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Exhibit 10.13    
    

PHYSICIANS
FORMULA HOLDINGS, INC.

2006 EQUITY INCENTIVE PLAN 

1.    Purpose.    

        This
plan shall be known as the Physicians Formula Holdings, Inc. 2006 Equity Incentive Plan (the "Plan"). The purpose of the Plan shall be to promote the long-term
growth and profitability of Physicians Formula Holdings, Inc. (the "Company") and its Subsidiaries by (i) providing certain directors, officers and employees of, and certain other
individuals who perform services for, the Company and its Subsidiaries with incentives to maximize stockholder value and otherwise contribute to the success of the Company and (ii) enabling the
Company to attract, retain and reward the best available persons for positions of responsibility. Grants of incentive or non-qualified stock options, stock appreciation rights ("SARs"),
restricted stock, restricted stock units, deferred stock units, performance awards, or any combination of the foregoing may be made under the Plan. 

2.    Definitions    

        (a)   "Board
of Directors" and "Board" mean the board of directors of the Company. 

        (b)   "Cause"
means the occurrence of one or more of the following events: 

          (i)  Conviction
of a felony or any crime or offense lesser than a felony involving the property of the Company or a Subsidiary; or 

         (ii)  Conduct
that has caused demonstrable and serious injury to the Company or a Subsidiary, monetary or otherwise; or 

        (iii)  Willful
refusal to perform or substantial disregard of duties properly assigned, as determined by the Company or a Subsidiary, as the case may be; or 

        (iv)  Breach
of duty of loyalty to the Company or a Subsidiary or any act of fraud or dishonesty with respect to the Company or a Subsidiary. 

        (c)   "Change
in Control" means the occurrence of one of the following events: 

          (i)  if
any "person" or "group" as those terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successors thereto, other than an Exempt Person, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act or any successor thereto), directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; or 

         (ii)  during
any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new directors whose election by the Board or
nomination for election by the Company's stockholders was approved by at least two-thirds of the directors then still in office who either were directors at the beginning of the period or
whose election was previously so approved, cease for any reason to constitute a majority thereof; or 

        (iii)  consummation
of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation (A) which would result in all or a
portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or
(B) by which the corporate existence of the Company is not affected and following which the Company's chief executive officer and directors retain their positions with the Company (and
constitute at least a majority of the Board); or 

 

        (iv)  consummation
of a plan of complete liquidation of the Company or a sale or disposition by the Company of all or substantially all the Company's assets, other than a
sale to an Exempt Person. 

        (d)   "Code"
means the Internal Revenue Code of 1986, as amended. 

        (e)   "Committee"
means the Compensation Committee of the Board, which shall consist solely of two or more members of the Board, and each member of the Committee shall be
(i) a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan by "non-employee directors"
is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, (ii) an "outside director" within the meaning of Section 162(m)
of the Code, unless administration of the Plan by "outside directors" is not then required in order to qualify for tax deductibility under Section 162(m) of the Code, and
(iii) independent, as defined by the rules of the Nasdaq Stock Market or any national securities exchange on which any securities of the Company are listed for trading, and if not listed for
trading, by the rules of the Nasdaq Stock Market. 

        (f)    "Common
Stock" means the Common Stock, par value $0.01 per share, of the Company, and any other shares into which such stock may be changed by reason of a
recapitalization, reorganization, merger, consolidation or any other change in the corporate structure or capital stock of the Company. 

        (g)   "Competition"
is deemed to occur if a person whose employment with the Company or its Subsidiaries has terminated obtains a position as a full-time or
part-time employee of, as a member of the board of directors of, or as a consultant or advisor with or to, or acquires an ownership interest in excess of 5% of, a corporation, partnership,
firm or other entity that engages in any of the businesses of the Company or any Subsidiary with which the person was involved in a management role at any time during his or her last five years of
employment with or other service for the Company or any Subsidiaries. 

        (h)   "Disability"
means a disability that would entitle an eligible participant to payment of monthly disability payments under any Company disability plan or as otherwise
determined by the Committee. 

        (i)    "Exchange
Act" means the Securities Exchange Act of 1934, as amended. 

        (j)    "Exempt
Person" means (i) Summit Master Company, LLC, Summit Partners, LLC, Summit Partners, L.P. or any of their affiliates, (ii) any person, entity or
group under the control of any party included in clause (i), or (iii) any employee benefit plan of the Company or any Subsidiary or a trustee or other administrator or fiduciary holding
securities under an employee benefit plan of the Company or any Subsidiary. 

        (k)   "Family
Member" has the meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under the Securities Act of 1933, as amended, and any
successor thereto. 

        (l)    "Fair
Market Value" of a share of Common Stock of the Company means, as of the date in question, the officially-quoted closing selling price of the stock (or if no
selling price is quoted, the bid price) on the principal securities exchange on which the Common Stock is then listed for trading (including for this purpose the Nasdaq Global Select Market) (the
"Market") for the applicable trading day or, if the Common Stock is not then listed or quoted in the Market, the Fair Market Value shall be the fair value of the Common Stock determined in good faith
by the Board; provided, however, that when shares received upon exercise of an option are immediately sold in the open market, the net sale price received may be used to determine the Fair Market
Value of any shares used to pay the exercise price or applicable withholding taxes and to compute the withholding taxes. 

        (m)  "Incentive
Stock Option" means an option conforming to the requirements of Section 422 of the Code and any successor thereto. 

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        (n)   "Non-Employee
Director" has the meaning given to such term in Rule 16b-3 under the Exchange Act and any successor thereto. 

        (o)   "Non-qualified
Stock Option" means any stock option other than an Incentive Stock Option. 

        (p)   "Other
Company Securities" mean securities of the Company other than Common Stock, which may include, without limitation, unbundled stock units or components thereof,
debentures, preferred stock, warrants and securities convertible into or exchangeable for Common Stock or other property. 

        (q)   "Retirement"
means retirement as defined under any Company pension plan or retirement program or termination of one's employment on retirement with the approval of the
Committee. 

        (r)   "Subsidiary"
means a corporation or other entity of which outstanding shares or ownership interests representing 50% or more of the combined voting power of such
corporation or other entity entitled to elect the management thereof, or such lesser percentage as may be approved by the Committee, are owned directly or indirectly by the Company. 

3.    Administration.    

        The
Plan shall be administered by the Committee; provided that the Board may, in its discretion, at any time and from time to time, resolve to administer the Plan, in which case the term
"Committee" shall be deemed to mean the Board for all purposes herein. Subject to the provisions of the Plan, the Committee shall be authorized to (i) select persons to participate in the Plan,
(ii) determine the form and substance of grants made under the Plan to each participant, and the conditions and restrictions, if any, subject to which such grants will be made,
(iii) certify that the conditions and restrictions applicable to any grant have been met, (iv) modify the terms of grants made under the Plan, (v) interpret the Plan and grants
made thereunder, (vi) make any adjustments necessary or desirable in connection with grants made under the Plan to eligible participants located outside the United States and
(vii) adopt, amend, or rescind such rules and regulations, and make such other determinations, for carrying out the Plan as it may deem appropriate. Decisions of the Committee on all matters
relating to the Plan shall be in the Committee's sole discretion and shall be conclusive and binding on all parties. The validity, construction, and effect of the Plan and any rules and regulations
relating to the Plan shall be determined in accordance with applicable federal and state laws and rules and regulations promulgated pursuant thereto and the rules and regulations of the principal
securities exchange on which the Common Stock is then listed for trading. No member of the Committee and no officer of the Company shall be liable for any action taken or omitted to be taken by such
member, by any other member of the Committee or by any officer of the Company in connection with the performance of duties under the Plan, except for such person's own willful misconduct or as
expressly provided by statute. 

