Document:

Exhibit
10.13

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT
AGREEMENT (this “Agreement” is entered into as of this 1st day of March,
2005, by and between Steven Robert Carlson (“Executive”) and OMP, Inc.,
a Delaware corporation (the “Company”). Capitalized terms not otherwise
defined in the text of this Agreement have the meanings set forth in Appendix
A, which is incorporated into this Agreement by reference.

 

Background

 

The Executive’s
experience and demonstrated skills and abilities and his unique qualifications
are needed by the Company, and the Company has determined that it is in the
best interests of the Company and its stockholders to engage Executive as the
Company’s President; and

 

The Company
recognizes the need to provide Executive with a level of compensation and
relative security that provides him the necessary economic and performance
incentives that will be of benefit to the Company stockholders in the long
term.

 

THEREFORE, the
Company has offered Executive employment for compensation and other benefits
set forth in this Agreement, and Executive is willing to accept employment on
such terms, of which terms, including, but limited to duties, responsibilities,
title, salary and benefits may not be reduced at any time during this
Agreement. The parties agree as follows:

 

ARTICLE I

 

EMPLOYMENT

 

1.1       Employment by the Company of Executive
and Acceptance by Executive. The Company employs Executive during the term
of this Agreement in such capacities and upon such conditions concerning rates
of compensation, benefits and other matters as are hereinafter stated.
Executive accepts such employment and agrees to devote a significant majority
of his business time, attention and energies exclusively to the business
interests of the Company, while employed by the Company except as otherwise
specifically approved in writing by or on behalf of the Company’s Board of
Directors (the “Board”), which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, Executive may serve on corporate,
civic or charitable boards or committees, deliver lectures, fulfill speaking
engagements, teach at educational institutions, or manage personal investments
without such advance written consent, provided that such activities do not
individually or in the aggregate materially interfere with the performance of
his duties under this Agreement.

 

1.2       Capacity. Executive shall be
employed during the term of this Agreement as President of the Company with
such duties, functions, responsibilities

 

 

and authority that are
commensurate with and appropriate for such position and as are from
time-to-time set forth in the Bylaws of the Company reporting to the Chief
Executive Officer (“CEO”) and otherwise delegated to Executive by the CEO
including but not limited to managing the day to day operations of the Company
including the 2005 Bonus Plan, Profit Forecasts, Budgets and Ongoing Strategic
Planning. Executive shall spend such time in Long Beach, California as his
responsibilities and duties require.

 

1.3       Indemnification. The Company shall
indemnify Executive to the maximum extent permitted by applicable law and the
Company’s Bylaws with respect to Executive’s service and the Executive shall
also be covered under a directors and officers liability insurance policy(ies)
paid for by the Company to the extent that the Company maintains such a
liability insurance policy(ies).

 

1.4       Term. Subject to the other
provisions of this Agreement, the term of this Agreement and Executive’s
employment shall be deemed to have commenced on March 1, 2005 upon signing of
the Agreement, and shall continue for a period of three years or until the
occurrence of an Event of Termination (as defined in Section 3.1) (the “Initial
Term”). Following the expiration of the Initial Term, the Initial Term
shall be automatically renewed for successive one-year periods (collectively,
the “Renewal Terms”; individually, a “Renewal Term”) unless, at least sixty
(60) days prior to the expiration of the Initial Term or of the then
current Renewal Term, either party provides the other with a notice of
intention not to renew, in which case Executive’s employment with the Company,
and the Company’s obligations shall terminate as of the end of the Initial Term
or said Renewal Term, as applicable. If the Initial Term is renewed, the terms
of this Agreement during such Renewal Term shall be the same as the terms in
effect immediately prior to such renewal, subject to any such changes or
modifications as mutually may be agreed between the parties as evidenced in a
written instrument signed by both the Company and Executive.

 

ARTICLE II

 

COMPENSATION, BENEFITS AND EXPENSE REIMBURSEMENT

 

2.1       Compensation and Benefits. For
services rendered pursuant to this Agreement, Executive’s compensation and
benefits will consist of the following:

 

(a)       Base Salary. The Company agrees to
pay to Executive in accordance with its normal payroll practices (but not less
frequently than monthly), and Executive agrees to accept, during the Initial
Term of this Agreement an annual base salary at the rate of Three Hundred
Thousand Dollars ($300,000) per year or such greater amount as the Board or the
compensation committee thereof (the “Compensation Committee”) may from
time-to-time determine (the “Base Salary”). Such Base Salary shall be
reviewed at least annually by the Board or the Compensation Committee.
Effective as of the date of any such increase, the Base Salary as so increased
shall be considered the new Base Salary for all purposes of this Agreement.

