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                                                              EXHIBIT 10.3

                          OMP ACQUISITION CORPORATION
                     1997 STOCK OPTION/STOCK ISSUANCE PLAN

                                  ARTICLE ONE

                               GENERAL PROVISIONS

I.       PURPOSE OF THE PLAN

         This 1997 Stock Option/Stock Issuance Plan is intended to promote the
interests of OMP Acquisition Corporation, a California corporation, by providing
eligible persons in the Corporation's employ or service with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to continue in such employ
or service.

         Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.

II.       STRUCTURE OF THE PLAN

         A. The Plan shall be divided into two (2) separate equity programs:

               (i) the Option Grant Program under which eligible persons may, at
     the discretion of the Plan Administrator, be granted options to purchase
     shares of Common Stock, and

               (ii) the Stock Issuance Program under which eligible persons may,
     at the discretion of the Plan Administrator, be issued shares of Common
     Stock directly, either through the immediate purchase of such shares or as
     a bonus for services rendered the Corporation (or any Parent or
     Subsidiary).

         B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

III.     ADMINISTRATION OF THE PLAN

         A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.

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         B. The Plan Administrator shall have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on all
parties who have an interest in the Plan or any option or stock issuance
thereunder.

IV.      ELIGIBILITY

         A. The persons eligible to participate in the Plan are as follows:

               (i) Employees,

               (ii) non-employee members of the Board or the non-employee
     members of the board of directors of any Parent or Subsidiary, and

               (iii) consultants and other independent advisors who provide
     services to the Corporation (or any Parent or Subsidiary).

         B. The Plan Administrator shall have full authority to determine, (i)
with respect to the grants under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding, and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive such
stock issuances, the time or times when those issuances are to be made, the
number of shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration to be paid by the
Participant for such shares.

         C. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.

V.       STOCK SUBJECT TO THE PLAN

         A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 500,000
shares.

         B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the

                                       2.
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cancellation-regrant provisions of Article Two. Unvested shares issued under the
Plan and subsequently repurchased by the Corporation, at the option exercise or
direct issue price paid per share, pursuant to the Corporation's repurchase
rights under the Plan shall be added back to the number of shares of Common
Stock reserved for issuance under the Plan and shall accordingly be available
for reissuance through one or more subsequent option grants or direct stock
issuances under the Plan.

         C. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan and (ii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option in order to prevent the dilution
or enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive. In no event shall any such
adjustments be made in connection with the conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.

                                       3.
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                                   ARTICLE TWO

                              OPTION GRANT PROGRAM

I.       OPTION TERMS

         Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

         A. EXERCISE PRICE.

               1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:

              (i) The exercise price per share shall not be less than
     eighty-five percent (85%) of the Fair Market Value per share of Common
     Stock on the option grant date.

             (ii) If the person to whom the option is granted is a 10%
     Shareholder, then the exercise price per share shall not be less than one
     hundred ten percent (110%) of the Fair Market Value per share of Common
     Stock on the option grant date.

               2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Four
and the documents evidencing the option, be payable in cash or check made
payable to the Corporation. Should the Common Stock be registered under Section
12 of the 1934 Act at the time the option is exercised, then the exercise price
may also be paid as follows:

              (i) in shares of Common Stock held for the requisite period
     necessary to avoid a charge to the Corporation's earnings for financial
     reporting purposes and valued at Fair Market Value on the Exercise Date, or

             (ii) to the extent the option is exercised for vested shares,
     through a special sale and remittance procedure pursuant to which the
     Optionee shall concurrently provide irrevocable instructions (A) to a
     Corporation-designated brokerage firm to effect the immediate sale of the
     purchased shares and remit to the Corporation, out of the sale proceeds
     available on the settlement date, sufficient funds to cover the aggregate
     exercise price payable for the purchased shares plus all applicable
     Federal, state and local income and employment taxes

                                       4.
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     required to be withheld by the Corporation by reason of such exercise and
     (B) to the Corporation to deliver the certificates for the purchased shares
     directly to such brokerage firm in order to complete the sale.

               Except to the extent such sale and remittance procedure is
     utilized, payment of the exercise price for the purchased shares must be
     made on the Exercise Date.

         B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option grant. However, no option shall have a term in excess of ten (10)
years measured from the option grant date.

         C. EFFECT OF TERMINATION OF SERVICE.

               1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

              (i) Should the Optionee cease to remain in Service for any reason
     other than death, Disability or Misconduct, then the Optionee shall have a
     period of three (3) months following the date of such cessation of Service
     during which to exercise each outstanding option held by such Optionee.

             (ii) Should Optionee's Service terminate by reason of Disability,
     then the Optionee shall have a period of twelve (12) months following the
     date of such cessation of Service during which to exercise each outstanding
     option held by such Optionee.

            (iii) If the Optionee dies while holding an outstanding option,
     then the personal representative of his or her estate or the person or
     persons to whom the option is transferred pursuant to the Optionee's will
     or the laws of inheritance shall have a twelve (12)-month period
     following the date of the Optionee's death to exercise such option.

             (iv) Under no circumstances, however, shall any such option be
     exercisable after the specified expiration of the option term.

              (v) During the applicable post-Service exercise period, the
     option may not be exercised in the aggregate for more than the number of
     vested shares for which the option is exercisable on the date of the
     Optionee's cessation of Service. Upon the expiration of the applicable
     exercise period or (if earlier) upon the expiration of the option term, the
     option shall terminate and cease to be outstanding for any vested shares
     for which the option has not been exercised. However, the option shall,
     immediately upon the Optionee's cessation

                                       5.

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     of Service, terminate and cease to be outstanding with respect to any and
     all option shares for which the option is not otherwise at the time
     exercisable or in which the Optionee is not otherwise at that time vested.

         (vi) Should Optionee's Service be terminated for Misconduct, then all
outstanding options held by the Optionee shall terminate immediately and cease
to remain outstanding.

               2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:

               (i) extend the period of time for which the option is to remain
     exercisable following Optionee's cessation of Service or death from the
     limited period otherwise in effect for that option to such greater period
     of time as the Plan Administrator shall deem appropriate, but in no event
     beyond the expiration of the option term, and/or

               (ii) permit the option to be exercised, during the applicable
     post-Service exercise period, not only with respect to the number of vested
     shares of Common Stock for which such option is exercisable at the time of
     the Optionee's cessation of Service but also with respect to one or more
     additional installments in which the Optionee would have vested under the
     option had the Optionee continued in Service.

         D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become the
recordholder of the purchased shares.

