exhibit10_3.htm


    Exhibit 10.3

      


      STOCK
PURCHASE INSTRUCTION

      
 

      THIS STOCK PURCHASE INSTRUCTION dated
September 12,
2008 (this “Instruction”) is between Physicians Formula Holdings,
Inc. (the “Purchaser”), and DEUTSCHE BANK SECURITIES INC.
(“Broker”).

      


      WITNESSETH:

      


      WHEREAS, the Purchaser has authorized
the repurchase of up to 1,500,000 shares of
common stock, par value $.01 per share (the “Stock”) with a maximum aggregate
purchase value of $9,750,000;
and

      


      WHEREAS, the Purchaser desires to
purchase shares of Stock in accordance with a written instruction to Broker that
complies with the requirements of Rule 10b5-1(c)(1) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”); and

      


      WHEREAS, Broker is willing to purchase
Stock for the Purchaser in accordance with this Instruction;

      


      NOW, THEREFORE, the Purchaser and
Broker hereby agree as follows:

      


      Section 1.  Appointment.  The
Purchaser hereby appoints Broker to purchase shares of Stock on the terms and
conditions set forth in this Instruction.  Subject to such terms and
conditions, Broker hereby accepts such appointment.

      


      Section 2.  Stock
Purchases.  Beginning on the Commencement Date (as defined in
Section 3 below), Broker shall purchase shares of Stock for the Purchaser’s
account in accordance with this Instruction on each day on which the Nasdaq
Stock Market (the “Exchange”) is open for trading and the Stock trades regular
way on the Exchange, at the then prevailing market prices; provided, however,
that:

      


      
        	
                (a)  

              	
                the
      total number of shares of Stock to be purchased on any day shall not
      exceed the then applicable volume limitation of Rule 10b-18 under the
      Exchange Act;

              


      

      


      
        	
                (b)  

              	
                the
      parameters and the price at which shares of Stock are to be purchased
      shall be as set forth on Schedule
A;

              


      

      


      
        	
                (c)  

              	
                the
      total number of shares of Stock to be purchased during the term of this
      Instruction shall not exceed the lesser of (i) 1,500,000 or
      (ii) the greatest number of shares, the aggregate purchase price for which
      does not exceed $9,750,000;
      and

              


      

      


      
        
          
             


          

          
             


            
              

            

          

          
             


          

        

      

      


      The
number of shares referred to in clauses (b) and (c) above shall be adjusted
automatically on a proportionate basis to take into account any stock split,
reverse stock split or stock dividend with respect to the Stock or any change in
capitalization with respect to the Purchaser that occurs during the term of this
Instruction.  Broker agrees to provide the Purchaser with notice of
each purchase made hereunder within one business day thereafter and at such
other times as the Purchaser may reasonably request and such other information
which the Purchaser reasonably requests in order to comply with its disclosure
obligations under Item 703 of Regulation S-K.

      


      Section 3.  Term of
Instruction.  Broker is authorized to begin purchasing Stock in
accordance with this Instruction on September 12, 2008
(the “Commencement Date”). Broker shall cease purchasing Stock and this
Instruction shall terminate on the earliest to occur of:  (a) the
close of trading on November 6, 2008; (b)
the date that the aggregate number of shares of Stock purchased by Broker under
this Instruction reaches 1,500,000 shares; (c)
the date that the aggregate purchase price of all purchases of Stock by Broker
under this Instruction reaches $9,750,000; (d) the
date the Purchaser gives notice of termination of this Instruction to Broker in
accordance with Section 4; or (e) the public announcement of a tender or
exchange offer for the Stock or of a merger, acquisition, recapitalization or
other similar business combination or transaction as a result of which the Stock
would be exchanged for or converted into cash, securities, or other
property.

      


      Section
4.   Termination by the
Purchaser. The Purchaser may, by notice to Broker on any day on which the
Exchange is open for trading, terminate this Instruction; provided that any
such termination shall be in good faith and shall not affect any pre-termination
purchases of Stock by Broker hereunder.

