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 and nine month periods ended September 30, 2014, the Company granted 6,000 and 349,700 options to purchase shares under the 2008 Plan. For the three and nine month periods ended September 30, 2013, there were 325,000 options for the purchase of shares granted under the 2008 Plan. As of September 30, 2014, approximately 3,183,200 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. There were no options for the purchase of shares granted under the 2011 Plan during the three month period ended September 30, 2014. During the nine month period ended September 30, 2014, the Company granted 300,000 options to purchase shares under the 2011 Plan. During the nine month period ended September 30, 2014, the Company also granted a total of 400,000 stock awards to non-employee members of the Board of Directors that immediately vested. There were 2,000,000 options for the purchase of shares or stock awards granted under the 2011 Plan during the three and nine month periods ended September 30, 2013. As of September 30, 2014, approximately 1,217,000 shares remain available for grant under the 2011 Plan.

Options awarded under the 2008 Plan and 2011 Plan 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 100,000 shares of the Company's stock are outstanding, which were granted to certain executives of the Company in December 2010 and which vested 50% on each of the first and second anniversaries of the grant. Options to purchase an aggregate of 1,206,600 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 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 and nine month periods ended September 30, 2014 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:



	Three Months Ended September 30,	Nine Months Ended September 30,
	2014	2014
Expected life (years)	6.01	5.25
Expected volatility	87.6%	83.2%
Expected dividend yield	—%	—%
Risk-free interest rate	1.8%	1.8%
Weighted average fair value of options granted during the period	$0.51	$0.39

The following table summarizes stock option activity for the nine month period ended September 30, 2014:



	Number of Options		Weighted Average Exercise Price Per Option		Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding balance at December 31, 2013	4,150,550		$	0.75
Granted	649,700		0.58
Exercised	(57,300	)	0.51
Expired	(582,800	)	1.19
Forfeited	(185,450	)	0.37
Outstanding balance at September 30, 2014	3,974,700		0.68		8.13	$353
Options exercisable at September 30, 2014	2,037,850		$	0.82	7.25	$162

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 September 30, 2014 and the exercise price, multiplied by the number of in-the-money stock options.

During the three and nine month periods ended September 30, 2014, an aggregate of 3,300 and 57,300 stock options valued with a weighted average exercise price of $0.65 and $0.51, respectively, were exercised. Options for the purchase of an aggregate of 746,200 shares of common stock vested during the nine month period ended September 30, 2014, and the aggregate fair value at grant date of these options was $0.3 million. As of September 30, 2014, there was approximately $0.6 million of total unrecognized compensation cost related to stock options. The cost is expected to be recognized over a weighted average period of 2.1 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. 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 Company is no longer granting purchase rights under the 2004 Plan.

The Company recorded $0.1 million and $0.5 million, respectively, of share-based compensation expense in selling, general and administrative expenses for the three and nine month periods ended September 30, 2014. The Company recorded $0.4 million and $0.6 million, respectively, of share-based compensation expense in selling, general and administrative expenses for the three and nine month periods ended September 30, 2013. In connection with the resignation of its former Chief Executive Officer and other former members of management which resulted in the forfeiture of certain share-based awards, the Company reversed previously recorded share-based compensation expense of $0.2 million during the nine month period ended September 30, 2013.