         E. UNVESTED SHARES. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right. The Plan Administrator may not impose a vesting schedule upon the option
grant or any shares of Common Stock subject to that option which is more
restrictive than twenty percent (20%) per year vesting, with the initial vesting
to occur not later than one (1) year after the option grant date. However, such
limitation shall not be applicable to any option grants made to individuals who
are officers of the Corporation, non-employee Board members or independent
consultants.

                                       6.
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         F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first
registered under Section 12 of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the Optionee
(or any successor in interest) of any shares of Common Stock issued under the
Plan. Such right of first refusal shall be exercisable in accordance with the
terms established by the Plan Administrator and set forth in the document
evidencing such right.

         G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death.

         H. WITHHOLDING. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.

II.      INCENTIVE OPTIONS

         The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
the Plan shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options shall NOT be subject to the
terms of this Section II.

         A. ELIGIBILITY. Incentive Options may only be granted to Employees.

         B. EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock
on the option grant date.

         C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.

         D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the option grant date.

                                       7.
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III.       CORPORATE TRANSACTION

         A. The shares subject to each option outstanding under the Plan at the
time of a Corporate Transaction shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, the shares subject to an
outstanding option shall NOT vest on such an accelerated basis if and to the
extent: (i) such option is assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and the Corporation's repurchase rights
with respect to the unvested option shares are concurrently assigned to such
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those unvested option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.

         B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are assigned
to the successor corporation (or parent thereof) in connection with such
Corporate Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase
right is issued.

         C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).

         D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction and (ii) the exercise price
payable per share under each outstanding option, PROVIDED the aggregate
exercise price payable for such securities shall remain the same.

         E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration (in whole or
in part) of one or more outstanding options (and the immediate termination of
the Corporation's repurchase rights with respect to the shares subject to
those options) upon the occurrence of a Corporate Transaction, whether or not
those options are to be assumed in the Corporate Transaction.

                                       8.
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         F. The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to structure such option so that the shares subject
to that option will automatically vest on an accelerated basis should the
Optionee's Service terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which the option is assumed and the
repurchase rights applicable to those shares do not otherwise terminate. Any
option so accelerated shall remain exercisable for the fully-vested option
shares until the EARLIER of (i) the expiration of the option term or (ii) the
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may provide that
one or more of the Corporation's outstanding repurchase rights with respect to
shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate on an accelerated basis, and the shares subject to those
terminated rights shall accordingly vest at that time.

         G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.

         H. The grant of options under the Plan shall in no way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

         IV. CANCELLATION AND REGRANT OF OPTIONS

         The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.

                                       9.
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                                  ARTICLE THREE

                             STOCK ISSUANCE PROGRAM

I.       STOCK ISSUANCE TERMS

         Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

         A. PURCHASE PRICE.

               1. The purchase price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issue date. However, the purchase
price per share of Common Stock issued to a 10% Shareholder shall not be less
than one hundred and ten percent (110%) of such Fair Market Value.

               2. Subject to the provisions of Section I of Article Four, shares
of Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

               (i) cash or check made payable to the Corporation, or

               (ii) past services rendered to the Corporation (or any Parent or
     Subsidiary).

         B. VESTING PROVISIONS.

               1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. However, the Plan Administrator may not impose a vesting schedule
upon any stock issuance effected under the Stock Issuance Program which is more
restrictive than twenty percent (20%) per year vesting, with initial vesting to
occur not later than one (1) year after the issuance date. Such limitation shall
not apply to any Common Stock issuances made to the officers of the Corporation,
non-employee Board members or independent consultants.

                                       10.

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               2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.

               3. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

               4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.

               5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

         C. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first
registered under Section 12 of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.

                                       11.
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     II.  CORPORATE TRANSACTION

         A. Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, except to the extent: (i) those repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.

         B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall automatically terminate on an
accelerated basis, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).

    III.  SHARE ESCROW/LEGENDS

         Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

                                       12.
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                                  ARTICLE FOUR

                                 MISCELLANEOUS

     I.  FINANCING

         The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price or the purchase price for shares issued to such
person under the Plan by delivering a full-recourse, interest-bearing
promissory note payable in one or more installments and secured by the
purchased shares. However, any promissory note delivered by a consultant must
be secured by collateral in addition to the purchased shares of Common Stock.
In no event shall the maximum credit available to the Optionee or Participant
exceed the SUM of (i) the aggregate option exercise price or purchase price
payable for the purchased shares plus (ii) any Federal, state and local
income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.

    II.  EFFECTIVE DATE AND TERM OF PLAN

         A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's shareholders. If
such shareholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan. Subject
to such limitation, the Plan Administrator may grant options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.

         B. The Plan shall terminate upon the EARLIEST of (i) the expiration of
the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. All options and
unvested stock issuances outstanding at that time under the Plan shall continue
to have full force and effect in accordance with the provisions of the documents
evidencing such options or issuances

   III.  AMENDMENT OF THE PLAN

         A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
pursuant to applicable laws and regulations.

                                       13.
<PAGE>

         B. Options may be granted under the Option Grant Program and shares may
be issued under the Stock Issuance Program which are in each instance in excess
of the number of shares of Common Stock then available for issuance under the
Plan, provided any excess shares actually issued under those programs shall be
held in escrow until there is obtained shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.

    IV.  USE OF PROCEEDS

         Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.

     V.  WITHHOLDING

         The Corporation's obligation to deliver shares of Common Stock upon the
exercise of any options or upon the issuance or vesting of any shares issued
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.

    VI.  REGULATORY APPROVALS

         The implementation of the Plan, the granting of any options under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.

   VII.  NO EMPLOYMENT OR SERVICE RIGHTS

         Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

                                       14.
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   VIII. FINANCIAL REPORTS

         The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.

                                       15.

<PAGE>

                                    APPENDIX

         The following definitions shall be in effect under the Plan:

         A. BOARD shall mean the Corporation's Board of Directors.

         B. CODE shall mean the Internal Revenue Code of 1986, as amended.

         C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.

         D. COMMON STOCK shall mean the Corporation's common stock.

         E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:

               (i) a merger or consolidation in which securities possessing more
     than fifty percent (50%) of the total combined voting power of the
     Corporation's outstanding securities are transferred to a person or persons
     different from the persons holding those securities immediately prior to
     such transaction, or

               (ii) the sale, transfer or other disposition of all or
     substantially all of the Corporation's assets in complete liquidation or
     dissolution of the Corporation.

