TransMontaigne Partners L.P.
Annual Report 2009

Plain-text annual report

Use these links to rapidly review the documentTABLE OF CONTENTS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATATable of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KCommission File Number 001-32505TRANSMONTAIGNE PARTNERS L.P.(Exact name of registrant as specified in its charter)Suite 3100, 1670 BroadwayDenver, Colorado 80202(Address, including zip code, of principal executive offices)(303) 626-8200(Telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Securities registered pursuant to Section 12(g) of the Act:NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No (Mark One)  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934for the fiscal year ended December 31, 2009ORo Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934For the transition period to Delaware 34-2037221(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)Title of Each Class Name of Each Exchangeon Which RegisteredCommon Limited Partner Units New York Stock Exchange Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes o No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "largeaccelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No  The aggregate market value of common limited partner units held by non-affiliates of the registrant on June 30, 2009 was $187,417,167.00, computed by reference to the last saleprice ($21.00 per common unit) of the registrant's common limited partner units on the New York Stock Exchange on June 30, 2009. The number of the registrant's common limited partner units outstanding on February 26, 2010 was 14,457,066.DOCUMENTS INCORPORATED BY REFERENCENone.Large accelerated filer o Accelerated filer  Non-accelerated filer o(Do not check if asmaller reporting company) Smaller reporting company oTable of ContentsTABLE OF CONTENTS Item Page No. Part I 1 and 2. Business and Properties 1 1A. Risk Factors 25 1B. Unresolved Staff Comments 40 3. Legal Proceedings 40 4. Submission of Matters to a Vote of Security Holders 40 Part II 5. Market for the Registrant's Common Units, Related Unitholder Matters and Issuer Purchases ofEquity Securities 40 6. Selected Financial Data 44 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 45 7A. Quantitative and Qualitative Disclosures About Market Risks 62 8. Financial Statements and Supplementary Data 64 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 99 9A. Controls and Procedures 99 9B. Other Information 101 Part III 10. Directors, Executive Officers of Our General Partner and Corporate Governance 101 11. Executive Compensation 107 12. Security Ownership of Certain Beneficial Owners and Management and Related UnitholderMatters 113 13. Certain Relationships and Related Transactions, and Director Independence 117 14. Principal Accounting Fees and Services 121 Part IV 15. Exhibits, Financial Statement Schedules 121 Table of Contents Our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to such reports, will beavailable free of charge on our website at www.transmontaignepartners.com under the heading "Unitholder Information," "SEC Filings" as soon asreasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. A copy of this annualreport on Form 10-K (without exhibits) will be furnished without charge to any unitholder who sends a written request to our offices, addressed asfollows: TransMontaigne Partners L.P., Attention: Investor Relations, 1670 Broadway, Suite 3100, Denver, Colorado 80202.CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934, including the following:•certain statements, including possible or assumed future results of operations, in "Management's Discussion and Analysis of FinancialCondition and Results of Operations;" •any statements contained in this annual report regarding the prospects for our business or any of our services or our ability to paydistributions; •any statements preceded by, followed by or that include the words "may," "seeks," "believes," "expects," "anticipates," "intends,""continues," "estimates," "plans," "targets," "predicts," "attempts," "is scheduled," or similar expressions; and •other statements contained in this annual report regarding matters that are not historical facts. Our business and results of operations are subject to risks and uncertainties, many of which are beyond our ability to control or predict. Because ofthese risks and uncertainties, actual results may differ materially from those expressed or implied by forward-looking statements, and investors arecautioned not to place undue reliance on such statements, which speak only as of the date thereof. Important factors, many of which are described in more detail in "Item 1A. Risk Factors" of this annual report, that could cause actual results todiffer materially from our expectations include, but are not limited to:•a reduction in revenue from any of our significant customers upon which we rely for a substantial majority of our revenue; •failure by any of our significant customers to continue to engage us to provide services after the expiration of existing terminalingservices agreements, or our failure to secure comparable alternative arrangements; •debt levels and restrictions in our debt agreements that may limit our operational flexibility; •we may have to refinance our existing debt in unfavorable market conditions; •a lack of access to new capital would impair our ability to expand our operations; •the impact of Morgan Stanley's status as a bank holding company on its ability to conduct certain nonbanking activities or retain certaininvestments, including control of our general partner; •the availability of acquisition opportunities and successful integration and future performance of acquired facilities; •competition from other terminals and pipelines that may be able to supply our significant customers with terminaling services on a morecompetitive basis; •the continued creditworthiness of, and performance by, our significant customers; •a decrease in demand for products in areas served by our terminals and pipelines;Table of Contents•the ability of our significant customers to secure financing arrangements adequate to purchase their desired volume of product; •the impact on our facilities or operations of extreme weather conditions, such as hurricanes, and other events, such as terrorist attacks orwar and costs associated with environmental compliance and remediation; •timing, cost and other economic uncertainties related to the construction of new tank capacity or facilities; •the impact of current and future laws and governmental regulations, general economic, market or business conditions; •the failure of our existing and future insurance policies to fully cover all risks incident to our business; •the age and condition of many of our pipeline and storage assets may result in increased maintenance and remediation expenditures; •our ability to generate sufficient cash from operations to enable us to maintain or grow the amount of the quarterly distribution to ourunitholders; •conflicts of interest and the limited fiduciary duties of our general partner, which is indirectly controlled by Morgan Stanley CapitalGroup; •cost reimbursements, which are determined by our general partner, and fees paid to our general partner and its affiliates for services willcontinue to be substantial; •the control of our general partner being transferred to a third party without unitholder consent; •our general partners limited call right may require unitholders to sell their common units at an undesirable time or price; •our failure to avoid federal income taxation as a corporation or the imposition of state level taxation; •the impact of new IRS regulations or a challenge of our current allocation of income, gain, loss and deductions among our unitholders orour use of a calendar year end for federal income tax purposes; and •the sale or exchange of 50% or more of our capital and profits interests within a 12-month period would result in a deemed terminationof our partnership for income tax purposes. We do not intend to update these forward-looking statements except as required by law.Table of ContentsPart I ITEMS 1 AND 2. BUSINESS AND PROPERTIES TransMontaigne Partners L.P. is a publicly traded Delaware limited partnership formed in February 2005 by TransMontaigne Inc. Wecommenced operations upon the closing of our initial public offering on May 27, 2005. Effective December 31, 2005, we changed our year end forfinancial and tax reporting purposes from June 30 to December 31. Effective September 1, 2006, Morgan Stanley Capital Group Inc., which we referto as Morgan Stanley Capital Group, purchased all of the issued and outstanding capital stock of TransMontaigne Inc. and, as a result, MorganStanley, the parent company of Morgan Stanley Capital Group, became the indirect owner of our general partner. Our common units are traded onthe New York Stock Exchange under the symbol "TLP." Our principal executive offices are located at 1670 Broadway, Suite 3100, Denver, Colorado80202; our telephone number is (303) 626-8200. Unless the context requires otherwise, references to "we," "us," "our," "TransMontaigne Partners,""Partners" or the "partnership" are intended to mean TransMontaigne Partners L.P. and our wholly owned and controlled operating subsidiaries.References to TransMontaigne Inc. are intended to mean TransMontaigne Inc. and its subsidiaries other than TransMontaigne GP L.L.C., ourgeneral partner, and TransMontaigne Partners and its subsidiaries. Unless otherwise indicated in this annual report, references to common unitsowned by Morgan Stanley or its percentage ownership interest in us do not include common units that may be held in client or customer accountscontrolled by affiliates of Morgan Stanley, which Morgan Stanley may be deemed to beneficially own under the federal securities laws.OVERVIEW We are a terminaling and transportation company with operations primarily in the United States along the Gulf Coast, in the Midwest, inBrownsville, Texas, along the Mississippi and Ohio Rivers, and in the Southeast. We provide integrated terminaling, storage, transportation and relatedservices for customers engaged in the distribution and marketing of light refined petroleum products, heavy refined petroleum products, crude oil,chemicals, fertilizers and other liquid products. Light refined products include gasolines, diesel fuels, heating oil and jet fuels. Heavy refined productsinclude residual fuel oils and asphalt. We do not purchase or market products that we handle or transport. Therefore, we do not have material directexposure to changes in commodity prices, except for the value of refined product gains and losses arising from terminaling services agreements withcertain customers. TransMontaigne Partners has no officers or employees and all of our management and operational activities are provided by officers andemployees of TransMontaigne Services Inc. TransMontaigne Services Inc. is an indirect wholly owned subsidiary of TransMontaigne Inc.TransMontaigne Inc. is an indirect wholly owned subsidiary of Morgan Stanley. We are controlled by our general partner, TransMontaigne GP L.L.C.,which is an indirect wholly owned subsidiary of TransMontaigne Inc. TransMontaigne GP L.L.C. is a holding company with no independent assets oroperations other than its general partner interest in TransMontaigne Partners L.P. TransMontaigne GP L.L.C. is dependent1Table of Contentsupon the cash distributions it receives from TransMontaigne Partners L.P. to service any obligations it may incur. The following diagram depicts ourcurrent organization and structure:2Table of Contents TransMontaigne Inc. is a leading distributor of unbranded refined petroleum products to independent wholesalers and industrial and commercialend users, delivering approximately 0.3 million barrels per day throughout the United States, primarily in the Gulf Coast, Southeast and Midwestregions. TransMontaigne Inc. currently relies on us to provide substantially all of the integrated terminaling services it requires to support its operationsin these geographic regions. Morgan Stanley is a leading global trading company with extensive trading activities focused on the energy markets, including crude oil andrefined petroleum products. Morgan Stanley Capital Group is the principal commodities trading arm of Morgan Stanley. Morgan Stanley CapitalGroup's trading and risk management activities cover a broad spectrum of the energy industry with extensive resources dedicated to refined productsupply and transportation. Morgan Stanley Capital Group engages in trading physical commodities, like the refined petroleum products that we handlein our terminals, and exchange or over-the-counter commodities derivative instruments. Morgan Stanley Capital Group has access to substantialstrategic long-term storage capacity located on all three coasts of the United States, in Northwest Europe and Asia. Our existing facilities are located in five geographic regions, which we refer to as our Gulf Coast, Midwest, Brownsville, River and Southeastfacilities.•Gulf Coast. Our Gulf Coast facilities consist of eight refined product terminals, seven of which are located in Florida and one of whichis located in Mobile, Alabama. These facilities currently have approximately 7.3 million barrels of aggregate active storage capacity. •Midwest. Our Midwest facilities consist of a 67-mile, interstate refined products pipeline between Missouri and Arkansas, which werefer to as the Razorback pipeline, and three refined product terminals with approximately 0.6 million barrels of aggregate active storagecapacity. •Brownsville. Our terminal in Brownsville, Texas has approximately 2.2 million barrels of aggregate active storage capacity, whichincludes a liquefied petroleum gas, or LPG, terminaling facility with aggregate active storage capacity of approximately 33,000 barrels.We operate a bi-directional refined products pipeline for an affiliate of Mexico's state-owned petroleum company for deliveries to andfrom Brownsville and Reynosa and Cadereyta, Mexico. We also own and operate an LPG pipeline from our Brownsville facilities to ourterminal in Matamoros, Mexico which we refer to as the Diamondback pipeline. Our Matamoros terminal has approximately 7,000barrels of aggregate active LPG storage capacity. •River. Our River facilities are composed of 12 refined product terminals located along the Mississippi and Ohio Rivers withapproximately 2.5 million barrels of aggregate active storage capacity. Our River facilities also include a dock facility located in BatonRouge, Louisiana that is connected to the Colonial pipeline. •Southeast. Our Southeast facilities consist of 22 refined petroleum products terminals located along the Colonial and Plantation pipelinesin Alabama, Georgia, Mississippi, North Carolina, South Carolina, and Virginia with an aggregate active storage capacity ofapproximately 9.1 million barrels. The volume of product that is handled, transported, throughput or stored in our terminals and pipelines is directly affected by the level of supplyand demand in the wholesale markets served by our terminals and pipelines. Overall supply of refined products in the wholesale markets is influencedby the products' absolute prices, the availability of capacity on delivering pipelines and vessels, fluctuating refinery margins and the markets' perceptionof future product prices. The demand for gasoline typically peaks during the summer driving season, which extends from April to September, anddeclines during the fall and winter months. The demand for marine fuels typically peaks in the winter months due to the increase in the number of cruiseships originating from Florida ports. Despite these3Table of Contentsseasonalities, the overall impact on the volume of product throughput at our terminals and pipelines is not material.Industry Overview Refined product terminaling and transportation companies, such as TransMontaigne Partners, facilitate the movement of refined products toconsumers around the country. Consumption of refined products in the United States exceeds domestic production, which necessitates