EMPLOYMENT AGREEMENT WITH JONAH SHACKNAI
First Amendment to the Employment Agreement
Second Amendment to the Employment Agreement
Third Amendment to the Employment Agreement
Fourth Amendment to the Employment Agreement
                                            
                        
EXHIBIT 10.9
 
 
                              EMPLOYMENT AGREEMENT
 
         THIS AGREEMENT is made as of this 24th day of July 1996 between MEDICIS
PHARMACEUTICAL CORP., a corporation organized under the laws of the State of
Delaware (the "Company") with offices located at 4343 East Camelback Road,
Phoenix, Arizona, and Jonah Shacknai (the "Executive"), residing at 5868 East
Berneil Lane, Paradise Valley, Arizona:
 
                                   WITNESSETH:
 
         WHEREAS, the Company and the Executive desire to enter into the present
Agreement whereby the Executive will continue to provide personal services to
the Company as Chairman and Chief Executive officer; and
 
         WHEREAS, in its business, the Company has developed and uses valuable
technical and nontechnical information including information relating to
development, use, manufacture and marketing of certain biologically-active
compounds, and it is necessary for the Company to protect certain of the
information either by patents, copyrights, or by holding it secret or
confidential; and
 
         WHEREAS, the aforesaid information is vital to the success of the
Company's business, and the Executive through his activities
                                                                               2
 
may become acquainted therewith, and may contribute thereto, either through
research, inventions, discoveries or otherwise; and
 
         WHEREAS, in the course of his employment, the Executive has gained and
will gain knowledge of the business affairs, finances, management, marketing
programs and philosophy, customers and methods of operation of the Company; and
 
         WHEREAS, the Company would suffer irreparable harm if the Executive
were to use such knowledge, information and business acumen in competition with
the Company,
 
         NOW, THEREFORE, in consideration of the continued employment of
Executive by the Company as Chairman and Chief Executive Officer, the above
premises and the mutual agreements hereinafter set forth, the receipt, adequacy
and sufficiency of which is hereby acknowledged, the parties agree as follows:
 
         1.       Definitions.
 
                  (a) "Business of the Company" shall mean and include the
business of developing, manufacturing, marketing, selling and using certain
chemical compounds for use in the dermatologic industry or such other businesses
as the Company derived substantial revenues from, which revenues exceed twenty
(20%) percent of the Company's gross annual revenues in the Company's most
recent fiscal year.
 
                  (b) "Competing Business" shall mean any business which is the
same or essentially the same as the Business of the Company.
                                                                               3
 
                  (c) "Confidential Information" shall mean all non public
customer lists, sales and marketing information, customer account records,
training and operations material and memoranda, trade secrets, strategic
planning materials and information product development plans, scientific and
technical information, personnel records, pricing information, and financial
information concerning or relating to the business, accounts, customers,
employees and affairs of the Company, obtained by or furnished, disclosed or
disseminated to the Executive, or obtained, assembled or compiled by the
Executive or under his supervision during the course of his employment by the
Company, and all physical embodiments of the foregoing, all of which are hereby
agreed to be the property of and confidential to the Company, but Confidential
Information shall not include any of the foregoing to the extent the same is or
becomes publicly known through no fault or breach of this Agreement by the
Executive.
 
         2.       Terms of Employment; Duties.
 
                  (a) The Company employs the Executive as Chairman of the Board
of Directors of the Company, and Chief Executive Officer of the Company, and the
Executive accepts such employment with the Company in that capacity subject to
the terms and conditions hereof. The Executive shall in such office have the
responsibilities which include presiding over and participating in deliberations
of the Board as its Chairman and as a member of the Board;
 
                                                                               4
 
serving on the Executive Committee of the Board; exercising ultimate
responsibility on a reporting basis for sales, marketing, research and
development, operations, regulatory compliance, finance, personnel, corporate
development, public and shareholder relations and governmental relations
activities of the Company; exercising ultimate responsibility for strategic
planning and evaluation, and serving as Company's official spokesman and
representative in all matters.
 
                  (b) Throughout his employment hereunder, the Executive shall
devote substantially all of his time, energy and skill during regular business
hours to the performance of the duties of his employment (reasonable vacations,
reasonable absences due to illness, and reasonable time as may be necessary for
the Executive to manage his personal investments, excepted), shall faithfully
and industriously perform such duties, and shall diligently follow and implement
all management policies and decisions of the Company.
 
         3.       Compensation and Related Matters
 
                  (a) For his services hereunder, the Company shall pay to the
Executive the compensation and provide the benefits set forth in Exhibit A
attached hereto and incorporated herein as part of this Agreement and such
benefits as are otherwise provided for herein.
                                                                               5
 
                  (b) The Executive shall be eligible to fully participate in
all present or future pension, retirement, medical, dental, disability, life
insurance or any other employee benefit plans of the Company, and in addition,
the Executive shall be eligible to fully participate in all present or future
incentive compensation, bonus, profit sharing, stock option or stock purchase
plans of the Company as and to the extent granted or approved and determined by
the Board of Directors of the Company, subject to the provisions of Exhibit A
hereof.
 
         4.       Term and Termination of This Agreement.
 
                  (a) The Executive's employment under this Agreement shall be.
for a period of five (5) years commencing on July 1, 1996 and expiring on June
30, 2001 ("the Initial Term"), which period shall automatically be extended
beyond its current five-year term, without further action by the parties, as of
June 30, 2001 and as of each succeeding five-year period thereafter, for another
five (5) year period beginning on July 1, 2001 and each succeeding five (5) year
period, unless either party shall have served written notice upon the other six
(6) months prior to June 30, 2001, or prior to June 30th of the expiration date
occurring on each succeeding five (5) year period thereafter, of its intention
to terminate or modify this Agreement, subject however to the earlier
termination thereof pursuant to the provisions of this Agreement. Should this
Agreement be automatically renewed for any five (5)
                                                                               6
 
year period, the terms of said Agreement shall remain the same, except for any
increases in the salary, bonuses or benefits provided by the Company to the
Executive.
 
                  (b) The term of the Executive's employment hereunder may be
terminated prior to the expiration of the Initial Term (or any extension or
automatic renewal thereof) in the following events:
 
                           (i)   termination by mutual agreement of the parties;
 
                           (ii)  termination by the Company without cause upon
                                 sixty (60) days' written notice to the
                                 Executive, as provided for in Section
                                 5(a)(iii);
 
                           (iii) termination upon the Executive's death or
                                 disability as defined in and as provided for in
                                 Section 5(a)(v);
 
                           (iv)  termination of the Executive for cause, as
                                 provided for in Sections 5(a)(ii) and 7;
 
                           (v)   resignation by the Executive for good reason,
                                 as provided for in Sections 5(a)(iii) and 8;
                                                                               7
 
                           (vi)  termination of the Executive arising as a
                                 result of change in ownership or control, as
                                 provided for in Sections 5(a)(iii) and 9; or
 
                           (vii) voluntary resignation by the Executive for
                                 reasons other than those falling within
                                 paragraph (i), (v) or (vi) herein.
 
         5.       Payments Upon Termination
 
                  (a)      In the event that the Executive's employment
                           hereunder is terminated pursuant to Section 4(b)
                           above, the Company shall pay to Executive the
                           following amounts within thirty (30) days of such
                           termination or as otherwise set forth below:
 
                           (i)    If the Executive's employment is terminated
                                  pursuant to subsection 4(b)(i), the Company
                                  shall pay to the Executive all amounts owing
                                  to the Executive as Annual Compensation
                                  through the Date of Termination (as defined
                                  herein), consisting of Base Salary through
                                  the end of the calendar month from the Date
                                  of Termination and a pro rata bonus based
                                  upon the Executive's prior year's bonus.
                                                                            8
 
                           (ii)   If the Executive's employment is terminated
                                  by the Company for Cause (as defined in
                                  Section 7 herein) pursuant to subsection
                                  4(b)(iv), or if the Executive voluntarily
                                  resigns his employment pursuant to Section
                                  4(b)(vii), the Company shall pay to the
                                  Executive all amounts owing to the Executive
                                  as Base Salary through the end of the
                                  calendar month of the Date of Termination.
 
                           (iii)  (a)  If the Executive's employment is      
                                       terminated by the Company without   
                                       cause (Section 4(b)(ii)), or in the 
                                       event of the termination of this    
                                       Employment Agreement pursuant to    
                                       Section 4(b)(v) and Section 8       
                                       herein (Resignation by Executive    
                                       For Good Reason), or in the event   
                                       the Company shall terminate this    
                                       Employment Agreement for any reason 
                                       other than pursuant to Section      
                                       4(a)(iv) (cause) or Section         
                                       4(a)(iii) (death or disability), or
                                       Section 4(b)(vi) and Section 9   
                                       (Termination of Employment as a     
                                       Result of Change In Ownership or    
                                       Control):                           
                                                                               9
 
                                            --       the Company shall pay the
                                                     Executive his then current
                                                     annual compensation, and a
                                                     pro rata bonus based on the
                                                     Executive's prior year's
                                                     bonus, through the Date of
                                                     Termination.
 
                                            --       in lieu of any further
                                                     salary payments to the
                                                     Executive for periods
                                                     subsequent to the Date of
                                                     Termination, the Company
                                                     shall pay as severance to
                                                     the Executive on the fifth
                                                     day following the Date of
                                                     Termination, a lump sum
                                                     payment equal to the number
                                                     of months remaining from
                                                     the date of termination
                                                     until the expiration date
                                                     of this Employment
                                                     Agreement, or any renewal
                                                     thereof, divided by twelve
                                                     (12), times the sum of (a)
                                                     the Executive's annual Base
                                                     Salary at the highest rate
                                                     in effect during the twelve
                                                     (12) months immediately
                                                     preceding the Date of
                                                     Termination and (b) the
                                                     average of the annual bonus
                                                     payments, if any, paid to
                                                     the Executive in the
                                                     preceding three (3) years,
                                                     however in
                                                                              10
 
                                                     no event shall the amount
                                                     of severance to be paid to
                                                     the Executive be less than
                                                     the amount of payment in
                                                     the event of non renewal of
                                                     the Employment Agreement,
                                                     as provided for in
                                                     paragraph 6 of this
                                                     Agreement, i.e. a lump sum
                                                     payment equal to (i) two
                                                     (2) times the sum of (A)
                                                     the Executive's annual Base
                                                     Salary at the highest rate
                                                     in effect during the twelve
                                                     (12) months immediately
                                                     preceding the Date of
                                                     Termination and (B) the
                                                     average of the Annual bonus
                                                     payments, if any, paid to
                                                     the Executive in the
                                                     preceding three (3) years;
                                                     and (ii) an additional
                                                     amount equal to 1/24 of the
                                                     lump sum payment provided
                                                     in clause (i), above,
                                                     multiplied by each full
                                                     year of the Executive's
                                                     service with the Company.
 
                                            --       the Company shall pay all 
                                                     other damages to which the
                                                     Executive may be entitled 
                                                     as a result of the
                                                     Company's termination of
                                                     his
                                                                              11
 
                                                     employment under this
                                                     Agreement, except for
                                                     Cause, including damages
                                                     for any and all loss of
                                                     benefits to the Executive
                                                     under the employee benefit
                                                     plans which he would have
                                                     received had this Agreement
                                                     not been terminated for
                                                     reasons set forth in
                                                     subsections 4(b)(ii)
                                                     4(b)(v) and 4(b)(vi),
                                                     herein, and had the
                                                     Executive's employment
                                                     continued for the full
                                                     Initial Term, or for the
                                                     full period of any
                                                     extension or automatic
                                                     renewal, and including all
                                                     legal fees and expenses
                                                     incurred by the Executive
                                                     in contesting or disputing
                                                     any such termination or in
                                                     seeking to obtain or
                                                     enforce any right or
                                                     benefit provided by this
                                                     Employment Agreement.
 
                           (iii)(b)         In the event of the termination of
                                            this Employment Agreement pursuant
                                            to Section 4(b)(vi) and Section 9
                                            herein (Termination of Employment as
                                            a Result of Change In Ownership Or
                                            Control):
                                                                              12
 
                                            --       the Company shall pay the
                                                     Executive his then current
                                                     annual compensation, and a
                                                     pro rata bonus based on the
                                                     Executive's prior year's
                                                     bonus, through the Date of
                                                     Termination.
 