 

 

(b)       Bonus Opportunity. The Board or
the Compensation Committee shall award Executive an annual bonus (the “Bonus”)
of up to fifty percent (50%) of the Base Salary based on achievement of the
benchmarks related to OMP’s revenue and EBITDA or such other objectives which
shall be set by the Compensation Committee of the Board. The objectives for the
Bonus during the first year of the Initial Term are attached hereto this
contract as Exhibit “A”. The structure of Executive’s Bonus shall be similar to
that which has been in effect for key Senior Executives of the Company provided
that such Bonus shall be paid in a single lump-sum cash payment as soon as
practical after the Compensation Committee can determine whether and the degree
to which the objectives have been achieved following the close of the year. The
Compensation Committee may, at its discretion, award such other incremental
bonus payments as it finds appropriate.

 

(c)       Benefit Plans.
Executive will be eligible to participate in the Company’s retirement plans
that are qualified under Section 40I(a) of the Internal Revenue Code of 1986,
as amended, and in the Company’s health, disability and other welfare benefit
plans that are generally applicable to all executive employees of the Company,
in accordance with the terms and conditions thereof.

 

(d)       Relocation Assistance.
The Company agrees to pay the Executive a payment of $50,000 upon execution of
this Agreement to cover expenses associated with the Executive establishing
housing accommodations for his working in the Long Beach area. The Company
further agrees on January 1, 2006 or the next business day thereafter, to pay
the Executive an additional $50,000.

 

The
Executive hereby agrees that in the event the Executive voluntarily terminates
his employment, as per Section 3.2, within 12 months of receipt of the first
payment as described above, the Executive will be required to repay the company
the intial $50,000 that was received. Such payment can be paid directly to the
Company by the Executive or the Company can deduct the amount due from any
final payment owed the Executive per Section 3.2.

 

(e)       Vacation.
Executive shall be awarded three weeks of vacation, consistent with vacation
policy for Senior Executives of the Company, for each full year of his
employment under this Agreement. Executive shall also be entitled to take 5
additional personal or sick days. Vacation shall cease to accrue if Executive’s
accrued but unused vacation reaches a total of seven weeks (“the Cap”) until
such time as he takes vacation and his accrual falls below the Cap.

 

(f)        Upon approval of the
Board of Directors, you will be granted options to purchase 250,000 shares of
the Company’s non-qualified common stock at the fair market value as determined
by the Board. At the sole discretion of the Board of Directors, it may award
additional non-qualified, qualified, or incentive stock options to the
Executive from time to time. These options shall vest in accordance with and be
subject to all other terms of the Company’s Stock Option Plan and Stock Option
Agreement attached to this Agreement as Exhibit “B”. Such options will vest
over a three (3) year period in equal installments on the anniversary date of
your employment in years 1, 2, and 3. In addition, any additional stock awards
issued by the Board, beyond the

 

 

initial
250,000 as specified above, shall be subject to the terms and conditions of
such awards at the time of issuance.

 

2.2       Expenses. The
Company shall reimburse Executive for all reasonable expenses incurred in the
course of the performance of Executive’s duties and responsibilities pursuant
to this Agreement and consistent with the Company’s policies with respect to
travel, entertainment and miscellaneous expenses, and the reasonable and
customary requirements with respect to the reporting of such expenses.

 

2.3       Withholding. The
Company shall be entitled to withhold from amounts to be paid to Executive
hereunder any federal, state or local withholding or  other taxes or charges that it is from
time-to-time required to withhold. The Company shall be entitled to rely on an opinion
of counsel if any questions as to the amount or requirement of any such
withholding shall arise.

 

ARTICLE III

 

TERMINATION

 

Each of the following events shall be considered an “Event of
Termination”:

 

3.1       Termination By the
Company For Cause. The Company may terminate this Agreement and Executive’s
employment hereunder at any time for Cause by giving notice to Executive
stating the basis for such termination, effective immediately upon giving such
notice or at such other time thereafter as the Company may designate. If the
Executive’s employment is terminated for Cause pursuant to this Section 3.1,
notwithstanding the other terms of this Agreement, Executive shall have no
further rights against the Company hereunder, except the right to receive (i) any
unpaid Base Salary with respect to the period prior to the effective date of
termination, and (ii) any accrued but unused vacation, and (iii) reimbursement
of expenses to which Executive is entitled under Sections 2.1(d) and 2.2
hereof. All unexercised options, vested and unvested, shall immediately
terminate.

