the relevant relationship), or both;

(ii) labor or collective bargaining Contracts (if any);

(iii) Contracts for pre-clinical or other testing, clinical or marketing trials relating to the Company’s Products and Contracts with physicians, hospitals, clinics or other healthcare providers, or other scientific or medical advisors;

(iv) any Contract reasonably likely to involve revenues, receipts, expenditures or liabilities in excess of $30,000 per annum or $50,000 in the aggregate, which is not cancelable by the Company (without penalty, cost or other liability) upon thirty (30) days’ notice;

(v) promissory notes, credit agreements, loans, indentures, evidences of Indebtedness or other instruments and Contracts relating to the borrowing or lending of money, whether as borrower, lender or guarantor, in each case, relating to Indebtedness or obligations in excess of $50,000;

(vi) any interest rate swaps, caps, floors or option Contracts or any other interest rate risk management arrangement or foreign exchange Contracts;

(vii) Contracts containing any provision limiting in any respect the freedom of the Company (or which after the Closing purport to limit or would limit the freedom of Buyer or any of its Subsidiaries or Affiliates) to engage in any line of business, to develop, market or distribute products or services, to compete with any Person, to operate at any location in the world or to change sales quotas or targets under any Contracts with distributors, sales representatives, or other agents;

(viii) joint venture or partnership agreements or joint development, distribution or similar Contracts pursuant to which any third party is entitled or obligated to develop or distribute any products or provide any services on behalf of the Company or pursuant to which the Company is entitled or obligated to develop, manufacture, supply, process, produce or distribute any Products or provide any services on behalf of any third party;

(ix) any Contract that is primarily a guarantee, indemnification, assumption or endorsement of, or any similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or Indebtedness of any other Person (except for Contracts in the ordinary course of business or standard agreements with end users and business partners);

(x) any currently effective Contract, or any Contract that has expired or been terminated which has surviving provisions, providing for indemnification of any Person with respect to liabilities relating to any current or former business of the Company or any predecessor Person;

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(xi) any Contract with any Governmental Authority or with any labor union;

(xii) Contracts for the acquisition, directly or indirectly (by merger or otherwise) of assets (whether tangible or intangible), including any capital stock of another Person, for consideration in excess of $50,000;

(xiii) Contracts involving the issuance or repurchase of any capital stock or other equity interest of the Company;

(xiv) performance or payment guarantees, keep well arrangements and other similar credit support obligations or arrangements;

(xv) leases or subleases in respect of (A) any Real Property or (B) any material rights, assets or property;

(xvi) Contracts under which (A) the Company has granted exclusive or non-exclusive rights to Products or (B) another party processes, produces or manufactures, or will process, produce or manufacture, Products;

(xvii) Contracts concerning Intellectual Property, including any agreements described in Sections 4.16(h) and 4.16(k) of this Agreement;

(xviii) stockholders’ rights plan or agreement, “poison pill” or similar plan or Contract;

(xix) any settlement agreement entered into within the last three (3) years;

(xx) Contracts with customers, suppliers and distributors involving amounts in excess of $50,000; and

(xxi) Except for those Contracts that will be terminated prior to the Closing, any Contract containing an obligation that is related to any business or operation of Seller (or a Subsidiary or Affiliate thereof, other than the Company) and unrelated to the business or operations of the Company.

(b) Seller has made available to Buyer true and complete copies of each Material Contract, together with all amendments and supplements thereto, or, if no written Contract exists, an accurate and complete description of such Material Contract. Except as set forth in Section 4.6(b)-1 of the Seller Disclosure Schedule, other than Material Contracts that have terminated or expired in accordance with their terms, each Material Contract is in full force and effect, is a valid and binding obligation of the Company and, to the Knowledge of Seller, of each other party thereto and is enforceable against the Company and, to the Knowledge of Seller, against each other party thereto, and such Material Contracts will continue to be (i) valid, binding and enforceable against the Company and, to the Knowledge of Seller, of each other party thereto, and (ii) in full force and effect immediately following the Closing, with no alteration or acceleration or increase in fees or liabilities, payments, obligations or burdens. The

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Company is not alleged to be and, to the Knowledge of Seller, no other party is or is alleged to be in, or has received notice of any, default under, or breach or violation of, any Material Contract and, to the Knowledge of Seller, no event has occurred which, with the giving of notice or passage of time or both, would constitute such a default, breach or violation and Seller has no reasonable basis for suspecting that any such default, breach or violation exists or will be forthcoming. No break-up or other similar fee is due or owing by the Company in connection with any prior negotiations, discussions or arrangements regarding any transaction, similar to the Contemplated Transaction or otherwise, or other Contract. Except as set forth in Section 4.6(b)-2 of the Seller Disclosure Schedule, the Company is not currently involved, nor has it been involved since December 31, 2010, in any dispute with any counterparty to any Material Contract, and the Company has not received written or, to the Knowledge of Seller, oral notice since December 31, 2010 from any such counterparty to the effect that such counterparty intends to terminate or otherwise alter or modify the terms of any such Material Contract.

(c) Section 4.6(c) of the Seller Disclosure Schedule sets forth any Material Contract which, by its terms, will be modified or adjusted, will become terminable by any other party thereto, or will require consent by or notification to any other party thereto, in each case, as a result of the execution of this Agreement or the consummation of the Contemplated Transactions.

(d) The Company has no liability pursuant to any grant from the National Institutes of Health, and no event has occurred which, with the giving of notice or the passage of time or both, would cause any liability to Buyer or any of its Affiliates with respect to any such grant, and the Company has no reasonable basis for suspecting that any such liability exists or will be forthcoming (whether as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby).

Section 4.7 Compliance.

(a) The Company is in compliance with, and is not in default or violation of (i) its Charter or Bylaws, (ii) any Law or Order by which the Company or its properties, rights or assets are bound or affected, and (iii) the terms of all bonds, indentures, Contracts, permits, franchises and other instruments or obligations to which the Company or by which the Company or its properties, rights or assets are bound or affected, except in the case of clauses (ii) and (iii) for immaterial noncompliance, defaults or violations. The Company is in material compliance with the terms of all applicable Approvals.

(b) The Company (i) is not, to the Knowledge of Seller, under investigation by any Governmental Authority with respect to any violation of any Approval or any Law or Order and (ii) has not been charged with, has not received notice of, or to the Knowledge of Seller, has not been threatened to be charged with, any revocation, withdrawal, suspension, cancellation, termination or modification of any Approval or any Law or Order applicable to the Company.

(c) Section 4.7(c) of the Seller Disclosure Schedule sets forth a complete and accurate list of all material permits issued to or held by the Company. Such listed permits are the only material permits that are required for the Company to conduct its business as presently

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conducted. Each such permit is in full force and effect; the Company is in material compliance with the terms of each such permit; and, to the Knowledge of Seller, no suspension or cancellation or material modification of such permit is threatened.

Section 4.8 Absence of Certain Changes or Events.

(a) During the period from December 31, 2010 to the date hereof, the Company has conducted its business only in the ordinary course of business consistent with past practice, and, since December 31, 2010, there has not been any change, development, circumstance, condition, event, occurrence, damage, destruction or loss that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

(b) Except as described in Section 4.8(b) of the Seller Disclosure Schedule, during the period from December 31, 2010 to the date hereof:

(i) there has not been (A) any change by the Company in its accounting or cash management methods, principles or practices (including with respect to reserves, revenue recognition, timing for payments of accounts payable, collections of accounts receivable and depreciation or amortization policies or rates) or (B) any revaluation by the Company of any of its assets, including writing down the value of inventory or writing off notes or accounts receivable;

(ii) the Company has not amended or otherwise modified its Charter or Bylaws, or altered through merger, liquidation, reorganization, restructuring or in any other fashion the structure or ownership of the Company;

(iii) the Company has not declared, set aside or paid any dividend or other distribution (whether in cash, stock (or similar equity interest) or property or any combination thereof) in respect of any of its capital stock; or amended the terms of, repurchased, redeemed or otherwise acquired any of its securities;

(iv) the Company has not sold, transferred, delivered, leased, subleased, licensed, sublicensed, mortgaged, pledged, encumbered, impaired or otherwise disposed of (in whole or in part), or created, incurred, assumed or caused to be subjected to any Lien on, any of the rights, assets or properties of the Company (including any Intellectual Property or accounts receivable), except for the sale of inventory and disposal of obsolete assets in the ordinary course of business consistent with past practice;

(v) the Company has not acquired any rights, assets or properties other than in the ordinary course of business consistent with past practice;

(vi) there has not been any damage, destruction or loss (whether or not covered by insurance) with respect to any material rights, assets or properties of the Company;

(vii) the Company has not (A) incurred or modified any Indebtedness or issued any debt securities or any warrants or rights to acquire any debt security, (B) assumed, guaranteed or endorsed or otherwise become responsible for, the obligations of any Person,

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(C) entered into any off-balance sheet financing arrangement or any accounts receivable or payable financing arrangement, or (D) made any loans or advances (except for advances of reasonable business expenses in the ordinary course of business consistent with past practice);

(viii) the Company has not authorized or made any capital expenditures outside of the ordinary course of business consistent with past practice and in excess of $50,000;

(ix) there has not been any (A) increase in, acceleration of or provision for compensation, benefits (fringe or otherwise) or other rights to any employee, contractor or subcontractor of the Company except in the ordinary course of business consistent with past practice, (B) grant, agreement to grant, or amendment or modification of any grant or agreement to grant, any severance, bonus, termination, retention or similar payment to any employee, contractor or subcontractor of the Company except in the ordinary course of business consistent with past practice, (C) loan or advance of money or other property by the Company to any of its employees, contractors or subcontractors (except for advances of business expenses in the ordinary course of business consistent with past practice), or (D) establishment, adoption, entrance into, amendment or termination of any Employee Plan (except as otherwise required by applicable Law), collective bargaining agreement or other labor agreement;

(x) there has not been any termination, lay off, or resignation of any executive or management employee or key employee at the Company, or any hiring to fill any executive or management position or key employee position at the Company; and to the Knowledge of Seller, there is no impending resignation or termination of employment of any such executive or management employee or key employee;

(xi) there has not been any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of the Company, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such employees;

(xii) the Company has not (A) made or changed any Tax election or changed any method of Tax accounting, (B) settled or compromised any federal, state, local or foreign Tax liability, (C) filed any amended Tax Return, (D) entered into any closing agreement relating to any Tax, (E) agreed to an extension of a statute of limitations, or (F) surrendered any right to claim a Tax refund; and

(xiii) there has not been any other event or condition of any character that, either individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company.

Section 4.9 Liabilities. The Company does not have any liabilities or obligations of any nature (whether known or unknown, absolute or contingent, liquidated or unliquidated, due or to become due, accrued, fixed or otherwise), and there is no existing fact, condition or circumstance which could reasonably be expected to result in such liabilities or obligations, except liabilities or obligations (a) disclosed in the unaudited listing of assets and liabilities of the Company as of June 30, 2011, (b) not required to be disclosed under GAAP or (c) incurred since June 30, 2011 in the ordinary course of business consistent with past practice (excluding any incurrence of Indebtedness), except as described in Section 4.9 of the Company Disclosure Schedule.

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Section 4.10 Absence of Litigation. Except as described in Section 4.10 of the Seller Disclosure Schedule, since the “Effective Time” (as defined in the LipoSonix Agreement), there have been no (a) Claims pending on behalf of or against or, to the Knowledge of Seller, Claims threatened on behalf of or against the Company (or Seller or its Affiliates with respect to the Company) or its properties, rights or assets (including cease and desist letters or requests for a license), (b) Order outstanding to which the Company or its properties, rights or assets is subject, (c) Claim which questions or challenges (i) the validity of this Agreement or (ii) any action taken or to be taken by the Company pursuant to this Agreement or in connection with the Contemplated Transactions. No director, officer, employee, consultant or agent of the Company has asserted a Claim or demand for payment or has a basis for a Claim or demand for payment against the Company in respect of the period prior to and including the Closing (other than accrued and unpaid compensation earned in the ordinary course of business).

Section 4.11 Employee Benefit Plans.

(a) As of the date of this Agreement, Section 4.11(a) of the Seller Disclosure Schedule lists and, in the case of employee benefit plans not reduced to writing, describes all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), including, without limitation, multiemployer plans within the meaning of Section 3(37) of ERISA, and all incentive and compensation plans, including without limitation all cash (including without limitation bonus) and equity (including without limitation stock option, restricted stock, stock purchase, stock appreciation rights), incentive, deferred compensation, retirement or supplemental retirement, severance, golden parachute, vacation, cafeteria, dependent care, medical care, employee assistance program, education or tuition assistance programs, insurance and other similar fringe or employee benefit plans, programs or arrangements, whether written or oral, and any employment or executive compensation or severance Contracts, written or otherwise, for the benefit of, or relating to, any present or former employee, director or independent contractor of the Company, (i) which is or has been entered into, contributed to, established by, participated in and/or maintained by the Company or any trade or business (whether or not incorporated) which is a member of a controlled group or which is under common control with the Company (an “ERISA Affiliate”) within the meaning of Section 414 of the Code, or (ii) under which the Company or ERISA Affiliate has any liability whether or not such plan is terminated (together, the “Employee Plans”). Seller has provided to Buyer correct and complete copies of (where applicable) (i) summary plan descriptions related to each Employee Plan, (ii) the most recent determination letters or opinion letters received from the IRS for each Employee Plan, (iii) the three most recent IRS Forms 5500 Annual Report for each Employee Plan, (iv) the most recent audited financial statement and actuarial valuation report for each Employee Plan, (v) the most recent discrimination testing results for each Employee Plan and (vi) all correspondence with, rulings by or opinions by the United States Internal Revenue Service (the “IRS”) or the U.S. Department of Labor for each Employee Plan. No Employee Plans are maintained, sponsored, or contributed to by the Company and the Company does not have, and following the Closing will not have, any liability with respect to any Employee Plans, except as set forth in (i) the Unaudited Financial Statements or (ii) the Statement of Working Capital.

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(b) (i) There has been no “prohibited transaction,” as such term is defined in Section 406 of ERISA and Section 4975 of the Code, with respect to any Employee Plan (and which is not otherwise exempt); (ii) there has been no breach of fiduciary obligations imposed under Title I of ERISA with respect to any Employee Plan; (iii) there are no Claims pending (other than routine claims for benefits) or, to the Knowledge of Seller, threatened against any Employee Plan or against the assets of any Employee Plan; (iv) all Employee Plans conform to, and in their operation and administration are in all material respects in compliance with, the terms thereof and requirements prescribed by any and all statutes (including ERISA and the Code), Orders and governmental Regulations currently in effect with respect thereto and any other applicable Laws; (v) the Company and ERISA Affiliates have performed in all material respects all obligations required to be performed by them under each Employee Plan and are not in default under or in violation of, and Seller Company has no Knowledge of any default or violation by any other Person with respect to, any of the Employee Plans; and (vi) each Employee Plan intended to qualify under Section 401(a) of the Code is so qualified (and each corresponding trust is exempt under Section 501 of the Code), and has received or is the subject of a favorable determination or opinion letter from the IRS, and nothing has occurred which may reasonably be expected to cause the loss of such qualification (or exemption).

(c) No Employee Plan is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) subject to Title IV of ERISA or a “multiemployer plan” (within the meaning of Section 3(37) of ERISA), and neither the Company nor any ERISA Affiliate has or has ever had an obligation to contribute, or incurred any liability in respect of a contribution, to any such employee pension benefit plan or multiemployer plan.

(d) No Employee Plan is (i) a “voluntary employees’ beneficiary association” (within the meaning of Section 501(c)(9) of the Code), (ii) an “employee stock ownership plan” (within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in “employer securities” (within the meaning of Section 409(l) of the Code), (iii) a “multiple employer plan,” as described in Code Section 413(c) or Sections 4063 or 4064 of ERISA, or (iv) a “multiple employer welfare arrangement” as defined in Section 3(40)(A) of ERISA (a “MEWA”). If any Employee Plan is a MEWA, the benefits thereunder are fully insured.

(e) Each Employee Plan that is a “group health plan” (within the meaning of Code Section 5000(b)(1)) has been operated in compliance in all material respects with the group health plan continuation coverage requirements of Section 4980B of the Code and Sections 601 through 608 of ERISA (“COBRA Coverage”), Section 4980D of the Code and Sections 701 through 713 of ERISA, Title XXII of the Public Health Service Act and the provisions of the Social Security Act, as amended, to the extent such requirements are applicable. No Employee Plan or other written or oral agreement exists which obligates the Company to provide health care coverage or medical, surgical, hospitalization, death or similar benefits (whether or not insured) to any current or former employee, director or consultant of the Company following such current or former employee’s, director’s or consultant’s termination of employment, service or consultancy with the Company, other than COBRA Coverage or similar state law coverage.

(f) Except as set forth in Section 4.11(f) of the Seller Disclosure Schedule, no Employee Plan exists that, as a result of the execution and delivery of this Agreement or the Contemplated Transactions (whether alone or in connection with any subsequent event(s)), could

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result in (i) severance pay or any increase in severance pay upon any termination of employment after the date of this Agreement, (ii) accelerating the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or result in any other material obligation pursuant to, any of the Employee Plans or (iii) any breach or violation of, or default under, any of the Employee Plans. The Company has not made any payments, is not obligated to make any payments, and is not a party to any agreements that as a result of the Contemplated Transactions (whether alone or in connection with any subsequent event(s) could obligate it to make any payments, that will not be deductible under Section 280G of the Code.

(g) All contributions and payments with respect to each Employee Plan that are required to be made by the Company with respect to periods ending on or prior to the Closing Date have been, or will be, made or accrued before the Closing Date in accordance with the terms of the applicable Employee Plan.

Section 4.12 Employment and Labor Matters.

(a) As of the date of this Agreement, Section 4.12(a) of the Seller Disclosure Schedule identifies (i) all current directors and officers of the Company and (ii) all current employees, consultants and agents (including sales representatives and distributors) employed or engaged by the Company and, for each individual identified in clauses (i) or (ii), sets forth each such individual’s rate of pay or annual compensation, job title and date of hire. As of the date of this Agreement, except as set forth in Section 4.12(a) of the Seller Disclosure Schedule, there are no employment, consulting, commission, incentive or bonus pay, severance pay, retention or continuation pay, termination or indemnification agreements or other similar Contracts of any nature (whether in writing or not) between the Company and any current or former stockholder, officer, director, employee, consultant, labor organization or other representative of the Company’s employees providing for payments in an aggregate amount of $50,000 or greater, nor is any such Contract presently being negotiated. There are no collective bargaining agreements or other similar Contracts (whether in writing or not) between the Company and any current or former officer, employee, labor organization or other representative of the Company’s employees, nor is any such Contract presently being negotiated. Seller has provided to Buyer complete and correct copies of all such agreements and Contracts. The Company has not failed to make or is not otherwise delinquent in payments to any of its employees or consultants for any wages, salaries, overtime pay, commissions, bonuses, benefits or other compensation for any services or otherwise arising under any policy, practice, Contract, plan, program or Law. Except as set forth in Section 4.12(a) of the Seller Disclosure Schedule, none of the Company’s employment policies or practices is currently being audited or investigated by any Governmental Authority or Court. Except as set forth in Section 4.12(a) of the Seller Disclosure Schedule, there is no pending or, to the Knowledge of Seller, threatened Claim, unfair labor practice charge, or other charge or inquiry against the Company brought by or on behalf of any employee, prospective employee, former employee, retiree, labor organization or other representative of the employee, or other individual or any Governmental Authority with respect to employment practices brought by or before any Court or Governmental Authority.

(b) Except as set forth in Section 4.12(b) of the Seller Disclosure Schedule, (i) there are no controversies pending or, to the Knowledge of Seller, threatened, between the

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Company, on the one hand, and its employees or consultants, on the other hand; (ii) the Company is not a party to any collective bargaining agreement or other labor union Contract applicable to Persons employed by the Company nor are there any activities or proceedings of any labor union to organize any such employees of the Company; (iii) since December 31, 2009, there have been no strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of the Company; and (iv) there are no employment-related grievances pending or, to the Knowledge of Seller, threatened. Except as set forth in Section 4.12(b)-1 of the Seller Disclosure Schedule, the Company is not a party to, or otherwise bound by, any consent decree with, or citation or other Order by, any Governmental Authority relating to employees or employment practices. The Company is in compliance in all material respects with all applicable Laws, Contracts and policies relating to employment, employment practices, wages, hours and terms and conditions of employment, including the obligations of the Worker Adjustment and Retraining Notification Act of 1988, as amended (the “WARN Act”), and similar Laws, and all other notification and bargaining obligations arising under any collective bargaining agreement, by Law or otherwise. The Company has not effectuated a “plant closing” or “mass layoff” as those terms are defined in the WARN Act and similar Laws, affecting in whole or in part any site of employment, facility, operating unit or employee of the Company, without complying with all provisions of the WARN Act or implemented any early retirement, separation or window program within the past two (2) years, nor has the Company planned or announced any such action or program for the future.

Section 4.13 Title to Assets; Leases; Sufficiency of Assets.

(a) The Company has good and marketable title to all of its real or personal properties (whether owned or leased), rights and assets, free and clear of all Liens. The Company does not currently own nor has ever owned any real property or interest therein, nor has received any notice of any Lien with respect to any of its leasehold interests.

(b) Section 4.13(b) of the Seller Disclosure Schedule contains a complete and accurate list of all leases of real property to which the Company is a party or by which it holds a leasehold interest or is otherwise obligated (collectively, “Real Property”). Seller has provided to Buyer complete and accurate copies of all such leases for Real Property. Each Real Property lease to which the Company is a party is legal, valid, binding and in full force and effect in accordance with its terms, and all rents and additional rents due to date from the Company on each such lease have been paid. As of the date of this Agreement, the Company has not received written notice that it is in material default under any Real Property lease to which the Company is a party, and there exists no material default by the Company, or to the Knowledge of Seller, by any other party under any such lease. Except as set forth in Section 4.13(b) of the Seller Disclosure Schedule, there are no leases, subleases, licenses, concessions or any other Contracts to which the Company is a party granting to any Person other than the Company any right to possession, use occupancy or enjoyment of any of the Real Property or any portion thereof and the Company is not obligated under or bound by any option, right of first refusal, purchase Contract, or other Contract to sell or otherwise dispose of any Real Property or any other interest in any Real Property.

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(c) Section 4.13(c) of the Seller Disclosure Schedule contains a complete and accurate list of all leases of all property (other than Real Property) to which the Company is a party or by which it holds a leasehold interest.

(d) Except as set forth in Section 4.13(d) of the Seller Disclosure Schedule, the tangible assets of the Company constitute all of the properties, assets, rights and facilities owned, used, held for use, intended for use, leased or licensed by the Company, Seller or its Affiliates in the operation of the business of the Company. To the Knowledge of Seller, the tangible assets of the Company constitute all of the properties, assets, rights and facilities necessary and sufficient to enable the Company, immediately following the Closing, to continue to conduct the business of the Company in the same manner as currently conducted.

Section 4.14 Taxes. For purposes of this Agreement, “Tax” or “Taxes” shall mean taxes, duties, fees, premiums, assessments, imposts, levies and governmental impositions of any kind, payable to any federal, state, local or foreign Governmental Authority, including, but not limited to, those on or measured by or referred to as income, franchise, profits, gross receipts, goods and services, capital, ad valorem, advance, corporation, custom duties, alternative or add-on minimum taxes, estimated, environmental, disability, registration, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and interest, penalties and additions to tax imposed with respect thereto; and “Tax Returns” shall mean returns, reports, forms and information statements, including any schedule or attachment thereto, with respect to Taxes required to be filed with the IRS or any other Governmental Authority or taxing authority or agency, domestic, state, local or foreign, including consolidated, combined and unitary tax returns. Except as set forth in Section 4.14 of the Seller Disclosure Schedule:

(a) All Tax Returns required to be filed by or on behalf of the Company have been timely filed, and all such Tax Returns are true, complete and correct in all material respects.

(b) All Taxes shown as due on such Tax Returns and payable by or with respect to the Company and all other material Taxes payable by or with respect to the Company have been timely paid. All assessments for Taxes due and owing by or with respect to the Company with respect to completed and settled examinations or concluded litigation have been paid. The Company has not incurred a Tax liability since December 31, 2010 other than a Tax liability in the ordinary course of business consistent with past practice. There are no Tax Liens on any assets, properties or rights of the Company except Liens for current Taxes not yet due and payable.

(c) No Claim or, to the Knowledge of Seller, audit has commenced and no notice has been given that such audit or other proceeding is pending or threatened with respect to the Company or any group of entities of which the Company is or has been a member in respect of any Taxes (an “Affiliated Group”). No Tax deficiency or claim for additional Taxes has been asserted or, to the Knowledge of Seller, threatened to be asserted against the Company or any Affiliated Group by any Taxing authority. No Claim has ever been made by a Taxing authority in any jurisdiction in which the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction.

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(d) The Company has not requested or been granted any waiver of any federal, state, local or foreign statute of limitations with respect to, or any extension of a period for the assessment of, any Tax. No extension or waiver of time within which to file any Tax Return of, or applicable to, the Company has been granted or requested which has not since expired.

(e) The Company is not and, to the Knowledge of Seller, has never been (nor does the Company have any liability for unpaid Taxes because it once was) a member of an affiliated, consolidated, combined or unitary group. The Company is not a party to any Tax allocation, Tax indemnity or Tax sharing agreement nor is the Company liable for the Taxes of any other person under Treasury Regulations §1.1502-6 (or any similar provision of state, local or foreign law), as transferee or successor, by Contract, or otherwise. The Company is not and, to the Knowledge of Seller, has never been a partner in a partnership or a participant in an arrangement or the owner of an entity that is or may be treated as a partnership for federal income Tax purposes.

(f) The Company has complied with all applicable Laws relating to the payment and withholding of Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441, 1442 and 3406 of the Code or similar provisions under any foreign Laws) and has, within the time and in the manner required by Law, withheld from payments to employees, independent contractors and other persons and paid over to the proper Governmental Authorities all amounts required to be so withheld and paid over under all applicable Laws.

(g) The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period or portion thereof ending after the Closing Date as a result of any (i) change in the method of accounting for a taxable period or portion thereof ending on or prior to the Closing Date, (ii) prepaid amount received on or prior to the Closing Date or (iii) intercompany transaction completed on or prior to the Closing Date.

(h) The Company has collected all sales, use and value added Taxes required to be collected, and has remitted on a timely basis to the appropriate taxing authorities all sales, use and value added Taxes required to be paid, or has been furnished properly completed exemption certificates.

(i) No closing agreement pursuant to Section 7121 of the Code (or any similar provision of state, local or foreign Law) has been entered into by or with respect to the Company.

(j) No power of attorney has been executed with respect to any matter relating to Taxes of the Company, which is currently in force.

(k) The Company has not been a party to any distribution occurring during the last two years in which the parties to such distribution treated the distribution as one to which Section 355 or Section 361 of the Code is applicable; nor has the Company been a party to any distribution that could constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

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(l) The Company has not entered into any transactions that are part of any “reportable transaction” under Sections 6011, 6111 or 6112 of the Code (or any similar provision under any state or local Law).

(m) The Company has not participated in or cooperated with an international boycott, within the meaning of Section 999 of the Code, nor has the Company had operations that are or may hereafter become reportable under Section 999 of the Code.

(n) The Company has complied in all material respects with tax-related requirements that the arm’s-length nature of the terms of any transactions between and among the Company, Seller or Affiliates be documented.

(o) The Company is not a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code and has not been a United States real property holding corporation at any time during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

(p) The Company does not have any deferred compensation plan or arrangement that is described in Section 409A(a)(1)(A)(i) of the Code.

Section 4.15 Environmental Matters.

(a) The Company is in compliance in all material respects with all applicable Environmental Laws.

(b) The Company has been duly issued and maintains all Environmental Permits necessary to operate the Company as currently operated and a complete list of all such Environmental Permits, all of which are valid and in full force and effect, is set forth in Section 4.15(b) of the Seller Disclosure Schedule.

(c) The Company does not have any material liability, known or unknown, contingent or absolute, under any Environmental Law, and the Company is not responsible for any such liability of any other person under any Environmental Law, whether by contract, by operation of law or otherwise. There are no pending, or to the Knowledge of Seller, threatened, Environmental Claims.

(d) The Company does not currently own, lease or operate, use or install, and has not formerly owned, leased or operated, used or installed, and, to Seller’s Knowledge, the Real Property does not contain: (i) underground improvements, including but not limited to treatment or storage tanks, used currently or in the past for the management of Hazardous Materials; (ii) a dump or landfill; (iii) filled in lands or wetlands; or (iv) PCBs, mold, lead-based paint, toxic mold, or asbestos-containing materials. The Company has not caused a Release of Hazardous Materials, and to Seller’s Knowledge, there has been no Release of Hazardous Materials, in each case at, on, under, or from the Real Property or any other property currently or formerly owned, leased or operated by the Company, such that the Company is or could be liable for Remediation with respect to such Hazardous Materials.

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(e) The Company has not arranged, by Contract or otherwise, for the transportation, disposal or treatment of Hazardous Materials at any location such that it is or would be liable for Remediation of such location pursuant to Environmental Laws.

(f) To the Knowledge of Seller, no Lien in favor of any Person relating to or in connection with any Environmental Claim has been filed or has attached to the Real Property. No authorization, notification, recording, filing, consent, waiting period, Remediation, or approval is required under any Environmental Law in order to consummate the Contemplated Transactions.

Section 4.16 Intellectual Property.

(a) Section 4.16(a) of the Seller Disclosure Schedule lists all: (i) patents, provisional and non-provisional patent applications, registered trademarks, trade names, and service marks, registered copyrights and domain names owned by or licensed to the Company (“Scheduled Company Intellectual Property”), including where applicable the jurisdictions, both domestic and foreign, in which each such item of Intellectual Property has been issued or registered or in which any application for such issuance and registration has been filed; (ii) written licenses, sublicenses and other agreements to which the Company is a party and pursuant to which any Person is authorized to use any Scheduled Company Intellectual Property and any other Intellectual Property owned by the Company; (iii) written licenses, sublicenses, and other agreements to which the Company is a party (other than licenses related to commercial off-the-shelf software programs) and pursuant to which the Company is authorized to use any Intellectual Property of any third party, including patents, patent applications, Trade Secrets, trademarks, and copyrights (“Third Party Intellectual Property Rights”) which are incorporated in, are, or form a part of, or cover any Product or the second generation of LipoSonix Product, part number P005700-01 or which are material to the Company’s operations, including any fully-paid, royalty-free, worldwide, irrevocable, perpetual, nonexclusive licenses in and to the Intellectual Property of any Person pursuant to consulting agreements between the Company and such Person (all of which consulting agreements are separately identified on Section 4.16(a)(iii) of the Seller Disclosure Schedule as “License Consulting Agreements”); and (iv) all agreements to which the Company is a party that provide for an optional or contingent license, sublicense, or other agreement as described in clauses (ii) or (iii) above in this paragraph. All ownership interests or encumbrances held by any third parties in the Scheduled Company Intellectual Property (including, but not limited to licenses, Liens, or security interests) are noted in Section 4.16(a)-2 of the Seller Disclosure Schedule. All (x) Scheduled Company Intellectual Property and (y) Trade Secrets that are used in and material to the business, Products and the second generation of LipoSonix Product, part number P005700-01 of the Company (the “Material Company Trade Secrets”), are, except where otherwise noted in Section 4.16(a)-3 of the Seller Disclosure Schedule, valid, enforceable, have been duly maintained, are in full force and effect, and have not been cancelled, expired, withdrawn, lapsed, invalidated, or abandoned. The Company is not obligated to, and Buyer shall not be obligated as a result of the consummation of the transactions contemplated herein to, pay any royalties and/or fees to any third party under any patent, trademark, copyright, or other Intellectual Property license, other than as set forth in Section 4.16(a) of the Seller Disclosure Schedule.

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(b) The Company has taken all action necessary in its reasonable discretion to obtain and/or maintain the enforceability and registration of all Scheduled Company Intellectual Property.

(c) Except as set forth in Section 4.16(c) of the Seller Disclosure Schedule, the Company has not sent to any third party or otherwise communicated to another Person since the “Effective Time” (as defined in the LipoSonix Agreement), any charge, complaint, Claim, demand or notice asserting that such Person has infringed, misappropriated, or acted in conflict with any of the Scheduled Company Intellectual Property or any other Intellectual Property owned by the Company or that any charge, complaint, Claim, demand, or notice asserting any such other Person has conducted any acts of unfair competition against the Company, nor, to the Knowledge of Seller, is any such infringement, misappropriation, conflict or act of unfair competition occurring or threatened.

(d) Except as set forth in Section 4.16(d) of the Seller Disclosure Schedule, since the “Effective Time” (as defined in the LipoSonix Agreement), neither Seller or the Company has received and Seller does not have Knowledge of any allegations, assertions, or suggestions of any charge, complaint, Claim, demand or notice that the Company has infringed, misappropriated, or acted in conflict with any Intellectual Property owned by any third party, that the Company has conducted any acts of unfair competition or other legal wrong against any third party and to its Knowledge there is no basis for any such allegations, assertions, or suggestions of any charge, complaint, Claim, demand or notice. Except as set forth in Section 4.16(d) of the Seller Disclosure Schedule, neither Seller or the Company has received and Seller does not have Knowledge of any notice (i) that the Scheduled Company Intellectual Property and the Material Company Trade Secrets are invalid, unenforceable or otherwise defective, inoperable, unregisterable, or unpatentable, except for communications from patent offices received in the normal course of patent prosecution or (ii) that the Company needs a license under any patents, trademarks, copyrights or other Intellectual Property of any third party. Neither Seller or the Company has received any offer to take a license for any patents, trademarks, copyrights, or other Intellectual Property of any third party to carry on its business as it is now being conducted or contemplated to be conducted including the development, manufacture, sale and other commercialization of Products or the second generation of LipoSonix Product, part number P005700-01.

(e) Except as set forth in Section 4.16(e) of the Seller Disclosure Schedule, to the Knowledge of Seller, there is no unauthorized use, disclosure, infringement or misappropriation of any rights of the Company in the Scheduled Company Intellectual Property and the rights of the Company in any other Intellectual Property, or any Third Party Intellectual Property Rights licensed to the Company, by any third party, including any employee or former employee of the Company, and, except as set forth in Section 4.16(e) of the Seller Disclosure Schedule, there are no royalties, fees, or other payments or compensation payable to the Company by any third party by reason of the Company’s ownership, use, sale, or disposition of Intellectual Property.

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(f) Except as set forth in Section 4.16(f) of the Seller Disclosure Schedule, the Company is not nor will the Company be, as a result of the execution and delivery of this Agreement, or the performance of its obligations hereunder, in breach of any license, sublicense, or Material Contract involving Intellectual Property, or violate any Third Party Intellectual Property Rights thereby.

(g) Any Product currently being manufactured in the United States for export to any other jurisdiction foreign to the United States, including Europe, any Product currently being developed by the Company for sale in the United States, including the second generation of LipoSonix Product, part number P005700-01, and the business of the Company as presently conducted in the United States and in any jurisdiction foreign to the United States, including Europe, do not interfere with, conflict with, infringe upon, misappropriate, or otherwise violate any Intellectual Property of any third party. No action or Claim is pending or, to the Knowledge of Seller, threatened alleging that the Product, the second generation of LipoSonix Product, part number P005700-01 or the operation of such business interferes with, conflicts with, infringes upon, misappropriates, or otherwise violates the Intellectual Property rights of any third party and, to the Knowledge of Seller, there is no basis therefor.

(h) Each current and former officer, employee, and consultant of the Company has executed and provided to the Company an agreement sufficient to ensure that the Company becomes, will become or may elect to become the owner or assignee of any Intellectual Property such current or former officer, employee, or consultant of the Company creates within the scope of his or her employment, or, in the case of a non-employee, from the services such current or former officer, employee, or consultant of the Company, performs for the Company, unless or except to the extent that the Company is entitled to become or elects to become the owner or assignee of such Intellectual Property by operation of Law.

(i) Except as set forth in Section 4.16(i) of the Seller Disclosure Schedule, no former stockholder, equityholder, partner, director, officer or employee of the Company (or any predecessor in interest) has or will have, after giving effect to the transactions contemplated by this Agreement, any legal or equitable right, title, or interest in or to, or any right to use, directly or indirectly, in whole or in part, any Scheduled Company Intellectual Property and any other Intellectual Property of the Company.

(j) The Intellectual Property that is used by the Company in the conduct of its business was either: (i) developed by employees of the Company within the scope of their employment; (ii) developed on behalf of the Company by a third party, and all ownership rights therein have been assigned or otherwise transferred to or vested in the Company pursuant to written agreements; or (iii) licensed or acquired from a third party pursuant to a written license, assignment, or other contract that is in full force and effect and under which the Company is not in material breach.

