NSE Executive Incentive Plan




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
	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	%
	

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

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

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

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










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
	Corporate 
 Revenue
	Region/Country/
 Division Revenue
	Corporate 
Operating Profit

	USA	 	 	 	 	|X|	 	|X|	 
	

	Region	 	 	 	 	|X|	 	|X|	 
	

	Division	 	 	 	 	|X|	 	|X|	 
	

	Corporate	 	 	|X| 	 	 	 	|X|	 
	












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.