        The
expenses of the Plan shall be borne by the Company. The Plan shall not be required to establish any special or separate fund or make any other segregation of assets to assume the
payment of any award under the Plan, and rights to the payment of such awards shall be no greater than the rights of the Company's general creditors. 

4.    Shares Available for the Plan.    

        Subject
to adjustments as provided in Section 16 hereof, an aggregate of nine hundred thousand (900,000) shares of Common Stock may be issued pursuant to the Plan, plus an
automatic annual increase on the first day of each of the Company's fiscal years beginning in 2007 and ending in 2016 equal to the lesser of (i) two percent (2%) of the shares of Common Stock
outstanding on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares of Common Stock as determined by the Committee (collectively, the "Shares").
Notwithstanding the foregoing, the maximum aggregate number of Shares that may be issued pursuant to Incentive Stock Options under the Plan 

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shall
not exceed two million nine hundred eighty four thousand three hundred and eighty three (2,984,383) (subject to adjustments as provided in Section 16 hereof), and such number shall not be
subject to annual adjustment as described in the preceding sentence. 

        Such
Shares may be in whole or in part authorized and unissued or held by the Company as treasury shares. If any grant under the Plan expires or terminates unexercised, becomes
unexercisable or is
forfeited as to any Shares, or is tendered or withheld as to any shares in payment of the exercise price of the grant or the taxes payable with respect to the exercise, then such unpurchased,
forfeited, tendered or withheld Shares shall thereafter be available for further grants under the Plan. 

        Without
limiting the generality of the foregoing provisions of this Section 4 or the generality of the provisions of Sections 3, 6 or 18 or any other section of this Plan, the
Committee may, at any time or from time to time, and on such terms and conditions (that are consistent with and not in contravention of the other provisions of this Plan) as the Committee may, in its
sole discretion, determine, enter into agreements (or take other actions with respect to the options) for new options containing terms (including exercise prices) more (or less) favorable than the
outstanding options. 

5.    Participation.    

        Participation
in the Plan shall be limited to those directors (including Non-Employee Directors), officers (including non-employee officers) and employees of, and
other individuals performing services for, the Company and its Subsidiaries selected by the Committee (including participants located outside the United States). Nothing in the Plan or in any grant
thereunder shall confer any right on a participant to continue in the service or employ as a director or officer of or in the performance of services for the Company or a Subsidiary or shall interfere
in any way with the right of the Company or a Subsidiary to terminate the employment or performance of services or to reduce the compensation or responsibilities of a participant at any time. By
accepting any award under the Plan, each participant and each person claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and
consent to, any action taken under the Plan by the Company, the Board or the Committee. 

        Incentive
Stock Options or Non-qualified Stock Options, SARs, restricted stock awards, restricted stock unit or deferred stock unit awards, performance awards, or any
combination thereof, may be granted to such persons and for such number of Shares as the Committee shall determine (such individuals to whom grants are made being sometimes herein called "optionees"
or "grantees," as the case may be). Determinations made by the Committee under the Plan need not be uniform and may be made selectively among eligible individuals under the Plan, whether or not such
individuals are similarly situated. A grant of any type made hereunder in any one year to an eligible participant shall neither guarantee nor preclude a further grant of that or any other type to such
participant in that year or subsequent years. 

6.    Incentive and Non-qualified Options.    

        The
Committee may from time to time grant to eligible participants Incentive Stock Options, Non-qualified Stock Options, or any combination thereof; provided that the
Committee may grant Incentive Stock Options only to eligible employees of the Company or its subsidiaries (as defined for this purpose in Section 422(a)(2) of the Code or any successor
thereto). In any one calendar year, the Committee shall not grant to any one participant options to purchase a number of shares of
Common Stock in excess of eight hundred thousand (8,000,000) (as adjusted pursuant to Section 16 hereof). The options granted shall take such form as the Committee shall determine, subject to
the following terms and conditions. 

        It
is the Company's intent that Non-qualified Stock Options granted under the Plan not be classified as Incentive Stock Options, that Non-qualified Stock Options
not give rise to plan failure income inclusion under Section 409A(a)(1) of the Code, that Incentive Stock Options be consistent 

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with
and contain or be deemed to contain all provisions required under Section 422 of the Code and any successor thereto, and that any ambiguities in construction be interpreted in order to
effectuate such intent. If an Incentive Stock Option granted under the Plan does not qualify as such for any reason, then to the extent of such non-qualification, the stock option
represented thereby shall be regarded as a Non-qualified Stock Option duly granted under the Plan, provided that such stock option otherwise meets the Plan's requirements for
Non-qualified Stock Options. 

        (a)    Price.    The price per Share deliverable upon the exercise of each option ("exercise price") may not be less
than 100% of the Fair Market Value of a share of Common Stock as of the date of grant of the option, and in the case of the grant of any Incentive Stock Option to an employee who, at the time of the
grant, owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the exercise price may not be less than 110% of the Fair Market Value of
a share of Common Stock as of the date of grant of the option, in each case unless otherwise permitted by Section 422 of the Code or any successor thereto. 

        (b)    Payment.    Options may be exercised, in whole or in part, upon payment of the exercise price of the Shares to
be acquired. Unless otherwise determined by the Committee, payment shall be made (i) in cash (including check, bank draft, money order or wire transfer of immediately available funds),
(ii) by delivery of outstanding shares of Common Stock with a Fair Market Value on the date of exercise equal to the aggregate exercise price payable with respect to the options' exercise,
(iii) by simultaneous sale through a broker reasonably acceptable to the Committee of Shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board or
(iv) by any combination of the foregoing. 

        In
the event a grantee elects to pay the exercise price payable with respect to an option pursuant to clause (ii) above, (A) only a whole number of share(s) of Common Stock
(and not fractional shares of Common Stock) may be tendered in payment, (B) such grantee must present evidence acceptable to the Company that he or she has owned any such shares of Common Stock
tendered in payment of the exercise price (and that such tendered shares of Common Stock have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of
exercise, and (C) Common Stock must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (1) physical delivery of the
certificate(s) for all such shares of Common Stock tendered in payment of the price, accompanied by duly executed instruments of transfer in a form
acceptable to the Company, or (2) direction to the grantee's broker to transfer, by book entry, such shares of Common Stock from a brokerage account of the grantee to a brokerage account
specified by the Company. When payment of the exercise price is made by delivery of Common Stock, the difference, if any, between the aggregate exercise price payable with respect to the option being
exercised and the Fair Market Value of the shares of Common Stock tendered in payment (plus any applicable taxes) shall be paid in cash. No grantee may tender shares of Common Stock having a Fair
Market Value exceeding the aggregate exercise price payable with respect to the option being exercised (plus any applicable taxes). 

        (c)    Terms of Options.    The term during which each option may be exercised shall be determined by the Committee,
but if required by the Code and except as otherwise provided herein, no option shall be exercisable in whole or in part more than ten years from the date it is granted, and no Incentive Stock Option
granted to an employee who at the time of the grant owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries shall be exercisable more
than five years from the date it is granted. All rights to purchase Shares pursuant to an option shall, unless sooner terminated, expire at the date designated by the Committee. The Committee shall
determine the date on which each option shall become exercisable and may provide that an option shall become exercisable in installments. The Shares constituting each installment may be purchased in
whole or in part at any time after such installment becomes exercisable, subject to such minimum exercise requirements as may be designated by the Committee. Prior to the exercise of an 

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option
and delivery of the Shares represented thereby, the optionee shall have no rights as a stockholder with respect to any Shares covered by such outstanding option (including any dividend or
voting rights). 