the importing ofrefined products from other countries. Moreover, a substantial majority of the petroleum refining that occurs in the United States east of the RockyMountains is concentrated in the Gulf Coast region, which necessitates the transportation of domestic product to other areas, such as the East Coast,Florida, Southeast and Midwest regions of the country. Terminaling and transportation companies receive, store, blend, treat and distribute refinedproducts, both domestic and imported, as they are transported from refineries to wholesalers, retailers and end-users. Refining. Refineries in the Gulf Coast region refine crude oil into various light refined products and heavy refined products. Light refinedproducts include gasolines, diesel fuels, heating oils and jet fuels. Heavy refined products include residual fuel oils and asphalt. Refined products ofspecific grade and characteristics are substantially identical in composition from one refinery to another and are referred to as being "fungible." Therefined products initially are stored at the refineries' own terminal facilities. The refineries owned by major oil companies then schedule for deliverysome of their refined product output to satisfy their own retail delivery obligations, for example, at branded gasoline stations, and sell the remainder oftheir refined product output to independent marketing and distribution companies or traders, such as TransMontaigne Inc. and Morgan Stanley CapitalGroup, for resale. Transportation. Before an independent distribution and marketing company, such as TransMontaigne Inc. and Morgan Stanley Capital Group,distributes refined petroleum products in the wholesale markets, it must first schedule that product for shipment by tankers or barges or on commoncarrier pipelines to a terminal. Refined product is transported to marine terminals, such as our Gulf Coast terminals and Baton Rouge, Louisiana dock facility, by vessels orbarges. Because there are economies of scale in transporting products by vessel, marine terminals with larger storage capacities for various commoditieshave the ability to offer their customers lower per-barrel freight costs to a greater extent than do terminals with smaller storage capacities. Refined product reaches inland terminals, such as our Southeast and Midwest terminals, by common carrier pipelines. Common carrier pipelinesare pipelines with published tariffs that are regulated by the Federal Energy Regulatory Commission, or FERC, or state authorities. These pipelines shipfungible refined products in batches, with each batch generally consisting of product owned by several different companies. As a batch of product isshipped on a pipeline, each terminal operator along the way draws the volume of product that is scheduled for that facility as the batch passes in thepipeline. Consequently, each terminal operator must monitor the type of product in the common carrier pipeline to determine when to draw productscheduled for delivery to that terminal. In addition, both the common carrier pipeline and the terminal operator monitor the volume of product drawn toensure that the amount scheduled for delivery at that location is actually received. At both inland and marine terminals, the various products are stored in tanks on behalf of our customers. Delivery. Most terminals have a tanker truck loading facility commonly referred to as a "rack." Often, commercial and industrial end-users andindependent retailers rely on independent trucking companies to pick up product at the rack and transport it to the end-user or retailer at its location. Eachtruck holds an aggregate of approximately 8,000 gallons (approximately 190 barrels) of various4Table of Contentsrefined products in different compartments. To initiate the transfer of product, the driver uses an access control card that identifies the customerpurchasing the refined product, the carrier and the driver as well as the type or grade of refined products to be pumped into the truck. A computerizedsystem electronically reviews the credentials of the carrier, including insurance and certain mandated certifications, and confirms the customer is withinproduct allocation limits. When all conditions are verified as being current and correct, the system authorizes the delivery of the refined product to thetruck. As refined product is being loaded into the truck, additives are injected to conform to government specifications and individual customerrequirements. If a truck is loading gasoline for retail sale by an independent gasoline station, generic additives will be added to the gasoline as it isloaded into the truck. If the gasoline is for delivery to a branded retail gasoline station, the proprietary additive compound of that particular retailer willbe added to the gasoline as it is loaded. The type and amount of additive are electronically and mechanically controlled by equipment located at the truckloading rack. Generally one to two gallons of additive are injected into an 8,000 gallon truckload of gasoline. At marine terminals, the refined product is stored in tanks and may be delivered to tanker trucks over a rack in the same manner as at an inlandterminal or to cruise ships and other vessels, known as bunkering, either at the dock, through a pipeline, or by truck or barge. Cruise ships typicallypurchase approximately 6,000 to 8,000 barrels, the equivalent of approximately 42 tanker truckloads, of bunker fuel per refueling. Bunker fuel is amixture of residual fuel oil and diesel fuel. Each large vessel generally requires its own mixture of bunker fuel to match the distinct characteristics of thatship's engines and turbines. Because the mixture for each ship requires precision to mix and deliver, cruise ships often prefer to obtain their fuel fromexperienced companies.Our Operations We are a terminaling and transportation company with operations primarily in the United States along the Gulf Coast, in the Midwest, inBrownsville, Texas, along the Mississippi and Ohio Rivers, and in the Southeast. We use our terminaling facilities to, among other things:•receive refined products from the pipeline, ship, barge or railcar making delivery on behalf of our customers, and transfer those refinedproducts to the tanks located at our terminals; •store the refined products in our tanks for our customers; •monitor the volume of the refined products stored in our tanks; •distribute the refined products out of our terminals in truckloads using truck racks and other distribution equipment located at ourterminals, including pipelines; and •heat residual fuel oils and asphalt stored in our tanks, and provide other ancillary services related to the throughput process. We derive revenue from our terminal and pipeline transportation operations by charging fees for providing integrated terminaling, transportationand related services. The fees we charge and our other sources of revenue are composed of:•Terminaling Services Fees. We generate terminaling services fees by distributing and storing products for our customers. Terminalingservices fees include throughput fees based on the volume of product distributed from the facility, injection fees based on the volume ofproduct injected with additive compounds and storage fees based on a rate per barrel of storage capacity per month. •Pipeline Transportation Fees. We earn pipeline transportation fees at our Razorback pipeline and Diamondback pipeline based on thevolume of product transported and the distance from the5Table of Contentsorigin point to the delivery point. The Federal Energy Regulatory Commission, or FERC, regulates the tariff on the Razorback pipelineand the Diamondback pipeline.•Management Fees and Reimbursed Costs. We manage and operate certain tank capacity at our Port Everglades (South) terminal for amajor oil company and receive a reimbursement of its proportionate share of operating and maintenance costs. We manage and operatefor an affiliate of Mexico's state-owned petroleum company a bi-directional products pipeline connected to our Brownsville, Texasterminal facility and receive a management fee and reimbursement of costs. We also manage and operate for another major oil companytwo terminals that are adjacent to our Southeast facilities and receive a reimbursement of its proportionate share of operating andmaintenance costs. •Other Revenue. We provide ancillary services including heating and mixing of stored products, product transfer services, railcarhandling, wharfage fees and vapor recovery fees. Pursuant to terminaling services agreements with our throughput customers, we areentitled to the volume of product gained resulting from differences in the measurement of product volumes received and distributed atour terminaling facilities. Consistent with recognized industry practices, measurement differentials occur as the result of the inherentvariances in measurement devices and methodology. We recognize as revenue the net proceeds from the sale of the product gained. The locations and approximate aggregate active storage capacity at our terminal facilities as of December 31, 2009 are as follows:6Locations Active storagecapacity (shell bbls) Gulf Coast Facilities Florida Port Everglades Complex Port Everglades-North 2,990,000 Port Everglades-South(1) 377,000 Jacksonville 271,000 Cape Canaveral 701,000 Port Manatee 1,385,000 Fisher Island 673,000 Tampa 694,000 Alabama Mobile 163,000 Gulf Coast Total 7,254,000 Midwest Facilities Rogers and Mt. Vernon (aggregate amounts) 406,000 Oklahoma City 158,000 Midwest Total 564,000 Brownsville, Texas Facilities Brownsville 2,182,000 Matamoros, Mexico 7,000 Brownsville Total 2,189,000 Table of Contents Gulf Coast Operations. Our Gulf Coast operations include eight refined product terminals located in Florida and Alabama. At our Gulf Coastterminals, we handle refined products and crude oil on behalf of, and provide integrated terminaling services to, customers engaged in the distributionand marketing of refined products and crude oil and the United States government. Our Gulf CoastLocations Active storagecapacity (shell bbls) River Facilities Arkansas City, AR 418,000 Evansville, IN 245,000 New Albany, IN 201,000 Greater Cincinnati, KY 200,000 Henderson, KY 182,000 Louisville, KY 181,000 Owensboro, KY 157,000 Paducah, KY Complex 322,000 Baton Rouge, LA Dock — Greenville, MS (Clay Street) 189,000 Greenville, MS (Industrial Road) 56,000 Cape Girardeau, MO 140,000 East Liverpool, OH 203,000 River Total 2,494,000 Southeast Facilities Albany, GA 203,000 Americus, GA 93,000 Athens, GA 203,000 Bainbridge, GA 261,000 Belton, SC — Birmingham, AL 178,000 Charlotte, NC 121,000 Collins/Purvis, MS 2,653,000 Collins, MS 141,000 Doraville, GA 438,000 Fairfax, VA 513,000 Greensboro, NC 479,000 Griffin, GA 107,000 Lookout Mountain, GA 221,000 Macon, GA 174,000 Meridian, MS 139,000 Montvale, VA 503,000 Norfolk, VA 1,336,000 Richmond, VA 478,000 Rome, GA 152,000 Selma, NC 529,000 Spartanburg, SC 166,000 Southeast Total 9,088,000 TOTAL CAPACITY 21,589,000 (1)Reflects our ownership interest net of a major oil company's ownership interest in certain tank capacity.7Table of Contentsterminals receive refined products from vessels on behalf of our customers. In addition, our Jacksonville terminal also receives asphalt by rail and ourPort Everglades (North) terminal also receives product by truck. We distribute by truck or barge at all of our Gulf Coast terminals. In addition, wedistribute products by pipeline at our Port Everglades and Tampa terminals and by rail at our Jacksonville terminal. A major oil company retains anownership interest, ranging from 25% to 50%, in specific tank capacity at our Port Everglades (South) terminal. We manage and operate the PortEverglades (South) terminal, and we are reimbursed by the major oil company for its proportionate share of our operating and maintenance costs. OurMobile, Alabama terminal facility receives and distributes refined product to trucks and barges. The principal customers at our Gulf Coast facilities are Marathon Petroleum Company LLC, which we refer to as Marathon, and Morgan StanleyCapital Group. Midwest Terminals and Pipeline Operations. In Missouri and Arkansas we own and operate the Razorback pipeline and terminals in Mt.Vernon, Missouri, at the origin of the pipeline and in Rogers, Arkansas, at the terminus of the pipeline. The Razorback pipeline is a 67-mile, 8-inchdiameter interstate common carrier pipeline that transports light refined product on behalf of Morgan Stanley Capital Group from our terminal at Mt.Vernon, where it is interconnected with a pipeline system owned by Magellan Midstream Partners, to our terminal at Rogers. The Razorback pipelinehas a capacity of approximately 30,000 barrels per day. The FERC regulates the transportation tariffs for interstate shipments on the Razorback pipeline.Morgan Stanley Capital Group currently is the only shipper on the Razorback pipeline and our sole customer at our Rogers and Mt. Vernon terminals. We also own and operate a terminal facility at Oklahoma City, Oklahoma. Our Oklahoma City terminal receives gasolines and diesel fuels from apipeline system owned by Magellan Midstream Partners for delivery via our truck rack to Shell Oil Products U.S., which we refer to as Shell, forredistribution to locations throughout the Oklahoma City region. Brownsville, Texas Operations. In Brownsville, Texas, we own and operate two terminal facilities and the Diamondback pipeline which handleliquid product movements between Mexico and south Texas including refined petroleum products, chemicals, vegetable oils, naphtha, wax and propaneon behalf of, and provide integrated terminaling services to, third parties engaged in the distribution and marketing of refined products and natural gasliquids. Our Brownsville facilities receive refined products on behalf of our customers from vessels, by truck or railcar. We also receive natural gasliquids by pipeline. The Diamondback pipeline consists of an 8" pipeline that transports LPG approximately 23 miles from our Brownsville facilities to ourMatamoros terminal, with approximately 16 miles located in Texas and approximately 7 miles located in Mexico and a 6" pipeline, which runs parallelto the 8" pipeline, that can be used by us in the future to transport additional LPG or refined products to our Matamoros terminal. The 8" pipeline has acapacity of approximately 7,500 barrels per day. The 6" pipeline has a capacity of approximately 4,300 barrels per day. We also operate and maintain the United States portion of a 174-mile bi-directional refined products pipeline owned by PMI Services NorthAmerica, Inc., an affiliate of Petroleos Mexicanos, or PEMEX, the state-owned, national petroleum company of Mexico. This pipeline connects ourBrownsville terminal complex to a pipeline in Mexico that delivers to PEMEX's terminal located in Reynosa, Mexico and terminates at PEMEX'srefinery, located in Cadereyta, Nuevo Leon, Mexico, a suburb of the large industrial city of Monterrey. The pipeline transports refined products andblending components. We operate and manage the approximately 18-mile portion of the pipeline located in the United States for a fee that is based onthe average daily volume handled during the month. Additionally, we are reimbursed for non-routine maintenance expenses based on the actual costsplus a fee based on a fixed percentage of the expense.8Table of Contents The customers we serve at our Brownsville terminal facilities consist principally of wholesale and retail marketers of refined products andindustrial and commercial end-users of refined products, waxes and industrial chemicals. Our principal customers are Valero Marketing and SupplyCompany, which we refer to as Valero, TransMontaigne Inc., Morgan Stanley Capital Group, and PMI Trading Limited. River Operations. Our River facilities include 12 refined product terminals along the Mississippi and Ohio Rivers and the Baton Rouge,Louisiana dock facility. At our River terminals, we handle gasolines, diesel fuels, heating oil, chemicals and fertilizers on behalf of, and provideintegrated terminaling services to, customers engaged in the distribution