Nu Skin Enterprises

Executive Incentive Plan

JULY 2001 (updated January 1, 2003)

Annual Incentive Plan

Nu Skin Enterprises, Inc. 2

Purpose

Nu Skin Enterprises, Inc. (“Nu Skin”) believes that sound compensation programs
are essential to the retention, attraction and motivation of personnel. The
purpose of the Plan is to focus employees on excellent, sustained performance
that leads to long-term growth, profitability and stability.

Objectives

The objectives of the Incentive Plan include:

•

Focusing employees on the achievement of Nu Skin Enterprise business and
strategic objectives;

•

Enhancing operational efficiency and teamwork within each division and country
and across divisions and countries;

•

Increasing revenue and operating income; and

•

Attracting, retaining and motivating employees by emphasizing “pay for
performance” compensation programs that offer competitive total compensation
(base salary + incentives) opportunities upon achievement of Nu Skin
Enterprises’ (NSE) financial and strategic objectives; and Division, Country,
Department and Individual objectives.

Annual Incentive Plan

Nu Skin Enterprises, Inc. 3

Effective Plan Date, Duration and Performance Cycles

•

Effective Plan Date

 

The effective Plan date is January 1, 2003. The Plan is in effect until further
notice and can be cancelled or changed by notification to plan participants
prior to the start of any performance cycle.

•

Performance Cycles

 

The Plan has two six-month performance cycles. Each cycle is based on the
specific results of each period. The six-month periods are January through June
and July through December. Within each six-month period, the results of each
quarter are calculated.

  »

Employees are eligible to earn 25% of their potential semi-annual incentive
award each fiscal quarter.

  »

50% of the semi-annual incentive is dependant on the combined results of both
quarters.

Six-Month Period     50%     25% 25%     Quarter Quarter

Annual Incentive Plan

Nu Skin Enterprises, Inc. 4

  »

The quarter and six-month period results are based upon the Company's,
Division's or Country's, departments, and individual performance during the
quarters and the six-month period. and,

  »

The calculation is based upon the individual’s base salary at the time of the
payment.

•

Constant Currency Basis

 

The Operating Profit and Revenue targets will be set based on budgets and
projections converted on a constant currency basis and the results for each
fiscal quarter will be converted to constant currency amounts for use in
computing performance bonuses.

 

Constant Currency means using the same currency exchange rate used to translate
the financial results for the corresponding period of the prior year, thus
eliminating the impact of currency fluctuations. These amounts will be computed
by the Nu Skin Enterprises’ Finance Department.

Annual Incentive Plan

Nu Skin Enterprises, Inc. 5

Incentives and Participants

 

Incentive Plan Participants have target award opportunities designed to reward
superiorNSE, Division, Country, Department and Individual performance and
maintain externallycompetitive total cash compensation commensurate with NSE’s
performance:

•

Participants’ incentive awards will be based upon the areas of the Company in
which they contribute and,

•

Participants are assigned a target incentive award opportunity expressed as a
percentage of their base salary. The following chart summarizes the percentages
used to calculate the bonus for each executive group.

Incentives

Position

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Total
Target
Incentive

--------------------------------------------------------------------------------

NSE
Profit
Portion

--------------------------------------------------------------------------------

NSE
Revenue
Portion

--------------------------------------------------------------------------------

Division/
Region
Revenue

--------------------------------------------------------------------------------

Chairman & CEO   60 % 60 % 40 % 0 %

--------------------------------------------------------------------------------

Senior Vice Presidents  60 % 60 % 40 % 0 %

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President, Executive Committee  60 % 60 % 40 % 0 % Executive Vice Presidents 

--------------------------------------------------------------------------------

CFO, CIO, CAO, CLO  50 % 60 % 40 % 0 %

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Division Presidents, Regional VPs, Country General Managers  50 % 60 % 10 % 30 %

--------------------------------------------------------------------------------

Vice Presidents  30-40 % 60 % 40 % 0 %

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Annual Incentive Plan

Nu Skin Enterprises, Inc. 6

Critical Success Factors (“CSF’s”)

•

The Company will use operating profit and revenue as Critical Success Factors
("CSF's").

