11. Stock–Based Compensation

At December 31, 2013, the Company had the following stock-based employee compensation plans:

Equity Incentive Plans

In April 2010, the Company's Board of Directors approved the Nu Skin Enterprises, Inc. 2010 Omnibus Incentive Plan (the "2010 Omnibus Incentive Plan"). This plan was approved by the Company's stockholders at the Company's 2010 Annual Meeting of Stockholders held in May of 2010. The 2010 Omnibus Incentive Plan provides for granting of a variety of equity based awards including stock options, stock appreciation rights, restricted stock, restricted stock units, other share based awards, performance cash, performance shares and performance units to executives, other employees, independent consultants and directors of the Company and its subsidiaries. Options granted under the 2010 Omnibus Incentive Plan are generally non-qualified stock options, but the 2010 Omnibus Incentive Plan permits some stock options granted to qualify as "incentive stock options" under the U.S. Internal Revenue Code. The exercise price of a stock option generally is equal to the fair market value of the Company's common stock on the stock option grant date. The contractual term of a stock option granted under the 2010 Omnibus Incentive Plan is seven years. Currently, all shares issued upon the exercise of stock options are from the Company's treasury shares. Subject to certain adjustments, 7.0 million shares were authorized for issuance under the 2010 Omnibus Incentive Plan. On June 3, 2013, the Company's stockholders approved an Amended and Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 3.2 million shares.

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NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

In November 2010, the compensation committee of the board of directors approved the grant of performance stock options to certain key employees under the 2010 Omnibus Incentive Plan. Vesting for the options is performance based, with the options vesting in three installments if the Company's earnings per share equal or exceed the three established performance levels, measured in terms of diluted earnings per share. One third of the options will vest upon earnings per share meeting or exceeding the first performance level, one third of the options will vest upon earnings per share meeting or exceeding the second performance level and one third of the options will vest upon earnings per share meeting or exceeding the third performance level. During the second quarter of 2012, first quarter of 2013 and third quarter of 2013 the first, second and third performance levels were fully achieved.

In July 2013, the compensation committee of the board of directors approved the grant of performance stock options to certain key employees under the Amended and Restated 2010 Omnibus Incentive Plan. Vesting for the options is performance based, with the options vesting in four installments if the Company's earnings per share equal or exceed the four established performance levels, measured in terms of diluted earnings per share. One fourth of the options will vest upon earnings per share meeting or exceeding the first performance level, one fourth of the options will vest upon earnings per share meeting or exceeding the second performance level, one fourth of the options will vest upon earnings per share meeting or exceeding the third performance level and one fourth of the options will vest upon earnings per share meeting or exceeding the fourth performance level. The unvested options will terminate upon the Company's failure to meet certain performance thresholds for each of years 2013 through 2019. In addition, all unvested options will terminate on March 30, 2020. The Company records an expense each period for the estimated amount of expense associated with the Company's projected achievement of the performance based targets.

The Company has also issued other performance based awards to a limited number of participants that similarly vest, or become eligible for vesting, upon achievement of various performance targets.

The fair value of stock option awards was estimated using the Black-Scholes option-pricing model with the following assumptions and weighted-average fair values as follows:

	December 31,
Stock Options:	2011			2012			2013

Weighted average grant date fair value of grants	$	9.98		$	13.31		$	22.10
Risk-free interest rate⁽¹⁾		1.8	%		0.8	%		1.4	%
Dividend yield⁽²⁾		2.6	%		2.7	%		3.1	%
Expected volatility⁽³⁾		38.4	%		46.8	%		41.7	%
Expected life in months⁽⁴⁾	63 months			58 months			62 months

⁽¹⁾

The risk-free interest rate is based upon the rate on a zero coupon U.S. Treasury bill, for periods within the contractual life of the option, in effect at the time of the grant.

⁽²⁾

The dividend yield is based on the average of historical stock prices and actual dividends paid.

⁽³⁾

Expected volatility is based on the historical volatility of the Company's stock price, over a period similar to the expected life of the option.

⁽⁴⁾

The expected term of the option is based on the historical employee exercise behavior, the vesting terms of the respective option, and a contractual life of either seven or ten years.

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NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

Options under the plans as of December 31, 2013 and changes during the year ended December 31, 2013 were as follows:

	Shares (in thousands)			Weighted-average Exercise Price		Weighted- average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)

Options activity – service based
Outstanding at December 31, 2012		3,235.2		$	18.55
Granted		172.5			94.53
Exercised		(1,244.0	)		16.16
Forfeited/cancelled/expired		(3.9	)		13.45
Outstanding at December 31, 2013		2,159.8			26.01		2.82	$	242,347
Exercisable at December 31, 2013		1,763.0			17.55		2.17		212,740

Options activity – performance based
Outstanding at December 31, 2012		2,727.0		$	28.06
Granted		2,605.5			77.51
Exercised		(794.4	)		25.10
Forfeited/cancelled/expired		(55.0	)		33.89
Outstanding at December 31, 2013		4,483.1			57.25		5.26	$	362,975
Exercisable at December 31, 2013		1,826.7			28.72		3.47		200,034

Options activity – all options
Outstanding at December 31, 2012		5,962.2		$	22.90
Granted		2,778.0			78.57
Exercised		(2,038.4	)		19.65
Forfeited/cancelled/expired		(58.9	)		32.54
Outstanding at December 31, 2013		6,642.9			47.10		4.47	$	605,322
Exercisable at December 31, 2013		3,589.7			23.23		2.83		412,774

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day of the respective years and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2013. This amount varies based on the fair market value of the Company's stock. The total fair value of options vested and expensed was $13.2 million, net of tax, for the year ended December 31, 2013.

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NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

Cash proceeds, tax benefits, and intrinsic value related to total stock options exercised during 2011, 2012 and 2013, were as follows (in millions):

	December 31,
	2011		2012		2013

Cash proceeds from stock options exercised	$	29.7	$	8.0	$	37.9
Tax benefit realized for stock options exercised		17.4		6.3		41.9
Intrinsic value of stock options exercised		61.6		10.6		241.7

Nonvested restricted stock awards as of December 31, 2013 and changes during the year ended December 31, 2013 were as follows:

	Number of Shares (in thousands)			Weighted-average Grant Date Fair Value

Nonvested at December 31, 2012		729.0		$	39.68

Granted		315.8			41.59
Vested		(305.4	)		34.88
Forfeited		(9.8	)		42.10

Nonvested at December 31, 2013		729.6			42.48

As of December 31, 2013, there was $16.4 million of unrecognized stock-based compensation expense related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 2.2 years. As of December 31, 2013, there was $58.4 million of unrecognized stock-based compensation expense related to nonvested stock option awards. That cost is expected to be recognized over a weighted-average period of 4.0 years.