                                            --       in lieu of any further
                                                     salary payments to the
                                                     Executive for periods
                                                     subsequent to the Date of
                                                     Termination, the Company
                                                     shall pay as severance to
                                                     the Executive on the fifth
                                                     day following the Date of
                                                     Termination, a lump sum
                                                     payment equal to 4 times
                                                     the sum of (a) the
                                                     Executive's annual Base
                                                     Salary at the highest rate
                                                     in effect during the twelve
                                                     (12) months immediately
                                                     preceding the Date of
                                                     Termination and (b) the
                                                     average of the annual bonus
                                                     payments, if any, paid to
                                                     the Executive in the
                                                     preceding three (3) years;
                                                     and
 
                                            --       the Company shall pay all 
                                                     other damages to which the
                                                     Executive may be entitled 
                                                     as a result of the
13
 
                                                     Company's termination of
                                                     his employment under this
                                                     Agreement, except for
                                                     Cause, including damages
                                                     for any and all loss of
                                                     benefits to the Executive
                                                     under the employee benefit
                                                     plans which he would have
                                                     received had this Agreement
                                                     not been terminated for
                                                     reasons set forth in
                                                     subsections 4(b)(ii)
                                                     4(b)(v) and 4(b)(vi),
                                                     herein, and had the
                                                     Executive's employment
                                                     continued for the full
                                                     Initial Term, or for the
                                                     full period of any
                                                     extension or automatic
                                                     renewal, and including all
                                                     legal fees and expenses
                                                     incurred by the Executive
                                                     in contesting or disputing
                                                     any such termination or in
                                                     seeking to obtain or
                                                     enforce any right or
                                                     benefit provided by this
                                                     Employment Agreement.
 
                           (iv)   If Executive's employment is terminated
                                  pursuant to subsection 4(b)(iii) by reason
                                  of Executive's death, the Company agrees to
                                  pay to the legal representative of his
                                  estate, (i) for a period of twelve (12)
                                  months
                                                                           14
 
                                  (commencing with the Date of Termination)
                                  an amount equal to and payable at the same
                                  rate at his then current Base Salary, and
                                  (ii) any payment the Executive's spouse,
                                  beneficiaries, or estate may be entitled to
                                  receive pursuant to any pension or employee
                                  benefit plan or life insurance policy
                                  presently maintained by the Company.
 
                           (v)    During any period that the Executive fails to
                                  perform his duties hereunder as a result of
                                  incapacity due to his physical or mental or
                                  emotional illness, the Executive shall
                                  continue to receive his full Base Salary
                                  along with any bonus payments awarded by the
                                  Board of Directors until the Executive
                                  returns to his duties or until his employment
                                  is terminated for reason of disability
                                  pursuant to Section 4(b)(iii).
 
                                  "Disability" shall mean the inability of
                                  the Executive to perform the duties of
                                  Chairman and Chief Exchange Officer of the
                                  Company due to physical, mental or
                                  emotional incapacity or illness, where such
                                  inability is expected to result in death or
                                  to be of long-continued
                                                                           15
 
                                  and indefinite duration, but in no event
                                  shall such duration be less than One
                                  Hundred Eighty (180) consecutive days. The
                                  determination of "Disability" shall be made
                                  by the Board of Directors of the Company
                                  ("the Board") and the Executive, as
                                  determined by an independent physician
                                  selected by both the Board and the
                                  Executive. In the event of such Disability,
                                  the Company may, at its election and by
                                  providing written notice thereof to the
                                  Executive within sixty (60) days after such
                                  determination, terminate the Executive's
                                  employment hereunder effective on the date
                                  set forth in such notice. If the Board or
                                  the Company does not timely give notice to
                                  the Executive of its election to terminate
                                  the Executive for such Disability, then the
                                  Company shall be deemed to have waived its
                                  right to terminate the Executive based upon
                                  such Disability.
 
                                  After such termination because of the
                                  Executive's disability, the Executive shall
                                  be paid, in substantially equal monthly
                                  installments, 100% of his Base Salary (at
                                  the rate in effect at the time Notice of
                                                                              16
 
                                  Termination is given) for twelve (12)
                                  months, and thereafter an annual amount
                                  equal to 50% of such Base Salary for the
                                  balance of the Initial Term, but in no
                                  event for less than a second twelve (12)
                                  month period.
 
                  (b)      In no event shall any payment pursuant to this
                           Section 5 be made to the extent that it would
                           constitute an "excess parachute payment," as
                           defined in Section 280G of the Internal Revenue
                           Code of 1986.  Should any such payment provided for
                           in section 5 constitute an "excess parachute
                           payment" as defined in Section 280G of the Internal
                           Revenue Code of 1986, the Company and the Executive
                           shall meet in good faith to negotiate a substitute
                           payment to the Executive equal to that amount which
                           constitutes the excess parachute payment, the
                           payment of which amount is permissible under the
                           Internal Revenue Code and regulations promulgated
                           thereunder.
 
                  (c)      Unless the Executive is terminated for Cause pursuant
                           to Section 4(a)(iii) or voluntarily resigns his
                           employment pursuant to section 4(a)(vii), the Company
                           shall maintain in full force and effect, for the
                           continued benefit of the
                                                                              17
 
                           Executive, for a period of four (4) years following
                           the Date of Termination all employee benefit plans
                           and programs in which Executive was entitled to
                           participate immediately prior to the Date of
                           Termination, provided that the Executive's continued
                           participation in such employee benefit plans is
                           possible under the general terms and provisions of
                           such plans and programs. In the event that the
                           Executive's participation in any such plan or program
                           is barred at any time during this four (4) year
                           period, the Company shall arrange to provide the
                           Executive with benefits substantially similar to
                           those which the Executive would otherwise have been
                           entitled to receive under such plans and programs
                           from which his continued participation is barred, or
                           alternatively, to provide to the Executive the
                           economic after-tax equivalent of the participation in
                           all of said employee benefit plans in which the
                           Executive's participation is barred. At the end of
                           the period of coverage, the Executive shall have the
                           option to have assigned to him at no cost and with no
                           apportionment of prepaid premiums any assignable
                           insurance policy owned by the Company which relate
                           specifically to the Executive.
                                                                              18
 
                  (d)      (i) In addition to the foregoing, if the
                               Executive's employment is terminated by the
                               Company without cause pursuant to Section
                               4(b)(ii), upon the Executive's death or
                               disability pursuant to Section 4(b)(iii),
                               upon the Executive's resignation for good
                               reason pursuant to Section 4(b)(v), as a
                               result of a change in ownership or control
                               pursuant to Section 4(b)(vi), or upon the
                               nonrenewal of this Agreement on its expira-
                               tion date, all stock options awarded to the
                               Executive on or before the Date of
                               Termination under the Company's outstanding
                               Incentive Stock Option Plans; or issuable to
                               Executive under any future stock option plans
                               granted by the Company during the term of
                               this Agreement ("the Options"), shall immedi-
                               ately vest to the Executive's benefit or the
                               benefit of the Executive's estate, in the
                               event of his death.  Further, the Executive
                               shall retain the right to exercise his rights
                               under the options for the full term(s)
                               thereof, and the Company shall take all
                               actions as are necessary to transfer the
                               Options from the Company's qualified stock
                               option plan(s) to the Company's nonqualified
                                                                              19
 
                               stock option plan(s) or such other plans as
                               may be applicable. The intent of this
                               provision is to insure that in the event of
                               termination of the Executive's employment
                               for reasons referenced in this subsection,
                               the Executive shall be fully vested in the
                               Options and shall have the full term of
                               each such option or options to exercise the
                               same.
 
                          (ii) In the event the Executive's employment is
                               terminated in accordance with Section
                               4(a)(vi) and, as a consequence of such change
                               in ownership or Control the Company's incen-
                               tive Stock option plans in existence at the
                               time of the Executive's termination of
                               employment cease to exist at any time before
                               the Executive's right to exercise the Options
                               pursuant to Section 5(d)(i) above has
                               expired, the Executive's right to the
                               Options, or to the receipt of cash compensa-
                               tion in lieu thereof, shall be governed by
                               the provisions of section 9(b)(ii), below.
 
                  (e)      The Executive shall not be required to mitigate the
                           amount of any payment provided for in this Section
                           5 by seeking other employment or otherwise, and no
                                                                              20
 
                           compensation earned by the Executive after his
                           termination of employment with the Company shall be
                           applied to offset any payment provided for in this
                           Agreement.
 
                  (f)      Any termination of the Executive's employment by the
                           Company or by the Executive (other than termination
                           by reason of the Executive's death) shall be
                           communicated by written Notice of Termination to the
                           other party hereto in accordance with provisions set
                           forth in this Agreement.
 
                  (g)      "Date of Termination" shall mean:
 
                           (i)   if the Executive's employment is terminated
                                 by his death, the date of his death,
 
                           (ii)  if the Executive's employment is terminated
                                 by reason of the Executive's disability,
                                 sixty (60) days after Notice of Termination
                                 is given (provided that the Executive shall
                                 not have returned to the performance of his
                                 duties on a reasonable full-time basis
                                 during such sixty (60) day period),
                                                                              21
 
                           (iii) if the Executive's employment is terminated
                                 for any other reason, the date specified in
                                 the Notice of Termination; provided that if
                                 within sixty (60) days after the Notice of
                                 Termination is given the party receiving such
                                 Notice of Termination notifies the other
                                 party that a dispute exists concerning the
                                 termination, the Date of Termination shall be
                                 the date on which said dispute is finally
                                 determined, either by mutual written agree-
                                 ment of the parties, or by a final arbitra-
                                 tion award as provided for in Section 18 (the
                                 time for appeal therefrom having expired and
                                 no appeal having been perfected).
 
         6.       Payment in the Event of Non Renewal of Agreement
 
                  (a) In the event this Agreement is not renewed by the Company
for a minimum period of three years after its expiration date of June 30, 2001,
the Company shall pay as severance to the Executive on the fifth day following
the Date of Termination, a lump sum payment equal to (i) two (2) times the sum
of (A) the Executive's annual Base Salary at the highest rate in effect during
the twelve (12) months immediately preceding the Date of Termination and (B) the
average of the annual bonus payments, if any, paid to the Executive in the
preceding three (3) years; and
                                                                              22
 
(ii) an additional amount equal to 1/24 of the lump sum payment provided in
clause (i), above, multiplied by each full year of the Executive's service with
the Company.
 
                  (b) Upon the non renewal of this Agreement by the Company as
provided in Section 6(a) above, the Company shall maintain in full force and
effect for the continued benefit of the Executive for a period of two (2) years
following the Date of Termination all employee benefit plans and programs in
which the Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued participation in such
employee benefit plans is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's participation in any
such plan or program is barred at any time during this two (2) year period, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive would otherwise have been entitled to
receive under such plans and programs from which his continued participation is
barred, or alternatively, to provide to the Executive the economic after-tax
equivalent of the participation in all of said employee benefit plans in which
the Executive's participation is barred. At the end of the period of coverage,
the Executive shall have the option to have assigned to him at no cost and with
no apportionment of prepaid premiums any assignable insurance policy owned by
the Company which relates specifically to him.
                                                                              23
 
                  (c) In the event of the non-renewal of the Company of this
Agreement as provided for in Section 6(a), above, all options awarded to the
Executive on or before the Date of Termination under the Company's outstanding
Incentive Stock option Plans, or issuable to Executive under any future stock
option plans established by the Company during the term of this Agreement, shall
immediately vest to the Executive's benefit and the Executive shall retain the
right to exercise his rights under the Options for the full term(s) thereof, and
the Company shall take all actions as are necessary to transfer the "Options"
from the Company's qualified stock option plan(s) to the Company's nonqualified
stock option plan(s) or such other plans as may be applicable.
 
         7.       Termination for Cause
 
                  (a) If the Company reasonably shall determine that there are
grounds for discharging the Executive for Cause (as hereinafter defined), the
Company may, through the Board, at its election within thirty (30) days
thereafter, give the Executive notice of its intention to terminate the
Executive for cause, stating the grounds for termination and specifying a date,
within thirty (30) days of such notice, on which the Executive shall be given an
opportunity to discuss such grounds for termination at a meeting of the Board.
                                                                              24
 
                  (b) If the grounds for termination are those specified in
clause (ii), (iii) or (iv) of paragraph (d) hereof, at such Board meeting the
Board and the Executive shall discuss in good faith and shall determine and set
forth in writing what actions the Executive might take, and by what date, to
cure the material adverse impact or default, as the case may be, to the
reasonable satisfaction of the Board, but in no event earlier than sixty (60)
days after said meeting. When the Board and the Executive have agreed in writing
upon a cure and the date by which it shall be provided, the Board shall take no
further action regarding termination for cause on such grounds until such date,
and on such date it shall provide written notice to the Executive that either
(i) the cure has been satisfactorily provided, and the Board shall continue to
employ the Executive under this Agreement pursuant to the terms hereof, or (ii)
the cure has not been satisfactorily provided and the Board is terminating the
Executive's employment for cause effective immediately.
 
                  (c) If the grounds for termination are those specified in
clause (i) of paragraph (d) hereof, it is understood and agreed that no
satisfactory cure is available. If following discussion with the Executive of
the grounds for his termination (as specified in clause (i) of paragraph (d)
hereof, at the Board meeting the Board shall continue intent on discharging the
Executive for cause on such grounds, the Company shall provide written notice of
termination to the Executive within thirty (30) days of the date of
25
 
such meeting, and such termination shall be effective upon the date set forth in
such notice.
 