         F. CORPORATION shall mean OMP Acquisition Corporation, a California
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of OMP Acquisition Corporation which shall by appropriate
action adopt the Plan.

         G. DISABILITY shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.

         H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

         I. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

                                       A-1.
<PAGE>

         J. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

               (i) If the Common Stock is at the time traded on the Nasdaq
     National Market, then the Fair Market Value shall be the closing selling
     price per share of Common Stock on the date in question, as such price is
     reported by the National Association of Securities Dealers on the Nasdaq
     National Market or any successor system. If there is no closing selling
     price for the Common Stock on the date in question, then the Fair Market
     Value shall be the closing selling price on the last preceding date for
     which such quotation exists.

               (ii) If the Common Stock is at the time listed on any Stock
     Exchange, then the Fair Market Value shall be the closing selling price per
     share of Common Stock on the date in question on the Stock Exchange
     determined by the Plan Administrator to be the primary market for the
     Common Stock, as such price is officially quoted in the composite tape of
     transactions on such exchange. If there is no closing selling price for the
     Common Stock on the date in question, then the Fair Market Value shall be
     the closing selling price on the last preceding date for which such
     quotation exists.

               (iii) If the Common Stock is at the time neither listed on any
     Stock Exchange nor traded on the Nasdaq National Market, then the Fair
     Market Value shall be determined by the Plan Administrator after taking
     into account such factors as the Plan Administrator shall deem appropriate.

         K. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

         L. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:

               (i) such individual's involuntary dismissal or discharge by the
     Corporation for reasons other than Misconduct, or

               (ii) such individual's voluntary resignation following (A) a
     change in his or her position with the Corporation which materially reduces
     his or her duties and responsibilities or the level of management to which
     he or she reports, (B) a reduction in his or her level of compensation
     (including base salary, fringe benefits and target bonuses under any
     corporate-performance based bonus or incentive programs) by more than
     fifteen percent (15%) or (C) a relocation of such individual's place of
     employment by more than fifty (50) miles, provided and only if such change,
     reduction or relocation is effected without the individual's consent.

                                       A-2.
<PAGE>

         M. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

         N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

         O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

         P. OPTION GRANT PROGRAM shall mean the option grant program in effect
under the Plan.

         Q. OPTIONEE shall mean any person to whom an option is granted under
the Plan.

         R. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

         S. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.

         T. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance
Plan, as set forth in this document.

         U. PLAN ADMINISTRATOR shall mean either the Board or the Committee
acting in its capacity as administrator of the Plan.

         V. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.

         W. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.

                                       A-3.
<PAGE>

         X. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

         Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.

         Z. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

         AA. 10% SHAREHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary ).

                                       A-4.
<PAGE>

                                   EXHIBIT B

                             STOCK OPTION AGREEMENT

<PAGE>

                          OMP ACQUISITION CORPORATION
                            STOCK OPTION AGREEMENT

RECITALS

         A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).

         B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

         C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

               NOW, THEREFORE, it is hereby agreed as follows:

               1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

               2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

               3. LIMITED TRANSFERABILITY. During Optionee's lifetime, this
option shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death.

               4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

               5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

<PAGE>

                  (a) Should Optionee cease to remain in Service for any
reason (other than death, Disability or Misconduct) while this option is
outstanding, then Optionee shall have a period of three (3) months
(commencing with the date of such cessation of Service) during which to
exercise this option, but in no event shall this option be exercisable at any
time after the Expiration Date.

                  (b) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or in
accordance with the laws of inheritance shall have the right to exercise this
option. Such right shall lapse, and this option shall cease to be
outstanding, upon the EARLIER of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (ii) the Expiration Date.

                  (c) Should Optionee cease Service by reason of Disability
while this option is outstanding, then Optionee shall have a period of twelve
(12) months (commencing with the date of such cessation of Service) during
which to exercise this option. In no event shall this option be exercisable
at any time after the Expiration Date.

               NOTE: Exercise of this option on a date later than three (3)
               months following cessation of Service due to Disability will
               result in loss of favorable Incentive Option treatment, UNLESS
               such Disability constitutes Permanent Disability. In the event
               that Incentive Option treatment is not available, this option
               will be taxed as a Non-Statutory Option upon exercise.

                  (d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of Option Shares in which Optionee is, at the time of
Optionee's cessation of Service, vested pursuant to the Vesting Schedule
specified in the Grant Notice or the special vesting acceleration provisions
of Paragraph 6. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to
be outstanding for any vested Option Shares for which the option has not been
exercised. To the extent Optionee is not vested in the Option Shares at the
time of Optionee's cessation of Service, this option shall immediately
terminate and cease to be outstanding with respect to those shares.

                  (e) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain outstanding.

               6. ACCELERATED VESTING.

                  (a) In the event of any Corporate Transaction, the Option
Shares at the time subject to this option but not otherwise vested shall
automatically vest in full so that this option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all
of the Option Shares as fully-vested shares and may be exercised for any or

                                       2.
<PAGE>

all of those vested shares. However, the Option Shares shall NOT vest on such an
accelerated basis if and to the extent: (i) this option is assumed by the
successor corporation (or parent thereof) in the Corporate Transaction and the
Corporation's repurchase rights with respect to the unvested Option Shares are
assigned to such successor corporation (or parent thereof) or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested Option Shares at the time of
the Corporate Transaction (the excess of the Fair Market Value of those Option
Shares over the Exercise Price payable for such shares) and provides for
subsequent payout in accordance with the same Vesting Schedule applicable to
those unvested Option Shares as set forth in the Grant Notice.

                  (b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with
the Corporate Transaction.

                  (c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.

                  (d) The Option Shares may also vest upon an accelerated
basis in accordance with the terms and conditions of any special addendum
attached to this Agreement.

                  (e) This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

               7. ADJUSTMENT IN OPTION SHARES. Should any change be made to
the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.

               8. SHAREHOLDER RIGHTS. The holder of this option shall not
have any shareholder rights with respect to the Option Shares until such
person shall have exercised the option, paid the Exercise Price and become
the record holder of the purchased shares.

                                       3.
<PAGE>

               9. MANNER OF EXERCISING OPTION.

                  (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:

                        (i) Execute and deliver to the Corporation a Purchase
     Agreement for the Option Shares for which the option is exercised.

                       (ii) Pay the aggregate Exercise Price for the
     purchased shares in one or more of the following forms:

                             (A) cash or check made payable to the
          Corporation; or

                             (B) a promissory note payable to the Corporation,
          but only to the extent authorized by the Plan Administrator in
          accordance with Paragraph 14.

