Share-Based Compensation

Employee Share-Based Compensation Plans - On May 29, 2008, the Company's shareholders approved the 2008 Omnibus Employee Incentive Plan (the “2008 Plan”) providing for the grant of stock options, stock appreciation rights, non-vested stock and performance shares. The 2008 Plan provides for the issuance of an aggregate of 5,000,000 shares. For the three months ended March 31, 2014, the Company granted 162,600 options to purchase shares under the 2008 Plan. For the three months ended March 31, 2013, there were no options for the purchase of shares granted under the 2008 Plan. As of March 31, 2014, approximately 3,209,300 shares remain available for grant under the 2008 Plan.

On May 24, 2011, the Company's shareholders approved the 2011 Omnibus Employee Incentive Plan (the "2011 Plan") providing for the grant of stock options and non-vested stock awards. On May 29, 2013, the Company's shareholders approved an amendment and restatement of the 2011 Plan which increased the number of shares of the Company's common stock available for issuance from 1,500,000 shares to 3,500,000 shares (subject to adjustment as provided in the Amended and Restated Omnibus Plan). During the three months ended March 31, 2014, the Company granted 300,000 options to purchase shares under the 2011 Plan. There were no options for the purchase of shares granted under the 2011 Plan during the three month periods ended March 31, 2013. As of March 31, 2014, approximately 1,166,750 shares remain available for grant under the 2011 Plan as amended.

Options awarded under the 2008 and 2011 Plans (as amended) are granted at fair value on the date of grant, are exercisable in accordance with a vesting schedule specified in the grant agreement, and have contractual lives of 10 years from the date of grant. Options to purchase an aggregate of 500,000 shares of the Company's stock granted to certain executives of the Company in December 2010 vested 50% on each of the first and second anniversaries of the grant. Options to purchase an aggregate of 1,344,100 shares of the Company's stock granted to certain employees of the Company vest one-third on each of the first, second and third anniversaries of the grant. Options to purchase 2,000,000 shares of the Company's stock granted to the Chief Executive Officer of the Company in September 2013, vest 25% upon receipt of the grant and 25% on the first, second and third anniversary of the grant. Other options granted by the Company vest 25% on each of the second through fifth anniversaries of the grant.

The fair value of the stock options granted during the three month period ended March 31, 2014 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:



	Three Months Ended March 31,
	2014
Expected life (years)	5.24
Expected volatility	85.0%
Expected dividend yield	—%
Risk-free interest rate	1.8%
Weighted average fair value of options granted during the period	$0.38

The following table summarizes stock option activity for the three month period ended March 31, 2014:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding balance at December 31, 2013	4,150,550		$	0.75
Granted	462,600		0.56
Exercised	(37,500	)	0.45
Expired	(505,550	)	1.20
Forfeited	(83,500	)	0.57
Outstanding balance at March 31, 2014	3,986,600		0.68		8.5	$222
Options exercisable at March 31, 2014	1,388,700		$	0.99	6.8	$51

The aggregate intrinsic value disclosed in the table above represents the difference between the Company's closing stock price on the last trading day of the quarter ended March 31, 2014 and the exercise price, multiplied by the number of in-the-money stock options.

During the three ended March 31, 2014, an aggregate of 37,500 stock options valued with a weighted average exercise price of $0.45 were exercised. No stock options were exercised during the three months ended March 31, 2013. Options for the purchase of an aggregate of 24,400 shares of common stock vested during the three month period ended March 31, 2014, and the aggregate fair value at grant date of these options was $0.01 million. As of March 31, 2014, there was approximately $0.7 million of total unrecognized compensation cost related to stock options. The cost is expected to be recognized over a weighted average period of 2.0 years.

In July 2009, an aggregate of 500,000 shares of non-vested stock were granted under the 2008 Plan. The fair value of these non-vested stock awards were based on the grant date fair value of $0.45 per share. The shares vest as follows: 25% after two years and 25% on each of the next three anniversary dates thereafter. As of March 31, 2014, an aggregate of 343,750 shares of such non-vested stock were forfeited and 150,000 were vested. In July 2011, an aggregate of 305,000 shares of non-vested stock were granted under the 2008 Plan. The fair value of these non-vested stock awards were based on the grant date fair value of $1.06 per share. As of March 31, 2014, an aggregate of 141,400 shares of such non-vested stock were forfeited and 155,100 were vested. The shares vest as follows: 33% on each of the first and second anniversary dates and 34% on the third anniversary. As of March 31, 2014, there was approximately $0.03 million of total unrecognized compensation cost related to non-vested stock awards. The cost is expected to be recognized over a weighted average period of 0.6 years.

Employee Stock Purchase Plan - The Company's 2004 Employee Stock Purchase Plan (the "2004 Plan") provides for the granting of purchase rights for up to 2,000,000 shares of the Company's stock to eligible employees of the Company. The 2004 Plan provides employees with the opportunity to purchase shares on the date thirteen months from the grant date (“the purchase date”) at a purchase price equal to 95% of the closing price of the Company’s common stock on the NYSE MKT on the grant date. During the period between the grant date and the purchase date, up to 10% of a participating employee's compensation, not to exceed $0.025 million, is withheld to fund the purchase of shares. Employees can cancel their purchases at any time during the period without penalty. In February 2013, under the 2004 Plan, purchase rights for approximately 233,000 shares were granted with an aggregate fair value of $0.03 million, based on the Black-Scholes option pricing model. The February 2013 offering period concluded in March 2014 and, in accordance with the 2004 Plan's automatic termination provision, there will be 36,154 shares issued. In February 2012, under the 2004 Plan, purchase rights for approximately 273,000 shares were granted with an aggregate grant date fair value of $0.05 million, based on the Black-Scholes pricing model. This offering period concluded in March 2013 and, in accordance with the 2004 Plan's automatic termination provision, no shares were issued. Unless terminated earlier by the Board of Directors, the 2014 Plan will terminate December 31, 2024.

Other Stock Awards - On May 30, 2007, the Company's shareholders approved the Hooper Holmes, Inc. 2007 Non-Employee Director Restricted Stock Plan (the “2007 Plan”), which provides for the automatic grant, on an annual basis for 10 years, of shares of the Company's stock to the Company's non-employee directors. The total number of shares that may be awarded under the 2007 Plan is 600,000. As of March 31, 2014, there remain available for grant approximately 360,000 shares under the 2007 Plan. Each non-employee member of the Board of Directors other than the non-executive chair receives 5,000 shares annually and the non-executive chair receives 10,000 shares annually of the Company's stock, with such shares vesting immediately upon issuance. The Company believes that the shares awarded under the 2007 Plan are “restricted securities”, as defined in SEC Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). The Company filed a Registration Statement on Form S-8 with respect to the 2007 Plan on April 16, 2008. The directors who receive shares under the 2007 Plan are "affiliates" as defined in Rule 144 under the Securities Act and thus remain subject to the applicable provisions of Rule 144. In addition, the terms of the awards (whether or not restricted) specify that the shares may not be sold or transferred by the recipient until the director ceases to serve on the Board or, if at that time the director has not served on the Board for at least four years, on the fourth anniversary of the date the director first became a Board member. During the three months ended March 31, 2014 and 2013, no shares were awarded under the 2007 Plan.

The Company recorded $0.1 million and $0.2 million of share-based compensation expense in selling, general and administrative expenses for the three month periods ended March 31, 2014 and 2013.