        (d)    Limitations on Grants.    If required by the Code, the aggregate Fair Market Value (determined as of the grant
date) of Shares for which an Incentive Stock Option is exercisable for the first time by any individual during any calendar year under all equity incentive plans of the Company and its Subsidiaries
(as defined in Section 422 of the Code or any successor thereto) may not exceed $100,000. 

        (e)    Termination.    

        (i)    Death or Disability.    If a participant ceases to be a director, officer or employee of, or to perform other
services for, the Company or any Subsidiary due to death or Disability, all of the participant's options and SARs shall become fully vested and exercisable and shall remain so for a period of
180 days from the date of such death or Disability, but in no event after the expiration date of the options and SARs; provided that the participant does not engage in Competition during such
180-day period unless he or she received written consent to do so from the Board or the Committee; provided further that the Board or Committee may extend such exercise period (and related
non-competition period) in its discretion, but in no event may such extended exercise period extend beyond the expiration date of the options. Notwithstanding the foregoing, if the
Disability giving rise to the termination of employment is not within the meaning of Section 22(e)(3) of
the Code or any successor thereto, Incentive Stock Options not exercised by such participant within 90 days after the date of termination of employment will cease to qualify as Incentive Stock
Options and will be treated as Non-qualified Stock Options under the Plan if required to be so treated under the Code. 

        (ii)    Retirement.    If a participant ceases to be a director, officer or employee of, or to perform other services
for, the Company or any Subsidiary upon the occurrence of his or her Retirement, (A) all of the participant's options and SARs that were exercisable on the date of Retirement shall remain
exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of Retirement, but in no event after the expiration date of the options or SARs; provided that
the participant does not engage in Competition during such 90 day period unless he or she receives written consent to do so from the Board or the Committee; provided further that the Board or
Committee may extend such exercise period (and related non-competition period) in its discretion, but in no event may such extended exercise period extend beyond the expiration date of the
options, and (B) all of the participant's options and SARs that were not exercisable on the date of Retirement shall be forfeited immediately upon such Retirement; provided, however, that such
options and SARs may become fully vested and exercisable in whole or in part in the discretion of the Committee. Notwithstanding the foregoing, Incentive Stock Options not exercised by such
participant within 90 days after Retirement will cease to qualify as Incentive Stock Options and will be treated as Non-qualified Stock Options under the Plan if required to be so
treated under the Code. 

        (iii)    Discharge for Cause.    If a participant ceases to be a director, officer or employee of, or to perform other
services for, the Company or a Subsidiary due to Cause, all of the participant's options and SARs shall expire and be forfeited immediately upon such cessation, whether or not then exercisable. 

        (iv)    Other Termination.    Unless otherwise determined by the Committee, if a participant ceases to be a director,
officer or employee of, or to otherwise perform services for, the Company or a Subsidiary for any reason other than death, Disability, Retirement or Cause, (A) all of the participant's options
and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 30 days after the date of 

6

 

such
cessation, but in no event after the expiration date of the options or SARs; provided that the participant does not engage in Competition during such 30-day period unless he or she
receives written consent to do so from the Board or the Committee; provided further that the Board or Committee may extend such exercise period (and related non-competition period) in its
discretion, but in no event may such extended exercise period extend beyond the expiration date of the options, and (B) all of the participant's options and SARs that were not exercisable on
the date of such cessation shall be forfeited immediately upon such cessation. Notwithstanding the foregoing, Incentive Stock Options not exercised within 90 days after termination will cease
to qualify as an Incentive Stock Option and will be treated as a Non-qualified Stock Option under the Plan if required to be so treated under the Code. 

        (v)    Change in Control.    If there is a Change in Control of the Company and a participant is terminated other than
for Cause from being a director, officer or employee of, or from performing other services for, the Company or a Subsidiary within one year after such Change in Control, all of the participant's
options and SARs shall become fully vested and exercisable upon such termination and shall remain so for up to one year after the date of termination, but in no event after the expiration date of the
options or SARs. In addition, the Committee shall have the authority to grant options and SARs that become fully vested and exercisable automatically upon a Change in Control, whether or not the
grantee is subsequently terminated. Notwithstanding the foregoing, Incentive Stock Options not exercised within 90 days after a participant's termination will cease to qualify as an Incentive
Stock Option and will be treated as a Non-qualified Stock Option under the Plan if required to be so treated under the Code. 

        (f)    Forfeiture.    If a participant exercises any of his or her options and SARs and, within one year thereafter,
either (i) is terminated from the Company or a Subsidiary for any of the reasons specified in the definition of "Cause" set forth in Section 2(b), or (ii) engages in Competition
without having received written consent to do so from the Board or the Committee, then the participant may, in the discretion of the Committee, be required to pay the Company the gain represented by
the difference between the aggregate selling price of the Shares acquired upon the exercise of options or SARs (or, if the Shares were not then sold, their aggregate Fair Market Value on the date of
exercise) and the aggregate exercise price of the options or SARs exercised (the "Option Gain"), without regard to any subsequent increase or decrease in the Fair Market Value of the Common Stock. In
addition, the Company may, in its discretion, deduct from any payment of any kind (including salary or bonus) otherwise due to any such participant an amount equal to the Option Gain. 

        (g)    Grant of Reload Options.    The Committee may provide (either at the time of grant or exercise of an option),
in its discretion, for the grant to a grantee who exercises all or any portion of an option ("Exercised Options") and who pays all or part of such exercise price with shares of Common Stock, of an
additional option (a "Reload Option") for a number of shares of Common Stock equal to the sum (the "Reload Number") of the number of shares of Common Stock tendered for the Exercised Options plus, if
so provided by the Committee, the number of shares of Common Stock, if any, tendered by the grantee in connection with the exercise of the Exercised Options to satisfy any federal, state or local tax
withholding requirements. The terms of each Reload Option, including the date of its expiration and the terms and conditions of its exercisability and transferability, shall be the same as the terms
of the Exercised Option to which it relates, except that (i) the grant date for each Reload Option shall be the date of exercise of the Exercised Option to which it relates and (ii) the
exercise price for each Reload Option shall be the Fair Market Value of the Common Stock on the grant date of the Reload Option. 

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7.    Stock Appreciation Rights.    The Committee shall have the authority to grant SARs under this Plan. SARs shall be subject to
such terms and conditions as the Committee may specify; provided that (1) the exercise price of an SAR may never be less than the Fair Market Value of the Shares subject to the SAR on the date
the SAR is granted, (2) the Shares are traded on an established securities market, and (3) no SAR may include any feature for the deferral of compensation other than the deferral of
recognition of income until the exercise of the SAR. 

        Prior
to the exercise of the SAR, the participant shall have no rights as a stockholder with respect to Shares covered by such outstanding SAR (including any dividend or voting rights). 

        Upon
the exercise of an SAR, the participant shall be entitled to a distribution in an amount equal to (A) the difference between the Fair Market Value of a share of Common Stock
on the date of exercise and the exercise price of the SAR multiplied by (B) the number of Shares as to which the SAR is exercised. 

        All
SARs will be exercised automatically on the last day prior to the expiration date of the SAR so long as the Fair Market Value of a share of Common Stock on that date exceeds the
exercise price of the SAR. 