(k) The Company has entered into written confidentiality agreements with all employees and third parties to whom the Company has disclosed material Company-owned confidential Intellectual Property.

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(l) The Company has taken reasonable measures to protect the confidentiality of its Trade Secrets, including requiring its former and current officers, employees, consultants, and all other Persons having access thereto to execute written non-disclosure agreements. No Material Company Trade Secret has been disclosed or authorized to be disclosed to any third party other than pursuant to a written non-disclosure agreement that adequately protects the Company’s proprietary interests in and to such Trade Secrets. To the Knowledge of Seller, no party to any non-disclosure agreement with the Company is in breach or default thereof.

(m) To the Knowledge of Seller, there is no patent, patent application, publication, knowledge, use, sale, or offer for sale of or by the Company or any third party, that prevents or interferes with the enforcement of the Company’s Intellectual Property or that affects the validity of the issued claims or the patentability of the pending claims of any of the Company’s patents or patent applications, except for any information cited to, from or communicated with patent authorities.

(n) Section 4.16(n) of the Seller Disclosure Schedule sets forth a list of all licenses, sublicenses, or other agreements pursuant to which the Company has in-licensed or acquired rights to any Intellectual Property together with a list of all milestones therein and whether such milestones have been completed or not as of the date of this Agreement.

(o) The Company has taken commercially reasonable steps to regularly scan its computer systems and all owned or licensed computer software with up-to-date virus detection software. To the Knowledge of Seller, neither its computer systems nor any owned or licensed computer software contain any viruses. For the purposes of this Agreement, “viruses” includes any computer code intentionally designed to disrupt, disable, or harm in any manner the operation of any software or hardware. To the Knowledge of Seller, neither its computer systems nor any owned or licensed computer software contain any worms, bombs, backdoors, disabling device code, or any design or routine which causes software to be erased, rendered inoperable, or otherwise become incapable of being used, either automatically or upon command by any party.

(p) The Company has taken commercially reasonable steps to restrict access to its computer systems to only those parties authorized by the Company and have further taken steps to detect and limit any unauthorized access of its computer systems. The Company has taken commercially reasonable steps to patch, fix, or otherwise update its own computer software and/ or close any security holes that it has discovered in its own computer systems and computer software. The Company has further taken commercially reasonable steps to install all updates, patches, or fixes released by the licensor to maintain up-to-date licensed computer software and to close any security holes found in its licensed computer software. To the extent that the Company is not itself authorized to modify or fix any licensed computer software in which it discovers a security issue, the Company has taken commercially reasonable steps to notify the licensor of such software and obtain updated licensed computer software from the licensor.

(q) The Company does not maintain any proprietary software for use in or with, or contemplated to be used in or with, its Products or the second generation of LipoSonix Product, part number P005700-01, which is subject to any open source licensing agreement and

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which thereby requires the Company to disclose the source code of said proprietary software. The use of any open source software in conjunction with its Products or the second generation of LipoSonix Product, part number P005700-01 (i) is de minimis; (ii) is wholly separable therefrom; or (iii) otherwise exempts the Company from having to disclose any proprietary software.

(r) [Reserved.]

(s) No Intellectual Property covered by, or that is the subject of, the ***, is currently used in, or is necessary to, any Product or the second generation of LipoSonix Product, part number P005700-01 of the Company. The commercialization, marketing, licensing, use, or sale of any Product or the second generation of LipoSonix Product, part number P005700-01 (as it currently exists) of the Company does not and will not result in any obligation on the part of the Company or Buyer, or any of their respective Affiliates, to pay any royalties or fees or to issue any securities pursuant to the terms of the ***. To the Knowledge of Seller, no Future Inventions (as such term is defined in the ***) have been made or conceived, whether individually or jointly, by any one or more of the parties to the ***.

(t) No Intellectual Property covered by, or that is the subject of, the ***, will be used in, or will be necessary to, any Product or the second generation of LipoSonix Product, part number P005700-01 of the Company subsequent to the termination of the *** due to the expiration of the Licensed Patents as defined in Section 1.2 therein. The commercialization, marketing, licensing, use, or sale of any Product or the second generation of LipoSonix Product, part number P005700-01 of the Company will not result in any obligation on the part of the Company or Buyer, or any of their respective Affiliates, to pay any royalties or fees or to issue any securities pursuant to the terms of the *** subsequent to the expiration of the Licensed Patents as defined in Section 1.2 therein. To the Knowledge of Seller, no Future Inventions (as such term is defined in the ***) have been made or conceived, whether individually or jointly, by any one or more of the parties to the ***.

Section 4.17 Insurance. Section 4.17-1 of the Seller Disclosure Schedule sets forth a complete and accurate list of all primary insurance policies and fidelity bonds covering the assets, business, equipment, properties, rights and operations of the Company. As of the date of this Agreement, Section 4.17-2 of the Seller Disclosure Schedule also contains (a) a list of all claims filed by the Company since the “Effective Time” (as defined in the LipoSonix Agreement) which are covered by the insurance policies maintained by the Company and (b) a list of all claims (including any pending claims subject to a reservation of rights) made by the Company since the “Effective Time” (as defined in the LipoSonix Agreement) for which coverage was denied by any insurer, and, to the Knowledge of Seller, the estimated amounts of such claims as listed in Section 4.17-2 of the Seller Disclosure Schedule as have been reasonably determined. Each insurance policy listed in Section 4.17-1 of the Seller Disclosure Schedule that was renewed on or after December 31, 2010 was renewed on substantially the same terms and conditions as the corresponding expiring policy. There is no Claim by or against the Company pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or which exceeds coverage limitations. No reservation of rights or denial of coverage has been issued by the underwriters of such policies or bonds with respect to any Claim pending against the Company. All premiums

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payable under all such policies and bonds have been paid and the Company is otherwise in full compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). The Company has not taken any action or failed to take any action which, with notice or the lapse of time or both, would constitute a breach or default, or permit termination or modification, of any of such insurance policies or bonds. The Company maintains insurance for the business and operations of the Company in amounts and on such terms as are (i) in compliance with applicable Law and any Contract(s) to which the Company is a party and (ii) reasonable and customary for businesses of the type conducted by the Company and covering risks which are normally insured by companies possessing similar assets and carrying on businesses of the type conducted by the Company. No insurer under any such policy or bond has cancelled or generally disclaimed liability under any such policy or bond or, to the Knowledge of Seller, indicated any intent to do so or to materially increase the premiums payable under or not renew any such policy. To the Knowledge of Seller, there is not any threatened termination of, notice of cancellation of, notice of non-renewal of or material premium increase with respect to any of such policies or bonds. With respect to incidents known to Seller that occurred prior to the Closing and which would reasonably result in a claim after the Closing, Seller has provided the relevant underwriters of such policies or bonds with notice of such incidents or will do so prior to the Closing. The Company has complied in all material respects with all applicable requirements (including contractual, statutory and regulatory requirements) governing the purchase of insurance (including the requirements to provide and/or retain evidence of such insurance).

Section 4.18 Brokers. Other than Deutsche Bank, no broker (including real estate brokers), financial advisor, finder or investment banker or other Person is entitled to any broker’s, financial advisor’s, finder’s or other fee or commission in connection with the Contemplated Transactions based upon arrangements made by or on behalf of Seller or the Company.

Section 4.19 Certain Business Practices. None of the Company or any of its directors, officers, employees or, to the Knowledge of Seller, consultants, sales representatives, distributors or agents, in such capacity and on behalf of the Company, has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful payments relating to political activity or (b) violated any applicable money laundering or anti-terrorism Law. The Company and its directors, officers, employees and, to the Knowledge of Seller, consultants, sales representatives, distributors, agents and business partners have complied at all times, and are in compliance, with all applicable U.S. and non-U.S. anti-corruption laws with respect to the Company, including but not limited to the U.S. Foreign Corrupt Practices Act, as amended (15 U.S.C. §§ 78dd-1 et seq.). In this regard, the Company and its directors, officers, employees and, to the Knowledge of Seller, consultants, sales representatives, distributors, agents and business partners, in such capacity and on behalf of the Company, have not given, offered, agreed or promised to give, or authorized the giving directly or indirectly, of any money or other thing of value to anyone as an inducement or reward for favorable action or forbearance from action or the exercise of influence.

Section 4.20 Interested Party Transactions. Except as disclosed in Section 4.20 of the Seller Disclosure Schedule, there are no existing, and since the “Effective Time” (as defined in the LipoSonix Agreement) there have been no, Contracts, transactions, Indebtedness or other

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arrangements, or any related series thereof, between the Company, on the one hand, and any of the directors, officers or other Affiliates (including Seller and its Subsidiaries), or any of their respective Affiliates or family members, on the other hand (except for amounts (i) due as salaries and bonuses in the ordinary course of business consistent with past practice, (ii) in reimbursement of ordinary expenses in the ordinary course of business consistent with past practice or (iii) in the case of Seller, for accounts payables and accrued liabilities paid, or accounts receivable received, in the ordinary course of business consistent with past practice). There is no Indebtedness owed to the Company by any employee, consultant, officer, director, sales representative, distributor or agent of the Company, other than salary advances or travel expenses in the ordinary course of business consistent with past practice. To the Knowledge of Seller, no officer or director of the Company has any direct or indirect ownership interest in any Affiliate of the Company (other than stock ownership interest in Seller) or any firm or corporation with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that officers or directors of the Company and members of their immediate families may own stock in publicly-traded companies that may compete with the Company. No member of the immediate family of any officer or director of the Company is directly or indirectly interested in any Material Contract.

Section 4.21 Health Regulatory.

(a) The Company has not engaged, and no other Person (i) who has a direct or indirect ownership interest (as defined in 42 C.F.R. § 1001.1001(a)(2)) in the Company, or (ii) who has an ownership or control interest (as defined in 42 C.F.R. § 420.201) in the Company, or (iii) who is an officer, director, agent (as defined in 42 C.F.R. § 1001.1001(a)(2)), or managing employee (as defined in 42 C.F.R. § 420.201) of the Company, has engaged on behalf of the Company in any activities which are prohibited by, or are cause for civil penalties or mandatory or permissive exclusion from any Federal Health Care Program under, any applicable Law, including, without limitation, 42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1395nn or 31 U.S.C. § 3729, or the regulations promulgated pursuant to such statutes, in each case to the extent applicable to the Company.

(b) Neither the Company, nor any officer, director, managing employee, or, to Seller’s Knowledge, agent of the Company is a party to, or bound by, any order, individual integrity agreement, corporate integrity agreement or other similar formal agreement with any Governmental Authority resulting from a failure, or alleged failure, to comply with applicable Laws.

(c) To Seller’s Knowledge, no person has filed or has threatened to file a whistleblower action against the Company under any Law, including under the False Claims Act of 1863 (31 U.S.C. 3729 et seq.).

(d) The Company has an operational healthcare compliance program, including a code of ethics or has adopted a code of ethics that governs all employees, including sales representatives, which interact with physician and hospital customers, and such employees’ interactions with their physician and hospital customers.

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(e) The Company is not a “covered entity,” nor a “Business Associate” as those terms are defined under the Health Insurance Portability and Accountability Act of 1996 and the regulations promulgated thereunder, as each is amended from time to time (“HIPAA”).

(f) The Company has not engaged in any activities, or otherwise acted in a manner, prohibited by or in violation of any Law governing the maintenance, use, disclosure, privacy, and/or security of, and standard transactions related to, Personal Information, including, but not limited to, the Gramm-Leach-Bliley Act and its implementing regulations (“GLBA”), HIPAA, as amended by HITECH, state health information privacy laws, and state data breach notification laws (collectively, “Privacy and Security Laws”); there is no charge, proceeding or, to the Knowledge of Seller, investigation by any Governmental Authority with respect to a violation of any applicable Privacy and Security Laws that is now pending or, to the Knowledge of Seller, threatened with respect to the Company; and the Company has not received any requests or demands from a Governmental Authority or any other party to make available its internal practices, books, and/or records relating to its use and disclosure of health information for purposes of determining a covered entity’s or the Company’s compliance with HIPAA or with other applicable privacy laws.

(g) There are no facts, circumstances or conditions that would reasonably be expected to form the basis for any Action against or affecting the Company relating to or arising under Privacy and Security Laws; and the Company has not acted in a manner regarding the maintenance, use, disclosure, privacy, or security of Personal Information that, to the Knowledge of Seller, would trigger a notification or reporting requirement under any Contract.

(h) For purposes of this Section 4.21, (i) “Action” means any suit, claim, action, proceeding, arbitration, mediation or investigation; and (ii) “Personal Information” means all financial, health, and/or other personal information, including, but not limited to, “nonpublic personal information” as defined under GLBA and “individually identifiable health information” as defined under HIPAA, that identifies, relates to, describes, is capable of being associated with, or with respect to which there is a reasonable basis to believe the information can be used to identify, an individual.

Section 4.22 FDA and International Regulatory and Related Matters.

(a) FDA Legal Compliance and Permits.

(i) General Compliance. The Company is conducting and has conducted its business and operations in compliance in all material respects with the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”), 21 U.S.C. § 301 et. seq., and all applicable regulations promulgated by the United States Food and Drug Administration (“FDA”) (collectively, “FDA Law and Regulation”).

(ii) Inspections. Except as set forth in Section 4.22(a)(ii) of the Seller Disclosure Schedule, the Company’s Bothell, Washington facility has not been inspected by the FDA or any state regulatory authority.

(iii) Enforcement. The Company has not received any written notice or, to the Knowledge of Seller, other communication from the FDA or any state regulatory

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authority alleging noncompliance with any applicable FDA Law and Regulation. The Company is not subject to any enforcement proceedings by the FDA or any state regulatory authority and, to the Knowledge of Seller, no such proceedings have been threatened. There is no civil, criminal or administrative action, suit, demand, claim, complaint, hearing, investigation, demand letter, warning letter, untitled letter or proceeding pending against the Company and the Company has no liability (whether actual or contingent) for failure to comply with any FDA Law and Regulation. There is no act, omission, event, or circumstance of which Seller has Knowledge that would reasonably be expected to give rise to or lead to any such action, suit, demand, claim, complaint, hearing, investigation, notice, demand letter, warning letter or proceeding or any similar liability. There has not been any violation of any FDA Law and Regulation by the Company in its product development efforts, submissions, record keeping and reports to FDA or any state regulatory authority that would reasonably be expected to require or lead to investigation, corrective action or regulatory enforcement action. There is no civil or criminal proceeding pending or, to the Knowledge of Seller, threatened relating to the Company or any Company employee which involves a matter within the FDA or any state regulatory authority’s jurisdiction. To the Knowledge of Seller, no director, officer, employee, consultant or agent of the Company has: (A) made any untrue statement of material fact or fraudulent statement to the FDA or any other Governmental Authority; (B) failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Authority; or (C) committed an act, made a statement, or failed to make a statement that would reasonably be expected to provide the basis for the FDA or any other Governmental Authority to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” as set forth in 56 Fed.Reg. 46191 (September 10, 1991), or similar policy. The Company has never been and is not now subject to FDA’s Application Integrity Policy or similar policy by any other Government Entity. No director, officer or employee of the Company, and to the Knowledge of Seller, no consultant or agent of the Company has been convicted of any crime or, to the Knowledge of Seller, engaged in any conduct for which debarment is mandated or permitted by 21 U.S.C. § 335a. No director, officer or employee of the Company, and to the Knowledge of Seller, no consultant or agent of the Company has been convicted of any crime or engaged in any conduct for which such Person or entity could be excluded from participating in the federal health care programs under Section 1128 of the Social Security Act, as amended, or any similar law or regulation. No current director, officer, employee, consultant or agent of the Company, or, to the Knowledge of Seller, former director or officer of the Company is listed on an “Exclusion List,” meaning the current (x) HHS/OIG List of Excluded Individuals/Entities (available through the Internet at http://www.oig.hhs.gov), (y) General Services Administration’s List of Parties Excluded from Federal Programs (available through the Internet at http://www.epls.gov) and (z) FDA Debarment List (available through the Internet at http://www.fda.gov/ora/compliance_ref/debar/).

(iv) Registration and Listing. The Company has designed, and currently manufactures the Products at its Bothell, Washington facility for distribution exclusively outside of the United States. The Company has not and does not market or commercially distribute the Products in the United States. The Company’s facility is registered with the FDA and the Company has listed the LipoSonix Product with the FDA under the applicable FDA registration and listing regulations and such registration and listing is current as of the Closing.

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(v) Quality System Regulation. To the Knowledge of Seller, the Company has designed and developed the LipoSonix Product and all other Products in commercial distribution in material compliance with the applicable provisions of the Quality System Regulation set forth in 21 C.F.R. § 820.30, including Design Control provisions.

(vi) No Adulteration or Misbranding. The Company has not introduced in U.S. commercial distribution during the period of six (6) calendar years immediately preceding the date hereof any of the Products which were upon their shipment by the Company adulterated or misbranded in violation of 21 U.S.C. § 331.

(vii) Clinical Trials. All studies, tests, including preclinical tests, and clinical trials in respect of the Company’s business being conducted by or on behalf of the Company that have been or will be submitted to any Governmental Authority, including the FDA and its counterparts worldwide, including in the European Union, in connection with any approval or authorization to market the Products, are being or have been conducted in compliance in all material respects with applicable Laws and Regulations, including those Laws and Regulations designed to protect patients. The Company has not received any written notices, correspondence or, to the Knowledge of Seller, other communication in respect of the Company’s business from the FDA or other Governmental Authority requiring the termination or suspension of any clinical trials conducted by, or on behalf of, the Company, and, to the Knowledge of Seller, neither the FDA nor any other Governmental Authority is considering such action. The Company has not received written notification from a Governmental Authority of the rejection of data obtained from any clinical trial conducted by, or on behalf of, the Company with respect to the Company’s business or the Products, which data were submitted to the Governmental Authority and which were necessary to obtain regulatory approval or clearance of a particular Product.

(viii) Exportation of Products. All Products that have been exported from the United States by the Company have been exported in compliance in all material respects with the applicable export requirements of the FDA Law and Regulation. The Company has complied in all material respects with all notification and reporting requirements applicable to the export requirements of the FDA Law and Regulation.

(ix) Labeling, Promotion, and Advertising. To the extent applicable, the Company has complied in all material respects with all FDA Law and Regulation pertaining to product labeling, advertising and promotion.

(x) List of Permits. Section 4.22(a)(x) of the Seller Disclosure Schedule sets forth a true and complete list of all required permits, licenses, registrations, certificates, orders, clearances or approvals issued under the FD&C Act (“FD&C Permits”) and held by the Company. Each such FD&C Permit is in full force and effect and, to the Knowledge of Seller, no suspension, revocation, cancellation or material modification of such FD&C Permit is threatened and there is no basis for believing that such FD&C Permit will not be renewable upon expiration. Each such FD&C Permit will continue in full force and effect immediately following the Closing.

(b) International Regulatory and Related Matters.

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(i) General Compliance. The Company is conducting and has conducted its business and operations in all EU member states and in other countries in which it currently is marketing the Products in compliance in all material respects with all applicable Laws and Regulations, including the essential requirements for affixing the CE mark to Products and related guidelines, as well as provisions in European Union (“EU”) and EU member state legislation governing the disposal of waste electrical products and, where applicable, governing product liability, electrical safety, and electromagnetic compatibility (collectively, “Applicable Non-U.S. Laws and Regulations” with respect to all legislation described in this paragraph (i) as applicable to the Products or activities of the Company).

(ii) Enforcement. Except as set forth in Section 4.22(b)(ii) of the Seller Disclosure Schedule, the Company has not received any written notice or, to the Knowledge of Seller, other communication from any non-U.S. regulatory agency/conformity assessment body (“Non-U.S. Regulatory Agency”) or other national authority alleging noncompliance with any Applicable Non-U.S. Laws and Regulations. The Company is not subject to any enforcement proceedings by a Non-U.S. Regulatory Agency or other national authority and, to Seller’s Knowledge, no such proceedings have been threatened. There is no civil, criminal or administrative action, suit, demand, claim, complaint, hearing, investigation, demand letter, warning letter or proceeding pending against the Company and the Company has no liability (whether actual or contingent) for failure to comply with any Applicable Non-U.S. Laws and Regulations. There is no act, omission, event, or circumstance of which the Company has Knowledge that would reasonably be expected to give rise to or lead to any such action, suit, demand, claim, complaint, hearing, investigation, notice, demand letter, warning letter or proceeding or any similar liability. There has not been any violation of any Applicable Non-U.S. Laws and Regulations by the Company in its product development efforts, submissions, record keeping and reports to any Non-U.S. Regulatory Agency or other national authority, or any declaration of conformity that it may have made that would reasonably be expected to require or lead to investigation, corrective action or regulatory enforcement action. There is no civil or criminal proceeding relating to the Company or any employee of the Company which involves a matter within or related to the jurisdiction of such Non-U.S. Regulatory Agency or other national authority.

(iii) Facilities Licenses and Permits. The Company has complied with all Applicable Non-U.S. Laws and Regulations pertaining to licenses and permits including requirements as to facilities where the Products are manufactured, processed, or held in any country, other than the U.S., where the Products are marketed.

(iv) CE Marking/Premarket Clearance. Each Product owned or distributed by the Company and in current commercial distribution is in compliance in all material respects with applicable marketing authorization, conformity assessments and quality systems requirements of the relevant country, and, in the EU member states, is marketed under, and is covered by, a medical device CE mark. Each Product is marketed in compliance with the regulatory requirements in each country where the Product is commercialized, and in the EU member states, on the basis of which the CE mark was affixed under the following EU legislation: Council Directive 93/42/EEC of 14 June 1993 concerning medical devices, Directive 2004/108/EC of the European Parliament and of the Council of 15 December 2004 on the approximation of the laws of the EU member states relating to electromagnetic compatibility

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and repealing Directive 89/336/EEC of the European Parliament and of the Council of 12 December 2006 on the harmonisation of the laws of EU member states relating to electrical equipment designed for use within certain voltage limits and any applicable national legislation in any EU member state implementing Council Directive 93/42/EEC, Directive 2004/108/EC and Directive 2006/95/EC.

(v) Commercial Distribution in EU and Other Countries Outside the United States. Section 4.22(b)(v) of the Seller Disclosure Schedule lists all Products that are in current commercial distribution or aimed for future distribution in the EU or other countries outside the United States.

(vi) Compliance with EU WEEE Directive. Regarding any Product that is in current commercial distribution in the EU the Company complies with (A) the requirements set forth by the Directive 2002/96/EC on waste electrical and electronic equipment and (B) any national legislation implementing Directive 2002/96/EC in any EU member state where such Product is marketed; in particular, to the extent possible under the national legislation in the respective EU member states, the Company (x) concluded agreements with all Persons distributing such Products in the EU securing compliance with Directive 2002/96/EC or (y) joined systems enabling purchasers of the products to return any electronic or electric waste from or in connection with the products free of charge to the distributor.

(vii) Quality Management System Regulation and Reporting.

(A) The Company has been audited by BSI Management Systems, its registrar and found to be in compliance with ISO 13485 and continues to operate in material compliance with ISO 13485.

(B) With the exception of those suppliers identified in Section 4.22(b)(vii)(B) of the Seller Disclosure Schedule, the Company and its suppliers that are subject to such requirements are, and have been since July 2007, in compliance with, and the Product in commercial distribution is designed, manufactured, prepared, assembled, packaged, labeled, stored, installed, serviced, and processed in compliance with, ISO 13485 and all other applicable quality standards.

(C) The Company is in compliance with record-keeping and reporting requirements for adverse event reporting under Applicable Non-U.S. Laws and Regulations of countries in which the Products are investigated or marketed. Section 4.22(b)(vii)(C) of the Seller Disclosure Schedule sets forth all adverse event reports submitted to Governmental Authorities under Applicable Non-U.S. Laws and Regulations.

(viii) No Unlawful Shipments. The Company has not introduced into commercial distribution, in the six (6) years prior to the date of this Agreement, any Products that are, or that were, upon their shipment by the Company, in violation of Applicable Non-U.S. Laws and Regulations.

(ix) Labeling, Promotion, and Advertising. All Products are and have been labeled, promoted, and advertised in all material respects accordance with their marketing authorization (if any), within the scope of their exemption from such authorization, or in

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accordance with applicable Non-U.S. Laws and Regulations, including EU or national legislation and guidelines governing the labeling, promotion and marketing of products falling within the category governing the Products.

(x) List of Permits. Section 4.22(b)(x) of the Seller Disclosure Schedule sets forth a list of all permits, licenses, registrations, certificates, orders, clearances or approvals which are held by the Company and which relate to the Company’s activities outside the U.S. (“Non-U.S. Permits”). Such Non-U.S. Permits are the only permits that are required for the Company to conduct its business outside the U.S. as presently conducted. Each such Non-U.S. Permit is in full force and effect and, to the Knowledge of Seller, no suspension, revocation, cancellation or material modification of such Non-U.S. Permit is threatened and there is no basis for believing that such Non-U.S. Permit will not be renewable upon expiration. Each such Non-U.S. Permit will continue in full force and effect immediately following the Closing.

Section 4.23 Product Liability; Product Warranties. Except as set forth in Section 4.23 of the Seller Disclosure Schedule, all Products and services sold, rented, leased, provided or delivered by the Company to customers conform, in all material respects, to applicable contractual commitments, express and implied warranties, product and service specifications, and, to the Knowledge of Seller, and other than as reserved for in the ordinary course of business, the Company has no liability for replacement or repair thereof or other damages in connection therewith. Except as set forth in Section 4.23 of the Seller Disclosure Schedule, no Product or service sold, leased, rented, provided or delivered by the Company to customers on or prior to the Closing is subject to any guaranty, warranty (other than warranties imposed by law) or other indemnity beyond the applicable standard terms and conditions of sale, rent or lease. Except as set forth in Section 4.23 of the Seller Disclosure Schedule, the Company does not have any liability arising out of any injury to a Person or property as a result of the ownership, possession, provision or use of any equipment, Product or service sold, rented, leased, provided or delivered by the Company on or prior to the Closing. All product liability claims that have been asserted against the Company, whether covered by insurance or not and whether litigation has resulted or not, are listed and summarized in Section 4.23 of the Seller Disclosure Schedule.

Section 4.24 Inventories. The inventories of the Company are in good and merchantable condition, are suitable and usable for the purposes for which they are intended and are in a condition such that they can be sold or used in the ordinary course of the business consistent with past practice. The Company has good and marketable title to its inventories free and clear of all Liens. Except as reserved against by the Company (which reserve is set forth in Section 4.24 of the Seller Disclosure Schedule), the inventories of the Company do not consist, in any material amount, of items that are obsolete or damaged.

Section 4.25 Trade Compliance Matters.

(a) The Company is in compliance in all material respects with all applicable export control and economic sanctions laws and regulations of the United States and other countries, including but not limited to the U.S. Export Administration Regulations (“EAR”) (15 C.F.R. 730 et seq.), the EAR’s rules on Restrictive Trade Practices or Boycotts (15 C.F.R. Part 760, the so-called “Anti-boycott Regulations”), and the economic sanctions rules and regulations

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implemented under statutory authority and/or Presidential Executive Orders and administered by the U.S. Treasury Department’s Office of Foreign Assets Control (31 C.F.R. Part 500 et seq.; collectively, the “OFAC Regulations”).

(b) The Company has not, directly or indirectly, exported, re-exported, sold or otherwise transferred any goods, software, or technology subject to the EAR in violation of the EAR or any OFAC Regulations. In the five (5) year period immediately preceding the date of this Agreement, the Company has not been a party to or a beneficiary under any contract under which goods have been sold or services provided, directly or indirectly, to customers in countries subject to sanctions under the OFAC Regulations without the proper license or other authorization from the U.S. Government. In addition, the Company has not engaged in any other transactions, or otherwise dealt, with any Person or entity with whom U.S. persons are prohibited from dealing under the EAR or the OFAC Regulations, including but not limited to any person or entity designated by OFAC on the list of Specially Designated Nationals and Blocked Persons.

(c) There has been and is no charge, proceeding or, to the Knowledge of Seller, investigation by any Governmental Authority with respect to a violation of any applicable U.S. or non-U.S. export, import control or economic sanctions Laws and Regulations including the EAR and the OFAC Regulations that is now pending or, to the Knowledge of Seller, has been asserted or threatened with respect to the Company.

(d) Except as set forth in Section 4.25(d) of the Seller Disclosure Schedule, the Company is in compliance in all material respects with all applicable U.S. and non-U.S. customs Laws and Regulations, including any export or import declaration filing, payment of customs duties, compliance with import quotas, import registration or any other similar requirements related to the exportation or importation of goods or services by the Company. As of the date of this Agreement, Section 4.25(d) of the Seller Disclosure Schedule lists each special import or export program in which the Company participates, including any temporary importation, bonded warehouse, expedited customs clearance or processing, drawback or similar program entitling the Company to customs or Tax benefits related to the importation or exportation of its goods or services. The Company is in compliance in all material respects with all requirements imposed under any such programs. Except as set forth in Section 4.25(d) of the Seller Disclosure Schedule, there is no charge, proceeding or, to the Knowledge of Seller, investigation by any Governmental Authority with respect to a material violation of any applicable U.S. or non-U.S. customs Laws or Regulations that is now pending or, to the Knowledge of Seller, threatened with respect to the Company.

(e) Neither the Company nor its representatives nor any person acting for, or on behalf of the Company, has paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value to any Government Official or to any person, in each case, under the circumstances where the Company, its representative or such person knew or reasonably ought to have known (after due and proper inquiry) that all or a portion of such money or thing of value would be offered, given or promised, directly or indirectly, to a Government Official: (i) for the purpose of (a) influencing any act or decision of a Government Official in their official capacity; (b) inducing a Government Official to do or omit to do any act in violation of their lawful duties; (c) securing

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any improper advantage; (d) inducing a Government Official to influence or affect any act or decision of any Governmental Authority, any company, business, enterprise or other entity owned, in whole or part, or controlled by an Governmental Authority, or any political party; or (e) assisting the Company or its representative or any person acting on behalf of the Company in obtaining or retaining business for or with, or directing business to, the Company, its representative or such person; and (ii) in a manner which would constitute or have the purpose or effect of public or commercial bribery, acceptance of or acquiescence in extortion, kickbacks or other unlawful or improper means of obtaining business or any improper advantage in violation of an anticorruption Laws and Regulations.

Section 4.26 Manufacturing and Marketing Rights. Except as set forth in Section 4.26 of the Seller Disclosure Schedule, the Company has not granted rights to manufacture, produce, assemble, license, market, or sell its Products to any other Person and is not bound by any agreement that affects the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its Products.

Section 4.27 Corporate Records. The minute books and other similar records of the Company contain accurate records, in all material respects, of actions taken at any meeting of the Board of Directors of the Company or any committee thereof and of written consents executed in lieu of the holding of any such meeting.

Section 4.28 Financial Statements. Section 4.28-1 of the Seller Disclosure Schedule sets forth the unaudited listing of assets and liabilities of the Company as of December 31, 2010, and the unaudited statements of revenue and direct expenses for the year ended December 31, 2010 (the “Unaudited 2010 Financial Statement”). Section 4.28-2 of the Seller Disclosure Schedule sets forth the unaudited listing of assets and liabilities of the Company as of June 30, 2011, and the unaudited statements of revenue and direct expenses for the six month period ended June 30, 2011 (the “Unaudited Interim Financial Statements”, and together with the Unaudited 2010 Financial Statement, the “Unaudited Financial Statements”). The Unaudited Financial Statements (x) fairly present the financial condition and results of operations of the Company at and as of the date and for the period indicated and (y) were compiled from books and records regularly maintained by management of Seller used to prepare the financial statements of Seller.

Section 4.29 LipoSonix Agreement.

(a) Seller has made available to Buyer a true and complete copy of the LipoSonix Agreement, together with all schedules, exhibits, amendments, supplements, modifications and waivers. The LipoSonix Agreement is in full force and effect, is a valid and binding obligation of Seller and of each other party thereto and is enforceable against Seller and each other party thereto, and the LipoSonix Agreement will continue to be (i) valid, binding and enforceable against Seller and each other party thereto, and (ii) in full force and effect immediately following the Closing, with no alteration or acceleration or increase in fees or liabilities, payments, obligations or burdens. Seller is not alleged to be and no other party is or is alleged to be in, or has received notice of any, default under, or breach or violation of the LipoSonix Agreement and, to the Knowledge of Seller, no event has occurred which, with the giving of notice or passage of time or both, would constitute such a default, breach or violation

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and Seller has no reasonable basis for suspecting that any such default, breach or violation exists or will be forthcoming. Seller is not currently involved, nor has it been involved since the “Effective Time” (as defined in the LipoSonix Agreement), in any dispute with any counterparty to the LipoSonix Agreement, and the Company has not received or provided written or, to the Knowledge of Seller, oral notice since the “Effective Time” (as defined in the LipoSonix Agreement), from or to any counterparty to the effect with respect to any such dispute. Seller has made no claims for indemnification under the LipoSonix Agreement, and to the Knowledge of Seller, there were no representations and warranties made by the Company under the LipoSonix Agreement that were inaccurate, and no breaches of any covenants made by the Company under the LipoSonix Agreement.

(b) No fees or payments of any kind will be due from either Seller or Buyer under the LipoSonix Agreement as a result of the consummation of the Contemplated Transactions. No “Mandatory Prepayment Amount” (as defined in the LipoSonix Agreement) will be payable from either Buyer or Seller under the LipoSonix Agreement, at the Closing or at any time in the future.

Section 4.30 [Reserved].

Section 4.31 Exclusivity of Representations and Warranties. Except as expressly set forth in this Article 4, Seller makes no representations or warranties, express or implied, with respect to the Company or any of the business, assets, liabilities or operations of the Company, and any such other representations or warranties are hereby expressly disclaimed.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

OF BUYER

Buyer hereby represents and warrant to Seller as follows:

Section 5.1 Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware, the state of its incorporation, and has all corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now conducted.

Section 5.2 Authority; Enforceability. Buyer has all requisite corporate power and authority to execute and deliver this Agreement and each other instrument and document required to be executed and delivered by it at or prior to the Closing, and to perform its obligations hereunder and thereunder and to consummate the Contemplated Transactions. The execution and delivery by Buyer of this Agreement and the performance of its obligations hereunder and thereunder have been duly and validly authorized by the Board of Directors of Buyer. No other corporate proceedings on the part of Buyer are necessary to authorize the consummation of the Contemplated Transactions. This Agreement has been duly and validly executed and delivered by Buyer, or will be duly and validly executed and delivered by Buyer at or prior to Closing, and assuming the due authorization, execution and delivery thereof by Seller,

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constitutes a legal, valid and binding obligation of Buyer enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

Section 5.3 No Conflict; Required Filings and Consents.

(a) The execution and delivery by Buyer of this Agreement and each other instrument and document required by this Agreement to be executed and delivered by Buyer do not, and the performance of this Agreement and each other instrument and document required by this Agreement to be executed and delivered by Buyer, shall not, (i) conflict with or violate the certificate of incorporation or bylaws of Buyer, (ii) any resolution adopted by the Board of Directors or stockholders of Buyer or (ii) subject to the filings and other matters referred to in Section 5.3(b), conflict with or violate in any material respect any Law or Order in each case applicable to Buyer or by which it or any of its properties, rights or assets are bound or affected.

(b) The execution and delivery by Buyer of this Agreement and each other instrument and document required by this Agreement to be executed and delivered by Buyer at or prior to the Closing do not, and the performance by Buyer of this Agreement and each instrument required by this Agreement to be executed and delivered by Buyer at or prior to the Closing shall not, require Buyer to obtain any Approval of any Person, observe any waiting period imposed by, or make any filing with or notification to, any Governmental Authority, except for compliance with any applicable requirements of the pre-merger notification requirements of the HSR Act and applicable Foreign Competition Laws, and except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Buyer.

Section 5.4 Absence of Litigation. As of the date hereof, there is no Claim pending against or, to the Knowledge of Buyer, threatened against Buyer which questions or challenges (a) the validity of this Agreement, or (b) any action taken or to be taken by Buyer pursuant to this Agreement or in connection with the Contemplated Transactions.

Section 5.5 Available Funds. Buyer has as of the date of this Agreement, and will have on the Closing Date and on the date on which the FDA Milestone Payment is due, a sufficient amount of cash (without giving effect to any unfunded financing regardless of whether any such financing is committed) to satisfy Buyer’s payment obligations required to be made at the Closing under this Agreement and upon the achievement of the FDA Milestone in the form of the FDA Milestone Payment, (ii) the resources and capabilities (financial or otherwise) to perform its obligations hereunder, and (iii) has not incurred any obligation, commitment, restriction or liability of any kind, which would impair or adversely affect such resources and capabilities.

Section 5.6 No Brokers. Other than Morgan Keegan & Co., there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Buyer who is or might be entitled to any fee or commission in connection with the consummation of the Contemplated Transactions.

