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 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 22, 2016, the MGP Compensation Committee determined that the vesting requirements for the 2013 grants of 284,272 restricted units (which was net of 9,178 forfeitures) had been satisfied as of January 1, 2016. As a result of this vesting, on February 11, 2016, the ARLP Partnership issued 176,319 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. On January 26, 2015, the MGP Compensation Committee determined that the vesting requirements for the 2012 grants of 202,778 restricted units (which was net of 11,450 forfeitures) had been satisfied as of January 1, 2015. As a result of this vesting, on February 11, 2015, the ARLP Partnership issued 128,150 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.

On January 22, 2016, the MGP Compensation Committee authorized additional grants of 969,028 restricted units, of which 959,028 units were granted. During the years ended December 31, 2015 and 2014, the ARLP Partnership issued grants of 303,165 units and 356,154 units, respectively. Grants issued during the year ended December 31, 2015 vest on January 1, 2018. Grants issued during the year ended December 31, 2014 vest on January 1, 2017. Vesting of all grants is subject to the satisfaction of certain financial tests, which management currently believes is probable. As of December 31, 2015, 12,976 of these outstanding ARLP LTIP grants have been forfeited. After consideration of the January 1, 2016 vesting and subsequent issuance of 176,319 common units, 3.8 million units remain available for issuance in the future, assuming that all grants issued in 2015 and 2014 and currently outstanding are settled with common units, without reduction for tax withholding, and no future forfeitures occur.

For the years ended December 31, 2015, 2014 and 2013, ARLP LTIP expense was $11.2 million, $9.6 million and $7.4 million, respectively. The total obligation associated with the ARLP LTIP as of December 31, 2015 and 2014 was $21.4 million and $17.9 million, respectively, and is included in noncontrolling interests in our consolidated balance sheets.

The fair value of the 2015, 2014 and 2013 grants is based upon the intrinsic value at the date of grant, which was $37.18, $40.72 and $31.51 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 and the terms of the ARLP LTIP awards, all non-vested grants include contingent rights to receive quarterly cash distributions in an amount or, in the case of the 2016 grants, in the discretion of the MGP Compensation Committee, phantom units credited to a bookkeeping account with value, 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, 2015 is as follows:

Non-vested grants at January 1, 2015		843,340
Granted		303,165
Vested		(202,778)
Forfeited		(3,934)

Non-vested grants at December 31, 2015		939,793

As of December 31, 2015, there was $12.1 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, 2015, the intrinsic value of the non-vested ARLP LTIP grants was $12.7 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 as of December 31, 2015.

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.

For both the SERP and Deferred Compensation Plans, when quarterly cash distributions are made with respect to ARLP or AHGP common units, an amount equal to such quarterly distribution is credited to each participant’s notional account as additional phantom units. All grants of phantom units under the SERP and Deferred Compensation Plans vest immediately.

For the years ended December 31, 2015 and 2014, SERP and MGP Deferred Compensation Plan participant notional account balances were credited with a total of 60,160 and 27,577 phantom units, respectively, and the fair value of these phantom units was $21.38 and $44.56, respectively, on a weighted-average basis. For the years ended December 31, 2015 and 2014, AGP Deferred Compensation Plan participant notional account balances were credited with a total of 5,478 and 4,868 phantom units, respectively, and the fair value of these phantom units was $40.87 and $63.73, respectively, on a weighted-average basis. Total SERP and Deferred Compensation Plans expense was approximately $1.5 million for the years ended December 31, 2015, 2004 and 2013.

As of December 31, 2015, there were 450,828 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 $6.2 million. As of December 31, 2015 and 2014, the total obligation associated with the SERP and MGP Deferred Compensation Plan was $13.8 million and $12.6 million, respectively, which was included in noncontrolling interests’ in our consolidated balance sheets. The total obligation associated with the AGP Deferred Compensation Plan as of December 31, 2015 and 2014 was $1.1 million and $1.0 million, respectively, and is included in partners’ capital-limited partners’ in our consolidated balance sheets.