**Exhibit 10.31**

**4-1-13**

**EMPLOYMENT AGREEMENT**

August10, 1999

David Goldstein9 Via ZapadorRancho Santa Margarita, CA 92688

Dear David:

I am pleased to offer youthe position of Director of Sales, United States for Obagi Medical Products,Inc. (“OMP” or the “Company”) effective Oct 18, 1999 on the following terms:

A.                                                                                   Duties

You will perform the dutiescustomarily associated with this position with respect to the Company’soperations on a full-time basis, and will report directly to the Vice Presidentof Sales and Marketing of the Company.

B.                                                                                     Compensation

Salary: Yoursalary shall be $110,000 per annum subject to annual cost of living increasesbased on the Consumer Price Index for All Items, All Urban Consumers for theLos Angeles-Anaheim-Riverside, CA area or such greater increase as may beapproved by the Company’s Board of Directors in its discretion. Your salaryshall be paid semi-monthly, subject to standard payroll deductions andwithholdings.

Stock Option Grant: The Company intends to grant you 5,000 stock options to purchasecommon stock of the Company under its Stock Option Plan. These options willhave an exercise price of $1.00 per share. All options will be subject to therequirements of the Company’s Stock Option Plan, applicable rules under theInternal Revenue Code, applicable accounting policies and securities laws.

Benefits: Youwill be eligible for three weeks vacation annually and sick leave according tostandard Company.   You will also receiveall other benefits the Company provides to its most senior employees (e.g.,health and dental insurance coverage). You will be eligible to participate inthe Company’s 401k plan after six months.

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Bonus: Youshall be entitled to an annual bonus based on the achievement of certainbenchmarks and in the amounts as set forth on Exhibit “A” attached hereto. Allbonuses will be subject to the standard payroll deductions and withholdings andshall be paid not later than the end of the first fiscal quarter of thefollowing year. No bonus shall be due and owing unless you are employed by theCompany on December 31 of the applicable year. Pro rated bonus for 4th Qtr1999 based on current published parameters.

C.*                                                                                    *Expenses

The Company shall reimburseyou for all other reasonable, ordinary and necessary expenses incurred in theperformance of your duties including all licenses and membership fees toagencies and associations (such reimbursement shall be conditioned upon thesubmission of reasonable detailed receipts and/or invoices substantiating suchexpenses).

D.                                                                                    Termination

Either you or the Companymay terminate your employment with or without cause, at any time, for anyreason whatsoever without advance notice. This at-will employment relationshipcannot be changed except by a writing signed by the Chairman of the Board ofthe Company.

If you voluntarily terminateyour employment, if you die or become physically or mentally disabled (subjectto the Company’s requirement to comply with all applicable laws), or if theCompany terminates your employment for cause, all compensation and benefitsshall cease immediately. For purposes of this agreement, termination for causeshall mean material misconduct, including, but not limited to (i) conviction ofany felony or any crime involving moral turpitude or dishonesty or which ispunishable by imprisonment in a state or federal correctional facility; (ii)participation in a fraud or act of dishonesty against the Company or any of itscustomers or suppliers; (iii) willful and material breach of Company policiesor willful violation of reasonable rules, regulations, orders or directives ofthe Company’s Board of Directors; (iv) refusal to perform your duties on afull-time basis; (v) material breach of any term of this Agreement; (vi)intentional damage to Company property; (vii) conduct by you which in the goodfaith and reasonable determination of the Board of Directors of the companydemonstrates gross negligence, willful malfeasance or gross unfitness to serve.In the case of sections iii, iv, and v, Company must provide Employee withwritten notice of their intent to terminate and Employee shall be given 30 daysto correct the “cause” in order to avoid termination. The determination as tothe adequacy of such “corrective” action on the part of the employee shall besubject to the good faith and reasonable determination of the Board ofDirectors of the Company.

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E.                                                                                      Policies and Procedures

You will be expected toabide by all Company policies and procedures. Company may issue policies,rules, regulations, guidelines, procedures, or other informational material,whether in the form of handbooks, memoranda, or otherwise, relating to itsemployees. These materials are general guidelines for your information andshall not be construed to alter, modify, or amend this agreement for any purposewhatsoever, and this agreement shall control over such policies, to the extentof any conflict.

F.                                                                                      Confidentiality/Non-Competition

At any time followingexecution of this agreement, you agree not to use or disclose, directly orindirectly, for any reason, whatsoever or in any way any confidentialinformation or trade secrets of Company, including, but not limited to,information with respect to Company as follows: the identity, lists, and/ordescriptions of any customers of Company; financial statements, cost reports,and other financial information; product or service pricing information;contract proposals and bidding information; processes, policies and proceduresdeveloped as part of a confidential business plan; and management systems andprocedures, including manuals and supplements thereto, other than (i) at thedirection of Company during the course of your employment (ii) after receipt ofthe prior written consent of Company, (iii) as required by any court orgovernmental regulatory agency having competent jurisdiction over Company, or(iv) information made public by Company.

You agree that allcopyrights, trademarks, tradenames, service marks, inventions, processes andother intangible or intellectual property rights that may be invented, conceived,developed or enhanced by you while you are employed by the Company that relateto the Company’s business, or that result from any work performed by you forthe Company, shall be the sole property of the Company, and you hereby assignto the Company any right or interest that you may otherwise have in respectthereof Upon the reasonable request of the Company, you shall execute,acknowledge, deliver and file any instrument or document necessary orappropriate to give effect to this provision and do all other acts and thingsnecessary to enable the Company to exploit the same or to obtain patents orsimilar protection with respect thereto. You agree mat the covenants set forthin this paragraph shall accrue to the benefit of Company, irrespective of thereason for termination of the other provisions of this agreement and thecorresponding employment relationship created hereby.