8.    Restricted Stock.    

        The
Committee may at any time and from time to time grant Shares of restricted stock under the Plan to such participants and in such amounts as it determines. Each grant of Shares of
restricted stock shall specify the applicable restrictions on such Shares, the duration of such restrictions (which shall be at least six months except as otherwise determined by the Committee or
provided in the third paragraph of this Section 8), and the time or times at which such restrictions shall lapse with respect to all or a specified number of Shares that are part of the grant. 

        The
participant will be required to pay the Company the aggregate par value of any Shares of restricted stock (or such larger amount as the Board may determine to constitute capital
under Section 154 of the Delaware General Corporation Law, as amended, or any successor thereto) within ten days of the date of grant, unless such Shares of restricted stock are treasury
shares. Unless otherwise determined by the Committee, certificates representing Shares of restricted stock granted under the Plan will be held in escrow by the Company on the participant's behalf
during any period of
restriction thereon and will bear an appropriate legend specifying the applicable restrictions thereon, and the participant will be required to execute a blank stock power therefor. Except as
otherwise provided by the Committee, during such period of restriction the participant shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive
dividends (so long as such dividends are paid by March 15 of the year following the year in which the participant's right to receive the dividend vests) and to vote, and any stock or other
securities received as a distribution with respect to such participant's restricted stock shall be subject to the same restrictions as then in effect for the restricted stock. 

        Except
as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company and its Subsidiaries
due to death, Disability or Retirement during any period of restriction, all restrictions on Shares of restricted stock granted to such participant shall lapse. At such time as a participant ceases to
be a director, officer or employee of, or otherwise performing services for, the Company or its Subsidiaries for any other reason, all Shares of restricted stock granted to such participant on which
the restrictions have not lapsed shall be immediately forfeited to the Company. 

        If
there is a Change in Control of the Company and a participant is terminated other than for Cause from being a director, officer or employee of, or from performing other services for,
the Company or a subsidiary within one year after such Change in Control, all restrictions on Shares of restricted stock granted to such participant shall lapse. In addition, the Committee shall have
the 

8

 

authority
to grant shares of restricted stock with respect to which all restrictions shall lapse automatically upon a Change in Control, whether or not the grantee is subsequently terminated. 

9.    Restricted Stock Units; Deferred Stock Units.    

        The
Committee may at any time and from time to time grant restricted stock units under the Plan to such participants and in such amounts as it determines. Each grant of restricted stock
units shall specify the applicable restrictions on such units, the duration of such restrictions (which shall be at least six months except as otherwise determined by the Committee or provided in the
third paragraph of this Section 9), and the time or times at which such restrictions shall lapse with respect to all or a specified number of units that are part of the grant. 

        Each
restricted stock unit shall be equivalent in value to one share of Common Stock and shall entitle the participant to receive from the Company at the end of the vesting period (the
"Vesting Period") applicable to such unit one Share, unless the participant elects in a timely fashion to defer the receipt of such Shares, as provided below. Restricted stock units may be granted
without payment of cash or consideration to the Company; provided that participants shall be required to pay to the Company the
aggregate par value of the Shares received from the Company within ten days of the issuance of such Shares unless such Shares are treasury shares. 

        Except
as otherwise provided by the Committee, during the Vesting Period the participant shall not have any rights as a shareholder of the Company; provided that the participant shall
have the right to receive accumulated dividends (so long as such dividends are paid by March 15 of the year following the year in which the participant's right to receive the dividend vests) or
distributions with respect to the corresponding number of shares of Common Stock underlying each restricted stock unit at the end of the Vesting Period, unless such restricted stock units are
converted into deferred stock units, in which case such accumulated dividends or distributions shall be paid by the Company to the participant at such time as the deferred stock units are converted
into Shares. 

        Except
as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary due
to death, Disability or Retirement during any Vesting Period, all restrictions on restricted stock units granted to such participant shall lapse and the participant shall then be entitled to receive
payment in Shares with respect to the applicable restricted stock units. At such time as a participant ceases to be a director, officer or employee of, or otherwise performing services for, the
Company or any Subsidiary for any other reason, all restricted stock units granted to such participant on which the restrictions have not lapsed shall be immediately forfeited to the Company. 

        If
there is a Change in Control of the Company and a participant is terminated other than for Cause from being a director, officer or employee of, or from performing other services for,
the Company or any Subsidiary within one year after such Change in Control, all restrictions on restricted stock units granted to such participant shall lapse. In addition, the Committee shall have
the authority to grant restricted stock units with respect to which all restrictions shall lapse automatically upon a Change in Control, whether or not the grantee is subsequently terminated. 

        A
participant may elect by written notice to the Company, which notice must be made before the later of (i) the close of the tax year preceding the year in which the restricted
stock units are granted or (ii) 30 days of first becoming eligible to participate in the Plan (or, if earlier, the last day of the tax year in which the participant first becomes
eligible to participate in the plan) and on or prior to the date the restricted stock units are granted, to defer the receipt of all or a portion of the Shares due with respect to the vesting of such
restricted stock units; provided that the Committee may impose such additional restrictions with respect to the time at which a participant may elect to defer receipt of Shares subject to the deferral
election, and any other terms with respect to a grant of restricted stock units to the extent the Committee deems necessary to enable the participant to defer recognition of 

9

 

income
with respect to such units until the Shares underlying such units are issued or distributed to the participant. Upon such deferral, the restricted stock units so deferred shall be converted
into deferred stock units. Except as provided below, delivery of Shares with respect to deferred stock units shall be made at the end of the deferral period set forth in the participant's deferral
election notice (the "Deferral Period"). Deferral Periods shall be no less than one year after the vesting date of the applicable restricted stock units. 

        Except
as otherwise provided by the Committee, during such Deferral Period the participant shall not have any rights as a shareholder of the Company; provided that, the participant shall
have the right to receive accumulated dividends or distributions with respect to the corresponding number of shares of Common Stock underlying each deferred stock unit at the end of the Deferral
Period when such deferred stock units are converted into Shares. 

        Except
as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary upon
his or her death prior to the end of the Deferral Period, the participant shall receive payment in Shares in respect of such participant's deferred stock units which would have matured or been earned
at the end of such Deferral Period as if the applicable Deferral Period had ended as of the date of such participant's death. 

        Except
as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary upon
becoming disabled (as defined under Section 409A(a)(2)(C) of the Code) or Retirement or for any other reason except termination for Cause prior to the end of the Deferral Period, the
participant shall receive payment in Shares in respect of such participant's deferred stock units at the end of the applicable Deferral Period or on such accelerated basis as the Committee may
determine, to the extent permitted by regulations issued under Section 409A(a)(3) of the Code. 

        Except
as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary due
to termination for Cause such participant shall immediately forfeit any deferred stock units which would have matured or been earned at the end of the applicable Deferral Period. 

        Except
as otherwise provided by the Committee, in the event of a Change in Control that also constitutes a "change in the ownership or effective control of" the Company, or a change in
the ownership of a substantial portion of the Company's assets (in each case as determined under regulations issued pursuant to Section 409A(a)(2)(A)(v) of the Code), a participant shall
receive payment in Shares in respect of such participant's deferred stock units which would have matured or been earned at the end of the applicable Deferral Period as if such Deferral Period had
ended immediately prior to the Change in Control; provided, however, that if an event that constitutes a Change in Control hereunder does not constitute a "change in control" under Section 409A
of the Code (or the regulations promulgated thereunder), no payments with respect to the deferred stock units shall be made under this paragraph to the extent such payments would constitute an
impermissible acceleration under Section 409A of the Code. 