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Section 5.7 Investment Representation. Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the risks and merits associated with the acquisition of the Shares, and Buyer is purchasing the Shares for its own account and not with a view to the sale or distribution thereof (within the meaning of securities Laws).

Section 5.8 Buyer Review. Buyer represents that it is a sophisticated entity that was advised by knowledgeable counsel and, to the extent it deemed necessary, other advisors in connection with this Agreement and has conducted its own independent review and evaluation of the Company and its business. Buyer acknowledges that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities law and Buyer must bear the economic risk of its investment in the Shares until and unless the offer and sale of such Shares is subsequently registered under the Securities Act and all applicable state securities laws or an exemption from such registration is applicable. Buyer is an “accredited investor” within the meaning of Regulation D under the Securities Act.

Section 5.9 No Outside Reliance. Buyer expressly acknowledges and agrees that (i) the representations and warranties contained in Article 4 are the only representations and warranties Seller is making regarding the Company and that Seller is not making any representations and warranties with respect to any other information about the Company provided to Buyer in the course of its due diligence investigation of the Company; (ii) except as specifically set forth in this Agreement, Seller is transferring the Shares and the properties and assets held by the Company “as is, where is, and with all faults;” (iii) except for the representations and warranties expressly set forth in Article 4, Buyer is not relying on any representations or warranties of any kind whatsoever, whether oral or written, express or implied, arising out of any statute, regulation or common law right or remedy, or otherwise, from Seller or the Company or directors, officers, employees, agents, stockholders, affiliates, consultants, counsel, accountants, investment bankers or representatives of any of them, as to any matter, concerning the Company or the properties or assets of the Company, or set forth, contained or addressed in any due diligence materials (including the completeness thereof). Without limiting the generality of the foregoing, Buyer expressly acknowledges and agrees that, except to the extent expressly addressed by Article 4, any financial information, projections or other information contained in any documents or other materials (including the “Confidential Information Memorandum” or documents in the “virtual data room”) or management presentations that have been or are in the future provided to Buyer or any of its Affiliates, agents, lenders or representatives are not and will not be deemed to be representations or warranties of Seller.

ARTICLE 6

COVENANTS

Section 6.1 Conduct of Business by the Company Pending the Closing. Seller covenants and agrees that, between the date of this Agreement and the earlier to occur of the Closing and the termination of this Agreement pursuant to its terms, unless Buyer shall otherwise specifically consent in writing in advance (provided that such consent shall only be requested and provided if consistent with applicable Law and provided further that such consent shall not be unreasonably withheld, conditioned or delayed), or unless otherwise expressly provided for by

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this Agreement, Seller shall cause the Company to (i) conduct its business only in the ordinary course of business and in a manner consistent with past practice and (ii) conduct its business in compliance with all applicable Laws and Orders. Seller shall cause the Company to use its commercially reasonable efforts to (A) preserve intact the business organization and assets and Intellectual Property of the Company, (B) keep available the services of the Company’s present officers, employees, consultants, sales representatives, distributors and sales agents (other than terminations in the ordinary course of business consistent with past practice), (C) maintain in effect Material Contracts (other than those Material Contracts that expire in accordance with their terms or terminations expressly provided for by this Agreement), and (D) preserve the Company’s present relationships with advertisers, publishers, sponsors, customers, licensees, suppliers, sales representatives, distributors and other Persons with which the Company has business relations. By way of amplification and not limitation, Seller shall cause the Company to not, between the date of this Agreement and the earlier to occur of the Closing and the termination of this Agreement pursuant to its terms, directly or indirectly do, or propose to do, any of the following without the prior written consent of Buyer (provided that such consent shall only be requested and provided if consistent with applicable Law and provided further that such consent shall not be unreasonably withheld, conditioned or delayed), unless otherwise expressly provided for by this Agreement or otherwise expressly set forth in Section 6.1 of the Seller Disclosure Schedule:

(a) amend or otherwise change the Charter or Bylaws or alter through merger, liquidation, reorganization, reclassification, recapitalization, restructuring or in any other fashion the corporate structure or capital structure or ownership of the Company;

(b) (i) issue, grant, sell, transfer, deliver, pledge, promise, dispose of or encumber, or authorize the issuance, grant, sale, transfer, deliverance, pledge, promise, disposition or encumbrance of, or alter or modify the terms of rights or obligations under any shares of capital stock of any class or series (common or preferred) or securities or other instruments (including notes or other evidences of Indebtedness) convertible into, or subscription rights, options or warrants to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible instruments or securities or any other ownership interest or stock-based rights of the Company, (ii) adopt, ratify or effectuate a stockholders’ rights plan or agreement or similar plan or Contract, or (iii) redeem, purchase or otherwise acquire, directly or indirectly, any of the capital stock of the Company;

(c) (i) other than cash dividends or other cash distributions to Seller in the ordinary course of business consistent with past practice, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, (ii) split, combine or reclassify any of its capital stock, (iii) effect a recapitalization; issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (iv) amend the terms of, repurchase, redeem or otherwise acquire, directly or indirectly, any of its securities;

(d) sell, transfer, assign, lease, sublease, license, sublicense, mortgage, pledge, encumber, impair or otherwise dispose of (in whole or in part), or create, incur, assume or cause to be subjected to any Lien on, any of the assets, properties or securities of the Company (including any Intellectual Property or accounts receivable), except for the sale of inventory in the ordinary course of business consistent with past practice;

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(e) (i) acquire (by merger, consolidation, acquisition of stock or assets or otherwise) or organize or form any corporation, limited liability company, partnership, association, joint venture, trust or other entity or Person or any business organization or division thereof, or (ii) acquire any rights, assets or properties other than in the ordinary course of business consistent with past practice;

(f) (i) incur or modify any Indebtedness or issue any debt securities or any warrants or rights to acquire any debt security, (ii) assume, guarantee or endorse or otherwise become responsible for, the obligations of any other Person, (iii) enter into any off-balance sheet financing arrangement or any accounts receivable or payable financing arrangement, or (iv) make any loans, advances or enter into any other financial commitments other than advances of reasonable expenses to employees in the ordinary course of business consistent with past practice;

(g) authorize or make any capital expenditures outside of the ordinary course of business consistent with past practice, or in excess of $100,000;

(h) (i) increase, accelerate or provide for additional compensation or fringe benefits of, or grant, agree to grant, pay or otherwise make payable any incentive, bonus or similar compensation or rights, to any present or former director, officer, employee, consultant, sales representative, distributor or agent of the Company, (ii) grant any severance, retention, continuation or termination pay to any present or former director, officer, employee, consultant, sales representative, distributor or agent of the Company outside of the ordinary course of business consistent with past practice, (iii) loan or advance any money or other property to any present or former director, officer, employee, consultant, sales representative, distributor or agent of the Company (except for advances of business expenses in the ordinary course of business consistent with past practice), (iv) establish, adopt, enter into, amend or terminate any Employee Plan or any plan, agreement, program, policy, trust, fund or other arrangement that would be an Employee Plan if it were in existence as of the date of this Agreement (except as may otherwise be required pursuant to Applicable Law), (v) terminate or lay off any executive or management employee or key employee (except for termination for “cause”), or (vi) grant any equity or equity-based awards or stock-based rights;

(i) fail to give any notices or other information required to be given to the employees of the Company, any collective bargaining unit representing any group of employees of the Company or any applicable Governmental Authority under the WARN Act, the National Labor Relations Act, the Code, COBRA, or other applicable Law in connection with the Contemplated Transactions;

(j) hire or retain, or continue to retain or employ, any employee or consultant having access to confidential or proprietary information of the Company unless such employee or consultant enters into, or has entered into, a proprietary information and inventions agreement in the form customarily used by the Company or an agreement containing substantially similar and no less restrictive confidentiality and inventions assignment provisions, or amend or otherwise modify, or grant a waiver under, any such confidentiality or proprietary information agreement with any such Person;

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(k) change any accounting or cash management policies, procedures or practices used by the Company (including with respect to reserves, revenue recognition, timing for payments of accounts payable and collection of accounts receivable) unless required by a change in Law or GAAP;

(l) (i) enter into any Contract that if entered into prior to the date hereof would be a Material Contract other than in the ordinary course of business consistent with the past practices of the Company and not exceeding $50,000, (ii) modify, amend, extend or supplement in any material respect, transfer or terminate any Material Contract or waive, release or assign any rights or Claims thereto or thereunder other than in the ordinary course of business consistent with the past practices of the Company and not exceeding $50,000, (iii) enter into or extend any lease or sublease with respect to Real Property with any third party, (iv) modify, amend or transfer in any way or terminate any license agreement, standstill or confidentiality agreement with any third party, or waive, release or assign any rights or Claims thereto or thereunder, (v) enter into any agreement or arrangement that limits or otherwise restricts or that could by its terms be reasonably expected to restrict the Company or its Affiliates or successors or that by its terms could, after the Effective Time, limit or restrict Buyer or any of its respective Subsidiaries or Affiliates or successors thereto, from engaging or competing in any line of business or in any geographic area, (vi) enter into or amend any agreement pursuant to which any other party is granted manufacturing, marketing or other development or distribution rights of any type or scope with respect to any Product or any of the Company’s technologies or (vii) enter into, modify, amend or supplement any Contract to provide exclusive rights or obligations or any non-competition or similar obligations or restrictions;

(m) (i) make or change any Tax election or change any method of tax accounting, (ii) settle or compromise any federal, state, local or foreign Tax liability, (iii) file any amended Tax Return, (iv) enter into any closing agreement relating to any Tax, (v) agree to an extension or waiver of any limitation period applicable to any claim or assessment in respect of Taxes, or (vi) surrender any right to claim a Tax refund;

(n) enter into any operating leases;

(o) except as required by Law, modify or change in any material respect any existing permit or operating license listed in Section 4.7(c) of the Seller Disclosure Schedule;

(p) pay, discharge, satisfy or settle any Claim or waive, assign or release any material rights or claims, except any Claim which settlement would not impose any injunctive or similar Order on the Company or restrict in any way the business of the Company, or exceed $50,000 in cost, liability or value to the Company;

(q) commence, join, make an appeal with respect to or settle a lawsuit, action, Claim or similar proceeding other than (i) for the routine collection of bills, (ii) to enforce its rights with respect to Intellectual Property, (iii) in such cases where Seller in good faith determines that failure to commence suit would result in the material impairment of a valuable

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aspect of its business, provided, that Seller consults with Buyer prior to the Company filing or taking of any action with respect to such lawsuit, action, Claim or similar proceeding, or (iv) pursuant to this Agreement;

(r) engage in, enter into or modify or amend any Contract, transaction, Indebtedness, commitment or other arrangement with, directly or indirectly, any of the directors, officers, employees, consultants, agents, or other Affiliates of the Company, or any of their respective Affiliates or family members, other than offer letters and other standard documents, in the Company’s forms (and not providing any rights to severance or similar payments), which have been provided to Buyer, with any new employees or consultants hired or retained after the date of this Agreement;

(s) fail to maintain in full force and effect all self-insurance and insurance, as the case may be, currently in effect, except that existing policies may be replaced by new or successor policies of substantially similar coverage and at a substantially similar cost;

(t) commence any proceeding for any voluntary liquidation, dissolution, or winding up of the Company, including but not limited to initiating any bankruptcy proceedings on its behalf;

(u) fill any orders for, or conduct any further business with, any third parties that are subject to a United States trade embargo;

(v) take any action if such action would or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company;

(w) fail to maintain in full force and effect all material permits, licenses, registrations, certificates, orders, clearances or approvals held by the Company; or

(x) authorize any of the foregoing, or agree or enter into or amend any Contract or commitment to do any of the foregoing.

Section 6.2 No Solicitation of Other Proposals.

(a) From the date hereof until the earlier to occur of the Closing and the termination of this Agreement pursuant to its terms, Seller shall not, nor shall Seller permit the Company or any of its Affiliates to, nor shall it authorize, direct or permit any of their respective directors, officers, employees, consultants, advisors, representatives or agents (collectively, the “Seller Representatives”) to, directly or indirectly, (i) solicit, facilitate, initiate, knowingly encourage or take any action to solicit, facilitate, initiate or knowingly encourage, any inquiries or communications regarding or the making of any proposal or offer that constitutes or may constitute an Acquisition Proposal, or (ii) participate or engage in any discussions or negotiations with, or provide any information to or take any other action with the intent to facilitate the efforts of, any Person concerning any possible Acquisition Proposal or any inquiry or communication which would reasonably be expected to result in an Acquisition Proposal. For purposes of this Agreement, the term “Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) relating to (i) any merger, consolidation, reorganization or other direct or indirect business combination, recapitalization, liquidation,

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winding-up of, or similar transaction, involving the Company, (ii) the issuance or acquisition of shares of capital stock or other equity securities of the Company, (iii) the sale, lease, exchange, license (whether exclusive or not), or other disposition of a substantial portion of the Intellectual Property of the Company or a substantial portion of the business or other assets of the Company, or (iv) any other transaction, the consummation of which would reasonably be expected to impede, interfere with, prevent or materially delay the Closing or any of the other transactions contemplated hereby or which would reasonably be expected to diminish significantly the benefits to Buyer or its Affiliates of the transactions contemplated hereby; provided, however, that an Acquisition Proposal shall not include any of the foregoing relating to Seller or any of its Subsidiaries other than the Company. Seller shall immediately cease and cause to be terminated, and shall cause all Seller Representatives to immediately terminate and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal. Seller shall take all reasonable actions to ensure that each Seller Representative complies with the provisions of this Section 6.2(a). Without limiting the foregoing, any action or conduct by any Seller Representative that would be a violation of this Section 6.2(a) if taken by Seller, whether or not such Person is purporting to act on behalf of Seller, shall be deemed to be a breach of this Section 6.2(a) by Seller.

(b) Nothing in this Section 6.2 shall permit Seller to enter into any agreement, orally or in writing, with respect to an Acquisition Proposal during the term of this Agreement. In addition to the other obligations of Seller set forth in this Section 6.2, Seller shall immediately advise Buyer orally and in writing of any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the Person making the same.

Section 6.3 Access to Information; Confidentiality.

(a) From the date hereof until the earlier to occur of the Closing and the termination of this Agreement pursuant to its terms, consistent with applicable Law, upon reasonable notice, Seller shall afford to the officers, employees, accountants, counsel and other representatives and agents of Buyer and its Affiliates (collectively “Buyer Representatives”) reasonable access (with reasonable prior notice, and during regular business hours) to the Company’s properties, records, databases, source code, books, Contracts, commitments and other information, and, during such period, Seller shall make available to Buyer and the Buyer Representatives the appropriate individuals for discussion of the Company’s business, properties and personnel as Buyer or the Buyer Representatives may reasonably request. Notwithstanding the foregoing, in exercising Buyer’s access rights under this Section 6.3, (i) Buyer and the Buyer Representatives shall not be permitted to interfere unreasonably with the conduct of the business of the Company, Seller or any of its Affiliates, (ii) the auditors and accountants of the Company, Seller or any of its Affiliates shall not be obligated to make any work papers available to any Person unless and until such Person has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such auditors or accountants and (iii) if the Parties are in an adversarial relationship in litigation or arbitration, the furnishing of information, documents or records in accordance with this Section 6.3(a) shall be subject to applicable rules relating to discovery.

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(b) Buyer shall keep all non-public information obtained pursuant to Section 6.3(a) confidential in accordance with the terms of the Confidentiality Agreement, dated April 7, 2011, between Seller and Buyer (the “Confidentiality Agreement”). The Confidentiality Agreement shall continue in full force and effect prior to the Closing and after any termination of this Agreement. The Confidentiality Agreement shall be deemed to have been terminated at the Closing Date solely with respect to information relating to the Company and its products and business; provided, however, that Buyer acknowledges that any and all other information provided to it by Seller or its representatives concerning Seller and its Affiliates shall remain subject to the terms and conditions of the Confidentiality Agreement. Anything contained in the Confidentiality Agreement to the contrary notwithstanding, Seller and Buyer hereby agree that each such Party may issue press release(s) or make other public announcements regarding the transactions contemplated in this Agreement only in accordance with Section 6.7.

(c) Buyer hereby agrees that it shall, and shall cause Buyer Representatives to, keep confidential any Confidential Information not related to the Company, its products or business that Buyer obtains as a result of the Contemplated Transactions and to promptly deliver to Seller or destroy (upon Seller’s request) any such Confidential Information, including all copies, reproductions, and extracts thereof.

(d) Seller hereby agrees that it shall, and shall cause Seller Representatives to, keep confidential any Confidential Information related to the Company, its assets (tangible and intangible), employees, finances, businesses and operations.

Section 6.4 Commercially Reasonable Efforts; Further Assurances.

(a) Upon the terms and subject to the conditions set forth in this Agreement, each Party shall use its commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable under applicable Law to consummate and make effective, in the most expeditious manner practicable, the Contemplated Transactions. Each Party shall use its commercially reasonable efforts to (i) as promptly as practicable, obtain all Approvals necessary to consummate the Contemplated Transactions, (ii) make all filings required by applicable Law required in connection with the authorization, execution and delivery of this Agreement by Buyer and Seller and the consummation by them of the Contemplated Transactions, (iii) furnish all information required for any application or other filing to be made pursuant to any Law or any applicable Regulations of any Governmental Authority in connection with the Contemplated Transactions and all information reasonably requested by any Governmental Authority in connection with the Contemplated Transactions, and (iv) obtain the expiration or termination of any applicable waiting period and any required clearances under the HSR Act or any applicable Foreign Competition Laws.

(b) Subject to the terms and conditions herein provided and without limiting the foregoing, Seller and Buyer shall promptly (but in no event later than fifteen (15) days after the date hereof) make or cause their “ultimate parent entities,” as that term is defined in the HSR Act and the Regulation promulgated thereunder to make, in consultation and cooperation with the other Party, (i) an appropriate filing of a notification and report form pursuant to the HSR Act relating to the Contemplated Transactions and (ii) all other necessary registrations, declarations, notices and filings relating to the Contemplated Transactions with other Governmental Authorities under any applicable Foreign Competition Laws.

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(c) Subject to applicable confidentiality restrictions or restrictions required by Law, Buyer and Seller shall notify the other promptly upon the receipt of (i) any comments or questions from any officials of any Governmental Authority in connection with any filings made pursuant to this Section 6.4 or the Contemplated Transactions and (ii) any request by any officials of any Governmental Authority for amendments or supplements to any filings made pursuant to any Laws or Regulations of any Governmental Authority or answers to any questions, or the production of any documents, relating to an investigation of the Contemplated Transactions by any Governmental Authority. Whenever any event occurs that is required to be set forth in an amendment or supplement to any filing made pursuant to this Section 6.4, each Party will promptly inform the other of such occurrence and cooperate in filing promptly with the applicable Governmental Authority such amendment or supplement. Without limiting the generality of the foregoing, each Party shall provide to the other (or the other’s respective advisors) upon request copies of all correspondence (including any submissions and document productions) between such Party and any Governmental Authority relating to the Contemplated Transactions. The Parties may, as they deem advisable and necessary, designate any competitively sensitive materials provided to the other under this Section 6.4 as “outside counsel only.” Such materials and the information contained therein shall be given only to outside counsel of the recipient and will not be disclosed by such outside counsel to employees, officers, or directors of the recipient without the advance written consent of the Party providing such materials. In addition, to the extent reasonably practicable, all discussions, telephone calls, and meetings with a Governmental Authority regarding the Contemplated Transactions shall include representatives of both Parties. Subject to applicable Law, the Parties will consult and cooperate with each other in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, and proposals made or submitted to any Governmental Authority regarding the Contemplated Transactions by or on behalf of any Party.

(d) Without limiting the foregoing, Buyer shall use reasonable best efforts to promptly take, in order to consummate the Contemplated Transactions by the End Date, all actions necessary to (i) secure the expiration or termination of any applicable waiting period and any required clearances under the HSR Act or any applicable Foreign Competition Laws and (ii) resolve any objections asserted with respect to the Contemplated Transactions raised by any Governmental Authority, and to prevent the entry of any court Order and to have vacated, lifted, reversed or overturned any Order that would prevent, prohibit, restrict, or delay the consummation of the Contemplated Transactions, including: (A) executing settlements, undertakings, consent decrees, stipulations, or other agreements with any Governmental Authority, (B) selling, divesting, licensing, or otherwise conveying particular assets or categories of assets or businesses of Buyer, (C) agreeing to sell, divest, license, or otherwise convey any particular assets or categories of assets or businesses of Buyer contemporaneously with or subsequent to the Closing, and (D) permitting Seller to sell, divest, license, or otherwise convey any particular assets or categories of assets or businesses of the Company prior to the Closing; provided, however, that Buyer shall not be required to take any action that would be material to the business or financial condition of Buyer and its Subsidiaries, taken as a whole, or material to the business or financial condition of the Company. No actions taken pursuant to this Section 6.4 shall be considered for purposes of determining whether a Material Adverse Effect on the

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Company or Buyer has occurred. Buyer shall, in consultation with Seller, respond to and seek to resolve as promptly as reasonably practicable any objections asserted by any Governmental Authority with respect to the Contemplated Transactions.

(e) Buyer shall not, and shall cause its Affiliates not to, acquire or agree to acquire, by merging with or into or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets, if the entering into of a definitive agreement relating to, or the consummation of such acquisition, merger or consolidation would reasonably be expected to: (i) impose any material delay in the obtaining of, or materially increase the risk of not obtaining, any consents of any Governmental Authority necessary to consummate the Contemplated Transactions or the expiration or termination of any applicable waiting period; (ii) materially increase the risk of any Governmental Authority seeking or entering an Order prohibiting the consummation of the Contemplated Transactions; (iii) materially increase the risk of not being able to remove any such Order on appeal or otherwise; or (iv) materially delay or prevent the consummation of the Contemplated Transactions.

(f) The Parties shall use their commercially reasonable efforts to satisfy or cause to be satisfied all of the conditions precedent that are set forth in Article 7, as applicable to each of them, and to cause the Contemplated Transactions to be consummated in the most expeditious manner practicable. Each Party, at the reasonable request of another Party, shall promptly execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of this Agreement and the Contemplate Transactions.

Section 6.5 Employee Benefits.

(a) From and after the Closing, Buyer shall provide employees of the Company (the “Employees”) with employee benefits (including hourly wage or salary level) that are substantially similar in the aggregate to those employee benefits provided to similarly situated employees of Buyer. Nothing in this Section 6.5(a) shall restrict in any way the ability of Buyer or the Company to terminate any Employee at any time.

(b) To the extent permitted by an applicable Buyer employee benefit plan or arrangement, Buyer shall give Employees full credit for purposes of eligibility to participate and vesting under the employee benefit plans or arrangements maintained by Buyer or its U.S. Affiliates in which such Employees participate for such Employees’ service with the Company to the same extent recognized by comparable plans of the Company immediately prior to the Closing Date. Notwithstanding the foregoing, with respect to any welfare benefit plans maintained by Buyer or its U.S. Affiliates for the benefit of Employees on and after the Closing Date, Buyer shall use commercially reasonable efforts to (i) cause to be waived any eligibility requirements or pre-existing condition limitations to the same extent waived under comparable plans of the Company immediately prior to the Closing Date and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to amounts paid by such Employees in the year of the Closing Date with respect to similar plans maintained by the Company.

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(c) Nothing contained in this Agreement shall (i) constitute or be deemed to be an amendment to any Employee Plan or any other compensation or benefit plan, program or arrangement of the Company, (ii) prevent the amendment or termination of any Employee Plan or interfere with the right or obligation of Buyer or the Company to make such changes as are necessary to conform with applicable Law or (iii) create any third-party beneficiary rights in any Employee (including any beneficiary or depending thereof) in respect of any compensation or benefits that may be provided under any plan or arrangement of Buyer.

Section 6.6 Notification of Certain Matters.

(a) Seller shall give prompt notice to Buyer, and Buyer shall give prompt notice to Seller, of the occurrence or non-occurrence of any fact, condition or event of which Seller has Knowledge or which Buyer has Knowledge, as applicable, the occurrence or non-occurrence of which would result in any representation or warranty contained in this Agreement being untrue or inaccurate in any material respect (or, in the case of any representation or warranty qualified by its terms by materiality (including the words “material” or “Material Adverse Effect”), then untrue or inaccurate in any respect) had such representation or warranty been made as of the time of occurrence or discovery of such fact, condition or event and any failure of Seller or Buyer, as the case may be, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.6 shall not limit or otherwise affect the remedies available hereunder to the Party receiving such notice, including the right to indemnification.

(b) Each of Buyer and Seller shall give prompt notice to the other Party of (i) any notice or other communication from any Person alleging that the Approval of such Person is or may be required in connection with this Agreement or the Contemplated Transactions, (ii) any notice, document, request, court papers or other communication from any Governmental Authority or other third party in connection with this Agreement or the Contemplated Transactions, (iii) any Claim relating to or involving or otherwise affecting such Party that relates to this Agreement or the Contemplated Transactions, or (iv) any fact, event, change, development, circumstance, condition or effect that such Party has determined would reasonably be expected to delay or impede the ability of such Party to consummate the Contemplated Transactions or to fulfill their respective obligations set forth herein or therein.

(c) Seller shall give prompt notice to Buyer of (i) the occurrence of a default, breach or violation or event that, with notice or lapse of time or both, would become a default, breach or violation under any Material Contract of the Company, (ii) any fact, event, change, development, circumstance, condition or effect that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company, and (iii) any of its representations or warranties contained herein failing to be true and correct in all material respects (or, in the case of any representation or warranty qualified by its terms by materiality (including the words “material” or “Material Adverse Effect”), failure to be true or accurate in any respect).

(d) Seller shall give any notices to third parties, and use commercially reasonable efforts to obtain any Approvals from third parties, (i) necessary to consummate the

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Contemplated Transactions (including but not limited to those Approvals set forth on Sections 4.5(a) and 4.5(b) of the Seller Disclosure Schedule), and (ii) otherwise required under any Contracts in connection with the consummation of the Contemplated Transactions. If Seller shall fail to obtain any such Approval from a third party, Seller shall use its commercially reasonable efforts to take such actions as are reasonably requested by Buyer (and Buyer agrees to cooperate therewith as reasonably requested) to limit the adverse effect upon Seller and Buyer, their respective Subsidiaries and Affiliates, and their respective businesses resulting, or which would result after the Closing, from the failure to obtain such consent. Notwithstanding the foregoing, Seller and Buyer shall cooperate with each other and shall use commercially reasonable efforts to have the guarantee described in Section 6.6(d) of the Seller Disclosure Schedule released prior to the Closing.

Section 6.7 Public Announcements. On or prior to Closing, no Party hereto will make any press release, public statement, public announcement or public filing with any Governmental Authority (including any exhibit thereto containing a copy of this Agreement) with respect to this Agreement or any of the Contemplated Transactions (including with respect to the matters set forth in Section 6.7 of the Seller Disclosure Schedule) without the prior written consent of the other Party; provided, however, that either Party may make any press release, public statement, public announcement or public filing which such Party determines is required by applicable Law or stock listing requirements and provided further, that the Party making such press release, public statement, public announcement or public filing shall provide to the other Party a copy of such press release, public statement, public announcement or public filing as early as is reasonably practicable prior to the making thereof, and will consult with the other Party regarding the contents thereof prior to making any such press release, public statement, public announcement or public filing.

Section 6.8 Claims. Prior to the Closing, Seller shall not settle or compromise any Claim brought in connection with the Contemplated Transactions by any present, former or purported holder of any securities of the Company or other present, former or purported counterparty to a Material Contract with the Company without the prior written consent of Buyer; provided, that such consent shall not be unreasonably withheld, conditioned or delayed.

Section 6.9 Delivery of Corporate Records. At or before the Closing, Seller shall deliver to Buyer or its designee correct and complete copies of all of the Company’s minute books of all stockholders, Board of Directors and committee meetings, unanimous or other consents, corporate seals, stock ledgers, true and complete copies of the Charter and Bylaws, and other similar records and items reasonably requested by Buyer from Seller.

Section 6.10 Certain Litigation Matters. After the Closing, with respect to the legal proceedings described in paragraph 2 of Section 4.10(a) of the Seller Disclosure Schedule, Buyer shall assume and continue to perform all of the obligations of the Company and Seller to coordinate the defense of the defendants, engage legal counsel (whether it continues to engage Clifford Chance LLP or otherwise), and pay for and reimburse any legal costs and expenses (including court costs and attorneys’ fees) of the defendants; provided, however, that all costs and expenses incurred by Buyer or the Company in connection with such legal proceedings shall be borne equally by Buyer and Seller; provided, further, that Seller’s obligations with respect to the legal proceedings described in paragraph 2 of Section 4.10(a) of the Seller Disclosure

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Schedule shall be limited to the amount set forth in Section 6.10 of the Seller Disclosure Schedule and, following the reimbursement by Seller to Buyer of such amount in accordance with Section 6.10 of the Seller Disclosure Schedule, Seller shall be deemed to have paid such amount in full and shall have no additional obligations or liability of any kind whatsoever with respect thereto.

Section 6.11 Post-Closing Books and Records of the Company. Until the end of the Contingent Payment Termination Date, Buyer shall maintain all books and records of the Company relating to periods ending on or prior to the Closing. If at any time after the Closing, Seller requires access to certain of such book(s) or record(s), Buyer shall, at its option, (i) deliver copies of such book(s) and/or record(s) specified in reasonable detail by Seller at Seller’s cost or (ii) make available such book(s) and/or record(s) as are specified in reasonable detail by Seller to Seller during normal business hours at a mutually agreed time and place, which information Seller agrees to keep confidential and not to disclose to any Person except to its representatives on a “need to know” basis.

Section 6.12 FDA Approval Matters.

(a) Prior to the Closing, Seller shall notify Buyer of any communications with the FDA or any Governmental Authority in any other jurisdiction, including outside of the United States, or any other Governmental Authority, whether written or oral, as soon as reasonably practicable, but in no event later than three (3) Business Days after the receipt of such communication, and within such same time period, Seller shall provide Buyer with copies of any such written communications and written summaries of any such oral communications.

(b) Prior to the Closing, from time to time and at the reasonable request of Buyer, Seller shall provide Buyer with updates concerning the progress of the Company’s regulatory filings and strategy for obtaining necessary regulatory Approvals to market and sell the LipoSonix Product. Seller shall reasonably consult with Buyer regarding any regulatory filing prior to finalizing such filings and delivering them to the relevant Governmental Authorities.

Section 6.13 Additional Covenants Regarding LipoSonix Agreement.

(a) Notwithstanding anything to the contrary in this Agreement (including Article 9), this Section 6.13 shall govern the rights and obligations of the Parties with respect to matters involving indemnification claims under Article 9 of the LipoSonix Agreement. In the event of any inconsistency between this Section 6.13 and Article 9 of this Agreement, the provisions of this Section 6.13 shall be controlling.

(b) In the event that (i) Seller (as “Parent” under the LipoSonix Agreement) or a “Parent Indemnified Person” (as defined in the LipoSonix Agreement) affiliated with Seller (a “Medicis Indemnitee”) submits an indemnification claim under Article 9 of the LipoSonix Agreement (a “LipoSonix Indemnification Claim”) or (ii) Buyer (or another Buyer Indemnified Person) provides notice of an indemnification claim under Article 9 of this Agreement with respect to Losses arising out of or resulting from the same or a substantially similar matter (or the same or substantially similar facts, events or circumstances) as those forming the basis for a

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LipoSonix Indemnification Claim by a Medicis Indemnitee (whether such Buyer indemnification claim is submitted before or after such Medicis Indemnitee submits such LipoSonix Indemnification Claim), Buyer and Seller agree as follows:

(i) Buyer shall, as reasonably requested by Seller, cooperate with such Medicis Indemnitee in connection with such Medicis Indemnitee’s efforts to seek recovery under Article 9 of the LipoSonix Agreement with respect to such LipoSonix Indemnification Claim (it being understood that Seller shall reimburse Buyer for its reasonable out of pocket expenses incurred in providing such cooperation);

(ii) Buyer shall set off against Contingent Payments then payable, or that become payable in the future, under the LipoSonix Agreement an amount equal to the amount of Losses with respect to such LipoSonix Indemnification Claim which “Parent” or the “Surviving Corporation” (as such terms are defined in the LipoSonix Agreement) is entitled to off-set against such Contingent Payments in accordance with Section 3.11(h) and Article 9 of the LipoSonix Agreement; it being understood that, as between Seller and Buyer, Buyer shall be responsible for making the determination whether Losses are “more likely than not to be incurred or suffered” for purposes of the LipoSonix Agreement, including Section 3.11(h) and Article 9 of the LipoSonix Agreement, and such determination shall be controlling for purposes of Section 3.11(h) and Article 9 of the LipoSonix Agreement with respect to such LipoSonix Indemnification Claim;

(iii) Buyer agrees to provide (or if requested by Seller, join with Seller or such Medicis Indemnitee in providing) such notices or other communications reasonably requested by Seller or such Medicis Indemnitee for purposes of complying with and/or preserving rights under Article 9 of the LipoSonix Agreement (including Section 9.11 of the LipoSonix Agreement) and Section 3.11(h) of the LipoSonix Agreement with respect to such LipoSonix Indemnification Claim and in order to preserve and effectuate the off-set rights set forth in the LipoSonix Agreement with respect thereto;

(iv) in the event that it is finally determined that such Medicis Indemnitee is entitled to indemnification under Article 9 of the LipoSonix Agreement with respect to such LipoSonix Indemnification Claim and that “Parent” or the “Surviving Corporation” (as such terms are defined in the LipoSonix Agreement) are entitled to retain some or all of the amounts previously off-set prior to such final determination under Section 3.11(h) and Article 9 of the LipoSonix Agreement (or which Buyer was otherwise entitled to off-set pursuant to the terms of the LipoSonix Agreement) with respect to such LipoSonix Indemnification Claim, Buyer agrees to promptly pay to Seller an amount equal to such off-set amount, less the sum of (x) any reasonable and documented out-of-pocket expenses incurred by Buyer as contemplated in clause (i) above (provided such documentation is promptly provided to Seller) in connection with such LipoSonix Indemnification Claim and (y) any amount to which Buyer is finally determined to be entitled to recover from Seller, if any, pursuant to a valid indemnification claim timely submitted in accordance with Article 9 of this Agreement with respect to Losses arising out of or resulting from the same or a substantially similar matter (or the same or substantially similar facts, events or circumstances) as those forming the basis for the LipoSonix Indemnification Claim;

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(v) in the event that it is finally determined that such Medicis Indemnitee is entitled to indemnification under Article 9 of the LipoSonix Agreement with respect to such LipoSonix Indemnification Claim and that “Parent” or the “Surviving Corporation” (as such terms are defined in the LipoSonix Agreement) are entitled to off-set some or all of such Losses against future Contingent Payments under Section 3.11(h) and Article 9 of the LipoSonix Agreement with respect to such LipoSonix Indemnification Claim, but no Contingent Payments (or an insufficient amount of Contingent Payments to fully offset such Losses) had otherwise become payable under the LipoSonix Agreement prior to such final determination against which such Losses could be off-set under Section 3.11(h) and Article 9 of the LipoSonix Agreement with respect to such LipoSonix Indemnification Claim, Buyer agrees to off-set such Losses against future Contingent Payments (up to an amount equal to the aggregate amount of such Losses) in accordance with Section 3.11(h) and Article 9 of the LipoSonix Agreement and to, thereafter, promptly pay to Seller an amount equal to such off-set amount, less the sum of (x) any reasonable and documented out-of-pocket expenses incurred by Buyer as contemplated in clause (i) above (provided such documentation is promptly provided to Seller) in connection with such LipoSonix Indemnification Claim and (y) any amount to which Buyer is finally determined to be entitled to recover from Seller, if any, pursuant to a valid indemnification claim timely submitted in accordance with Article 9 of this Agreement with respect to Losses arising out of or resulting from the same or substantially similar matter (or the same or substantially similar facts, events or circumstances) as those forming the basis for the LipoSonix Indemnification Claim;

(vi) to the extent that Buyer (or another Buyer Indemnified Person) provides notice of an indemnification claim under Article 9 of this Agreement with respect to Losses arising out of or resulting from the same or a substantially similar matter (or the same or substantially similar facts, events or circumstances) as those forming the basis for a LipoSonix Indemnification Claim by a Medicis Indemnitee (whether such Buyer indemnification claim is submitted before or after such Medicis Indemnitee submits such LipoSonix Indemnification Claim), Buyer agrees that, notwithstanding anything in Article 9 of this Agreement to the contrary, (x) resolution of, and any recovery with respect to, the portion of such Buyer indemnification claim that arises out of or results from the same or a substantially similar matter (or the same or substantially similar facts, events or circumstances) as those forming the basis for a LipoSonix Indemnification Claim shall be tolled under this Agreement pending a final determination of such LipoSonix Indemnification Claim, (y) such Buyer indemnification claim shall remain subject to all other limitations on and conditions to indemnification set forth in Article 9 of this Agreement, and (z) such Buyer Indemnified Persons shall not be entitled to recover any Losses from Seller under Article 9 of this Agreement with respect to such Buyer indemnification claim (or the applicable portion thereof that is tolled hereunder) unless and until a final determination is made with respect to such LipoSonix Indemnification Claim and then only to the extent that the amount of Losses to which such Buyer Indemnified Person is otherwise entitled to recover from Seller with respect to such Buyer indemnification claim (or applicable portion thereof that is tolled hereunder) pursuant to the terms of Article 9 of this Agreement exceeds the amount which “Parent” or the “Surviving Corporation” (as such terms are defined in the LipoSonix Agreement) are entitled to off-set against Contingent Payments under Section 3.11(h) and Article 9 of the LipoSonix Agreement;

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(vii) Buyer agrees to provide written notification to Seller of any indemnification claim it intends to assert under Article 9 of the LipoSonix Agreement prior to submitting any such claim under the LipoSonix Agreement and to allow Seller to participate, at its sole expense, in any such indemnification claim (it being understood that the other provisions of this Section 6.13 shall apply in the event Buyer also submits an indemnification claim against Seller under Article 9 of this Agreement and/or a Medicis Indemnitee also submits a LipoSonix Indemnification Claim under Article 9 of the LipoSonix Agreement with respect to Losses arising out of or resulting from the same or a substantially similar matter (or the same or substantially similar facts, events or circumstances) as those forming the basis for such LipoSonix Indemnification Claim;

(viii) in the event any indemnification claim under the LipoSonix Agreement involves a “Third Party Claim” (as defined in the LipoSonix Agreement), the procedure with respect to third party claims set forth in Section 9.10 of the LipoSonix Agreement shall govern to the extent inconsistent with the procedures for Third Party Claims under Section 9.5 of this Agreement; it being understood that, if both Buyer and a Medicis Indemnitee have asserted indemnification claims under Article 9 of the LipoSonix Agreement with respect to Losses arising out of or resulting from the same or a substantially similar matter (or the same or substantially similar facts, events or circumstances), Buyer shall be entitled to make the determination as to (and to control) the defense of such “Third Party Claim” under Article 9 of the LipoSonix Agreement;

(ix) if Buyer complies with all of its obligations under this Section 6.13 with respect to indemnification claims and off-set rights under the LipoSonix Agreement, Seller agrees to indemnify Buyer for any Losses actually incurred or suffered as a result of any actions taken or not taken at the direction of Seller pursuant to this Section 6.13; it being understood that, to the extent Buyer’s failure to comply with its obligations under this Section 6.13 with respect to any indemnification claim under the LipoSonix Agreement results in Seller’s or Buyer’s inability to off-set all or a portion of any Losses against amounts under Section 3.11(h) or Article 9 of the LipoSonix Agreement that it would otherwise have been entitled to off-set had Buyer timely complied with all of its obligations hereunder and under the LipoSonix Agreement (the “Lost Offset Amount”), such Lost Offset Amount shall reduce dollar-for-dollar the amount of any Losses to which Seller is otherwise obligated to indemnify Buyer under Article 9 of this Agreement with respect to any indemnification claims thereunder;

(x) consistent with the foregoing provisions of this Section 6.13, for the avoidance of doubt, Buyer shall not be deemed to have suffered a Loss for purposes of Article 9 of this Agreement, to the extent that: (I) Buyer off-sets such Losses against Contingent Payments under Section 3.11(h) and Article 9 of the LipoSonix Agreement (including future Contingent Payments) or (II) Buyer was otherwise entitled to off-set such Losses against the Contingent Payments under Section 3.11(h) and Article 9 of the LipoSonix Agreement (including future Contingent Payments) but failed to timely and properly exercise such off-set rights; and

(xi) the Parties agree to provide each other with copies of all notices provided under Article 9 or Section 3.11(h) of the LipoSonix Agreement to any third Person with respect to any indemnification claims or effort to exercise off-set rights thereunder.