 

3.2       Executive Resigns or
Voluntarily Terminates Employment. While Executive expects to fulfill the
obligations of his employment to the satisfaction of the Board, and maintain
his employment throughout the term of this Agreement, Executive may terminate
his employment under this Agreement if Executive provides the Company at least
sixty (60) days advance written notice. During this notice period, Executive
may be relieved of any responsibilities. The Company and the Executive will
meet and discuss a mutually satisfactory way to make any necessary transition.
If Executive’s employment is terminated by the Executive pursuant to this Section
3.2. notwithstanding the other terms of this Agreement, Executive shall
have no further rights against the Company hereunder, except for the right to
receive (i) any unpaid Base Salary with respect to the period prior to the
effective date of termination, (ii) Base Salary during the 60 day notice period
whether relieved of his duties or not, (iii) any accrued but unused vacation,
and (iv) reimbursement of expenses to which Executive is

 

 

entitled under Sections
2.1 (d) and 2.2 hereof. All unexercised and unvested options shall immediately
terminate and all unexercised and vested options must be exercised by the
Executive within ninety (90) days of termination of employment or they shall
terminate.

 

3.3       Termination by Death or Disability.
Executive’s employment and the Company’s obligations under this Agreement shall
terminate as follows: (i) automatically, effective immediately and without any
notice being necessary, upon Executive’s death; and (ii) in the event that
Executive becomes Disabled, by the Company giving notice of termination to
Executive. If Executive’s employment is terminated pursuant to this Section
3.3 because of the Executive’s death or disability, notwithstanding the
other terms of this Agreement, Executive shall have no further rights against
the Company hereunder, except for the right to receive (i) any unpaid Base
Salary with respect to the period prior to the effective date of termination
plus a continuation of the Base Salary for a period of six (6) months
after the termination of employment and (ii) any accrued but unused vacation,
and (iv) reimbursement of expenses to which Executive is entitled under Sections
2.1d and 2.2 hereof, plus the greater of any accrued Bonus or Bonus
prorated for the period through the termination, that has been earned but not
yet paid with respect to the period prior to the effective date of termination.
All unexercised and vested options must be exercised by the Executive, or
Executive’s estate, within one hundred eighty (180) days of termination of
employment or they shall terminate.

 

3.4       Termination by the Company Without
Cause. While the Company and Executive both expect to maintain a
satisfactory relationship throughout the term of this Agreement, the Company
may terminate Executive’s employment without Cause. If Executive’s employment
is terminated by the Company without Cause pursuant to this Section 3.4,
notwithstanding the other terms of this Agreement, Executive shall have the
right to receive (i) any unpaid Base Salary plus the greater of any accrued
Bonus or Bonus prorated for the period through termination that has been earned
but not yet paid with respect to the period prior to the effective date of
termination payable on the regularly payroll dates, (ii) any accrued but unused
vacation, and (iv) an amount equal to eighteen (18) months of Base Salary, and
(v) reimbursement of expenses to which Executive is entitled under Sections
2.1(d) and 2.2 hereof and (vi) if Executive elects to continue his health
insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of
l985 (“COBRA”) following the termination of his employment, then the Company
shall pay Executive’s monthly premium under COBRA (including any premium for
coverage of Executive’s spouse and/or dependents) as is consistent with the
Senior Executive Cobra Coverage. In addition, the number of shares subject to
Executive’s outstanding options equal to the number of shares that would vest
over the twelve (12) month period following Executive’s termination of
employment, shall immediately vest and become exercisable. Except for COBRA
premium payments and stock option vesting, all amounts payable under this
Section 3.4 shall be paid in a single-lump sum cash payment as soon as
practicable after termination of Executive’s employment, which in no event
shall be more than thirty (30) days after Executive’s termination of
employment.

 

All unexercised
and vested options must be exercised by the Executive within

 

 

one hundred and eighty
(180) days of termination of employment or they shall terminate.

 

3.5       Termination of Employment in
Connection with a Change in Control. Executive shall be entitled to
terminate his employment within one (1) year following a Change in Control and
for Good Reason or the Company or any successor company terminates Executive’s
employment within one (1) year following a Change in Control other than for
Cause, notwithstanding the other terms of this Agreement, Executive shall have
no further rights against the Company or the successor company hereunder,
except for the right to receive (i) any unpaid Base Salary plus any accrued
Bonus or Bonus that has been earned but not yet paid with respect to the period
prior to the effective date of termination, (ii) any accrued but unused
vacation and (iii) an amount equal to eighteen (18) months of Base Salary, (iv)
reimbursement of expenses to which Executive is entitled under Sections
2.1(d) and 2.2 hereof and (vi) if Executive elects to continue his health
insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”) following the termination of his employment, then the Company
shall pay Executive’s monthly premium under COBRA (including any premium for
coverage of Executive’ s spouse and/or dependents) as is consistent with the
Senior Executive Cobra Coverage. In addition, the number of shares subject to
Executive’s outstanding options equal to the number of shares that would vest
over the twelve (12) month period following Executive’s termination of
employment shall immediately vest and become exercisable. Except for COBRA
premium payments and stock option vesting, all amounts payable under this
Section 3.4 shall be paid in a single-lump sum cash payment as soon as
practicable after termination of Executive’s employment, which in no event
shall be more than thirty (30) days after Executive’s termination of
employment.