      


      Section 5.  Compliance with Rule 10b-18,
etc.  It is the intent of the parties that this Instruction
comply with the requirements of Rule 10b-18 under the Exchange Act. Broker
agrees to effect all purchases hereunder in compliance with Rule 10b-18 under
the Exchange Act, including without limitation the timing, price and volume
restrictions thereof, and to comply with all other applicable laws, rules and
regulations in effecting any purchase of Stock under this Instruction and
performing its obligations hereunder.  The Purchaser agrees not to
take any action which would cause any such purchase by Broker not to comply with
Rule 10b-18 under the Exchange Act.

      


      Section 6.  Compliance with Rule
10b5-1(c).  It is the intent of the parties that this
Instruction comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the
Exchange Act, and this Instruction shall be interpreted to comply with the
requirements of Rule 10b5-1(c) under the Exchange Act.  Without
limiting the foregoing, (a) the Purchaser acknowledges and agrees that it may
not attempt to exercise any subsequent influence over how, when or whether to
effect purchases of Stock pursuant to the terms of this Instruction nor may it
enter into or alter any corresponding or hedging transaction or position with
respect to the Stock covered by this Instruction; and (b) Broker agrees that no
person who exercises influence, directly or indirectly, on its behalf in
effecting purchases of Stock pursuant to the terms of this Instruction may do so
while aware of any material non-public information relating to the Stock or the
Purchaser.

      


      
        
          
             


          

          
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      Section 7.  Representations and
Warranties.  The Purchaser represents and warrants
that:

      


      (a) it is not
aware of material, non-public information about the Stock or the Purchaser on
the date hereof;

      


      (b) it is
entering into this Instruction in good faith and not as part of a plan or scheme
to evade the prohibitions of Rule 10b5-1 under the Exchange Act;
and

      


      (c) the
purchase, subject to compliance by Broker with its obligations hereunder, will
not contravene any provision of applicable law or any agreement or other
instrument binding on the Purchaser or any judgment, order or decree of any
governmental authority having jurisdiction over the Purchaser.

      


      Section 8.  Indemnification and
Limitation on Liability.

      


      (a)           The
Purchaser agrees to indemnify and hold harmless Broker (and its directors,
officers, employees and affiliates) from and against all claims, liabilities,
losses, damages and expenses (including reasonable attorneys’ fees and costs)
arising out of or attributable to:  (i) any material breach by the
Purchaser of this Instruction (including the Purchaser representations and
warranties), and (ii) any violation by the Purchaser of applicable laws or
regulations; provided, however, that the Purchaser shall have no indemnification
obligations in the case of bad faith, gross negligence or willful misconduct of
the Broker or any other indemnified person.  This indemnification
shall survive the termination of this Instruction.

      


      (b)           Notwithstanding
any other provision herein, neither party shall be liable to the other
for:  (i) special, indirect, punitive, exemplary, or consequential
damages, or incidental losses or damages or any kind, including but not limited
to lost profits, lost savings, or loss of use of facility or equipment,
regardless of whether arising from breach of contract, warranty, tort, strict
liability or otherwise, and even if advised of the possibility of such losses or
damages or if such losses or damages could have been reasonably foreseen, or
(ii) any failure to perform or for any delay in performance that results from a
cause or circumstance that is beyond its reasonable control, including but not
limited to failure of electronic or mechanical equipment, strikes, failure of
common carrier or utility systems, severe weather, market disruptions or other
causes commonly known as “acts of God”.

      


      (c)           The
Purchaser acknowledges and agrees that Broker has not provided the Purchaser
with any tax, accounting or legal advice with respect to this Instruction,
including whether the Purchaser would be entitled to any of the affirmative
defenses under Rule 10b5-1.

      


      Section 9.  Market Disruptions,
Restrictions, etc.

      


      (a)           The
Purchaser shall notify Broker as soon as reasonably practicable if it becomes
subject to any legal, regulatory or contractual restriction that would prohibit
Broker from making purchases under this Instruction (it being understood the
Purchaser becoming aware of material, non-public information shall not
constitute such a restriction), and, in such a case,

      


      
        
          
             


          

          
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      the
Purchaser and Broker shall cooperate to amend or otherwise revise this
Instruction to take account of such legal, regulatory or contractual restriction
(provided that
neither party shall be required to take any action that would be inconsistent
with the requirements of Rule 10b-5 or Rule 10b5-1(c) under the Exchange
Act).