                  (d)      For purposes of this Agreement the term "cause"
shall mean:
 
                           (i)    the conviction of the Executive for a felony
                                  involving fraud or moral turpitude;
 
                           (ii)   The Executive's engaging in activities
                                  prohibited by Section 10 hereof;
 
                           (iii)  the Executive's frequent willful gross
                                  neglect (other than as a result of
                                  physical, mental or emotional illness) of
                                  his duties and responsibilities under this
                                  Agreement that has a material adverse
                                  impact on the business or reputation of the
                                  Company; or
 
                           (iv)   the Executive's willful gross misconduct that
                                  has a material adverse impact on the business
                                  or reputation of the Company.
 
                  (e) For each act or occurrence giving rise to a basis for
termination for cause, failure by the Company to timely give. all written
notices as set forth in this Section, from the date the
                                                                              26
 
Board or any of its members were either (i) aware of such act or occurrence
giving rise to a basis for termination for cause, or (ii) with reasonable due
diligence should have known of such act or occurrence giving rise to a basis for
termination for cause, shall constitute a waiver of the Company's right to
terminate based upon such cause, but such waiver shall not prejudice the
Company's right to terminate pursuant to this Section based upon another act or
occurrence giving rise to a basis for termination for cause, whether of the same
or a different type.
 
         8.       Resignation by Executive for Good Reason
 
         In the event that the Company shall during the term of this contract
(i) fail to continue the appointment of the Executive as Chairman and Chief
Executive Officer, (ii) reduce the Executive's annual salary below the minimum
amount specified in Appendix A, (iii) materially diminish the duties or
responsibilities of the Executive as Chairman and Chief Executive Officer, as
the same are set forth hereinabove, (iv) assign to the Executive such duties and
responsibilities inconsistent with his position as Chairman and Chief Executive
Officer, or (v) after a change in ownership or control of the Company, relocate
its headquarters to a location more than thirty (30) miles, by air, from its
location immediately prior to such charge in ownership or control (each of the
foregoing hereinafter referred to as a "Triggering Event"), then the Executive
may give notice to the Company of his election to
                                                                              27
 
terminate this Agreement pursuant to this Section, effective sixty (60) days
from the date of such notice, unless the Company shall have cured the default
giving rise to his Notice of Termination. Such notice from the Executive shall
state the Triggering Event that provides the grounds for his termination, and
such notice must be given, if at all, within one hundred and twenty (120) days
of the occurrence of the Triggering Event referred to as providing such grounds
for termination. Within the sixty (60) day period specified in the Executive's
notice to the Company, the Executive and the Board shall discuss in good faith
what actions the Board might take, and by what date, to cure the default
involved in the Triggering Event specified by the Executive. If within that
sixty (60) day period the Board and the Executive are unable to agree in writing
upon a cure or the date by which such cure shall be provided, the Executive's
termination shall be effective on the date specified in his original notice to
the Company. If within such sixty (60) day period the Board and the Executive
shall agree in writing upon a cure and the date by which it shall be provided,
then on such date the Executive shall notify the Board either (i) that the cure
has been satisfactorily provided, and the Executive is willing to continue his
employment under this Agreement pursuant to the terms hereof (except as such
terms may have been altered by the agreed-upon cure), or (ii) that the cure has
not been satisfactorily provided and the Executive is terminating his employment
hereunder effective immediately.
                                                                              28
 
         9.       Termination of Employment as a Result of Change in
                  Ownership or Control of the Company
 
                  (a) In the event that the Company shall enter into an
agreement to merge with, or to sell or otherwise dispose of all or substantially
all of its assets or stock to, or is acquired by another corporation or other
entity (hereinafter, a "Change in ownership or Control"), and the parties to
such agreement do not appoint the Executive as Chairman and Chief Executive
Officer (or to such other position of authority and responsibility as may be
acceptable to the Executive in his sole discretion) of the newly created or
merged entity or purchaser, then the Board shall notify the Executive in
writing, specifying such other senior executive position with the new entity
purchaser, or controlling entity, in which the Executive is to serve, the duties
to be assigned to such position, and any other amendments to the terms and
provisions of this Agreement that the above-mentioned parties propose. In no
event, however, shall the remuneration, benefit coverage, stock option
entitlements or severance payments be less than that provided for in this
Agreement. At any time during the period following such notice and ending six
(6) months from the effective date of the Change in Ownership or Control, the
Executive may elect to give notice to the Company, to the purchaser, to the new
entity, or to the controlling entity as the case may be, that he is terminating
this Agreement pursuant to this Section, effective on the date specified in such
notice. If the Agreement is terminated pursuant to this section the Company
shall provide the Executive
                                                                              29
 
all benefits and obligations as provided in Section 5 hereof; provided, however,
that prior to the effective date of the Change in Ownership or Control, the
Company shall make arrangements satisfactory to the Executive by providing
adequate security that the new entity, purchaser or controlling entity following
the Change in ownership or Control will have the financial resources to make the
payments and provide for the payments and benefits (or the economic equivalent
thereof) to the Executive on a timely basis in accordance with the terms of this
Agreement.
 
                  (b) In the event the Change in Ownership or Control results in
the dissolution, elimination or modification of the Company's Incentive Stock
Option Plans or any future stock option plan(s) established by the Company, and
the Executive becomes employed by the successor entity in accordance with
Section 9(a), above, the Executive may, at his sole discretion, elect to (i)
accept participation in and the award of stock options in such stock option
plans of the successor or controlling entity, as offered to him by such
successor or controlling entity, or (ii) receive a payment in cash for such
stock options of the Company as calculated in accordance with the following
formula:
 
         (A)      All stock options awarded to the Executive by the Company
                  shall be deemed to have become fully vested as of the date on
                  which the Company's Incentive Stock Option Plans or any future
                  stock option plans established by the
                                                                              30
 
                  Company have been dissolved, eliminated or modified ("the Old
                  Vested Options"). The Executive shall retain the right to
                  exercise all such Options for the full term(s) thereof, and
                  the Company shall take all actions as are necessary to
                  transfer the Options from the Company's qualified stock
                  options plan(s) to the Company's non-qualified stock option
                  plan(s) or such other plans as applicable.
 
                  The cash equivalent of these Stock Options shall be the
                  average of the then present value of all stock options granted
                  to the Executive over the prior three (3) years, and shall be
                  determined pursuant to the "Black-Scholes" options pricing
                  model.
 
                  The Executive will be provided with a lump-sum payment, within
                  30 days of the dissolution, elimination or modification of the
                  Company's stock options plans, equal to the calculated cash
                  equivalent of the Old Vested options, plus an additional cash
                  amount (grossed up) to cover all taxes required to be paid by
                  the Executive on this cash equivalent.
 
         (B)      In addition, the Executive will be credited, for the purpose
                  of this Section, with additional stock options equal to 0.5
                  percent (0.5%) of the fully diluted
                                                                              31
 
                  capitalization of the Company calculated as of the day before
                  the change in ownership or Control, multiplied by the number
                  of years (including fraction thereof) from that date to the
                  end of the term of this Agreement as set forth in Section 4(a)
                  ("the Cash Equivalency Obligation of Successor"). The cash
                  equivalency of stock options provided in this paragraph shall
                  be determined pursuant to the "Black-Scholes" options pricing
                  model.
 
                  On the first anniversary date of this Agreement following the
                  Change in ownership or Control, the successor entity shall
                  provide the Executive with a cash payment to be calculated as
                  follows: the Cash Equivalency obligation of Successor
                  multiplied by a fraction the numerator of which is the number
                  of months or fraction thereof from the effective date of the
                  Change in ownership or Control to the anniversary date and the
                  denominator of which is the total number of months or fraction
                  thereof from the effective date of the Change in ownership or
                  Control and the end of the term of this Agreement. On each
                  succeeding anniversary date through the end of the term of
                  this Agreement, the successor entity shall provide the
                  Executive with a cash payment to be calculated as follows: the
                  Cash Equivalency obligation of Successor multiplied by a
                  fraction the numerator of which is 12 and the denominator of
                  which is the total number of months
                                                                              32
 
                  between the effective date of the Change in ownership or
                  Control and the end of the term of this Agreement.
 
                  (c) In the event the Change in Ownership or Control results in
the Executive's participation in a medical insurance plan which provides a
lesser amount of benefits or coverage than the Company's medical plan for the
Executive and/or members of his immediate family, the successor or controlling
entity shall provide the Executive with a cash payment sufficient to reimburse
the Executive for all medical expenses incurred by the Executive for himself and
for members of his immediate family, and the successor or controlling entity
shall provide the Executive with an additional cash amount (gross up) to cover
all taxes required to be paid by the Executive on such medical expense
reimbursement.
 
         10.      Agreement Not to Compete.
 
         The Executive agrees that during his employment by the Company, and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination arises as a result of a change in ownership or
control as provided for in Section 5(a)(iii) and 9 herein, in which case the
Executive shall not be bound by any post-termination agreement not to compete,
he will not, without the prior written consent of the Company, either directly
or indirectly, on his own behalf or in the service or on behalf of others as a
shareholder (other than ownership of less
                                                                              33
 
than five percent (5%) of the outstanding voting securities of an entity whose
voting securities are traded on a national securities exchange), officer,
trustee, consultant, or executive or managerial employee, engage in, consult
with or be employed by any competing Business.
 
         11.      Agreement Not to Solicit Customers.
 
         The Executive agrees that during his employment by the Company and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination is for cause under Section 7, or voluntary
resignation under Section 4(a)(7), or non-renewal of this Agreement under
Section 6, he will not without the prior written consent of the Company, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any Competing Business, any person or entity whose account with
the Company was sold or serviced by or under the supervision of the Executive
during the two (2) years preceding the termination of such employment.
 
         12.      Agreement Not to Solicit Employees.
 
         The Executive agrees that during his employment by the Company and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination is for cause
 
                                                                              34
 
under Section 7, or voluntary resignation under Section 4(a)(7), or non renewal
or this Agreement under Section 6, he will not, either directly or indirectly,
on his own behalf or in the service or on behalf of others, solicit, divert or
hire away, or attempt to solicit, divert or hire away, to any Competing Business
any person employed by the Company, whether or not such employee is a full-time
employee or a temporary employee of the Company, whether or not such employment
is pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
 
         13.      Ownership, Non-Disclosure and Non-Use of Confidential
                  Information.
 
                  (a) The Executive acknowledges and agrees that all
Confidential Information as defined in Section 1(c), hereof, and all physical
embodiments thereof, are confidential to and shall be and remain the sole and
exclusive property of the Company. Upon request by the Company, and in any event
upon termination of his employment with the Company for any reason, the
Executive shall promptly deliver to the Company all property belonging to the
Company, including without limitation, all Confidential Information (and all
embodiments thereof), then in his custody, control or possession.
 
                  (b) The Executive agrees that he will not, either during the
term of his employment by the Company, or for a period of five (5) years after
the termination of his employment, without the
                                                                              35
 
prior written consent of the Company, disclose or make available any
Confidential Information, as defined in Section 1(c) hereof, to any person or
entity, nor shall he make or cause to be made, or permit or allow, either on his
own behalf or on behalf of others, any use of such Confidential Information
other than in the proper performance of his duties hereunder.
 
         14.      Ownership of Inventions.
 
                  (a) The Executive shall promptly disclose to the Company all
discoveries, inventions, and improvements, patentable or unpatentable, conceived
or made by the Executive, individually or jointly with any other person or
persons, during the period of his employment by the Company (whether or not
during working hours) relating in any manner to the business or activities of
the Company, whether such discovery, invention or improvement be a machine,
apparatus, process, composition, article, or other subject. All such
discoveries, inventions and improvements shall be the sole and exclusive
property of the Company in respect to any and all countries, their territories
and possessions. The Executive shall, during his employment within the Company
and thereafter, perform at the request and expense of the Company all lawful
acts and execute, acknowledge and deliver all such instruments deemed necessary
by the Company to vest in the Company the entire right, title and interest in
and to such discoveries, inventions and improvements, and to enable the Company
to properly
                                                                              36
 
prepare, file and prosecute applications for and obtain patents (including like
kinds of industrial property) thereon in any and all countries selected by the
Company as well as reissues, renewals and extensions thereof, and to obtain and
record title to such applications and patents so that the Company shall be the
sole and absolute owner thereof in any and all countries in which it may desire
patent or like protection.
 
                  (b) Any provision in this Agreement requiring the Executive to
assign his rights in any invention does not apply to an invention for which no
equipment, supplies, facility, or trade secret information of the Company was
used and which was developed entirely on the Executive's own time, and: (a)
which does not relate (i) to the Business of the Company or (ii) to the
Company's actual or demonstrably anticipated research or development, or (b)
which does not result from any work performed by the Executive for the Company.
 