                  Should the Common Stock be registered under Section 12 of the
          1934 Act at the time the option is exercised, then the Exercise Price
          may also be paid as follows:

                             (C) in shares of Common Stock held by Optionee (or
          any other person or persons exercising the option) for the requisite
          period necessary to avoid a charge to the Corporation's earnings for
          financial reporting purposes and valued at Fair Market Value on the
          Exercise Date; or

                             (D) to the extent the option is exercised for
          vested Option Shares, through a special sale and remittance procedure
          pursuant to which Optionee (or any other person or persons exercising
          the option) shall concurrently provide irrevocable instructions (a) to
          a Corporation-designated brokerage firm to effect the immediate sale
          of the purchased shares and remit to the Corporation, out of the sale
          proceeds available on the settlement date, sufficient funds to cover
          the aggregate Exercise Price payable for the purchased shares plus all
          applicable Federal, state and local income and employment taxes
          required to be withheld by the Corporation by reason of such exercise
          and (b) to the Corporation to deliver the certificates for the
          purchased shares directly to such brokerage firm in order to complete
          the sale.

                                       4.
<PAGE>

                    Except to the extent the sale and remittance procedure is
          utilized in connection with the option exercise, payment of the
          Exercise Price must accompany the Purchase Agreement delivered to the
          Corporation in connection with the option exercise.

                      (iii) Furnish to the Corporation appropriate documentation
     that the person or persons exercising the option (if other than Optionee)
     have the right to exercise this option.

                       (iv) Execute and deliver to the Corporation such written
     representations as may be requested by the Corporation in order for it to
     comply with the applicable requirements of Federal and state securities
     laws.

                        (v) Make appropriate arrangements with the Corporation
     (or Parent or Subsidiary employing or retaining Optionee) for the
     satisfaction of all Federal, state and local income and employment tax
     withholding requirements applicable to the option exercise.

                  (b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.

                  (c) In no event may this option be exercised for any
fractional shares.

               10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE
EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION
AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS
SPECIFIED IN THE PURCHASE AGREEMENT.

               11. COMPLIANCE WITH LAWS AND REGULATIONS.

                  (a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the
Nasdaq National Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.

                  (b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.

                                       5.

<PAGE>

         12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.

         13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

         14. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse, interest-bearing
promissory note secured by those Option Shares. The payment schedule in effect
for any such promissory note shall be established by the Plan Administrator in
its sole discretion.

         15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

         16. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.

         17. SHAREHOLDER APPROVAL. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may be issued under the Plan as last approved by the shareholders, then
this option shall be void with respect to such excess shares, unless shareholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.

         18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

               (a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.

                                       6
<PAGE>

               (b) This option shall not become exercisable in the calendar year
in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.

               (c) Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

                                       7
<PAGE>

                                    APPENDIX

         The following definitions shall be in effect under the Agreement:

         A. AGREEMENT shall mean this Stock Option Agreement.

         B. BOARD shall mean the Corporation's Board of Directors.

         C. CODE shall mean the Internal Revenue Code of 1986, as amended.

         D. COMMON STOCK shall mean the Corporation's common stock.

         E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:

               (i) a merger or consolidation in which securities possessing more
     than fifty percent (50%) of the total combined voting power of the
     Corporation's outstanding securities are transferred to a person or persons
     different from the persons holding those securities immediately prior to
     such transaction, or

               (ii) the sale, transfer or other disposition of all or
     substantially all of the Corporation's assets in complete liquidation or
     dissolution of the Corporation.

         F. CORPORATION shall mean OMP Acquisition Corporation, a California
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of OMP Acquisition Corporation which shall by appropriate
action adopt the Plan.

         G. DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.

         H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

         I. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.

                                       A-1
<PAGE>

         J. EXERCISE PRICE shall mean the exercise price payable per Option
Share as specified in the Grant Notice.

         K. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.

         L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

               (i) If the Common Stock is at the time traded on the Nasdaq
     National Market, then the Fair Market Value shall be the closing selling
     price per share of Common Stock on the date in question, as the price is
     reported by the National Association of Securities Dealers on the Nasdaq
     National Market. If there is no closing selling price for the Common Stock
     on the date in question, then the Fair Market Value shall be the closing
     selling price on the last preceding date for which such quotation exists.

               (ii) If the Common Stock is at the time listed on any Stock
     Exchange, then the Fair Market Value shall be the closing selling price per
     share of Common Stock on the date in question on the Stock Exchange
     determined by the Plan Administrator to be the primary market for the
     Common Stock, as such price is officially quoted in the composite tape of
     transactions on such exchange. If there is no closing selling price for the
     Common Stock on the date in question, then the Fair Market Value shall be
     the closing selling price on the last preceding date for which such
     quotation exists.

               (iii) If the Common Stock is at the time neither listed on any
     Stock Exchange nor traded on the Nasdaq National Market, then the Fair
     Market Value shall be determined by the Plan Administrator after taking
     into account such factors as the Plan Administrator shall deem appropriate.

         M. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.

         N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

         O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

                                       A-2
<PAGE>

         P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).

         Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

         R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

         S. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.

         T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

         U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

         V. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance
Plan.

         W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.

         X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.

         Y. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant.

         Z. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.

                                       A-3

<PAGE>

         AA. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

         AB. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.

                                       A-4.
<PAGE>

                          OMP ACQUISITION CORPORATION
                        NOTICE OF GRANT OF STOCK OPTION

         Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of OMP Acquisition Corporation (the
"Corporation"):

               OPTIONEE: ____________________________________________

               GRANT DATE: __________________________________________

               VESTING COMMENCEMENT DATE: ___________________________

               EXERCISE PRICE: $ __________________________ per share

               NUMBER OF OPTION SHARES: _______shares of Common Stock

               EXPIRATION DATE:______________________________________

               TYPE OF OPTION:     ______Incentive Stock Option

                                   ______Non-Statutory Stock Option

               DATE EXERCISABLE: Immediately Exercisable

               VESTING SCHEDULE: The Option Shares shall be initially unvested
               and subject to repurchase by the Corporation at the Exercise
               Price paid per share. Optionee shall acquire a vested interest
               in, and the Corporation's repurchase right shall accordingly
               lapse with respect to, (i) twenty-five percent (25%) of the
               Option Shares upon Optionee's completion of one (1) year of
               Service measured from the Vesting Commencement Date and (ii) the
               balance of the Option Shares in a series of thirty-six (36)
               successive equal monthly installments upon Optionee's completion
               of each additional month of Service over the thirty-six
               (36)-month period measured from the first anniversary of the
               Vesting Commencement Date. In no event shall any additional
               Option Shares vest after Optionee's cessation of Service.

         Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the OMP Acquisition Corporation 1997 Stock
Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be bound by
the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A.

<PAGE>

         Optionee understands that any Option Shares purchased under the Option
will be subject to the terms set forth in the Stock Purchase Agreement attached
hereto as Exhibit B. Optionee hereby acknowledges receipt of a copy of the Plan
in the form attached hereto as Exhibit C.

         REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.

         NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.

         DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.

DATED:________________, 199__

                                   OMP ACQUISITION CORPORATION

                                   By: ___________________________________

                                   Title: ________________________________

                                        __________________________________
                                               OPTIONEE

                                   Address: ______________________________

                                            ______________________________

ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - STOCK PURCHASE AGREEMENT
EXHIBIT C - 1997 STOCK OPTION/STOCK ISSUANCE PLAN

                                       2.
<PAGE>

                                   EXHIBIT C

                            STOCK PURCHASE AGREEMENT

<PAGE>

                                    ADDENDUM
                                       TO
                             STOCK OPTION AGREEMENT

         The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement dated________, 199_____ (the
"Option Agreement") by and between OMP Acquisition Corporation (the
"Corporation") and ______________________("Optionee") evidencing the stock
option (the "Option") granted on such date to Optionee under the terms of the
Corporation's 1997 Stock Option/Stock Issuance Plan, and such provisions shall
be effective immediately. All capitalized terms in this Addendum, to the extent
not otherwise defined herein, shall have the meanings assigned to them in the
Option Agreement.

                       INVOLUNTARY TERMINATION FOLLOWING
                             CORPORATE TRANSACTION

         1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, none of the Option Shares shall vest on an accelerated basis upon the
occurrence of that Corporate Transaction, and Optionee shall accordingly
continue, over his or her period of Service following the Corporate Transaction,
to vest in the Option Shares in one or more installments in accordance with the
provisions of the Option Agreement. However, upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Corporate
Transaction, all the Option Shares at the time subject to the Option shall
automatically vest in full on an accelerated basis so that the Option shall
immediately become exercisable for all the Option Shares as fully-vested
shares and may be exercised for any or all of those Option Shares as vested
shares. The Option shall remain so exercisable until the EARLIER of (i) the
Expiration Date or (ii) the expiration of the one (1)-year period measured from
the date of the Involuntary Termination.

         2. For purposes of this Addendum, an INVOLUNTARY TERMINATION shall mean
the termination of Optionee's Service by reason of:

               (i) Optionee's involuntary dismissal or discharge by the
     Corporation for reasons other than for Misconduct, or

               (ii) Optionee's voluntary resignation following (A) a change in
     Optionee's position with the Corporation (or Parent or Subsidiary employing
     Optionee) which materially reduces Optionee's duties and responsibilities
     or the level of management to which he or she reports, (B) a reduction in
     Optionee's level of compensation (including base salary, fringe benefits
     and target bonuses under any corporate-performance based incentive
     programs) by more than fifteen percent (15%) or (C) a relocation of
     Optionee's place of employment by more than fifty (50) miles, provided and
     only if such change, reduction or relocation is effected by the Corporation
     without Optionee's consent.

<PAGE>

         3. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the
Corporate Transaction and shall supersede any provisions to the contrary in
Paragraph 5 of the Option Agreement. The provisions of this Addendum shall also
supersede any provisions to the contrary in Paragraph 18 of the Option Agreement
concerning the deferred exercisability of the Option.

         IN WITNESS WHEREOF, OMP Acquisition Corporation has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.

                                   OMP ACQUISITION CORPORATION

                                   By: ________________________________

                                   Title: _____________________________

EFFECTIVE DATE: _______, 199__

                                       2.<PAGE>

                          OBAGI MEDICAL PRODUCTS, INC.
                      2000 STOCK OPTION/STOCK ISSUANCE PLAN

                                   ARTICLE ONE

                               GENERAL PROVISIONS

         I.       PURPOSE OF THE PLAN

                  This 2000 Stock Option/Stock Issuance Plan is intended to
promote the interests of Obagi Medical Products, Inc., a California
corporation, by providing eligible persons in the Corporation's employ or
service with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to continue in such employ or service.

                  Capitalized terms herein shall have the meanings assigned
to such terms in the attached Appendix.

         II.      STRUCTURE OF THE PLAN

                  A. The Plan shall be divided into two (2) separate equity
programs:

                                         (i)         the Option Grant Program
         under which eligible persons may, at the discretion of the Plan
         Administrator, be granted options to purchase shares of Common Stock,
         and

                                        (ii)         the Stock Issuance Program
         under which eligible persons may, at the discretion of the Plan
         Administrator, be issued shares of Common Stock directly, either
         through the immediate purchase of such shares or as a bonus for
         services rendered the Corporation (or any Parent or Subsidiary).

                  B. The provisions of Articles One and Four shall apply to
both equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.

         III.     ADMINISTRATION OF THE PLAN

                  A. The Plan shall be administered by the Board. However,
any or all administrative functions otherwise exercisable by the Board may be
delegated to the Committee. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by
the Board at any time. The Board may also at any time terminate the functions
of the Committee and reassume all powers and authority previously delegated
to the Committee.

                                       1
<PAGE>

                  B. The Plan Administrator shall have full power and
authority (subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding options or stock issuances thereunder as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final
and binding on all parties who have an interest in the Plan or any option or
stock issuance thereunder.

         IV.      ELIGIBILITY

                  A. The persons eligible to participate in the Plan are as
follows:

                                         (i)         Employees,

                                        (ii)         non-employee members of the
         Board or the non-employee members of the board of directors of any
         Parent or Subsidiary, and

                                       (iii)         consultants and other
         independent advisors who provide services to the Corporation (or any
         Parent or Subsidiary).

                  B. The Plan Administrator shall have full authority to
determine, (i) with respect to the grants under the Option Grant Program,
which eligible persons are to receive the option grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or
a Non-Statutory Option, the time or times when each option is to become
exercisable, the maximum term for which the option is to remain outstanding,
and (ii) with respect to stock issuances under the Stock Issuance Program,
which eligible persons are to receive such stock issuances, the time or times
when those issuances are to be made, the number of shares to be issued to
each Participant, the vesting schedule (if any) applicable to the issued
shares, and the consideration to be paid by the Participant for such shares.