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(c) In the event that Buyer submits an indemnification claim under Article 9 of the LipoSonix Agreement, including on behalf of the “Surviving Corporation” (as such term is defined in the LipoSonix Agreement), Seller agrees to provide (or if requested by Buyer, join with Buyer in providing) such notices as reasonably requested by Buyer in order to preserve and effectuate the off-set rights set forth in the LipoSonix Agreement with respect thereto.

Section 6.14 Control of Business. Subject to the terms of this Agreement, Buyer acknowledges on behalf of itself and its Affiliates and its and their directors, officers, employees, Affiliates, agents, representatives, successors and assigns that the operation of the Company remain in the dominion and control of Seller, as applicable, until the Closing and that none of the foregoing Persons will provide, directly or indirectly, any directions, orders, advice, aid, assistance or information to any director, officer or employee of the Company, as applicable, except as specifically contemplated or permitted by this Article 6 or as otherwise consented to in advance by an executive officer of Seller, as applicable.

Section 6.15 Seller Marks. Notwithstanding anything in this Agreement to the contrary, Buyer acknowledges and agrees that Buyer does not possess and is not obtaining pursuant to this Agreement, any rights in, or to use (whether by license or otherwise), the name “Medicis” or any service marks, trademarks, trade names, identifying symbols, logos, emblems, signs, insignia or Internet domain names related thereto or containing or comprising any of the foregoing, including any transliterations thereof or any name or mark confusingly similar thereto (collectively, the “Seller Marks”). Buyer acknowledges and agrees that as between Buyer, on the one hand, and Seller and its Affiliates, on the other hand, all right, title and interest in and to the Seller Marks are owned exclusively by Seller and its Affiliates. Upon the Closing, Buyer shall (a) cease any and all use of all Seller Marks in any and all forms (whether used alone, in a stylized version or with other marks or designs), on any and all items and materials including, without limitation, any websites, Internet domain names, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, computer software and other business documents and materials (“Documents and Materials”); and (b) destroy, remove or replace all Seller Marks from all Documents and Materials of any type and regardless of form or format that are in the possession or control of Buyer.

Section 6.16 Audit and Preparation of Company Financial Statements. From and after the date hereof, Seller and Buyer shall cooperate in the negotiation of a letter agreement to be entered into by Seller and Buyer governing the terms and conditions of Seller’s cooperation with Buyer in connection with Buyer’s obligation (if any) to prepare and file a Current Report on Form 8-K containing the information required therein, including the audited and unaudited financial statements of the Company required by Rule 3-05 of Regulation S-X of the Securities and Exchange Commission (the “SEC”) together with the unqualified audit opinion of Ernst & Young LLP, Seller’s registered independent accounting firm, and the pro forma financial information with respect to the transactions contemplated by this Agreement to the extent required by Article 11 of Regulation S-X of the SEC.

Section 6.17 Buyer Financing. From and after the date hereof, Buyer shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange and obtain the proceeds of the revolving line of credit and term loan as described in the letter from Silicon Valley Bank dated

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September 7, 2011 and addressed to Buyer, including using its commercially reasonable efforts to: (i) enter into definitive agreements with respect thereto on the terms and conditions contained in the letter as promptly as practicable after the date hereof and (ii) satisfy on a timely basis all conditions applicable to Buyer that are within Buyer’s control in such definitive agreements.

Section 6.18 Transition Services Agreement. Prior to the Closing, the Parties shall use commercially reasonable efforts to negotiate and enter into a transition services agreement on terms reasonably acceptable to the Parties, pursuant to which Seller would provide certain temporary services to the Company after the Closing on a transitional basis in order to avoid interruption of the Company’s business.

Section 6.19 No Use of Corporate Name. On the Closing Date or the first Business Day after the Closing Date, Buyer shall cause the Company to change its name from “Medicis Technologies Corporation” to a name that does not contain the word “Medicis” or any transliterations thereof or any name confusingly similar thereto, and deliver evidence that Buyer has made the filing required pursuant to this sentence with the Secretary of State of the State of Delaware and that the filing has become effective as of the Closing Date or such first Business Day in accordance with the DGCL.

ARTICLE 7

CONDITIONS

Section 7.1 Conditions to Each Party’s Obligations. The respective obligations of each Party to consummate the Contemplated Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a) HSR Act; Foreign Competition Laws. Any applicable waiting period under the HSR Act relating to the Contemplated Transactions, if any, shall have expired or been terminated and any approvals required under applicable Foreign Competition Laws shall have been obtained.

(b) No Governmental Restriction, Etc. There shall not be in effect any Order asserted by any Governmental Authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the Contemplated Transactions; provided, that prior to asserting the failure of this condition the Party asserting its failure shall have used its reasonable best efforts to have such Order vacated.

Section 7.2 Additional Conditions to Obligations of Buyer. The obligations of Buyer to consummate the Contemplated Transactions shall also be subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a) Representations and Warranties. The representations and warranties of Seller contained in this Agreement (which shall, for purposes of this Section 7.2(a), be read without any qualification contained therein as to materiality, including the words “material” or “Material Adverse Effect”) shall be true and correct on the date hereof and on and as of the Closing, with the same effect as if made on and as of the Closing (other than such representations

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that are made as of a specified date, which shall be true and correct as of such date), except where failures of such representations and warranties to be so true and correct have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company; provided, however, that the representations and warranties of Seller contained in Sections 4.1, 4.2, 4.3(a) and 4.4 shall be true and correct in all material respects on the date hereof and on and as of the Closing, with the same effect as if made on and as of the Closing (other than such representations that are made as of a specified date, which shall be true and correct in all material respects as of such date). Buyer shall have received a certificate to such effect signed by an authorized officer of Seller.

(b) Agreements and Covenants. Seller shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing; and Buyer shall have received a certificate to such effect signed by an authorized officer of Seller.

(c) No Material Adverse Change. There shall not have occurred any fact, event, change, development, circumstance or effect which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company.

(d) Resignation of Directors and Officers. Seller shall have received letters of resignation, effective as of the Closing, from each of the directors and officers of the Company.

(e) FIRPTA. Seller shall have delivered to Buyer written certification of the non-foreign status of Seller within the meaning of, and in accordance with the provisions of, Treasury Regulations § 1.1445-2(h)(2).

(f) No Governmental Restriction, Etc. There shall not be any pending action, suit or proceeding asserted by any Governmental Authority (i) challenging or seeking to restrain or prohibit the consummation of the Contemplated Transactions or (ii) seeking to require Buyer to take any of the actions specified in clauses (A) through (D) of Section 6.4(d) that would be material to the business or financial condition of Buyer and its Subsidiaries, taken as a whole, or material to the business or financial condition of the Company.

Section 7.3 Additional Conditions to Obligations of Seller. The obligation of Seller to consummate the Contemplated Transactions by this Agreement shall also be subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a) Representations and Warranties. The representations and warranties of Buyer contained in this Agreement (which shall, for purposes of this Section 7.3(a), be read without any qualification contained therein as to materiality, including the words “material” or “Material Adverse Effect”) shall be true and correct on the date hereof and on and as of the Closing, with the same effect as if made on and as of the Closing (other than such representations that are made as of a specified date, which shall be true and correct as of such date), except where failures of such representations and warranties to be so true and correct have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Buyer. Seller shall have received a certificate to such effect signed by an authorized officer of Buyer.

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(b) Agreements and Covenants. Buyer shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing; and Seller shall have received a certificate to such effect signed by an authorized officer of Buyer.

ARTICLE 8

TERMINATION, AMENDMENT AND WAIVER

Section 8.1 Termination. This Agreement may be terminated and the Contemplated Transactions may be abandoned at any time prior to the Closing:

(a) By mutual written consent of the Parties;

(b) By either Buyer or Seller if the Closing shall not have occurred on or before January 11, 2012 (as the same may be extended pursuant to this Section 8.1(b), the “End Date”); provided, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any Party whose willful failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to have occurred on or before such date; and provided, further, that if the consummation of the Contemplated Transactions is subject to the notification requirement and waiting period under the HSR Act or any applicable Foreign Competition Laws and the expiration of the applicable waiting period under the HSR Act or any applicable Foreign Competition Laws has not been obtained by the End Date, the End Date shall be automatically extended, without further action of the Parties, until March 12, 2012; or

(c) By either Buyer or Seller, if a Court or Governmental Authority shall have issued an Order or taken any other action, in each case which has become final and non-appealable and which restrains, enjoins or otherwise prohibits the transactions contemplated herein; provided, that the issuance of such final, non-appealable Order shall not be attributable to the breach of this Agreement by the Party seeking termination pursuant to this Section 8.1(c);

(d) By Buyer, if Buyer is not in breach of its obligations under this Agreement, and if (i) at any time that any of the representations and warranties of Seller herein become untrue or inaccurate such that Section 7.2(a) would not be satisfied (treating such time as if it were the Closing for purposes of this Section 8.1(d)) or (ii) there has been a breach on the part of Seller of any of its covenants or agreements contained in this Agreement such that Section 7.2(b) would not be satisfied (treating such time as if it were the Closing for purposes of this Section 8.1(d)), and, in both case (i) and case (ii), such breach (if curable) has not been cured within thirty (30) days after notice to Seller by Buyer; provided, however, that no such cure period shall be required for a breach which by its nature cannot be cured; or

(e) By Seller, if it is not in breach of its obligations under this Agreement, and if (i) at any time that any of the representations and warranties of Buyer herein become untrue or inaccurate such that Section 7.3(a) would not be satisfied (treating such time as if it were the Closing for purposes of this Section 8.1(e)) or (ii) there has been a breach on the part of Buyer of any of their respective covenants or agreements contained in this Agreement such that Section 7.3(b) would not be satisfied (treating such time as if it were the Closing for purposes of

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this Section 8.1(e)), and, in both case (i) and case (ii), such breach (if curable) has not been cured within thirty (30) days after written notice to Buyer by Seller; provided, however, that no such cure period shall be required for a breach which by its nature cannot be cured.

Section 8.2 Effect of Termination.

(a) In the event of the termination of this Agreement pursuant to Section 8.1 (which termination will be effective immediately upon the delivery of written notice of the terminating Party to the other Parties hereto), this Agreement (other than this Section 8.2 (Effect of Termination) and Sections 6.3 (Access to Information; Confidentiality), 6.7 (Public Announcements) and 11.1 through 11.10 (Miscellaneous) and any related definitional provisions herein, which shall survive such termination) will forthwith become void and be of no further force and effect, and there will be no liability on the part of the Parties or any of their respective officers or directors to the other and all rights and obligations of any Party hereto will cease, except that nothing herein will relieve any Party from liability for any Intentional Breach by such Party, prior to termination of this Agreement in accordance with its terms, of any representation, warranty, covenant or agreement contained in this Agreement.

Section 8.3 Amendment. Any provision of this Agreement may be amended or waived prior to the Closing if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Seller and Buyer or in the case of a waiver, by the Party against whom the waiver is to be effective.

Section 8.4 Waiver. At any time prior to the Closing, Buyer, on the one hand, and Seller, on the other, may, to the extent permitted by Law, extend the time for the performance of any of the obligations or other acts required by the other Party hereunder, waive any inaccuracies in the representations and warranties made to such Party and contained herein or in any document delivered pursuant hereto and waive compliance with any of the agreements or conditions for the benefit of such Party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party or Parties to be bound thereby. For the avoidance of doubt, no such waiver granted pursuant to the foregoing shall limit an Indemnified Person’s right to indemnification under Article 9 with respect to the matter waived, except to the extent specified in such waiver.

ARTICLE 9

INDEMNIFICATION

Section 9.1 Survival; Time Limitation. All representations, warranties, covenants and obligations in this Agreement will survive the Closing and the consummation of the Contemplated Transactions, subject to the following:

(a) If the Closing occurs, Seller will have indemnification obligations under this Article 9, subject to Section 9.7, with respect to (i) any breach, untruth or inaccuracy of any representation or warranty of Seller contained in Article 4 of this Agreement (other than the representations and warranties in Sections 4.3, 4.4, 4.18 and 4.29 of this Agreement, as to which a Claim may be made at any time, and the representations and warranties in Section 4.14, as to

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which a Claim may be made until ninety (90) days after the expiration of the applicable statute of limitations) or (ii) any Claim for indemnification pursuant to Section 9.2(a)(ii) (except in respect of an Intentional Breach by Seller of the covenants or agreements described in such Section), Section 9.2(a)(vii) or Section 9.2(a)(viii), only if on or before the twelve (12) month anniversary of the Closing Date, Buyer notifies Seller as set forth in Sections 9.4 or 9.5, as applicable, of this Agreement.

(b) If the Closing occurs, Buyer will have indemnification obligations under this Article 9, subject to Section 9.7, with respect to any breach, untruth or inaccuracy of any representation or warranty of Buyer contained in Article 5 of this Agreement (other than the representations and warranties in Sections 5.2, 5.5 through 5.9 of this Agreement, as to which a Claim may be made at any time), only if on or before the twelve (12) month anniversary of the Closing Date, Seller notifies Buyer as set forth in Sections 9.4 or 9.5, as applicable, of this Agreement.

Section 9.2 Indemnification; Remedies.

(a) Subject to the limitations set forth in this Article 9, Buyer and its Affiliates (including, from and after the Closing, the Company) and each of their respective officers, directors, agents, representatives, employees, successors and permitted assigns (hereinafter referred to individually as a “Buyer Indemnified Person” and collectively as “Buyer Indemnified Persons”) shall be indemnified by Seller, as set forth in this Article 9, from and against any and all amounts payable, payments, losses, damages, claims, demands, actions or causes of action, liabilities, settlements, judgments, costs and expenses, including interest, penalties, fines and fees (including reasonable attorneys’ fees and costs of Claims) (collectively, “Losses”), arising out of or resulting from any of the following matters:

(i) the breach, untruth or inaccuracy of any representation or warranty of Seller contained in Article 4 of this Agreement or in any schedule, exhibit or certificate delivered by Seller pursuant hereto, determined in each case and for all purposes without regard to any materiality (including the word “material”), Material Adverse Effect or similar qualifier contained therein (other than Sections 4.6(a) and 4.8(a), for which breaches, untruths or inaccuracies shall be determined without disregarding any materiality (including the word “material”), Material Adverse Effect or similar qualifier contained therein);

(ii) the breach or nonperformance by Seller of any of its covenants or agreements contained in this Agreement to be performed prior to or at the Closing, determined in each case and for all purposes without regard to any materiality (including the word “material”), Material Adverse Effect or similar qualifier contained therein;

(iii) the breach or nonperformance by Seller of any of its covenants or agreements contained in this Agreement to be performed after the Closing, determined in each case and for all purposes without regard to any materiality (including the word “material”), Material Adverse Effect or similar qualifier contained therein;

(iv) the following Taxes and, except as otherwise provided in Section 10.3, any Losses incurred in contesting or otherwise in connection with any such Taxes: (A)

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Taxes imposed on the Company with respect to Tax periods ending on or before the Closing Date; (B) with respect to Tax periods beginning before the Closing Date and ending after the Closing Date, Taxes imposed on the Company which are allocable, pursuant to Section 10.1, to the portion of such period ending on the Closing Date; (C) Taxes of any Person attributable to any taxable period for which the Company (or any predecessor or subsidiary thereof) is held liable under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law) by reason of the Company (or any predecessor or subsidiary) being (or having been) included in any consolidated, affiliated, combined, aggregate or unitary group at any time before the Closing Date; (D) Taxes imposed on any Person other than the Company for which the Company is liable under an agreement entered into on or before the Closing Date; (E) any Taxes imposed in connection with the transactions contemplated by this Agreement (including by reason of the Company ceasing to be a member of any Affiliated Group); and (F) Taxes imposed on the Company, as a result of any breach of warranty or misrepresentation under Section 4.14; provided, that payments under this paragraph shall only be made to the extent that the amount exceeds any accrual or reserve for Taxes included in the calculation of Final Working Capital;

(v) the breach or nonperformance by Seller of its obligations set forth in the LipoSonix Agreement;

(vi) matters with respect to which and to the extent that Seller or its Affiliates are entitled to indemnification pursuant to Article 9 of the LipoSonix Agreement, only if and to the extent that (A) a Buyer Indemnified Person is not otherwise entitled to indemnification under the LipoSonix Agreement and (B) such Losses are off-set against Contingent Payments under Section 3.11(h) and Article 9 of the LipoSonix Agreement;

(vii) the breach, untruth or inaccuracy of any representation or warranty of Seller, or the breach or nonperformance by MAC, of any of its covenants or agreements, contained in the Asset Purchase Agreement;

(viii) any claim based upon breach of product warranty, strict liability in tort, negligent design or manufacture of product, or any other product liability claim (whether in tort, contract or otherwise), arising from the materials, design, testing, manufacture, packaging or labeling (including instructions for use) with respect to any Product sold or manufactured by the Company prior to Closing; and

(ix) any amounts payable to any director, officer, employee, agent, consultant or advisor of the Company as a result of announcement or the consummation of the transactions contemplated hereby, including change-in-control payments (whether triggered by the change-in-control alone or in combination with a later termination of employment), severance payments, retention or “stay” bonuses, special or closing bonuses or similar payments, in each case that the Company or Buyer is or will become contractually obligated to pay under any Contract with the Company or Seller.

(b) Subject to the limitations set forth in this Article 9, Seller and its Affiliates and each of their respective officers, directors, agents, representatives, employees, successors and permitted assigns (hereinafter referred to individually as a “Seller Indemnified Person” and collectively as “Seller Indemnified Persons”) shall be indemnified by Buyer, as set forth in this Article 9 from and against any and all Losses arising out of or resulting from any of the following matters:

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(i) the breach, untruth or inaccuracy of any representation or warranty of Buyer contained in Article 5 of this Agreement or in any schedule, exhibit or certificate delivered by Buyer pursuant hereto, determined in each case and for all purposes without regard to any materiality (including the word “material”), Material Adverse Effect or similar qualifier contained therein;

(ii) the breach or nonperformance by Buyer of any of its covenants or agreements contained in this Agreement, determined in each case and for all purposes without regard to any materiality (including the word “material”), Material Adverse Effect or similar qualifier contained therein; and

(iii) the breach or nonperformance by Buyer of the obligations set forth in the LipoSonix Agreement to make the Contingent Payments as set forth in the LipoSonix Agreement.

(c) Nothing in this Agreement shall limit the liability of any Party for any breach of any representation, warranty, covenant or agreement in this Agreement if this Agreement is terminated.

Section 9.3 Calculation of Losses; Indemnification Limitations.

(a) For the purposes of calculating the amount of Losses pursuant to Section 9.2(a)(i) and Section 9.2(b)(i), the representations and warranties in this Agreement shall be read without any materiality (including the word “material”), Material Adverse Effect or similar qualifiers.

(b) Subject to Section 9.7, the Buyer Indemnified Persons or the Seller Indemnified Persons (each, an “Indemnified Person”), as the case may be, shall not be entitled to indemnification pursuant to Sections 9.2(a)(i) (except in respect of the representations and warranties made under Sections 4.3, 4.4, 4.14, 4.18 and 4.29, as to which the limitation in this Section 9.3(b) shall not apply), 9.2(a)(ii) (except in respect of an Intentional Breach by Seller of the covenants or agreements described in such Section, as to which the limitation in this Section 9.3(b) shall not apply), 9.2(a)(iii) (except in respect of an Intentional Breach by Seller of the covenants or agreements described in such Section, as to which the limitation in this Section 9.3(b) shall not apply), 9.2(a)(vii), 9.2(a)(viii) and 9.2(b)(i) (except in respect of the representations and warranties made under Sections 5.2, 5.5 through 5.9, as to which the limitation in this Section 9.3(b) shall not apply) for any Losses until the aggregate amount of all Losses incurred by the Buyer Indemnified Persons or the Seller Indemnified Persons, as the case may be, exceeds *** (the “Threshold”), in which case the Indemnified Persons shall be entitled to indemnification for the full amount of Losses including the Threshold (i.e., back to dollar one); provided, however, that only individual Claims with a value in excess of *** shall be included in the Threshold or be counted for determining the amount of Losses to be indemnified to the Buyer Indemnified Persons or the Seller Indemnified Persons, as the case may be.

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(c) For the avoidance of doubt, the limitations in Section 9.3(b) shall not apply to any Claim for indemnification pursuant to Sections 9.2(a)(ii) and 9.2(a)(iii) in respect of an Intentional Breach by Seller of the covenants or agreements described in such Sections, Sections 9.2(a)(iv) through (vi), Section 9.2(a)(ix) and Sections 9.2(b)(ii) and 9.2(b)(iii).

(d) Notwithstanding anything in this Agreement to the contrary, subject to Section 9.7, the right of the Buyer Indemnified Persons to seek indemnification (i) pursuant to Section 9.2(a)(i) (except in respect of the representations and warranties made under Sections 4.3, 4.4, 4.14, 4.18 and 4.29), Section 9.2(a)(ii) (except in respect of an Intentional Breach by Seller of the covenants or agreements described in such Section), Section 9.2(a)(iii) (except in respect of an Intentional Breach by Seller of the covenants or agreements described in such Section), Section 9.2(a)(vii) and Section 9.2(a)(viii), shall be limited to and capped at an amount equal to the sum of (x) *** of the sum of the Purchase Price and the FDA Milestone Payment (to the extent actually paid by Buyer to Seller) and (y) *** of the Seller Contingent Payments, other than the FDA Milestone Payment, actually paid by Buyer to Seller hereunder and shall be satisfied exclusively by off-setting against the Seller Contingent Payments; and (ii) pursuant to (A) Section 9.2(a)(i) with respect to the representations and warranties made under Sections 4.3(a), 4.4, 4.18 and 4.29 and (B) Section 9.2(a)(v), shall be limited to and capped at an amount equal to *** of the sum of (x) the Purchase Price and (y) the Seller Contingent Payments actually paid by Buyer to Seller hereunder; provided, that, in the event that Buyer is entitled to indemnification pursuant to Articles 9, but its recovery is limited by clause (i) or (ii) of this sentence, Buyer shall be entitled to recover any unrecovered amount as to which Buyer is entitled to indemnification pursuant to Article 9 from future Contingent Payments, subject to limitations set forth in clauses (i) and (ii) of this sentence.

(e) Subject to Section 9.7, any Claim required to be made by Seller or Buyer, as the case may be, on or prior to the expiration of the applicable survival period set forth in Section 9.1, and not made, shall be irrevocably and unconditionally released and waived by such party.

(f) The amount of any Losses for which indemnification is provided under this Article 9 shall be net of any amounts actually recovered or recoverable by the Indemnified Party under insurance policies or otherwise with respect to such Losses and, to the extent applicable, shall be subject to the obligations and limitations set forth in Section 6.13. The Indemnified Party shall use commercially reasonable efforts to obtain full recovery under all insurance policies covering any Losses to the same extent as it would if such Losses were not subject to indemnification hereunder. In the event that an insurance or other recovery is made by any party with respect to any Losses for which any such person has been indemnified hereunder and has received funds in the amount of the Losses or portion thereof (including under the off-set provisions of the LipoSonix Agreement), then a refund equal to the aggregate amount of the recovery shall be made promptly to the Indemnifying Party.

Section 9.4 Notice of Claims. In the event any Indemnified Person wishes to pursue its, his or her rights to indemnification under this Article 9, if the matter does not involve a Third Party Claim under Section 9.5 hereof, the Indemnified Person shall give written notice thereof to the Indemnifying Party stating that an indemnification Claim or Claims pursuant to Section 9.2 or any other provision of this Agreement is being made, describing the basis for such Claim with

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reasonable specificity and specifying in reasonable detail the Losses in respect of such Claim (provided that the Indemnified Person shall not be bound by any estimate of Losses made in good faith and contained in such description). Within thirty (30) days from the receipt of such notice, the Indemnifying Party shall provide a written notice to such Indemnified Person indicating whether the Indemnifying Party objects to such Claim. If no such objection notice is received by such Indemnified Person within such thirty (30) day period, the Indemnifying Party waives any objection to such Indemnified Person being indemnified for such Claim pursuant to this Agreement under this Article 9. If such notice of objection is provided within such period, the Indemnifying Party and the Indemnified Person or its, his or her representative(s) shall then attempt in good faith for thirty (30) days to agree upon the rights of the respective parties with respect to each of such Claims. If no such resolution can be reached after good faith negotiation, such Indemnified Person or the Indemnifying Party may institute proceedings in a court of competent jurisdiction (in accordance with Section 11.8) to resolve any such dispute, and each such Indemnified Person and the Indemnifying Party, subject to Section 6.13, shall seek to resolve such dispute in as expeditious a manner as practicable. In the case of any such proceeding, the Indemnified Person and the Indemnifying Party shall each be responsible for the payment of its own fees and expenses.

Section 9.5 Third Party Claims.

(a) In the event that an Indemnified Person is made a defendant in or party to any Claim instituted by any third party, the liability or the costs or expenses of which are Losses indemnifiable pursuant to this Article 9 (any such third party Claim being referred to as a “Third Party Claim”), such Indemnified Party shall give the party from whom indemnification hereunder is sought (the “Indemnifying Party”) prompt written notice thereof specifying in reasonable detail the Losses with respect to such Third Party Claim (including a good faith estimate of such Losses, if reasonably available); provided, however, that the delay or failure to give such notice shall only relieve the Indemnifying Party of its indemnification obligations under this Article 9 to the extent, if at all, that the Indemnifying Party is materially prejudiced by reasons of such delay or failure; and provided further, that such written notice must in all events be provided on or before the expiration of the applicable survival period set forth in Section 9.1. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, promptly following the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim, other than privileged documents and those notices and documents separately addressed to the Indemnifying Party.

(b) The Indemnifying Party will have the right to assume the defense, at its own expense and by counsel reasonably acceptable to the Indemnified Party, of the Indemnified Party against any Third Party Claim so long as (i) the Indemnifying Party gives written notice to the Indemnified Party within thirty (30) days after it first receives notice of such Third Party Claim pursuant to Section 9.5(a) that it will defend the Indemnified Party against the Third Party Claim, (ii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief against the Indemnified Party, (iii) the Indemnified Party has not been advised by counsel that a conflict is likely to exist if the same counsel were to represent the Indemnified Party and the Indemnifying Party in connection with conducting the defense of the Third Party Claim, (iv) the Third Party Claim does not relate to or otherwise arise in connection any criminal or regulatory enforcement action, (v) the Third Party Claim does not relate to the

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payment or non-payment of Taxes and (vi) the Indemnifying Party conducts the defense of the Third Party Claim diligently. If the Indemnifying Party does not, within fifteen (15) days of it first receiving notice of a Third Party Claim pursuant to Section 9.5(a), elect to assume the defense of such Third Party Claim, or if the Indemnified Party assumes such defense and, thereafter, any of the conditions in subclauses (i) through (vi) above of this Section 9.5(b) exist, the applicable Indemnified Party may assume the defense of, defend against, negotiate, settle or otherwise deal with such Third Party Claim, at the Indemnifying Party’s expense. If the applicable Indemnified Party defends any Third Party Claim pursuant to the preceding sentence or pursuant to subclauses (i) through (vi) above of this Section 9.5(b), then the Indemnifying Party shall reimburse the applicable Indemnified Party for the reasonable costs and expenses of defending such Third Party Claim upon submission of periodic bills, and the Indemnifying Party shall cooperate in the defense of such Third Party Claim. If the Indemnifying Party assumes the defense of any Third Party Claim pursuant to and in accordance with this Section 9.5(b), the Indemnifying Party shall keep the Indemnified Parties apprised of the status of such Third Party Claim and any significant developments with respect thereto and the applicable Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim.

(c) If the Indemnifying Party assumes the defense of a Third Party Claim pursuant to and in accordance with Section 9.5(b), the Indemnified Parties shall cooperate in the defense or prosecution thereof and the Indemnified Parties shall agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend if such settlement, compromise or discharge (i) does not require any payment or other action by, or limitation (including injunctive or any other equitable relief) on, any Indemnified Party and (ii) fully releases such Indemnified Parties in connection with such Third Party Claim. In no event shall the Indemnifying Party admit any liability with respect to such Third Party Claim or settle, compromise, pay or discharge such Third Party Claim without the prior written consent of the Indemnified Parties.

(d) Notwithstanding the foregoing provisions of Sections 9.5(b) and (c), the provisions of Section 6.13(b)(viii) shall apply in lieu of the provisions of Sections 9.5(b) and (c) to the extent the same Third Party Claim covered under this Section 9.5(b) is also the basis for an indemnification claim by a Medicis Indemnitee under the LipoSonix Agreement, as contemplated in Section 6.13.

Section 9.6 Other Matters. Notwithstanding anything in this Agreement, any amounts payable pursuant to the indemnification obligations under this Article 9 shall be paid without duplication and in no event shall any Party hereto be indemnified under different provisions of this Agreement for the same Losses. Without limiting the generality of the foregoing, Buyer shall make no claim for indemnification under this Article 9 in respect of any matter that is taken into account in the calculation of any adjustment to the Purchase Price pursuant to Section 2.4 or for which Buyer was entitled to offset against Contingent Payments pursuant to Section 3.11(h) and Article 9 of the LipoSonix Agreement.

Section 9.7 Exclusive Remedies. Notwithstanding anything to the contrary herein, the Parties hereby agree that, except for Claims based on fraud, from and after the Closing, the exclusive remedy for any breach of a representation or warranty, covenant or agreement

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contained in this Agreement shall be the indemnification provisions set forth in this Article 9; provided, however, that nothing in this Article 9 shall prohibit any Party from seeking specific performance or injunctive relief against any other Party in respect of a breach by such other Party of any covenant hereunder.

Section 9.8 No Special, Punitive or Consequential Damages. Notwithstanding anything to the contrary in this Agreement, except in the case of fraud, no Party shall be liable to or otherwise responsible for special, punitive or consequential damages, other than: (i) special, punitive or consequential damages awarded to a third party pursuant to a Third Party Claim; and (ii) consequential damages awarded to a Party pursuant to a Claim for indemnification under this Article 9 pursuant to Section 9.2(a)(i) (other than with respect of the representations and warranties made under Sections 4.3, 4.14, 4.18 and 4.29) or pursuant to Section 9.2(b)(i).

ARTICLE 10

TAX

Section 10.1 Tax Allocation. In the case of Taxes that are payable with respect to a taxable period that begins before the Closing Date and ends after the Closing Date, the portion of any such Tax that is allocable to the portion of the period ending on the Closing Date shall be:

(a) in the case of Taxes that are either (x) based upon or related to income, receipts, payroll or other compensation for services or (y) imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible) (other than conveyances pursuant to this Agreement), deemed equal to the amount which would be payable if the taxable year ended with the Closing Date (except that, solely for purposes of determining the marginal tax rate applicable to income or receipts during such period in a jurisdiction in which such tax rate depends upon the level of income or receipts, annualized income or receipts may be taken into account if appropriate for an equitable sharing of such Taxes); and

(b) in the case of Taxes not described in Section 10.1(a) that are imposed on a periodic basis and measured by the level of any item, deemed to be the amount of such Taxes for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period) multiplied by a fraction the numerator of which is the number of calendar days in the period ending on the Closing Date and the denominator of which is the number of calendar days in the entire period.

Section 10.2 Returns and Payments.

(a) Seller shall prepare and file in a timely manner all Tax Returns relating to the Company that are due on or before the Closing Date and all income Tax Returns for Tax years of the Company ended on or before the Closing Date regardless of whether such income Tax Returns are filed before or after the Closing Date. Seller shall pay in a timely manner all Taxes that are due with respect to such Tax Returns. Such Tax Returns shall be prepared, and each item thereon treated, in a manner consistent with past practices employed with respect to the Company and shall utilize accounting methods, elections and conventions that do not have the effect of distorting the allocation of income or expense between the Tax periods covered by

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such Tax Returns and subsequent Tax periods. Buyer shall have the right to review such Tax Returns insofar as they pertain to the Company for fifteen (15) days prior to the filing of such Tax Returns, and Seller agrees to discuss with Buyer in good faith the items reflected on such Tax Return and any adjustments reasonably requested by Buyer.