         15.      Business and Travel Expense.
 
         The Executive shall be reimbursed for his out-of-pocket expenses
incurred in carrying out the Company's business, including all travel and
entertainment expenses reasonably required by the Executive in his position as
Chairman and Chief Executive officer, in accordance with Company policy and upon
proof of such expenditures. It is understood that the Executive's wife may
accompany
 
                                                                              37
 
him on business travel when the Executive determines that her presence will
enable him to further the interests of the Company and in such circumstances the
Executive shall be reimbursed for her reasonable out-of-pocket travel and
entertainment expenses as well.
 
         16.      Financial Planning Expenses.
 
         The Company shall reimburse the Executive for reasonable costs and
expenses incurred by the Executive for financial, estate and tax planning up to
an aggregate of Ten Thousand Dollars ($10,000) annually.
 
         17.      Legal and Consulting Fees.
 
         The Company shall pay all reasonable legal fees and consulting expenses
incurred by the Executive in connection with the negotiation and preparation of
this Agreement.
 
         18.      Resolution of Disputes
 
                  (a) Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in the
City of Phoenix, in accordance with the rules of the American Arbitration
Association (the "AAA"). The arbitration shall be before three (3) arbitrators,
all of whom shall be attorneys. One arbitrator shall be appointed by the
Executive; one
 
arbitrator shall be appointed by the Company, and the third Arbitrator shall be
selected by the two appointed Arbitrators. In the event the two appointed
Arbitrators are unable to agree upon the third Arbitrator, either party may
petition the Superior Court of the State of Arizona, Maricopa County, for
appointment of the third arbitrator. The arbitrators shall not have the
authority to add to, subtract from or in any way modify the express written
terms of the Agreement, and in rendering an award, the arbitrators shall be
required to adhere to the express written provisions of this Agreement and the
intention of the parties appearing therefrom. The decision of the arbitrators
shall be final and binding on the parties hereto and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
 
                  (b) The costs for the arbitration shall be borne equally by
both parties.
 
                  (c) Pending the outcome or resolution of any arbitration, the
Company shall continue payment of all amounts when and as due the Executive
under this Agreement without regard to any dispute; provided, however, that if
the arbitration shall be decided in favor of the Company, the, Executive shall
promptly repay to the Company, with interest at the prime rate as published from
time to time by Chemical Bank, all amounts he would not have been entitled to
receive under this Agreement had the dispute not been taken to arbitration, and
the arbitration award in favor of
                                                                              39
 
the Company shall be deemed an award in the amount of the repayment
due to the Company.
 
         19.      Compliance With Securities Laws.
 
         The Executive shall comply with all federal and state securities laws
and Company policies and guidelines relating thereto concerning insider trading,
reporting requirements, and confidentiality of undisclosed internal material
information about the Company.
 
         20.      Severability, etc.
 
                  (a) The Executive agrees that the covenants and agreements
contained in sections 10, 11, 12 and 13 of this Agreement, and the subsections
of those Sections, are of the essence of this Agreement; that each of such
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company and the Business of the Company; that the company is
engaged in the Business of the company; that irreparable loss and damage will be
suffered by the Company should the Executive breach any of such covenants and
agreements; that each of such covenants and agreements is separate, distinct and
severable not only from the other of such covenants and agreements but also from
the other and remaining provisions of this Agreement; that the unenforceability
of any such covenant or agreement shall not affect
                                                                              40
 
the validity or enforceability of any other such covenant or agreements or any
other provision or provisions of this Agreement; and that, in addition to other
remedies available to it, the Company shall be entitled to seek both temporary
and permanent injunctive relief to prevent a breach or contemplated breach by
the Executive of any of such covenants or agreements.
 
                  (b) In the event any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable because it is invalid or in
conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the rights and obligations of
the parties shall be construed and enforced as if this Agreement did not contain
such invalid or unenforceable provisions.
 
         21.      No Set-Off By the Company.
 
         The Company shall continue to provide to the Executive all
compensation, benefits and prerequisites of the office of Chairman and Chief
Executive Officer provided for in this Agreement notwithstanding the existence
of any claim, dispute, action or cause of action by the Company against the
Executive, whether based. upon this Agreement or otherwise. Such dispute, claim
or cause of action by the Company against the Executive shall be resolved in
accordance with Section 18 hereof, with the exception
                                                                              41
 
of the Company's right to seek injunctive relief provided for in
section 20 hereof.
 
         22.      Headings.
 
         The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
 
         23.      Notices.
 
         Any notice to either party hereunder shall be in writing, and shall be
deemed to be sufficiently given to or served on such party, for all purposes, if
the same shall be personally delivered to such party, or sent to such party by
registered mail, postage prepaid, at the address of such party given above.
Either party hereto may change the address to which notices are to be sent to
such party hereunder by written notice of such new address given to the other
party hereto.
 
         24.      Governing Law.
 
         This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Arizona applicable to contracts to be
performed therein, without regard to conflict of laws principles.
                                                                              42
 
         25.      Assignment.
 
         This Agreement may not be assigned by the Company without the prior
written consent of the Executive. The Executive shall have the right to
designate a beneficiary, his executor, his administrator or his estate to
receive any payments or benefits payable under this Agreement upon his death.
 
         26.      Waiver.
 
         Except as otherwise provided for in this Agreement, no term or
condition of this Agreement shall be deemed to have been waived, nor shall there
be any estoppel against the enforcement of any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.
 
         27.      Amendment of Agreement.
 
         This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
                                                                              43
 
         28.      Entire Agreement.
 
         This Agreement represents the entire understanding of the parties
hereto and supersedes any prior understandings or agreements between the
parties, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided
and not expressly provided in this Agreement.
 
         IN WITNESS WHEREOF, the Executive has executed this Agreement and the
Company has caused this Agreement to be executed by its representative thereunto
duly authorized as of the date set forth above.
 
                                           MEDICIS PHARMACEUTICAL CORPORATION
 
                                  By: /s/ Michael A. Pietrangelo
                                      -----------------------------------------
                                      Michael A. Pietrangelo
                                      Chairman of the Executive Committee
                                       of the Board of Directors
 
                                  By: /s/ Joseph Salvani
                                     ------------------------------------------
                                     Joseph Salvani
                                     Chairman, Compensation Committee,
                                      Member of Board of Directors
 
                                  By: /s/ Jonah Shacknai
                                     ------------------------------------------
                                     Jonah Shacknai
EXHIBIT A - STOCK OPTION AND COMPENSATION COMMITTEE
 
The following sets forth the Executive's compensation in accordance with
paragraph 3(a):
 
1.       Annual base compensation*          $400,000 per year
         ("Base Salary")
 
2.       Health/Medical and other           Actual cost
         employee benefits pro-
         vided to other employees
         of the Company.
 
3.       Health Club Membership             $100 per month
 
4.       Automobile Allowance               $900 per month
 
5.       Incentive Stock Options            Minimum annual award of .5 percent 
                                            (.5%) of the fully diluted         
                                            capitalization of the Company to be
                                            awarded no earlier than thirty (30)
                                            days before or no later than thirty
                                            (30) days after the anniversary    
                                            date of this Agreement. In the     
                                            event of a change in ownership or  
                                            control of the Company, or if the  
                                            Company's Incentive Stock Option   
                                            Plans are dissolved, eliminated or 
                                            modified, then the Executive shall 
                                            receive in lieu of this minimum    
                                            annual award, a minimum annual     
                                            award equal to the "cash           
                                            equivalent" as set forth and       
                                            provided for in Section 9(b).      
                                            
6.       Annual Cash Bonus                  The Board agrees to determine, in  
                                            good faith, the annual cash bonus  
                                            to be provided to the Executive    
                                            based upon the Executive's         
                                            performance and the performance of 
                                            the Company measured against the   
                                            Company's fiscal plan for the prior
                                            fiscal year.                       
 
*The Stock Option and Compensation Committee will review the base salary amount
annually and provide an increase in the Executive's base annual compensation as
appropriate and within its discretion.

 

#Top of the Document

 

EXHIBIT 10.9(a)

AMENDMENT

      AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN MEDICIS PHARMACEUTICAL CORPORATION AND JONAH SHACKNAI, DATED JULY 1, 1996 (the “Agreement”).

      THIS AMENDMENT is made as of this 1st day of April, 1999, between Medicis Pharmaceutical Corporation, a corporation organized under the laws of the State of Delaware (the “Company”) with offices located at 4343 East Camelback Road, Phoenix, Arizona, and Jonah Shacknai (the “Executive”), residing at (residence address):

      WITNESSETH:

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

      WHEREAS, the Executive has informed the Company that he desires to reduce the office-based commitment associated with his position so as to enable him to have maximum flexibility in the care of his children;

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

1


      WHEREAS, the Executive shall continue in his responsibilities as set forth in Section 2(a) of the Agreement, with particular emphasis on corporate strategy and product development,

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

 

1.

 

Section 2(b) of the Agreement shall read: “Throughout his employment hereunder, the Executive shall devote 2.5 days of his time during the normal business week to fulfillment of the duties of his employment from the Company’s headquarters at 4343 East Camelback Road, Phoenix, Arizona, or from such other headquarters location in the greater Phoenix area as the Company may determine. The Executive shall be available to meet with Company personnel, attend telephonic meetings and participate in other corporate matters, as appropriate, from his home during the remaining periods of the normal business week, provided that the Executive’s children are not in his care at such time. It is expressly understood and agreed that the Executive shall not be available for corporate matters when his children are in his care. The Executive has elected to apply his vacation time to facilitation of this amended schedule.

 

 

 

 

 

2.

 

Section 3 of the Agreement shall have added a subsection (c) which shall read, “Provided that the Executive maintains a satisfactory or better level of performance, he shall remain fully eligible for an annual cash bonus at the discretion of the Company’s executive compensation committee of its board of directors.”

2


 

3.

 

Except as modified herein, all other terms and conditions of the Agreement shall remain in full force and effect.

 

 

/s/ Michael A. Pietrangelo
Michael A. Pietrangelo
Chairman, Executive Committee
Chairman, Executive Compensation Committee

 

/s/ Jonah Shacknai
Jonah Shacknai

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#Top of the Document

 

EXHIBIT 10.9(b)

AMENDMENT

      Amendment to Employment Agreement between Medicis Pharmaceutical Corporation and Jonah Shacknai, dated July 1, 1996, as amended by an agreement dated April 1, 1999.

      THIS AMENDMENT is made as of this 21st day of February, 2001, between Medicis Pharmaceutical Corporation, a corporation organized under the laws of the State of Delaware (the “Company”), with offices located at 8125 North Hayden Road, Scottsdale, Arizona, and Jonah Shacknai (the “Executive”), residing at (residence address).

WITNESSETH

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

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

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

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

1


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

 

1.

 

The Agreement shall be renewed for a five (5) year period commencing in July 1, 2001 and expiring on June 30, 2006 (the amended term) and for successive periods as provided for in Article 4 of the Agreement.

 

 

 

 

 

2.

 

Section 5 of the Agreement shall have added a subsection (h) which shall read:

 

 

 

 

      (h) Except in the event the Agreement is terminated for cause as defined in and pursuant to the terms of Section 7, the Company shall provide the Executive, at a cost to the Executive identical to the Executive’s health insurance premium, with coverage under the Company’s Health/Medical and Dental plans for the Executive and for all eligible dependents of the Executive. Such coverage shall be provided for the remainder of the life of the Executive. Pursuant to this subsection (h), the Company shall provide the Executive and the Executive’s eligible dependents with coverage identical to that provided by the Company to its senior officers at the time of this amendment.

 

 

3.

 

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

 

 

 

 

      (i) In the Event of the non-renewal of this Agreement by the Company, (section 6), or if the Executive’s employment is terminated by the Company without cause (section 4(b)(ii) ), or in the event of a termination of the Executive’s employment arising as a result of a change in ownership or control as provided for in sections 5(a)(iii) and 9, the Company will provide the Executive with a STIPEND of Seventy Five Thousand ($75,000) annually for administrative support and services. Said STIPEND shall be made to the Executive for a period of three (3) years following the date of termination, or for the balance of the term of

2


 

 

 

this amended Agreement, whichever is greater, and shall be provided semi-annually commencing on the first day of the month following the date of the Executive’s termination.

 

 

 

 

MEDICIS PHARMACEUTICAL CORPORATION

 

JONAH SHACKNAI

 

 

 

 

 

 

 

 

 

 

 

 

By: /s/ Michael A. Pietrangelo

 

/s/ Jonah Shacknai

3

#Top of the Document

 

 

 

THIRD AMENDMENT

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

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

WITNESSETH

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

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

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

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

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

-1-


 

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

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

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

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

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

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

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

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

-2-


 

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

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

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

-3-


 

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

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

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

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

-4-


 

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

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

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

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

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

-5-


 

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

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

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

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

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

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

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

-6-


 

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

 

 

 

 

 

MEDICIS PHARMACEUTICAL CORPORATION

 

 

 

 

 

 

 

By:

 

/s/ Michael A. Pietrangelo

 

 

 

 

 

 

 

 

 

Michael A. Pietrangelo
Chairman of the Executive Committee
of the Board of Directors

 

 

 

 

 

 

 

By:

 

/s/ Spencer Davidson

 

 

 

 

 

 

 

 

 

Spencer Davidson
Chairman of the Compensation Committee
of the Board of Directors

 

 

 

 

 

 

 

 

 

 

 

JONAH SHACKNAI

 

 

 

 

 

/s/ Jonah Shacknai

 

 

  

 

 

-7-


 

EXHIBIT A — STOCK OPTION AND COMPENSATION COMMITTEE

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

 

 

 

 

 

1.