and marketing of refined products and industrial and commercial end-users.Our River terminals receive products from vessels and barges on behalf of our customers and distribute products primarily to trucks and barges. Theprincipal customer at our River facilities is Valero. Southeast Operations. Our Southeast facilities include 22 refined product terminals along the Plantation and Colonial pipelines. At ourSoutheast terminals, we handle gasolines, diesel fuels, jet fuel and heating oil on behalf of, and provide integrated terminaling services to customersengaged in the distribution and marketing of refined products and the United States Government. Our Southeast terminals primarily receive productsfrom the Plantation and Colonial pipelines on behalf of our customers and distribute products primarily to trucks. The principal customers at ourSoutheast facilities are Morgan Stanley Capital Group and the United States government.Business Strategies Our primary business objective is to increase distributable cash flow per unit. The most effective means of growing our business and increasingcash distributions to our unitholders is to expand our asset base and infrastructure, and to increase utilization of our existing infrastructure. We intend toaccomplish this by executing the following strategies: Generate stable cash flows through the use of long-term contracts with our customers. We intend to continue to generate stable cash flowsby capitalizing on the fee-based nature of our business, our minimum revenue commitments from our customers and the long-term nature of ourcontracts with many of our customers. We generate revenue from customers who pay us fees based on the volume of storage capacity contracted for,volume of refined products throughput at our terminals or volume of refined products transported in the Razorback and Diamondback pipelines. Wehave long-term terminaling services agreements with, among others, Marathon, Morgan Stanley Capital Group, PMI Trading Limited, the United Statesgovernment, TransMontaigne Inc. and Valero. Pursue strategic and accretive acquisitions in new and existing markets. We plan to pursue acquisitions of energy-related terminaling andtransportation facilities, including facilities that may be outside our existing areas of operation. In many cases, we would expect to pursue theseacquisitions jointly with TransMontaigne Inc. and Morgan Stanley Capital Group. In light of the recent industry trend of large energy companiesdivesting their distribution and logistic assets, we believe there will continue to be significant acquisition opportunities. Maximize the benefits of our relationship with TransMontaigne Inc. and Morgan Stanley Capital Group. TransMontaigne Inc. and MorganStanley Capital Group intend to use us as the primary vehicle for their energy-related terminaling and transportation businesses that support theirphysical trading, marketing and distribution businesses. We intend to capitalize on the strategic fit between our infrastructure with Morgan StanleyCapital Group's global supply capabilities and TransMontaigne Inc.'s marketing and distribution business. In addition, our relationship withTransMontaigne Inc. and Morgan Stanley Capital Group provides us with access to a significant pool of management talent and strong relationshipsthroughout the energy industry, which we intend to utilize to implement our strategies.9Table of Contents Execute cost-effective expansion and asset enhancement opportunities. We continually evaluate opportunities to expand our existing assetbase. For example, in 2009 we placed newly constructed tanks into service at certain of our Gulf Coast terminals, added ethanol blending functionalityat certain of our Southeast terminals and placed additional LPG tankage into service at our Brownsville terminals. We have additional projects inprogress to expand our Gulf Coast terminaling capacity and to add additional ethanol blending functionality at certain of our Southeast terminals. Maintain a disciplined financial policy. We will continue to pursue a disciplined financial policy by maintaining a prudent capital structure,managing our exposure to interest rate risk and conservatively managing our cash reserves.Competitive Strengths We believe that we are well positioned to successfully execute our business strategies using the following competitive strengths: The terminaling services agreements we have with our existing customers provide us with stable cash flows. Based on our terminalingservices agreements in effect at January 1, 2010, we have contractual commitments from our customers that are expected to generate a substantialmajority of our actual revenue for the year ending December 31, 2010. Of this firm commitment revenue, approximately 70% was generated underterminaling services agreements with remaining terms of greater than three years at December 31, 2009. We expect that our actual revenue for the yearwill be higher than our contractual commitments because certain of our terminaling services agreements with customers do not contain minimumrevenue commitments and because our customers often use other services we provide that are in addition to the services covered by the minimumrevenue commitments. We believe that the fee-based nature of our business, our minimum revenue commitments from our customers, the long-termnature of our contracts with many of our customers and our lack of material direct exposure to changes in commodity prices (except for the value ofrefined product gains and losses arising from terminaling services agreements with certain customers) will provide us with stable cash flows. We do not have material direct commodity price risk. Because we do not purchase or market the products that we handle or transport, our cashflows are not subject to material direct exposure to changes in commodity prices, except for the value of refined product gains and losses arising fromterminaling services agreements with certain customers. We benefit from the strategic fit between our operations and the operations of TransMontaigne Inc. and Morgan Stanley CapitalGroup. The operations of TransMontaigne Inc. and Morgan Stanley Capital Group fit strategically with our broad geographical terminal andtransportation distribution capability. Our terminaling service agreements with TransMontaigne Inc. and Morgan Stanley Capital Group enable them tosupport their refined product supply, risk management and marketing businesses and, at the same time, provide us with stable cash flows and helpensure that our facilities are more fully utilized. Our relationships with TransMontaigne Inc. and Morgan Stanley Capital Group enhance our ability to make strategic acquisitions. Underthe omnibus agreement with TransMontaigne Inc., we have the right to negotiate for the purchase of certain facilities that TransMontaigne Inc.purchases or constructs in the future. In addition, we believe that our relationships with TransMontaigne Inc. and Morgan Stanley Capital Group willprovide us with an advantage in acquiring businesses that have an element of commodity price risk or product marketing and distribution risk inherentin their operations. In these circumstances, we expect that Morgan Stanley Capital Group will assume most or all of the direct commodity priceexposure and that TransMontaigne Inc. will assume most or all of the risks related to distributing and marketing the product. As a result, we expect tooperate the acquired asset infrastructure under terminaling services agreements that will provide us with stable cash flows. Moreover, we believe that thevalue of any terminaling facilities that we acquire will be enhanced if we can concurrently obtain a terminaling services agreement withTransMontaigne Inc. or Morgan Stanley Capital Group.10Table of Contents We have the ability to execute cost-effective expansion and asset enhancement opportunities. We have high utilization of our existing storagecapacity, which enables us to focus on expanding our terminal capacity and acquiring additional terminal capacity for our current and future customers.In addition, the current expansion of our waterborne terminal capacity at our Gulf Coast terminals may facilitate a significant reduction in freight costsfor our customers. We have a substantial presence in Florida, which has significant demand for refined petroleum products, and is not currently served by anylocal refinery or interstate refined product pipeline. Seven of our terminals serve our customers' operations in metropolitan areas in Florida, whichwe believe to be an attractive area for the following reasons:•Refined products are largely distributed in Florida through terminals with waterborne access, such as our terminals, because Florida hasno refineries or interstate refined product pipelines. •The Florida market is attractive to physical commodity traders because they can originate product supplies from multiple locations, bothdomestically and overseas, and transport the product to the terminal by vessel. •The ports served by our terminals are among the busiest cruise ship ports in the United States, with year-round demand. Through TransMontaigne Inc. and Morgan Stanley Capital Group, our general partner has access to a knowledgeable management teamwith significant experience in the energy industry and in executing acquisition and expansion strategies. The members of our general partner'smanagement team have significant experience with regard to the implementation of acquisition, operating and growth strategies in many facets of theenergy industry, including:•crude oil marketing and transportation; •natural gas and natural gas liquid gathering, processing, transportation and marketing; •propane storage, transportation and marketing; and •refined product storage, transportation and marketing.Over the course of their respective careers, members of our general partner's management team have established strong, long-standing relationshipswithin the energy industry, which we believe will enable us to grow and expand our business through both acquisitions and internal expansion. Inaddition, through our affiliation with Morgan Stanley Capital Group, we have access to its strong relationships throughout the energy industry.Competition We face competition from other terminals and pipelines that may be able to supply our customers with integrated terminaling and transportationservices on a more competitive basis. We compete with national, regional and local terminal and transportation companies, including the major integratedoil companies, of widely varying sizes, financial resources and experience. These competitors include BP p.l.c., Chevron U.S.A. Inc., CITGOPetroleum Corporation, Conoco Phillips, Exxon Mobil Corporation, Amerada Hess Corporation, Holly Corporation and its affiliate Holly EnergyPartners, L.P., Kinder Morgan, Inc. and its affiliate Kinder Morgan Energy Partners, L.P., Magellan Midstream Partners, L.P., Marathon AshlandPetroleum, LLC, Motiva Enterprises LLC, Murphy Oil Corporation, NuStar Energy L.P., Sunoco, Inc. and its affiliate Sunoco Logistics Partners L.P.,and11Table of Contentsterminals in the Caribbean. In particular, our ability to compete could be harmed by factors we cannot control, including:•price competition from terminal and transportation companies, some of which are substantially larger than we are and have greaterfinancial resources, and control substantially greater storage capacity, than we do; •the perception that another company can provide better service; and •the availability of alternative supply points, or supply points located closer to our customers' operations. We also compete with national, regional and local terminal and transportation companies for acquisition and expansion opportunities. Some ofthese competitors are substantially larger than us and have greater financial resources and lower costs of capital than we do.Significant Customer Relationships We have several significant customer relationships from which we expect to continue to derive a substantial majority of our revenue for theforeseeable future. These relationships include:Our Relationship With TransMontaigne Inc. And Morgan Stanley Capital Group General. A majority of our business is devoted to providing integrated terminaling and transportation services to Morgan Stanley Capital Group.Pursuant to the terms of our terminaling services agreements with Morgan Stanley Capital Group, we expect to continue to derive a majority of ourrevenue from Morgan Stanley Capital Group for the foreseeable future. We are controlled by our general partner, TransMontaigne GP L.L.C., which is an indirect wholly owned subsidiary of TransMontaigne Inc.Formed in 1995, TransMontaigne Inc. is a terminaling, distribution and marketing company that markets refined petroleum products to wholesalers,distributors and industrial and commercial end users throughout the United States, primarily in the Gulf Coast, Southeast and Midwest regions.TransMontaigne Inc. also owns a 100% interest in Olco Petroleum Group Inc., a Canadian petroleum marketing and terminaling company. As ofFebruary 26, 2010, TransMontaigne Inc. owned six refined product terminals; one dry bulk product terminal; a hydrant system in Port Everglades; andits distribution and marketing business. TransMontaigne Inc.'s marketing operations generally consist of the distribution and marketing of refinedproducts through contract and rack spot sales in the physical markets. On September 1, 2006, a wholly owned subsidiary of Morgan Stanley CapitalGroup purchased all of the issued and outstanding capital stock of TransMontaigne Inc. TransMontaigne Inc. and Morgan Stanley Capital Group have asignificant interest in our partnership through their ownership of common units representing limited partner interests equal to approximately 22.1% ofour aggregate outstanding limited and general partner interests, our sole general partner interest (representing 2% of our aggregate outstanding limitedand general partner interests) and the incentive distribution rights. Morgan Stanley Capital Group is a leading global commodity trader involved in proprietary and counterparty-driven trading in numerouscommodities markets including crude oil and refined products,12Customer LocationMorgan Stanley Capital Group Gulf Coast, Midwest, Brownsville and Southeast facilitiesTransMontaigne Inc Gulf Coast and Brownsville facilitiesValero Marketing and Supply Company River and Brownsville facilitiesMarathon Petroleum Company LLC Gulf Coast and River facilitiesPMI Trading Limited, an affiliate of PEMEX Brownsville facilitiesTable of Contentsnatural gas and natural gas liquids, coal, electric power, base and precious metals and others. Morgan Stanley Capital Group has been actively tradingcrude oil and refined products for over 20 years and on a daily basis trades millions of barrels of physical crude oil and refined products and exchange-traded and over-the-counter crude oil and refined product derivative instruments. Morgan Stanley Capital Group also invests as principal in acquisitionsthat complement Morgan Stanley's commodity trading activities. Morgan Stanley Capital Group has substantial strategic long-term storage capacitylocated on all three coasts of the United States, in Northwest Europe and Asia.Rights of First Offer and Refusal The omnibus agreement provides us with a right of first offer to purchase TransMontaigne Inc.'s and its subsidiaries' right, title and interest in thePensacola, Florida refined petroleum products terminal and any assets acquired in an asset exchange transaction that replace the Pensacola assets. If weand TransMontaigne Inc. cannot agree on the terms of the purchase, TransMontaigne Inc. has the right during a six-month period following our offer tosell such assets to a third party bidder who pays at least 105% of the purchase price offered by us; provided that if TransMontaigne Inc. does not sellthe assets to a third-party bidder during this period, we have the right to purchase the assets on the terms previously offered by us. This right of firstoffer is exercisable on or before December 15, 2010. The omnibus agreement