Stock-Based Compensation

Summary of Plans

As of December 31, 2013, the Company had one active stock-based compensation plan, the Second Amended and Restated Omnibus Incentive Plan (“2003 Plan”), available to grant future awards. There were 2,040,897 shares authorized for grant as of December 31, 2013, and approximately 1,707,674 shares available for grant under the 2003 Plan. The Company’s policy is to issue new shares of common stock for all stock options exercised and restricted stock grants.

The Board of Directors and the stockholders of the Company have approved the adoption and subsequent amendments of the 2003 Plan. The 2003 Plan provides for grants of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents and other stock unit awards to officers and employees. The 2003 Plan also provides for grants of nonqualified stock options to directors of the Company who are not, and who have not been during the immediately preceding 12-month period, officers or employees of the Company or any of its subsidiaries. Restricted stock and restricted stock units (“RSUs”) are granted to certain employees to incent performance and retention. RSUs issued under these plans provide that shares awarded may not be sold or otherwise transferred until restrictions have lapsed. The release of RSUs on each of the vesting dates is contingent upon continued active employment by the employee until the vesting dates.

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company’s Consolidated Statements of Earnings (Loss) for the years ended December 31, 2013 and 2012 and the eleven months ended December 31, 2011 included compensation expense for restricted stock, RSUs and stock-based awards granted subsequent to January 31, 2006 based on the grant date fair value estimated in accordance with the provisions of ASC 718, “Compensation—Stock Compensation” (“ASC 718”). The Company recognizes these compensation costs net of a forfeiture rate for only those awards expected to vest, on a straight-line basis over the requisite service period of the award, which is over periods of 3 years for stock options; 2 to 5 years for employee restricted stock and RSUs; and 1 to 2 years for non-employee restricted stock and RSUs. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Transactions related to restricted stock and RSUs are summarized as follows:



	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (In thousands)
Nonvested restricted stock and RSUs at December 31, 2011	202,656		$	21.10
Granted	76,998		36.18
Vested	(149,472	)	20.47
Forfeited	(7,500	)	25.38
Nonvested restricted stock and RSUs at December 31, 2012	122,682		$	31.06	$	1,908
Granted	60,422		16.08
Vested	(76,883	)	28.75
Forfeited	(5,481	)	23.65
Nonvested restricted stock and RSUs at December 31, 2013	100,740		$	24.25	$	1,096
Total restricted stock and RSUs at December 31, 2013	158,630		$	28.79	$	1,726

Compensation expense related to restricted stock and RSUs for the years ended December 31, 2013 and 2012 and the eleven months ended December 31, 2011 was approximately $1.7 million, $4.6 million and $1.5 million, respectively. The total recognized tax benefit for the years ended December 31, 2013 and 2012 and the eleven months ended December 31, 2011 was approximately $0.6 million, $1.7 million and $0.5 million, respectively. The total intrinsic value of restricted stock and RSUs vested for the years ended December 31, 2013 and 2012 was $0.6 million and $0.8 million, respectively. The weighted average grant date fair value of restricted stock and RSUs granted during the years ended December 31, 2013 and 2012 and the eleven months ended December 31, 2011 was approximately $16, $36 and $24 per share, respectively. The average grant date fair value of restricted stock and RSUs vested for the years ended December 31, 2013 and 2012 and the eleven months ended December 31, 2011 was approximately $29, $20 and $23 per share, respectively.

As of December 31, 2013, there was $0.5 million of unearned compensation expense related to non-vested restricted stock and RSU awards. This cost is expected to be recognized over a weighted average period of 1.0 years. The total unrecognized stock-based compensation cost to be recognized in future periods as of December 31, 2013 does not consider the effect of stock-based awards that may be issued in subsequent periods.