10.    Performance Awards.    

        Performance
awards may be granted to participants at any time and from time to time as determined by the Committee. The Committee shall have complete discretion in determining the size
and composition of performance awards granted to a participant. The period over which performance is to be measured (a "performance cycle") shall commence on the date specified by the Committee and
shall end on the last day of a fiscal year specified by the Committee. A performance award shall be paid no later than the 15th day of the third month following the completion of a
performance cycle. Performance awards may include (i) specific dollar-value target awards, (ii) performance units, the 

10

 

value
of each such unit being determined by the Committee at the time of issuance, and/or (iii) performance Shares, the value of each such Share being equal to the Fair Market Value of a share
of Common Stock. 

        The
value of each performance award may be fixed or it may be permitted to fluctuate based on a performance factor (e.g., return on equity) selected by the Committee. 

        The
Committee shall establish performance goals and objectives for each performance cycle on the basis of such criteria and objectives as the Committee may select from time to time,
including, without limitation, the performance of the participant, the Company, one or more of its Subsidiaries or divisions or any combination of the foregoing. During any performance cycle, the
Committee shall have the authority to adjust the performance goals and objectives for such cycle for such reasons as it deems equitable. 

        The
Committee shall determine the portion of each performance award that is earned by a participant on the basis of the Company's performance over the performance cycle in relation to
the performance
goals for such cycle. The earned portion of a performance award may be paid out in Shares, cash, Other Company Securities, or any combination thereof, as the Committee may determine. 

        A
participant must be a director, officer or employee of, or otherwise perform services for, the Company or its Subsidiaries at the end of the performance cycle in order to be entitled
to payment of a performance award issued in respect of such cycle; provided, however, that except as otherwise determined by the Committee, if a participant ceases to be a director, officer or
employee of, or to otherwise perform services for, the Company and its Subsidiaries upon his or her death, Retirement, or Disability prior to the end of the performance cycle, the participant shall
earn a proportionate portion of the performance award based upon the elapsed portion of the performance cycle and the Company's performance over that portion of such cycle. 

        In
the event of a Change in Control, a participant shall earn no less than the portion of the performance award that the participant would have earned if the applicable performance
cycle(s) had terminated as of the date of the Change in Control. 

11.    Withholding Taxes.    

        (a)    Participant Election.    Unless otherwise determined by the Committee, a participant may elect to deliver
shares of Common Stock (or have the Company withhold shares acquired upon exercise of an option or SAR or deliverable upon grant or vesting of restricted stock, as the case may be) to satisfy, in
whole or in part, the amount the Company is required to withhold for taxes in connection with the exercise of an option or SAR or the delivery of restricted stock upon grant or vesting, as the case
may be. Such election must be made on or before the date the amount of tax to be withheld is determined. Once made, the election shall be irrevocable. The fair market value of the shares to be
withheld or delivered will be the Fair Market Value as of the date the amount of tax to be withheld is determined. In the event a participant elects to deliver or have the Company withhold shares of
Common Stock pursuant to this Section 11(a), such delivery or withholding must be made subject to the conditions and pursuant to the procedures set forth in Section 6(b) with respect to
the delivery or withholding of Common Stock in payment of the exercise price of options. 

        (b)    Company Requirement.    The Company may require, as a condition to any grant or exercise under the Plan or to
the delivery of certificates for Shares issued hereunder, that the grantee make provision for the payment to the Company, either pursuant to Section 11(a) or this Section 11(b), of
federal, state or local taxes of any kind required by law to be withheld with respect to any grant or delivery of Shares. The Company, to the extent permitted or required by law, shall have the right
to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee, an amount equal to any federal, state or local taxes of any kind required by law to be withheld with
respect to any grant or delivery of Shares under the Plan. 

11

 

12.    Written Agreement; Vesting.    

        Unless
the Committee determines otherwise, each participant to whom a grant is made under the Plan shall enter into a written agreement with the Company that shall contain such
provisions, including without limitation vesting requirements, consistent with the provisions of the Plan, as may be approved by the Committee. Unless the Committee determines otherwise and except as
otherwise provided in Sections 6, 7, 8, 9 and 10 in connection with a Change in Control or certain occurrences of termination, no grant under this Plan may be exercised, and no restrictions relating
thereto may lapse, within six months of the date such grant is made. 

13.    Transferability.    

        Unless
the Committee determines otherwise, no award granted under the Plan shall be transferable by a participant other than by will or the laws of descent and distribution or to a
participant's Family Member by gift or a qualified domestic relations order as defined by the Code. Unless the Committee determines otherwise, an option or SAR may be exercised only by the optionee or
grantee thereof; by his or her Family Member if such person has acquired the option or SAR by gift or qualified domestic relations order; by the executor or administrator of the estate of any of the
foregoing or any person to whom the option or SAR is transferred by will or the laws of descent and distribution; or by the guardian or legal representative of any of the foregoing; provided that
Incentive Stock Options may be exercised by any Family Member, guardian or legal representative only if permitted by the Code and any regulations thereunder. All provisions of this Plan shall in any
event continue to apply to any award granted under the Plan and transferred as permitted by this Section 13, and any transferee of any such award shall be bound by all provisions of this Plan
as and to the same extent as the applicable original grantee. 

14.    Listing, Registration and Qualification.    

        If
the Committee determines that the listing, registration or qualification upon any securities exchange or under any law of Shares subject to any option, SAR, performance award,
restricted stock unit, deferred stock unit or restricted stock grant is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of Shares
thereunder, no such option or SAR may be exercised in whole or in part, no such performance award may be paid out, and no Shares may be issued, unless such listing, registration or qualification is
effected free of any conditions not acceptable to the Committee. 

15.    Transfer of Employee.    

        The
transfer of an employee from the Company to a Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to another shall not be considered a termination of employment; nor
shall it be considered a termination of employment if an employee is placed on military or sick leave or such other leave of absence which is considered by the Committee as continuing intact the
employment relationship. 

16.    Adjustments.    

        In
the event of a reorganization, recapitalization, stock split, stock dividend, combination of Shares, merger, consolidation, distribution of assets, or any other change in the
corporate structure or shares of the Company, the Committee shall make such adjustment as it deems appropriate in the number and kind of Shares or other property available for issuance under the Plan
(including, without limitation, the total number of Shares available for issuance under the Plan pursuant to Section 4), in the number and kind of options, SARs, Shares, restricted stock units,
deferred stock units or other property covered by grants previously made under the Plan, and in the exercise price of outstanding options or SARS; provided, however, that the Committee shall not be
required to make any adjustment that would (i) require the inclusion of any compensation deferred pursuant to provisions of the Plan (or an award 

12

 

thereunder)
in a participant's gross income pursuant to Section 409A of the Code and the regulations issued thereunder from time to time and/or (ii) cause any award made pursuant to the
Plan to be treated as providing for the deferral of compensation pursuant to such Code section and regulations. Any such adjustment shall be final, conclusive and binding for all purposes of the Plan.
In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation or in which a Change in Control is to occur, all of the Company's
obligations regarding awards that were granted hereunder and that are outstanding on the date of such event shall, on such terms as may be approved by the Committee prior to such event, be
(a) canceled in exchange for cash or other property (but, with respect to vested deferred stock units, only if such merger, consolidation, other reorganization, or Change in Control constitutes
a "change in ownership or control" of the Company or a "change in the ownership of a substantial portion" of the Company's assets, as determined pursuant to regulations issued under
Section 409A(a)(2)(A)(v) of the Code) or (b) assumed by the surviving or continuing corporation. 

