13. Stock-Based Compensation

Stock Plans

The Loral amended and restated 2005 stock incentive plan (the “Stock Incentive Plan”) allows for the grant of several forms of stock-based compensation awards including stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses and other stock-based awards (collectively, the “Awards”). The total number of shares of voting common stock reserved and available for issuance under the Stock Incentive Plan is 1,555,618 shares of which 1,296,405 were available for future grant at December 31, 2012. This number of shares of voting common stock available for issuance would be reduced if restricted stock units or SS/L phantom stock appreciation rights are settled in voting common stock. In addition, shares of common stock that are issuable under awards that expire, are forfeited or canceled, or withheld in payment of the exercise price or taxes relating to an Award, will again be available for Awards under the Stock Incentive Plan. Options issued under the Stock Incentive Plan generally have an exercise price equal to the fair market value of our stock, as defined, vest over a four-year period and have a five to seven year life. The Awards provide for accelerated vesting if there is a change in control, as defined in the Stock Incentive Plan.

A summary of the Company’s stock option activity for the year ended December 31, 2012 is presented below:


					Weighted
			Weighted		Average		Aggregate
			Average		Remaining		Intrinsic
			Exercise		Contractual		Value
	Shares		Price		Term		(In thousands)
Outstanding at January 1, 2012		339,000	$	30.86		1.5 years	$	$ 11,533
Adjustments to options outstanding		22,000	$	—
Exercised		(361,000)	$	28.94
Forfeited		—	$	—
Outstanding at December 31, 2012		—	$	—		—	$	—
Vested and expected to vest at December 31, 2012		—	$	—		—	$	—
Exercisable at December 31, 2012		—	$	—		—	$	—

Adjustments to options outstanding in 2012 reflect equitable adjustments for dividends and distributions paid during the year (see Note 12).

A summary of the Company’s non-vested restricted stock activity for the year ended December 31, 2012 is presented below:


			Weighted Average
			Grant- Date
	Shares		Fair Value
Non-vested restricted stock at January 1, 2012		4,000	$	33.58
Granted		—	$	—
Vested		(4,000)	$	33.58
Forfeited		—	$	—
Non-vested restricted stock at December 31, 2012		—	$	—

Mr. Targoff was awarded 85,000 RSUs (the “Initial Grant”) on March 5, 2009 (the “Grant Date”). In addition, the Company agreed to issue Mr. Targoff 50,000 RSUs on the first anniversary of the Grant Date and 40,000 RSUs on the second anniversary of the Grant Date (the “Subsequent Grants”). Vesting of the Initial Grant requires the satisfaction of two conditions: a time-based vesting condition and a stock price vesting condition. Vesting of the Subsequent Grants is subject only to the stock-price vesting condition. The time-based vesting condition for the Initial Grant was satisfied upon Mr. Targoff’s continued employment through March 5, 2010, the first anniversary of the Grant Date. The stock price vesting condition, which applies to both the Initial Grant and the Subsequent Grants, has been satisfied. As a result of the termination of Mr. Targoff’s employment in December 2012, both the Initial Grant and the Subsequent Grants will be settled in June 2013, in accordance with Internal Revenue Code Section 409A.

A summary of the Company’s non-vested RSU activity for the year ended December 31, 2012 is presented below:


			Weighted
			Average
			Grant- Date
	Shares		Fair Value
Non-vested RSUs at January 1, 2012		24,600	$	52.11
Granted and adjustments		21,181	$	58.78
Vested		(15,100)	$	46.26
Forfeited		(3,000)	$	—
Non-vested RSUs at December 31, 2012		27,681	$	38.53

RSU’s granted and adjustments in 2012 include 10,124 RSUs as a result of equitable adjustments for dividends and distributions paid during the year.

In June 2009, the Company introduced a performance based long-term incentive compensation program consisting of SS/L phantom stock appreciation rights (“SS/L Phantom SARs”). Because SS/L common stock is not freely tradable on the open market and thus does not have a readily ascertainable market value, SS/L equity value under the program is derived from an Adjusted EBITDA-based formula. Each SS/L Phantom SAR provides the recipient with the right to receive an amount equal to the increase in SS/L’s notional stock price over the base price multiplied by the number of SS/L Phantom SARs vested on the applicable vesting date, subject to adjustment. SS/L Phantom SARs are settled and the SAR value (if any) is paid out on each vesting date. SS/L Phantom SARs may be settled in Loral voting common stock (based on the fair value of Loral voting common stock on the date of settlement) or cash at the option of the Company. SS/L Phantom SARs expire on June 30, 2016.

The liability for SS/L Phantom SARs granted to SS/L employees was retained by SS/L in connection with the Sale and the liability for SS/L Phantom SARs granted to Loral employees was retained by Loral. For the liability retained by Loral, the SS/L notional stock price was frozen as of December 31, 2011 in connection with the Sale.

A summary of SS/L Phantom SARs granted to Loral employees along with their vesting schedule is presented below. The fair value of the SS/L Phantom SARs in included as a liability in our consolidated balance sheet.


		Vesting Date – March 18,
Grant Date	SARs granted	2010	2011	2012	2013	2014
June-2009	225,000	50%	25%	25%	―	―
May-2010	140,000	―	25%	25%	25%	25%

A summary of the Company’s non-vested SS/L Phantom SAR activity for the year ended December 31, 2012 is presented below:


			Weighted
			Average
			Grant- Date
	Shares		Fair Value
Non-vested SS/L Phantom SARs at January 1, 2012		275,000	$	4.78
Granted		—	$	—
Vested		(193,750)	$	5.50
Forfeited (includes reduction in shares resulting from Sale)		(11,250)	$	8.73
Non-vested SS/L Phantom SARs at December 31, 2012		70,000	$	2.13

During fiscal years 2012, 2011 and 2010, the following activity occurred under the Stock Incentive Plan (in thousands):



	Year Ended December 31,
	2012		2011		2010
Total intrinsic value of options exercised	$	17,472	$	39,018	$	16,889
Total fair value of restricted stock vested	$	287	$	155	$	1,493
Total fair value of restricted stock units vested	$	1,403	$	3,969	$	12,687

Stock-based compensation expense consists of the following:



	Year Ended December 31,
	2012		2011		2010
Total stock compensation	$	2,036	$	3,969	$	10,023
Stock-based compensation included in income from discontinued operations		240		1,424		5,212
Stock-based compensation included in income from continuing operations	$	1,796	$	2,545	$	4,811

Included in total stock-based compensation expense is stock-based compensation paid in cash of $4.7 million, $4.4 million and $3.8 million for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012, total unrecognized compensation costs related to non-vested awards were $0.5 million and are expected to be recognized over a weighted average remaining period of six months.