You agree that while you areemployed by the Company and for a period of three years thereafter, you willnot, without the prior written consent of the Company’s Board of Directors:

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a.             Whether for compensation or otherwise,directly or indirectly engage in the Company’s business, or any part thereof,or assist any other person in such person’s conduct of the Company’s business,or any part thereof, whether as a director, officer, employee, consultant,adviser, independent contractor or otherwise;

b.             Hold a legal or beneficial interest in anyperson which is engaged in the Company’s business or any part thereof, whethersuch interest is as an owner, investor, partner, creditor (other than as atrade creditor in the ordinary course of business), joint venture or otherwise;

c.             Solicit, divert or attempt to divert from theCompany or any person deriving title to the goodwill of the Company (a “Transferee”)any business constituting, or any customer of, any part of the Company’sbusiness then conducted by the Company or such Transferee; or

d.             Induce or attempt to induce any person then,or during the immediately preceding six (6) month period, engaged or employed(whether part-time or full- time) by the Company or any Transferee, whether asan officer, employee, consultant, salesman, adviser or independent contractorto leave the employ of the Company or such Transferee, as the case may be, orto cease providing the services to the Company or such Transferee, as the casemay be, then provided by such person, or in any other manner seek to engage oremploy any such person (whether or not for compensation) as an officer,employee consultant, adviser or independent contractor such that such personwould thereafter be unable to devote his or her full business time andattention to the business then conducted by the Company or such Transferee, asthe case may be.

You hereby specificallyacknowledge and agree that the restrictions contained in this paragraph arereasonable and necessary to protect the business and prospective business ofCompany, and that the enforcement of the provisions of this paragraph will notwork an undue hardship on you.

However, in the event youremployment is terminated by the Company without cause, you shall be permittedto do the following as of the first anniversary of the date of suchtermination:

a.             Whether for compensation or otherwise,directly or indirectly engage in the Company’s business, or any part thereof,or assist any other person in such person’s conduct of the Company’s business,or any part thereof, whether as a director, officer, employee consultant,adviser, independent contractor or otherwise; or

b.             Hold a legal or beneficial interest in anyperson which is engaged in the Company’s business or any part thereof, whethersuch interest is as an owner, investor, partner, creditor (other than as atrade creditor in the ordinary course of business), joint venture or otherwise;or

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G.                                                                                  Miscellaneous

To ensure rapid and economical resolution of anydisputes which may arise with the Company, or any of its officers or directorsor under this agreement, you agree that any and all disputes or controversies,whether of law or fact of any nature whatsoever (including, but not limited to,all state and federal statutory and discrimination claims whether for race,sex, sexual orientation, religion, national origin, age, marital status, ormedical condition, handicap or disability, or otherwise) arising from any suchdispute or regarding the interpretation, performance, enforcement or breach ofthis agreement shall be resolved by final and binding arbitration under theJudicial Arbitration and Mediation Services Rules of Practice and Procedure.

If any provision of this agreement is held to beillegal, invalid, or unenforceable under present or future laws, such provisionshall be fully severable, and this agreement and each separate provision hereofshall be construed and enforced as if such illegal invalid, or unenforceableprovision had never comprised a part of this agreement, and the remainingprovisions of this agreement, shall remain in full force and effect and shallnot be affected by the illegal, invalid or unenforceable provision or by itsseverance from this agreement. In addition, in lieu of such illegal, invalid orunenforceable provision, there shall be added automatically as a part of thisagreement a provision as similar in terms to such illegal, invalid, or unenforceableprovision as may be possible and be legal, valid, and enforceable, if suchreformation is allowable under applicable law.

This agreement constitutes the complete, final andexclusive embodiment of the entire agreement between you and the Company withrespect to the terms and conditions of your employment, and it supersedes anyother agreements or promises made to you by anyone, whether oral orwritten.  You agree that, except asprovided herein, no other representations or promises were made to youregarding your employment with the Company. This agreement shall be construedand interpreted in accordance with the laws of the State of California.

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We look forward to your joining the Company and to asuccessful and enjoyable working relationship.

 
| Sincerely,                  |
|-----------------------------|
|                        |
|                        |
| By                          |   | /s/ Phillip J.  Rose 8/10/99 |   |
|                        |   | Phillip J. Rose,  President & CEO  Obagi Medical Products, Inc. |   |
|                        |   |   |   |
|                        |   |   |   |
| Accepted By:                |   |
|                        |   |   |   |
| /s/ David Goldstein 8/31/99 |   |
| David Goldstein             |   |

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**Exhibit “A”**

Annualbonus based on the percentage achievement of the Company’s consolidated annualNet Revenue and EBITDA plan approved by the Board of Directors, in accordancewith the following schedule:

| Percentage of Plan Achieved | ** ** | **Bonus Payable**  |
|-----------------------------|------------|--------------------|
|                        |       |               |
| 90%                         |       | 30% of Base Salary |
| 100%                        |       | 40% of Base Salary |
| 115%                        |       | 50% of Base Salary |

 

Achievement of plan for the purposes of bonuscalculation will be weighted 50% to Net Revenue and 50% to EBITDA.

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