also provides TransMontaigne Inc. a right of first refusal to purchase any assets that we propose to sell. Before we enterinto any contract to sell such terminal or pipeline facilities to a third party, we must give written notice of all material terms of such proposed sale toTransMontaigne Inc. TransMontaigne Inc. will then have the sole and exclusive option for a period of 45 days following receipt of the notice, topurchase the subject facilities for no less than 105% of the purchase price offered by the third party on the terms specified in the notice. TransMontaigne Inc. also has a right of first refusal to contract for the use of any refined product storage capacity that we put into commercialservice (i) after January 1, 2008, or (ii) was subject to a terminaling services agreement that expires or is terminated (excluding a contract renewablesolely at the option of our customer) after January 1, 2008, provided that TransMontaigne Inc. agrees to pay 105% of the fees offered by the third partycustomer.Terminaling Services Agreements Florida Terminals and Razorback Pipeline System Terminaling Services Agreement—Morgan Stanley Capital Group. We have aterminaling services agreement with Morgan Stanley Capital Group relating to our Florida, Mt. Vernon, Missouri and Rogers, Arkansas terminals.Effective June 1, 2008, we amended the terminaling services agreement to include renewable fuels blending functionality at the Florida Terminals. Theinitial term expires on May 31, 2014 for the Florida terminals and on May 31, 2012 for the Razorback pipeline system. After the initial term, theterminaling services agreement will automatically renew for subsequent one-year periods, subject to either party's right to terminate with six months'notice prior to the end of the initial term or the then current renewal term. Under this agreement, Morgan Stanley Capital Group agreed to throughput avolume of refined product that will, at the fee and tariff schedule contained in the agreement, result in minimum throughput payments to us ofapproximately $36.3 million for the contract year ending May 31, 2010 (approximately $36.6 million for the contract year ending May 31, 2011); withstipulated annual increases in throughput payments each contract year thereafter. Morgan Stanley Capital Group's minimum annual throughput paymentis reduced proportionately for any decrease in storage capacity due to out-of-service tank capacity. If a force majeure event occurs that renders performance impossible with respect to an asset for at least 30 consecutive days, Morgan StanleyCapital Group's obligations would be temporarily suspended with respect to that asset. If a force majeure event continues for 30 consecutive days ormore and13Table of Contentsresults in a diminution in the storage capacity we make available to Morgan Stanley Capital Group, Morgan Stanley Capital Group's minimum revenuecommitment would be reduced proportionately for the duration of the force majeure event. Morgan Stanley Capital Group may not assign the terminaling services agreement without our consent. Upon termination of the agreement,Morgan Stanley Capital Group has a right of first refusal to enter into a new terminaling services agreement with us, provided they pay no less than105% of the fees offered by any third party. Southeast Terminaling Services Agreement—Morgan Stanley Capital Group. We have a terminaling and transportation services agreementwith Morgan Stanley Capital Group relating to our Southeast terminals. The terminaling services agreement commenced on January 1, 2008 and has aseven-year term expiring on December 31, 2014, subject to a seven-year renewal option at the election of Morgan Stanley Capital Group. Under thisagreement, Morgan Stanley Capital Group agreed to throughput a volume of refined product at our Southeast terminals that will, at the fee schedulecontained in the agreement, result in minimum throughput payments to us of approximately $33.1 million for the contract year ending December 31,2010; with stipulated annual increases in throughput payments each contract year thereafter. Morgan Stanley Capital Group's minimum annualthroughput payment is reduced proportionately for any decrease in storage capacity due to out-of-service tank capacity. In exchange for its minimumthroughput commitment, we agreed to provide Morgan Stanley Capital Group approximately 8.7 million barrels of light oil storage capacity at ourSoutheast terminals. Under this agreement we also agreed to undertake certain capital projects to provide renewable fuels blending functionality atcertain of our Southeast terminals with estimated completion dates that extend through December 31, 2010. Upon completion of each of the projects,Morgan Stanley Capital Group has agreed to pay us an ethanol blending fee. At December 31, 2009, we had received payments totaling approximately$17 million and we expect to receive future payments through December 31, 2010 from Morgan Stanley Capital Group in the range of $4 million to$8 million. If a force majeure event occurs that renders performance impossible with respect to an asset for at least 30 consecutive days, Morgan StanleyCapital Group's obligations would be temporarily suspended with respect to that asset. If a force majeure event continues for 30 consecutive days ormore and results in a diminution in the storage capacity we make available to Morgan Stanley Capital Group, Morgan Stanley Capital Group's minimumrevenue commitment would be reduced proportionately for the duration of the force majeure event. Morgan Stanley Capital Group may not assign the terminaling services agreement without our consent. Collins Terminaling Services Agreement—Morgan Stanley Capital Group. In January 2010, we entered into a terminaling services agreementwith Morgan Stanley Capital Group relating to our Collins, Mississippi facility that will expire seven years following the in-service date of certain tankcapacity and other improvements to be constructed by us, subject to one-year automatic renewals unless terminated by either party upon 180 days noticeprior to the end of the then-current renewal term. Under this agreement, Morgan Stanley Capital Group agreed to throughput a volume of light oilproducts at our terminal that will, at the fee schedule contained in the agreement, result in minimum throughput payments to us of approximately$4.1 million for the one-year period following the in-service date. In exchange for its minimum revenue commitment, we agreed to undertake certaincapital projects to provide an additional 700,000 barrels of light oil capacity and other improvements at the Collins terminal, with estimated completionto occur on or before May 1, 2011. If a force majeure event occurs that renders performance impossible with respect to an asset for at least 30 consecutive days, Morgan StanleyCapital Group's obligations would be temporarily suspended with respect to that asset. If a force majeure event continues for 30 consecutive days ormore and results in a diminution in the storage capacity we make available to Morgan Stanley Capital Group,14Table of ContentsMorgan Stanley Capital Group's minimum revenue commitment would be reduced proportionately for the duration of the force majeure event. Neither party may transfer or assign this agreement without the consent of the other party unless such assignment is to an affiliate or, in the case ofPartners, a successor in interest to us or to the Collins terminal. Southeast Terminaling Services Agreement—United States Government. We have a terminaling services agreement with the United Statesgovernment that will expire on April 30, 2012. The United States government has the option to extend the agreement for two additional five-yearincrements. Pursuant to the terminaling services agreement, we agreed to provide the United States government with approximately 0.3 million barrelsof light refined product storage capacity at our Selma, NC terminal. Gulf Coast (Mobile) Terminaling Services Agreement—TransMontaigne Inc. We have a terminaling and transportation services agreementwith TransMontaigne Inc. that will expire on December 31, 2012. Under this agreement, TransMontaigne Inc. agreed to throughput at our Mobileterminal a volume of refined products that will, at the fee schedule contained in the agreement, result in minimum revenue to us of approximately$2.5 million for the contract year ending December 31, 2010. Gulf Coast (Florida) Terminaling Services Agreement—Marathon. We have a terminaling services agreement with Marathon regardingapproximately 1.0 million barrels of asphalt storage capacity throughout our Florida facilities that will expire on May 1, 2011. Under the terms of theTerminaling Services Agreement, we are proscribed from placing into commercial service any new or converted asphalt storage capacity at our Floridafacilities without Marathon's express written consent. River Terminaling Services Agreement—Valero. We have a terminaling services agreement with Valero that will expire on April 1, 2013.Pursuant to the terminaling services agreement, we agreed to provide Valero with approximately 1.1 million barrels of light refined product storagecapacity, in the aggregate, at our Cape Girardeau, Evansville, Greenville, Henderson, Owensboro and Paducah terminals. Valero also has a right tomatch any third-party offer to use any existing, new or converted light refined product storage capacity that we put into commercial service at any of theRiver terminals subject to this agreement. If Valero fails to exercise its right to match, it has the right to terminate the terminaling services agreement inits entirety or with respect to the applicable terminal. Brownsville LPG Terminaling Services Agreement—TransMontaigne Inc. We have a terminaling and transportation services agreement withTransMontaigne Inc. relating to our Brownsville, Texas facilities that will expire on March 31, 2010. Under this agreement, TransMontaigne Inc.agreed to throughput at our Brownsville facilities certain minimum volumes of natural gas liquids that will result in minimum revenue to us ofapproximately $1.6 million per year. In exchange for TransMontaigne Inc.'s minimum throughput commitment, we agreed to provideTransMontaigne Inc. approximately 33,000 barrels of LPG storage capacity at our Brownsville facilities. Matamoros LPG Terminaling Services Agreement—TransMontaigne Inc. During 2008, we entered into a terminaling and transportationservices agreement with TransMontaigne Inc. relating to our natural gas liquids storage facility in Matamoros, Mexico that will expire on March 31,2010. Under this agreement, TransMontaigne Inc. agreed to throughput a volume of natural gas liquids that will, at the fee schedule contained in theagreement, result in minimum throughput payments to us of approximately $0.6 million per year. In exchange for TransMontaigne Inc.'s minimumthroughput payments, we agreed to provide TransMontaigne Inc. approximately 7,000 barrels of natural gas liquids storage capacity. Brownsville Terminaling Services Agreements—PMI Trading Limited. We have multiple terminaling services agreements with PMI TradingLimited, an affiliate of PEMEX, relating to our Brownsville,15Table of ContentsTexas facilities that, if not renewed, will expire between August 31, 2010 and June 30, 2016. Under these agreements, PMI agreed to throughput andstore at our terminals certain minimum volumes of aviation gasoline, diesel, gasoline, jet fuel, distillate, and natural gas liquids. We also manage andoperate an approximately 18-mile bi-directional pipeline on behalf of PMI. Brownsville Terminaling Services Agreement—Morgan Stanley Capital Group. We have a terminaling and transportation services agreementwith Morgan Stanley Capital Group, relating to our Brownsville, Texas facilities that will expire on October 31, 2010. Under this agreement, MorganStanley Capital Group agreed to store a specified minimum amount of fuel oils at our terminals that will result in minimum revenue to us ofapproximately $1.3 million per year. In exchange for its minimum revenue commitment, we agreed to provide Morgan Stanley Capital Group aminimum amount of storage capacity for such fuel oils. Brownsville Terminaling Services Agreement—Valero. We have a terminaling services agreement with Valero pursuant to which we agreed toprovide Valero with approximately 168,000 barrels of heavy oil storage capacity at our Brownsville facilities. The current term of the terminalingservices agreement expires on January 31, 2012. At the end of the current term, the terminaling services agreement will automatically renew forsubsequent two-year periods, subject to either party's right to terminate with 90 days notice prior to the end of the then-current renewal term. InSeptember 2009, we entered into an additional terminaling services agreement with Valero pursuant to which we agreed to provide Valero withapproximately 147,000 barrels of light oil storage capacity at our Brownsville facilities. Under this agreement, we also agreed to undertake certaincapital projects with estimated completion dates through August 1, 2010. The current term of the terminaling services agreement expires five years fromthe in-service date of certain capital projects. At the end of the current term, the terminaling services agreement will automatically renew for subsequentfive-year periods, subject to either party's right to terminate with 90 days notice prior to the end of the then-current renewal term. Oklahoma City Revenue Support Agreement—TransMontaigne Inc. We have a revenue support agreement with TransMontaigne Inc. thatprovides that in the event any current third-party terminaling agreement should expire, TransMontaigne Inc. agrees to enter into a terminaling servicesagreement that will expire no earlier than November 1, 2012. The terminaling services agreement will provide that TransMontaigne Inc. agrees tothroughput such volume of refined product as may be required to guarantee minimum revenue to us of $0.8 million per year. If TransMontaigne Inc.fails to meet its minimum revenue commitment in any year, it must pay us the amount of any shortfall within 15 business days following receipt of aninvoice from us. In exchange for TransMontaigne Inc.'s minimum revenue commitment, we agreed to provide TransMontaigne Inc. approximately153,000 barrels of light oil storage capacity at our Oklahoma City terminal. TransMontaigne Inc.'s minimum revenue commitment currently is not ineffect because Shell is under contract through March 31, 2011, for the utilization of the light oil storage capacity at the terminal. Brownsville and River Renewable Fuels Terminaling Services Agreement—TransMontaigne Inc. We have a terminaling and transportationservices agreement with TransMontaigne Inc. relating to certain renewable fuels capacity at our Brownsville and River terminals that will expire onMay 31, 2012. Under this agreement, TransMontaigne Inc. agreed to throughput at these terminals certain minimum volumes of renewable fuels thatwill, at the fee schedule contained in the agreement, result in minimum revenue to us of approximately $0.6 million per year. In exchange forTransMontaigne Inc.'s minimum throughput commitment, we agreed to provide TransMontaigne Inc. approximately 116,000 barrels of storage capacityat these terminals. Other Terminaling Services Agreements. We also have terminaling service agreements with other customers at our terminal facilities forthroughput and storage of refined products, crude oil and other products. These agreements include various minimum throughput commitments, storagecommitments and other terms, including duration, that we negotiate on a case-by-case basis.16Table of ContentsTerminals and Pipeline Control Operations The pipelines we own or operate are operated via geosynchronous satellite, microwave, radio and frame relay communication systems from acentral control room located in Atlanta, Georgia. We also monitor activity at our terminals from this control room. The control center operates with state-of-the-art System Control and Data Acquisition, or SCADA, systems. Our control center is equipped withcomputer