        Without
limitation of the foregoing, in connection with any transaction of the type specified by clause (iii) of the definition of a Change in Control in Section 2(c) that
also constitutes a "change in ownership or control" of the Company or a "change in the ownership of a substantial portion" of the Company's assets, as determined pursuant to regulations issued under
Section 409A(a)(2)(A)(v) of the Code, the Committee may, in its discretion, (i) cancel any or all outstanding options under the Plan in consideration for payment to the holders
thereof of an amount equal to the portion of the consideration that would have been payable to such holders pursuant to such transaction if their options had been fully exercised immediately prior to
such transaction, less the aggregate exercise price that would have been payable therefor, or (ii) if the amount that would have been payable to the option holders pursuant to such transaction
if their options had been fully exercised immediately prior thereto would be equal to or less than the aggregate exercise price that would have been payable therefor,
cancel any or all such options for no consideration or payment of any kind. Payment of any amount payable pursuant to the preceding sentence may be made in cash or, in the event that the consideration
to be received in such transaction includes securities or other property, in cash and/or securities or other property in the Committee's discretion. 

17.    Amendment and Termination of the Plan.    

        The
Board of Directors or the Committee, without approval of the stockholders, may amend or terminate the Plan, except that no amendment shall become effective without prior approval of
the stockholders of the Company if stockholder approval would be required by applicable law or regulations or by any listing requirement of the principal stock exchange on which the Common Stock is
then listed. 

        Notwithstanding
any other provisions of the Plan, and in addition to the powers of amendment set forth in this Section 17 and Section 18 hereof or otherwise, the provisions
hereof and the provisions of any award made hereunder may be amended unilaterally by the Committee from time to time to the extent necessary (and only to the extent necessary) to prevent the
implementation, application or existence (as the case may be) of any such provision from (i) requiring the inclusion of any compensation deferred pursuant to the provisions of the Plan (or an
award thereunder) in a participant's gross income pursuant to Section 409A of the Code, and the regulations issued thereunder from time to time and/or (ii) inadvertently causing any
award hereunder to be treated as providing for the deferral of compensation pursuant to such Code section and regulations. 

18.    Amendment or Substitution of Awards under the Plan.    

        The
terms of any outstanding award under the Plan may be amended from time to time by the Committee in its discretion in any manner that it deems appropriate, including, but not limited
to, acceleration of the date of exercise of any award and/or payments thereunder or of the date of lapse of restrictions on Shares (but only to the extent permitted by regulations issued under
Section 409A(a)(3) 

13

 

of
the Code); provided that, except as otherwise provided in Section 16, no such amendment shall adversely affect in a material manner any right of a participant under the award without his or
her written consent, and provided further that the Committee shall not reduce the exercise price of any options or SARs awarded under the Plan without approval of the stockholders of the Company. The
Committee may, in its discretion, permit holders of awards under the Plan to surrender outstanding awards in order to exercise or realize rights under other awards, or in exchange for the grant of new
awards, or require holders of awards to surrender outstanding awards as a condition precedent to the grant of new awards under the Plan, but only if such surrender, exercise, realization, exchange, or
grant (a) would not constitute a distribution of deferred compensation for purposes of Section 409A(a)(3) of the Code or (b) constitutes a distribution of deferred compensation
that is permitted under regulations issued pursuant to Section 409A(a)(3) of the Code. 

19.    Commencement Date; Termination Date.    

        The
date of commencement of the Plan shall be the date on which the Company's Registration Statement on Form S-1 (File No. 333-136913) is declared
effective by the Securities and Exchange Commission. If required by the Code, the Plan will also be subject to reapproval by the shareholders of the Company prior to the time required under the Code. 

        Unless
previously terminated upon the adoption of a resolution of the Board terminating the Plan, the Plan shall terminate at the close of business on the ten year anniversary of the
date on which the Company's Registration Statement on Form S-1 (File No. 333-136913) is declared effective by the Securities and Exchange Commission. No
termination of the Plan shall materially and adversely affect any of the rights or obligations of any person, without his or her written consent, under any grant of options or other incentives
theretofore granted under the Plan. 

20.    Severability.    Whenever possible, each provision of the Plan shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of the Plan is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of the Plan. 

21.    Governing Law.    The Plan shall be governed by the corporate laws of the State of Delaware, without giving effect to any
choice of law provisions that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. 

14

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Exhibit 10.16    
    

Physicians Formula Holdings, Inc.

1055 West 8th Street

Azusa, California 91702

   

                            , 2006 

Ingrid
Jackel

2405 E. Orange Grove Blvd.

Pasadena, CA, 91104 

	Re:
	Physicians
Formula Holdings, Inc.

(formerly, PFI Holdings Corp.) (the "Company")

Amended and Restated Grant of Nonqualified Stock Option 

Dear
Ingrid: 

        The
Company's Board of Directors has previously granted to you, on November 3, 2003, a "performance-vesting" stock option (an "Option") under the Physicians Formula
Holdings, Inc. 2003 Stock Option Plan (the "Plan"), a copy of which is attached hereto and incorporated herein by reference. In connection with an initial public offering of the Company's
Common Stock (as defined below) (the "Initial Public Offering"), the Board desires to amend and restate the terms of your Option, effective upon the closing of the Initial Public Offering, to (among
other things) accelerate the vesting of a portion of your Option upon completion of the Initial Public Offering. This Amended and
Restated Grant of Nonqualified Stock Option amends and restates in its entirety the Grant of Nonqualified Stock Option, dated November 3, 2003, relating to your Option. 

        1.     Definitions.
For the purposes of this Agreement, the following terms shall have the meanings set forth below: 

        "Board" shall mean the Board of Directors of the Company. 

        "Cause" shall have the meaning set forth in that certain Employment Agreement, dated as of November 3, 2003, by and between you and
Pierre Fabre, Inc. (now known as Physicians Formula, Inc.) (as the same may be amended or modified from time to time in accordance with its terms). 

        "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute. 

        "Committee" shall mean the committee of the Board which may be designated by the Board to administer the Plan. The Committee shall be
composed of two or more directors as appointed from time to time to serve by the Board. 

        "Common Stock" shall mean the Company's Common Stock, par value $.01 per share, or, in the event that the outstanding Common Stock is
hereafter changed into or exchanged for different stock or securities of the Company, such other stock or securities. 

        "Company" shall mean Physicians Formula Holdings, Inc., a Delaware corporation, and (except to the extent the context clearly
requires otherwise) any subsidiary corporation of Physicians Formula Holdings, Inc. as such term is defined in Section 424(f) of the Code. 

        "Disability" shall mean your inability, due to illness, accident, injury, physical or mental incapacity or other disability, to carry out
effectively your duties and obligations as an employee of the Company or to participate effectively and actively in the management of the Company for a period of at least 90 consecutive days or for
shorter periods aggregating at least 120 days (whether or not consecutive) during any twelve-month period, as determined in the reasonable judgment of the Board. 

        "Option Shares" shall mean (i) all shares of Common Stock issued or issuable upon the exercise of the Option and (ii) all
shares of Common Stock issued with respect to the Common Stock referred to 

 

in
clause (i) above by way of stock dividend or stock split or in connection with any conversion, merger, consolidation or recapitalization or other reorganization affecting the Common Stock.
Option Shares shall continue to be Option Shares in the hands of any holder other than you (except for the Company and, to the extent that you are permitted to transfer Option Shares pursuant to
paragraph 14 hereof, purchasers pursuant to a Public Sale), and each such transferee thereof shall succeed to the rights and obligations of a holder of Option Shares hereunder. 

        "Person" shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. 

        "Public Sale" shall mean any sale of Option Shares to the public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act. 