 

Annual base compensation* (“Base
Salary”)

 

$1,020,000 per year

 

 

 

 

 

2.

 

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

 

Actual cost

 

 

 

 

 

3.

 

Stock Options and Restricted Stock Grants

 

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

 

 

 

 

 

4.

 

Annual Cash Bonus

 

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

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

 

 

 
  EMPLOYMENT AGREEMENT
 
         THIS AGREEMENT is made as of this 24th day of July 1996 between MEDICIS
PHARMACEUTICAL CORP., a corporation organized under the laws of the State of
Delaware (the "Company") with offices located at 4343 East Camelback Road,
Phoenix, Arizona, and Jonah Shacknai (the "Executive"), residing at 5868 East
Berneil Lane, Paradise Valley, Arizona:
 
                                   WITNESSETH:
 
         WHEREAS, the Company and the Executive desire to enter into the present
Agreement whereby the Executive will continue to provide personal services to
the Company as Chairman and Chief Executive officer; and
 
         WHEREAS, in its business, the Company has developed and uses valuable
technical and nontechnical information including information relating to
development, use, manufacture and marketing of certain biologically-active
compounds, and it is necessary for the Company to protect certain of the
information either by patents, copyrights, or by holding it secret or
confidential; and
 
         WHEREAS, the aforesaid information is vital to the success of the
Company's business, and the Executive through his activities
<PAGE>   2
                                                                               2
 
may become acquainted therewith, and may contribute thereto, either through
research, inventions, discoveries or otherwise; and
 
         WHEREAS, in the course of his employment, the Executive has gained and
will gain knowledge of the business affairs, finances, management, marketing
programs and philosophy, customers and methods of operation of the Company; and
 
         WHEREAS, the Company would suffer irreparable harm if the Executive
were to use such knowledge, information and business acumen in competition with
the Company,
 
         NOW, THEREFORE, in consideration of the continued employment of
Executive by the Company as Chairman and Chief Executive Officer, the above
premises and the mutual agreements hereinafter set forth, the receipt, adequacy
and sufficiency of which is hereby acknowledged, the parties agree as follows:
 
         1.       Definitions.
 
                  (a) "Business of the Company" shall mean and include the
business of developing, manufacturing, marketing, selling and using certain
chemical compounds for use in the dermatologic industry or such other businesses
as the Company derived substantial revenues from, which revenues exceed twenty
(20%) percent of the Company's gross annual revenues in the Company's most
recent fiscal year.
 
                  (b) "Competing Business" shall mean any business which is the
same or essentially the same as the Business of the Company.
<PAGE>   3
                                                                               3
 
                  (c) "Confidential Information" shall mean all non public
customer lists, sales and marketing information, customer account records,
training and operations material and memoranda, trade secrets, strategic
planning materials and information product development plans, scientific and
technical information, personnel records, pricing information, and financial
information concerning or relating to the business, accounts, customers,
employees and affairs of the Company, obtained by or furnished, disclosed or
disseminated to the Executive, or obtained, assembled or compiled by the
Executive or under his supervision during the course of his employment by the
Company, and all physical embodiments of the foregoing, all of which are hereby
agreed to be the property of and confidential to the Company, but Confidential
Information shall not include any of the foregoing to the extent the same is or
becomes publicly known through no fault or breach of this Agreement by the
Executive.
 
         2.       Terms of Employment; Duties.
 
                  (a) The Company employs the Executive as Chairman of the Board
of Directors of the Company, and Chief Executive Officer of the Company, and the
Executive accepts such employment with the Company in that capacity subject to
the terms and conditions hereof. The Executive shall in such office have the
responsibilities which include presiding over and participating in deliberations
of the Board as its Chairman and as a member of the Board;
<PAGE>   4
                                                                               4
 
serving on the Executive Committee of the Board; exercising ultimate
responsibility on a reporting basis for sales, marketing, research and
development, operations, regulatory compliance, finance, personnel, corporate
development, public and shareholder relations and governmental relations
activities of the Company; exercising ultimate responsibility for strategic
planning and evaluation, and serving as Company's official spokesman and
representative in all matters.
 
                  (b) Throughout his employment hereunder, the Executive shall
devote substantially all of his time, energy and skill during regular business
hours to the performance of the duties of his employment (reasonable vacations,
reasonable absences due to illness, and reasonable time as may be necessary for
the Executive to manage his personal investments, excepted), shall faithfully
and industriously perform such duties, and shall diligently follow and implement
all management policies and decisions of the Company.
 
         3.       Compensation and Related Matters
 
                  (a) For his services hereunder, the Company shall pay to the
Executive the compensation and provide the benefits set forth in Exhibit A
attached hereto and incorporated herein as part of this Agreement and such
benefits as are otherwise provided for herein.
<PAGE>   5
                                                                               5
 
                  (b) The Executive shall be eligible to fully participate in
all present or future pension, retirement, medical, dental, disability, life
insurance or any other employee benefit plans of the Company, and in addition,
the Executive shall be eligible to fully participate in all present or future
incentive compensation, bonus, profit sharing, stock option or stock purchase
plans of the Company as and to the extent granted or approved and determined by
the Board of Directors of the Company, subject to the provisions of Exhibit A
hereof.
 
         4.       Term and Termination of This Agreement.
 
                  (a) The Executive's employment under this Agreement shall be.
for a period of five (5) years commencing on July 1, 1996 and expiring on June
30, 2001 ("the Initial Term"), which period shall automatically be extended
beyond its current five-year term, without further action by the parties, as of
June 30, 2001 and as of each succeeding five-year period thereafter, for another
five (5) year period beginning on July 1, 2001 and each succeeding five (5) year
period, unless either party shall have served written notice upon the other six
(6) months prior to June 30, 2001, or prior to June 30th of the expiration date
occurring on each succeeding five (5) year period thereafter, of its intention
to terminate or modify this Agreement, subject however to the earlier
termination thereof pursuant to the provisions of this Agreement. Should this
Agreement be automatically renewed for any five (5)
<PAGE>   6
                                                                               6
 
year period, the terms of said Agreement shall remain the same, except for any
increases in the salary, bonuses or benefits provided by the Company to the
Executive.
 
                  (b) The term of the Executive's employment hereunder may be
terminated prior to the expiration of the Initial Term (or any extension or
automatic renewal thereof) in the following events:
 
                           (i)   termination by mutual agreement of the parties;
 
                           (ii)  termination by the Company without cause upon
                                 sixty (60) days' written notice to the
                                 Executive, as provided for in Section
                                 5(a)(iii);
 
                           (iii) termination upon the Executive's death or
                                 disability as defined in and as provided for in
                                 Section 5(a)(v);
 
                           (iv)  termination of the Executive for cause, as
                                 provided for in Sections 5(a)(ii) and 7;
 
                           (v)   resignation by the Executive for good reason,
                                 as provided for in Sections 5(a)(iii) and 8;
<PAGE>   7
                                                                               7
 
                           (vi)  termination of the Executive arising as a
                                 result of change in ownership or control, as
                                 provided for in Sections 5(a)(iii) and 9; or
 
                           (vii) voluntary resignation by the Executive for
                                 reasons other than those falling within
                                 paragraph (i), (v) or (vi) herein.
 
         5.       Payments Upon Termination
 
                  (a)      In the event that the Executive's employment
                           hereunder is terminated pursuant to Section 4(b)
                           above, the Company shall pay to Executive the
                           following amounts within thirty (30) days of such
                           termination or as otherwise set forth below:
 
                           (i)    If the Executive's employment is terminated
                                  pursuant to subsection 4(b)(i), the Company
                                  shall pay to the Executive all amounts owing
                                  to the Executive as Annual Compensation
                                  through the Date of Termination (as defined
                                  herein), consisting of Base Salary through
                                  the end of the calendar month from the Date
                                  of Termination and a pro rata bonus based
                                  upon the Executive's prior year's bonus.
<PAGE>   8
                                                                            8
 
                           (ii)   If the Executive's employment is terminated
                                  by the Company for Cause (as defined in
                                  Section 7 herein) pursuant to subsection
                                  4(b)(iv), or if the Executive voluntarily
                                  resigns his employment pursuant to Section
                                  4(b)(vii), the Company shall pay to the
                                  Executive all amounts owing to the Executive
                                  as Base Salary through the end of the
                                  calendar month of the Date of Termination.
 
                           (iii)  (a)  If the Executive's employment is      
                                       terminated by the Company without   
                                       cause (Section 4(b)(ii)), or in the 
                                       event of the termination of this    
                                       Employment Agreement pursuant to    
                                       Section 4(b)(v) and Section 8       
                                       herein (Resignation by Executive    
                                       For Good Reason), or in the event   
                                       the Company shall terminate this    
                                       Employment Agreement for any reason 
                                       other than pursuant to Section      
                                       4(a)(iv) (cause) or Section         
                                       4(a)(iii) (death or disability), or
                                       Section 4(b)(vi) and Section 9   
                                       (Termination of Employment as a     
                                       Result of Change In Ownership or    
                                       Control):                           
<PAGE>   9
                                                                               9
 
                                            --       the Company shall pay the
                                                     Executive his then current
                                                     annual compensation, and a
                                                     pro rata bonus based on the
                                                     Executive's prior year's
                                                     bonus, through the Date of
                                                     Termination.
 
                                            --       in lieu of any further
                                                     salary payments to the
                                                     Executive for periods
                                                     subsequent to the Date of
                                                     Termination, the Company
                                                     shall pay as severance to
                                                     the Executive on the fifth
                                                     day following the Date of
                                                     Termination, a lump sum
                                                     payment equal to the number
                                                     of months remaining from
                                                     the date of termination
                                                     until the expiration date
                                                     of this Employment
                                                     Agreement, or any renewal
                                                     thereof, divided by twelve
                                                     (12), times the sum of (a)
                                                     the Executive's annual Base
                                                     Salary at the highest rate
                                                     in effect during the twelve
                                                     (12) months immediately
                                                     preceding the Date of
                                                     Termination and (b) the
                                                     average of the annual bonus
                                                     payments, if any, paid to
                                                     the Executive in the
                                                     preceding three (3) years,
                                                     however in
<PAGE>   10
                                                                              10
 
                                                     no event shall the amount
                                                     of severance to be paid to
                                                     the Executive be less than
                                                     the amount of payment in
                                                     the event of non renewal of
                                                     the Employment Agreement,
                                                     as provided for in
                                                     paragraph 6 of this
                                                     Agreement, i.e. a lump sum
                                                     payment equal to (i) two
                                                     (2) times the sum of (A)
                                                     the Executive's annual Base
                                                     Salary at the highest rate
                                                     in effect during the twelve
                                                     (12) months immediately
                                                     preceding the Date of
                                                     Termination and (B) the
                                                     average of the Annual bonus
                                                     payments, if any, paid to
                                                     the Executive in the
                                                     preceding three (3) years;
                                                     and (ii) an additional
                                                     amount equal to 1/24 of the
                                                     lump sum payment provided
                                                     in clause (i), above,
                                                     multiplied by each full
                                                     year of the Executive's
                                                     service with the Company.
 
                                            --       the Company shall pay all 
                                                     other damages to which the
                                                     Executive may be entitled 
                                                     as a result of the
                                                     Company's termination of
                                                     his
<PAGE>   11
                                                                              11
 
                                                     employment under this
                                                     Agreement, except for
                                                     Cause, including damages
                                                     for any and all loss of
                                                     benefits to the Executive
                                                     under the employee benefit
                                                     plans which he would have
                                                     received had this Agreement
                                                     not been terminated for
                                                     reasons set forth in
                                                     subsections 4(b)(ii)
                                                     4(b)(v) and 4(b)(vi),
                                                     herein, and had the
                                                     Executive's employment
                                                     continued for the full
                                                     Initial Term, or for the
                                                     full period of any
                                                     extension or automatic
                                                     renewal, and including all
                                                     legal fees and expenses
                                                     incurred by the Executive
                                                     in contesting or disputing
                                                     any such termination or in
                                                     seeking to obtain or
                                                     enforce any right or
                                                     benefit provided by this
                                                     Employment Agreement.
 
                           (iii)(b)         In the event of the termination of
                                            this Employment Agreement pursuant
                                            to Section 4(b)(vi) and Section 9
                                            herein (Termination of Employment as
                                            a Result of Change In Ownership Or
                                            Control):
<PAGE>   12
                                                                              12
 
                                            --       the Company shall pay the
                                                     Executive his then current
                                                     annual compensation, and a
                                                     pro rata bonus based on the
                                                     Executive's prior year's
                                                     bonus, through the Date of
                                                     Termination.
 
