12. Stock–Based Compensation

At December 31, 2016, 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 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. On May 24, 2016, the Company's stockholders approved a Second Amended and Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 3.8 million shares.

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 recognized $5.2 million of expense, $6.4 million of income and $7.5 million of income related to these awards in 2014, 2015 and 2016, respectively. The amounts in 2014, 2015 and 2016 reflect the reversal of stock compensation for awards no longer expected to vest.

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:	2014	2015	2016

Weighted average grant date fair value of grants	$ 23.01	$ 16.26	$ 12.59
Risk-free interest rate⁽¹⁾	1.7%	1.7%	1.4%
Dividend yield⁽²⁾	1.9%	2.1%	2.3%
Expected volatility⁽³⁾	45.4%	46.8%	47.9%
Expected life in months⁽⁴⁾	62 months	65 months	68 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.

Options under the plans as of December 31, 2016 and changes during the year ended December 31, 2016 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, 2015		1,469.7		$	32.85
Granted		1,465.9			34.59
Exercised		(660.2	)		11.56
Forfeited/cancelled/expired		(68.4	)		47.27
Outstanding at December 31, 2016		2,207.0			39.93		5.07		27,021
Exercisable at December 31, 2016		650.1			48.95		2.46		6,381

Options activity – performance based
Outstanding at December 31, 2015		3,598.7		$	61.10
Granted		739.1			34.24
Exercised		(385.7	)		30.47
Forfeited/cancelled/expired		(226.2	)		72.74
Outstanding at December 31, 2016		3,725.9			58.23		3.45		24,970
Exercisable at December 31, 2016		900.5			31.67		0.96		14,760

Options activity – all options
Outstanding at December 31, 2015		5,068.4		$	52.91
Granted		2,205.0			34.48
Exercised		(1,045.9	)		18.54
Forfeited/cancelled/expired		(294.6	)		66.82
Outstanding at December 31, 2016		5,932.9			51.42		4.05		51,991
Exercisable at December 31, 2016		1,550.6			38.91		1.59		21,141

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, 2016. This amount varies based on the fair market value of the Company's stock. The total fair value of options vested was $4.2 million of expense, $2.8 million of income and $1.0 million of income, net of tax, for the years ended December 31, 2014, 2015 and 2016, respectively.

Cash proceeds, tax benefits and intrinsic value related to total stock options exercised during 2014, 2015 and 2016, were as follows (U.S. dollars in thousands):

	December 31,
	2014		2015		2016

Cash proceeds from stock options exercised	$	11,042	$	13,041	$	15,707
Tax benefit realized for stock options exercised		11,947		4,451		3,840
Intrinsic value of stock options exercised		17,159		12,085		30,587

Nonvested restricted stock awards as of December 31, 2016 and changes during the year ended December 31, 2016 were as follows:

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

Nonvested at December 31, 2015		662.2		$	60.87

Granted		220.9			39.62
Vested		(210.3	)		58.20
Forfeited		(76.4	)		63.34

Nonvested at December 31, 2016		596.4			53.62

The Company recognizes stock-based compensation on a straight-line basis, except for performance based awards for which expense is recognized using a graded-attribution method if the results are materially different than the straight-line method. As of December 31, 2016, there was $16.8 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, 2016, there was $18.8 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 2.7 years.