(b) Except as otherwise provided in Section 10.2(a), Buyer shall prepare and file or cause to be prepared and filed in a timely manner all Tax Returns relating to the Company with respect to Tax periods beginning before the Closing Date (“Pre-Closing Date Tax Returns”), as well as all Tax Returns relating to the Company with respect to Tax periods beginning on or after the Closing Date. Pre-Closing Date Tax Returns shall be prepared, and each item thereon treated, in a manner consistent with past practices employed with respect to the Company (except to the extent counsel for Buyer determines there is no reasonable basis in Law therefor or determines that a Tax Return cannot be so prepared and filed or an item so reported without being subject to penalties) and shall utilize accounting methods, elections and conventions that do not have the effect of distorting the allocation of income or expense between the Tax periods covered by such Tax Returns and subsequent Tax periods. With respect to any Pre-Closing Date Tax Return, Seller shall have the right to review such Tax Return for fifteen (15) days prior to the filing of such Tax Return, and Buyer shall discuss in good faith the items reflected on such Tax Return and any adjustments reasonably requested by Seller. At the same time that Buyer provides to Seller as copy of a Pre-Closing Date Tax Return for Seller’s review, Buyer shall also provide to Seller a written schedule of allocation calculations (if applicable) pursuant to Section 10.1. If the Parties are unable in good faith to agree on such allocation, the dispute shall be submitted to a Qualified Accountant for its determination, which shall be binding upon the Parties (and the Parties shall bear equally the costs of such determination). Buyer shall timely pay any Taxes due with respect to a Pre-Closing Date Tax Return and Seller shall promptly reimburse Buyer for Taxes allocable (pursuant to Section 10.1) to the portion of the Taxable period occurring on or before the Closing Date, except to the extent the Taxes allocable to the period on or before the Closing Date have been paid previously by Seller or reflected in the determination of Final Working Capital.

Section 10.3 Contests.

(a) After the Closing Date, Buyer shall promptly notify Seller in writing of any written notice of a proposed adjustment or claim in an audit or administrative or judicial proceeding involving Buyer or the Company which, if determined adversely to the taxpayer, would be grounds for indemnification under Article 9; provided, however, that a failure to give such notice will not affect Buyer’s right to indemnification thereunder except to the extent, if any, that, but for such failure, Seller could have avoided the Tax liability in question.

(b) In the case of an audit or administrative or judicial proceeding that relates solely to taxable periods ending on or before the Closing Date, Seller shall have the right at Seller’s expense to participate in and control the conduct of such audit or proceeding. Seller shall keep Buyer informed of the progress of any such audit or proceeding, and Buyer also may participate in any such audit or proceeding at its expense. Seller shall not settle any proceeding without the consent of Buyer, which consent shall not be unreasonably withheld, if the settlement would adversely affect the Company. If Seller does not assume the defense of any such audit or proceeding, Buyer may defend the same in such manner as it may deem appropriate at its expense, including, but not limited to, settling such audit or proceeding.

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(c) With respect to any other audit or proceeding not controlled by Seller, such audit or proceeding shall be controlled by Buyer; provided, that Buyer shall keep Seller apprised of the status of such audit or proceeding and Seller shall have the right to participate at its own expense in such audit or proceeding.

Section 10.4 Cooperation and Exchange of Information. Seller and Buyer will each provide the other with such cooperation and information as any of them reasonably may request of the other in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes, participating in or conducting any audit or other proceeding in respect of Taxes or making representations to or furnishing information to parties subsequently desiring to purchase either of the Company or a part of the business acquired from the Company by Buyer. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by Tax authorities. Seller and Buyer shall (and Buyer after the Closing Date will cause the Company and its Subsidiaries, if any, to) retain all Tax Returns, schedules and work papers, records and other documents in their possession relating to Tax matters of the Company and its Subsidiaries, if any, for the taxable period first ending after the Closing Date and for all prior taxable periods until the later of (i) the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, or (ii) six (6) years following the due date (without extension) for such Tax Returns. Any information obtained under this Section 10.4 shall be kept confidential except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting an audit or other proceeding.

Section 10.5 Characterization of Payments. Buyer and Seller agree to treat all payments made by any of them to or for the benefit of the others (including any payments to the Company) under the indemnity provisions of this Agreement and for any misrepresentations or breach of warranties or covenants as adjustments to the purchase price for Tax purposes and that such treatment shall govern for purposes hereof except to the extent that the Laws of a particular jurisdiction provide otherwise, in which case such payments shall be made in an amount sufficient to indemnify the relevant party on an after-Tax basis.

Section 10.6 Transfer Taxes. All transfer, documentary, sales, use, registration and any other such Taxes and related fees (including any penalties, interest and additions to Tax) (“Transfer Taxes”) arising out of or incurred in connection with this Agreement shall be borne equally by Seller and Buyer. The Party that is legally required to file a Tax Return relating to Transfer Taxes shall be responsible for preparing and timely filing such Tax Return.

ARTICLE 11

MISCELLANEOUS

Section 11.1 Fees and Expenses. Except as specifically provided to the contrary in this Agreement, all costs and expenses incurred in connection with this Agreement and the

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Contemplated Transactions shall be paid by the Party incurring such expenses, whether or not the transactions contemplated hereby are consummated; provided, however, that Buyer and Seller shall share equally all out-of-pocket fees and expenses (including fees and expenses of counsel) payable in connection with regulatory filings, including under the HSR Act and any applicable Foreign Competition Laws.

Section 11.2 Notices. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally or sent by nationally recognized overnight courier or by registered or certified mail, postage prepaid, return receipt requested, or by facsimile or telecopier, as follows:

(a) If to Buyer, to:

Solta Medical, Inc.

25881 Industrial Boulevard

Hayward, CA 94545

Attention: Stephen J. Fanning

Telecopy: (510) 786-6880

with a copy (which shall not constitute notice) to:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

One Market, Spear Tower, Suite 3300

San Francisco, CA 94105

Attention: Robert T. Ishii

Telecopy: (415) 947-2099

(b) If to Seller, to:

Medicis Pharmaceutical Corporation

7720 North Dobson Road

Scottsdale, AZ 85256

Attention: Mark A. Prygocki and Seth L. Rodner

Telecopy: (480) 291-8806

with a copy (which shall not constitute notice) to:

Hogan Lovells US LLP

Columbia Square

555 Thirteenth Street, N.W.

Washington, DC 20004-1109

Attention: Joseph E. Gilligan

Telecopy: (202) 637-5910

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. All such notices or communications shall be

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deemed to be received (i) in the case of personal delivery, nationally recognized overnight courier or registered or certified mail, on the date of such delivery, and (ii) in the case of facsimile or telecopier or electronic mail, upon receipt of the appropriate facsimile or telecopier confirmation. Communications by electronic mail shall not constitute notice.

Section 11.3 Severability. If any term or other provision of this Agreement, or the application thereof, is invalid, illegal, void or incapable of being enforced by any rule of Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect and the application of such term or provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the Parties hereto. Any provision of this Agreement held invalid, illegal, void or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid, illegal, void or unenforceable.

Section 11.4 Entire Agreement. This Agreement (including all exhibits, annexes and schedules hereto and thereto) and other documents and instruments delivered pursuant hereto or thereto constitute the entire agreement and supersede all prior representations, agreements, understandings and undertakings (other than the Confidentiality Agreement), both written and oral, among the Parties, or any of them, with respect to the subject matter hereof and thereof and no Party is relying on any prior oral or written representations, agreements, understandings or undertakings (other than the Confidentiality Agreement) with respect to the subject matter hereof and thereof.

Section 11.5 Assignment. This Agreement shall not be assigned by operation of Law or otherwise without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.

Section 11.6 Parties in Interest. Subject to Section 11.5 hereof, this Agreement shall be binding upon and inure solely to the benefit of each Party and each of their respective permitted successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person, other than the Indemnified Persons who shall be third party beneficiaries hereof, to the extent set forth in Article 9, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 11.7 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of any Party in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 11.8 Governing Law; Jurisdiction. This Agreement and all disputes controversies or claims relating to, arising out of or under, or in connection with this Agreement and the Contemplated Transactions, including the negotiation, execution and performance hereunder and thereunder, shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of choice of law or conflicts of law rules or provisions (whether of the State of

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Delaware or any other jurisdiction). Each of the Parties hereto irrevocably and unconditionally (a) consents to submit itself to the sole and exclusive personal jurisdiction of the state courts of the State of Delaware or any court of the United States located in the State of Delaware in connection with any dispute, claim, or controversy arising out of or relating to this Agreement or the Contemplated Transactions, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it shall not bring any action, suit, or proceeding in connection with any dispute, claim, or controversy arising out of or relating to this Agreement or the Contemplated Transactions in any court or tribunal other than the state courts of the State of Delaware or any court of the United States located in the State of Delaware. Each of the Parties hereto further agrees and covenants that if subject matter jurisdiction over any action, suit, or proceeding in connection with any dispute, claim, or controversy arising out of or relating to this Agreement or the Contemplated Transactions exists in the Court of Chancery of the State of Delaware by reason of Section 111 of the DGCL or if there otherwise exists a good faith basis for concluding that the Court of Chancery of the State of Delaware would have subject matter jurisdiction in connection with any such action, suit, or proceeding, then any such action, suit, or proceeding shall be brought exclusively in the Court of Chancery of the State of Delaware, and each Party agrees that it shall not attempt to deny or defeat subject matter jurisdiction over such action, suit, or proceeding in the Court of Chancery of the State of Delaware. Each of the Parties hereto irrevocably and unconditionally consents to service being made through the notice procedures set forth in Section 11.2. Each of the Parties hereto hereby agrees that service of any process, summons, notice or document by prepaid certified or registered mail to the respective addresses set forth in Section 11.2 shall be effective service of process for any action, suit, or proceeding in connection with any dispute, claim, or controversy arising out of or relating to this Agreement and any of the Contemplated Transactions. Nothing herein shall be deemed to limit or prohibit service of process by any other manner as may be permitted by applicable law. Each of the Parties hereto hereby agrees that this Agreement involves at least $100,000 and that this Agreement has been entered into in express reliance on 6 Del. C. § 2708.

Section 11.9 Waiver of July Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE CONTEMPLATED TRANSACTIONS OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE CONTEMPLATED TRANSACTIONS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.9.

Section 11.10 Enforcement of Agreement; Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is

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accordingly agreed that the Parties shall be entitled to an injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the state courts of the State of Delaware or any court of the United States located in the State of Delaware, this being in addition to any other remedy to which such Party is entitled at law or in equity.

Section 11.11 Counterparts. This Agreement may be executed and delivered in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. The exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile or by electronic delivery in portable document format (PDF) format shall be sufficient to bind the parties to the terms and conditions of this Agreement.

Section 11.12 Due Diligence Materials; Seller Disclosure Schedule.

(a) For purposes of this Agreement, the phrase “provided to Buyer” shall mean the posting by Seller of the various materials, documents and information produced by Seller throughout Buyer’s due diligence review process to a virtual data room managed by Seller or otherwise delivered to Buyer or any of its representatives, up until 5:00 p.m. (Pacific Daylight Time) on Monday, September 12, 2011.

(b) The Seller Disclosure Schedules include descriptions of certain Contracts which may not meet the threshold requirements for disclosure that are set forth in this Agreement. The inclusion of such Contracts does not mean that all Contracts to which Company is a party are included in the Schedules or that such Contracts are deemed to be material. Similarly, the Seller Disclosure Schedules may include certain information that does not meet the minimum standards of materiality requiring disclosure thereunder. The inclusion of such information does not mean that all information contained therein is deemed to be material.

[The remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, Seller and Buyer have executed and delivered this Stock Purchase Agreement or caused this Stock Purchase Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

BUYER:
SOLTA MEDICAL, INC.
By:	/s/ Stephen J. Fanning

Name:	Stephen J. Fanning
Title:	Chairman, President and Chief Executive Officer

SELLER:

MEDICIS PHARMACEUTICAL CORPORATION

By: /s/ Mark A. Prygocki

Name:	Mark A. Prygocki
Title:

ANNEX I

DEFINITIONS

“Accountant” has the meaning set forth in Section 2.7(f).

“Action” has the meaning set forth in Section 4.21(h)(i).

“Acquisition Proposal” has the meaning set forth in Section 6.2(a).

“Acquiring Person” has the meaning set forth in Section 2.8.

“***” has the meaning set forth in Section ***.

“Additional LipoSonix Contingent Payment” has the meaning set forth in Section 2.6(a)(i).

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person.

“Affiliated Group” has the meaning set forth in Section 4.14(c).

“Agreed Contingent Payment Amount” has the meaning set forth in Section 2.7(e).

“Agreement” has the meaning set forth in the Preamble.

“Applicable Non-U.S. Laws and Regulations” has the meaning set forth in Section 4.22(b)(i).

“Appraiser” has the meaning set forth in Section 2.7(f).

“Approvals” has the meaning set forth in Section 4.1(a).

“Asset Purchase Agreement” has the meaning set forth in the Recitals.

“Base Purchase Price” has the meaning set forth in Section 2.2.

“Business Day” means any day other than a Saturday, Sunday or day on which banks are permitted to close in the State of New York or the State of Arizona.

“Buyer” has the meaning set forth in the Preamble.

“Buyer Group” means Buyer and its direct and indirect Subsidiaries and Affiliates, including, after the Closing, the Company.

“Buyer Indemnified Person(s)” has the meaning set forth in Section 9.2(a).

“Buyer Representatives” has the meaning set forth in Section 6.3(a).

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“Bylaws” means the Bylaws of the Company.

“***” has the meaning set forth in Section ***.

“Charter” means the Certificate of Incorporation of the Company.

“Claim” means any claim, suit, action, arbitration, cause of action, complaint, allegation, criminal prosecution, investigation, demand letter, or proceeding, whether at law or at equity, before or by any Court, Governmental Authority, arbitrator, other tribunal, or any other Person, and any information request from a Governmental Authority.

“Closing” has the meaning set forth in Section 3.1.

“Closing Date” has the meaning set forth in Section 3.1.

“COBRA Coverage” has the meaning set forth in Section 4.11(e).

“Code” means the U.S. Internal Revenue Code of 1986, as amended, from time to time, and the Regulations promulgated and rulings issued thereunder.

“Commercially Reasonable Efforts” has the meaning set forth in Section 2.6(g)(ii).

“Common Stock” means the Common Stock, par value $0.01, of the Company.

“Company” has the meaning set forth in the Recitals.

“Company Incremental Amount” has the meaning set forth in Section 2.6(a)(ii).

“Confidential Information” means any information (in whatever form, whether written, oral, electronic or otherwise) concerning the businesses and affairs of a Disclosing Party and all analyses, compilations, forecasts, studies or other documents which contain or reflect any such information; provided, however, that the term “Confidential Information” shall not include (a) information that is or becomes publicly available other than as a direct or indirect result of disclosure by a Receiving Party or its Representatives or (b) information that becomes available to the Receiving Party on a nonconfidential basis from a source (other than such Disclosing Party or its Representatives) that, to the Knowledge of such Receiving Party, is not prohibited from disclosing such information to such Receiving Party by any legal, contractual or fiduciary obligation to such Disclosing Party.

“Confidentiality Agreement” has the meaning set forth in Section 6.3(b).

“Contemplated Transactions” means all of the transactions and other matters contemplated by this Agreement.

“Contingent Payments” has the meaning set forth in Section 3.9(b) of the LipoSonix Agreement.

“Contingent Payment Audit” has the meaning set forth in Section 2.7(c).

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“Contingent Payment Certificate” has the meaning set forth in Section 2.7(b)(ii).

“Contingent Payment Commencement Date” has the meaning set forth in Section 2.6(a)(iii).

“Contingent Payment Product” has the meaning set forth in Section 2.6(a)(iv).

“Contingent Payment Termination Date” has the meaning set forth in Section 2.6(a)(v).

“Contingent Payment Year” has the meaning set forth in Section 2.6(a)(vi).

“Contract” means any contract, plan, undertaking, understanding, agreement, license, sublicense, consent, lease, note, mortgage or other binding commitment, whether written or oral.

“Control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of stock or other equity or similar interests, as trustee or executor, by Contract or credit arrangement or otherwise.

“Court” means any court or arbitration tribunal of the United States, any domestic state, or any foreign country, and any political subdivision or agency thereof.

“Credit Agreement” means that certain Loan and Security Agreement between Silicon Valley Bank and Buyer entered into as of March 9, 2009, as amended.

“DGCL” means the General Corporation Law of the State of Delaware.

“Disclosing Party” means a Party that discloses Confidential Information to a Receiving Party or to any Representative of such Receiving Party.

“Dispute Notice” has the meaning set forth in Section 2.7(d).

“Dispute Period” has the meaning set forth in Section 2.7(d).

“Disputed Contingent Payment Amount” has the meaning set forth in Section 2.7(e).

“Documents and Materials” has the meaning set forth in Section 6.13.

“EAR” has the meaning set forth in Section 4.25(a).

“Employees” has the meaning set forth in Section 6.5(a).

“Employee Plans” has the meaning set forth in Section 4.11(a).

“End Date” has the meaning set forth in Section 8.1(b).

“Environmental Claims” means all Claims pursuant to Environmental Laws, including but not limited to, those based on, arising out of or otherwise relating to: (i) the Remediation, presence or Release of, or exposure to, Hazardous Materials or other environmental conditions

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initiated, existing or occurring prior to the Closing Date at, on, under, above, from, or about any Real Property or any other real property currently or formerly owned, leased or operated by the Company or any of its predecessors or Affiliates; (ii) the off-site Release, treatment, transportation, storage or disposal prior to the Closing Date of Hazardous Materials originating from the Real Property or any other real property currently or formerly owned, leased or operated by the Company or any of its predecessors or Affiliates; (iii) any violations of Environmental Laws by the Company or any of its predecessors or Affiliates prior to the Closing Date, including reasonable expenditures necessary to cause the Company to be in compliance with or resolve violations of Environmental Laws.

“Environmental Laws” means any and all Laws, Orders, codes, or other legally enforceable requirement (including, without limitation, common law) of the United States, or any state, local, municipal or other U.S. Governmental Authority, regulating, relating to or imposing liability or standards of conduct concerning Hazardous Materials, or the protection of the environment, human health, employee health and safety, or natural resources, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601 et seq.

“Environmental Permits” means any and all permits, licenses, registrations, notifications, exemptions and any other Approvals under any Environmental Laws.

“ERISA” has the meaning set forth in Section 4.11(a).

“ERISA Affiliate” has the meaning set forth in Section 4.11(a).

“Estimated Working Capital” has the meaning set forth in Section 2.4(a).

“Estimated Working Capital Schedule” has the meaning set forth in Section 2.4(a).

“EU” has the meaning set forth in Section 4.22(b)(i).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FD&C Act” has the meaning set forth in Section 4.22(a)(i).

“FD&C Permits” has the meaning set forth in Section 4.22(a)(x).

“FDA” has the meaning set forth in Section 4.22(a)(i).

“FDA Law and Regulation” has the meaning set forth in Section 4.22(a)(i).

“FDA Milestone” has the meaning set forth in Section 2.6(a)(vii).

“FDA Milestone Payment” has the meaning set forth in Section 2.6(c).

“FDA Milestone Payment Amount” has the meaning set forth in Section 2.6(a)(viii).

“Federal Health Care Program” has the meaning set forth in 42 U.S.C. § 1320a-7b(f).

I-4

“Final Working Capital” has the meaning set forth in Section 2.4(b).

“Final Working Capital Schedule” has the meaning set forth in Section 2.4(b).

“Foreign Competition Laws” means any non-U.S. Laws and Orders that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, lessening of competition or restraint of trade.

“GAAP” means generally accepted accounting principles in the United States.

“GLBA” has the meaning set forth in Section 4.21(f).

“Governmental Authority” means any governmental agency or authority of the United States, any domestic state, or any foreign country, and any political subdivision or agency thereof, and includes any authority having governmental or quasi-governmental powers, including any administrative agency or commission.

“Gross Profit Payment Product” has the meaning set forth in Section 2.6(a)(ix).

“Hazardous Materials” means any wastes, substances, radiation, or materials (whether solids, liquids or gases): (i) which are hazardous, toxic, infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are or become defined as “pollutants,” “contaminants,” “hazardous materials,” “hazardous wastes,” “hazardous substances,” “chemical substances,” “radioactive materials,” “solid wastes,” or other similar designations in, or otherwise subject to regulation under, any Environmental Laws; (iii) the presence of which on the Real Property cause or threaten to cause a nuisance pursuant to applicable statutory or common law upon the Real Property or to adjacent properties; (iv) which contain without limitation polychlorinated biphenyls (“PCBs”), mold, methyl-tertiary butyl ether (“MTBE”), asbestos or asbestos-containing materials, lead-based paints, toxic mold, urea-formaldehyde foam insulation, or petroleum or petroleum products (including, without limitation, crude oil or any fraction thereof); or (v) which pose a hazard to human health, safety, natural resources, employees, or the environment.

“HIPAA” has the meaning set forth in Section 4.21(e).

“HITECH” means the Health Information Technology for Economic and Clinical Health Act provisions of the American Recovery and Reinvestment Act of 2009, Pub. Law No. 111-5 and its implementing regulations for which compliance is required as of the date of this Agreement.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Indebtedness” means (i) all indebtedness (whether or not contingent) for borrowed money, (ii) all obligations (contingent or otherwise) for the deferred purchase price of assets, property or services (other than current trade payables incurred in the ordinary course of business), (iii) all obligations evidenced by notes, bonds, debentures or other similar instruments, (iv) all indebtedness created or arising under any conditional sale or other title retention

I-5

agreement with respect to property, (v) all obligations under capital leases, (vi) all obligations, contingent or otherwise, as an account party under acceptance, letter of credit or similar facilities, (vii) all obligations under any currency, interest rate or other hedge agreement or any other hedging arrangement, (viii) all direct or indirect guarantee, support or keep well obligations in respect of obligations of the kind referred to in clauses (i) through (vii) above, and (ix) all obligations of the kind referred to in clauses (i) through (viii) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and Contract rights) owned by the Company, whether or not the Company has assumed or become liable for the payment of such obligation; provided, however, that the Contingent Payments under the LipoSonix Agreement shall not be deemed an Indebtedness of the Company or Seller.

“Indemnified Person” has the meaning set forth in Section 9.3(b).

“Indemnifying Party” has the meaning set forth in Section 9.5(a).

“Intellectual Property” means all patents (utility models and inventor’s certificates), provisional and non-provisional patent applications, trademarks, trade names, service marks, trade dress, copyrights and any applications therefor, domain names, schematics, technology, know-how, Trade Secrets, Confidential Information, customer lists, technical information, technical data, process technology, plans, drawings and blue prints, inventions, algorithms, devices, systems, processes, computer software programs and applications (source code or object code form), and tangible or intangible proprietary information.

“Intentional Breach” means a material breach that is a consequence of an act knowingly undertaken by the breaching party with the intent of causing a breach of this Agreement.

“Interest Rate” means the U.S. Prime Rate as published in the Wall Street Journal from time to time plus one and a half percent (1.5%), on the date that funds were initially set-off by Buyer pursuant to Section 2.7(h).

“IRS” has the meaning set forth in Section 4.11(a).

“JSC” has the meaning set forth in Section 2.6(h)(ii).

“Knowledge” means (i) in the case of Seller, the actual knowledge of a particular fact or other matter of Jens Quistgaard, Michael Hoffman, Nancy McKinley, Michael Fritts, Charles Desilets, Keith Sullivan and Blake Little; (ii) in the case of Buyer, the actual knowledge of a particular fact or other matter of any individual who is serving as an executive officer of Buyer as of the date hereof; and (iii) in each case, after the reasonable inquiry of the aforementioned persons.

“Law” means all laws, statutes, ordinances, directives, Regulations and similar mandates of any Governmental Authority, including all Orders of Courts having the effect of law in each such jurisdiction.

“Lien” means any mortgage, pledge, security interest, attachment, encumbrance, lien (statutory or otherwise), license, claim, option, conditional sale agreement, right of first refusal,

I-6

first offer, termination, participation or purchase or charge of any kind (including any agreement to give any of the foregoing); provided, however, that the term “Lien” shall not include (i) statutory liens for Taxes, which are not yet due and payable, (ii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented, (iii) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance, old age pension or other social security programs mandated under applicable Laws, (iv) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies and other like liens, and (v) restrictions on transfer of securities imposed by applicable state and federal securities Laws.

“LipoSonix Agreement” has the meaning set forth in the Recitals.

“LipoSonix Indemnification Claim” has the meaning set forth in Section 6.13(b).

“LipoSonix Product” has the meaning set forth in Section 2.6(a)(x).

“LipoSonix Technology” has the meaning set forth in Section 2.6(a)(xi).

“Losses” has the meaning set forth in Section 9.2(a).

“Lost Offset Amount” has the meaning set forth in Section 6.13(b)(ix).

“MAC” has the meaning set forth in the Recitals.

“Material Adverse Effect” means any fact, event, change, development, circumstance or effect (i) that, when such term is used in relation to the Company (A) is materially adverse to the business, financial condition, assets, liabilities, or results of operations of the Company, or (B) would materially impair or delay the ability of Seller to perform its obligations hereunder, including the consummation of the Contemplated Transactions or (ii) that, when such term is used in relation to Buyer, would materially impair or delay the ability of Buyer to perform its obligations hereunder, including the consummation of the Contemplated Transactions. Any fact, event, change, development, circumstance, or effect shall not be deemed to have a Material Adverse Effect if such fact, event, change, development, circumstance or effect results or arises from (i) changes or conditions generally affecting the Company’s industry, except to the extent such fact, event, change, development, circumstance or effect disproportionately affects (relative to other participants in the Company’s industry) the Company, (ii) changes in general economic or political conditions (including armed hostilities or terrorist actions), except to the extent such changes or conditions disproportionately affect (relative to other participants in the Company’s industry) the Company, (iii) changes in accounting requirements or principles or in applicable Law or other legal or regulatory conditions, except to the extent such changes disproportionately affect (relative to other participants in the Company’s industry) the Company, (iv) any failure, in and of itself, by Seller or the Company to meet internal or external projections or forecasts or revenue or earnings predictions, (v) the public announcement, or notification to any Person, of this Agreement and the Contemplated Transactions or the consummation of the Contemplated Transactions or (vi) the performance of or compliance with the express terms of this Agreement.

“Material Company Trade Secrets” has the meaning set forth in Section 4.16(a).

I-7

“Material Contracts” has the meaning set forth in Section 4.6(a).

“Medicis Indemnitee” has the meaning set forth in Section 6.13(b).

“MEWA” has the meaning set forth in Section 4.11(d).

“Non-U.S. Permits” has the meaning set forth in Section 4.22(b)(x).

“Non-U.S. Regulatory Agency” has the meaning set forth in Section 4.22(b)(ii).

“OFAC Regulations” has the meaning set forth in Section 4.25(a).

“Order” means any judgment, order, decision, writ, injunction, ruling or decree of, or any settlement under the jurisdiction of, any Court or Governmental Authority.

“Parties” has the meaning set forth in the Preamble.

“PCBs” has the meaning set forth in the definition of “Hazardous Materials” in Annex I.

“Person” means an individual, corporation, partnership, association, trust, unincorporated organization, limited liability company, joint venture, other entity or group (as defined in Section 13(d)(3) of the Exchange Act).

“Personal Information” has the meaning set forth in Section 4.21(h)(ii).

“Pre-Closing Date Tax Returns” has the meaning set forth in Section 10.2(b).

“Privacy and Security Laws” has the meaning set forth in Section 4.21(f).

“Product” means any product (including any component thereof) manufactured, shipped, sold, marketed, distributed, and/or otherwise introduced into the stream of commerce by or on behalf of the Company, including any product sold within or outside of the United States by the Company as the distributor, agent, or pursuant to any other contractual relationship with a non-U.S. manufacturer.

“Purchase Price” has the meaning set forth in Section 2.2.

“Qualified Accountant” has the meaning set forth in Section 2.4(c).

“Qualified Acquiring Person” has the meaning set forth in Section 2.8.

“Quarterly Contingent Payment Certificate” has the meaning set forth in Section 2.7(b)(i).

“Real Property” has the meaning set forth in Section 4.13(b).

“Receiving Party” means a Party or any Representative of such Party that receives Confidential Information from a Disclosing Party.

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“Regulation” means any rule, regulation, policy or interpretation of any Governmental Authority having the effect of Law.

“Release” means any presence or exposure to or emission, spill, seepage, leak, escape, leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal, migration, release or threatened release of Hazardous Materials into or upon the environment, including the air, soil, improvements, surface water, groundwater, the sewer, septic system, storm drain, publicly owned treatment works, or waste treatment, storage, or disposal systems.

“Remediation” means any investigation, clean-up, removal action, remedial action, restoration, repair, response action, corrective action, monitoring, sampling and analysis, installation, reclamation, closure, or post-closure in connection with the suspected, threatened or actual Release of Hazardous Materials.

“Sales Milestone” has the meaning set forth in Section 2.6(a)(xii).

“Sales Milestone Payment” has the meaning set forth in Section 2.6(d).

“Sales Milestone Payment Amount” has the meaning set forth in Section 2.6(a)(xiii).

“Sales Payment Product” has the meaning set forth in Section 2.6(a)(xiv).

“Sales/Profit Contingent Payment” has the meaning set forth in Section 2.6(e).

“Sales/Profit Contingent Payment Amount” has the meaning set forth in Section 2.6(a)(xv).

“Sales/Profit Contingent Payment Percentage” has the meaning set forth in Section 2.6(a)(xvi).

“Scheduled Company Intellectual Property” has the meaning set forth in Section 4.16(a).

“Second Generation LipoSonix Product” has the meaning set forth in Section 2.6(a)(vii).

“SEC” has the meaning set forth in Section 6.16.

“Securities Act” has the meaning set forth in Section 5.8.

“Seller” has the meaning set forth in the Preamble.

“Seller Contingent Payments” has the meaning set forth in Section 2.2.

“Seller Disclosure Schedule” has the meaning set forth in the preamble to Article 4.

“Seller Indemnified Person(s)” has the meaning set forth in Section 9.2(b).

“Seller Marks” has the meaning set forth in Section 6.13.

“Seller Representatives” has the meaning set forth in Section 6.2(a).

I-9

“Shares” has the meaning set forth in the Recitals.

“Statement of Working Capital” has the meaning set forth in Section 2.4(a).

“Subsidiary” or “Subsidiaries” of the Company, Seller, Buyer or any other Person means any corporation, partnership, joint venture, limited liability company, trust, unincorporated organization, association or other legal entity of which the Company, Seller, Buyer or such other Person, as the case may be, (i) owns, directly or indirectly, greater than 50% of the stock or other equity interests the holder of which is generally entitled to vote as a general partner or for the election of the board of directors or other governing body of a corporation, partnership, joint venture, limited liability company, trust, unincorporated organization, association or other legal entity or (ii) has any arrangement, understanding or agreements entitling the Company, Seller, Buyer or other Person to vote as a general partner or for the election of a majority of the board of directors or other governing body of a corporation, partnership, joint venture, limited liability company, trust, unincorporated organization, association or other legal entity.

“Successor Subsidiary” has the meaning set forth in Section 2.8(a).

“Target Working Capital” shall mean ***.

“Tax” has the meaning set forth in Section 4.14.

“Tax Returns” has the meaning set forth in Section 4.14.

“Third Party Claim” has the meaning set forth in Section 9.5(a).

“Third Party Intellectual Property Rights” has the meaning set forth in Section 4.16(a).

“Threshold” has the meaning set forth in Section 9.3(b).

“Trade Secrets” means information, including but not limited to, know-how, Confidential Information, customer lists, software (source code and object code), technical information, data (including pharmacological, toxicological, preclinical and clinical test data and results), process technology, plans, drawings and blue prints, anywhere in the world that derives independent economic value, actual or potential, from not generally being known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and that is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

“Transfer Taxes” has the meaning set forth in Section 10.6.

“Unaudited 2010 Financial Statement” has the meaning set forth in Section 4.28.

“Unaudited Financial Statements” has the meaning set forth in Section 4.28.

“Unaudited Interim Financial Statements” has the meaning set forth in Section 4.28.

“WARN Act” has the meaning set forth in Section 4.12(b).

I-10

“Worldwide Ancillary Gross Profit” has the meaning set forth in Section 2.6(a)(xvii).

“Worldwide Ancillary Gross Profit Adjustments” has the meaning set forth in Section 2.6(a)(xviii).

“Worldwide Gross Profit” has the meaning set forth in Section 2.6(a)(xix).

“Worldwide Net Sales” has the meaning set forth in Section 2.6(a)(xx).

“Worldwide Net Sales Adjustments” has the meaning set forth in Section 2.6(a)(xxi).

I-11

EX-10.5

Exhibit 10.5

AMENDMENT NO. 1

TO THE

MEDICIS PHARMACEUTICAL CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

This Amendment No. 1 (“Amendment”) to the Medicis Pharmaceutical Corporation Supplemental Executive Retirement Plan (the “Plan”) is adopted by Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), as of October 6, 2011, with an effective date of June 1, 2011.

RECITALS

The Board of Directors (the “Board”) of the Company is authorized to amend the Plan pursuant to Section 9.1 of the Plan.

The Board deems it advisable and in the best interest of the Company and its stockholders to amend the Plan, as provided below, solely to clarify the manner in which retirement benefits of participants under the Plan are intended to be calculated.

AMENDMENT

1. Section 2.4 of the Plan (the definition of “Benefit Accrual Percentage”) is hereby deleted in its entirety and the remaining sections in Article II are renumbered accordingly.

2. In Section 4.1 of the Plan, the phrase “his Benefit Accrual Percentage” is hereby deleted and replaced with “calculating his Retirement Benefit”.

3. Section 5.1(a) of the Plan is hereby amended and restated in its entirety as follows:

“(a) A Participant’s Retirement Benefit under this Plan as of any date of reference, computed as an annual benefit payable for twenty (20) years at Normal Retirement Date, shall equal the product of:

(i)(A) with respect to any Tier I Participant, 2.5% of such Participant’s Average Earnings, multiplied by the number of Participant’s years of Service as of such reference date up to a maximum of twenty (20) years of Service;

(B) with respect to any Tier II Participant, 1.25% of such Participant’s Average Earnings, multiplied by the number of Participant’s years of Service as of such reference date up to a maximum of twenty (20) years of Service;

(C) with respect to the Tier III Participant, 10% of such Participant’s Average Earnings, multiplied by the number of Participant’s years of Service as of such reference date up to a maximum of five (5) years of Service;

(D) with respect to the Tier IV Participant, 3.125% of such Participant’s Average Earnings, multiplied by the number of Participant’s years of Service as of such reference date up to a maximum of sixteen (16) years of Service;

(E) with respect to the Tier V Participant,

(1) 3.125% of such Participant’s Average Earnings, multiplied by the number of Participant’s years of Service as of May 31, 2011, plus

(2) 2.5% of such Participant’s Average Earnings, multiplied by the number of Participant’s years of Service from June 1, 2011 through such reference date;

provided, however, that the maximum aggregate years of Service taken into account for the Tier V Participant for purposes of calculating (1) plus (2) above shall be eighteen (18) years of Service;

provided, further, that in no event shall the Retirement Benefit exceed (x) fifty percent (50%) of a Participant’s Average Earnings with respect to any Tier I Participant, Tier III Participant, Tier IV Participant and Tier V Participant, and (y) twenty-five percent (25%) of a Participant’s Average Earnings with respect to any Tier II Participant.”

4. Section 5.1(b) of the Plan is hereby amended by adding the following sentence after the first sentence thereof:

“In the event a Participant accrues a Retirement Benefit after his Normal Retirement Date, such Retirement Benefit shall be calculated in accordance with Section 5.1(a), provided, that the Retirement Benefit shall be computed as an annual benefit payable for twenty (20) years at Separation from Service.”

5. Section 5.1(c) of the Plan is hereby amended by amending and restating the last sentence thereof as follows:

“In the event a Participant’s Retirement Benefit commences after his Normal Retirement Date, the Accrued Retirement Benefit as of Normal Retirement Date shall be credited with four percent (4%) annual interest for each year (based on a consecutive twelve (12) month period from the Participant’s Normal Retirement Date, and including any partial years) that the Retirement Benefit commences following the Participant’s Normal Retirement Date.”

6. Capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings assigned to them in the Plan. Except as otherwise expressly set forth in this Amendment, the Plan shall remain in full force and effect in accordance with its terms.

7. This Amendment shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws relating to conflicts or choice of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

* * * * *

2

I hereby certify that this Amendment No. 1 was duly adopted by the Board of Directors on October 6, 2011.

Executed this 6^th day of October, 2011.

MEDICIS PHARMACEUTICAL CORPORATION
/s/ Seth L. Rodner
Name:	Seth L. Rodner
Title:	Senior Vice President, General Counsel and Secretary

3

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Jonah Shacknai, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Medicis Pharmaceutical Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2011

JONAH SHACKNAI

/s/ JONAH SHACKNAI

(Jonah Shacknai)

Chairman of the Board and

Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Richard D. Peterson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Medicis Pharmaceutical Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2011

RICHARD D. PETERSON

/s/ RICHARD D. PETERSON

(Richard D. Peterson)

Executive Vice President, Chief Financial Officer

and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the quarterly report of Medicis Pharmaceutical Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2011, as filed with the Securities and Exchange Commission (the “Report”), Jonah Shacknai, Chief Executive Officer of the Company, and Richard D. Peterson, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company.