        "Sale of the Company" shall mean the sale of the Company pursuant to which any "person" or "group" (as those terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder and other than Summit Partners, L.P. and/or any of its affiliated investment
funds) acquires (i) capital stock of the Company possessing the voting power under normal circumstances to elect a majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. 

        "Securities Act" shall mean the Securities Act of 1933, as amended, and any successor statute. 

        2.     Option. 

        (a)   Terms.    Your Option is for the purchase of up to 291,667 shares of Common Stock (the
"Option Shares") at a price per share of $0.10 (the "Exercise Price"), payable upon exercise as set
forth in paragraph 2(b) below. Your Option shall expire at the close of business on November 3, 2013 (the "Expiration Date"), subject to
earlier expiration as provided in paragraph 3(c) below or upon termination of your employment as provided in paragraph 4(b) below. Your Option is not intended to be an "incentive stock
option" within the meaning of Section 422 of the Code. 

        (b)   Payment of Option Price.    Subject to paragraph 3 below, your Option may be exercised in whole or in
part upon payment of an amount (the "Option Price") equal to the product of (i) the Exercise Price multiplied by (ii) the number of Option
Shares to be acquired. Payment shall be made in cash (including check, bank draft or money order). 

        3.     Exercisability/Vesting. 

        (a)   Normal Vesting.    Your Option may be exercised only to the extent it has become vested as provided in this
paragraph 3. Upon the closing of the Initial Public Offering, your Option shall immediately vest and become exercisable with respect to 225,203 of the Option Shares, and your Option shall vest
and become exercisable with respect to the remaining Option Shares in twenty-four (24) equal installments on each monthly anniversary of the closing date of the Initial Public
Offering (i.e., monthly "pro-rated" vesting), if and only if you are, and have been,
continuously employed by the Company from the date of this Agreement through such monthly anniversary date. 

        (b)   Effect on Vesting in Case of Employment Termination.    Notwithstanding paragraph 3(a) above, unless
otherwise determined by the Committee, if your employment with the Company terminates prior to the Expiration Date for any reason other than for Cause, your Option shall be vested and fully
exercisable with respect to that portion of your Option that was vested and exercisable on the date your employment with the Company ceased and any portion of your Option that was not vested and
exercisable on such date shall expire and be forfeited. If you are discharged for Cause, all of your Option not previously exercised shall expire and be forfeited whether exercisable or not. The
number 

2

 

of
Option Shares with respect to which your Option may be exercised shall not increase once you cease to be employed by the Company. 

        (c)   Acceleration of Vesting on Sale of the Company.    If you have been continuously employed by the Company from
the date of this Agreement until a Sale of the Company, the portion of your outstanding Option which has not become vested as of the date of such event shall immediately vest and become exercisable
with respect to 100% of the Option Shares simultaneously with the consummation of the Sale of the Company. In any event, any portion of your Option which has not been exercised prior to or in
connection with the Sale of the Company shall expire and be forfeited, unless otherwise determined by the Committee or the Board in its sole discretion. 

        4.     Expiration
of Option. 

        (a)   Normal Expiration.    In no event shall any part of your Option be exercisable after the Expiration Date set
forth in paragraph 2(a) above. 

        (b)   Early Expiration Upon Termination of Employment.    Any portion of your Option that was not vested and
exercisable as of the date your employment with the Company terminated shall expire and be forfeited on such date, and any portion of your Option that was vested and exercisable as of the date your
employment with the Company terminated shall also expire and be forfeited; provided that: (i) if you die or become subject to any Disability, the
portion of your Option that is vested and exercisable shall expire 90 days from the date of your death or Disability, but in no event after the Expiration Date, (ii) if you resign, the
portion of your Option that is vested and exercisable shall expire 45 days from the date of your resignation, but in no event after the Expiration Date, and (iii) if you are discharged
other than for Cause, the portion of your Option that is vested and exercisable shall expire 30 days from the date of your discharge, but in no event after the Expiration Date. 

        5.     Procedure for Exercise.    You may exercise all or any portion of your Option, to the extent it has vested and
is exercisable, at any time and from time to time prior to its expiration, by delivering written notice to the Company (to the attention of the Company's Secretary) and your written acknowledgement
that you have reviewed and have been afforded an opportunity to ask questions of management of the Company with respect to all financial and other information provided to you regarding the Company,
together with payment of the Option Price in accordance with the provisions of paragraph 2(b) above. As a condition to any exercise of your Option, you shall permit the Company to deliver to
you all financial and other information regarding the Company it believes necessary to enable you to make an informed investment decision, and you shall make all customary investment representations
which the Company requires. 

        6.     Securities Laws Restrictions and Other Restrictions on Transfer of Option Shares.    You represent and warrant
that when you exercise your Option you shall be purchasing Option Shares for your own account and not on behalf of others. You understand and acknowledge that federal and state securities laws govern
and restrict your right to offer, sell or otherwise dispose of any Option Shares unless your offer, sale or other disposition thereof is registered or qualified under the Securities Act and applicable
state securities laws, or in the opinion of the Company's counsel, such offer, sale or other disposition is exempt from registration or qualification thereunder. You agree that you shall not offer,
sell or otherwise dispose of any Option Shares in any manner which would: (i) require the Company to file any registration statement with the Securities and Exchange Commission (or any similar
filing under state law) or to amend or supplement any such filing or (ii) violate or cause the Company to violate the Securities Act, the rules and regulations promulgated thereunder or any
other state or federal law. You further understand that the certificates for any Option Shares you purchase shall bear such legends as the Company deems necessary or desirable in connection with the
Securities Act or other rules, regulations or laws. 

3

 

        7.     Non-Transferability of Option.    Your Option is personal to you and is not transferable by you
other than by will or the laws of descent and distribution. During your lifetime only you (or your guardian or legal representative) may exercise your Option. In the event of your death, your Option
may be exercised only (i) by the executor or administrator of your estate or the person or persons to whom your rights under the Option shall pass by will or the laws of descent and
distribution and (ii) to the extent that you were entitled hereunder at the date of your death. 

        8.     Conformity with Plan.  Your Option is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan (which is incorporated herein by reference). Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge your receipt of this Agreement and the Plan and agree to be bound by all of the terms of this Agreement and the Plan.
Notwithstanding anything to the contrary in this Agreement, the Company is not making, and you hereby acknowledge that the Company has not made, any representations or warranties with respect to the
tax treatment of your Option or any tax consequences in connection therewith. 

        9.     Rights of Participants.    Nothing in this Agreement shall interfere with or limit in any way the right of the
Company to terminate your employment at any time (with or without Cause), nor confer upon you any right to continue in the employ of the Company for any period of time or to continue your present (or
any other) rate of compensation, and in the event of your termination of employment (including, but not limited to, termination by the Company without Cause), any portion of your Option that was not
previously vested and exercisable shall expire and be forfeited, except as otherwise provided herein. Nothing in this Agreement shall confer upon you any right to be selected again as a Plan
participant, and nothing in the Plan or this Agreement shall provide for any adjustment to the number of Option Shares subject to your Option upon the occurrence of subsequent events except as
provided in paragraph 11 below. 

        10.   Withholding of Taxes.    The Company shall be entitled, if necessary or desirable, to withhold from you from
any amounts due and payable by the Company to you (or secure payment from you in lieu of withholding) the amount of any minimum statutory withholding with respect to any Option Shares issuable under
this Plan, and the Company may defer such issuance unless indemnified by you to its satisfaction. 