•

The incentive bonus will be weighted 60% to operating profit and 40% to revenue.

•

For corporate employees, NSE Revenue is the CSF. For USA employees, USA revenue
is the CSF. For divisional employees, the relevant divisional global revenue is
the CSF.

Work Area

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Corporate
Revenue

--------------------------------------------------------------------------------

Region/Country/
Division Revenue

--------------------------------------------------------------------------------

Corporate
Operating Profit

--------------------------------------------------------------------------------

USA        |X|   |X|  

--------------------------------------------------------------------------------

Region        |X|   |X|  

--------------------------------------------------------------------------------

Division        |X|   |X|  

--------------------------------------------------------------------------------

Corporate    |X|        |X|  

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Annual Incentive Plan

Nu Skin Enterprises, Inc. 7

Performance Thresholds

•

Threshold levels represent the minimum acceptable performance levels required
for incentive pay-out in each category.

 

The Operating Profit threshold is 90%

 

The Revenue threshold is 90%

 

The Department Goals threshold is 80%

 

The Individual Goals threshold is 80%

If the Operating Profit threshold is not met, no Revenue incentive will be paid.
If Department objectives or Individual objectives are below the threshold level
at the end of the Plan performance cycle, no incentive will be paid.

Targets

Target levels are established by NSE’s Executive Committee and essentially
represent achievement of 100% of budgeted revenue and operating profit, adjusted
for currency fluctuations.

•

Outstanding levels represent performance levels that exceed the target
objectives.

•

At the Outstanding performance level, target cash incentives will be increased
linearly.

•

At achievement of 90% of the CSFs and achievement of “Pass” for Department and
Individual Goals, one-half of the cash incentive will be paid out. The pay-out
amount is increased linearly up to full payment at 100% achievement of CSFs.

Annual Incentive Plan

Nu Skin Enterprises, Inc. 8

Department Targets

•

Departments set objectives that align with CSFs and the priorities of NSE and
the division/country they support.

• A Department must achieve 80% of its respective Goals to earn a “pass” (P) to
be eligible for any payment under the incentive plan;

•

A Department is defined as a cost- center or group of cost- centers as
determined by the employee's vice president;

• The approved budget must account for 25% of Department Goals. If a Department
exceeds their approved budget by 5% or more, the employees in the Department are
not eligible for the incentive unless such overruns are approved in advance by
the NSE Executive Committee.

Individual Targets

• Target incentive award levels are determined by the Individual’s level of job
responsibility, reflecting that job’s ability to impact NSE’s financial
performance, as well as competitive total compensation practices (base salary
plus incentives) for comparable jobs within organizations similar in size and
scope.

• Individual performance objectives for each participant are established prior
to the start of the performance period. Some Individual objectives may stretch
for the entire fiscal year. Performance levels for Individual objectives are
negotiated with each manager.

• The cost center of the participant determines which CSFs relate to the
participant’s incentive payout;

• A participant must achieve at least 80% of Individual Goals to earn a “pass”
(P) to be eligible for any payment under the incentive plan; and

• A participant's job performance must be at least at "competent" level.

Annual Incentive Plan

Nu Skin Enterprises, Inc. 9

Incentive Award Pay-Out Guidelines and Eligibility

• Incentive awards, if earned, will be distributed to Plan participants at the
end of each performance cycle;

• All participants must be on the payroll at the time of the payment;

• Participants must be actively employed (not on a leave-of-absence) a minimum
of six weeks to participate in the plan. The award amount will be prorated based
on the number of days actively employed during the bonus period;

• Participants will receive their awards, when earned, by separate check;

• Award payments shall be subject to any State and/or Federal tax withholdings;
and

• Award payments will be made within 45 days of the close of each quarter or 6
month period.

•

The actual incentive pay-out may be smaller or larger, depending on overall NSE,
Country and Division performance results.