                  C. The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.

         V.       STOCK SUBJECT TO THE PLAN

                  A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall
not exceed 250,000 shares.

                  B. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent (i)
the options expire or terminate for any reason prior to exercise in full or
(ii) the options are cancelled in accordance with the cancellation-

                                       2
<PAGE>

regrant provisions of Article Two. Shares issued under the Plan and
subsequently repurchased by the Corporation pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares
of Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or
direct stock issuances under the Plan.

                  C. Should any change be made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan and (ii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive. In no event shall any such adjustments be made
in connection with the conversion of one or more outstanding shares of the
Corporation's preferred stock into shares of Common Stock.

                                       3
<PAGE>

                                   ARTICLE TWO

                              OPTION GRANT PROGRAM

         I.       OPTION TERMS

Each option shall be evidenced by a Stock Option Agreement which complies
with the terms specified below. Each Stock Option Agreement evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

                  A. EXERCISE PRICE.

                           1. The exercise price per share shall be fixed by
the Plan Administrator in accordance with the following provisions:

                                         (i)         The exercise price per
         share shall not be less than eighty-five percent (85%) of the Fair
         Market Value per share of Common Stock on the option grant date.

                                        (ii)         If the person to whom the
         option is granted is a 10% Shareholder, then the exercise price per
         share shall not be less than one hundred ten percent (110%) of the Fair
         Market Value per share of Common Stock on the option grant date.

                           2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I
of Article Four and the documents evidencing the option, be payable in cash
or check made payable to the Corporation. Should the Common Stock be
registered under section 12 of the 1934 Act at the time the option is
exercised, then the exercise price may also be paid as follows:

                                         (i)         in shares of Common Stock
         held for the requisite period necessary to avoid a charge to the
         Corporation's earnings for financial reporting purposes and valued at
         Fair Market Value on the Exercise Date, or

                                        (ii)         through a special sale and
         remittance procedure pursuant to which the Optionee shall concurrently
         provide irrevocable instructions (A) to a Corporation-designated
         brokerage firm to effect the immediate sale of the purchased shares
         and remit to the Corporation, out of the sale proceeds available on
         the settlement date, sufficient funds to cover the aggregate exercise
         price payable for the purchased shares plus all applicable Federal,
         state and local

                                       4
<PAGE>

         income and employment taxes required to be withheld by the
         Corporation by reason of such exercise and (B) to the Corporation to
         deliver the certificates for the purchased shares directly to such
         brokerage firm in order to complete the sale.

                                    Except to the extent such sale and
remittance procedure is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.

                  B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option grant. However, no option shall have a term
in excess of ten (10) years measured from the option grant date. The Plan
Administrator may not impose a vesting schedule upon the option grant which
is more restrictive than twenty percent (20%) per year vesting, with the
initial vesting to occur not later than one (1) year after the option grant
date. However, such limitation shall not be applicable to any option grants
made to individuals who are officers of the Corporation, non-employee Board
members or independent consultants.

                  C. MANNER OF EXERCISING OPTION. Optionee shall be required
to execute and deliver to the Corporation a Purchase Agreement for the Option
Shares for which the option is exercised.

                  D. EFFECT OF TERMINATION OF SERVICE.

                           1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:

                                         (i)         Should the Optionee cease
         to remain in Service for any reason other than death, Disability or
         Misconduct, then the Optionee shall have a period of three (3) months
         following the date of such cessation of Service during which to
         exercise each outstanding option held by such Optionee.

                                        (ii)         Should Optionee's Service
         terminate by reason of Disability, then the Optionee shall have a
         period of twelve (12) months following the date of such cessation of
         Service during which to exercise each outstanding option held by such
         Optionee.

                                       (iii)         If the Optionee dies while
         holding an outstanding option, then the personal representative of his
         or her estate or the person or persons to whom the option is
         transferred pursuant to the Optionee's will or the laws of inheritance
         shall have a twelve (12)-month period following the date of the
         Optionee's death to exercise such option.

                                       5
<PAGE>

                                        (iv)         Under no circumstances,
         however, shall any such option be exercisable after the specified
         expiration of the option term.

                                         (v)         During the applicable
         post-Service exercise period, the option may not be exercised in the
         aggregate for more than the number of vested shares for which the
         option is exercisable on the date of the Optionee's cessation of
         Service. Upon the expiration of the applicable exercise period or (if
         earlier) upon the expiration of the option term, the option shall
         terminate and cease to be outstanding for any vested shares for which
         the option has not been exercised. However, the option shall,
         immediately upon the Optionee's cessation of Service, terminate and
         cease to be outstanding with respect to any and all option shares for
         which the option is not otherwise at the time exercisable or in which
         the Optionee is not otherwise at that time vested.

                                        (vi)         Should Optionee's Service
         be terminated for Misconduct, then all outstanding options held by the
         Optionee shall terminate immediately and cease to remain outstanding.

                           2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                                         (i)         extend the period of time
         for which the option is to remain exercisable following Optionee's
         cessation of Service or death from the limited period otherwise in
         effect for that option to such greater period of time as the Plan
         Administrator shall deem appropriate, but in no event beyond the
         expiration of the option term, and/or

                                        (ii)         permit the option to be
         exercised, during the applicable post-Service exercise period, not
         only with respect to the number of vested shares of Common Stock for
         which such option is exercisable at the time of the Optionee's
         cessation of Service but also with respect to one or more additional
         installments in which the Optionee would have vested under the option
         had the Optionee continued in Service.

                  E. SHAREHOLDER RIGHTS. The holder of an option shall have
no shareholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become the recordholder of the purchased shares.

                  F. REPURCHASE RIGHTS. Until such time as the Common Stock
is first registered under section 12 of the 1934 Act, the Corporation shall
have the option, but not the obligation, to repurchase all or any part of any
shares of Common Stock issued under the Plan. Such repurchase rights shall be
exercisable in accordance with the terms established by the Plan
Administrator and set forth in the document evidencing such right.

                                       6
<PAGE>

                  G. FIRST REFUSAL RIGHTS. Until such time as the Common
Stock is first registered under section 12 of the 1934 Act, the Corporation
shall have the right of first refusal with respect to any proposed
disposition by the Optionee (or any successor in interest) of any shares of
Common Stock issued under the Plan. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan
Administrator and set forth in the document evidencing such right.

                  H. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime
of the Optionee, the option shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death.

                  I. WITHHOLDING. The Corporation's obligation to deliver
shares of Common Stock upon the exercise of any options granted under the
Plan shall be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.

