DEBT

Senior Notes—We originally issued $150 million aggregate principal amount of senior notes (the "Notes") in April 2013 pursuant to a note purchase agreement entered into in August 2012. On October 3, 2016, we repaid $15 million of the Notes as part of negotiations relating to our previous noncompliance with financial covenants under the Notes. On October 31, 2016, we entered into a revised note purchase agreement governing the Notes. As of December 31, 2016, the Notes consist of the following series:


•	$54 million of Senior Notes, Series A, due April 16, 2020


•	$40.5 million of Senior Notes, Series B, due April 14, 2023


•	$40.5 million of Senior Notes, Series C, due April 16, 2025

In the first quarter of 2017, we repaid an additional $5.5 million of the Notes in connection with the sale of an asset.

Under the original note purchase agreement, we were subject to financial covenants consisting of a maximum leverage ratio and a minimum fixed charge coverage ratio as specified in the note purchase agreement. We were not in compliance with these financial covenants as of March 31, 2016, June 30, 2016, or September 30, 2016. Under a series of waivers entered into during the first nine months of 2016 and the revised note purchase agreement, the holders of the Notes permanently waived the requirement that we comply with these financial covenants for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016 (and agreed that any noncompliance with these covenants for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016, would not constitute a default or event of default under the agreement). As part of these waivers, our interest rates on the Notes increased several times during 2016.

Under the revised note purchase agreement, we granted to the collateral agent for the Noteholders a first lien on substantially all of our non-current assets and a second lien on substantially all of our current assets.

The revised note purchase agreement provides for the following changes to the Notes, among others:

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The agreement includes a minimum adjusted EBITDA covenant, which adjusts over time and is measured quarterly through March 2018, ranging from negative $20 million in the quarter ended September 30, 2016, to negative $7.5 million in the quarter ending March 31, 2018. Adjusted EBITDA is a non-GAAP measure that is calculated as adjusted earnings before interest, income taxes, depreciation, amortization, and certain other expenses for the prior four quarters, as defined under the agreement.

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The agreement requires us to maintain a minimum fixed charge coverage amount of negative $15 million and negative $10 million for the quarters ending June 30, 2018, and September 30, 2018, respectively. The agreement includes requirements relating to a leverage ratio and a fixed charge coverage ratio to be tested on a quarterly basis commencing with the quarter ending June 30, 2018, with respect to the leverage ratio, and December 31, 2018, with respect to the fixed charge coverage ratio. The maximum leverage ratio will be 11.5 to 1.0 for the quarter ending June 30, 2018, and decreases to 3.5 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. The minimum fixed charge coverage ratio will be 0.25 to 1.0 for the quarter ending December 31, 2018, and increases to 1.3 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. In general, our minimum fixed charge coverage is calculated as adjusted EBITDA for the prior four quarters, minus maintenance capital expenditures, cash paid for income taxes and interest expense, plus scheduled principal amortization of long-term funded indebtedness; our leverage ratio is calculated as the ratio of funded indebtedness to adjusted EBITDA for the prior four quarters, and our fixed charge coverage ratio is calculated as the ratio of adjusted EBITDA for the prior four quarters, minus maintenance capital expenditures and cash paid for income taxes, to interest expense plus scheduled principal amortization of long-term funded indebtedness.

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The interest rates for the Notes increased by 4.5% above the previous rates such that, as of December 31, 2016, the Series A Senior Notes bear interest at 7.73%, the Series B Senior Notes bear interest at 8.63%, and the Series C Senior Notes bear interest at 8.78%, which reflect the highest rates in a pricing grid. These interest rates are based on a pricing grid set forth in the revised agreement and will be adjusted quarterly based upon our financial performance and certain financial covenant levels. In addition, additional interest of 2%, which may be paid in kind, will begin to accrue on April 1, 2018, unless we satisfy certain financial covenant tests.


•	We are required to make certain offers to prepay the Notes with the proceeds of dispositions of certain specified property and with the proceeds of certain equity issuances, as set forth in the agreement.

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In addition, under the terms of the Notes, in December 2016, we engaged Cantor Fitzgerald & Co., a nationally-recognized investment bank, to assess, evaluate, and assist in pursuing potential strategic alternatives available to us, as we determine to be appropriate. These potential strategic alternatives could include, but are not limited to, continuing our current operating plan, equity offerings or balance sheet restructurings, merger and acquisition opportunities, partnership or joint venture opportunities, entering into new or complementary businesses, or a sale of Intrepid or some or all of our assets.

Our outstanding long-term debt, net, is as follows (in thousands):



	December 31, 2016			December 31, 2015
Senior Notes	$	135,000		$	150,000
Less deferred financing costs	(1,566		)	(515		)
Long-term debt, net	$	133,434		$	149,485

The obligations under the Notes are unconditionally guaranteed by several of our subsidiaries.

Credit Facility—On October 31, 2016, we entered into a credit agreement with Bank of Montreal that provides an asset-based revolving credit facility of up to $35 million in aggregate principal amount. The amount available is subject to monthly borrowing base limits based upon our inventory and receivables. If our total remaining availability under the credit facility falls below $6 million, we would be subject to a minimum fixed charge coverage ratio of 1 to 1. Any borrowings on the credit facility will bear interest at 1.75% to 2.25% above LIBOR (London Interbank Offered Rate), based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The credit facility expires on October 31, 2018. As of December 31, 2016, there were no amounts outstanding under the facility, other than a $0.5 million letter of credit. We may occasionally borrow and repay amounts under the facility for near-term working capital needs. We were in compliance with our financial covenants as of December 31, 2016.

Previous Credit Facility—Pursuant to a series of amendments during 2016, the amount available to us under our previous unsecured credit facility was reduced from $250 million to $1 million, which amount could be used only for letters of credit, and the maturity date was accelerated to September 30, 2016. The credit facility matured according to its terms on September 30, 2016, and therefore is no longer outstanding.

Additional Letter of Credit—In addition to the letter of credit referred to above, as of December 31, 2016, we also had a $0.5 million letter of credit outstanding secured by a restricted cash account reflected in "Prepaid expenses and other current assets" on the condensed consolidated balance sheets. Subsequent to December 31, 2016, this letter of credit was cancelled and the $0.5 million restricted cash account was released.

Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred gross interest expense of $12.1 million, $6.6 million, and $6.7 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Amounts included in interest expense for the years ended December 31, 2016, 2015 and 2014 (in thousands) are as follows:



	Year ended December 31,
	2016		2015		2014
Interest on notes and line of credit commitment fees	$	9,152	$	6,292	$	6,296
Negotiated make-whole payment	806		—		—
Amortization of deferred financing costs	2,113		352		392
Gross interest expense	12,071		6,644		6,688
Less capitalized interest	449		293		456
Interest expense, net	$	11,622	$	6,351	$	6,232