/s/ JONAH SHACKNAI

Jonah Shacknai

Chairman of the Board and

Chief Executive Officer

November 9, 2011

/s/ RICHARD D. PETERSON

Richard D. Peterson

Executive Vice President, Chief Financial Officer

and Treasurer

November 9, 2011

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Nor will this certification be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

XML

DIVIDENDS (DETAILS) (USD $) In Millions, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Notes To Consolidated Financial Statement Abstract
Cash dividend declared per common share	$ 0.08	$ 0.06	$ 0.24	$ 0.18
Dividends Payable Current	$ 5.1		$ 5.1

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Balance Sheet Parentheticals [Line Items]
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Common stock in treasury, shares	13,354,705	12,897,610
Class A
Balance Sheet Parentheticals [Line Items]
Common Stock Shares Issued and Outstanding	74,732,033	71,863,191
Common Stock Par Value	$ 0.014	$ 0.014
Common Stock Shares Authorized	150,000,000	150,000,000
Class B
Balance Sheet Parentheticals [Line Items]
Common Stock Shares Issued and Outstanding	0	0
Common Stock Par Value	$ 0.014	$ 0.014
Common Stock Shares Authorized	1,000,000	1,000,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Sales
Net product revenues	$ 183,456	$ 174,581	$ 537,171	$ 509,907
Net contract revenues	1,212	2,515	3,237	6,327
Net Revenues Total	184,668	177,096	540,408	516,234
Cost of product revenues (1)	17,169	17,778	49,737	49,215
Gross profit	167,499	159,318	490,671	467,019
Operating Expenses:
Selling, general and administrative (2)	93,228	78,089	268,251	227,464
Research And Development Expense	28,733	8,673	58,202	22,652
Depreciation and amortization	7,254	6,926	21,688	20,575
Impairment of intangible assets	2,259	2,293	2,259	2,293
Operating income (loss)	36,025	63,337	140,271	194,035
Interest and investment income	(1,283)	(1,061)	(3,796)	(3,001)
Interest Expense	1,267	1,058	3,467	3,177
Other (income) expense, net	0	0	0	257
Income from continuing operations before income tax expense	36,041	63,340	140,600	193,602
Income tax expense	13,091	29,834	56,454	79,150
Income from continuing operations	22,950	33,506	84,146	114,452
Loss from discontinued operations, net of income tax benefit	3,498	5,928	16,551	15,005
Net income (loss)	$ 19,452	$ 27,578	$ 67,595	$ 99,447
Basic net income (loss) per share - continuing operations	$ 0.36	$ 0.56	$ 1.35	$ 1.90
Basic net income (loss) per share - discontinued operations	$ (0.06)	$ (0.10)	$ (0.27)	$ (0.26)
Basic net income (loss) per share	$ 0.31	$ 0.46	$ 1.09	$ 1.65
Diluted net income (loss) per share - continuing operations	$ 0.34	$ 0.51	$ 1.25	$ 1.75
Diluted net income (loss) per shares - discontinued operations	$ (0.06)	$ (0.10)	$ (0.27)	$ (0.26)
Diluted net income (loss) per share	$ 0.29	$ 0.42	$ 1.01	$ 1.52
Cash dividend declared per common share	$ 0.08	$ 0.06	$ 0.24	$ 0.18
Common shares used in calculating:
Basic net income per share	61,336	58,509	60,264	58,278
Weighted Average Number Of Diluted Shares Outstanding	67,914	64,687	66,960	64,437

XML

EARNINGS PER SHARE (DETAILS) (USD $) In Thousands, except Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Earnings Per Share Basic Two Class Method Abstract
Net income (loss)	$ 19,452	$ 27,578	$ 67,595	$ 99,447
Undistributed Earnings Allocated To Participating Securities	583	802	2,097	3,204
Net Income Loss Available To Common Stockholders Basic	18,869	26,776	65,498	96,243
Weighted average number of shares outstanding basic	61,336,000	58,509,000	60,264,000	58,278,000
Earnings Per Share Basic Undistributed	$ 0.31	$ 0.46	$ 1.09	$ 1.65
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	(466)	(721)	(1,709)	(2,919)
Undistributed Earnings Reallocated To Unvested Stockholders	460	717	1,685	2,903
Interest On Old Notes Net Of Tax	799	666	2,175	1,998
Interest On New Notes Net Of Tax			1	1
Net Income Loss Available To Common Stockholders Diluted	19,662	27,438	67,650	98,226
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	5,823,000	5,823,000	5,823,000	5,823,000
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	4,000	4,000	4,000	4,000
Incremental Common Shares Attributable To Share Based Payment Arrangements	751,000	351,000	869,000	332,000
Weighted Average Number Of Diluted Shares Outstanding	67,914,000	64,687,000	66,960,000	64,437,000
Earnings per share diluted	$ 0.29	$ 0.42	$ 1.01	$ 1.52
Segment Continuing Operations [Member]
Earnings Per Share Basic Two Class Method Abstract
Income Loss From Continuing Operations	22,950	33,506	84,146	114,452
Undistributed Earnings Allocated To Participating Securities	702	980	2,645	3,698
Net Income Loss Available To Common Stockholders Basic	22,248	32,526	81,501	110,754
Weighted average number of shares outstanding basic	61,336,000	58,509,000	60,264,000	58,278,000
Earnings Per Share Basic Undistributed	$ 0.36	$ 0.56	$ 1.35	$ 1.90
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	(579)	(899)	(2,244)	(3,413)
Undistributed Earnings Reallocated To Unvested Stockholders	572	894	2,213	3,395
Interest On Old Notes Net Of Tax	799	666	2,175	1,998
Interest On New Notes Net Of Tax			1	1
Net Income Loss Available To Common Stockholders Diluted	23,040	33,187	83,646	112,735
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	5,823,000	5,823,000	5,823,000	5,823,000
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	4,000	4,000	4,000	4,000
Incremental Common Shares Attributable To Share Based Payment Arrangements	751,000	351,000	869,000	332,000
Weighted Average Number Of Diluted Shares Outstanding	67,914,000	64,687,000	66,960,000	64,437,000
Earnings per share diluted	$ 0.34	$ 0.51	$ 1.25	$ 1.75
Segment Discontinued Operations [Member]
Earnings Per Share Basic Two Class Method Abstract
Income Loss From Discontinued Operations	(3,498)	(5,928)	(16,551)	(15,005)
Undistributed Earnings Allocated To Participating Securities	0	0	0	0
Net Income Loss Available To Common Stockholders Basic	(3,498)	(5,928)	(16,551)	(15,005)
Weighted average number of shares outstanding basic	61,336,000	58,509,000	60,264,000	58,278,000
Earnings Per Share Basic Undistributed	$ (0.06)	$ (0.10)	$ (0.27)	$ (0.26)
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	0	0	0	0
Undistributed Earnings Reallocated To Unvested Stockholders	0	0	0	0
Interest On Old Notes Net Of Tax	0	0	0	0
Interest On New Notes Net Of Tax			0	0
Net Income Loss Available To Common Stockholders Diluted	$ (3,498)	$ (5,928)	$ (16,551)	$ (15,005)
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	0	0	0	0
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	0	0	0	0
Incremental Common Shares Attributable To Share Based Payment Arrangements	0	0	0	0
Weighted Average Number Of Diluted Shares Outstanding	61,336,000	58,509,000	60,264,000	58,278,000
Earnings per share diluted	$ (0.06)	$ (0.10)	$ (0.27)	$ (0.26)
Stock Options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount	1,695,545	7,511,980	2,581,316	9,969,349

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STOCK REPURCHASES

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Treasury Stock Text Block

17.       STOCK REPURCHASE

On August 8, 2011, the Company announced that its Board of Directors approved a Stock Repurchase Plan to purchase up to $200 million in aggregate value of shares of Medicis Class A common stock. Any repurchases will be made in compliance with the Securities and Exchange Commission's Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions.

The number of shares to be repurchased and the timing of repurchases will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. It is intended that any repurchases will be funded by existing general corporate funds.The plan does not obligate the Company to repurchase any common stock. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the purchase limit is reached, but may be suspended or terminated at any time at the Company's discretion without prior notice.

In accordance with this plan, the Company purchased 49,264 shares of its Class A common stock in the open market at a weighted average cost of $36.03 per share during the three months ended September 30, 2011.

As part of its stock repurchase program, the Company may from time to time enter into structured share repurchase agreements with financial institutions. These agreements generally require the Company to make one or more cash payments in exchange for the right to receive shares of its common stock and/or cash at the expiration of the agreement and/or at various times during the term of the agreement, generally based on the market price of the Company's common stock during the relevant valuation period or periods, but the Company may enter into structured share repurchase agreements with different features.

In August 2011, the Company entered into structured share repurchase arrangements and purchased from a financial institution over the counter “in-the-money” capped call options for an aggregate premium of $50.0 million. The capped call options have various scheduled expiration dates within the month of November 2011. An option will be automatically exercised if the market price of the Company's Class A common stock on the relevant expiration date is greater than the applicable lower strike price (i.e. the options are “in-the-money”). If the market price of the Company's Class A common stock on the relevant expiration date is below the applicable lower strike price, the relevant option will expire with no value. If the market price of the Company's Class A common stock on the relevant expiration date is between the applicable lower and upper strike prices, the value per option to the Company will be the then-current market price less that lower strike price and the relevant options will be physically settled. If the market price of the Company's Class A common stock is above the applicable upper strike price, the value per option to the Company will be the difference between the applicable upper strike price and lower strike price and the default settlement method for the relevant options will be cash settlement, although the Company may elect physical settlement subject to certain conditions. Under these arrangements, any prepayments made or cash payments received at settlement are recorded as a component of additional paid-in capital in the Company's condensed consolidated balance sheets.

After giving effect to the purchases during the three months ended September 30, 2011 and the purchase of the capped call options, the remaining authorized amount under the plan is approximately $148.2 million.

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DOCUMENT AND ENTITY INFORMATION (USD $)	9 Months Ended
	Sep. 30, 2011	Jun. 30, 2011	Nov. 04, 2011 Class A	Nov. 04, 2011 Class B
Document And Entity Information [Line Items]
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Entity Registration Name	Medicis Pharmaceutical Corporation
Entity Central Index Key	0000859368
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Well Knows Season Issuer	Yes
Entity Public Float		$ 2,092,313,017
Entity Common Stock Shares Outstanding			63,092,598	0
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3

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CONVERTIBLE NOTES (DETAILS) (USD $)	9 Months Ended
	Sep. 30, 2011
Convertible Senior Notes Due 2032 Member
Debt Instrument [Line Items]
Debt Instrument Principal Amount	$ 169,100,000
Stated Interest Rate	2.50%
Stated Contingent Interest Rate	0.50%
Contingent Interest Payable	300,000
Contingent Interest Rate Terms	The Company also agreed to pay contingent interest at a rate equal to 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2007, if the average trading price of the Old Notes reaches certain thresholds.
Debt Instrument Convertible Terms Of Conversion Feature	The Old Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances: during any quarter commencing after June 30, 2002, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 110% of the conversion price of the Old Notes, or $31.96. The Old Notes are initially convertible at a conversion price of $29.05 per share, which is equal to a conversion rate of approximately 34.4234 shares per $1,000 principal amount of Old Notes, subject to adjustment; if the Company has called the Old Notes for redemption; during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the Old Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the Old Notes; or upon the occurrence of specified corporate transactions.
Debt Instrument Fee Amount	12,600,000
Deferred Tax Liability Convertible Debt	60,300,000
Convertible Senior Notes Due 2033 Member
Debt Instrument [Line Items]
Debt Instrument Principal Amount	181,000
Stated Interest Rate	1.50%
Stated Contingent Interest Rate	0.50%
Contingent Interest Rate Terms	The Company will also pay contingent interest at a rate of 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes reaches certain thresholds.
Debt Instrument Convertible Terms Of Conversion Feature	The remaining New Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances: during any quarter commencing after September 30, 2003, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 120% of the conversion price of the New Notes, or $46.51. The New Notes are initially convertible at a conversion price of $38.76 per share, which is equal to a conversion rate of approximately 25.7998 shares per $1,000 principal amount of New Notes, subject to adjustment; if the Company has called the New Notes for redemption; during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the New Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the New Notes; or upon the occurrence of specified corporate transactions.
Debt Instrument Fee Amount	$ 5,100,000

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

20.       RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) – Fair Value Measurement, to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU No. 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU No. 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and must be applied prospectively. The Company is currently assessing what impact, if any, the revised guidance will have on its results of operations and financial condition.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The updated guidance amends the FASB Accounting Standards Codification (“Codification”) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both alternatives, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU No. 2011-05 will be applied retrospectively. ASU No. 2011-05 is effective for annual reporting periods beginning after December 15, 2011, with early adoption permitted, and will be applied retrospectively. It is expected that the adoption of this amendment will only impact the presentation of comprehensive income within the Company's consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The updated guidance permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit's fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed in annual reporting periods beginning after December 15, 2011, with early adoption permitted. The Company is currently assessing what impact, if any, the revised guidance will have on its results of operations and financial condition.

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OTHER CURRENT LIABILITIES (DETAILS) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Accrued Liabilities Current Abstract
Accrued Incentives Including SARs Liability	$ 38,022	$ 33,923
Deferred Revenue Current	9,094	16,422
Other Accrued Liabilities Current	26,792	24,883
Total Other Current Liabilities	73,908	75,228
Deferred Revenue Abstract
Deferred Revenue Aesthetics Products Net Of Cost Of Revenue	8,155	10,334
Deferred Contract Revenue	662	3,014
Deferred Revenue Sales Into Distribution Channel In Excess Of Eight Weeks Of Projected Demand	198	582
Other Deferred Revenue	79	2,492
Deferred Revenue Current	$ 9,094	$ 16,422

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

FAIR VALUE MEASUREMENTS

6.       FAIR VALUE MEASUREMENTS

As of September 30, 2011, the Company held certain assets that are required to be measured at fair value on a recurring basis.  These included certain of the Company's short-term and long-term investments, including investments in auction rate floating securities.

The Company has invested in auction rate floating securities, which are classified as available-for-sale securities and reflected at fair value.  Due to events in credit markets, the auction events for some of these instruments held by the Company failed during the three months ended March 31, 2008 (See Note 5).  Therefore, the fair values of these auction rate floating securities, which are primarily rated AAA, are estimated utilizing a discounted cash flow analysis as of September 30, 2011.  These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction.  These investments were also compared, when possible, to other observable market data with similar characteristics to the securities held by the Company. Changes to these assumptions in future periods could result in additional declines in fair value of the auction rate floating securities.

The Company's assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820, Fair Value Measurements and Disclosures, at September 30, 2011, were as follows (in thousands):

			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	Sept. 30, 2011		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	344,671	$	344,671	$	-	$	-
Federal agency notes and bonds		239,836		239,836		-		-
Auction rate floating securities		18,068		-		-		18,068
Asset-backed securities		33,122		33,122		-		-
Total assets measured at fair value	$	635,697	$	617,629	$	-	$	18,068

The following tables present the Company's assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months endedSeptember 30, 2011 (in thousands):

	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at June 30, 2011	$	19,884
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		459
Purchases		-
Settlements		(2,275)
Balance at September 30, 2011	$	18,068
	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at December 31, 2010	$	21,480
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		863
Purchases		-
Settlements		(4,275)
Balance at September 30, 2011	$	18,068

XML

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

SUBSEQUENT EVENTS

21.       SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of issuance of its financial statements.

On November 1, 2011, the Company closed its saleof all issued and outstanding shares of common stock of Medicis Technologies Corporation (f/k/a LipoSonix, Inc.) (“LipoSonix”) to Solta Medical, Inc., a Delaware corporation (“Solta”), pursuant to the previously announced stock purchase agreement, dated September 12, 2011, by and between the Company and Solta (the “Agreement”). In connection therewith, on November 1, 2011, a separate subsidiary of the Company transferredto Solta certain assets and assigned to Solta certain agreements, in each case related to LipoSonix. Solta paid to the Companyat the closing $15.5 million in cash, consisting of the initial purchase price of $15 million and a preliminary working capital adjustment, which remains subject to a customary post-closing review based on the amount of working capital of LipoSonix at the closing. In addition, Solta has agreed to pay to the Company the following contingent payments after the closing, subject to the terms and conditions of the Agreement:

     (i)     a one-time cash payment of up to $20 million upon approval by the U.S. Food and Drug Administration (“FDA”) of a specified LipoSonix product prior to October 1, 2012 (the FDA approval was obtained in late October 2011,as a result of which Solta is required to make the $20 million payment to the Company on or prior to November 19, 2011); and

     (ii)     additional contingent cash and milestone payments, which will expire after approximately seven years, based upon, among other things, the achievement of year-to-year increases and specified targets in the adjusted net sales and adjusted gross profits of such LipoSonix products.

At the closing, Solta also assumed the contingent payment obligations of the Company with respect to the former shareholders of LipoSonix, Inc. pursuant to the Agreement and Plan of Merger among the Company, LipoSonix, Inc. and the other parties thereto dated as of June 16, 2008.

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STRATEGIC COLLABORATIONS (DETAILS) (USD $) In Millions	3 Months Ended	9 Months Ended	3 Months Ended				9 Months Ended
	Mar. 31, 2011 Research And Development Arrangement Anacor [Member]	Sep. 30, 2011 Research And Development Arrangement Anacor [Member]	Jun. 30, 2011 Research And Development Arrangement Privately Held Biotechnology Company [Member]	Dec. 31, 2010 Research And Development Arrangement Privately Held Biotechnology Company [Member]	Sep. 30, 2010 Research And Development Arrangement Privately Held Biotechnology Company [Member]	Sep. 30, 2011 Research And Development Arrangement Lupin [Member]	Sep. 30, 2011 Research And Development Arrangement Lupin [Member]
Long Term Purchase Commitment [Line Items]
Long Term Purchase Commitment Milestone Payments Made	$ 7.0		$ 5.5	$ 10.0	$ 5.0	$ 20.0
Long Term Purchase Commitment Future Potential Milestone Payments		$ 153.0			$ 100.5		$ 38.0

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SHARE BASED COMPENSATION (DETAILS) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share Based Compensation Expense		$ 4,438,000	$ 7,946,000	$ 20,445,000	$ 13,003,000
Share Based Compensation Employee Stock Purchase Plan Activity Abstract
Stock Options Outstanding Weighted Average Exercise Price Beginning of Period				$ 30.01
Stock Options Granted Weighted Average Exercise Price	$ 34.30	$ 34.30		$ 34.30
Stock Options Exercised Weighted Average Exercise Price	$ 27.69	$ 27.69		$ 27.69
Stock Options Cancelled Weighted Average Exercise Price	$ 36.82	$ 36.82		$ 36.82
Stock Options Outstanding Weighted Average Exercise Price End of Period	$ 31.31	$ 31.31		$ 31.31
Stock Options Outstanding Number Beginning Balance				6,491,353
Stock Options Granted Shares				79,933
Stock Options Exercised Shares				(2,385,326)
Stock Options Cancelled Shares				(80,705)
Stock Options Outstanding Number Ending Balance	4,105,255	4,105,255		4,105,255
Stock Options Outstanding Remaining Contractual Term	2.7	2.7		2.7
Stock Options Outstanding Aggregate Intrinsic Value	24,374,272	24,374,272		24,374,272
Employee Stock Option [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Plan Description				Stock option awards are granted at the fair market value on the date of grant. The option awards vest over a period determined at the time the options are granted, ranging from one to five years, and generally have a maximum term of ten years. Certain options provide for accelerated vesting if there is a change in control (as defined in the plans). When options are exercised, new shares of the Company’s Class A common stock are issued.
Compensation Cost Not Yet Recognized	1,200,000	1,200,000		1,200,000
Compensation Cost Recognition Period				2.5
Share Based Compensation Expense		187,000	307,000	670,000	1,145,000
Share Based Compensation Employee Stock Purchase Plan Activity Abstract
Total Intrinsic Value Of Options Excercised				20,534,415
Options Excercisable Shares	3,951,443	3,951,443		3,951,443
Options Excercisable Weighted Average Exercise Price	$ 31.51	$ 31.51		$ 31.51
Options Exercisable Weighted Average Remaining Contractual Term				2.5
Options Excercisable Aggregate Intrinsic Value	22,784,758	22,784,758		22,784,758
Options Outstanding Vested And Expected To Vest Shares	3,843,409	3,843,409		3,843,409
Options Outstanding Vested And Expected To Vest Weighted Average Exercise Price	$ 31.54	$ 31.54		$ 31.54
Options Outstanding Vested And expected To Vest Aggregate Intrinsic Value	21,951,973	21,951,973		21,951,973
Options Outstanding Vested And Expected To Vest Weighted Average Remaining Contractual Term				2.7
Options Exercisable Vested And Expected To Vest Shares	3,730,281	3,730,281		3,730,281
Options Exercisable Vested And Expected To Vest Weighted Average Exercise Price	$ 31.64	$ 31.64		$ 31.64
Options Exercisable Vested And Expected To Vest Weighted Average Remaining Contractual Term				2.5
Options Exercisable Vested And Expected To Vest Aggregate Intrinsic Value	21,021,472	21,021,472		21,021,472
Share Based Payment Award Fair Value Assumptions And Methodology Abstract
Fair Value Assumptions Expected Volatility Rate				0.33%	0.33%
Fair Value Assumptions Expected Life				7.0	7.0
Fair Value Assumptions Risk Free Interest Rate Minimum				2.47%	2.82%
Fair Value Assumptions Risk Free Interest Rate Maximum				2.81%	3.04%
Fair Value Assumptions Risk Expected Dividend Yield Minimum				0.77%	1.02%
Fair Value Assumptions Risk Expected Dividend Yield Maximum				0.88%	1.06%
Grant Date Fair Value Of Options				$ 12.25	$ 8.28
Restricted Stock Units RSU [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation Cost Not Yet Recognized	34,800,000	34,800,000		34,800,000
Compensation Cost Recognition Period				3.2
Share Based Compensation Expense		2,794,000	2,401,000	8,593,000	5,577,000
Share Based Compensation Equity Instruments Other Than Options Plan Activity Abstract
Restricted Stock Nonvested Number Beginning Balance				1,794,445
Restricted Stock Granted Shares				758,457
Units Vested				(485,030)
Forfeited Units				(29,619)
Restricted Stock Nonvested Number Ending Balance	2,038,253	2,038,253		2,038,253
Restricted Stock Nonvested Weighted Average Grant Date Fair Value Beginning of Period				$ 17.94
Restricted Stock Granted Weighted Average Grant Date Fair Value				$ 31.48
Awards Vested Weighted Average Grant Date Fair Value				$ 19.19
Units Cancelled Weighted Average Grant Date Fair Value	$ 24.00	$ 24.00		$ 24.00
Restricted Stock Nonvested Weighted Average Grant Date Fair Value End of Period	$ 22.59	$ 22.59		$ 22.59
Fair Value Of Awards Vested				9,300,000	7,800,000
Stock Appreciation Rights SARS [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation Cost Not Yet Recognized	31,200,000	31,200,000		31,200,000
Compensation Cost Recognition Period				3.0
Share Based Compensation Expense		1,457,000	5,238,000	11,182,000	6,281,000
Share Based Payment Award Fair Value Assumptions And Methodology Abstract
Fair Value Assumptions Expected Volatility Rate	0.33%			0.32%
Fair Value Assumptions Expected Volatility Rate Minimum	0.96%				0.32%
Fair Value Assumptions Expected Volatility Rate Maximum	1.43%				0.33%
Fair Value Assumptions Expected Life				7.0	7.0
Fair Value Assumptions Expected Life Minimum	4.4
Fair Value Assumptions Expected Life Maximum	6.5
Fair Value Assumptions Risk Free Interest Rate				3.12%
Fair Value Assumptions Risk Free Interest Rate Minimum					2.06%
Fair Value Assumptions Risk Free Interest Rate Maximum					3.07%
Fair Value Assumptions Risk Expected Dividend Yield	0.88%			0.87%
Fair Value Assumptions Risk Expected Dividend Yield Minimum					0.89%
Fair Value Assumptions Risk Expected Dividend Yield Maximum					1.06%
Share Based Compensation Equity Instruments Other Than Options Plan Activity Abstract
Grant Date Fair Value of Stock Appreciation Rights				$ 9.90	$ 8.16
Remeasurement Date Fair Value Of Stock Appreciation Rights	$ 20.66
Share Based Compensation Stock Appreciation Rights Plan Activity Abstract
Stock Appreciation Rights Outstanding Weighted Average Exercise Price Beginning of Period						$ 16.99
Stock Appreciation Rights Granted Weighted Average Exercise Price	$ 27.56	$ 27.56		$ 27.56
Stock Appreciation Rights Exercised Weighted Average Exercise Price	$ 15.54	$ 15.54		$ 15.54
Stock Appreciation Rights Cancelled Weighted Average Exercise Price	$ 16.21	$ 16.21		$ 16.21
Stock Appreciation Rights Outstanding Weighted Average Exercise Price End of Period	$ 17.46	$ 17.46		$ 17.46
Stock Appreciation Rights Outstanding Number Beginning Balance						3,030,142
Stock Appreciation Rights Granted Number	64,135	64,135		64,135
Stock Appreciation Rights Exercised Number	(279,852)	(279,852)		(279,852)
Stock Appreciation Rights Cancelled Number	(191,284)	(191,284)		(191,284)
Stock Appreciation Rights Outstanding Number Ending Balance	2,623,141	2,623,141		2,623,141
Stock Appreciation Rights Outstanding Weighted Average Remaining Contractual Term				5.0
Stock Appreciation Rights Outstanding Aggregate Intrinsic Value	49,884,864	49,884,864		49,884,864
Total Intrinsic Value Of Stock Appreciation Rights Excercised				5,701,172
Stock Appreciation Rights Exercisable Number	88,268	88,268		88,268
Stock Appreciation Rights Exercisable Weighted Average Exercise Price	$ 17.35	$ 17.35		$ 17.35
Stock Appreciation Rights Exercisable Weighted Average Remaining Contractual Term				5.0
Stock Appreciation Rights Exercisable Aggregate Intrinsic Value	$ 1,688,693	$ 1,688,693		$ 1,688,693

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

COMMITMENTS AND CONTINGENCIES

19.       COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is currently party to various legal proceedings, including those noted in this section. Unless specifically noted below, any possible range of loss associated with the legal proceedings described below is not reasonably estimable at this time. The Company is engaged in numerous other legal actions not described below arising in the ordinary course of its business and, while there can be no assurance, the Company believes that the ultimate outcome of these actions will not have a material adverse effect on its operating results, liquidity or financial position.

From time to time the Company may conclude it is in the best interests of its stockholders, employees, and customers to settle one or more litigation matters, and any such settlement could include substantial payments; however, other than as noted below, the Company has not reached this conclusion with respect to any particular matter at this time. There are a variety of factors that influence the Company's decisions to settle and the amount the Company may choose to pay, including the strength of its case, developments in the litigation, the behavior of other interested parties, the demand on management time and the possible distraction of the Company's employees associated with the case and/or the possibility that the Company may be subject to an injunction or other equitable remedy. It is difficult to predict whether a settlement is possible, the amount of an appropriate settlement or when is the opportune time to settle a matter in light of the numerous factors that go into the settlement decision. Unless otherwise specified below, any settlement payment made pursuant to any of the completed settlement agreements described below is immaterial to the Company for financial reporting purposes.

Stockholder Class Action Litigation

On October 3, 10 and 27, 2008, purported stockholder class action lawsuits styled Andrew Hall v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01821-MHB); Steamfitters Local 449 Pension Fund v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01870-DKD); and Darlene Oliver v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01964-JAT) were filed in the United States District Court for the District of Arizona on behalf of stockholders who purchased securities of the Company during the period between October 30, 2003 and approximately September 24, 2008. The Court consolidated these actions into a single proceeding and on May 18, 2009 an amended complaint was filed alleging violations of the federal securities laws arising out of the Company's restatement of its consolidated financial statements in 2008. On December 2, 2009, the Court granted the Company's and other defendants' dismissal motions and dismissed the consolidated amended complaint without prejudice. On January 18, 2010 the lead plaintiff filed a second amended complaint, and on or about August 9, 2010, the Court denied the Company's and other defendants' related dismissal motions. On December 17, 2010, the lead plaintiff filed a motion for class certification, and the defendants filed an opposition to the motion on March 8, 2011.

On June 6, 2011, the Company, certain of its current officers who are named in the complaint, and the Company's outside auditors entered into a Memorandum of Understanding with the plaintiffs' representatives to memorialize an agreement in principle to settle the pending action. On September 21, 2011, the parties filed with the Court a motion for preliminary approval of a Settlement Stipulation (the “Class Action Stipulation”) setting forth the terms of the settlement. The Court granted the motion for preliminary approval on November 2, 2011, ordered that notice be given to class participants and set a hearing for final approval for February 23, 2012. Under the terms of the Class Action Stipulation, the Company's portion of the settlement will be paid entirely by insurance. The Company's outside auditors will contribute to the settlement. The Company itself is not required to make any payments to fund the settlement, and the Class Action Stipulation contains no admission of liability by the Company or the named individuals in the action, the allegations of which are expressly denied therein. The Class Action Stipulation remains subject to notice to the class participants and final approval by the Court. In the event the settlement is not finally approved by the Court, the Company will continue to vigorously defend the claims in the class action lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company's financial position and results of operations in the period in which the lawsuits are resolved.

Stockholder Derivative Lawsuits

On January 21, 2009, the Company received a letter from an alleged stockholder demanding that its Board of Directors take certain actions, including potentially legal action, in connection with the restatement of its consolidated financial statements in 2008. The letter stated that, if the Board of Directors did not take the demanded action, the alleged stockholder would commence a derivative action on behalf of the Company. The Company's Board of Directors reviewed the letter during the course of 2009 and established a special committee of the Board of Directors, comprised of directors who are independent and disinterested with respect to the allegations in the letter, to assess the allegations contained in the letter. The special committee engaged outside counsel to assist with the investigation. The special committee completed its investigation, and on or about February 16, 2010, the Board of Directors, pursuant to the report and recommendation of the special committee, resolved to decline the derivative demand. On February 26, 2010, Company counsel sent a declination letter to opposing counsel. On or about October 21, 2010, the stockholder filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa, alleging that such individuals breached their fiduciary duties to the Company in connection with the restatement. The stockholder seeks to recover unspecified damages and costs, including counsel and expert fees.

On or about October 20, 2010, a second alleged stockholder of the Company filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa. The complaint alleges, among other things, that such individuals breached their fiduciary duties to the Company in connection with the restatement. The complaint further alleges that a demand upon the Board of Directors to institute an action in the Company's name would be futile and that the stockholder is therefore excused under Delaware law from making such a demand prior to filing the complaint. The stockholder seeks, among other things, to recover unspecified damages and costs, including counsel and expert fees.

On June 6, 2011, the Company and certain of its current officers and directors who are named in the complaints entered into a Memorandum of Understanding with the plaintiffs' representatives to memorialize an agreement in principle to settle the pending actions. On October 7, 2011, the parties filed with the Court a motion for preliminary approval of a settlement stipulation (the “Derivative Lawsuits Stipulation”) setting forth the terms of the settlement. The Court granted the motion for preliminary approval on November 3, 2011, ordered that notice be given to stockholders and set a hearing for final approval for December 14, 2011. The only financial component under the Derivative Lawsuits Stipulation, which remains subject to final Court approval among other customary conditions, involves payment of plaintiffs' attorneys' fees, which will be paid entirely by insurance. The Company itself is not required to make any payments to fund the settlement. The settlement also reflects certain control and other enhancements taken by the Company in connection with and subsequent to the restatement of its consolidated financial statements in 2008. The Derivative Lawsuits Stipulation contains no admission of liability by the Company or the named individuals in the lawsuits, the allegations of which are expressly denied therein. In the event the Derivative Lawsuits Stipulation is not finally approved by the Court, the Company will continue to vigorously defend the claims in the derivative lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company's financial position and results of operations in the period in which the lawsuits are resolved.

Hyperion Arbitration

On June 23, 2011, Hyperion Therapeutics, Inc. (“Hyperion”) filed a demand for arbitration before the American Arbitration Association for a determination of the rights and obligations of Hyperion and Ucyclyd Pharma, Inc., a subsidiary of the Company (“Ucyclyd”), under a collaboration agreement between the parties, dated August 23, 2007, as amended (the “Collaboration Agreement”). Pursuant to the terms of the Collaboration Agreement, Hyperion is responsible for the ongoing research and development of a compound referred to as HPN-100 (formerly known as GT4P) for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. In addition, if certain specified conditions are satisfied, then Hyperion will have certain purchase rights under the Collaboration Agreement with respect to HPN-100, as well as Ucyclyd's existing on-market products, AMMONUL® and BUPHENYL®, and will be required to pay Ucyclyd royalties and regulatory and sales milestone payments in connection with certain licenses that will be granted to Hyperion upon exercise of the purchase rights. In its demand for arbitration, Hyperion requested a judgment regarding the rights of the parties in connection with the development activities relating to HPN-100, including relating to the submission of a NDAto the FDA for HPN-100 for the treatment of urea cycle disorder. The Company responded to the demand for arbitration on July 28, 2011.  In its response, the Company denied the allegations of Hyperion and requested the arbitration panel deny Hyperion's requested declaratory relief. Additionally, the Company brought counterclaims against Hyperion and sought a declaration of rights in the Company's favor and an award of damages.On August 16, 2011, Hyperion responded to the Company's counterclaims and asserted new claims for relief. On September 15, 2011, the Company responded to Hyperion's supplemental claims. Pleadings are now closed and the parties are currently engaged in discovery, including depositions. Arbitration hearings are currently scheduled to be held in January of 2012.

In addition to the matters discussed above, in the ordinary course of business, the Company is involved in a number of legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them.  Although the outcome of these actions is not presently determinable, it is the opinion of the Company's management, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations, financial condition or cash flows of the Company.

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INVENTORIES

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

INVENTORIES

11.       INVENTORIES

The Company primarily utilizes third parties to manufacture and package inventories held for sale, takes title to certain inventories once manufactured, and warehouses such goods until packaged for final distribution and sale. Inventories consist of salable products held at the Company's warehouses, as well as raw materials and components at the manufacturers' facilities, and are valued at the lower of cost or market using the first-in, first-out method. The Company provides valuation reserves for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

Inventory costs associated with products that have not yet received regulatory approval are capitalized if, in the view of the Company's management, there is probable future commercial use and future economic benefit. If future commercial use and future economic benefit are not considered probable, then costs associated with pre-launch inventory that has not yet received regulatory approval are expensed as research and development expense during the period the costs are incurred. As of September 30, 2011 and December 31, 2010, there wereno costs capitalized into inventory for products that had not yet received regulatory approval.

Inventories are as follows (in thousands):

	September 30, 2011		December 31, 2010
Raw materials	$	11,251	$	15,801
Work-in-process		3,343		3,236
Finished goods		19,837		24,838
Valuation reserve		(3,559)		(8,593)
Total inventories	$	30,872	$	35,282

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DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

DISCONTINUED OPERATIONS

2.DISCONTINUED OPERATIONS

On February 25, 2011, the Company announced that as a result of the Company's strategic planning process and the current regulatory and commercial capital equipment environment, the Company determined to explore strategic alternatives for its LipoSonix business including, but not limited to, the sale of the stand-alone business. As a result of this decision, the Company now classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes, including comparable period results. The Company engaged an investment banking firm to assist the Company in its exploration of strategic alternatives for LipoSonix. On November1, 2011, the Company sold LipoSonix to Solta Medical, Inc. See Note 21.

Intangible assets and property and equipment related to LipoSonix were determined to be impaired as of December 31, 2010, based on the Company's analysis of the long-lived assets' carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of approximately $7.7 million related to LipoSonix intangible assets and $2.1 million related to LipoSonix property and equipment during the three months ended December 31, 2010. The write-down of intangible assets and property and equipment related to LipoSonix represented the full carrying value of the respective assets as of December 31, 2010. Therefore, no depreciation or amortization expense was recognized during the nine months ended September 30, 2011 related to the discontinued operations, as the long-lived assets of the discontinued operations were written down to $0 as of December 31, 2010.

The following is a summary of loss from discontinued operations, net of income tax benefit, for the three and ninemonths ended September 30, 2011 and 2010 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2011		2010		2011		2010
Net revenues	$	157	$	218	$	513	$	1,615
Cost of revenues		87		251		2,543		1,097
Gross profit		70		(33)		(2,030)		518
Operating expenses:
Selling, general and administrative		3,478		5,351		15,072		12,892
Research and development		1,788		3,589		8,436		10,191
Depreciation and amortization		-		322		-		965
Loss from discontinued operations
before income tax benefit		(5,196)		(9,295)		(25,538)		(23,530)
Income tax benefit		(1,698)		(3,367)		(8,987)		(8,525)
Loss from discontinued operations,
net of income tax benefit	$	(3,498)	$	(5,928)	$	(16,551)	$	(15,005)

The Company includes only revenues and costs directly attributable to the discontinued operations, and not those attributable to the ongoing entity. Accordingly, no interest expense or general corporate overhead costs have been allocated to the LipoSonix discontinued operations. Included in cost of revenues for the nine months ended September 30, 2011 was a $1.9 million charge related to an increase in the valuation reserve for LipoSonix inventory that is not expected to be sold.