      


      (b)           The
Purchaser understands that Broker may not be able to effect a purchase due to a
market disruption or a legal, regulatory or contractual restriction applicable
to Broker.  If any purchase cannot be executed as required by Section
2 due to a market disruption or legal, regulatory or contractual restriction
applicable to Broker, Broker agrees, subject to Section 3, to refrain from
making such purchase at such time and to effect such purchase as promptly as
practical after the cessation or termination of such market disruption or
applicable restriction.

      


      (c)           Broker
agrees not to purchase Stock under this Instruction after it has received notice
from the Purchaser to terminate this Instruction under Section 4.

      


      Section 10.  Fees.  The
Purchaser shall pay Broker $0.03 per share of
Stock purchased under this Instruction.

      


      Section 11.  Entire Agreement;
Amendments; Assignment.  This Instruction constitutes the
entire agreement of the parties with respect to the subject matter hereof and
shall not be modified or amended except by a writing signed by each of the
parties (provided that any
such modification or amendment shall not be inconsistent with the requirements
of Rule 10b5-1(c) under the Exchange Act).  In the event of any
inconsistency between this Instruction and the account agreement between the
parties, this Instruction shall govern.  Neither party may assign its
rights or obligations under this Instruction without the prior written consent
of the other party and any such assignment without such consent shall be
void.

      


      Section 12.  Notices.  All
notices hereunder must be in writing and shall be deemed to have been duly given
only if delivered personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile
numbers:

      


      If to the
Purchaser, to:

      


      Physicians Formula Holdings,
Inc.

      1055 West 8th
Street

      Azusa, CA 91702

      Attn: Joseph J. Jaeger

       

      
        
          
             


          

          
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      If to
Broker, to:

      


      Deutsche Bank Securities
Inc.

      60 Wall Street, NYC60-0425

      New York,
NY  10005-2858

      


      All such
notices shall (a) if delivered personally to the address as provided in this
Section, be deemed given upon delivery, (b) if delivered by facsimile
transmission to the facsimile number as provided in this Section, be deemed
given upon receipt, and (c) if delivered by mail in the manner described above
to the address as provided in this Section, be deemed given upon
receipt.  Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other party hereto.

      


      Section 13.  Governing
Law.  This Instruction shall be governed by and construed in
accordance with the laws of the State of New York without regard to any
conflicts of laws principles thereof.

      


      Section 14.  Counterparts.  This
Instruction may be executed in several counterparts, each of which shall be
regarded as an original and all of which shall constitute one and the same
document.

      


      IN WITNESS WHEREOF, the parties have
caused this Instruction to be signed by their duly authorized representatives as
of the date first above written.

       

    

    
      
        	 	 	 	 DEUTSCHE
      BANK SECURITIES INC.	 
	 	 	 	 	 	 
	By: 	
                /s/
      Joseph J. Jaeger

              	 	 	By:	
                /s/
      Peter Cahill

              	 
	Name: 	
                Joseph
      J. Jaeger

              	 	 	Name:	
                Peter
      Cahill

              	 
	Title: 	
                Chief
      Financial Officer

              	 	 	Title:	
                Director

              	 
	 	 	 	 	 	 	 
	 	 	 	 	By:	/s/
      John Sullivan	 
	 	 	 	 	Name:	John
      Sullivan	 
	 	 	 	 	Title:	Vice
      President	 


      

    

    
      


      
        
          
             


          

          
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      Schedule
A

       

      
        
          	
                  Share
      Price

                	
                  Repurchase
      shares/day

                
	 
      	 
      
	
                  $6.26
      to $6.50

                	
                  15,000

                
	
                  $6.01
      to $6.25

                	
                  20,000

                
	
                  $5.76
      to $6.00

                	
                  25,000

                
	
                  $5.51
      to $5.75

                	
                  30,000

                
	
                  $5.50
      and below

                	
                  10b-18
      maximum

                


        

      

       

       

      
        	
                n  

              	
                Broker
      may buy higher amount when stock drops into lower price band
      intraday

              


      

       

      
        	
                n  

              	
                Broker
      has discretion to  buy +/- 20% of
  order

              


      

       

      
        	
                n  

              	
                All
      purchases will be made under 10b-18

              


      

       

      
 

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