systems designed to continuously monitor operational data, including refined product throughput, flow rates and pressures. In addition, thecontrol center monitors alarms and throughput balances. The control center operates remote pumps, motors, engines, and valves associated with thereceipt of refined products. The computer systems are designed to enhance leak-detection capabilities, sound automatic alarms if operational conditionsoutside of pre-established parameters occur, and provide for remote-controlled shutdown of pump stations on the pipeline. Pump stations and meter-measurement points on the pipeline are linked by satellite or telephone communication systems for remote monitoring and control. In addition, ourBrownsville, Texas and Collins, Mississippi facilities contain full back-up/redundant disaster recovery systems covering all of our SCADA systems.Safety and Maintenance We perform preventive and normal maintenance on the pipeline and terminal systems we operate or own and make repairs and replacements whennecessary or appropriate. We also conduct routine and required inspections of the pipeline and terminal tanks we operate or own as required by code orregulation. External coatings and impressed current cathodic protection systems are used to protect against external corrosion. We conduct all cathodicprotection work in accordance with National Association of Corrosion Engineers standards. We continually monitor, test, and record the effectivenessof these corrosion-inhibiting systems. We monitor the structural integrity of all of our Department of Transportation, or DOT, regulated pipeline systems. These pipeline systems includethe Razorback pipeline; a 37-mile pipeline, known as the "Pinebelt pipeline," located in Covington County, Mississippi that transports refined petroleumliquids between our Collins and Collins/Purvis terminal facilities; a 1-mile diesel fuel pipeline, known as the "Belle Meade pipeline," owned by andoperated for Virginia Power Corp. in Richmond, Virginia; the Diamondback pipeline; and an approximately 18-mile, bi-directional refined petroleumliquids pipeline in Texas, known as the "MB pipeline," that we operate and maintain on behalf of PMI Services North America, Inc., an affiliate ofPEMEX. The maintenance of structural integrity includes a program of periodic internal inspections as well as hydrostatic testing that conforms toFederal standards. Beginning in 2002, the Department of Transportation, or DOT, required internal inspections or other integrity testing of all DOT-regulated crude oil and refined product pipelines. We believe that the pipelines we own and manage meet or exceed all DOT inspection requirements forall pipelines located in the United States, and meet or exceed the corresponding Mexican regulatory requirements for the portion of the Diamondbackpipeline located in Mexico. Maintenance facilities containing equipment for pipe repairs, spare parts, and trained response personnel are located along all of these pipelines.Employees participate in simulated spill deployment exercises on a regular basis. They also participate in actual spill response boom deploymentexercises in planned spill scenarios in accordance with Oil Pollution Act of 1990 requirements. We believe that the pipelines we own and manage havebeen constructed and are maintained in all material respects in accordance with applicable federal, state, and local laws and the regulations and standardsprescribed by the American Petroleum Institute, the DOT, and accepted industry practice. At our terminals, tanks designed for gasoline storage are equipped with internal or external floating roofs that minimize emissions and preventpotentially flammable vapor accumulation between17Table of Contentsfluid levels and the roof of the tank. Our terminal facilities have all required facility response plans, spill prevention and control plans, and other plansand programs to respond to emergencies. Many of our terminal loading racks are protected with water deluge systems activated by either heat sensors or an emergency switch. Several ofour terminals also are protected by foam systems that are activated in case of fire.Safety Regulation We are subject to regulation by the DOT under the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, or PIPES, andcomparable state statutes relating to the design, installation, testing, construction, operation, replacement and management of the pipeline facilities weoperate or own. PIPES covers petroleum and petroleum products and requires any entity that owns or operates pipeline facilities to comply with suchregulations and also to permit access to and copying of records and to make certain reports and provide information as required by the Secretary ofTransportation. We believe that we are in material compliance with these PIPES regulations. The DOT Office of Pipeline Safety, or OPS, has promulgated regulations that require qualification of pipeline personnel. These regulations requirepipeline operators to develop and maintain a written qualification program for individuals performing covered tasks on pipeline facilities. The intent ofthese regulations is to ensure a qualified work force and to reduce the probability and consequence of incidents caused by human error. The regulationsestablish qualification requirements for individuals performing covered tasks, and amends certain training requirements in existing regulations. Webelieve that we are in material compliance with these OPS regulations. We also are subject to OPS regulation for High Consequence Areas, or HCAs, for Category 2 pipeline systems (companies operating less than500 miles of jurisdictional pipeline). This regulation specifies how to assess, evaluate, repair and validate the integrity of pipeline segments that couldimpact populated areas, areas unusually sensitive to environmental damage and commercially navigable waterways, in the event of a release. Thepipelines we own or manage are subject to these requirements. The regulation requires an integrity management program that utilizes internal pipelineinspection, pressure testing, or other equally effective means to assess the integrity of pipeline segments in HCAs. The program requires periodicreview of pipeline segments in HCAs to ensure adequate preventative and mitigative measures exist. Through this program, we evaluated a range ofthreats to each pipeline segment's integrity by analyzing available information about the pipeline segment and consequences of a failure in an HCA. Theregulation requires prompt action to address integrity issues raised by the assessment and analysis. We have completed baseline assessments for allsegments. Our terminals also are subject to various state regulations regarding our storage of refined product in aboveground storage tanks. These regulationsrequire, among other things, registration of tanks, financial assurances and inspection and testing, consistent with the standards established by theAmerican Petroleum Institute. We have completed baseline assessments for all of the segments and believe that we are in material compliance with theseaboveground storage tank regulations. We also are subject to the requirements of the federal Occupational Safety and Health Act, or OSHA, and comparable state statutes that regulate theprotection of the health and safety of workers. In addition, the OSHA hazard communication standard, the Environmental Protection Agency, or EPA,community right-to-know regulations under Title III of the Federal Superfund Amendment and Reauthorization Act, and comparable state statutesrequire us to organize and disclose information about the hazardous materials used in our operations. Certain parts of this information must be reportedto employees, state and local governmental authorities, and local citizens upon request. We believe that we are in material compliance with OSHA andstate requirements, including general industry standards, record keeping requirements and monitoring of occupational exposures.18Table of Contents In general, we expect to increase our expenditures during the next decade to comply with higher industry and regulatory safety standards such asthose described above. Although we cannot estimate the magnitude of such expenditures at this time, we do not believe that they will have a materialadverse impact on our results of operations.Environmental Matters Our operations are subject to stringent and complex laws and regulations pertaining to health, safety and the environment. As an owner or operatorof refined product terminals and pipelines, we must comply with these laws and regulations at federal, state and local levels. These laws and regulationscan restrict or impact our business activities in many ways, such as:•requiring remedial action to mitigate releases of hydrocarbons, hazardous substances or wastes caused by our operations or attributableto former operators; •requiring capital expenditures to comply with environmental control requirements; and •enjoining the operations of facilities deemed in non-compliance with permits issued pursuant to such environmental laws andregulations. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including theassessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certainenvironmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hydrocarbons, hazardous substancesor wastes have been released or disposed of. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims forpersonal injury and property damage allegedly caused by the release of hydrocarbons, hazardous substances or other wastes into the environment. The trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment. As a result, therecan be no assurance as to the amount or timing of future expenditures that may be required for environmental compliance or remediation, and actualfuture expenditures may be different from the amounts we currently anticipate. We try to anticipate future regulatory requirements that may affect ouroperations and to plan accordingly to comply with and minimize the costs of such requirements. We do not believe that compliance with federal, state or local environmental laws and regulations will have a material adverse effect on ourbusiness, financial position or results of operations. In addition, we believe that the various environmental activities in which we are presently engagedare not expected to materially interrupt or diminish our operational ability. We cannot assure you, however, that future events, such as changes inexisting laws, the promulgation of new laws, or the development or discovery of new facts or conditions will not cause us to incur significant costs. Thefollowing is a discussion of certain material environmental concerns that relate to our business.Water The Federal Water Pollution Control Act of 1972, renamed and amended as the Clean Water Act or CWA, imposes strict controls against thedischarge of pollutants, including oil and its derivatives into navigable waters. The discharge of pollutants into regulated waters is prohibited except inaccordance with the regulations issued by the EPA or the state. We are subject to various types of storm water discharge requirements at our terminals.The EPA and a number of states have adopted regulations that require us to obtain permits to discharge storm water run-off from our facilities. Suchpermits may require us to monitor and sample the effluent from our operations. The cost involved in obtaining and renewing these storm water permitsis not material. We believe that we are in substantial compliance with effluent limitations at our facilities and with the CWA generally.19Table of Contents The CWA provides penalties for any discharges of petroleum products in reportable quantities and imposes substantial potential liability for thecosts of removing an oil or hazardous substance spill. State laws for the control of water pollution also provide for various civil and criminal penaltiesand liabilities in the event of a release of petroleum or its derivatives in surface waters or into the groundwater. Spill prevention control andcountermeasure requirements of federal laws require, among other things, appropriate containment be constructed around product storage tanks to helpprevent the contamination of navigable waters in the event of a product tank spill, rupture or leak. The primary federal law for oil spill liability is the Oil Pollution Act of 1990, as amended, or OPA, which addresses three principal areas of oilpollution—prevention, containment and cleanup. It applies to vessels, offshore platforms, and onshore facilities, including terminals, pipelines andtransfer facilities. In order to handle, store or transport oil, shore facilities are required to file oil spill response plans with the United States Coast Guard,the OPS, or the EPA. Numerous states have enacted laws similar to OPA. Under OPA and similar state laws, responsible parties for a regulated facilityfrom which oil is discharged may be liable for removal costs and natural resources damages. We believe that we are in substantial compliance withregulations pursuant to OPA and similar state laws. Contamination resulting from spills or releases of refined products is an inherent risk in the petroleum terminal and pipeline industry. To the extentthat groundwater contamination requiring remediation exists around the facilities we own as a result of past operations, we believe any suchcontamination is being controlled or remedied without having a material adverse effect on our financial condition. However, such costs can beunpredictable and are site specific and, therefore, the effect may be material in the aggregate.Air Emissions Our operations are subject to the federal Clean Air Act, or CAA, and comparable state and local statutes. The CAA requires most industrialoperations in the United States to incur expenditures to meet the air emission control standards that are developed and implemented by the EPA and stateenvironmental agencies. These laws and regulations regulate emissions of air pollutants from various industrial sources, including our operations, andalso impose various monitoring and reporting requirements. Such laws and regulations may require a facility to obtain pre-approval for the constructionor modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air emissions and obtain and strictlycomply with air permits containing requirements. Many of our terminaling operations require air permits. These operations generally include volatile organic compound emissions (primarilyhydrocarbons) associated with truck loading activities and tank working and breathing losses. The sources of these emissions are strictly regulatedthrough the permitting process. Such regulation includes stringent control technology and extensive permit review and periodic renewal. The costinvolved in obtaining and renewing these permits is not material. Moreover, any of our facilities that emit volatile organic compounds or nitrogen oxides and are located in ozone non-attainment areas faceincreasingly stringent regulations, including requirements to install various levels of control technology on sources of pollutants. We believe that we arein substantial compliance with existing standards and regulations pursuant to the CAA and similar state and local laws, and we do not anticipate thatimplementation of additional regulations will have a material adverse effect on us. Congress and numerous states are currently considering proposed legislation directed at reducing "greenhouse gas emissions." It is not possible atthis time to predict how legislation that may be enacted to address greenhouse gas emissions would impact our operations. Although future laws andregulations could result in increased compliance costs or additional operating restrictions, they are not20Table of Contentsexpected to have a material adverse effect on our business, financial position, results of operations and cash flows.Hazardous and Solid Waste Our operations are subject to the federal Resource Conservation and Recovery Act, as amended, or RCRA, and comparable state laws, whichimpose detailed requirements for the handling, storage, treatment, and