 

The Executive will
have one hundred and eighty (180) days to exercise any such options vested but
not yet exercised from the termination of employment or they shall terminate.

 

In the event that
any payment or benefit received or to be received by Executive pursuant to this
Agreement or otherwise from the Company or any successor of the Company would
be subject to the excise tax imposed by Code Section 4999 or any interest or
penalties with respect to such excise tax (such excise tax and any such
interest and penalties are collectively referred to herein as the “Excise Tax”),
then Executive shall be entitled to either the full amount of the payments and
benefits or such lesser amount that would result in no portion of the payments
or benefits being subject to excise tax under Code Section 4999, whichever of
the foregoing amounts results in the receipt by Executive, on an after-tax
basis, of the greater payment. Unless the Company and Executive otherwise agree
in writing, any calculation required under this Section 3.5 shall be made in
writing by independent public accountants agreed to by the Company and
Executive, whose calculation shall be conclusive and binding upon Executive and
the Company for all purposes. The Company and Executive shall furnish to the
accountants such information and documents as the accountants may reasonably
request in order to make a determination under this Section 3.5. All fees and
expenses of the accounting firm shall be borne solely by the Company.

 

3.6       Contingent on Release. Payments
under this Section 3.6 related to termination are contingent upon Executive’s
execution of a full and complete release,

 

 

substantially in the form
of Exhibit “C”, at the time of termination, but prior to receipt of any
compensation or benefits in excess of the compensation or benefits already
earned and accrued. Payments shall be paid in a one time lump sum commensurate
with the Executive’s execution of a full and complete release.

 

ARTICLE IV

 

CONFIDENTIALITY

 

4.1       Confidential Information.
Executive acknowledges that he has been required to use his personal
intellectual skills on behalf of the Company, its subsidiaries and affiliates
(the term “Company” as used in this Article IV shall include such
subsidiaries and affiliates) and that it is reasonable and fair that the fruits
of such skills should inure to the sole benefit of the Company. Executive
further acknowledges that he has acquired information of a confidential nature
relating to the operation, finances, business relationships and trade secrets
and other intellectual property of the Company (“Confidential Information”).
During the Initial Term and the Renewal Term, and for a period of five (5)
years following termination of employment, Executive will not, except in the
course of Executive’s regular authorized duties on behalf of the Company, or
with the prior written, consent of the Company, permit disclosure, use,
publish, disclose or authorize anyone else to use, publish or disclose, any
Confidential Information of the Company. Executive shall not remove or retain
any Confidential Information of the Company, except for use in the course of
Executive’s regular authorized duties on behalf of the Company. The foregoing
notwithstanding, Executive has no obligation to refrain from using, publishing
or disclosing any such Confidential Information that is or hereafter shall
become part of the public domain, other than by use, publication or disclosure
by Executive. This prohibition also does not prohibit Executive’s use of
general skills and know-how acquired during and prior to employment with the
Company, as long as such use does not involve the use, publication or
disclosure of the Company’s Confidential Information or trade secrets.
Executive represents that he shall not, during his employment with the Company,
improperly use or disclose the trade secrets of former employers and that he
has returned all property and confidential information belonging to all former
employers.

 

4.2       Agreement to Transfer.
Executive shall without further payment, assign, transfer and set over, and
does hereby assign, transfer and set over, to the Company, its successors and
assigns, all Executive’s right, title and interest in and to all trade secrets,
secret processes, inventions, improvements, patents, patent applications,
trademarks, trademark applications, copyrights and any and all intellectual
property rights which Executive solely or jointly with others has conceived,
made, acquired or suggested at any time during employment or within a one-year
period after termination of employment and which relate to the existing or
potential products, processes, work, research or other activities of the
Company.

 

4.3       Prohibited Activity.
Executive agrees that during the Initial Term, any Renewal Term and for a period
of eighteen (18) months after termination of employment, without the Company’s
express written consent, Executive shall not,

 

 

directly or indirectly,
(i) employ, solicit for employment or recommend for employment any person
employed by the Company (or any Affiliate of the Company) or (ii) engage in any
activity that is or may be competitive with the Company in any county of any
state or other jurisdiction where the Company conducts its business, i.e.
engage in any activity or company that sells its aesthetic Rx and OTC products
directly to physicians for dispensing said products to their patients. Examples
of such Companies are included but not limited to: SkinMedica, JNJ, Connetics,
and Medicis.