Transactions involving stock options are summarized as follows:



	Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2011	70,100		$	54.88	0.91	—
Options expired	(40,350	)	55.19
Outstanding and exercisable at December 31, 2012	29,750		54.46		0.50	—
Options expired	(27,250	)	53.64
Outstanding and exercisable at December 31, 2013	2,500		$	63.37	0.69	—

At December 31, 2013 and 2012, options to purchase 2,500 and 29,750 shares, respectively, were vested and exercisable.

The aggregate intrinsic value in the table above represents the difference between the Company’s closing stock price on the last trading day for the year ended December 31, 2013 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. Intrinsic value will change in future periods based on the fair market value of the Company’s stock and the number of shares outstanding. There were no grants or exercises in the years ended December 31, 2013 and 2012 and the eleven months ended December 31, 2011.

All per share amounts, including weighted average option exercise prices and weighted average grant date fair value amounts, as well as shares outstanding and all share activity have been adjusted retroactively to reflect the two-for-one stock split that took place on June 15, 2012.

ViSalus, Inc. 2012 Omnibus Incentive Plan

On May 14, 2013, the Board of Directors of ViSalus, Inc. adopted the ViSalus, Inc. 2012 Omnibus Incentive Plan (the “ViSalus

Plan”), which allows the Board of Directors of ViSalus to grant nonqualified stock options, incentive stock options, stock

appreciation rights, restricted stock units, dividend equivalents and performance compensation awards to employees and others

of ViSalus and its affiliates. The objectives of the ViSalus Plan are to attract, retain and provide incentives to employees and

others to promote the long-term success of the business. In May 2013, 7,050,000 shares were authorized for grant under this

plan by the Board of Directors of ViSalus and 348,149 shares were available for grant as of December 31, 2013.

Transactions related to restricted stock and RSUs are summarized as follows:

For the year ended December 31, 2013, 3,401,713 RSUs were issued, 215,850 forfeited and 3,185,863 outstanding. Compensation expense related to RSUs for the year ended December 31, 2013 was $0.6 million. The total recognized tax benefit for the year ended December 31, 2013 was $0.2 million. As of December 31, 2013, there was $2.7 million of unearned compensation expense related to non-vested RSUs. This cost is expected to be recognized over a weighted average period of 5.1 years. RSUs vest over an eight-year period beginning October 1, 2014 through October 1, 2020.

Transactions involving stock options are summarized as follows:

For the year ended December 31, 2013, 3,649,038 stock options were issued, 133,050 forfeited and 3,515,988 outstanding. Compensation expense related to nonqualified stock options for the year ended December 31, 2013 was $49 thousand. The total recognized tax benefit for the year ended December 31, 2013 was $17 thousand. As of December 31, 2013, there was $11 thousand of unearned compensation expense related to non-vested nonqualified stock options awards. This cost is expected to be recognized over a weighted average period of 9.2 years. Nonqualified stock options vest over an eight-year period beginning October 1, 2013 through October 1, 2020.

The fair value of the RSUs and nonqualified stock options were determined using a discounted cash flow methodology. The discounted cash flow methodology used an estimated weighted average cost of capital to discount the estimated future cash flows of ViSalus to its present value.

ViSalus is required to estimate the expected forfeiture rate and only recognizes expense for those shares and options expected

to vest. If the actual forfeiture rate is materially different from the estimate, the share-based compensation expense could be

materially different.

The ViSalus Plan permits its participants to elect to have ViSalus purchase some or all of the shares acquired under the ViSalus

Plan upon the vesting of RSUs or exercise of stock options unless such purchase would materially adversely affect ViSalus or

would violate, or be prohibited by, the terms of any lending arrangements of the Company or ViSalus. These put rights

automatically terminate upon an initial public offering of the common stock of ViSalus. Awards subject to these “put rights”

may be classified as a liability and are subject to fair value measurement in accordance with ASC section 718 on “Stock

Compensation”. Additional expense (or expense reduction) may be recorded in future periods for increases (or decreases) in the

fair value of these awards. The fair value of these awards is based on ViSalus's future operating performance and may change

significantly if ViSalus's sales forecasts and operating profits exceed or fall short of projections.