disposal of hazardous and solid waste. All of our terminal facilities are classifiedby the EPA as Conditionally Exempt Small Quantity Generators, except for Owensboro, Kentucky, Montvale, Virginia, Paducah, Kentucky and NewAlbany, Indiana (which are currently classified as Large Quantity Generators, but are expected to be eligible for re-classification as ConditionallyExempt Small Quantity Generators in the near future). Our terminals do not generate hazardous waste except in isolated and infrequent cases. At suchtimes, only third party disposal sites which have been audited and approved by us are used. Our operations also generate solid wastes that are regulatedunder state law or the less stringent solid waste requirements of RCRA. We believe that we are in substantial compliance with the existing requirementsof RCRA and similar state and local laws, and the cost involved in complying with these requirements is not material.Site Remediation The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or CERCLA, also known as the"Superfund" law, and comparable state laws impose liability without regard to fault or the legality of the original conduct, on certain classes of personsresponsible for the release of hazardous substances into the environment. Such classes of persons include the current and past owners or operators ofsites where a hazardous substance was released, and companies that disposed or arranged for disposal of hazardous substances at offsite locations suchas landfills. In the course of our operations we will generate wastes or handle substances that may fall within the definition of a "hazardous substance."CERCLA authorizes the EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seekto recover from the responsible classes of persons the costs they incur. Under CERCLA, we could be subject to joint and several liability for the costsof cleaning up and restoring sites where hazardous substances have been released, for damages to natural resources, and for the costs of certain healthstudies. We believe that we are in substantial compliance with the existing requirements of CERCLA. We currently own, lease, or operate numerous properties and facilities that for many years have been used for industrial activities, including refinedproduct terminaling operations. Hazardous substances, wastes, or hydrocarbons may have been released on or under the properties owned or leased byus, or on or under other locations where such substances have been taken for disposal. In addition, some of these properties have been operated by thirdparties or by previous owners whose treatment and disposal or release of hazardous substances, wastes, or hydrocarbons, was not under our control.These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, wecould be required to remove previously disposed substances and wastes (including substances disposed of or released by prior owners or operators),remediate contaminated property (including groundwater contamination, whether from prior owners or operators or other historic activities or spills), orperform remedial plugging or pit closure operations to prevent future contamination.21Table of Contents For example, we are currently remediating two sites, one at our facility in Rogers, Arkansas and one at our facility in Owensboro, Kentucky. InOctober 2006, we experienced a release of product at our Rogers, Arkansas terminal that was caused by human error and did not involve any systemmalfunctions. Through December 31, 2009, the remediation costs incurred at the Rogers terminal were approximately $3.6 million and we estimate thatthe total cost for completing the remediation will be between approximately $4.5 million and approximately $5.1 million. In October 2008, weexperienced a release of product near our facility in Owensboro, Kentucky due to a leak in a line that connects the terminal's storage capacity to its dockfacility. Through December 31, 2009, the remediation costs incurred at the Owensboro terminal were approximately $2.8 million and we estimate thatthe total cost for completing the remediation will be between approximately $6.1 million and approximately $7.2 million. With respect to the costs of ourremediation activity in these two locations, we believe that our share of the total remediation liability, net of probable reimbursements, will not exceed$1.7 million in the aggregate. Under an indemnification agreement, which contains the indemnification terms previously set forth in the omnibus agreement,TransMontaigne Inc. has agreed to indemnify us for five years after May 27, 2005 against certain potential environmental claims, losses and expensesassociated with the operation of the Florida and Midwest terminals and occurring before May 27, 2005. TransMontaigne Inc.'s maximum liability forthis indemnification obligation is $15.0 million and it has no obligation to indemnify us for aggregate losses until such losses exceed $250,000 in theaggregate. TransMontaigne Inc. has no indemnification obligations with respect to environmental claims made as a result of additions to ormodifications of environmental laws promulgated after May 27, 2005. We have agreed to indemnify TransMontaigne Inc. against environmentalliabilities related to our facilities, to the extent these liabilities are not subject to TransMontaigne Inc.'s indemnification obligations. TransMontaigne Inc.estimates that the total cost for remediating the contamination at the Florida terminals will be between approximately $3.2 million and approximately$9.2 million. TransMontaigne Inc.'s activities are being administered in part by the Florida Department of Environmental Protection under state-administered programs that encourage and help to fund all or a portion of the cleanup of contaminated sites. Under these programs,TransMontaigne Inc. has received, and believes that it is eligible to continue to receive, state reimbursement of a significant portion of the costsassociated with the remediation of the Florida terminals. As such, TransMontaigne Inc. believes that its share of the total remediation liability, net ofprobable reimbursements, will be between approximately $0.6 million and approximately $3.4 million. TransMontaigne Inc.'s remediation liability, netof probable reimbursements, for the Midwest terminals is $nil. Under the purchase agreement for the Brownsville, Texas and River facilities, TransMontaigne Inc. agreed to indemnify us through December 31,2011 against certain potential environmental liabilities associated with the operation of the Brownsville and River facilities that occurred on or prior toDecember 31, 2006. Our environmental losses must first exceed $250,000 and TransMontaigne Inc.'s indemnification obligations are capped at$15.0 million. The cap amount does not apply to any environmental liabilities known to exist as of December 31, 2006. TransMontaigne Inc. believesthat its total remediation liability, net of probable reimbursements, for the Brownsville and River facilities will be between approximately $0.4 millionand approximately $1.6 million. Under the purchase agreement for the Southeast facilities, TransMontaigne Inc. has agreed to indemnify us through December 31, 2012, againstcertain potential environmental liabilities associated with the operation of the Southeast Terminals that occurred on or prior to December 31, 2007. Ourenvironmental losses must first exceed $250,000 and TransMontaigne Inc.'s indemnification obligations are capped at $15.0 million, which cap amountdoes not apply to any environmental liabilities known to exist as of December 31, 2007. TransMontaigne Inc. believes its total remediation liability, netof probable reimbursements, for the Southeast facilities will be between approximately $0.9 million and approximately $1.6 million.22Table of ContentsEndangered Species Act The Endangered Species Act restricts activities that may affect endangered or threatened species or their habitats. While some of our facilities are inareas that may be designated as habitat for endangered or threatened species, we believe that we are in substantial compliance with the EndangeredSpecies Act. However, the discovery of previously unidentified endangered or threatened species could cause us to incur additional costs or becomesubject to operating restrictions or bans in the affected area.Operational Hazards and Insurance Our terminal and pipeline facilities may experience damage as a result of an accident or natural disaster. These hazards can cause personal injuryand loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage and suspension of operations. Wemaintain insurance of various types that we consider adequate to cover our operations, properties and loss of income at specified locations. Coverage fordomestic acts of terrorism as defined in Terrorism Risk Insurance Program Reauthorization Act 2007 are covered under certain casualty insurancepolicies. The insurance covers all of our facilities in amounts that we consider to be reasonable. The insurance policies are subject to deductibles that weconsider reasonable and not excessive. Our insurance does not cover every potential risk associated with operating terminals, pipelines and otherfacilities. Consistent with insurance coverage generally available to the industry, our insurance policies provide limited coverage for losses or liabilitiesrelating to pollution, with broader coverage for sudden and accidental occurrences. The damages associated with Hurricane Ike and other recent tropicalstorms, and their overall effect on the Gulf Coast property insurance industry have adversely impacted the availability and cost of coastal propertycoverage. We share insurance policies, including our general liability and pollution policies, with TransMontaigne Inc. These policies contain caps on theinsurer's maximum liability under the policy, and claims made by either of TransMontaigne Inc. or us are applied against the caps. The possibility existsthat, in any event in which we wish to make a claim under a shared insurance policy, our claim could be denied or only partially satisfied due to claimsmade by TransMontaigne Inc. against the policy cap.Tariff Regulation The Razorback pipeline, which runs between Mt. Vernon, Missouri and Rogers, Arkansas, and the Diamondback pipeline, which runs betweenBrownsville, Texas and Matamoros, Mexico, transport petroleum products subject to regulation by the FERC under the Interstate Commerce Act andthe Energy Policy Act of 1992 and rules and orders promulgated under those statutes. FERC regulation requires that the rates of pipelines providinginterstate service, such as the Razorback and Diamondback pipelines, be filed at FERC and posted publicly, and that these rates be "just and reasonable"and nondiscriminatory. Such rates are currently regulated by the FERC primarily through an index methodology, whereby a pipeline is allowed tochange its rates based on the change from year to year in the Producer Price Index for Finished Goods (PPI-FG), plus a 1.3 percent adjustment for theperiod July 1, 2006 through June 30, 2011. In the alternative, interstate pipeline companies may elect to support rate filings by using a cost-of-servicemethodology, competitive market showings, or actual agreements between shippers and the oil pipeline company. The FERC generally has not investigated interstate rates on its own initiative when those rates have not been the subject of a protest or a complaintby a shipper. A shipper or other party having a substantial economic interest in our rates could, however, challenge our rates. In response to suchchallenges, the FERC could investigate our rates. If our rates were successfully challenged, the amount23Table of Contentsof cash available for distribution to unitholders could be reduced. In the absence of a challenge to our rates, given our ability to utilize either filed rates asannually indexed or to utilize rates tied to cost of service methodology, competitive market showing, or actual agreements between shippers and us, wedo not believe that these regulations would have any negative material monetary impact on us unless the regulations were substantially modified in sucha manner so as to prevent a pipeline company's ability to earn a fair return for the shipment of petroleum products utilizing its transportation system,which we believe to be an unlikely scenario. On July 20, 2004, the United States Court of Appeals for the District of Columbia Circuit, or D.C. Circuit, issued its opinion in BP West CoastProducts, LLC v. FERC, which vacated the portion of the FERC's decision applying the Lakehead policy, under which the FERC allowed a regulatedentity organized as a master limited partnership to include in its cost-of-service an income tax allowance to the extent that entity's unitholders werecorporations subject to income tax. On May 4, 2005, the FERC adopted a policy statement providing that all entities owning public utility assets—oiland gas pipelines and electric utilities—would be permitted to include an income tax allowance in their cost-of-service rates to reflect the actual orpotential income tax liability attributable to their public utility income, regardless of the form of ownership. Any tax pass-through entity seeking anincome tax allowance would have to establish that its partners or members have an actual or potential income tax obligation on the entity's public utilityincome. The FERC's new policy was subsequently challenged before the D.C. Circuit and on May 29, 2007, the D.C. Circuit denied the petitions forreview with respect to the income tax allowance issues. As the FERC continues to apply this policy in individual cases, the ultimate impact remainsuncertain. If the FERC were to act to substantially reduce or eliminate the right of a master limited partnership to include in its cost-of-service an incometax allowance to reflect actual or potential income tax liability on public utility income, it may become more difficult for the Razorback and Diamondbackpipelines to justify their rates if challenged in a protest or complaint. In addition to being regulated by the FERC, we are required to maintain a Presidential Permit from the United States Department of State to operateand maintain the Diamondback pipeline, because the pipeline transports petroleum products across the international boundary line between the UnitedStates and Mexico. The Department of State's regulations do not affect our rates but do require the agency's approval for the international crossing. Wedo not believe that these regulations would have any negative material monetary impact on us unless the regulations were substantially modified, whichwe believe to be an unlikely scenario.Title to Properties The Razorback and Diamondback pipelines are generally constructed on easements and rights-of-way granted by the apparent record owners of theproperty and in some instances these grants are revocable at the election of the grantor. Several rights-of-way for the Razorback pipeline and other realproperty assets are shared with other pipelines and other assets owned by affiliates of TransMontaigne Inc. and by third parties. We have become awarethat the location of our Diamondback pipeline deviates from the boundaries of certain easements obtained when the pipeline was built. We currently areinvestigating the situation and negotiating with individual landowners regarding several of the easements for the Diamondback pipeline in the UnitedStates and Mexico. In many instances, lands over which rights-of-way have been obtained are subject to prior liens that have not been subordinated tothe right-of-way grants. We have obtained permits from public authorities to cross over or under, or to lay facilities in or along, watercourses, countyroads, municipal streets, and state highways and, in some instances, these permits are revocable at the election of the grantor. We have also obtainedpermits from railroad companies to cross over or under lands or rights-of-way, many of which are also revocable at the grantor's election. In somecases, property for pipeline purposes was purchased in fee.24Table of Contents Some of the