                                            --       in lieu of any further
                                                     salary payments to the
                                                     Executive for periods
                                                     subsequent to the Date of
                                                     Termination, the Company
                                                     shall pay as severance to
                                                     the Executive on the fifth
                                                     day following the Date of
                                                     Termination, a lump sum
                                                     payment equal to 4 times
                                                     the sum of (a) the
                                                     Executive's annual Base
                                                     Salary at the highest rate
                                                     in effect during the twelve
                                                     (12) months immediately
                                                     preceding the Date of
                                                     Termination and (b) the
                                                     average of the annual bonus
                                                     payments, if any, paid to
                                                     the Executive in the
                                                     preceding three (3) years;
                                                     and
 
                                            --       the Company shall pay all 
                                                     other damages to which the
                                                     Executive may be entitled 
                                                     as a result of the
<PAGE>   13
                                                                              13
 
                                                     Company's termination of
                                                     his employment under this
                                                     Agreement, except for
                                                     Cause, including damages
                                                     for any and all loss of
                                                     benefits to the Executive
                                                     under the employee benefit
                                                     plans which he would have
                                                     received had this Agreement
                                                     not been terminated for
                                                     reasons set forth in
                                                     subsections 4(b)(ii)
                                                     4(b)(v) and 4(b)(vi),
                                                     herein, and had the
                                                     Executive's employment
                                                     continued for the full
                                                     Initial Term, or for the
                                                     full period of any
                                                     extension or automatic
                                                     renewal, and including all
                                                     legal fees and expenses
                                                     incurred by the Executive
                                                     in contesting or disputing
                                                     any such termination or in
                                                     seeking to obtain or
                                                     enforce any right or
                                                     benefit provided by this
                                                     Employment Agreement.
 
                           (iv)   If Executive's employment is terminated
                                  pursuant to subsection 4(b)(iii) by reason
                                  of Executive's death, the Company agrees to
                                  pay to the legal representative of his
                                  estate, (i) for a period of twelve (12)
                                  months
<PAGE>   14
                                                                           14
 
                                  (commencing with the Date of Termination)
                                  an amount equal to and payable at the same
                                  rate at his then current Base Salary, and
                                  (ii) any payment the Executive's spouse,
                                  beneficiaries, or estate may be entitled to
                                  receive pursuant to any pension or employee
                                  benefit plan or life insurance policy
                                  presently maintained by the Company.
 
                           (v)    During any period that the Executive fails to
                                  perform his duties hereunder as a result of
                                  incapacity due to his physical or mental or
                                  emotional illness, the Executive shall
                                  continue to receive his full Base Salary
                                  along with any bonus payments awarded by the
                                  Board of Directors until the Executive
                                  returns to his duties or until his employment
                                  is terminated for reason of disability
                                  pursuant to Section 4(b)(iii).
 
                                  "Disability" shall mean the inability of
                                  the Executive to perform the duties of
                                  Chairman and Chief Exchange Officer of the
                                  Company due to physical, mental or
                                  emotional incapacity or illness, where such
                                  inability is expected to result in death or
                                  to be of long-continued
<PAGE>   15
                                                                           15
 
                                  and indefinite duration, but in no event
                                  shall such duration be less than One
                                  Hundred Eighty (180) consecutive days. The
                                  determination of "Disability" shall be made
                                  by the Board of Directors of the Company
                                  ("the Board") and the Executive, as
                                  determined by an independent physician
                                  selected by both the Board and the
                                  Executive. In the event of such Disability,
                                  the Company may, at its election and by
                                  providing written notice thereof to the
                                  Executive within sixty (60) days after such
                                  determination, terminate the Executive's
                                  employment hereunder effective on the date
                                  set forth in such notice. If the Board or
                                  the Company does not timely give notice to
                                  the Executive of its election to terminate
                                  the Executive for such Disability, then the
                                  Company shall be deemed to have waived its
                                  right to terminate the Executive based upon
                                  such Disability.
 
                                  After such termination because of the
                                  Executive's disability, the Executive shall
                                  be paid, in substantially equal monthly
                                  installments, 100% of his Base Salary (at
                                  the rate in effect at the time Notice of
<PAGE>   16
                                                                              16
 
                                  Termination is given) for twelve (12)
                                  months, and thereafter an annual amount
                                  equal to 50% of such Base Salary for the
                                  balance of the Initial Term, but in no
                                  event for less than a second twelve (12)
                                  month period.
 
                  (b)      In no event shall any payment pursuant to this
                           Section 5 be made to the extent that it would
                           constitute an "excess parachute payment," as
                           defined in Section 280G of the Internal Revenue
                           Code of 1986.  Should any such payment provided for
                           in section 5 constitute an "excess parachute
                           payment" as defined in Section 280G of the Internal
                           Revenue Code of 1986, the Company and the Executive
                           shall meet in good faith to negotiate a substitute
                           payment to the Executive equal to that amount which
                           constitutes the excess parachute payment, the
                           payment of which amount is permissible under the
                           Internal Revenue Code and regulations promulgated
                           thereunder.
 
                  (c)      Unless the Executive is terminated for Cause pursuant
                           to Section 4(a)(iii) or voluntarily resigns his
                           employment pursuant to section 4(a)(vii), the Company
                           shall maintain in full force and effect, for the
                           continued benefit of the
<PAGE>   17
                                                                              17
 
                           Executive, for a period of four (4) years following
                           the Date of Termination all employee benefit plans
                           and programs in which Executive was entitled to
                           participate immediately prior to the Date of
                           Termination, provided that the Executive's continued
                           participation in such employee benefit plans is
                           possible under the general terms and provisions of
                           such plans and programs. In the event that the
                           Executive's participation in any such plan or program
                           is barred at any time during this four (4) year
                           period, the Company shall arrange to provide the
                           Executive with benefits substantially similar to
                           those which the Executive would otherwise have been
                           entitled to receive under such plans and programs
                           from which his continued participation is barred, or
                           alternatively, to provide to the Executive the
                           economic after-tax equivalent of the participation in
                           all of said employee benefit plans in which the
                           Executive's participation is barred. At the end of
                           the period of coverage, the Executive shall have the
                           option to have assigned to him at no cost and with no
                           apportionment of prepaid premiums any assignable
                           insurance policy owned by the Company which relate
                           specifically to the Executive.
<PAGE>   18
                                                                              18
 
                  (d)      (i) In addition to the foregoing, if the
                               Executive's employment is terminated by the
                               Company without cause pursuant to Section
                               4(b)(ii), upon the Executive's death or
                               disability pursuant to Section 4(b)(iii),
                               upon the Executive's resignation for good
                               reason pursuant to Section 4(b)(v), as a
                               result of a change in ownership or control
                               pursuant to Section 4(b)(vi), or upon the
                               nonrenewal of this Agreement on its expira-
                               tion date, all stock options awarded to the
                               Executive on or before the Date of
                               Termination under the Company's outstanding
                               Incentive Stock Option Plans; or issuable to
                               Executive under any future stock option plans
                               granted by the Company during the term of
                               this Agreement ("the Options"), shall immedi-
                               ately vest to the Executive's benefit or the
                               benefit of the Executive's estate, in the
                               event of his death.  Further, the Executive
                               shall retain the right to exercise his rights
                               under the options for the full term(s)
                               thereof, and the Company shall take all
                               actions as are necessary to transfer the
                               Options from the Company's qualified stock
                               option plan(s) to the Company's nonqualified
<PAGE>   19
                                                                              19
 
                               stock option plan(s) or such other plans as
                               may be applicable. The intent of this
                               provision is to insure that in the event of
                               termination of the Executive's employment
                               for reasons referenced in this subsection,
                               the Executive shall be fully vested in the
                               Options and shall have the full term of
                               each such option or options to exercise the
                               same.
 
                          (ii) In the event the Executive's employment is
                               terminated in accordance with Section
                               4(a)(vi) and, as a consequence of such change
                               in ownership or Control the Company's incen-
                               tive Stock option plans in existence at the
                               time of the Executive's termination of
                               employment cease to exist at any time before
                               the Executive's right to exercise the Options
                               pursuant to Section 5(d)(i) above has
                               expired, the Executive's right to the
                               Options, or to the receipt of cash compensa-
                               tion in lieu thereof, shall be governed by
                               the provisions of section 9(b)(ii), below.
 
                  (e)      The Executive shall not be required to mitigate the
                           amount of any payment provided for in this Section
                           5 by seeking other employment or otherwise, and no
<PAGE>   20
                                                                              20
 
                           compensation earned by the Executive after his
                           termination of employment with the Company shall be
                           applied to offset any payment provided for in this
                           Agreement.
 
                  (f)      Any termination of the Executive's employment by the
                           Company or by the Executive (other than termination
                           by reason of the Executive's death) shall be
                           communicated by written Notice of Termination to the
                           other party hereto in accordance with provisions set
                           forth in this Agreement.
 
                  (g)      "Date of Termination" shall mean:
 
                           (i)   if the Executive's employment is terminated
                                 by his death, the date of his death,
 
                           (ii)  if the Executive's employment is terminated
                                 by reason of the Executive's disability,
                                 sixty (60) days after Notice of Termination
                                 is given (provided that the Executive shall
                                 not have returned to the performance of his
                                 duties on a reasonable full-time basis
                                 during such sixty (60) day period),
<PAGE>   21
                                                                              21
 
                           (iii) if the Executive's employment is terminated
                                 for any other reason, the date specified in
                                 the Notice of Termination; provided that if
                                 within sixty (60) days after the Notice of
                                 Termination is given the party receiving such
                                 Notice of Termination notifies the other
                                 party that a dispute exists concerning the
                                 termination, the Date of Termination shall be
                                 the date on which said dispute is finally
                                 determined, either by mutual written agree-
                                 ment of the parties, or by a final arbitra-
                                 tion award as provided for in Section 18 (the
                                 time for appeal therefrom having expired and
                                 no appeal having been perfected).
 
         6.       Payment in the Event of Non Renewal of Agreement
 
                  (a) In the event this Agreement is not renewed by the Company
for a minimum period of three years after its expiration date of June 30, 2001,
the Company shall pay as severance to the Executive on the fifth day following
the Date of Termination, a lump sum payment equal to (i) two (2) times the sum
of (A) the Executive's annual Base Salary at the highest rate in effect during
the twelve (12) months immediately preceding the Date of Termination and (B) the
average of the annual bonus payments, if any, paid to the Executive in the
preceding three (3) years; and
<PAGE>   22
                                                                              22
 
(ii) an additional amount equal to 1/24 of the lump sum payment provided in
clause (i), above, multiplied by each full year of the Executive's service with
the Company.
 
                  (b) Upon the non renewal of this Agreement by the Company as
provided in Section 6(a) above, the Company shall maintain in full force and
effect for the continued benefit of the Executive for a period of two (2) years
following the Date of Termination all employee benefit plans and programs in
which the Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued participation in such
employee benefit plans is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's participation in any
such plan or program is barred at any time during this two (2) year period, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive would otherwise have been entitled to
receive under such plans and programs from which his continued participation is
barred, or alternatively, to provide to the Executive the economic after-tax
equivalent of the participation in all of said employee benefit plans in which
the Executive's participation is barred. At the end of the period of coverage,
the Executive shall have the option to have assigned to him at no cost and with
no apportionment of prepaid premiums any assignable insurance policy owned by
the Company which relates specifically to him.
<PAGE>   23
                                                                              23
 
                  (c) In the event of the non-renewal of the Company of this
Agreement as provided for in Section 6(a), above, all options awarded to the
Executive on or before the Date of Termination under the Company's outstanding
Incentive Stock option Plans, or issuable to Executive under any future stock
option plans established by the Company during the term of this Agreement, shall
immediately vest to the Executive's benefit and the Executive shall retain the
right to exercise his rights under the Options for the full term(s) thereof, and
the Company shall take all actions as are necessary to transfer the "Options"
from the Company's qualified stock option plan(s) to the Company's nonqualified
stock option plan(s) or such other plans as may be applicable.
 
         7.       Termination for Cause
 
                  (a) If the Company reasonably shall determine that there are
grounds for discharging the Executive for Cause (as hereinafter defined), the
Company may, through the Board, at its election within thirty (30) days
thereafter, give the Executive notice of its intention to terminate the
Executive for cause, stating the grounds for termination and specifying a date,
within thirty (30) days of such notice, on which the Executive shall be given an
opportunity to discuss such grounds for termination at a meeting of the Board.
<PAGE>   24
                                                                              24
 
                  (b) If the grounds for termination are those specified in
clause (ii), (iii) or (iv) of paragraph (d) hereof, at such Board meeting the
Board and the Executive shall discuss in good faith and shall determine and set
forth in writing what actions the Executive might take, and by what date, to
cure the material adverse impact or default, as the case may be, to the
reasonable satisfaction of the Board, but in no event earlier than sixty (60)
days after said meeting. When the Board and the Executive have agreed in writing
upon a cure and the date by which it shall be provided, the Board shall take no
further action regarding termination for cause on such grounds until such date,
and on such date it shall provide written notice to the Executive that either
(i) the cure has been satisfactorily provided, and the Board shall continue to
employ the Executive under this Agreement pursuant to the terms hereof, or (ii)
the cure has not been satisfactorily provided and the Board is terminating the
Executive's employment for cause effective immediately.
 