 

4.4       Return of Documents.
Immediately upon termination of employment, Executive will return to the
Company, and so certify in writing to the Company, that the Executive has
returned to the Company all the Company’s papers, documents and things,
including information stored for use in or with computers and software
applicable to the Company’s business (and all copies thereof), which are in
Executive’s possession or under Executive’s control.

 

4.5       No Conflicts.
Executive Represents and warrants that Executive has not previously assumed any
obligations inconsistent with those of this Agreement and that employment by
the Company does not conflict with any prior obligations to third parties.

 

4.6       Equitable Relief.
Executive agrees that any breach of Article IV of this Agreement could cause
substantial and irreparable harm to the Company for which money damages would
be an inadequate remedy. Accordingly, the Company shall in any such event be
entitled to obtain injunctive and other forms of equitable relief to prevent
such breach and to recover from Executive the Company’s costs (including
without limitation reasonable attorneys’ fees) incurred in connection with
enforcing Article IV this Agreement, in addition to any other rights or
remedies available at law, in equity or by statute.

 

ARTICLE V

 

GENERAL PROVISIONS

 

5.1       Notices. While the
parties enter this Agreement anticipating the communication among them will be
open and take place without resorting to unnecessary formalities, in the event
that a formal Notice under this Agreement is necessary, such Notice provided
for in this Agreement shall be given in writing and shall be deemed given to a
party at the earlier of (i) when actually delivered to such party, or (ii) when
received by such party after sending by registered or certified mail (return
receipt requested) or sent to such party by courier, confirmed by receipt, and
addressed to such party at the address designated below for such party as
follows (or to such other address for such party as such party may have
substituted by notice pursuant to this Section 5.1). However, if the
party to receive notice is unavailable or unwilling to make himself available
for receipt of such Notice, then Notice will be complete after reasonable
efforts to provide Notice have been made under this Section 5.1, and
more than five (5) days have passed since attempting to provide Notice.

 

 

(a)       If to the Company:

 

OMP,
Inc.

310 Golden Shore

Long Beach, CA 90802

Attn: Chairman of the Compensation Committee 

         Chief Executive Officer

 

with
a copy to:

 

Wes
Fredericks

Dorsey and Whitney

250 Park Avenue

New York, New York

10177

 

(b)                   If to Executive:

 

Steve
R Carlson

615 Hurlingham Ave

San Mateo, CA 94402

 

With
a copy to:

 

Brian
Burr

Orrick, Herrington & Sutcliffe

1020 Marsh Rd

Menlo Park, CA 94025

 

5.2       Integration. This
Agreement constitutes a single, integrated written contract expressing the
entire agreement of the parties concerning the subject matter referred to
herein and therein. No covenants, agreements, representations, or warranties of
any kind whatsoever, whether express or implied in law or fact, have been made
by any party hereto, except as specifically set forth in this Agreement. All
prior and contemporaneous discussions, negotiations, and agreements have been
and are merged and integrated into, and are superseded by, this Agreement and
the Agreement.

 

5.3       Modifications. No
modification, amendment, or waiver of any of the provisions contained in this
Agreement, or any future representation, promise, or condition in connection
with the subject matter of this Agreement, shall be binding upon any party
hereto unless made in writing and signed by each of Executive and the Company.

 

 

5.4       Assignability. This Agreement and
the rights and duties set forth herein may not be assigned by Executive, or by
the Company, in whole or in part, except that the Company may assign its rights
and obligations to: (i) any affiliated corporations, parent corporations,
brother-sister corporations, subsidiaries (whether or not wholly owned), or
divisions or (ii) a successor of all or a portion of the Company’s business or
(iii) a purchaser of all or substantially all of the Company’s assets if such
successor expressly assumes the Company’s obligations hereunder in writing.
This Agreement shall be binding on and inure to the benefit of each party and
such party’s respective heirs, legal representatives, successors and permitted
assigns.

 

5.5       Arbitration. Any controversy,
dispute or claim arising out of or relating to this Agreement, or the breach
hereof, shall be settled by a single arbitrator in binding arbitration
conducted in Los Angeles, California, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”), and judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator’s decision shall be in writing. In
addition to the Commercial Arbitration Rules of the AAA and unless otherwise
agreed to by the parties, the following rules shall apply:

 

(a)       Each party shall be
entitled to discovery exclusively by the following means: (i) requests for admission, (ii) requests for
production of documents, (iii) up to 15 written interrogatories (with any
subpart to be counted as a separate interrogatory), and (iv) depositions of no
more than six individuals.