The following is a summary of assets and liabilities held for sale associated with the LipoSonix discontinued operations as of September 30, 2011 and December 31, 2010 (in thousands):

	September 30, 2011		December 31, 2010
Cash and cash equivalents	$	572	$	629
Accounts receivable, net		65		129
Inventories, net		4,050		4,495
Deferred tax assets, net		3,162		7,328
Other assets		254		546
Assets held for sale from discontinued operations	$	8,103	$	13,127
Accounts payable	$	1,694	$	1,802
Other liabilities		4,641		5,474
Liabilities held for sale from discontinued operations	$	6,335	$	7,276

The following is a summary of net cash used in operating activities from discontinued operations for the nine months ended September 30, 2011 and 2010 (in thousands):

	Nine Months Ended
	September 30,		September 30,
	2011		2010
Loss from discontinued operations, net of income tax benefit	$	(16,551)	$	(15,005)
Depreciation and amortization		-		965
Share-based compensation expense		(129)		1,116
Decrease in assets held for sale from discontinued operations		5,024		1,774
(Decrease) increase in liabilities held for sale from discontinued operations		(631)		2,818
Net cash used in operating activities from
discontinued operations	$	(12,287)	$	(8,332)

Net cash used in investing activities from discontinued operations of $1.2 million for the nine months ended September 30, 2010 represents purchases of property and equipment.

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OTHER CURRENT LIABILITIES (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Other Current Liabilities Table Text Block

	September 30, 2011		December 31, 2010
Accrued incentives, including SARs liability	$	38,022	$	33,923
Deferred revenue		9,094		16,422
Other accrued expenses		26,792		24,883
	$	73,908	$	75,228

Schedule Of Other Deferred Revenue Table Text Block

	September 30, 2011		December 31, 2010
Deferred revenue - aesthetics products, net
of cost of revenue	$	8,155	$	10,334
Deferred contract revenue		662		3,014
Deferred revenue - sales into distribution
channel in excess of eight weeks of
projected demand		198		582
Other deferred revenue		79		2,492
	$	9,094	$	16,422

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STRATEGIC COLLABORATIONS

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Strategic Collaborations Disclosure Textblock

8.       STRATEGIC COLLABORATIONS

Joint Development Agreement with Lupin

On July 21, 2011, the Company entered into a Joint Development Agreement (the “Joint Development Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to in this paragraph as “Lupin”), whereby the Company and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Joint Development Agreement, subject to the terms and conditions contained therein, the Company made an up-front $20.0 million payment to Lupin and will make additional payments to Lupin of up to $38.0 million upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the agreement. In addition, the Company will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Joint Development Agreement. The $20.0 million up-front payment was recognized as research and development expense during the three months ended September 30, 2011.

Collaboration with a privately-held U.S. biotechnology company

On September 10, 2010, the Company and a privately-held U.S. biotechnology company entered into a sublicense and development agreement to develop an agent for specific dermatological conditions in the Americas and Europe and a purchase option to acquire the privately-held U.S. biotechnology company.

Under the terms of the agreements, the Company paid the privately-held U.S. biotechnology company $5.0 million in connection with the execution of the agreement, and will pay additional potential milestone payments totaling approximately $100.5 million upon successful completion of certain clinical, regulatory and commercial milestones.

During the three months ended December 31, 2010 and June 30, 2011, development milestones were achieved, and the Company made a $10.0 million and a $5.5 million payment, respectively, pursuant to the agreements. The initial $5.0 million payment, the $10.0 million milestone payment and the $5.5 million milestone payment were recognized as research and development expense during the three months ended September 30, 2010, December 31, 2010 and June 30, 2011, respectively.

Research and Development Agreement with Anacor

On February 9, 2011, the Company entered into a research and development agreement with Anacor Pharmaceuticals, Inc. (“Anacor”) for the discovery and development of boron-based small molecule compounds directed against a target for the potential treatment of acne. Under the terms of the agreement, the Company paid Anacor $7.0 million in connection with the execution of the agreement, and will pay up to $153.0 million upon the achievement of certain research, development, regulatory and commercial milestones, as well as royalties on sales by the Company. Anacor will be responsible for discovering and conducting the early development of product candidates which utilize Anacor's proprietary boron chemistry platform, while the Company will have an option to obtain an exclusive license for products covered by the agreement. The initial $7.0 million payment was recognized as research and development expense during the three months ended March 31, 2011.

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CONTINGENT CONVERTIBLE SENIOR NOTES

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

CONTINGENT CONVERTIBLE SENIOR NOTES

13.       CONTINGENT CONVERTIBLE SENIOR NOTES

       In June 2002, the Company sold $400.0 million aggregate principal amount of its 2.5% Contingent Convertible Senior Notes Due 2032 (the “Old Notes”) in private transactions. As discussed below, approximately $230.8 million in principal amount of the Old Notes was exchanged for New Notes on August 14, 2003. The Old Notes bear interest at a rate of 2.5% per annum, which is payable on June 4 and December 4 of each year, beginning on December 4, 2002. The Company also agreed to pay contingent interest at a rate equal to 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2007, if the average trading price of the Old Notes reaches certain thresholds.Contingent interest of $0.3 million was payable at September 30, 2011. No contingent interest related to the Old Notes was payable at December 31, 2010. The Old Notes will mature on June 4, 2032.

       The Company may redeem some or all of the Old Notes at any time on or after June 11, 2007, at a redemption price, payable in cash, of 100% of the principal amount of the Old Notes, plus accrued and unpaid interest, including contingent interest, if any. Holders of the Old Notes may require the Company to repurchase all or a portion of their Old Notes on June 4, 2012 and June 4, 2017, or upon a change in control, as defined in the indenture governing the Old Notes, at 100% of the principal amount of the Old Notes, plus accrued and unpaid interest to the date of the repurchase, payable in cash. Under GAAP, if an obligation is due on demand or will be due on demand within one year from the balance sheet date, even though liquidation may not be expected within that period, it should be classified as a current liability. Accordingly, the outstanding balance of Old Notes along with the deferred tax liability associated with accelerated interest deductions on the Old Notes will be classified as a current liability during the respective twelve month periods prior to June 4, 2012 and June 4, 2017. As of September 30, 2011, $169.1 million of the Old Notes and $60.3 million of deferred tax liabilities were classified as current liabilities in the Company's condensed consolidated balance sheets. The $60.3 million of deferred tax liabilities were included within current deferred tax assets, net. If all of the Old Notes are put back to the Company on June 4, 2012, the Company would be required to pay $169.1 million in outstanding principal, plus accrued interest. The Company would also be required to pay the accumulated deferred tax liability related to the Old Notes.

The Old Notes are convertible, at the holders' option, prior to the maturity date into shares of the Company's Class A common stock in the following circumstances:

• during any quarter commencing after June 30, 2002, if the closing price of the Company's Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 110% of the conversion price of the Old Notes, or $31.96. The Old Notes are initially convertible at a conversion price of $29.05 per share, which is equal to a conversion rate of approximately 34.4234 shares per $1,000 principal amount of Old Notes, subject to adjustment;

• if the Company has called the Old Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the Old Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company's Class A common stock on that day multiplied by the number of shares of the Company's Class A common stock issuable upon conversion of $1,000 principal amount of the Old Notes; or

• upon the occurrence of specified corporate transactions.

       The Old Notes, which are unsecured, do not contain any restrictions on the payment of dividends, the incurrence of additional indebtedness or the repurchase of the Company's securities and do not contain any financial covenants.

       The Company incurred $12.6 million of fees and other origination costs related to the issuance of the Old Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2007.

       On August 14, 2003, the Company exchanged approximately $230.8 million in principal amount of its Old Notes for approximately $283.9 million in principal amount of its 1.5% Contingent Convertible Senior Notes Due 2033 (the “New Notes”). Holders of Old Notes that accepted the Company's exchange offer received $1,230 in principal amount of New Notes for each $1,000 in principal amount of Old Notes. The terms of the New Notes are similar to the terms of the Old Notes, but have a different interest rate, conversion rate and maturity date. Holders of Old Notes that chose not to exchange continue to be subject to the terms of the Old Notes.

       The New Notes bear interest at a rate of 1.5% per annum, which is payable on June 4 and December 4 of each year, beginning December 4, 2003. The Company will also pay contingent interest at a rate of 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes reaches certain thresholds. No contingent interest related to the New Notes was payable at September 30, 2011 or December 31, 2010. The New Notes mature on June 4, 2033.

       As a result of the exchange, the outstanding principal amounts of the Old Notes and the New Notes were $169.2 million and $283.9 million, respectively. The Company incurred approximately $5.1 million of fees and other origination costs related to the issuance of the New Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2008.

Holders of the New Notes were able to require the Company to repurchase all or a portion of their New Notes on June 4, 2008, at 100% of the principal amount of the New Notes, plus accrued and unpaid interest, including contingent interest, if any, to the date of the repurchase, payable in cash. Holders of approximately $283.7 million of New Notes elected to require the Company to repurchase their New Notes on June 4, 2008. The Company paid $283.7 million, plus accrued and unpaid interest of approximately $2.2 million, to the holders of New Notes that elected to require the Company to repurchase their New Notes. The Company was also required to pay an accumulated deferred tax liability of approximately $34.9 million related to the repurchased New Notes. This $34.9 million deferred tax liability was paid during the second half of 2008. Following the repurchase of these New Notes, $181,000 of principal amount of New Notes remained outstanding as of September 30, 2011 and December 31, 2010.

The remaining New Notes are convertible, at the holders' option, prior to the maturity date into shares of the Company's Class A common stock in the following circumstances:

• during any quarter commencing after September 30, 2003, if the closing price of the Company's Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 120% of the conversion price of the New Notes, or $46.51. The New Notes are initially convertible at a conversion price of $38.76 per share, which is equal to a conversion rate of approximately 25.7998 shares per $1,000 principal amount of New Notes, subject to adjustment;

• if the Company has called the New Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the New Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company's Class A common stock on that day multiplied by the number of shares of the Company's Class A common stock issuable upon conversion of $1,000 principal amount of the New Notes; or

• upon the occurrence of specified corporate transactions.

       The remaining New Notes, which are unsecured, do not contain any restrictions on the incurrence of additional indebtedness or the repurchase of the Company's securities and do not contain any financial covenants. The New Notes require an adjustment to the conversion price if the cumulative aggregate of all current and prior dividend increases above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold has not been reached and no adjustment to the conversion price has been made.

During the quarters ended June 30, 2011 and September 30, 2011, the Old Notes met the criteria for the right of conversion into shares of the Company's Class A common stock. This right of conversion of the holders of Old Notes was triggered by the stock closing above $31.96 on 20 of the last 30 trading days and the last trading day of the quarters ended June 30, 2011 and September 30, 2011.During the quarter ended September 30, 2011, no holders of Old Notes converted their Old Notes into shares of the Company's Class A common stock. The holders of Old Notes have this conversion right only until December 31, 2011.At the end of each future quarter, the conversion rights will be reassessed in accordance with the bond indenture agreement to determine if the conversion trigger rights have been achieved. During the quarter ended September 30, 2011, the New Notes did not meet the criteria for the right of conversion.

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IMPAIRMENT OF INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2011

Impairment Of Intangible Assets Disclosure Abstract

Impairment Of Intangible Assets Disclosure

9.       IMPAIRMENT OF INTANGIBLE ASSETS

The Company assesses the potential impairment of long-lived assets when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant under-performance of a product line in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the Company's use of the assets. Recoverability of assets that will continue to be used in the Company's operations is measured by comparing the carrying amount of the asset grouping to the Company's estimate of the related total future net cash flows. If an asset carrying value is not recoverable through the related cash flows, the asset is considered to be impaired. The impairment is measured by the difference between the asset grouping's carrying amount and its fair value, based on the best information available, including market prices or discounted cash flow analysis. If the assets determined to be impaired are to be held and used, the Company recognizes an impairment loss through a charge to operating results to the extent the present value of anticipated net cash flows attributable to the asset are less than the asset's carrying value. When it is determined that the useful life of assets are shorter than originally estimated, and there are sufficient cash flows to support the carrying value of the assets, the Company will accelerate the rate of amortization charges in order to fully amortize the assets over their new shorter useful lives.

During the quarter ended September 30, 2011, an intangible asset related to an authorized generic product from which the Company receives contract revenue was determined to be impaired based on the Company's analysis of the intangible asset's carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the contract revenue related to the authorized generic product included projected net revenues for the authorized generic product for which the Company receives contract revenue being less than originally anticipated.

During the quarter ended September 30, 2010, an intangible asset related to certain of the Company's non-primary products was determined to be impaired based on the Company's analysis of the intangible asset's carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of approximately $2.3 million related to this intangible asset.

Factors affecting the future cash flows of the non-primary products related to the intangible asset include the planned discontinuation of the products, which are not significant components of the Company's operations. In addition, as a result of the impairment analysis, the remaining amortizable life of the intangible asset was reduced to five months. The intangible asset became fully amortized on February 28, 2011.

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RESEARCH & DEVELOPMENT (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Research And Development Expense Detail Table Text Block

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2011		2010		2011		2010
Ongoing research and development costs	$	7,638	$	3,261	$	21,588	$	17,141
Payments related to strategic collaborations		21,000		5,000		35,500		5,000
Share-based compensation expense		95		412		1,114		511
Total research and development	$	28,733	$	8,673	$	58,202	$	22,652

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RESEARCH AND DEVELOPMENT

9 Months Ended

Sep. 30, 2011

Research And Development Disclosure Abstract

Research Development And Computer Software Disclosure Text Block

7.RESEARCH AND DEVELOPMENT

All research and development costs, including payments related to products under development and research consulting agreements, are expensed as incurred. The Company may continue to make non-refundable payments to third parties for new technologies and for research and development work that has been completed. These payments may be expensed at the time of payment depending on the nature of the payment made.

       The Company's policy on accounting for costs of strategic collaborations determines the timing of the recognition of certain development costs. In addition, this policy determines whether the cost is classified as development expense or capitalized as an asset. Management is required to form judgments with respect to the commercial status of such products in determining whether development costs meet the criteria for immediate expense or capitalization. For example, when the Company acquires certain products for which there is already an Abbreviated New Drug Application (“ANDA”) or a New Drug Application (“NDA”) approval related directly to the product, and there is net realizable value based on projected sales for these products, the Company capitalizes the amount paid as an intangible asset. If the Company acquires product rights which are in the development phase and to which the Company has no assurance that the third party will successfully complete its development milestones, the Company expenses such payments.

Research and development expense for the three and nine months endedSeptember 30, 2011 and 2010 are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2011		2010		2011		2010
Ongoing research and development costs	$	7,638	$	3,261	$	21,588	$	17,141
Payments related to strategic collaborations		21,000		5,000		35,500		5,000
Share-based compensation expense		95		412		1,114		511
Total research and development	$	28,733	$	8,673	$	58,202	$	22,652

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STOCK REPURCHASES (DETAILS) (USD $) In Millions, except Share data	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2011
Notes To Consolidated Financial Statement Abstract
Stock Repurchase Program Authorized Amount		$ 200
Treasury Stock Acquired Number Of Shares	49,264
Treasury Stock Acquired Average Cost Per Share	$ 36.03
Structured Share Repurchase Agreement Prepayment	50.0
Stock Repurchase Program Remaining Authorized Repurchase Amount		$ 148.2

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Operating Activities:
Net income (loss)	$ 67,595	$ 99,447
Loss from discontinued operations, net of income tax benefit	16,551	15,005
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,688	20,575
Defined Benefit Plan Amortization Of Prior Service Cost Credit	1,599	0
Adjustment to impairment of available-for-sale investments	0	260
Gain on sale of available-for-sale investments, net	(105)	910
Unrealized gain on supplemental executive retirement plan investments	(47)	0
Share-based compensation expense	20,445	13,003
Deferred income tax benefit	(1,821)	16,708
Tax expense from exercise of stock options and vesting of restricted stock awards	2,265	(869)
Excess tax benefits from share-based payment arrangements	(3,403)	(369)
Increase Decrease Provision For Sales Discounts And Chargebacks	996	1,221
Accretion (amortization) of premium/(discount) on investments	3,774	2,833
Impairment of intangible assets	2,259	2,293
Income from continuing operations	84,146	114,452
Changes in operating assets and liabilities:
Accounts receivable	(23,407)	(49,847)
Inventories	4,410	(11,055)
Other current assets	(5,019)	(5,916)
Accounts payable	6,303	5,063
Reserve for sales returns	11,988	9,345
Income taxes payable	(4,628)	(12,656)
Other current liabilities	(13,929)	916
Other liabilities	710	(2,879)
Accrued consumer rebate and loyalty programs	30,754	25,129
Managed care and Medicaid reserves	10,046	3,510
Net cash provided by operating activities from continuing operations	149,024	132,627
Net Cash Used In Operating Activities From Discontinued Operations	(12,287)	(8,332)
Net cash provided by operating activities	136,737	124,295
Investing Activities:
Purchase of property and equipment	(4,225)	(5,272)
Payments for purchase of product rights	(12,880)	715
Purchase of investments for supplemental executive retirement plan	(9,840)	0
Purchase of available-for-sale investments	(602,765)	(315,023)
Sale of available-for-sale investments	199,574	104,135
Maturity of available-for-sale investments	269,830	94,475
Net cash provided by (used in) investing activities from continuing operations	(160,306)	(120,970)
Net cash used in investing activities from discontinued operations	0	(1,224)
Net cash provided by (used in) investing activities	(160,306)	(122,194)
Financing Activities
Payment of dividends	(13,568)	(9,588)
Payments for the repurchase of common stock	(1,775)	0
Cash paid in advance under structured share repurchase arrangements	(50,000)	0
Withholding of common shares for tax obligations on vested restricted stock awards	(6,508)	(3,426)
Excess tax benefits from share based payment arrangements	3,403	369
Proceeds from exercise of stock options	58,071	13,114
Net cash provided by (used in) financing activities	(10,377)	469
Effect Of Exchange Rate On Cash And Cash Equivalents	(369)	102
Net increase (decrease) in cash and cash equivalents	(34,315)	2,672
Cash and cash equivalents at beginning of period	218,362	207,941
Cash and cash equivalents at end of period	$ 184,047	$ 210,613

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SHARE BASED COMPENSATION

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

SHARE-BASED COMPENSATION

3.       SHARE-BASED COMPENSATION

At September 30, 2011, the Company had seven active share-based employee compensation plans. Of these seven share-based compensation plans, only the 2006 Incentive Award Plan is eligible for the granting of future awards.

Stock Option Awards

Stock option awards are granted at the fair market value on the date of grant. The option awards vest over a period determined at the time the options are granted, ranging from one to five years, and generally have a maximum term of ten years. Certain options provide for accelerated vesting if there is a change in control (as defined in the plans). When options are exercised, new shares of the Company's Class A common stock are issued.

The total value of the stock option awards is expensed ratably over the service period of the employees receiving the awards. As of September 30, 2011, total unrecognized compensation cost related to stock option awards, to be recognized as expense subsequent to September 30, 2011, was approximately $1.2 million and the related weightedaverage period over which it is expected to be recognized is approximately 2.5years.All of the unrecognized compensation cost related to stock option awards relates to continuing operations.

A summary of stock option activity within the Company's stock-based compensation plans and changes for the nine months endedSeptember 30, 2011, is as follows:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Balance at December 31, 2010	6,491,353	$	30.01
Granted	79,933	$	34.30
Exercised	(2,385,326)	$	27.69
Terminated/expired	(80,705)	$	36.82
Balance at September 30, 2011	4,105,255	$	31.31	2.7	$	24,374,272

The intrinsic value of options exercised during the nine months ended September 30, 2011 was $20,534,415. Options exercisable under the Company's share-based compensation plans at September 30, 2011 were 3,951,443, with a weighted average exercise price of $31.51, a weighted average remaining contractual term of 2.5years, and an aggregate intrinsic value of $22,784,758.

A summary of outstanding and exercisable stock options that are fully vested and are expected to vest, based on historical forfeiture rates, as of September 30, 2011, is as follows:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Outstanding, net of expected forfeitures	3,843,409	$	31.54	2.7	$	21,951,973
Exercisable, net of expected forfeitures	3,730,281	$	31.64	2.5	$	21,021,472

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	Nine Months Ended
	September 30, 2011	September 30, 2010
Expected dividend yield	0.77% to 0.88%	1.02% to 1.06%
Expected stock price volatility	0.33	0.33
Risk-free interest rate	2.47% to 2.81%	2.82% to 3.04%
Expected life of options	7.0 Years	7.0 Years

The expected dividend yield is based on expected annual dividends to be paid by the Company as a percentage of the market value of the Company's stock as of the date of grant. The Company determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company.

The weighted average fair value of stock options granted during the nine months ended September 30, 2011 and 2010, was $12.25 and $8.28, respectively.

Restricted Stock Awards

The Company also grants restricted stock awards to certain employees. Restricted stock awards are valued at the closing market value of the Company's Class A common stock on the date of grant, and the total value of the award is expensed ratably over the service period of the employees receiving the grants. As of September 30, 2011, the total amount of unrecognized compensation cost related to nonvested restricted stock awards, to be recognized as expense subsequent to September 30, 2011, was approximately $34.8 million, and the related weighted average period over which it is expected to be recognized is approximately 3.2 years. All of the unrecognized compensation cost related to nonvested restricted stock awards relates to continuing operations.

A summary of restricted stock activity within the Company's share-based compensation plans and changes for the nine months ended September 30, 2011, is as follows:

		Weighted
		Average
		Grant-Date
Nonvested Shares	Shares	Fair Value
Nonvested at December 31, 2010	1,794,445	$	17.94
Granted	758,457	$	31.48
Vested	(485,030)	$	19.19
Forfeited	(29,619)	$	24.00
Nonvested at September 30, 2011	2,038,253	$	22.59

The total fair value of restricted shares vested during the nine months ended September 30, 2011 and 2010 was approximately $9.3 million and $7.8 million, respectively.

Stock Appreciation Rights

During 2009, the Company began granting cash-settled stock appreciation rights (“SARs”) to many of its employees. SARs generally vest over a graduated five-year period and expire seven years from the date of grant, unless such expiration occurs sooner due to the employee's termination of employment, as provided in the applicable SAR award agreement. SARs allow the holder to receive cash (less applicable tax withholding) upon the holder's exercise, equal to the excess, if any, of the market price of the Company's Class A common stock on the exercise date over the exercise price, multiplied by the number of shares relating to the SAR with respect to which the SAR is exercised.  The exercise price of the SAR is the fair market value of a share of the Company's Class A common stock relating to the SAR on the date of grant. The total value of the SAR is expensed over the service period of the employee receiving the grant, and a liability is recognized in the Company's condensed consolidated balance sheets until settled. The fair value of SARs is required to be remeasured at the end of each reporting period until the award is settled, and changes in fair value must be recognized as compensation expense to the extent of vesting each reporting period based on the new fair value. As of September 30, 2011, the total measured amount of unrecognized compensation cost related to outstanding SARs, to be recognized as expense subsequent to September 30, 2011, based on the remeasurement at September 30, 2011, was approximately $31.2 million, and the related weighted average period over which it is expected to be recognized is approximately3.0 years. All of the unrecognized compensation cost related to outstanding SARs relates to continuing operations.

The fair value of each SAR was estimated on the date of the grant, and was remeasured at quarter-end, using the Black-Scholes option pricing model with the following assumptions:

	SARs Granted During the	SARs Granted During the	Remeasurement
	Nine Months Ended	Nine Months Ended	as of
	September 30, 2011	September 30, 2010	September 30, 2011
Expected dividend yield	0.87%	0.89% to 1.06%	0.88%
Expected stock price volatility	0.32	0.32 to 0.33	0.36
Risk-free interest rate	3.12%	2.06% to 3.07%	0.96% to 1.43%
Expected life of SARs	7.0 Years	7.0 Years	4.4 to 6.5 Years

The weighted average fair value of SARs granted during the nine months endedSeptember 30, 2011 and 2010, as of the respective grant dates, was $9.90 and $8.16, respectively. The weighted average fair value of all SARs outstanding as of the remeasurement date of September 30, 2011 was $20.66.

A summary of SARs activity for the nine months ended September 30, 2011 is as follows:

				Weighted
		Weighted			Average
		Average			Remaining	Aggregate
	Number	Exercise			Contractual	Intrinsic
	of SARs	Price			Term	Value
Balance at December 31, 2010	3,030,142	$	16.99
Granted	64,135	$	27.56
Exercised	(279,852)	$	15.54
Terminated/expired	(191,284)	$	16.21
Balance at September 30, 2011	2,623,141	$	17.46	5.0	$	49,884,864

The intrinsic value of SARs exercised during the nine months ended September 30, 2011 was $5,701,172.

As of September 30, 2011, 88,268SARs were exercisable, with a weighted average exercise price of $17.35, a weighted average remaining contractual term of 5.0 years, and an aggregate intrinsic value of $1,688,693.       

Total share-based compensation expense related to continuing operations recognized during the three months and nine months ended September 30, 2011 and 2010 was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Stock options	$	187	$	307	$	670	$	1,145
Restricted stock awards		2,794		2,401		8,593		5,577
Stock appreciation rights		1,457		5,238		11,182		6,281
Total share-based
compensation expense	$	4,438	$	7,946	$	20,445	$	13,003

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INVESTMENTS (DETAILS) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Mar. 31, 2010	Sep. 30, 2011	Sep. 30, 2010
Available For Sale Securities Balance Sheet Reported Amounts Abstract
Available For Sale Securities Current	$ 590,000,000		$ 590,000,000
Available For Sale Securities Noncurrent	45,700,000		45,700,000
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	642,183,000		642,183,000
Available For Sale Securities Gross Unrealized Gains	756,000		756,000
Available For Sale Securities Gross Unrealized Losses	(7,242,000)		(7,242,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0		0
Available For Sale Securities Fair Value Disclosure	635,697,000		635,697,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value	289,368,000		289,368,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value	18,068,000		18,068,000
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses			1,009,000
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses			6,232,000
Available For Sale Securities Gross Realized Gain Loss Abstract
Available For Sale Securities Gross Realized Gains	100,000		100,000
Other Comprehensive Income Available For Sale Securities Adjustment Before Tax Period Increase Decrease			400,000
Available For Sale Securities Debt Maturities Amortized Cost Abstract
Available For Sale Securities Debt Maturities Within One Year Amortized Cost	296,177,000		296,177,000
Available For Sale Securities Debt Maturities After One Through Five Years Amortized Cost	321,706,000		321,706,000
Available For Sale Securities Debt Maturities After Ten Years Amortized Cost	24,300,000		24,300,000
Available For Sale Securities Debt Maturities Fair Value Abstract
Available For Sale Securities Debt Maturities Within One Year Fair Value	296,406,000		296,406,000
Available For Sale Securities Debt Maturities After One Through Five Years Fair Value	321,223,000		321,223,000
Available For Sale Securities Debt Maturities After Ten Years Fair Value	18,068,000		18,068,000
Available For Sale Securities Other Disclosure Items Abstract
Other Than Temporary Impairment Loss Recognized		300,000	0	260,000
Corporate Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	345,409,000		345,409,000
Available For Sale Securities Gross Unrealized Gains	211,000		211,000
Available For Sale Securities Gross Unrealized Losses	(949,000)		(949,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0		0
Available For Sale Securities Fair Value Disclosure	344,671,000		344,671,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value	208,222,000		208,222,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value	0		0
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses			948,000
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses			0
US Treasury And Government [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	239,360,000		239,360,000
Available For Sale Securities Gross Unrealized Gains	532,000		532,000
Available For Sale Securities Gross Unrealized Losses	(56,000)		(56,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0		0
Available For Sale Securities Fair Value Disclosure	239,836,000		239,836,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value	71,824,000		71,824,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value	0		0
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses			56,000
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses			0
Auction Rate Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	24,300,000		24,300,000
Available For Sale Securities Gross Unrealized Gains	0		0
Available For Sale Securities Gross Unrealized Losses	(6,232,000)		(6,232,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0		0
Available For Sale Securities Fair Value Disclosure	18,068,000		18,068,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value	0		0
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value	18,068,000		18,068,000
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses			0
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses			6,232,000
Asset Backed Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	33,114,000		33,114,000
Available For Sale Securities Gross Unrealized Gains	13,000		13,000
Available For Sale Securities Gross Unrealized Losses	(5,000)		(5,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0		0
Available For Sale Securities Fair Value Disclosure	33,122,000		33,122,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value	9,322,000		9,322,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value	0		0
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses			5,000
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses			$ 0

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FAIR VALUE (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Fair Value Assets Measured On Recurring Basis Text Block

			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	Sept. 30, 2011		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	344,671	$	344,671	$	-	$	-
Federal agency notes and bonds		239,836		239,836		-		-
Auction rate floating securities		18,068		-		-		18,068
Asset-backed securities		33,122		33,122		-		-
Total assets measured at fair value	$	635,697	$	617,629	$	-	$	18,068

Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation Text Block

	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at June 30, 2011	$	19,884
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		459
Purchases		-
Settlements		(2,275)
Balance at September 30, 2011	$	18,068
	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at December 31, 2010	$	21,480
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		863
Purchases		-
Settlements		(4,275)
Balance at September 30, 2011	$	18,068

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COMPREHENSIVE INCOME (DETAILS) (USD $) In Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Other Comprehensive Income Loss Net Of Tax Period Increase Decrease Abstract
Total Comprehensive Income (Loss)	$ 19.2	$ 28.4	$ 46.2	$ 101.3
Other Comprehensive Income Defined Benefit Plan Net Prior Service Costs Credit Arising During Period Net Of Tax			$ 21.4

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SERP

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

4.       SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

On June 24, 2011, the Company's Compensation Committee adopted the Medicis Pharmaceutical Supplemental Executive Retirement Plan, as such plan may be amended from time to time (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including the Company's named executive officers. The SERP is effective as of June 1, 2011. Retirement benefits are calculated based on a SERP participant's (1) years of service and (2) average earnings (base salary plus cash bonus or incentive payments) during any three calendar years of service (regardless of whether the years are consecutive), beginning with the 2009 calendar year. The SERP retirement benefit is intended to be paid to participants who reach the “normal retirement date,” which is age 65, or age 59 ½ with twenty years of service, subject to certain exceptions.

A SERP participant vests in 1/6th of his or her retirement benefit per plan year, (which runs from June 1 to May 31), effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant's normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant's separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant's employment agreement, or in the absence of such employment agreement or definitions, in the Company's Executive Retention Plan), or (3) a “change in control” of the Company. A SERP participant accrues his or her retirement benefit based on (x) the participant's number of years of service with the Company (including prior years of service), divided by (y) the number of years designated for such participant's tier (which ranges from five to twenty years).

Participants in the SERP received credit for prior service with the Company. The prior service accrued benefit of approximately $33.8 million was recorded during the three months ended June 30, 2011 as other comprehensive income within stockholders' equity, and is amortized as compensation expense over the remaining service years of each participant. The Company also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income. Amortization of prior service costs recognized as compensation expense during the three and nine months ended September 30, 2011, was approximately $1.2 million and $1.6 million, respectively.

Compensation expense recognized during the three months ended September 30, 2011 related to current service costs was approximately $0.3 million. Interest cost accrued related to prior and current service costs during the three months ended September 30, 2011 was approximately $0.4 million. The total present value of accrued benefits for the SERP as of September 30, 2011 was approximately $34.5 million, which is included in other long-term liabilities in the Company's condensed consolidated balance sheets as of September 30, 2011.

During the three months ended September 30, 2011, the Company purchased life insurance policy investments of approximately $9.8 million to fund the SERP. The life insurance policies cover the SERP participants. The Company intends to make similar annual purchases during each of the next four years. A net gain on the investments of approximately $0.1 million was recognized during the three months ended September 30, 2011. The Company's expected return on the plan assets is 4%. The total investment related to the SERP of $9.9 million is included in other assets in the Company's condensed consolidated balance sheets as of September 30, 2011, and is the cash surrender value of the life insurance policies, representing the fair value of the plan assets.

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RESEARCH & DEVELOPMENT (DETAILS) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Research And Development Expense Abstract
Ongoing Research And Development Costs	$ 7,638	$ 3,261	$ 21,588	$ 17,141
Research And Development Expense Payments Related To Strategic Collaborations	21,000	5,000	35,500	5,000
Research And Development Expense	28,733	8,673	58,202	22,652
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share Based Compensation Expense	4,438	7,946	20,445	13,003
Research And Development Expense [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share Based Compensation Expense	$ 95	$ 412	$ 1,114	$ 511

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DISCONTINUED OPERATIONS (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Disposal Groups Including Discontinued Operations Income Statement Balance Sheet And Additional Disclosures Text Block

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2011		2010		2011		2010
Net revenues	$	157	$	218	$	513	$	1,615
Cost of revenues		87		251		2,543		1,097
Gross profit		70		(33)		(2,030)		518
Operating expenses:
Selling, general and administrative		3,478		5,351		15,072		12,892
Research and development		1,788		3,589		8,436		10,191
Depreciation and amortization		-		322		-		965
Loss from discontinued operations
before income tax benefit		(5,196)		(9,295)		(25,538)		(23,530)
Income tax benefit		(1,698)		(3,367)		(8,987)		(8,525)
Loss from discontinued operations,
net of income tax benefit	$	(3,498)	$	(5,928)	$	(16,551)	$	(15,005)

	September 30, 2011		December 31, 2010
Cash and cash equivalents	$	572	$	629
Accounts receivable, net		65		129
Inventories, net		4,050		4,495
Deferred tax assets, net		3,162		7,328
Other assets		254		546
Assets held for sale from discontinued operations	$	8,103	$	13,127
Accounts payable	$	1,694	$	1,802
Other liabilities		4,641		5,474
Liabilities held for sale from discontinued operations	$	6,335	$	7,276

	Nine Months Ended
	September 30,		September 30,
	2011		2010
Loss from discontinued operations, net of income tax benefit	$	(16,551)	$	(15,005)
Depreciation and amortization		-		965
Share-based compensation expense		(129)		1,116
Decrease in assets held for sale from discontinued operations		5,024		1,774
(Decrease) increase in liabilities held for sale from discontinued operations		(631)		2,818
Net cash used in operating activities from
discontinued operations	$	(12,287)	$	(8,332)

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SEGMENTS (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Reconciliation Of Revenue From Segments To Consolidated Text Block

	Three Months Ended					Nine Months Ended
	September 30,		September 30,			September 30,		September 30,
	2011		2010			2011		2010
Acne and acne-related dermatological products	$	119,119	$	118,506		$	345,711	$	363,483
Non-acne dermatological products		55,659		49,499			165,599		124,767
Non-dermatological products		9,890		9,091			29,098		27,984
Total net revenues	$	184,668	$	177,096		$	540,408	$	516,234
		Three Months Ended					Nine Months Ended
		September 30,		September 30,			September 30,		September 30,
		2011		2010			2011		2010
Acne and acne-related dermatological products		65	%	67	%		64	%	70	%
Non-acne dermatological products		30		28			31		24
Non-dermatological products		5		5			5		6
Total net revenues		100	%	100	%		100	%	100	%

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FAIR VALUE (DETAILS) (USD $) In Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2011
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	$ 344,671	$ 344,671
US Treasury And Government Fair Value Disclosure	239,836	239,836
Auction Rate Securities Fair Value Disclosure	18,068	18,068
Asset Backed Securities Fair Value Disclosure	33,122	33,122
Total Assets Measured At Fair Value	635,697	635,697
Fair Value Inputs Level 1 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	344,671	344,671
US Treasury And Government Fair Value Disclosure	239,836	239,836
Auction Rate Securities Fair Value Disclosure	0	0
Asset Backed Securities Fair Value Disclosure	33,122	33,122
Total Assets Measured At Fair Value	617,629	617,629
Fair Value Inputs Level 2 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	0	0
US Treasury And Government Fair Value Disclosure	0	0
Auction Rate Securities Fair Value Disclosure	0	0
Asset Backed Securities Fair Value Disclosure	0	0
Total Assets Measured At Fair Value	0	0
Fair Value Inputs Level 3 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	0	0
US Treasury And Government Fair Value Disclosure	0	0
Auction Rate Securities Fair Value Disclosure	18,068	18,068
Asset Backed Securities Fair Value Disclosure	0	0
Total Assets Measured At Fair Value	18,068	18,068
Auction Rate Securities [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Beginning Balance	19,884	21,480
Transfers To (From) Level 3	0	0
Total Gains (Losses) Included In Other (Income) Expense, Net	0	0
Total Gains Included In Other Comprehensive Income	459	863
Purchases	0	0
Settlements	(2,275)	(4,275)
Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Ending Balance	$ 18,068	$ 18,068

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INVESTMENTS (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Available For Sale Securities Reconciliation Table Text Block

	September 30, 2011
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	345,409	$	211	$	(949)	$	-	$	344,671
Federal agency notes and bonds		239,360		532		(56)		-		239,836
Auction rate floating securities		24,300		-		(6,232)		-		18,068
Asset-backed securities		33,114		13		(5)		-		33,122
Total securities	$	642,183	$	756	$	(7,242)	$	-	$	635,697

Investments Classified By Contractual Maturity Date Table Text Block

	September 30, 2011
			Estimated
	Cost		Fair Value
Available-for-sale
Due in one year or less	$	296,177	$	296,406
Due after one year through five years		321,706		321,223
Due after 10 years		24,300		18,068
	$	642,183	$	635,697

Schedule Of Unrealized Loss On Investments Table Text Block

	Less Than 12 Months				Greater Than 12 Months
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss
Corporate notes and bonds	$	208,222	$	948	$	-	$	-
Federal agency notes and bonds		71,824		56		-		-
Auction rate floating securities		-		-		18,068		6,232
Asset-backed securities		9,322		5		-		-
Total securities	$	289,368	$	1,009	$	18,068	$	6,232

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OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

OTHER CURRENT LIABILITIES

12.       OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in thousands):

	September 30, 2011		December 31, 2010
Accrued incentives, including SARs liability	$	38,022	$	33,923
Deferred revenue		9,094		16,422
Other accrued expenses		26,792		24,883
	$	73,908	$	75,228

Deferred revenue is comprised of the following (in thousands):

	September 30, 2011		December 31, 2010
Deferred revenue - aesthetics products, net
of cost of revenue	$	8,155	$	10,334
Deferred contract revenue		662		3,014
Deferred revenue - sales into distribution
channel in excess of eight weeks of
projected demand		198		582
Other deferred revenue		79		2,492
	$	9,094	$	16,422

The Company defers revenue, and the related cost of revenue, of its aesthetics products, including DYSPORT®, PERLANE® and RESTYLANE®, until its exclusive U.S. distributor ships the product to physicians. Deferred contract revenue primarily relates to the Company's strategic collaboration with Hyperion Therapeutics, Inc. The Company also defers the recognition of revenue for certain sales of inventory into the distribution channel that are in excess of eight (8) weeks of projected demand.