                  (c) If the grounds for termination are those specified in
clause (i) of paragraph (d) hereof, it is understood and agreed that no
satisfactory cure is available. If following discussion with the Executive of
the grounds for his termination (as specified in clause (i) of paragraph (d)
hereof, at the Board meeting the Board shall continue intent on discharging the
Executive for cause on such grounds, the Company shall provide written notice of
termination to the Executive within thirty (30) days of the date of
<PAGE>   25
                                                                              25
 
such meeting, and such termination shall be effective upon the date set forth in
such notice.
 
                  (d)      For purposes of this Agreement the term "cause"
shall mean:
 
                           (i)    the conviction of the Executive for a felony
                                  involving fraud or moral turpitude;
 
                           (ii)   The Executive's engaging in activities
                                  prohibited by Section 10 hereof;
 
                           (iii)  the Executive's frequent willful gross
                                  neglect (other than as a result of
                                  physical, mental or emotional illness) of
                                  his duties and responsibilities under this
                                  Agreement that has a material adverse
                                  impact on the business or reputation of the
                                  Company; or
 
                           (iv)   the Executive's willful gross misconduct that
                                  has a material adverse impact on the business
                                  or reputation of the Company.
 
                  (e) For each act or occurrence giving rise to a basis for
termination for cause, failure by the Company to timely give. all written
notices as set forth in this Section, from the date the
<PAGE>   26
                                                                              26
 
Board or any of its members were either (i) aware of such act or occurrence
giving rise to a basis for termination for cause, or (ii) with reasonable due
diligence should have known of such act or occurrence giving rise to a basis for
termination for cause, shall constitute a waiver of the Company's right to
terminate based upon such cause, but such waiver shall not prejudice the
Company's right to terminate pursuant to this Section based upon another act or
occurrence giving rise to a basis for termination for cause, whether of the same
or a different type.
 
         8.       Resignation by Executive for Good Reason
 
         In the event that the Company shall during the term of this contract
(i) fail to continue the appointment of the Executive as Chairman and Chief
Executive Officer, (ii) reduce the Executive's annual salary below the minimum
amount specified in Appendix A, (iii) materially diminish the duties or
responsibilities of the Executive as Chairman and Chief Executive Officer, as
the same are set forth hereinabove, (iv) assign to the Executive such duties and
responsibilities inconsistent with his position as Chairman and Chief Executive
Officer, or (v) after a change in ownership or control of the Company, relocate
its headquarters to a location more than thirty (30) miles, by air, from its
location immediately prior to such charge in ownership or control (each of the
foregoing hereinafter referred to as a "Triggering Event"), then the Executive
may give notice to the Company of his election to
<PAGE>   27
                                                                              27
 
terminate this Agreement pursuant to this Section, effective sixty (60) days
from the date of such notice, unless the Company shall have cured the default
giving rise to his Notice of Termination. Such notice from the Executive shall
state the Triggering Event that provides the grounds for his termination, and
such notice must be given, if at all, within one hundred and twenty (120) days
of the occurrence of the Triggering Event referred to as providing such grounds
for termination. Within the sixty (60) day period specified in the Executive's
notice to the Company, the Executive and the Board shall discuss in good faith
what actions the Board might take, and by what date, to cure the default
involved in the Triggering Event specified by the Executive. If within that
sixty (60) day period the Board and the Executive are unable to agree in writing
upon a cure or the date by which such cure shall be provided, the Executive's
termination shall be effective on the date specified in his original notice to
the Company. If within such sixty (60) day period the Board and the Executive
shall agree in writing upon a cure and the date by which it shall be provided,
then on such date the Executive shall notify the Board either (i) that the cure
has been satisfactorily provided, and the Executive is willing to continue his
employment under this Agreement pursuant to the terms hereof (except as such
terms may have been altered by the agreed-upon cure), or (ii) that the cure has
not been satisfactorily provided and the Executive is terminating his employment
hereunder effective immediately.
<PAGE>   28
                                                                              28
 
         9.       Termination of Employment as a Result of Change in
                  Ownership or Control of the Company
 
                  (a) In the event that the Company shall enter into an
agreement to merge with, or to sell or otherwise dispose of all or substantially
all of its assets or stock to, or is acquired by another corporation or other
entity (hereinafter, a "Change in ownership or Control"), and the parties to
such agreement do not appoint the Executive as Chairman and Chief Executive
Officer (or to such other position of authority and responsibility as may be
acceptable to the Executive in his sole discretion) of the newly created or
merged entity or purchaser, then the Board shall notify the Executive in
writing, specifying such other senior executive position with the new entity
purchaser, or controlling entity, in which the Executive is to serve, the duties
to be assigned to such position, and any other amendments to the terms and
provisions of this Agreement that the above-mentioned parties propose. In no
event, however, shall the remuneration, benefit coverage, stock option
entitlements or severance payments be less than that provided for in this
Agreement. At any time during the period following such notice and ending six
(6) months from the effective date of the Change in Ownership or Control, the
Executive may elect to give notice to the Company, to the purchaser, to the new
entity, or to the controlling entity as the case may be, that he is terminating
this Agreement pursuant to this Section, effective on the date specified in such
notice. If the Agreement is terminated pursuant to this section the Company
shall provide the Executive
<PAGE>   29
                                                                              29
 
all benefits and obligations as provided in Section 5 hereof; provided, however,
that prior to the effective date of the Change in Ownership or Control, the
Company shall make arrangements satisfactory to the Executive by providing
adequate security that the new entity, purchaser or controlling entity following
the Change in ownership or Control will have the financial resources to make the
payments and provide for the payments and benefits (or the economic equivalent
thereof) to the Executive on a timely basis in accordance with the terms of this
Agreement.
 
                  (b) In the event the Change in Ownership or Control results in
the dissolution, elimination or modification of the Company's Incentive Stock
Option Plans or any future stock option plan(s) established by the Company, and
the Executive becomes employed by the successor entity in accordance with
Section 9(a), above, the Executive may, at his sole discretion, elect to (i)
accept participation in and the award of stock options in such stock option
plans of the successor or controlling entity, as offered to him by such
successor or controlling entity, or (ii) receive a payment in cash for such
stock options of the Company as calculated in accordance with the following
formula:
 
         (A)      All stock options awarded to the Executive by the Company
                  shall be deemed to have become fully vested as of the date on
                  which the Company's Incentive Stock Option Plans or any future
                  stock option plans established by the
<PAGE>   30
                                                                              30
 
                  Company have been dissolved, eliminated or modified ("the Old
                  Vested Options"). The Executive shall retain the right to
                  exercise all such Options for the full term(s) thereof, and
                  the Company shall take all actions as are necessary to
                  transfer the Options from the Company's qualified stock
                  options plan(s) to the Company's non-qualified stock option
                  plan(s) or such other plans as applicable.
 
                  The cash equivalent of these Stock Options shall be the
                  average of the then present value of all stock options granted
                  to the Executive over the prior three (3) years, and shall be
                  determined pursuant to the "Black-Scholes" options pricing
                  model.
 
                  The Executive will be provided with a lump-sum payment, within
                  30 days of the dissolution, elimination or modification of the
                  Company's stock options plans, equal to the calculated cash
                  equivalent of the Old Vested options, plus an additional cash
                  amount (grossed up) to cover all taxes required to be paid by
                  the Executive on this cash equivalent.
 
         (B)      In addition, the Executive will be credited, for the purpose
                  of this Section, with additional stock options equal to 0.5
                  percent (0.5%) of the fully diluted
<PAGE>   31
                                                                              31
 
                  capitalization of the Company calculated as of the day before
                  the change in ownership or Control, multiplied by the number
                  of years (including fraction thereof) from that date to the
                  end of the term of this Agreement as set forth in Section 4(a)
                  ("the Cash Equivalency Obligation of Successor"). The cash
                  equivalency of stock options provided in this paragraph shall
                  be determined pursuant to the "Black-Scholes" options pricing
                  model.
 
                  On the first anniversary date of this Agreement following the
                  Change in ownership or Control, the successor entity shall
                  provide the Executive with a cash payment to be calculated as
                  follows: the Cash Equivalency obligation of Successor
                  multiplied by a fraction the numerator of which is the number
                  of months or fraction thereof from the effective date of the
                  Change in ownership or Control to the anniversary date and the
                  denominator of which is the total number of months or fraction
                  thereof from the effective date of the Change in ownership or
                  Control and the end of the term of this Agreement. On each
                  succeeding anniversary date through the end of the term of
                  this Agreement, the successor entity shall provide the
                  Executive with a cash payment to be calculated as follows: the
                  Cash Equivalency obligation of Successor multiplied by a
                  fraction the numerator of which is 12 and the denominator of
                  which is the total number of months
<PAGE>   32
                                                                              32
 
                  between the effective date of the Change in ownership or
                  Control and the end of the term of this Agreement.
 
                  (c) In the event the Change in Ownership or Control results in
the Executive's participation in a medical insurance plan which provides a
lesser amount of benefits or coverage than the Company's medical plan for the
Executive and/or members of his immediate family, the successor or controlling
entity shall provide the Executive with a cash payment sufficient to reimburse
the Executive for all medical expenses incurred by the Executive for himself and
for members of his immediate family, and the successor or controlling entity
shall provide the Executive with an additional cash amount (gross up) to cover
all taxes required to be paid by the Executive on such medical expense
reimbursement.
 
         10.      Agreement Not to Compete.
 
         The Executive agrees that during his employment by the Company, and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination arises as a result of a change in ownership or
control as provided for in Section 5(a)(iii) and 9 herein, in which case the
Executive shall not be bound by any post-termination agreement not to compete,
he will not, without the prior written consent of the Company, either directly
or indirectly, on his own behalf or in the service or on behalf of others as a
shareholder (other than ownership of less
<PAGE>   33
                                                                              33
 
than five percent (5%) of the outstanding voting securities of an entity whose
voting securities are traded on a national securities exchange), officer,
trustee, consultant, or executive or managerial employee, engage in, consult
with or be employed by any competing Business.
 
         11.      Agreement Not to Solicit Customers.
 
         The Executive agrees that during his employment by the Company and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination is for cause under Section 7, or voluntary
resignation under Section 4(a)(7), or non-renewal of this Agreement under
Section 6, he will not without the prior written consent of the Company, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any Competing Business, any person or entity whose account with
the Company was sold or serviced by or under the supervision of the Executive
during the two (2) years preceding the termination of such employment.
 
         12.      Agreement Not to Solicit Employees.
 
         The Executive agrees that during his employment by the Company and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination is for cause
<PAGE>   34
                                                                              34
 
under Section 7, or voluntary resignation under Section 4(a)(7), or non renewal
or this Agreement under Section 6, he will not, either directly or indirectly,
on his own behalf or in the service or on behalf of others, solicit, divert or
hire away, or attempt to solicit, divert or hire away, to any Competing Business
any person employed by the Company, whether or not such employee is a full-time
employee or a temporary employee of the Company, whether or not such employment
is pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
 
         13.      Ownership, Non-Disclosure and Non-Use of Confidential
                  Information.
 
                  (a) The Executive acknowledges and agrees that all
Confidential Information as defined in Section 1(c), hereof, and all physical
embodiments thereof, are confidential to and shall be and remain the sole and
exclusive property of the Company. Upon request by the Company, and in any event
upon termination of his employment with the Company for any reason, the
Executive shall promptly deliver to the Company all property belonging to the
Company, including without limitation, all Confidential Information (and all
embodiments thereof), then in his custody, control or possession.
 
                  (b) The Executive agrees that he will not, either during the
term of his employment by the Company, or for a period of five (5) years after
the termination of his employment, without the
<PAGE>   35
                                                                              35
 
prior written consent of the Company, disclose or make available any
Confidential Information, as defined in Section 1(c) hereof, to any person or
entity, nor shall he make or cause to be made, or permit or allow, either on his
own behalf or on behalf of others, any use of such Confidential Information
other than in the proper performance of his duties hereunder.
 