 

(b)       Unless the arbitrator
finds that delay is reasonably justified or as otherwise agreed to by the
parties, all discovery shall be completed, and the arbitration hearing shall commence within five months after the
appointment of the arbitrator.

 

(c)       Unless the arbitrator
finds that delay is reasonably justified, the hearing will be completed, and an
award rendered within 30 days of commencement of the hearing. The arbitrator’s
authority shall include the ability to render equitable types of relief and, in
such event, any aforesaid court may enter an order enjoining and/or compelling
such actions or relief ordered or as found by the arbitrator. The arbitrator also shall make a
determination regarding which party’s legal position in any such controversy or
claim is the more substantially correct (the “Prevailing Party”) and the
arbitrator shall require the other party to pay the legal and other
professional fees and costs incurred by the Prevailing Party in connection with
such arbitration proceeding and any necessary court action. However,
notwithstanding the foregoing, the parties expressly agree that a court of
competent jurisdiction may enter a temporary restraining order or an order
enjoining a breach of Article IV of this Agreement pending a final award or further
order by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which the parties
may be entitled.

 

5.6       Severability. If
any court of competent jurisdiction determines that any provision of this
Agreement is invalid or unenforceable, then such invalidity or unenforceability
shall be limited only to the jurisdiction in which the determination was made
and shall have no effect on the other provisions hereof, which shall remain
valid,

 

 

binding and enforceable
and in full force and effect, and such invalid or unenforceable provision shall
be rewritten or construed in a manner so as to give the maximum valid and
enforceable effect to the intent of the parties expressed herein.

 

5.7       Waiver of Breach. The waiver by
either party of the breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach by either party.

 

5.8       Governing Law; Construction. This
Agreement and the obligations hereunder shall be interpreted, construed and
enforced in accordance with the laws of the State of California (without regard
to its conflict of laws principles). Any ambiguities in this Agreement shall
not be strictly construed against the drafter of the language, but rather shall
be resolved by applying the most reasonable interpretation under the
circumstances, giving full consideration to the intentions of the parties. The
terms of this Agreement are the result of negotiations between the parties.
Accordingly, no party shall be deemed to be the drafter of this Agreement.

 

5.9       Counterparts. This
Agreement may be executed in two or more counterparts each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.

 

5.10     Representation.
Company hereby represents and warrants to Executive and acknowledges that
Executive is relying on such representations and warranties, that Company has
previously disclosed in writing all matters known to Company that could have a
material adverse affect on the Company or its business or prospects. The
information disclosed to Executive by Company is accurate and complete in all
material respects and otherwise contains no material misstatements or
omissions.

 

 

IN WITNESS WHEREOF, the Parties execute this Agreement as
indicated below.

 

 

	
  Dated: March 1, 2005

  	
  /s/ Steven Robert
  Carlson

  	
   

  
	
   

  	
  Steven Robert Carlson

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated: March 1, 2005

  	
  By:

  	
  /s/ Austin T. McNamara

  	
   

  
	
   

  	
   

  	
  OMP, Inc.

  	
   

  
	
   

  	
   

  	
  Its:

  	
  CEO

  	
   

  
	
   

  	
   

  	
  Obagi Medical Products,
  Inc.

  
						

 

 

Appendix A

 

DEFINITIONS

 

“Affiliate”
shall mean a person, corporation, partnership, limited liability company or
other entity which, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, OMP, Inc. and
shall include Stonington Capital 1994 Fund, L.P.

 

“Cause”
shall mean that the Board of Directors has made a reasonable determination that
any of the following exists: (i) Executive has committed gross negligence, or
willful misconduct in the performance of Executive’s duties to the Company;
which will or has resulted in material loss of business or has materially
injured the reputation of the Company; (ii) Executive has repeatedly failed to
follow reasonable and lawful instructions from the Board of Directors or the
CEO of the Company and has failed to cure that conduct after receiving twenty
(20) days written notice from the Board of Directors or the CEO; (iii)
Executive has committed a felony deemed by the Company to be adverse to its
best interests or reputation; (iv) Executive has misappropriated funds or
property of the Company; (v) Executive has attempted to obtain a personal
profit from any transaction in which the Company has an interest, and which
represents the corporate opportunity of the Company or is adverse to the
interests of the Company, unless the transaction was approved in writing by the
Company after full disclosure relating to the transaction; or (vi) Executive
has breached a material provision of this Agreement or any other material
agreement to which Executive and Company are parties or has breached any
obligation or duty owed to the Company; however, for claimed violations under
(i), (ii) and (vi) above, the Executive shall have a period of thirty (30) days
in which to present exculpatory information concerning a claimed violation to
the Board, or to cure said violation.

