15. COMPENSATION PLANS

ARLP Partnership

The ARLP Partnership has established the ARLP LTIP for certain employees and officers of MGP and its affiliates who perform services for the ARLP Partnership. The ARLP LTIP awards are grants of non-vested "phantom" or notional units, which upon satisfaction of vesting requirements, entitle the ARLP LTIP participant to receive ARLP common units. Annual grant levels and vesting provisions for designated participants are recommended by the President and Chief Executive Officer of the MGP, subject to review and approval of the MGP Compensation Committee.

On January 25, 2012, the MGP Compensation Committee determined that the vesting requirements for the 2009 grants of 9,125 restricted units (which is net of 500 forfeitures) and the grants issued during the three months ended December 31, 2008 of 135,305 restricted units (net of 5,840 forfeitures) had been satisfied as of January 1, 2012. As a result of this vesting, on February 14, 2012, the ARLP Partnership issued 93,938 unrestricted common units to ARLP LTIP participants. The remaining units were settled in cash to satisfy the tax withholding obligations for the ARLP LTIP participants. On January 23, 2013, the MGP Compensation Committee authorized additional grants of 156,575 restricted units, of which 146,725 were granted.

During the years ended December 31, 2012, 2011, and 2010, the ARLP Partnership issued grants of 107,114 units, 108,416 units and 138,130 units, respectively. Grants issued during the year ended December 31, 2012 vest on January 1, 2015. Grants issued during the year ended December 31, 2011 vest on January 1, 2014. Grants issued during the year ended December 31, 2010 vest on January 1, 2013. Vesting of all grants is subject to the satisfaction of certain financial tests, which management currently believes is probable. As of December 31, 2012, 12,782 of these outstanding ARLP LTIP grants have been forfeited. On January 23, 2013, the MGP Compensation Committee determined that the vesting requirements for the 2010 grants of 130,102 restricted units (which is net of 8,028 forfeitures) had been satisfied as of January 1, 2013. As a result of this vesting, on February 15, 2013, the ARLP Partnership issued 82,400 unrestricted common units to the ARLP LTIP participants. The remaining units were settled in cash to satisfy the individual statutory minimum tax obligations of the ARLP LTIP participants. After consideration of the January 1, 2013 vesting and subsequent issuance of 82,400 common units, 2.2 million units remain available for issuance in the future, assuming that all grants issued in 2011 and 2012 and currently outstanding are settled with common units, without reduction for tax withholding, and no future forfeitures occur.

For the years ended December 31, 2012, 2011 and 2010, ARLP LTIP expense was $6.4 million, $5.3 million and $4.1 million, respectively. The total obligation associated with the ARLP LTIP as of December 31, 2012 and 2011 was $12.1 million and $9.6 million, respectively, and is included in noncontrolling interests in our consolidated balance sheets.

The fair value of the 2012, 2011 and 2010 grants is based upon the intrinsic value at the date of grant, which was $77.71, $66.84 and $39.59 per restricted unit, respectively, on a weighted average basis. The ARLP Partnership expects to settle the non-vested ARLP LTIP grants by delivery of ARLP common units, except for the portion of the grants that will satisfy the minimum statutory tax withholding requirements. As provided under the distribution equivalent rights provision of the ARLP LTIP, all non-vested grants include contingent rights to receive quarterly cash distributions in an amount equal to the cash distribution the ARLP Partnership makes to unitholders during the vesting period.

A summary of non-vested ARLP LTIP grants as of and for the year ended December 31, 2012 is as follows:


Non-vested grants at January 1, 2012	384,218
Granted	107,114
Vested	(144,430	)
Forfeited	(6,024	)

Non-vested grants at December 31, 2012	340,878

As of December 31, 2012, there was $7.8 million in total unrecognized compensation expense related to the non-vested ARLP LTIP grants that are expected to vest. That expense is expected to be recognized over a weighted-average period of 1.5 years. As of December 31, 2012, the intrinsic value of the non-vested ARLP LTIP grants was $19.8 million.

AHGP Partnership

We have also adopted a Long-Term Incentive Plan (the "AHGP LTIP") for employees, directors and consultants of our general partner and its affiliates, including the ARLP Partnership. Grants under the AHGP LTIP are to be made in AHGP restricted units, which are "phantom" units that entitle the grantee to receive either a common unit or equivalent amount of cash upon the vesting of the phantom unit. The aggregate number of common units reserved for issuance under the AHGP LTIP is 5,215,000. There have been no grants under the AHGP LTIP.

SERP and Directors Deferred Compensation Plans

The ARLP Partnership has a SERP to provide deferred compensation benefits for certain officers and key employees. All allocations made to participants under the SERP are made in the form of "phantom" ARLP units. The SERP is administered by the MGP Compensation Committee.

Our directors participate in the AGP Deferred Compensation Plan, and the directors of MGP participate in the MGP Deferred Compensation Plan. Pursuant to the Deferred Compensation Plans, for amounts deferred either automatically or at the election of the director, a notional account is established and credited with notional common units of ARLP or AHGP, as appropriate, which are described in the Deferred Compensation Plans as "phantom" units.

Amounts that were payable under the SERP or Deferred Compensation Plans on or prior to January 1, 2011, were paid in either cash or common units of ARLP or AHGP, as appropriate. Effective for amounts that become payable after January 1, 2011, the Deferred Compensation Plans and the SERP require that vested benefits be paid to participants only in common units of ARLP or AHGP, as appropriate, and therefore the phantom units now qualify for equity award accounting treatment. As a result, we reclassified a total of $9.2 million of obligations for the SERP and the MGP Deferred Compensation Plan from other long-term liabilities to noncontrolling interests in our consolidated balance sheets as required under FASB ASC 718, Compensation—Stock Compensation, on January 1, 2011. In addition, we reclassified $0.7 million of obligations for the AGP Deferred Compensation Plan from due to affiliates to partners' capital-limited partners' in our consolidated balance sheets during the year ended December 31, 2011. For the years ended December 31, 2012 and 2011, SERP and MGP Deferred Compensation Plan participant notional account balances were credited with a total of 13,791 and 13,725 phantom units, respectively, and the fair value of these phantom units was $60.91 and $72.83, respectively, on a weighted-average basis. For the years ended December 31, 2012 and 2011, AGP Deferred Compensation Plan participant notional account balances were credited with a total of 3,867 and 3,756 phantom units, respectively, and the fair value of these phantom units was $46.55 and $48.53, respectively, on a weighted-average basis. Total expense for the SERP and Deferred Compensation Plans was approximately $1.0 million, $1.2 million and $4.3 million for the years ended December 31, 2012, 2011 and 2010, respectively.

As of December 31, 2012, there were 175,241 total phantom units outstanding under the SERP and Deferred Compensation Plans and the total intrinsic value of the SERP and Deferred Compensation Plans phantom units was $10.0 million. As of December 31, 2012, the total obligation associated with the SERP and MGP Deferred Compensation Plan was $10.7 million, which was included in noncontrolling interests' in our consolidated balance sheets. The total obligation associated with the AGP Deferred Compensation Plan was $0.6 million and is included in partners' capital-limited partners' in our consolidated balance sheets. On February 14, 2013, the ARLP Partnership issued 5,705 ARLP common units to MGP directors under the MGP Deferred Compensation Plan.