leases, easements, rights-of-way, permits, licenses and franchise ordinances transferred to us will require the consent of the grantor totransfer these rights, which in some instances is a governmental entity. Our general partner has obtained or is in the process of obtaining sufficient third-party consents, permits, and authorizations for the transfer of the facilities necessary for us to operate our business in all material respects as describedin this annual report. With respect to any consents, permits, or authorizations that have not been obtained, our general partner believes that theseconsents, permits, or authorizations will be obtained, or that the failure to obtain these consents, permits, or authorizations would not have a materialadverse effect on the operation of our business. Our general partner believes that we have satisfactory title to all of our assets. Although title to these properties is subject to encumbrances in somecases, such as customary interests generally retained in connection with acquisition of real property, liens that can be imposed in some jurisdictions forgovernment-initiated action to clean up environmental contamination, liens for current taxes and other burdens, and easements, restrictions, and otherencumbrances to which the underlying properties were subject at the time of our acquisition, our general partner believes that none of these burdensshould materially detract from the value of these properties or from our interest in these properties or should materially interfere with their use in theoperation of our business.Employees TransMontaigne GP L.L.C. is our general partner and manages our operations and activities. TransMontaigne GP L.L.C. is an indirect whollyowned subsidiary of TransMontaigne Inc. Likewise, TransMontaigne Services Inc. is an indirect wholly owned subsidiary of TransMontaigne Inc. andemploys the personnel who provide support to TransMontaigne Inc.'s operations, as well as our operations. As of February 19, 2010, TransMontaigneServices Inc. had approximately 588 employees, of whom 315 provide services directly to us. As of February 19, 2010, none of TransMontaigneServices Inc.'s employees who provide services directly to us were covered by a collective bargaining agreement. TransMontaigne Services Inc.considers its employee relations to be good.ITEM 1A. RISK FACTORS Our business, operations and financial condition are subject to various risks. You should consider carefully the following risk factors, in additionto the other information set forth in this annual report in connection with any investment in our securities. Limited partner interests are inherentlydifferent from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be facedby a corporation engaged in a similar business. If any of the following risks actually occurs, our business, financial condition, results of operations orcash flows could be materially adversely affected. In that case, we might not be able to continue to make distributions on our common units at currentlevels, or at all. As a result of any of these risks, the market value of our common units representing limited partnership interests could decline, andinvestors could lose all or a part of their investment.Risks Inherent in Our Business We depend upon a relatively small number of customers for a substantial majority of our revenue. A substantial reduction of revenue fromone or more of these customers would have a material adverse effect on our financial condition and results of operations. We expect to derive a substantial majority of our revenue from a small number of significant customers for the foreseeable future. Events thatadversely affect the business operations of any one or more of our significant customers may adversely affect our financial condition or results ofoperations. Therefore, we are indirectly subject to the business risks of our significant customers, many of which are similar to the business risks weface. For example, a material decline in refined petroleum product25Table of Contentssupplies available to our customers, or a significant decrease in our customers' ability to negotiate marketing contracts on favorable terms, could result ina material decline in the use of our tank capacity or throughput of product at our terminal facilities, which would likely cause our revenue and results ofoperations to decline. In addition, if any of our significant customers were unable to meet its contractual commitments to us for any reason, then ourrevenue and cash flow would decline. The obligations of several of our key customers under their terminaling services agreements may be reduced or suspended in somecircumstances, which would adversely affect our financial condition and results of operations. Our agreements with several of our significant customers provide that, if any of a number of events occur, which we refer to as events of forcemajeure, and the event renders performance impossible with respect to a facility, usually for a specified minimum period of days, our customer'sobligations would be temporarily suspended with respect to that facility. In that case, a significant customer's minimum revenue commitment may bereduced or the contract may be subject to termination. As a result, our revenue and results of operations could be materially adversely affected. If one or more of our current terminaling services agreements is terminated or expires and we are unable to secure comparable alternativearrangements, our financial condition and results of operations will be adversely affected. We have terminaling services agreements that expire on various dates ranging from 2010 to 2016. After the expiration of each of these terminalingservices agreements, the customers may elect not to continue to engage us to provide services. In addition, even if a customer does engage us, the termsof any renegotiated agreement may be less favorable than the agreement it replaces. In either case, we may not be able to generate sufficient additionalrevenue from third parties to replace any shortfall in revenue or increase in costs. Additionally, we may incur substantial costs if modifications to ourterminals are required by a new or renegotiated terminaling services agreement. To the extent a customer does not extend or renew a terminaling servicesagreement, if we extend or renew such a terminaling services agreement on less favorable terms or if we must incur substantial costs in relation to a newor renegotiated terminaling services agreement, our financial condition and results of operations could be adversely affected. Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities. Our level of debt could have important consequences to us. For example our level of debt could:•impair our ability to obtain additional financing, if necessary, for distributions to unitholders, working capital, capital expenditures,acquisitions or other purposes; •require us to dedicate a substantial portion of our cash flow to make principal and interest payments on our debt, reducing the funds thatwould otherwise be available for operations and future business opportunities; •make us more vulnerable to competitive pressures, changes in interest rates or a downturn in our business or the economy generally; •impair our ability to make quarterly distributions to our unitholders; and •limit our flexibility in responding to changing business and economic conditions. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducingdistributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancingour debt, or26Table of Contentsseeking additional equity capital. We may not be able to affect any of these actions on satisfactory terms, or at all. Our senior secured credit facility also contains covenants limiting our ability to make distributions to unitholders in certain circumstances. Inaddition, our senior secured credit facility contains various covenants that limit, among other things, our ability to incur indebtedness, grant liens or enterinto a merger, consolidation or sale of assets. Furthermore, our senior secured credit facility contains covenants requiring us to maintain certain financialratios and tests. Any future breach of any of these covenants or our failure to meet any of these ratios or conditions could result in a default under theterms of our senior secured credit facility, which could result in acceleration of our debt and other financial obligations. If we were unable to repay thoseamounts, the lenders could initiate a bankruptcy proceeding or liquidation proceeding or proceed against the collateral. In the event we are required to refinance our existing debt in unfavorable market conditions, we may have to pay higher interest rates and besubject to more stringent financial covenants, which could adversely affect our results of operations and may impair our ability to make quarterlydistributions to our unitholders. Our existing senior secured credit facility matures by its terms in December 2011. At December 31, 2009, we had outstanding borrowings ofapproximately $165.0 million under our senior secured credit facility. Our credit facility provides that we pay interest on outstanding balances at interestrates based on market rates plus specified margins, ranging from 1.5% to 2.5% depending on the total leverage ratio in the case of loans with interestrates based on LIBOR, and ranging from 0.5% to 1.5% depending on the total leverage ratio in the case of loans with interest rates based on the primerate. In the event we are required to refinance our senior secured credit facility in unfavorable market conditions, we may have to pay interest at higherrates on outstanding borrowings and may be subject to more stringent financial covenants than we are today, which could adversely affect our results ofoperations and may impair our ability to make quarterly distributions to our unitholders. Our continued working capital requirements, distributions to unitholders and expansion programs may require access to additional capital.Tightened credit markets or more expensive capital could impair our ability to maintain or grow our operations, or to fund distributions to ourunitholders. Our primary liquidity needs are to fund our working capital requirements, distributions to unitholders and capital expenditures. At December 31,2009, our senior secured credit facility provides for a maximum borrowing line of credit equal to $200 million, which may be increased by up to anadditional $100 million subject to the approval of the administrative agent and the receipt of additional commitments from one or more lenders. AtDecember 31, 2009, our outstanding borrowings under the senior secured credit facility were approximately $165 million, resulting in available capacityof approximately $35 million. At December 31, 2009, we have capital projects that currently are or will be under construction with estimated completiondates that extend through March 31, 2011, pursuant to which we expect to incur between $29 million and $33 million in remaining capital expenditures.We expect to fund these capital expenditures with additional borrowings under our senior secured credit facility and payments from Morgan StanleyCapital Group in the range of $4 million to $8 million, which are due and payable upon completion of certain of the capital projects. Upon our paymentof the remaining capital expenditures to complete the capital projects referred to above, our receipt of payments from Morgan Stanley Capital Group anda reduction in our outstanding borrowings under the senior secured credit facility considering the net proceeds and cash contribution of approximately$52.1 million from our January 15, 2010 equity offering, we currently expect to have approximately $60 million in available capacity under our seniorsecured credit facility. If we cannot obtain adequate financing to complete the approved capital projects while maintaining our current operations, wemay not be able to continue to operate our business as it is currently conducted, or we may be unable to maintain or grow the quarterly distribution toour unitholders.27Table of Contents Moreover, our long term business strategies include acquiring additional energy-related terminaling and transportation facilities and furtherexpansion of our existing terminal capacity. We will need to raise additional funds to grow our business and implement these strategies. We anticipatethat such additional funds would be raised through equity or debt financings. Any equity or debt financing, if available at all, may not be on terms thatare favorable to us. An inability to access the capital markets may result in a substantial increase in our leverage and have a detrimental impact on ourcreditworthiness. If we cannot obtain adequate financing, we may not be able to fully implement our business strategies, and our business, results ofoperations and financial condition would be adversely affected. Morgan Stanley Capital Group, which is our largest customer and controls our general partner, is owned by Morgan Stanley. OnSeptember 21, 2008, Morgan Stanley became a bank holding company under applicable federal banking law and regulations, which imposeregulatory limitations on Morgan Stanley's ability to conduct certain nonbanking activities or retain or make certain investments. If the Board ofGovernors of the Federal Reserve System, or the FRB, determines that any of our activities or investments would be impermissible under the BankHolding Company Act, or BHC Act, and Morgan Stanley is unable to obtain relief from the FRB within the statutory two-year grace period, withthe possibility of three one-year extensions, Morgan Stanley (i) may cause us to discontinue any such activity or divest any such investment, or(ii) may transfer control of our general partner to an unaffiliated third party, prior to the end of the referenced grace period. On September 21, 2008, Morgan Stanley obtained the approval of the Board of Governors of the Federal Reserve System, or the FRB, to becomea bank holding company. Two days later, Morgan Stanley became a financial holding company under the BHC Act. As a financial holding company,Morgan Stanley will be able to engage in any activity that is financial in nature, incidental to a financial activity or complementary to a financial activity.The BHC Act, by its terms, provides any company, such as Morgan Stanley, that becomes a financial holding company a two-year grace period toconform its existing nonfinancial activities and investments to the requirements of the BHC Act with the possibility of three one-year extensions. TheBHC Act grandfathers "activities related to the trading, sale or investment in commodities and underlying physical properties," provided that MorganStanley conducted any such type of activities as of September 30, 1997 and provided that certain other conditions are satisfied, which conditions arereasonably in the control of Morgan Stanley. In addition, the BHC Act permits the FRB to determine by regulation or order that certain activities arecomplementary to a financial activity and do not pose a risk to safety and soundness. The FRB has previously determined that a range of commoditiesactivities are either financial in nature, incidental to a financial activity, or complementary to a financial activity. During April 2009, Morgan Stanley advised us that it has conducted an internal review and has concluded that, based upon its review, all of ouractivities and investments are permissible under the BHC Act. The FRB has not yet completed its review of these activities and investments. The FRB could conclude that certain of our activities or investmentswill not be deemed permissible under the BHC Act. If so, Morgan Stanley (i) may cause us to discontinue any such activity or divest any suchinvestment or (ii) may transfer control of our general partner to an unaffiliated third party, prior to the end of the referenced grace period. We are unableto predict whether, if either of these actions is required, it would have a material adverse impact on our financial condition or results of operations.28Table of Contents Upon becoming a financial holding company, Morgan