 

“Change in
Control” shall mean (i) the consummation of a merger or consolidation of
the Company with or into another entity or any other corporate reorganization,
if persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization own immediately after such
merger, consolidation or other reorganization fifty percent (50%) or more of
the voting power of the outstanding securities of each of (A) the continuing or
surviving entity and (B) any direct or indirect parent corporation of such
continuing or surviving entity, or (ii) the sale, transfer or other disposition
of all or substantially all of the Company’s assets. A transaction shall not
constitute a Change in Control if its sole purpose is to change the state of
the Company’s incorporation or to create a holding company that will be owned
in substantially the same proportions by the persons who held the Company’s
securities immediately before such transaction.

 

“Confidential
Information” shall mean information that is possessed by or developed for
the Company and that relates to the Company’s existing or potential business or
technology, which information is generally not known to the public and which
information the Company seeks to protect from disclosure to its existing or

 

 

potential competitors or
others, including, without limitation, the following: business plans,
strategies, existing or proposed bids, costs, technical developments, existing
or proposed research projects, financial or business projections, investments,
marketing plans, negotiation strategies, training information and materials,
information generated for client engagements and information stored or
developed for use in or with computers. Confidential Information also includes
information received by the Company from others for which the Company has an
obligation to treat as confidential, including all information obtained in
connection with client engagements.

 

“Disabled”
shall mean that Executive is unable to perform his services under this
Agreement for a continuous period of six months by reason of his physical or
mental illness or incapacity with reasonable accommodation. If there is any
dispute as to whether Executive is or was physically or mentally unable to
perform his duties under this Agreement, such question shall be submitted to a
licensed physician agreed to by Executive (or any legal guardian lawfully
appointed) and the Company, or, if they are unable to so agree, appointed by
the Orange County branch of the American Arbitration Association at the request
of either Executive (or such legal guardian) or the Company. Executive shall
submit to such examinations and provide such information as such physician may
reasonably request and the determination of such physician as to Executive’s
physical or mental condition shall be binding and conclusive upon Executive and
the Company.

 

“Good Reason”
shall mean any of the following that occur without Executive’s prior written
consent, (i) the assignment to Executive of duties which are substantially
inconsistent with Executive’s position, duties, responsibilities, and status
hereunder, (ii) an adverse change in Executive’s reporting responsibilities,
titles, or office as an employee, or a material reduction in Executive’s duties
and responsibilities; or (ii) any breach of this Agreement by the Company (iv)
any reduction in Executive’s Base Salary, Bonus, or benefits as described
herein or (v) the relocation of Executive’s principal place of employment by
more than fifty (50) miles; provided, however, that for claimed violations
above, the Company shall have a period of thirty (30) days in which to cure
said violation.Exhibit 10.14

 

SEVERANCE AGREEMENT

 

THIS AGREEMENT
is entered into as of                     
        ,         ,
by and between OMP, Inc. and its successors and assigns (the “Company”) and                                           
(“Employee”).

 

WHEREAS,
except as expressly set forth herein, the Company desires to continue to retain
the services of Employee under the same terms and conditions that Employee is
currently employed;

 

WHEREAS, the
parties desire to enter into this Severance Agreement (“Agreement”) to set
forth certain terms and conditions under which Employee may be eligible to
receive severance payments in the event of his or her employment termination;

 

NOW, THEREFORE,
in consideration of the mutual agreements and covenants herein and other good
and valuable consideration, the sufficiency of which is acknowledged, the
Company and Employee hereby agree as follows:

 

1.       Severance Benefit
Eligibility. If, within 12 months following a Change in Control, Employee’s
employment is terminated (a) by the Company without Cause and other than as a
result of Employee’s death or disability or (b) by Employee for Good Reason,
Employee shall be entitled to the following payments:

 

(i)                                     Severance Payments. Provided Employee first executes and does
not revoke a release in a form acceptable to the Company, Employee shall be
entitled to be paid a cash amount equal to 100% of Employee’s then current
annual base salary, which amount shall be payable over the course of twelve
(12) consecutive months, in each case consistent with the Company’s regular
payroll practices and subject to applicable payroll taxes and other withholding
and further subject to Section 5, below.

 

(ii)                                  Definitions.

 

a.              Cause. For purposes of this Agreement, “Cause” shall mean:
(1) any act or omission that constitutes cause under any Company policy or
employment agreement in existence between the parties, (2) the commission by
Employee of a dishonest, illegal or wrongful act involving fraud,
misrepresentation, moral turpitude or misappropriation which causes damage to
the Company’s business, (3) Employee’s willful absence from his employment or failure
or refusal to perform his duties, or (4) Employee’s willful failure or refusal
to perform specific lawful directives of the Company.

