Share-Based Compensation

Employee Stock-Based Compensation Plan — 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. During the three years ended December 31, 2014, options for the purchase of 359,700, 325,000 and 900,000 shares were granted under the 2008 Plan. During the year ended December 31, 2014, no shares of restricted stock were granted. During the year ended December 31, 2013, 205,532 shares of restricted stock were granted, which vest immediately but cannot be sold for one year from date of grant, to the Company's Chief Executive Officer as settlement for a discretionary bonus of $0.1 million. As of December 31, 2014, approximately 3,493,200 shares remain available for grant under the 2008 Plan.

On May 24, 2011, the Company's shareholders approved the 2011 Omnibus Employee Incentive Plan (as subsequently amended and restated, the "2011 Plan") providing for the grant of stock options and non-vested stock awards. The 2011 Plan provides for the issuance of an aggregate of 3,500,000 shares. On June 11, 2014, the Company's shareholders approved an amendment and restatement of the 2011 Plan to rename the 2011 Plan as the Hooper Holmes, Inc. 2011 Omnibus Incentive Plan and also to include non-employee directors and consultants as eligible participants. The 2011 Plan is to remain in effect until the earlier of (i) the 10th anniversary of the plan's original effective date of May 24, 2011, or (ii) the date all shares of stock available for issuance have been issued. During the year ended December 31, 2014, the Company granted a total of 400,000 stock awards to non-employee members of the Board of Directors that immediately vested. During the three years ended December 31, 2014, 2013 and 2012, options for the purchase of 300,000, 2,000,000 and 1,225,000 shares, respectively, were granted under the 2011 Plan. As of December 31, 2014, the Company is authorized to grant share-based awards of approximately 1,217,000 shares under the 2011 Plan.

Options under the 2008 and 2011 Plans 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 100,000 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 1,066,600 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 anniversaries of the grant. All other options granted by the Company vest 25% on each of the second through fifth anniversaries of the grant.

The fair value of each stock option granted during the year was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:



	2014		2013		2012
Expected life (years)	5.3		5.4		5.5
Expected volatility	82.9	%	89.6	%	92.4	%
Expected dividend yield	—		—		—
Risk-free interest rate	1.8	%	1.5	%	0.7	%
Weighted average fair value of options granted during the year	$0.39		$0.34		$0.47

The expected life of options granted is derived from the Company’s historical experience and represents the period of time that options granted are expected to be outstanding. Expected volatility is based on the Company’s historical volatility. The risk-free interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of the grant.

The following table summarizes stock option activity for the year ended December 31, 2014:



				Weighted
			Weighted Average	Average Remaining	Aggregate Intrinsic
	Number of Shares		Exercise Price Per Share	Contractual Life (years)	Value (in thousands)
Outstanding at December 31, 2013	4,150,550		$0.75
Granted	659,700		$0.58
Exercised	(57,300	)	0.52
Expired	(615,300	)	$1.19
Forfeited	(485,450	)	$0.53
Outstanding at December 31, 2014	3,652,200		$0.67	7.8	$117
Exercisable at December 31, 2014	2,005,350		$0.80	7.1	$58

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 2014 (December 31, 2014) and the exercise price, multiplied by the number of in-the-money stock options for each category.

For the year ended December 31, 2014, 57,300 stock options valued with a weighted average exercise price of $0.52 were exercised under the 2008 Plan. No stock options were exercised during the year end December 31, 2014 under the 2011 Plan. For the year ended December 31, 2013, 173,050 and 9,880 stock options valued with a weighted average exercise price of $0.38 and $0.65, respectively, were exercised under the 2008 Plan and 2011 Plan, respectively. No stock options were exercised during the year ended December 31, 2012.

Options for the purchase of 770,600, 1,498,850 and 1,176,150 shares of common stock vested during the years ended December 31, 2014, 2013 and 2012, respectively, and the aggregate fair value at grant date of these options was $0.3 million, $0.7 million and $0.7 million, respectively. As of December 31, 2014, there was approximately $0.4 million of unrecognized compensation cost related to stock options which is expected to be recognized over a weighted average period of 1.8 years.

The Company’s initial accruals for share-based compensation expense are based on the estimated number of instruments for which the requisite service is expected to be rendered. Therefore, the Company is required to incorporate the probability of pre-vesting forfeitures in determining the number of options and restricted stock that are estimated to vest. The forfeiture rate is based on historical forfeiture experience. The Company monitors employee termination patterns to estimate forfeiture rates.

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. Under the 2004 Plan, purchase rights for approximately 233,000 shares were granted in the February 2013 offering period 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 were 36,154 shares issued. The February 2012 offering period concluded in March 2013 and, in accordance with the 2004 Plan's automatic termination provision, no shares were issued. The February 2011 offering period concluded in March 2012 and in accordance with the 2004 Plan's automatic termination provision, no shares were issued. The Company is no longer granting purchase rights under the 2004 Plan.

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. There were no shares awarded under the 2007 Plan for the year ended December 31, 2014. For the years ended December 31, 2013 and 2012, shares awarded under the 2007 Plan totaled 30,000 each year. The fair value of these stock awards was based on the grant date market value and totaled $0.02 million each year.

The Company recorded $0.5 million, $0.6 million and $0.7 million of share-based compensation expense in selling, general and administrative expenses for each of the years ended December 31, 2014, 2013 and 2012, respectively, related to stock options, non-vested stock, restricted stock awards and the 2004 Plan. In connection with the resignation of former executive officers, the Company reclassified previously recorded share-based compensation expense totaling $0.2 million during the year ended December 31, 2013. The reclassifications were recorded in restructuring charges (See Note 6). There were no reclassifications during 2014 or 2012.