NOTE 11:  CAPITAL TRANSACTIONS

Dividends

The Company paid cash dividends totaling $776, for the year ended December 31, 2009.  During the second quarter of 2009, the Company suspended payment of its quarterly cash dividend.

Share-Based Compensation

During the year ended December 31, 2009, the Company’s shareholders adopted and approved the Nature’s Sunshine Products, Inc. 2009 Stock Incentive Plan (the “2009 Incentive Plan”).  The 2009 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards (collectively “Awards”).  The Compensation Committee of the Board of Directors has authority and discretion to determine the type of Award as well as the amount, terms and conditions of each Award under the 2009 Incentive Plan, subject to the limitations of the 2009 Incentive Plan. A total of 1,500 shares of the Company’s common stock were authorized for the granting of awards under the 2009 Incentive Plan, after its amendment by shareholders in 2010. The numbers of shares available for Awards, as well as the terms of outstanding Awards, are subject to adjustment as provided in the 2009 Incentive Plan for stock splits, stock dividends, recapitalizations and other similar events.

The Company also maintained a stock option plan, which was approved by shareholders in 1995 and expired in 2005 (“the 1995 Stock Plan”). The 1995 Stock Plan provided for the granting or awarding of certain nonqualified stock options to officers, directors and other employees. The term, not to exceed 10 years, and the vesting and exercise period of each stock option awarded under the 1995 Stock Plan were determined by the Company’s Board of Directors. All grants under the 1995 Stock Plan were made at the quoted fair market value of the stock at the date of grant.

Stock option activity for 2011, 2010 and 2009 consisted of the following:

During the year ended December 31, 2011, the Company issued options to purchase 630 shares of common stock under the 2009 Incentive Plan to the Company’s executive officers, other employees and to new members of its Board of Directors, of which 505 will not vest until certain earnings metrics have been achieved. These options were issued with a weighted-average exercise price of $10.84 per share, and a weighted-average grant date fair value of $5.13 per share. All of the options issued have an option termination date of ten years from the option grant date.

During the year ended December 31, 2010, the Company issued options to purchase 475 shares of common stock under the 2009 Incentive Plan, issued to the Company’s executive officers and other employees and to a new member of the Board of Directors, of which 300 were subject to achieving certain earnings metrics.  These options were issued with a weighted average exercise price of $10.03 per share, and a weighted-average grant date fair value of $4.27 per share.  All of the 475 options issued have an option termination date of ten years from the option grant date.

During the year ended December 31, 2009, the Company issued options to purchase 250 shares of common stock under the 2009 Incentive Plan, issued to the Company’s executive officers and other employees and to new members of the Board of Directors.  These options were issued with a weighted-average exercise price of $5.35 per share, and a weighted average grant date fair value of $3.68 per share.  All of the 250 options issued have an option termination date of ten years from the option grant date.

For the years ended December 31, 2011 and 2010, the Company issued 36 and 23 shares of common stock upon the exercise of stock options at an average exercise price of $11.08 and $5.81 per share, respectively. The aggregate intrinsic values of options exercised during the years ended December 31, 2011 and 2010 was $211 and $82, respectively. No options were exercised during the year ended December 31, 2009.

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31, 2011, 2010 and 2009:

Expected option lives and volatilities are based on historical data of the Company. The risk free interest rate is calculated as the average U.S. Treasury bill rate that corresponds with the option life.

Share-based compensation expense from non-qualified stock options for the years ended December 31, 2011, 2010 and 2009 was $557, $437 and $478, respectively; the related tax benefit was approximately $222, $173 and $191, respectively. As of December 31, 2011, 2010 and 2009, the unrecognized share-based compensation cost related to grants described above was $607, $451 and $441, respectively.  As of December 31, 2011, the remaining compensation cost is expected to be recognized over the weighted-average period of approximately 1.5 years.

The Company recorded shared-based compensation expense of $2,921 and a related tax benefit of approximately $1,168 for the year ended December 31, 2011 for the performance-based stock options that will vest upon achieving six, eight and ten percent operating income margins as reported in four of five consecutive quarters. As of December 31, 2011, the unrecognized share-based compensation expense related to these options was approximately $652, which is expected to be recognized over a weighted-average period of approximately 0.5 years.

The following table summarizes information about options outstanding and exercisable at December 31, 2011.

At December 31, 2011, the aggregate intrinsic value of outstanding options to purchase 1,374 shares of common stock, the exercisable options to purchase 772 shares of common stock, and options to purchase 602 shares of common stock expected to vest was $7,757, $4,819 and $2,732, respectively. At December 31, 2010, the aggregate intrinsic value of outstanding options to purchase 859 shares of common stock, the exercisable options to purchase 303 shares of common stock, and options to purchase 218 shares of common stock expected to vest was $855, $377 and $359, respectively.