Note 10 — COMPENSATION PLANS

Cash Bonus Programs—At times, we use cash bonus programs that allow participants to receive varying percentages of their aggregate base salary. Any awards under the cash bonus programs are based on a variety of elements related to our performance in certain production, operational, financial, and other areas, as well as the participants' individual performance. We accrue cash bonus expense related to the applicable year's performance. As part of our cost savings initiatives, we did not implement a cash bonus programs for 2016 and have not implemented a cash bonus program for 2017.

Equity Incentive Compensation Plan—Our Board of Directors and stockholders adopted a long-term incentive compensation plan called the Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). We have issued common stock, restricted shares of common stock, performance units, and non-qualified stock option awards under the Plan. As of March 31, 2017, the following awards were outstanding under the Plan: 3,254,164 shares of restricted stock; performance units representing 126,050 shares of common stock; and options to purchase 1,846,645 shares of common stock. As of March 31, 2017, 460,640 shares of common stock remained available for issuance under the Plan.

Restricted Stock

•Restricted Stock with Service-Based Vesting—Under the Plan, the Compensation Committee of the Board of Directors (the "Compensation Committee") has granted restricted stock to members of the Board of Directors, executive officers, and other key employees. The awards contain service conditions associated with continued employment or service. The terms of the restricted stock provide voting and regular dividend rights to the holders of the awards. Upon vesting, the restrictions on the restricted stock lapse and the shares are considered issued and outstanding for accounting purposes.

In 2016, 2015, and 2014, the Compensation Committee granted restricted stock to executives and key employees under the Plan as part of our annual equity award program. The 2016 awards vest over four years, and the 2015 and 2014 awards vest over three years, subject to continued employment or service. From time to time, the Compensation Committee grants restricted stock to newly hired or promoted employees or other employees or consultants who have achieved extraordinary personal performance objectives. Restricted stock awards generally vest over one to four years, subject to continued employment or service.

In 2016, the Compensation Committee granted 562,010 shares of restricted stock to non-employee members of the Board of Directors and one employee member of the Board of Directors under the Plan for their annual service as directors. The restricted stock vests one year after the date of grant, subject to continued service.

In measuring compensation expense associated with the grant of restricted stock, we use the fair value of the award, determined as the closing stock price for our common stock on the grant date. Compensation expense is recorded monthly over the vesting period of the award. Total compensation expense related to the restricted stock awards was $0.7 million for each of the three months ended March 31, 2017, and 2016. As of March 31, 2017, there was $3.2 million of total remaining unrecognized compensation expense related to restricted stock that will be expensed through 2020.

•Restricted Stock with Service- and Market-Condition-Based Vesting—In 2016, the Compensation Committee granted restricted stock to a member of our executive team as part of his annual compensation package. The restricted stock vests in four equal installments, subject to his continued employment; provided however, that no vesting occurs unless and until the closing market price of our common stock equals or exceeds $2.06 per share, which is double the closing price of our common stock on the date of grant, for 20 consecutive trading days, on or before the five-year anniversary of the grant date. As of March 31, 2017, this market condition has not been met.

In measuring compensation expense associated with this grant of restricted stock, we use the fair value of the award, determined using a Monte Carlo simulation valuation model. Compensation expense is recorded monthly over the vesting period of the award.

A summary of activity relating to our restricted stock for the quarter ended March 31, 2017, is presented below:



			Weighted Average Grant-Date Fair Value
	Shares		Weighted Average Grant-Date Fair Value
Restricted stock, beginning of period	3,531,418		$	1.78
Granted	—		$	—
Vested	(131,183	)	$	14.39
Forfeited	(146,071	)	$	1.29
Restricted stock, end of period	3,254,164		$	1.52

Performance Units

In 2015, the Compensation Committee granted at-risk performance units under the Plan to a member of our executive team as part of his annual compensation package. The performance units vest in February 2018, and payout, if any, is based on market-based conditions relating to one-, two- and three-year performance periods beginning on the grant date. No shares were earned under the first, one-year performance period or the second, two-year performance period. As of March 31, 2017, a total of 126,050 shares of common stock were available for future payout under these performance units, subject to the third, three-year performance measure being met and continued employment through the vesting date.

Non-qualified Stock Options

• Non-qualified Stock Options with Service-Based Vesting—In 2016 and from 2009 to 2011, the Compensation Committee issued non-qualified stock options under the Plan to our executives and other key employees as part of our annual award program. The stock options granted in 2016 vest over four years and have a ten-year term from the grant date. The stock options granted from 2009 to 2011 generally vested over three years. In measuring compensation expense for options, we estimated the fair value of the award on the grant dates using the Black‑Scholes option valuation model. Option valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock.

The following assumptions were used to compute the weighted average fair market value of options granted in 2016:



Risk free interest rate	1.8	%
Dividend yield	0.0	%
Estimated volatility	63.8	%
Expected option life	6.25 years

Our estimate of volatility was based on our historic volatility. The estimate of expected option life was determined based on the "simplified method," giving consideration to the overall vesting period and the contractual terms of the award. This method was used because we have no option exercise history for options issued prior to 2016. The risk-free interest rate for the period that matched the option awards' expected life was based on the U.S. Treasury constant maturity yield at the time of grant.

•Non-qualified Stock Options with Service- and Market-Condition-Based Vesting—In 2016, the Compensation Committee granted 600,000 non-qualified stock options with service- and market-condition-based vesting requirements under the Plan to a member of our executive team as part of his annual compensation package. The stock options vest in four equal annual installments, subject to continued employment; provided, however, that no vesting occurs unless and until the closing market price of our common stock equals or exceeds $2.06 per share, which is double the closing price of our stock on the date of grant, for 20 consecutive trading days on or before the five-year anniversary of the grant date. As of March 31, 2017, this market condition has not been met.

In measuring compensation expense associated with this grant of non-qualified stock options, we used the fair value of the award, determined using a Monte Carlo simulation valuation model. Compensation expense is recorded monthly over the vesting period of the award.

Non-Qualified Stock Option Activity

A summary of our stock option activity for the three months ended March 31, 2017, is as follows:



	Shares		Weighted Average Exercise Price
Outstanding non-qualified stock options, beginning of period	1,883,706		$3.90
Granted	—		$—
Exercised	—		$—
Forfeited	(30,165	)	$1.03
Expired	(6,896	)	$27.33
Outstanding non-qualified stock options, end of period	1,846,645		$3.86

Vested or expected to vest, end of period	1,846,645		$3.86

Exercisable non-qualified stock options, end of period	211,961		$25.68