11. 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 1,742,879 shares of which 1,158,879 were available for future grant at December 31, 2011. 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.

In June 2009, Michael B. Targoff, Chief Executive Officer of Loral, was awarded an option to purchase 125,000 shares of voting common stock with an exercise price of $35 per share (the "June 2009 CEO Grant"). The option was vested with respect to 25% of the underlying shares upon grant, with the remainder of the option subject to vesting as to 25% of the underlying shares on each of the first three anniversaries of the grant date. The option expires on June 30, 2014.

The fair value of the June 2009 CEO Grant was estimated using the Hull-White I barrier lattice model based on the assumptions below. There were no stock options granted in 2011 or 2010.

		September 30,
	Year Ended December 31,
	2009
Risk — free interest rate		2.72	%
Expected life (years)		4.67
Estimated volatility		64.77	%
Expected dividends		None
Weighted average grant date fair value	$	11.39

A summary of the Company's stock option activity for the year ended December 31, 2011 is presented below:

		September 30,			September 30,		September 30,		September 30,
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2011		1,134,915		$	28.46		1.3 years	$	54,524

Granted		—		$	—
Exercised		(795,915	)	$	27.43
Forfeited		—		$	—

Outstanding at December 31, 2011		339,000		$	30.86		1.5 years	$	11,533

Vested and expected to vest at December 31, 2011		339,000		$	30.86		1.5 years	$	11,533

Exercisable at December 31, 2011		307,750		$	30.44		1.4 years	$	10,599

A summary of the Company's non-vested restricted stock activity for the year ended December 31, 2011 is presented below:

		September 30,			September 30,
	Shares			Weighted Average Grant- Date Fair Value
Non-vested restricted stock at January 1, 2011		6,000		$	33.58
Granted		—		$	—
Vested		(2,000	)	$	33.58
Forfeited		—		$	—

Non-vested restricted stock at December 31, 2011		4,000		$	33.58

On March 5, 2009, the Compensation Committee approved awards of restricted stock units (the "RSUs") for certain executives of the Company. Each RSU has a value equal to one share of voting common stock and generally provides the recipient with the right to receive one share of voting common stock or cash equal to the value of one share of voting common stock, at the option of the Company, on the settlement date.

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. Both the Initial Grant and the Subsequent Grants will be settled on March 31, 2013 or earlier under certain circumstances.

The fair value of the RSUs awarded in 2009 that vest upon achievement of a market condition and a time-based vesting condition was estimated using Monte Carlo simulation. Ex-dividend prices were simulated and those prices were used to determine when the price hurdle target will be achieved, if ever. The following assumptions were used to derive the fair value of such RSUs and the period over which the price hurdle target would be achieved:

		September 30,
	Year Ended December 31,
	2009
Risk — free interest rate		1.581	%
Estimated volatility		59.83	%
Expected dividends		None
Weighted average grant date fair value	$	8.51

C. Patrick DeWitt, formerly Senior Vice President of Loral and Chief Executive Officer of SS/L and currently Chairman of the Board of SS/L, was awarded 25,000 RSUs on March 5, 2009, of which 66.67% vested on March 5, 2010, with the remainder vesting ratably on a quarterly basis over the subsequent two years. All of Mr. DeWitt's RSUs will be settled on March 12, 2012 or earlier under certain circumstances. The fair value of these RSUs is based upon the market price of Loral voting common stock as of the grant date. The weighted average grant date fair value of the award was $12.41.

A summary of the Company's non-vested RSU activity for the year ended December 31, 2011 is presented below:

		September 30,			September 30,
	Shares			Weighted Average Grant- Date Fair Value
Non-vested RSUs at January 1, 2011		70,811		$	18.25
Granted		15,000		$	64.11
Vested		(61,211	)	$	15.88
Forfeited		—		$	—

Non-vested RSUs at December 31, 2011		24,600		$	52.11

In April 2009, other SS/L employees were granted 66,259 shares of Loral voting common stock, which were fully vested as of the grant date. The grant date fair value of the award is based on Loral's average stock price of $24.01 at the date of grant.

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.

A summary of SS/L Phantom SARs granted 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.

		September 30,		September 30,			September 30,			September 30,			September 30,			September 30,
			Vesting Date – March 18,
Grant Date	SARs granted		2010			2011			2012			2013			2014
June-2009		225,000		50	%		25	%		25	%		—			—
Oct-2009		217,500		50	%		25	%		25	%		—			—
Oct-2009		65,000		25	%		25	%		25	%		25	%		—
Dec-2009		32,500		50	%		25	%		25	%		—			—
May-2010		175,000		—			25	%		25	%		25	%		25	%

A summary of the Company's non-vested SS/L Phantom SAR activity for the year ended December 31, 2011 is presented below:

		September 30,			September 30,
	Shares			Weighted Average Grant- Date Fair Value
Non-vested SS/L Phantom SARs at January 1, 2011		461,250		$	5.17
Granted		—			—
Vested		(178,750	)		5.60
Forfeited		(7,500	)		9.08

Non-vested SS/L Phantom SARs at December 31, 2011		275,000		$	4.78

During fiscal years 2011, 2010 and 2009, the following activity occurred under the Stock Incentive Plan (in thousands):

		September 30,		September 30,		September 30,
	Year Ended December 31,
	2011		2010		2009
Total intrinsic value of options exercised	$	39,018	$	16,889	$	1,578
Total fair value of restricted stock vested	$	155	$	1,493	$	1,395
Total fair value of stock awards vested	$	—	$	—	$	1,591
Total fair value of restricted stock units vested	$	3,969	$	12,687	$	—

We recorded total stock compensation expense of $4.0 million (of which $2.8 million was or is expected to be paid in cash), $10.0 million (of which $7.5 million was paid in cash) and $9.6 million (of which $2.1 million was paid in cash) for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, total unrecognized compensation costs related to non-vested awards were $2.2 million and are expected to be recognized over a weighted average remaining period of 1.2 years.