        11.   Adjustments.    In the event of (a) a reorganization, recapitalization, stock dividend or stock split,
or combination or other change in the shares of Common Stock, the Board or the Committee shall make such adjustments in the number and type of shares authorized by the Plan, the number and type of
shares covered by your Option and the Exercise Price specified herein as may be determined to be appropriate and equitable, in order to prevent the dilution or enlargement of rights under your Option,
and (b) any merger, consolidation or exchange of shares, the Board or the Committee may make such adjustments in the number and type of shares authorized by the Plan, the number and type of
shares covered by your Option and the Exercise Price specified herein as may be determined to be appropriate and equitable, in order to prevent the dilution or enlargement of rights under your Option.
The issuance by the Company of shares of stock of any class, or options or securities exercisable or convertible into shares of stock of any class, for cash or property, or for labor or services
either upon direct sale, or upon the exercise of rights or warrants to subscribe therefore, or upon exercise or conversion of other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock then subject to any Options. 

        12.   Restrictions on Transfer. 

4

 

        (a)   Restrictive Legend.    The certificates representing the Option Shares shall bear the following legend: 

"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON NOVEMBER 3, 2003, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN OPTION AGREEMENT BETWEEN THE COMPANY AND
INGRID JACKEL DATED AS OF                        , 2006, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." 

        (b)   Opinion of Counsel.    You may not sell, transfer or dispose of any Option Shares (except pursuant to an
effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel reasonably acceptable in form and substance to the Company that registration
under the Securities Act or any applicable state securities law is not required in connection with such transfer. 

        (c)   Holdback.    You agree not to effect any public sale or distribution of any equity securities of the Company,
or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180 days after the effectiveness of any underwritten public
offering, except as part of such underwritten registration if otherwise permitted by the Company. 

        13.   Remedies.    The parties hereto shall be entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto acknowledge and agree that money damages would
not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto shall be entitled to specific performance and/or injunctive relief (without posting bond or other
security) from any court of law or equity of competent jurisdiction in order to enforce or prevent any violation of the provisions of this Agreement. 

        14.   Amendment.    Except as otherwise provided herein and notwithstanding anything to the contrary in the Plan, any
provision of this Agreement may be amended or waived only with the prior written consent of the Company and the Plan participants who have been granted options to purchase a majority of the options
under the Plan (based on the number of underlying shares of Common Stock issuable upon the exercise of all such options) theretofore granted under the Plan (unless you will be treated in a manner
different from other Plan participants, in which case your individual written consent will also be required). 

        15.   Successors and Assigns.    Except as otherwise expressly provided herein, all covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so
expressed or not. 

        16.   Severability.    Whenever possible, each provision of this Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of this Agreement. 

5

 

        17.   Counterparts.    This Agreement may be executed simultaneously in two or more counterparts (including by means
of telecopied signature pages), each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement. 

        18.   Descriptive Headings.    The descriptive headings of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement. 

        19.   Governing Law.    The corporate law of Delaware shall govern all questions concerning the relative rights of
the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal law, and not the law of conflicts, of
California. 

        20.   Notices.    All notices, demands or other communications to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall be sent to you and to the Company at the addresses indicated below: 

If to the Optionee:

Ingrid
Jackel

2405 E. Orange Grove Blvd.

Pasadena, CA, 91104 

If to the Company:

Physicians
Formula Holdings, Inc.

1055 West 8th Street

Azusa, California 91702

Attn:    Chief Executive Officer

             Chief Financial Officer

Telecopy:    (626) 334-3395 

With a copy to (which shall not constitute notice to the Company):  

Summit Partners, L.P.

499 Hamilton Avenue

Palo Alto, California 94301

Attention:    Walter G. Kortschak

Attention:    Craig D. Frances

Telephone:    (415) 321-1166

Telecopy:    (415) 321-1188 

Kirkland &
Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601

Attention:    Ted H. Zook, P.C.

Telephone:    (312) 861-2000

Telecopy:    (312) 861-2200 

or
to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 

        21.   Entire Agreement.    This Agreement and the Plan constitute the entire understanding between you and the
Company, and supersedes all other agreements, whether written or oral, with respect to the acquisition by you of Common Stock of the Company. If there are any conflicts in terms and 

6

 

conditions
between this Agreement and the Plan, the terms and conditions of the Plan shall govern, unless otherwise determined by the Committee or the Board. 

        22.   Code Section 280G.    Notwithstanding any provision of this Agreement to the contrary, if all or any
portion of the payments or benefits received or realized by you pursuant to this Agreement either alone or together with other payments or benefits which you receive or realize or are then entitled to
receive or realize from the Company or any of its affiliates would constitute a "parachute payment" within the meaning of Section 280G of the Code and the regulations promulgated thereunder
and/or any corresponding and applicable state law provision, such payments or benefits provided to you shall be reduced by reducing the amount of payments or benefits payable to you pursuant to
paragraph 3(c) of this Agreement to the extent necessary so that no portion of such payments or benefits shall be subject to the excise tax imposed by Section 4999 of the Code and any
corresponding and/or applicable state law provision; provided that such reduction shall only be made if, by reason of such reduction, your net after tax benefit shall exceed the net after tax benefit
if such reduction were not made. For purposes of this paragraph, "net after tax benefit" shall mean the sum of (i) the total amount received or
realized by you pursuant to this Agreement that would constitute a "parachute payment" within the meaning of Section 280G of the Code and any corresponding and applicable state law provision,
plus (ii) any other payments or benefits which you receive or realize or are then entitled to receive or realize from the Company and any of its affiliates that would constitute a "parachute
payment" within the meaning of Section 280G of the Code and any corresponding and applicable state law provision, less (iii) the amount of federal and/or state income taxes payable with
respect to the payments or benefits described in (i) and (ii) above calculated at the maximum marginal individual income tax rate for each year in which payments or benefits shall be
realized by you (based upon the rate in effect for such year as set forth in the Code, and any corresponding applicable state law provisions at the time of the first receipt or realization of the
foregoing), less (iv) the amount of excise taxes imposed with respect to the payments or benefits described in (i) and (ii) above by Section 4999 of the Code and any
corresponding and applicable state law provision. 

*    *    *    *    * 

7

 

        Please
execute the extra copy of this Agreement in the space below and return it to the Company's Secretary at its executive offices to confirm your understanding and acceptance of the
agreements contained in this Agreement. 

	

 	
 	

Very truly yours,
	

 	
 	

PHYSICIANS FORMULA HOLDINGS, INC.
	

 	
 	

By:	

	

 	
 	

 	
 	

Name:	

	

 	
 	

 	
 	

Title:	

Enclosures:    (1)    Extra copy of this Agreement

Enclosures:    (2)    Copy of the Plan 

        The
undersigned hereby acknowledges having read this Agreement and the Plan and hereby agrees to be bound by all provisions set forth herein and in the Plan. 

	

Dated as of                             , 2006	

OPTIONEE
	

 	

 Name: Ingrid Jackel

 
 

CONSENT    
    

        The undersigned spouse of Ingrid Jackel hereby acknowledges that I have read the foregoing Stock Option Agreement and that I understand its contents. I am aware
that the Agreement provides for the repurchase of my spouse's shares of Common Stock under certain circumstances and imposes other restrictions on the transfer of such Common Stock. I agree that my
spouse's interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably bound by this Agreement and further that the my community
property interest, if any, shall be similarly bound by this Agreement. I am aware that the legal, financial and other matters contained in this Agreement are complex and I am free to seek advice with
respect thereto from independent counsel. I have either sought such advice or determined after carefully reviewing this Agreement that I will waive such right. 

	

 	

 Name of Spouse:
	

 	

 Witness

8

QuickLinks

Exhibit 10.16

CONSENT

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