         II.      INCENTIVE OPTIONS

         The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of the Plan shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options shall NOT be
subject to the terms of this Section II.

                  A. ELIGIBILITY. Incentive Options may only be granted to
Employees.

                  B. EXERCISE PRICE. The exercise price per share shall not
be less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.

                  C. DOLLAR LIMITATION. The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.

                  D. 10% SHAREHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Shareholder, then the option term shall not exceed
five (5) years measured from the option grant date.

                                       7
<PAGE>

         III.     CORPORATE TRANSACTION

                  A. The shares subject to each option outstanding under the
Plan at the time of a Corporate Transaction shall automatically vest in full
so that each such option shall, immediately prior to the effective date of
the Corporate Transaction, become fully exercisable for all of the shares of
Common Stock at the time subject to that option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. However, the
shares subject to an outstanding option shall NOT vest on such an accelerated
basis if and to the extent: (i) such option is assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and the
Corporation's repurchase rights are concurrently assigned to such successor
corporation (or parent thereof) or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those unvested option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant.

                  B. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

                  C. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction, had the option been exercised immediately prior to such
Corporate Transaction. Appropriate adjustments shall also be made to (i) the
number and class of securities available for issuance under the Plan
following the consummation of such Corporate Transaction and (ii) the
exercise price payable per share under each outstanding option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same.

                  D. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration (in
whole or in part) of one or more outstanding options (and the immediate
termination of the Corporation's repurchase rights with respect to the shares
subject to those options) upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed in the Corporate Transaction.

                  E. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand
Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.

                                       8
<PAGE>

                  F. The grant of options under the Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

         IV.      CORPORATION'S RIGHT TO ACCELERATE EXERCISE RIGHTS

                  Upon the occurrence of an Organic Change, the Corporation
shall have the right, exercisable in the Corporation's sole discretion, to
require that all Options which have become vested be exercised or become void
if not exercised within a period of fifteen (15) days after the Corporation
gives notice that it intends to consummate a transaction which would be an
Organic Change, but in any event not later than the effective date of the
Organic Change. The term "Organic Change" shall mean (a) a merger of the
Corporation with or into another corporation, (b) a consolidation of the
Corporation with another corporation, (c) sale of all or substantially all of
the assets of the Corporation, (d) sale or transfer of more than fifty
percent (50%) of the issued and outstanding Stock of the Corporation to
another person in a single transaction or series of transactions or (e) the
filing of a registration statement by the Corporation under the Securities
Act of 1933, as amended, with the United States Securities and Exchange
Commission (the "SEC") for the registration of equity securities of the
Corporation.

         V.       CANCELLATION AND REGRANT OF OPTIONS

                  The Plan Administrator shall have the authority to effect,
at any time and from time to time, with the consent of the affected option
holders, the cancellation of any or all outstanding options under the Plan
and to grant in substitution therefor new options covering the same or
different number of shares of Common Stock but with an exercise price per
share based on the Fair Market Value per share of Common Stock on the new
option grant date.

                                       9
<PAGE>

                                  ARTICLE THREE

                             STOCK ISSUANCE PROGRAM

         I.       STOCK ISSUANCE TERMS

                  Shares of Common Stock may be issued under the Stock
Issuance Program through direct and immediate issuances without any
intervening option grants. Each such stock issuance shall be evidenced by a
Stock Issuance Agreement which complies with the terms specified below.

                  A.       PURCHASE PRICE.

                           1. The purchase price per share shall be fixed by
the Plan Administrator but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the issue date.
However, the purchase price per share of Common Stock issued to a 10%
Shareholder shall not be less than one hundred and ten percent (110%) of such
Fair Market Value.

                           2. Subject to the provisions of Section I of
Article Four, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

                                         (i)         cash or check made payable
         to the Corporation, or

                                        (ii)         past services rendered to
         the Corporation (or any Parent or Subsidiary).

                  B.       VESTING PROVISIONS.

                           1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully
and immediately vested upon issuance or may vest in one or more installments
over the Participant's period of Service or upon attainment of specified
performance objectives. However, the Plan Administrator may not impose a
vesting schedule upon any stock issuance effected under the Stock Issuance
Program which is more restrictive than twenty percent (20%) per year vesting,
with initial vesting to occur not later than one (1) year after the issuance
date. Such limitation shall not apply to any Common Stock issuances made to
the officers of the Corporation, non-employee Board members or independent
consultants.

                           2. Any new, substituted or additional securities
or other property (including money paid other than as a regular cash
dividend) which the Participant may have the

                                       10
<PAGE>

right to receive with respect to the Participant's unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.

                           3. The Participant shall have full shareholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest
in those shares is vested. Accordingly, the Participant shall have the right
to vote such shares and to receive any regular cash dividends paid on such
shares.

                           4. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued
under the Stock Issuance Program or should the performance objectives not be
attained with respect to one or more such unvested shares of Common Stock,
then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further shareholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money indebtedness), the
Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares.

                           5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

                  C. FIRST REFUSAL RIGHTS. Until such time as the Common
Stock is first registered under section 12 of the 1934 Act, the Corporation
shall have the right of first refusal with respect to any proposed
disposition by the Participant (or any successor in interest) of any shares
of Common Stock issued under the Stock Issuance Program. Such right of first
refusal shall be exercisable in accordance with the terms established by the
Plan Administrator and set forth in the document evidencing such right.

                  D. PURCHASE OPTION. Until such time as the Common Stock is
first registered under section 12 of the 1934 Act, the Corporation shall have
the option, but not the obligation, to purchase all or any part of any shares
of Common Stock issued under the Plan. Such purchase rights shall be
exercisable in accordance with the terms established by the Plan
Administrator and set forth in the document evidencing such right.

                                       11
<PAGE>

         II.      SHARE ESCROW/LEGENDS

                  Unvested shares may, in the Plan Administrator's
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant
with restrictive legends on the certificates evidencing those unvested shares.

                                       12
<PAGE>

                                  ARTICLE FOUR

                                  MISCELLANEOUS

         I.       FINANCING

                  The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price or the purchase price for shares
issued to such person under the Plan by delivering a full-recourse,
interest-bearing promissory note payable in one or more installments and
secured by the purchased shares. However, any promissory note delivered by a
consultant must be secured by collateral in addition to the purchased shares
of Common Stock. In no event shall the maximum credit available to the
Optionee or Participant exceed the SUM of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any
Federal, state and local income and employment tax liability incurred by the
Optionee or the Participant in connection with the option exercise or share
purchase.