         14.      Ownership of Inventions.
 
                  (a) The Executive shall promptly disclose to the Company all
discoveries, inventions, and improvements, patentable or unpatentable, conceived
or made by the Executive, individually or jointly with any other person or
persons, during the period of his employment by the Company (whether or not
during working hours) relating in any manner to the business or activities of
the Company, whether such discovery, invention or improvement be a machine,
apparatus, process, composition, article, or other subject. All such
discoveries, inventions and improvements shall be the sole and exclusive
property of the Company in respect to any and all countries, their territories
and possessions. The Executive shall, during his employment within the Company
and thereafter, perform at the request and expense of the Company all lawful
acts and execute, acknowledge and deliver all such instruments deemed necessary
by the Company to vest in the Company the entire right, title and interest in
and to such discoveries, inventions and improvements, and to enable the Company
to properly
<PAGE>   36
                                                                              36
 
prepare, file and prosecute applications for and obtain patents (including like
kinds of industrial property) thereon in any and all countries selected by the
Company as well as reissues, renewals and extensions thereof, and to obtain and
record title to such applications and patents so that the Company shall be the
sole and absolute owner thereof in any and all countries in which it may desire
patent or like protection.
 
                  (b) Any provision in this Agreement requiring the Executive to
assign his rights in any invention does not apply to an invention for which no
equipment, supplies, facility, or trade secret information of the Company was
used and which was developed entirely on the Executive's own time, and: (a)
which does not relate (i) to the Business of the Company or (ii) to the
Company's actual or demonstrably anticipated research or development, or (b)
which does not result from any work performed by the Executive for the Company.
 
         15.      Business and Travel Expense.
 
         The Executive shall be reimbursed for his out-of-pocket expenses
incurred in carrying out the Company's business, including all travel and
entertainment expenses reasonably required by the Executive in his position as
Chairman and Chief Executive officer, in accordance with Company policy and upon
proof of such expenditures. It is understood that the Executive's wife may
accompany
<PAGE>   37
                                                                              37
 
him on business travel when the Executive determines that her presence will
enable him to further the interests of the Company and in such circumstances the
Executive shall be reimbursed for her reasonable out-of-pocket travel and
entertainment expenses as well.
 
         16.      Financial Planning Expenses.
 
         The Company shall reimburse the Executive for reasonable costs and
expenses incurred by the Executive for financial, estate and tax planning up to
an aggregate of Ten Thousand Dollars ($10,000) annually.
 
         17.      Legal and Consulting Fees.
 
         The Company shall pay all reasonable legal fees and consulting expenses
incurred by the Executive in connection with the negotiation and preparation of
this Agreement.
 
         18.      Resolution of Disputes
 
                  (a) Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in the
City of Phoenix, in accordance with the rules of the American Arbitration
Association (the "AAA"). The arbitration shall be before three (3) arbitrators,
all of whom shall be attorneys. One arbitrator shall be appointed by the
Executive; one
<PAGE>   38
                                                                              38
 
arbitrator shall be appointed by the Company, and the third Arbitrator shall be
selected by the two appointed Arbitrators. In the event the two appointed
Arbitrators are unable to agree upon the third Arbitrator, either party may
petition the Superior Court of the State of Arizona, Maricopa County, for
appointment of the third arbitrator. The arbitrators shall not have the
authority to add to, subtract from or in any way modify the express written
terms of the Agreement, and in rendering an award, the arbitrators shall be
required to adhere to the express written provisions of this Agreement and the
intention of the parties appearing therefrom. The decision of the arbitrators
shall be final and binding on the parties hereto and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
 
                  (b) The costs for the arbitration shall be borne equally by
both parties.
 
                  (c) Pending the outcome or resolution of any arbitration, the
Company shall continue payment of all amounts when and as due the Executive
under this Agreement without regard to any dispute; provided, however, that if
the arbitration shall be decided in favor of the Company, the, Executive shall
promptly repay to the Company, with interest at the prime rate as published from
time to time by Chemical Bank, all amounts he would not have been entitled to
receive under this Agreement had the dispute not been taken to arbitration, and
the arbitration award in favor of
<PAGE>   39
                                                                              39
 
the Company shall be deemed an award in the amount of the repayment
due to the Company.
 
         19.      Compliance With Securities Laws.
 
         The Executive shall comply with all federal and state securities laws
and Company policies and guidelines relating thereto concerning insider trading,
reporting requirements, and confidentiality of undisclosed internal material
information about the Company.
 
         20.      Severability, etc.
 
                  (a) The Executive agrees that the covenants and agreements
contained in sections 10, 11, 12 and 13 of this Agreement, and the subsections
of those Sections, are of the essence of this Agreement; that each of such
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company and the Business of the Company; that the company is
engaged in the Business of the company; that irreparable loss and damage will be
suffered by the Company should the Executive breach any of such covenants and
agreements; that each of such covenants and agreements is separate, distinct and
severable not only from the other of such covenants and agreements but also from
the other and remaining provisions of this Agreement; that the unenforceability
of any such covenant or agreement shall not affect
<PAGE>   40
                                                                              40
 
the validity or enforceability of any other such covenant or agreements or any
other provision or provisions of this Agreement; and that, in addition to other
remedies available to it, the Company shall be entitled to seek both temporary
and permanent injunctive relief to prevent a breach or contemplated breach by
the Executive of any of such covenants or agreements.
 
                  (b) In the event any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable because it is invalid or in
conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the rights and obligations of
the parties shall be construed and enforced as if this Agreement did not contain
such invalid or unenforceable provisions.
 
         21.      No Set-Off By the Company.
 
         The Company shall continue to provide to the Executive all
compensation, benefits and prerequisites of the office of Chairman and Chief
Executive Officer provided for in this Agreement notwithstanding the existence
of any claim, dispute, action or cause of action by the Company against the
Executive, whether based. upon this Agreement or otherwise. Such dispute, claim
or cause of action by the Company against the Executive shall be resolved in
accordance with Section 18 hereof, with the exception
<PAGE>   41
                                                                              41
 
of the Company's right to seek injunctive relief provided for in
section 20 hereof.
 
         22.      Headings.
 
         The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
 
         23.      Notices.
 
         Any notice to either party hereunder shall be in writing, and shall be
deemed to be sufficiently given to or served on such party, for all purposes, if
the same shall be personally delivered to such party, or sent to such party by
registered mail, postage prepaid, at the address of such party given above.
Either party hereto may change the address to which notices are to be sent to
such party hereunder by written notice of such new address given to the other
party hereto.
 
         24.      Governing Law.
 
         This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Arizona applicable to contracts to be
performed therein, without regard to conflict of laws principles.
<PAGE>   42
                                                                              42
 
         25.      Assignment.
 
         This Agreement may not be assigned by the Company without the prior
written consent of the Executive. The Executive shall have the right to
designate a beneficiary, his executor, his administrator or his estate to
receive any payments or benefits payable under this Agreement upon his death.
 
         26.      Waiver.
 
         Except as otherwise provided for in this Agreement, no term or
condition of this Agreement shall be deemed to have been waived, nor shall there
be any estoppel against the enforcement of any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.
 
         27.      Amendment of Agreement.
 
         This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
<PAGE>   43
                                                                              43
 
         28.      Entire Agreement.
 
         This Agreement represents the entire understanding of the parties
hereto and supersedes any prior understandings or agreements between the
parties, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided
and not expressly provided in this Agreement.
 
         IN WITNESS WHEREOF, the Executive has executed this Agreement and the
Company has caused this Agreement to be executed by its representative thereunto
duly authorized as of the date set forth above.
 
                                           MEDICIS PHARMACEUTICAL CORPORATION
 
                                  By: /s/ Michael A. Pietrangelo
                                      -----------------------------------------
                                      Michael A. Pietrangelo
                                      Chairman of the Executive Committee
                                       of the Board of Directors
 
                                  By: /s/ Joseph Salvani
                                     ------------------------------------------
                                     Joseph Salvani
                                     Chairman, Compensation Committee,
                                      Member of Board of Directors
 
                                  By: /s/ Jonah Shacknai
                                     ------------------------------------------
                                     Jonah Shacknai

 

 

 

 

 

 

 

Exhibit 10.7

FOURTH AMENDMENT

Amendment to Employment Agreement between Medicis Pharmaceutical Corporation and Jonah Shacknai, dated July 1, 1996, as amended on April 1, 1999, February 21, 2001 and December 30, 2005 (the “Agreement”).

This Fourth Amendment (the “Amendment”) is made as of this 23rd day of December, 2008 between Medicis Pharmaceutical Corporation, a corporation organized under the laws of the State of Delaware (the “Company”), with offices located at 7720 North Dobson Road,
Scottsdale, Arizona, and Jonah Shacknai (the “Executive”), residing in Scottsdale, Arizona:

WITNESSETH:

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

WHEREAS, the Company and the Executive desire to amend the Agreement to satisfy the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and Internal Revenue Service guidance issued thereunder (“Section 409A”).

NOW, THEREFORE, in consideration of the continued employment of the Executive by the Company as Chairman and Chief Executive Officer, the above premises and the mutual agreements hereinafter set forth, the receipt, adequacy and sufficiency of which is hereby acknowledged, the parties agree to amend the Agreement as follows:

1. Section 5(k) of the Agreement shall have added subsections (d) through (i), which shall read:

     “(d) Executive will be considered to have terminated employment with the Company only when Executive incurs a “separation from service” with the Company within the meaning of Treasury Regulation Section 1.409A-1(h).

     (e) The severance payments payable under Sections 5(a)(i), 5(a)(ii), 5(a)(iii)(a), 5(a)(iii)(b) and 6(a), and the stipend payable under Section 5(i), shall be construed to be compliant payments that are payable in connection with Executive’s “separation from service.” The lump sum severance payments payable under Sections 5(a)(i), 5(a)(ii), and 5(a)(iii) shall be paid within five (5) days following the Date of Termination (on such date as is determined by the Company). The severance payments payable under Section 5(a)(iv) shall be construed to be compliant payments that are payable in connection with Executive’s death.

     (f) The provision of continued benefits pursuant to Sections 5(c), 5(h) and 6(b) shall be provided in a manner that is exempt from Section 409A of the Code in accordance with Treasury Regulation Section 1.409A-1(a)(5), and, to the extent such continued benefits are not exempt from Section 409A, in a manner that complies with Section 409A in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv).

     (g) The payment of damages under the third paragraph of Section 5(a)(iii)(a) and the third paragraph of Section 5(a)(iii)(b) shall be construed to be exempt payments of settlements

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or awards resolving bona fide legal claims in accordance with Treasury Regulation Section 1.409A-1(b)(11) and paid in a manner consistent with such intent; provided, however, that if the payment of such damages cannot be provided in a manner that is exempt from Section 409A, such payment shall be made in a cash lump sum payment within five (5) days from the date such obligation arises.

     (h) The tax gross-up payments payable under Sections 5(b), 9(b)(A) and 9(c) shall be paid in a manner that complies with Section 409A in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v), including, without limitation, that each such gross-up payment shall be made by the end of the Executive’s taxable year next following the Executive’s taxable year in which the Executive remits the related taxes.

     (i) The reimbursement of expenses and/or provision of in-kind benefits under Sections 9(c), 15, 16 and 17 shall be provided in a manner that complies with Section 409A in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv), including, without limitation, that the reimbursement of expenses or provision of in-kind benefits in Executive’s taxable year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.”

2.

 

Section 9(b)(A) of the Agreement shall be amended by adding the following to the end of the last paragraph thereof:

“, provided, that Executive remains employed with the successor entity through the date of such dissolution, elimination or modification of the Company’s stock option plans.”

3.

 

Section 9(b)(B) of the Agreement shall be amended as follows:

 

a.

 

By adding the following to the end of the first sentence of the second paragraph thereof:

 

 

 

 

“; provided, that Executive remains employed with the successor entity through the date of the first anniversary following a Change in Ownership or Control, and such cash payment is paid in a lump sum within thirty (30) days following such date.”

 

 

b.

 

By adding the following to the end of the second paragraph thereof:

 

 

 

 

“; provided, however, that Executive will be eligible to receive each such cash payment due upon each successive anniversary following a Change in Ownership or Control only if: (i) Executive remains employed with the successor entity through the date of such successive anniversary and the cash payment payable upon such anniversary is paid in a lump sum within thirty (30) days following such anniversary date, or (ii) if Executive is terminated by the Company without cause (under Section 4(b)(ii)) or has an “involuntary separation from service” within the meaning of Treasury Regulation Section 1.409A-1(n)(2)(i), the cash payment payable during the period in which the Date of Termination occurs is paid in a lump sum within thirty (30) days following the Date of Termination.”

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The Agreement, as amended by this Amendment, shall remain in full force and effect in accordance with the terms and conditions thereof. The formation, construction, and performance of this Amendment shall be construed in accordance with the laws of Arizona, without regard to conflict of laws principles. This Amendment may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

 

 

 

 

 

 

 

 

MEDICIS PHARMACEUTICAL CORPORATION

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Mark Prygocki

 

 

Name:

 

Mark Prygocki

 

 

 

 

Title:

 

Executive Vice President, Chief Operating Officer

 

 

 

 

 

 

 

 

 

 

JONAH SHACKNAI

 

 

 

 

 

 

 

 

 

 

 

/s/ Jonah Shacknai

 

 

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