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SHORT-TERM AND LONG-TERM INVESTMENTS

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

SHORT-TERM AND LONG-TERM INVESTMENTS

5.       SHORT-TERM AND LONG-TERM INVESTMENTS

The Company's policy for its short-term and long-term investments is to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations and delivers an appropriate yield in relationship to the Company's investment guidelines and market conditions. Short-term and long-term investments consist of corporate and various government agency and municipal debt securities. The Company's investments in auction rate floating securities consist of investments in student loans. Management classifies the Company's short-term and long-term investments as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in stockholders' equity. Realized gains and losses and declines in value judged to be other than temporary, if any, are included in other expense in the condensed consolidated statement of operations. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary, results in impairment of the fair value of the investment. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security. Dividends and interest income are recognized when earned. The cost of securities sold is calculated using the specific identification method. At September 30, 2011, the Company has recorded the estimated fair value of available-for-sale securities in short-term and long-term investments of approximately $590.0million and $45.7million, respectively.

Available-for-sale securities consist of the following at September 30, 2011 (in thousands):

	September 30, 2011
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	345,409	$	211	$	(949)	$	-	$	344,671
Federal agency notes and bonds		239,360		532		(56)		-		239,836
Auction rate floating securities		24,300		-		(6,232)		-		18,068
Asset-backed securities		33,114		13		(5)		-		33,122
Total securities	$	642,183	$	756	$	(7,242)	$	-	$	635,697

During the three and nine months ended September 30, 2011, gross realized gains on sales of available-for-sale securities totaled $0.1 million. During the three and nine months ended September 30, 2011, there were no significant gross realized losses on sales of available-for-sale securities. Gross unrealized gains and lossesare determined based on the specific identification method. The net adjustment to unrealized losses during the nine months ended September 30, 2011, on available-for-sale securities included in stockholders' equity totaled $0.4 million.The amortized cost and estimated fair value of the available-for-sale securities at September 30, 2011, by maturity,are shown below (in thousands):

	September 30, 2011
			Estimated
	Cost		Fair Value
Available-for-sale
Due in one year or less	$	296,177	$	296,406
Due after one year through five years		321,706		321,223
Due after 10 years		24,300		18,068
	$	642,183	$	635,697

Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties, and the Company views its available-for-sale securities as available for current operations.At September 30, 2011, approximately $ 45.7 million in estimated fair value expected to mature greater than one year has been classified as long-term investments since these investments are in an unrealized loss position, and management has both the ability and intent to hold these investments until recovery of fair value, which may be maturity.

As of September 30, 2011, the Company's investments included auction rate floating securities with a fair value of $18.1 million. The Company's auction rate floating securities are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals through auctions. The negative conditions in the credit markets from 2008 through the first nine months of 2011 have prevented some investors from liquidating their holdings, including their holdings of auction rate floating securities. During the three months ended March 31, 2008, the Company was informed that there was insufficient demand at auction for the auction rate floating securities. As a result, these affected auction rate floating securities are now considered illiquid, and the Company could be required to hold them until they are redeemed by the holder at maturity. The Company may not be able to liquidate the securities until a future auction on these investments is successful.

During the three months ended March 31, 2010, the Company became aware of new circumstances that directly impacted the valuation of an asset-backed security that is owned by the Company. An unrealized loss on the asset-backed security, based on the Company's intent to hold the security until recovery of the fair value, had previously been recorded in stockholders' equity. Based on the new circumstances related to the investment, the Company determined that the impairment of the asset-backed security was other-than-temporary, as the Company believed it would not recover its investment even if the asset were held to maturity. A $0.3 million impairment charge was therefore recorded in other expense, net, during the three months ended March 31, 2010 related to the asset-backed security. The asset-backed security was sold in April 2010.

The following table shows the gross unrealized losses and the fair value of the Company's investments, with unrealized losses that are not deemed to be other-than-temporarily impaired aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2011 (in thousands):

	Less Than 12 Months				Greater Than 12 Months
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss
Corporate notes and bonds	$	208,222	$	948	$	-	$	-
Federal agency notes and bonds		71,824		56		-		-
Auction rate floating securities		-		-		18,068		6,232
Asset-backed securities		9,322		5		-		-
Total securities	$	289,368	$	1,009	$	18,068	$	6,232

As of September 30, 2011, the Company has concluded that the unrealized losses on its investment securities are temporary in nature and are caused by changes in credit spreads and liquidity issues in the marketplace.  Available-for-sale securities are reviewed quarterly for possible other-than-temporary impairment. This review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security's performance and the creditworthiness of the issuer.  Additionally, the Company does not intendto sell and it is not more-likely-than-not that the Company will be required to sell any of the securities before the recovery of their amortized cost basis.

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DIVIDENDS DECLARED ON COMMON STOCK

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

DIVIDENDS DECLARED ON COMMON STOCK

15.       DIVIDENDS DECLARED ON COMMON STOCK

On September 14, 2011, the Company announced that its Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of the Company's Class A common stock,which was paid onOctober31, 2011, to stockholders of record at the close of business on October 3, 2011. The $5.1 million dividend was recorded as a reduction of accumulated earnings and is included in other current liabilities in the accompanying condensed consolidated balance sheets as of September 30, 2011. The Company has not adopted a dividend policy.

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SERP (DETAILS) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure Abstract
Defined Benefit Plan Amortization Of Prior Service Cost Credit	$ 1,599	$ 0

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SHARE BASED COMPENSATION (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Share Based Compensation Stock Options Activity Table Text Block

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Balance at December 31, 2010	6,491,353	$	30.01
Granted	79,933	$	34.30
Exercised	(2,385,326)	$	27.69
Terminated/expired	(80,705)	$	36.82
Balance at September 30, 2011	4,105,255	$	31.31	2.7	$	24,374,272

Schedule of Share Based Compensation Arrangement by Share Based Payment Award, Options, Vested and Expected to Vest, Outstanding Table Text Block

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Outstanding, net of expected forfeitures	3,843,409	$	31.54	2.7	$	21,951,973
Exercisable, net of expected forfeitures	3,730,281	$	31.64	2.5	$	21,021,472

Schedule Of Share Based Payment Award Stock Options Valuation Assumptions Table Text Block

	Nine Months Ended
	September 30, 2011	September 30, 2010
Expected dividend yield	0.77% to 0.88%	1.02% to 1.06%
Expected stock price volatility	0.33	0.33
Risk-free interest rate	2.47% to 2.81%	2.82% to 3.04%
Expected life of options	7.0 Years	7.0 Years

Schedule Of Sharebased Compensation Restricted Stock And Restricted Stock Units Activity Table Text Block

		Weighted
		Average
		Grant-Date
Nonvested Shares	Shares	Fair Value
Nonvested at December 31, 2010	1,794,445	$	17.94
Granted	758,457	$	31.48
Vested	(485,030)	$	19.19
Forfeited	(29,619)	$	24.00
Nonvested at September 30, 2011	2,038,253	$	22.59

Schedule Of Share Based Payment Award Stock Appreciation Rights Valuation Assumptions Table Text Block

	SARs Granted During the	SARs Granted During the	Remeasurement
	Nine Months Ended	Nine Months Ended	as of
	September 30, 2011	September 30, 2010	September 30, 2011
Expected dividend yield	0.87%	0.89% to 1.06%	0.88%
Expected stock price volatility	0.32	0.32 to 0.33	0.36
Risk-free interest rate	3.12%	2.06% to 3.07%	0.96% to 1.43%
Expected life of SARs	7.0 Years	7.0 Years	4.4 to 6.5 Years

Schedule Of Share Based Compensation Stock Appreciation Rights Award Activity Table Text Block

				Weighted
		Weighted			Average
		Average			Remaining	Aggregate
	Number	Exercise			Contractual	Intrinsic
	of SARs	Price			Term	Value
Balance at December 31, 2010	3,030,142	$	16.99
Granted	64,135	$	27.56
Exercised	(279,852)	$	15.54
Terminated/expired	(191,284)	$	16.21
Balance at September 30, 2011	2,623,141	$	17.46	5.0	$	49,884,864

Schedule Of Compensation Cost For Share Based Payment Arrangements Allocation Of Share Based Compensation Costs By Plan Table Text Block

	Three Months Ended				Nine Months Ended
	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Stock options	$	187	$	307	$	670	$	1,145
Restricted stock awards		2,794		2,401		8,593		5,577
Stock appreciation rights		1,457		5,238		11,182		6,281
Total share-based
compensation expense	$	4,438	$	7,946	$	20,445	$	13,003

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CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Parentheticals (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	$ 4,438	$ 7,946	$ 20,445	$ 13,003
Cost of product revenues
Income Statement Parentheticals [Line Items]
Amounts exclude amortization of intangible assets related to acquired products	5,266	5,184	15,984	15,551
Selling, general and administrative
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	4,343	7,534	19,331	12,491
Research and Development
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	$ 95	$ 412	$ 1,114	$ 512

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COMPREHENSIVE INCOME

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

COMPREHENSIVE INCOME

16.       COMPREHENSIVE INCOME

Total comprehensive income includes net income and other comprehensive income (loss), which consists of foreign currency translation adjustments, unrealized gains and losses on available-for-sale investments and unamortized prior service costs related to the Company's supplemental executive retirement plan, net of income tax effects. Total comprehensive income for the three months endedSeptember 30, 2011 and 2010, was $19.2 million and $28.4 million, respectively. Total comprehensive income for the nine months ended September 30, 2011 and 2010, was $46.2 million and $101.3 million, respectively. Included as a reduction of total comprehensive income for the nine months ended September 30, 2011 is $21.4 million related to the establishment of prior service costs related to the Company's supplemental executive retirement plan, net of income tax benefit.

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IMPAIRMENT OF INTANGIBLE ASSETS (DETAILS) (USD $) In Millions	3 Months Ended
	Sep. 30, 2011 Intangible Asset Related To Authorized Generic Product [Member]	Sep. 30, 2010 Intangible Asset Related To Non Primary Products [Member]
Impaired Intangible Assets [Line Items]
Impaired Intangible Asset Facts And Circumstances Leading To Impairment	Factors affecting the future cash flows of the contract revenue related to the authorized generic product included projected net revenues for the authorized generic product for which the Company receives contract revenue being less than originally anticipated.	Factors affecting the future cash flows of the non-primary products related to the intangible asset include the planned discontinuation of the products, which are not significant components of the Company’s operations.
Impairment Of Intangible Assets Finitelived	$ 2.3	$ 2.3

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NET INCOME PER COMMON SHARE

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

NET INCOME PER COMMON SHARE

18.       NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):

	Three Months Ended
	September 30, 2011							September 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	22,950	$	(3,498)	$	19,452	$	33,506	$	(5,928)	$	27,578
Less: income (loss) allocated to
participating securities		702		-		583		980		-		802
Net income (loss) available to
common stockholders		22,248		(3,498)		18,869		32,526		(5,928)		26,776
Weighted average number of common
shares outstanding		61,336		61,336		61,336		58,509		58,509		58,509
Basic net income (loss) per
common share	$	0.36	$	(0.06)	$	0.31	$	0.56	$	(0.10)	$	0.46
DILUTED
Net income (loss)	$	22,950	$	(3,498)	$	19,452	$	33,506	$	(5,928)	$	27,578
Less: income (loss) allocated to
participating securities		702		-		583		980		-		802
Net income (loss) available to
common stockholders		22,248		(3,498)		18,869		32,526		(5,928)		26,776
Less:
Undistributed earnings allocated to
unvested stockholders		(579)		-		(466)		(899)		-		(721)
Add:
Undistributed earnings re-allocated to
unvested stockholders		572		-		460		894		-		717
Add:
Tax-effected interest expense
related to Old Notes		799		-		799		666		-		666
Net income (loss) assuming dilution	$	23,040	$	(3,498)	$	19,662	$	33,187	$	(5,928)	$	27,438
Weighted average number of common
shares outstanding		61,336		61,336		61,336		58,509		58,509		58,509
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		751		-		751		351		-		351
Weighted average number of common
shares assuming dilution		67,914		61,336		67,914		64,687		58,509		64,687
Diluted net income (loss) per
common share	$	0.34	$	(0.06)	$	0.29	$	0.51	$	(0.10)	$	0.42

	Nine Months Ended
	September 30, 2011							September 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	84,146	$	(16,551)	$	67,595	$	114,452	$	(15,005)	$	99,447
Less: income (loss) allocated to
participating securities		2,645		-		2,097		3,698		-		3,204
Net income (loss) available to
common stockholders		81,501		(16,551)		65,498		110,754		(15,005)		96,243
Weighted average number of common
shares outstanding		60,264		60,264		60,264		58,278		58,278		58,278
Basic net income (loss) per
common share	$	1.35	$	(0.27)	$	1.09	$	1.90	$	(0.26)	$	1.65
DILUTED
Net income (loss)	$	84,146	$	(16,551)	$	67,595	$	114,452	$	(15,005)	$	99,447
Less: income (loss) allocated to
participating securities		2,645		-		2,097		3,698		-		3,204
Net income (loss) available to
common stockholders		81,501		(16,551)		65,498		110,754		(15,005)		96,243
Less:
Undistributed earnings allocated to
unvested stockholders		(2,244)		-		(1,709)		(3,413)		-		(2,919)
Add:
Undistributed earnings re-allocated to
unvested stockholders		2,213		-		1,685		3,395		-		2,903
Add:
Tax-effected interest expense
related to Old Notes		2,175		-		2,175		1,998		-		1,998
Tax-effected interest expense
related to New Notes		1		-		1		1		-		1
Net income (loss) assuming dilution	$	83,646	$	(16,551)	$	67,650	$	112,735	$	(15,005)	$	98,226
Weighted average number of common
shares outstanding		60,264		60,264		60,264		58,278		58,278		58,278
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		869		-		869		332		-		332
Weighted average number of common
shares assuming dilution		66,960		60,264		66,960		64,437		58,278		64,437
Diluted net income (loss) per
common share	$	1.25	$	(0.27)	$	1.01	$	1.75	$	(0.26)	$	1.52

Diluted net income per common share must be calculated using the “if-converted” method. Diluted net income per share using the “if-converted” method is calculated by adjusting net income for tax-effected net interest on the Old Notes and New Notes, divided by the weighted average number of common shares outstanding assuming conversion.

Unvested share-based payment awards that contain rights to receive nonforfeitable dividends or dividend equivalents (whether paid or unpaid) are participating securities, and thus, are included in the two-class method of computing earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Restricted stock granted to certain employees by the Company (see Note 3) participate in dividends on the same basis as common shares, and these dividends are not forfeitable by the holders of the restricted stock. As a result, the restricted stock grants meet the definition of a participating security.

The diluted net income per common share computation for the three months endedSeptember 30, 2011and 2010 excludes 1,695,545 and 7,511,980 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive.The diluted net income per common share computation for the nine months ended September 30, 2011 and 2010 excludes 2,581,316 and 9,969,349 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive.

Due to the net loss from discontinued operations during the three and ninemonths ended September 30, 2011 and 2010, diluted earnings per share and basic earnings per share from discontinued operations are the same, as the effect of potentially dilutive securities would be anti-dilutive.

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NATURE OF BUSINESS

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

NATURE OF BUSINESS

1.NATURE OF BUSINESS

       Medicis Pharmaceutical Corporation (“Medicis” or the “Company”) is a leading specialty pharmaceutical company focusing primarily on the development and marketing of products in the United States (“U.S.”) for the treatment of dermatological and aesthetic conditions. Medicis also markets products in Canada for the treatment of dermatological and aesthetic conditions and began commercial efforts in Europe with the Company's acquisition of LipoSonix, Inc. (“LipoSonix”) in July 2008.

The Company offers a broad range of products addressing various conditions or aesthetic improvements including facial wrinkles, glabellar lines, acne, fungal infections, hyperpigmentation, photoaging, psoriasis, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin). Medicis currently offers 12 branded products. Its primary brands are DYSPORT®, PERLANE®, RESTYLANE®, SOLODYN®, VANOS® and ZIANA®. Medicis entered the non-invasive body contouring market with its acquisition of LipoSonix in July 2008. Beginning in the first quarter of 2011, the Company classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes. See Note 2.

The consolidated financial statements include the accounts of Medicis and its wholly owned subsidiaries. The Company does not have any subsidiaries in which it does not own 100% of the outstanding stock. All of the Company's subsidiaries are included in the consolidated financial statements. All significantintercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements of Medicis have been prepared in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The financial information is unaudited, but reflects all adjustments, consisting only of normal recurring adjustments and accruals, which are, in the opinion of the Company's management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

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SEGMENT AND PRODUCT INFORMATION

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

SEGMENT AND PRODUCT INFORMATION

10.       SEGMENT AND PRODUCT INFORMATION

       The Company operates in one business segment: pharmaceuticals. The Company's current pharmaceutical franchises are divided between the dermatological and non-dermatological fields. The dermatological field represents products for the treatment of acne and acne-related dermatological conditions and non-acne dermatological conditions. The non-dermatological field represents products for the treatment of urea cycle disorderand contract revenue. The acne and acne-related dermatological product lines include SOLODYN® and ZIANA®. During early 2011, the Company discontinued its TRIAZ® branded products and decided to no longer promote its PLEXION® branded products. The non-acne dermatological product lines include DYSPORT®, LOPROX®, PERLANE®, RESTYLANE® and VANOS®. The non-dermatological product lines include AMMONUL®and BUPHENYL®.The non-dermatological field also includes contract revenues associated with licensing agreements and authorized generics.

The Company's pharmaceutical products, with the exception of AMMONUL® and BUPHENYL®, are promoted to dermatologists and plastic surgeons. Such products are often prescribed by physicians outside these two specialties, including family practitioners, general practitioners, primary-care physicians and OB/GYNs, as well as hospitals, government agencies, and others. Currently, the Company's products are sold primarily to wholesalers and retail chain drug stores.

       Net revenues and the percentage of net revenues for each of the product categories are as follows (amounts in thousands):

	Three Months Ended					Nine Months Ended
	September 30,		September 30,			September 30,		September 30,
	2011		2010			2011		2010
Acne and acne-related dermatological products	$	119,119	$	118,506		$	345,711	$	363,483
Non-acne dermatological products		55,659		49,499			165,599		124,767
Non-dermatological products		9,890		9,091			29,098		27,984
Total net revenues	$	184,668	$	177,096		$	540,408	$	516,234
		Three Months Ended					Nine Months Ended
		September 30,		September 30,			September 30,		September 30,
		2011		2010			2011		2010
Acne and acne-related dermatological products		65	%	67	%		64	%	70	%
Non-acne dermatological products		30		28			31		24
Non-dermatological products		5		5			5		6
Total net revenues		100	%	100	%		100	%	100	%

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INVENTORIES (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Inventory Current Table Text Block

	September 30, 2011		December 31, 2010
Raw materials	$	11,251	$	15,801
Work-in-process		3,343		3,236
Finished goods		19,837		24,838
Valuation reserve		(3,559)		(8,593)
Total inventories	$	30,872	$	35,282

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INCOME TAXES

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

INCOME TAXES

14.       INCOME TAXES

Income taxes are determined using an annual effective tax rate, which generally differs from the U.S. Federal statutory rate, primarily because of state and local income taxes, enhanced charitable contribution deductions for inventory, tax credits available in the U.S., the treatment of certain share-based payments that are not designed to normally result in tax deductions, various expenses that are not deductible for tax purposes, changes in valuation allowances against deferred tax assets and differences in tax rates in certain non-U.S. jurisdictions. The Company's effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions it uses to estimate its annual effective tax rate, including factors such as its mix of pre-tax earnings in the various tax jurisdictions in which it operates, changes in valuation allowances against deferred tax assets, reserves for tax audit issues and settlements, utilization of tax credits and changes in tax laws in jurisdictions where the Company conducts operations. The Company recognizes tax benefits only if the tax position is more likely than not of being sustained. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities, along with net operating losses and credit carryforwards. The Company records valuation allowances against its deferred tax assets to reduce the net carrying value to amounts that management believes is more likely than not to be realized.

At September 30, 2011, the Company has an unrealized tax loss of $21.0 million related to the Company's option to acquire Revance or license Revance's topical product that is under development. The Company will not be able to determine the character of the loss until the Company exercises or fails to exercise its option. A realized loss characterized as a capital loss can only be utilized to offset capital gains. At September 30, 2011, the Company has recorded a valuation allowance of $7.6 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

At September 30, 2011, the Company has an unrealized tax loss of $21.9 million related to the Company's option to acquire a privately-held U.S. biotechnology company. If the Company fails to exercise its option, a capital loss will be recognized. A loss characterized as a capital loss can only be used to offset capital gains. At September 30, 2011, the Company has recorded a valuation allowance of $7.9million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

During the three months ended September 30, 2011, the Company recognized a deferred tax asset of $31.9 million related to the excess of tax basis in the common stock of Medicis Technologies Corporation over the carrying amount for financial reporting purposes. The deferred tax asset was recognized due to the expected reversal of this basis upon the sale by the Company of the common stock of Medicis Technologies Corporation. The Company closed its sale of Medicis Technologies Corporation to Solta Medical, Inc., on November 1, 2011 (See Note 21). A capital loss will be recognized on the sale of the common stock of Medicis Technologies Corporation to Solta Medical, Inc. during the three months ended December 31, 2011. As a capital loss can only be used to offset capital gains, the Company has recorded at September 30, 2011, a valuation allowance of $31.9 million against the deferred tax asset associated with this basis difference in order to reduce the carrying value of the deferred tax asset to $0.

During the three months endedSeptember 30, 2011 and September 30, 2010, the Company made net tax payments of $13.0 million and $14.7 million, respectively. During the nine months ended September 30, 2011 and September 30, 2010, the Company made net tax payments of $51.0 million and $62.4 million, respectively.

The Company operates in multiple tax jurisdictions and is periodically subject to audit in these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. The Company and its domestic subsidiaries file a consolidated U.S. federal income tax return. Such returns have either been audited or settled through statute expiration through 2007. The state of California conducted an examination of the Company's tax returns for the periods ending June 30, 2005, December 31, 2005, December 31, 2006 and December 31, 2007. During the three months ended March 31, 2011, the Company reached a settlement for all periods with the state of California and paid approximately $0.5 million. The state of California has also notified the Company of an upcoming examination of the Company's tax returns for the periods ending December 31, 2008 and December 31, 2009.

The Company owns two subsidiaries that file corporate tax returns in Sweden. The Swedish tax authorities examined the tax return of one of the subsidiaries for fiscal 2004. The examiners issued a no change letter, and the examination is complete. The Company's other subsidiary in Sweden has not been examined by the Swedish tax authorities. The Swedish statute of limitations may be open for up to five years from the date the tax return was filed. Thus, all returns filed for periods ending December 31, 2006 forward are open under the statute of limitations.

At September 30, 2011 and December 31, 2010, the Company had unrecognized tax benefitsof $1.0 million and $1.4 million, respectively. The amount of unrecognized tax benefits which, if ultimately recognized,could favorablyaffect the Company's effective tax rate in a future period is $0.6 million and $0.9 million as of September 30, 2011 and December 31, 2010, respectively.During the next twelve months, the Company estimates that it is reasonably possible that the amount of unrecognized tax benefits will decrease by $0.7 million.

The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. The Company had approximately $0.5million for the payment of interest and penalties accrued (net of tax benefit) at September 30, 2011 and December 31, 2010.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 184,047	$ 218,362
Short Term Investments	589,963	485,192
Accounts receivable, net	153,033	130,622
Inventories, net	30,872	35,282
Deferred tax assets, net	28,735	70,461
Other current assets	20,287	15,268
Assets held for sale from discontinued operations	8,103	13,127
Total current assets	1,015,040	968,314
Property and equipment, net	23,150	24,435
Net intangible assets	189,752	195,308
Goodwill	92,398	92,398
Deferred tax assets, net	92,234	36,898
Long-term investments	45,734	21,480
Other assets	12,878	2,991
Total Assets	1,471,186	1,341,824
Current liabilities
Accounts payable	47,318	41,015
Current portion contingent convertible senior notes	169,145	0
Reserve for sales returns	72,680	60,692
Accrued Consumer Rebates And Loyalty Programs	132,432	101,678
Managed Care And Medicaid Reserves	59,421	49,375
Income taxes payable	0	4,628
Other current liabilities	73,908	75,228
Liabilities held for sale from discontinued operations	6,335	7,276
Total current liabilities	561,239	339,892
Long-term liabilities
Contingent convertible senior notes	181	169,326
Other liabilities	39,565	5,084
Stockholders' Equity
Preferred stock	0	0
Additional paid-in capital	743,367	715,651
Accumulated other comprehensive (loss) income	(23,567)	(2,149)
Accumulated earnings	513,316	460,716
Less: Treasury stock	363,944	347,691
Total stockholders' equity	870,201	827,522
Total liabilities and stockholders' equity	1,471,186	1,341,824
Class A
Stockholders' Equity
Common stock	1,029	995
Class B
Stockholders' Equity
Common stock	$ 0	$ 0

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EARNINGS PER SHARE (TABLES)

9 Months Ended

Sep. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Earnings Per Share Basic And Diluted Table Text Block

	Three Months Ended
	September 30, 2011							September 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	22,950	$	(3,498)	$	19,452	$	33,506	$	(5,928)	$	27,578
Less: income (loss) allocated to
participating securities		702		-		583		980		-		802
Net income (loss) available to
common stockholders		22,248		(3,498)		18,869		32,526		(5,928)		26,776
Weighted average number of common
shares outstanding		61,336		61,336		61,336		58,509		58,509		58,509
Basic net income (loss) per
common share	$	0.36	$	(0.06)	$	0.31	$	0.56	$	(0.10)	$	0.46
DILUTED
Net income (loss)	$	22,950	$	(3,498)	$	19,452	$	33,506	$	(5,928)	$	27,578
Less: income (loss) allocated to
participating securities		702		-		583		980		-		802
Net income (loss) available to
common stockholders		22,248		(3,498)		18,869		32,526		(5,928)		26,776
Less:
Undistributed earnings allocated to
unvested stockholders		(579)		-		(466)		(899)		-		(721)
Add:
Undistributed earnings re-allocated to
unvested stockholders		572		-		460		894		-		717
Add:
Tax-effected interest expense
related to Old Notes		799		-		799		666		-		666
Net income (loss) assuming dilution	$	23,040	$	(3,498)	$	19,662	$	33,187	$	(5,928)	$	27,438
Weighted average number of common
shares outstanding		61,336		61,336		61,336		58,509		58,509		58,509
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		751		-		751		351		-		351
Weighted average number of common
shares assuming dilution		67,914		61,336		67,914		64,687		58,509		64,687
Diluted net income (loss) per
common share	$	0.34	$	(0.06)	$	0.29	$	0.51	$	(0.10)	$	0.42

	Nine Months Ended
	September 30, 2011							September 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	84,146	$	(16,551)	$	67,595	$	114,452	$	(15,005)	$	99,447
Less: income (loss) allocated to
participating securities		2,645		-		2,097		3,698		-		3,204
Net income (loss) available to
common stockholders		81,501		(16,551)		65,498		110,754		(15,005)		96,243
Weighted average number of common
shares outstanding		60,264		60,264		60,264		58,278		58,278		58,278
Basic net income (loss) per
common share	$	1.35	$	(0.27)	$	1.09	$	1.90	$	(0.26)	$	1.65
DILUTED
Net income (loss)	$	84,146	$	(16,551)	$	67,595	$	114,452	$	(15,005)	$	99,447
Less: income (loss) allocated to
participating securities		2,645		-		2,097		3,698		-		3,204
Net income (loss) available to
common stockholders		81,501		(16,551)		65,498		110,754		(15,005)		96,243
Less:
Undistributed earnings allocated to
unvested stockholders		(2,244)		-		(1,709)		(3,413)		-		(2,919)
Add:
Undistributed earnings re-allocated to
unvested stockholders		2,213		-		1,685		3,395		-		2,903
Add:
Tax-effected interest expense
related to Old Notes		2,175		-		2,175		1,998		-		1,998
Tax-effected interest expense
related to New Notes		1		-		1		1		-		1
Net income (loss) assuming dilution	$	83,646	$	(16,551)	$	67,650	$	112,735	$	(15,005)	$	98,226
Weighted average number of common
shares outstanding		60,264		60,264		60,264		58,278		58,278		58,278
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		869		-		869		332		-		332
Weighted average number of common
shares assuming dilution		66,960		60,264		66,960		64,437		58,278		64,437
Diluted net income (loss) per
common share	$	1.25	$	(0.27)	$	1.01	$	1.75	$	(0.26)	$	1.52

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INCOME TAXES (DETAILS) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Mar. 31, 2011	Dec. 31, 2010
Tax Credit Carryforward [Line Items]
Income Taxes Paid Net	$ 13,000,000	$ 14,700,000	$ 51,000,000	$ 62,400,000
Income Tax Uncertainties Abstract
Income Tax Examination Liability Refund Adjustment From Settlement With Taxing Authority					500,000
Unrecognized Tax Benefits Beginning Balance			1,400,000
Unrecognized Tax Benefits Ending Balance	1,000,000		1,000,000
Unrecognized Tax Benefits That Would Impact Effective Tax Rate	600,000		600,000			900,000
Significant Change In Unrecognized Tax Benefits Is Reasonably Possible Amount Of Unrecorded Benefit	700,000		700,000
Unrecognized Tax Benefits Income Tax Penalties And Interest Accrued	500,000		500,000			500,000
Deferred Tax Asset Parents Basis In Discontinued Operation	31,900,000		31,900,000
Option To Acquire Revance Or License Product Under Development [Member]
Tax Credit Carryforward [Line Items]
Tax Credit Carryforward Amount	21,000,000		21,000,000
Tax Credit Carryforward Valuation Allowance	7,600,000		7,600,000
Tax Credit Carryforward Deferred Tax Asset	0		0
Option To Acquire Privately Held US Biotechnology Company [Member]
Tax Credit Carryforward [Line Items]
Tax Credit Carryforward Amount	21,900,000		21,900,000
Tax Credit Carryforward Valuation Allowance	7,900,000		7,900,000
Tax Credit Carryforward Deferred Tax Asset	$ 0		$ 0

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SEGMENTS (DETAILS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	$ 184,668	$ 177,096	$ 540,408	$ 516,234
Net Revenues Total	184,668	177,096	540,408	516,234
Net Revenues Percent	100.00%	100.00%	100.00%	100.00%
Acne And Acne Related Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	119,119	118,506	345,711	363,483
Net Revenues Total	119,119	118,506	345,711	363,483
Net Revenues Percent	65.00%	67.00%	64.00%	70.00%
Non Acne Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	55,659	49,499	165,599	124,767
Net Revenues Total	55,659	49,499	165,599	124,767
Net Revenues Percent	30.00%	28.00%	31.00%	24.00%
Non Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	9,890	9,091	29,098	27,984
Net Revenues Total	$ 9,890	$ 9,091	$ 29,098	$ 27,984
Net Revenues Percent	5.00%	5.00%	5.00%	6.00%

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INVENTORIES (DETAILS) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Inventory Net Abstract
Inventory Raw Materials	$ 11,251	$ 15,801
Inventory Work In Process	3,343	3,236
Inventory Finished Goods	19,837	24,838
Inventory Valuation Reserves	(3,559)	(8,593)
Inventories, net	$ 30,872	$ 35,282

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DISCONTINUED OPERATIONS (DETAILS) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2011	Dec. 31, 2010	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Notes To Consolidated Financial Statement Abstract
Impairment Of Intangible Assets Discontinued Operations		$ 7,700,000
Impairment Of Property And Equipment Discontinued Operations		2,100,000
Disposal Group Including Discontinued Operation Income Statement Disclosures [Abstract]
Net Revenues Discontinued Operations	157,000		218,000	513,000	1,615,000
Cost Of Revenues Discontinued Operations	87,000		251,000	2,543,000	1,097,000
Gross Profit Discontinued Operations	70,000		(33,000)	(2,030,000)	518,000
Selling General And Administrative Expense Discontinued Operations	3,478,000		5,351,000	15,072,000	12,892,000
Research And Development Expense Discontinued Operations	1,788,000		3,589,000	8,436,000	10,191,000
Depreciation And Amortization Expense Discontinued Operations	0		322,000	0	965,000
Discontinued Operation Income Loss From Discontinued Operation Before Income Tax	(5,196,000)		(9,295,000)	(25,538,000)	(23,530,000)
Income Tax Benefit Discontinued Operation	(1,698,000)		(3,367,000)	(8,987,000)	(8,525,000)
Loss from discontinued operations, net of income tax benefit	(3,498,000)		(5,928,000)	(16,551,000)	(15,005,000)
Increase In Inventory Valuation Reserve Discontinued Operations				1,900,000
Assets Of Disposal Group Including Discontinued Operation Current [Abstract]
Cash And Cash Equivalents Discontinued Operations	572,000	629,000		572,000
Accounts Receivable Net Discontinued Operations	65,000	129,000		65,000
Inventories Net Discontinued Operations	4,050,000	4,495,000		4,050,000
Deferred Tax Assets Net Discontinued Operations	3,162,000	7,328,000		3,162,000
Other Current Assets Discontinued Operations	254,000	546,000		254,000
Assets of Disposal Group, Including Discontinued Operation, Current, Total	8,103,000	13,127,000		8,103,000
Liabilities Of Disposal Group Including Discontinued Operation Current Abstract
Accounts Payable Discontinued Operations	1,694,000	1,802,000		1,694,000
Other Current Liabilities Discontinued Operations	4,641,000	5,474,000		4,641,000
Liabilities of Disposal Group, Including Discontinued Operation, Current, Total	6,335,000	7,276,000		6,335,000
Net Cash Provided By Used In Discontinued Operations Abstract
Income Loss From Discontinued Operations Net Of Tax	(3,498,000)		(5,928,000)	(16,551,000)	(15,005,000)
Depreciation And Amortization Discontinued Operations				0	965,000
Share Based Compensation Discontinued Operations				(129,000)	1,116,000
Increase Decrease In Assets Of Disposal Group Including Discontinued Operation Current				5,024,000	1,774,000
Increase Decrease In Liabilities Of Disposal Group Including Discontinued Operation Current				(631,000)	2,818,000
Cash Provided By Used In Operating Activities Discontinued Operations				(12,287,000)	(8,332,000)
Cash Provided By Used In Investing Activities Discontinued Operations				$ 0	$ (1,224,000)