 

b.              Good Reason. For purposes of
this Agreement, “Good Reason” shall mean the occurrence of any of the
following: (1) the Company shall have defaulted in its obligation to pay
compensation to Employee when due which is not cured within thirty (30) days
following written notice by the Employee, (2) any failure by the Company to
comply in any material respect with any provisions of an existing, written
employment agreement between the parties which is not cured within thirty (30)
days following written notice by the Employee, (3) a material diminution in the
Employee’s compensation, benefits, title, authority, duties, responsibilities
or status, without the consent of the Employee which is not cured within thirty
(30) days following written notice by the Employee, or (4) the move of Employee’s
workplace more than fifty (50) miles.

 

1

 

c.               Change in Control. For purposes of this Agreement, “Change in
Control” shall mean the occurrence, subsequent to the date hereof, of
any of the following events:

 

(1)         any “person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), other than the Company, Obagi Medical Products, Inc. (“Obagi”), any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, Obagi or a corporation owned, directly or indirectly, by the
stockholders of the Company or Obagi in substantially the same proportions as
their ownership of stock of the Company or Obagi, becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company or Obagi representing 50% or more of the combined
voting power of the Company’s or Obagi’s, respectively, then outstanding securities;

 

(2)         during any period of twenty-four (24)
consecutive months, individuals who at the beginning of such period constitute the
board of directors of the Company (the “Board”) and any new director (other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in subparagraphs (1), (2) or (3))
whose election by the Board or nomination for election by the Board or by the
stockholders of the Company was approved by a vote of at least a majority of
the directors then still in office who either were directors at the beginning
of such period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof;

 

(3)         the Company or Obagi merges or consolidates with
any other corporation or entity, other than (y) a merger or consolidation which
would result in the voting securities of the Company or Obagi outstanding
immediately prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) at least
50% of the combined voting securities of the Company or Obagi, respectively, or
such surviving entity outstanding immediately after such merger or
consolidation or (z) a merger or consolidation effected to implement a
recapitalization of the Company or Obagi (or similar transaction) in which no “person”
(as hereinabove defined) acquires 50% or more of the combined voting power of
the Company’s or Obagi’s, respectively, then outstanding securities; or

 

(4)         The Company sells or otherwise disposes of all
or substantially all of its assets.

 

2.             No Employment Contract. This Agreement shall not be deemed to
constitute a contract of employment, nor shall any provision hereof affect
either the right of the Company to discharge Employee at will or pursuant to
the terms and conditions of any other agreement between the Company and the
Employee.

 

2

 

3.             Entire Agreement; Prior Agreements. This Agreement contains the entire
agreement between Employee and the Company regarding the subject matter hereof and,
as such, fully supersedes any and all prior agreements or understandings
between Employer and the Company pertaining to the subject matter addressed in
this Agreement; provided, that,
this Agreement shall not, except as expressly provided herein, supersede,
replace, or otherwise affect in any manner Employee’s Employment Agreement with
the Company dated,                           .
To the extent any term or condition of this Agreement conflicts with any term
or condition of any other agreement between the parties, whether written or
oral, this Agreement shall prevail.

 

4.             Choice of Law. This Agreement shall be governed by the
laws of the State of California without giving effect to the principles of
choice of law thereof.

 

5.             Tax Matters. The Employee is responsible for payment of all taxes (including any
interest and penalties) legally imposed upon him in connection with benefits
provided under this Agreement and the Company shall have no liability to the
Employee or any other party with respect to any such tax or amount. All
benefits and payments provided hereunder are subject to applicable tax and
other withholdings required by law, and, to the extent such payments are to be
made in cash, they will be made net of such withholding amounts. Notwithstanding
anything to the contrary in this Agreement, to the extent that any benefits or
payments provided hereunder constitute “deferred compensation” under Internal
Revenue Code Section 409A (and any guidance, whenever issued, thereunder) and
the Employee is a “specified employee” (also as defined thereunder) with
respect to his employer if such employer has a class of stock that is publicly
traded on an established securities market (or otherwise), no distribution or
payment of any amount shall be made before a date that is six months following
the date of the Employee’s “separation from service” (also as defined in
Section 409A) or, if earlier, the date of the Employee’s death. To the extent
any delay in payment is required under the preceding sentence, the amounts that
would otherwise have been required to be made during such period of delay shall
accumulate during such period and shall be paid within five (5) business days
after the end of such period.

 

6.             Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument.

 

3

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date written below.

 

 

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  [EMPLOYEE
  NAME]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  OMP,
  Inc.

  

 

4

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