Document:

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.NSE 2002 Truman Hunt Offer Letter (CEO)

January 17, 2003 

Mr. Truman Hunt
75 West Center Street
Provo, Utah 84601

Dear Truman: 

     It is with great pleasure that we
offer you the position of President and Chief Executive Officer of Nu Skin
Enterprises, Inc. The President/CEO reports to the Chairman of the Board of
Directors. 

     This position is offered on the
following terms: 

	1. 	 Effective
Dates. You would assume the title and responsibilities of the Company's President
effective immediately. Your
responsibilities and those retained by Mr. Lund will be determined between the two of
you. Upon Mr. Lund's departure to serve a mission, currently anticipated to be June 2003,
you will assume the additional title and responsibilities of the CEO. 

	2.	Base
Salary. Your annual base salary will be immediately increased to $425,000. Upon your
assumption of CEO responsibilities, your annual base salary will be increased to
$550,000. Your base salary will be evaluated annually by the Compensation Committee of
the Board of Directors and will be subject to adjustments based on company performance,
market conditions and any other relevant data. 

	3. 	 Cash
Bonus Plan. You will participate in the company's standard cash incentive plan, as may be
amended time from to time, and you will be eligible to receive cash bonuses at the "60%-level"
within that incentive plan.

	4.	Stock
Award. You will receive a restricted stock award immediately of 250,000 shares.
These shares will vest at a rate of 25% per calendar year, with the first 25% vesting on
January 1, 2004, and on January 1 of each year thereafter. The company recognizes that,
upon vesting, the tax consequences of the stock award will require that you sell shares
of stock to cover tax liabilities associated with the award. Therefore, the shares
subject to the award will be registered by the company. 

	 	In addition,
in connection with the stock award, you shall be entitled to receive a cash payment upon
the Company’s payment of any cash dividends to shareholders generally in an amount
equal to 250,000 times the amount of the cash dividends paid per share. 

	5. 	 Stock
Options. You will receive an immediate grant of 250,000 stock options at current fair
market value. These stock options will vest 25% per calendar year, with the first 25%
vesting on December 31, 2003. 

	 	In addition,
beginning in 2004, you will participate in the company’s standard stock option
awards at a level to be determined annually by the Compensation Committee, but at a
level not to be less than 50,000 shares of common stock per year, vesting ratably over
a four-year period. 

	6. 	 Change
of Control. In the event of a change in voting control of the Company, the following
shall occur: 

	 	A. 	 All
outstanding stock awards and stock options shall be considered vested immediately prior
to the announcement of any such transaction. 

	 	B. 
	If within 24 months of a change of control your employment is terminated involuntarily
or you are asked to assume a lesser position with the company for any reason except for
cause (as defined below), you shall be entitled to terminate your employment if you so
choose and accept (i) a lump sum severance payment equal to three times your annual
target compensation then in effect (base plus cash bonus at 60% of base), (ii)
continuation of health insurance benefits for a period of 36 months following
termination or until similar benefits are obtained through other employment, and (iii)
tax protection to offset the impact of any excise tax imposed on the above termination
benefits as a result of any applicable IRS or state regulations on excessive
compensation payments. A request to relocate to an office with located at a distance
greater than a radius of 60 miles from the Provo, Utah office, will constitute
involuntary termination. 
 

	7. 	 Other
Benefits. You shall be eligible to participate in all of the benefit plans offered by the
company to members of senior management at the highest level authorized the Compensation
Committee for any member of management. 

	8.	Termination.
In the event your employment is terminated for any reason other than for cause, your
resignation, death or disability, you shall be entitled to (i) a lump sum severance
payment equal to two times your annual target compensation then in effect, and (ii) tax
protection to offset the impact of any excise tax imposed on the above termination
benefit as a result of any applicable IRS or state regulations on excessive compensation
payments. In addition, you shall be allowed to exercise any vested stock options that
have 

2 

	  	vested as
the date of your termination for a period of 1 year following termination of your
employment. 

	 	A.
	As used herein, “cause” shall mean (i) any act or omission that constitutes a
material breach by you of your obligations as CEO and which breach is materially
injurious to the Company, (ii) your willful and continued failure or refusal to
substantially perform the duties required of you in you position with the Company, which
failure is not cured within twenty (20) days following written notice of such failure,
(iii) any willful violation by you of any material law or regulation applicable to the
business of the Company or any of its subsidiaries or affiliates, or your conviction of,
or a plea of nolo contendre to, a felony, or any willful perpetration by
you of a common law fraud, or (iv) any other willful misconduct by you that is
materially injurious to the financial condition or business reputation of, or is
otherwise materially injurious to, the Company or any of its subsidiaries or affiliates.

 

	9. 	 Key
Employee Covenants. You shall continue to be subject to and bound by the Company's Key
Employee Covenants that apply generally to members of senior management, including
covenants of confidentiality, assignment of work product, and non-competition and
non-solicitation. 

     Please confirm your willingness to
accept the employment terms set forth above by signing and returning a copy of
this letter. We look forward to a rich and rewarding professional relationship
with you. 

	  	Very truly
yours, 

	 	/s/  Steven J.
Lund          
           
        

Steven J. Lund

President and Chief Executive Officer

	 	/s/  Blake M. Roney          
           
        

Blake M. Roney

Chairman

Accepted this 17th day of January, 2003 

/s/  Truman Hunt          
           
        

Truman Hunt

3

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