11. COMPENSATION PLANS

ARLP Long-Term Incentive Plan

The ARLP Partnership has 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, also referred to as "restricted units", which upon satisfaction of time and performance based 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 MGP, subject to review and approval of the MGP Compensation Committee. Vesting of all grants outstanding are subject to the satisfaction of certain financial tests, which management currently believes are probable. Grants issued to ARLP LTIP participants are expected to cliff vest on January 1st of the third year following issuance of the grants. 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 tax withholding obligations of ARLP LTIP participants. As provided under the distribution equivalent rights provisions of the ARLP LTIP and the terms of the ARLP LTIP awards, all non-vested grants include contingent rights to receive quarterly distributions in cash or, in the case of the 2016 and 2017 grants, at the discretion of the MGP Compensation Committee, cash or in lieu of cash, phantom units credited to a bookkeeping account with value, equal to the cash distributions we make to unitholders during the vesting period.

A summary of non-vested ARLP LTIP grants as of and for the nine months ended September 30, 2017 is as follows:


	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)

Non-vested grants at January 1, 2017	1,604,748	$	23.19	$	36,027
Granted	475,310		23.17
Vested (1)	(350,516)		40.73
Forfeited	(35,516)		20.01
Non-vested grants at September 30, 2017	1,694,026		19.62		32,779

(1)

During the nine months ended September 30, 2017, the ARLP Partnership issued 222,011 unrestricted common units to the ARLP LTIP participants. The remaining vested units were settled in cash to satisfy tax withholding obligations of the ARLP LTIP participants.

ARLP LTIP expense was $2.8 million and $3.1 million for the three months ended September 30, 2017 and 2016, respectively, and $8.2 million and $9.0 million for the nine months ended September 30, 2017 and 2016, respectively. The total obligation associated with the ARLP LTIP as of September 30, 2017 was $18.9 million and is included in Noncontrolling interests line item in our condensed consolidated balance sheets. As of September 30, 2017, there was $14.3 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 1.4 years.

After consideration of the January 1, 2017 vesting and subsequent issuance of 222,011 common units, approximately 2.5 million units remain available under the ARLP LTIP for issuance in the future, assuming all grants issued in 2017, 2016 and 2015 and currently outstanding are settled with ARLP common units, without reduction for tax withholding, and no future forfeitures occur.

AHGP Long-Term Incentive Plan

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 September 30, 2017.

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 and SERP distributions will be settled in the form of ARLP common units. The SERP is administered by the MGP Compensation Committee.

Our directors participate in the AGP Amended and Restated Deferred Compensation Plan for Directors ("AGP Deferred Compensation Plan"), and the directors of MGP participate in the MGP Deferred Compensation Plan (collectively, the "Deferred Compensation Plans"). 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. Distributions from the Deferred Compensation Plans will be settled in the form of ARLP or AHGP common units, as applicable.

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.

A summary of SERP and MGP Deferred Compensation Plan activity as of and for the nine months ended September 30, 2017 is as follows:


	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)

Phantom units outstanding as of January 1, 2017	494,018	$	29.77	$	11,091
Granted	40,359		21.22
Phantom units outstanding as of September 30, 2017	534,377		29.13		10,340

Total SERP and MGP Deferred Compensation Plan expense was $0.3 million for each of the three months ended September 30, 2017 and 2016, and $1.0 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, the total obligation associated with the SERP and MGP Deferred Compensation Plan was $15.6 million and is included in Noncontrolling interests line item in our condensed consolidated balance sheet.

A summary of the AGP Deferred Compensation Plan activity as of and for the nine months ended September 30, 2017 is as follows:


	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)

Phantom units outstanding as of January 1, 2017	26,112	$	36.67	$	734
Granted	1,520		27.91
Issued	(4,357)		39.18
Phantom units outstanding as of September 30, 2017	23,275		35.63		647

Total AGP Deferred Compensation Plan expense was $16,075 and $52,775 for the three months ended September 30, 2017 and 2016, respectively, and $41,943 and $164,203 for the nine months ended September 30, 2017 and 2016, respectively. The total obligation associated with the AGP Deferred Compensation Plan as of September 30, 2017 was $0.8 million and is included in Limited partners – Common Unitholders line item in our condensed consolidated balance sheets.