Salary Increase
On June 24, 2010, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of Physicians Formula Holdings, Inc. (the “Company”) considered its employee base salary rates, including those of its named executive officers, which had been reduced in the spring of 2009 in response to the worldwide economic crisis. On June 24, 2010, the Compensation Committee approved an increase to the base salaries for all employees impacted by the previous reduction, including its named executive officers, to the level in effect immediately prior to the 2009 salary reductions. As a result, Ing rid Jackel’s base salary will be increased from $340,704 to $378,560, Jeffrey P. Rogers’ base salary will be increased from $340,704 to $378,560, and Jeff M. Berry’s salary will be increased from $316,368 to $351,520. The base salary increase is effective for all impacted employees as of July 5, 2010.
Annual Bonus Plan
On June 24, 2010, the Compensation Committee approved the Physicians Formula, Inc. Annual Bonus Plan (the “Plan”). The purpose of the Plan is to provide annual incentives, contingent upon continued employment and meeting certain corporate and/or individual goals, to certain employees of Physicians Formula, Inc. who make substantial contributions to the Company and who are designated by the Compensation Committee, including each of the named executive officers (each, a “Participant”).
On June 24, 2010, the Compensation Committee also established the performance criteria for the determination of the annual cash bonus payable for 2010. The 2010 bonus payable to each Participant (such amount, the “Bonus”) will be determined based on the increase in Earnings Per Share (as defined below) for 2010 above the Company’s budgeted 2010 Earnings Per Share, after adding back all 2010 bonuses payable under the Plan. For purposes of calculating the Bonus, “Earnings Per Share” means the diluted earnings (or loss) per share of the Company, as determined by the Committee in accordance with generally accepted accounting principles for inclusion in the Company’s annual audited financial statements, subject to adjustment to exclude any reported cumulative effect of accounting changes, any reported income and losses from discontinued operations, and any reported extraordinary or nonrecurring gains and losses as determined under generally accepted accounting principles.
Based on the Earnings Per Share achieved for 2010 above the budgeted amount, the Committee will assign a bonus payout percentage between 0 and 100% (the “EPS Payout Percentage”). Each Participant will be entitled to receive a Bonus equal to: (i) the EPS Payout Percentage, multiplied by (ii) the Participant’s target bonus for 2010. The maximum EPS Payout Percentage will be 100% in any event.
The Bonus payable for 2010, if any, is to be paid in the form of cash as soon as practicable following the end of 2010, but no later than two and a half months following the end of 2010. Each Participant must be employed by the Company as of the last day of the fiscal year in order to be entitled to receive his or her Bonus.
2010 Target Bonuses
The following table sets forth the minimum and target/maximum cash bonus amounts payable to each named executive officer upon achievement of the specified level of Earnings Per Share set by the Committee:
| Executive | Minimum ($) | Target/Maximum ($) |
| Ingrid Jackel | 0 | $189,280 |
| Jeffrey P. Rogers | 0 | $189,280 |
| Jeff M. Berry | 0 | $175,760 |
Because payouts under the Plan depend on future corporate performance, the actual amounts the Company will pay to Participants under the Plan for 2010 are not yet determinable.