         II.      EFFECTIVE DATE AND TERM OF PLAN

                  A. The Plan shall become effective when adopted by the
Board, but no option granted under the Plan may be exercised, and no shares
shall be issued under the Plan, until the Plan is approved by the
Corporation's shareholders. If such shareholder approval is not obtained
within twelve (12) months after the date of the Board's adoption of the Plan,
then all options previously granted under the Plan shall terminate and cease
to be outstanding, and no further options shall be granted and no shares
shall be issued under the Plan. Subject to such limitation, the Plan
Administrator may grant options and issue shares under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.

                  B. The Plan shall terminate upon the EARLIEST of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for
issuance under the Plan shall have been issued as vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. All options and unvested stock issuances outstanding at that
time under the Plan shall continue to have full force and effect in
accordance with the provisions of the documents evidencing such options or
issuances.

         III.     AMENDMENT OF THE PLAN

                  A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no
such amendment or modification shall adversely affect the rights and
obligations with respect to options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment

                                       13
<PAGE>

or modification. In addition, certain amendments may require shareholder
approval pursuant to applicable laws and regulations.

                  B. Options may be granted under the Option Grant Program
and shares may be issued under the Stock Issuance Program which are in each
instance in excess of the number of shares of Common Stock then available for
issuance under the Plan, provided any excess shares actually issued under
those programs shall be held in escrow until there is obtained shareholder
approval of an amendment sufficiently increasing the number of shares of
Common Stock available for issuance under the Plan. If such shareholder
approval is not obtained within twelve (12) months after the date the first
such excess issuances are made, then (i) any unexercised options granted on
the basis of such excess shares shall terminate and cease to be outstanding
and (ii) the Corporation shall promptly refund to the Optionees and the
Participants the exercise or purchase price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) for the period the shares were held in escrow, and
such shares shall thereupon be automatically cancelled and cease to be
outstanding.

         IV.      USE OF PROCEEDS

                  Any cash proceeds received by the Corporation from the sale
of shares of Common Stock under the Plan shall be used for general corporate
purposes.

         V.       WITHHOLDING

                  The Corporation's obligation to deliver shares of Common
Stock upon the exercise of any options or upon the issuance or vesting of any
shares issued under the Plan shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.

         VI.      REGULATORY APPROVALS

                  The implementation of the Plan, the granting of any options
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it and the shares of Common Stock issued pursuant to it.

         VII.     NO EMPLOYMENT OR SERVICE RIGHTS

                  Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person)
or of the Optionee or the Participant, which rights are hereby expressly
reserved by each, to terminate such person's Service at any time for any
reason, with or without cause.

                                       14
<PAGE>

          VIII.    FINANCIAL REPORTS

                  The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.

                                       15
<PAGE>

                                    APPENDIX

                  The following definitions shall be in effect under the Plan:

         A. BOARD shall mean the Corporation's Board of Directors.

         B. CODE shall mean the Internal Revenue Code of 1986, as amended.

         C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.

         D. COMMON STOCK shall mean the Corporation's common stock.

         E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:

                        (i) a merger or consolidation in which securities
         possessing more than fifty percent (50%) of the total combined voting
         power of the Corporation's outstanding securities are transferred to a
         person or persons different from the persons holding those securities
         immediately prior to such transaction, or

                         (ii) the sale, transfer or other disposition of all or
         substantially all of the Corporation's assets in complete liquidation
         or dissolution of the Corporation.

         F. CORPORATION shall mean Obagi Medical Products, Inc., a California
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Obagi Medical Products, Inc. which shall by
appropriate action adopt the Plan.

         G. DISABILITY shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined
by the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.

         H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.

         I. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

         J. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

                                    A-1
<PAGE>

                        (i) If the Common Stock is at the time traded on the
         NASDAQ National Market, then the Fair Market Value shall be the closing
         selling price per share of Common Stock on the date in question, as
         such price is reported by the National Association of Securities
         Dealers on the NASDAQ National Market or any successor system. If there
         is no closing selling price for the Common Stock on the date in
         question, then the Fair Market Value shall be the closing selling price
         on the last preceding date for which such quotation exists.

                       (ii) If the Common Stock is at the time listed on any
         Stock Exchange, then the Fair Market Value shall be the closing selling
         price per share of Common Stock on the date in question on the Stock
         Exchange determined by the Plan Administrator to be the primary market
         for the Common Stock, as such price is officially quoted in the
         composite tape of transactions on such exchange. If there is no closing
         selling price for the Common Stock on the date in question, then the
         Fair Market Value shall be the closing selling price on the last
         preceding date for which such quotation exists.

                      (iii) If the Common Stock is at the time neither listed on
         any Stock Exchange nor traded on the NASDAQ National Market, then the
         Fair Market Value shall be determined by the Plan Administrator after
         taking into account such factors as the Plan Administrator shall deem
         appropriate.

         K. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code section 422.

         L. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:

                        (i) such individual's involuntary dismissal or
         discharge by the Corporation for reasons other than Misconduct, or

                       (ii) such individual's voluntary resignation following
         (A) a change in his or her position with the Corporation which
         materially reduces his or her duties and responsibilities or the level
         of management to which he or she reports, (B) a reduction in his or her
         level of compensation (including base salary, fringe benefits and
         target bonuses under any corporate-performance based bonus or incentive
         programs) by more than fifteen percent (15%) or (C) a relocation of
         such individual's place of employment by more than fifty (50) miles,
         provided and only if such change, reduction or relocation is effected
         without the individual's consent.

         M. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized
use or disclosure by such person of confidential information or trade secrets
of the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of the

                                      A-2
<PAGE>

Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds
for the dismissal or discharge of any Optionee, Participant or other person
in the Service of the Corporation (or any Parent or Subsidiary).

         N. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

         O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code section 422.

         P. OPTION GRANT PROGRAM shall mean the option grant program in
effect under the Plan.

         Q. OPTIONEE shall mean any person to whom an option is granted under
the Plan.

         R. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.

         S. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.

         T. PLAN shall mean the Corporation's 2000 Stock Option/Stock
Issuance Plan, as set forth in this document.

         U. PLAN ADMINISTRATOR shall mean either the Board or the Committee
acting in its capacity as administrator of the Plan.

         V. SERVICE shall mean the provision of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.

         W. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.

         X. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.

         Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.

                                     A-3
<PAGE>

         Z. STOCK OPTION AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of option shares
under the Stock Option Plan.

         AA. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.

         BB. 10% SHAREHOLDER shall mean the owner of stock (as determined
under Code section 424(d)) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).

                                     A-4

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