Stock-Based Compensation

Blyth, Inc. Amended and Restated 2003 Omnibus Incentive Plan

As of June 30, 2014, 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 June 30, 2014, and approximately 1,574,085 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 three and six months ended June 30, 2014 and 2013 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, 2013	100,740		$	24.25	$	1,096
Granted	133,949		9.56
Vested	(61,777	)	27.20
Forfeited	(721	)	33.11
Nonvested restricted stock and RSUs at June 30, 2014	172,191		$	11.73	$	1,405
Total restricted stock and RSUs at June 30, 2014	240,313		$	18.23	$	1,961

Compensation expense related to restricted stock and RSUs for the three months ended June 30, 2014 and 2013 was approximately $0.3 million and $0.4 million, respectively. The total recognized tax benefit for the three months ended June 30, 2014 and 2013 was approximately $0.1 million and $0.2 million, respectively. Compensation expense related to restricted stock and RSUs for the six months ended June 30, 2014 and 2013 was approximately $0.7 million and $1.1 million, respectively. The total recognized tax benefit for the six months ended June 30, 2014 and 2013 was approximately 0.3 million and 0.4 million, respectively.

As of June 30, 2014, there was $1.0 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 2.1 years. The total unrecognized stock-based compensation cost to be recognized in future periods as of June 30, 2014 does not consider the effect of stock-based awards that may be issued in subsequent periods.

Transactions involving stock options are summarized as follows:

For the six months ended June 30, 2014, 2,500 stock options were outstanding with a weighted average exercise price of $63.37. The weighted average remaining contractual life is 0.19 years.

Authorized unissued shares may be used under the stock-based compensation plans. The Company intends to issue shares of its common stock to meet the stock requirements of its awards in the future.

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 of common stock of ViSalus were authorized for grant under this plan by the Board of Directors of ViSalus and 36,249 shares of common stock of ViSalus were available for grant as of June 30, 2014.

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



	Shares
Outstanding and exercisable at December 31, 2013	3,185,863
Forfeited	(32,000	)
Outstanding and exercisable at June 30, 2014	3,153,863

Compensation expense related to RSUs for the three months ended June 30, 2014 and 2013 was a benefit of $0.2 million and and expense of $0.6 million, respectively. The total recognized tax expense for the three months ended June 30, 2014 and 2013 was $0.1 million and a benefit of $0.2 million, respectively. Compensation expense related to RSUs for the six months ended June 30, 2014 and 2013 was $29 thousand and $0.6 million, respectively. The total recognized tax benefit for the six months ended June 30, 2014 and 2013 was $10 thousand and $0.2 million, respectively. As of June 30, 2014, there was $1.3 million of unearned compensation expense related to non-vested RSUs. This cost is expected to be recognized over a weighted average period of 4.8 years. RSUs vest beginning October 1, 2014 through October 1, 2020.

Transactions involving stock options are summarized as follows:



	Shares
Options outstanding at December 31, 2013	3,515,988
Granted	358,000
Forfeited	(14,100	)
Options outstanding at June 30, 2014	3,859,888

Compensation expense related to nonqualified stock options for the three months ended June 30, 2014 and 2013 was a benefit of $25 thousand and and expense of $0.5 million, respectively. The total recognized tax expense for the three months ended June 30, 2014 and 2013 was $9 thousand and a benefit of $0.2 million, respectively. Compensation expense related to nonqualified stock options for the six months ended June 30, 2014 and 2013 was $6 thousand and $0.5 million, respectively. The total recognized tax benefit for the six months ended June 30, 2014 and 2013 was $2 thousand and $0.2 million, respectively. As of June 30, 2014, there was $0.1 million 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 4.8 years. Nonqualified stock options vest beginning October 1, 2013 through October 1, 2020.

The fair value of the RSUs and nonqualified stock options was determined using a combination of a discounted cash flow methodology and a valuation approach using similar publicly traded companies. 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. The publicly traded company methodology used various market multiples with consideration for comparable operating revenues and earnings.

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.

ViSalus Salary Deferral Program

In February 2014, ViSalus offered its senior executives, founders and independent board member the right to participate in a long-term incentive program, which we refer to as the 2014 ViSalus LTIP, in exchange for their agreement to defer the receipt of a portion of their 2014 salary or commissions until no later than March 15, 2015. The award under the 2014 ViSalus LTIP is a performance award payable in cash and the amount of the LTIP award depends on the amount deferred. For those participants who elected to defer under 50% of their base salary or commissions, the LTIP award will equal the amount deferred, and for those participants who elected to defer 50% or more of their base salary or commissions, the LTIP award will equal two times the amount deferred. The LTIP award will only be paid if ViSalus achieves trailing twelve month earnings before interest and taxes of $20.0 million or more, inclusive of the entire compensation award associated with the program, and the participant is associated with ViSalus through the LTIP payment date. As of June 30, 2014 there were 18 participants in the 2014 ViSalus LTIP who have deferred salaries and commissions totaling approximately $2.2 million until no later than March 15, 2015. The maximum amount payable by ViSalus under the 2014 ViSalus LTIP is $4.2 million if ViSalus achieves the performance goal and all participants are associated with ViSalus at the LTIP payment date. As of June 30, 2014, no amounts for the LTIP award have been accrued for under this program as the probability of whether these targets will be achieved remains uncertain.