Stanley became subject to the consolidated supervision and regulation of the FRB. As aresult, our general partner, which is an indirectly wholly owned subsidiary of Morgan Stanley, and the Partnership are now also subject to suchsupervision and regulation. In addition, the statutes and regulations governing the activities of financial holding companies are subject to change fromtime to time. We are currently unable to predict whether becoming subject to the consolidated supervision and regulation affecting Morgan Stanley as afinancial holding company, or any future changes in the statutes and regulations governing the activities of financial holding companies, will have amaterial impact on us, or what any such impact may be. We are currently unable to predict whether the FRB will conclude that certain of our activities or investments will not be deemed permissible underthe BHC Act. We are therefore unable to predict whether Morgan Stanley would be required to cause us to discontinue any such activities orinvestments, or whether Morgan Stanley would be required to transfer control of our general partner to an unaffiliated third party. We are, therefore,also unable to predict whether, if either of these actions is required, it would have a material adverse impact on our financial condition or results ofoperation. We also cannot currently predict whether, if Morgan Stanley is required to transfer control of our general partner to an unaffiliated third party,it would materially affect our relationship with Morgan Stanley Capital Group, or materially adversely affect our results of operations or financialcondition. In addition, the uncertainty surrounding our future relationship with Morgan Stanley may suppress the market value of our common units. If we do not make acquisitions on economically acceptable terms, any future growth will be limited. Our ability to grow is dependent principally on our ability to make acquisitions that are attractive because they are expected to result in an increasein our quarterly distributions to unitholders. Our acquisition strategy is based, in part, on our expectation of ongoing divestitures of product terminal andtransportation facilities by large industry participants. A material decrease in such divestitures would limit our opportunities for future acquisitions andcould adversely affect our operations and cash flows. In addition, we may be unable to make attractive acquisitions for any of the following reasons, among others:•because we are outbid by competitors, some of which are substantially larger than us and have greater financial resources and lowercosts of capital than we do; •because we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them, or acceptableterminaling services contracts with them or another customer; or •because we are unable to raise financing for such acquisitions on economically acceptable terms. If we consummate future acquisitions, our capitalization and results of operations may change significantly. Any acquisitions we make are subject to substantial risks, which could adversely affect our financial condition and results of operations. Any acquisition involves potential risks, including risks that we may:•fail to realize anticipated benefits, such as cost-savings or cash flow enhancements; •decrease our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions; •significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;29Table of Contents•encounter difficulties operating in new geographic areas or new lines of business; •incur or assume unanticipated liabilities, losses or costs associated with the business or assets acquired for which we are not indemnifiedor for which the indemnity is inadequate; •be unable to hire, train or retain qualified personnel to manage and operate our growing business and assets; •less effectively manage our historical assets because of the diversion of management's attention; or •incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges. If any acquisitions we ultimately consummate result in one or more of these outcomes, our financial condition and results of operations may beadversely affected. For example, effective December 31, 2007, we acquired the Diamondback Pipeline running from Brownsville, Texas to Matamoros, Mexico, withassociated rights of way and easements. In late 2008 and early 2009, we were notified that the location of the pipeline deviates in certain respects fromthe easements granted in connection with its construction. We are continuing to investigate the situation and negotiate with individual landownersregarding several of the easements for the pipelines in the United States and Mexico. In the event we are unable to correct the easements and are insteadrequired to relocate a portion of the Diamondback pipeline to conform with the current easements, we could incur significant costs and our results ofoperations and cash flows may be adversely affected. Competition from other terminals and pipelines that are able to supply our customers with storage capacity at a lower price could adverselyaffect our financial condition and results of operations. We face competition from other terminals and pipelines that may be able to supply our customers with integrated terminaling services on a morecompetitive basis. We compete with national, regional and local terminal and pipeline companies, including the major integrated oil companies, of widelyvarying sizes, financial resources and experience. Our ability to compete could be harmed by factors we cannot control, including:•price competition from terminal and transportation companies, some of which are substantially larger than us and have greater financialresources and control substantially greater product storage capacity, than we do; •the perception that another company may provide better service; and •the availability of alternative supply points or supply points located closer to our customers' operations. If we are unable to compete with services offered by other enterprises, our financial condition and results of operations would be adverselyaffected. We are exposed to the credit risks of Morgan Stanley Capital Group and TransMontaigne Inc. and our other significant customers, whichcould affect our creditworthiness. Any material nonpayment or nonperformance by such customers could also adversely affect our financialcondition and results of operations. Because of Morgan Stanley Capital Group's and TransMontaigne Inc.'s ownership interest in and control of us, the strong operational linksbetween Morgan Stanley Capital Group and TransMontaigne Inc. and us and our reliance on Morgan Stanley Capital Group and TransMontaigne Inc.for a substantial majority of our revenue, if one or more credit rating agencies were to view unfavorably the credit quality of Morgan Stanley CapitalGroup or TransMontaigne Inc.,30Table of Contentswe could experience an increase in our borrowing costs or difficulty accessing capital markets. Such a development could adversely affect our ability togrow our business. We are subject to risks of loss resulting from nonpayment or nonperformance by our other significant customers. Some of our significantcustomers may be highly leveraged and subject to their own operating and regulatory risks. Any material nonpayment or nonperformance by our othersignificant customers could require us to pursue substitute customers for our affected assets or provide alternative services. There can be no assurancethat any such efforts would be successful or would provide similar fees. These events could adversely affect our financial condition and results ofoperations. A significant decrease in demand for refined products due to price volatility or adverse economic conditions may cause one or more of oursignificant customers to reduce their use of our tank capacity and throughput volumes at our terminal facilities, which would adversely affect ourfinancial condition and results of operations. The recent volatile market conditions, economic recession resulting in lower consumer spending on gasolines, distillates and travel, and record highprices of refined products as seen during 2008 may cause a reduction in demand for refined products, which could result in a material decline in the useof our tank capacity or throughput of product at our terminal facilities. Additionally, the continued volatility in the price of refined products may renderour customers' hedging activities ineffective, which could cause one or more of our significant customers to decrease their supply and marketingactivities in order to reduce their exposure to price fluctuations. Additional factors that could lead to a decrease in market demand for refined products include:•an increase in the market price of crude oil that leads to higher refined product prices; •higher fuel taxes or other governmental or other regulatory actions that increase, directly or indirectly, the cost of gasolines or otherrefined products; or •a shift by consumers to more fuel-efficient or alternative fuel vehicles or an increase in fuel economy, whether as a result of technologicaladvances by manufacturers, pending legislation proposing to mandate higher fuel economy or otherwise. Any decrease in supply and marketing activities may result in reduced throughput volumes at our terminal facilities, which would adversely affectour financial condition and results of operations. Because of recent, unprecedented contraction in global financial and credit markets, one or more of our significant customers may becomeunable to secure financing arrangements adequate to purchase their desired volume of product, which could reduce use of our tank capacity andthroughput volumes at our terminal facilities and adversely affect our financial condition and results of operations. The contraction in the global financial and credit markets in 2008 and 2009 has adversely affected the liquidity of many large financial institutionsand may affect other businesses in the future. In part, these conditions have reduced the credit available to various enterprises, including those involvedin the supply and marketing of refined products. As a result of these conditions, some of our customers may suffer short or long-term reductions intheir ability to finance their supply and marketing activities, or may voluntarily elect to reduce their supply and marketing activities in order to preserveworking capital. A significant decrease in our customers' ability to secure financing arrangements adequate to support their historic refined productthroughput volumes could result in a material decline in use of our tank capacity or the throughput of refined product at our terminal facilities. In thecurrent economic climate, we may not be able to generate sufficient additional revenue from third parties to replace any shortfall in revenue from ourcurrent customers, which would likely cause our revenue and31Table of Contentsresults of operations to decline and may impair our ability to make quarterly distributions to our unitholders. Our business involves many hazards and operational risks, including adverse weather conditions, which could cause us to incur substantialliabilities and increased operating costs. Our operations are subject to the many hazards inherent in the terminaling and transportation of products, including:•leaks or accidental releases of products or other materials into the environment, whether as a result of human error or otherwise; •extreme weather conditions, such as hurricanes, tropical storms, and rough seas, which are common along the Gulf Coast; •explosions, fires, accidents, mechanical malfunctions, faulty measurement and other operating errors; and •acts of terrorism or vandalism. If any of these events were to occur, we could suffer substantial losses because of personal injury or loss of life, severe damage to and destructionof storage tanks, pipelines and related property and equipment, and pollution or other environmental damage resulting in curtailment or suspension ofour related operations and potentially substantial unanticipated costs for the repair or replacement of property and environmental cleanup. In addition, ifwe suffer accidental releases or spills of products at our terminals or pipelines, we could be faced with material third-party costs and liabilities, includingthose relating to claims for damages to property and persons. For example, in October 2008 we experienced a release of product at our facility inOwensboro, Kentucky, which we anticipate will result in approximately $0.9 million in unreimbursed environmental remediation costs and productlosses. Furthermore, events like hurricanes can affect large geographical areas which can cause us to suffer additional costs and delays in connectionwith subsequent repairs and operations because contractors and other resources are not available, or are only available at substantially increased costsfollowing widespread catastrophes. Expanding our business by constructing new facilities subjects us to risks that the project may not be completed on schedule and that thecosts associated with the project may exceed our estimates or budgeted costs, which could adversely affect our financial condition and results ofoperations. The construction of additions or modifications to our existing terminal and transportation facilities, and the construction of new terminals andpipelines, involves numerous regulatory, environmental, political, legal and operational uncertainties beyond our control and requires the expenditure ofsignificant amounts of capital. If we undertake these projects, they may not be completed on schedule or at all and may exceed the budgeted cost.Moreover, our revenue may not increase immediately upon the expenditure of funds on a particular project. For instance, if we construct additionalstorage capacity, the construction may occur over an extended period of time, and we will not receive any material increases in revenue until the projectis completed. Moreover, we may construct additional storage capacity to capture anticipated future growth in consumption of products in a market inwhich such growth does not materialize. Because of our lack of asset diversification, adverse developments in our terminals or pipeline operations could adversely affect our revenueand cash flows. We rely exclusively on the revenue generated from our terminals and pipeline operations. Because of our lack of diversification in asset type, anadverse development in these businesses would have a32Table of Contentssignificantly greater impact on our financial condition and results of operations than if we maintained more diverse assets. Our operations are subject to governmental laws and regulations relating to the protection of the environment that may expose us tosignificant costs and liabilities. Our business is subject to the jurisdiction of numerous governmental agencies that enforce complex and stringent laws and regulations with respectto a wide range of environmental, safety and other regulatory matters. We could be adversely affected by increased costs resulting from more strictpollution control requirements or liabilities resulting from non-compliance with required operating or other regulatory permits. New environmental lawsand regulations might adversely impact our activities, including the transportation, storage and distribution of petroleum products. Federal, state andlocal agencies also could impose additional safety requirements, any of which could affect our profitability. Furthermore, our failure to comply withenvironmental or safety related laws and regulations also could result in the assessment of administrative, civil and criminal penalties, the imposition ofinvestigatory and remedial obligations and even the issuance of injunctions that restrict or prohibit the performance of our operations. Terrorist attacks, and the threat of terrorist attacks, have resulted in increased costs to our business. Continued hostilities in the Middle Eastor other sustained military campaigns may adversely impact our ability to make distributions to our unitholders. The long-term impact of terrorist attacks, such as the attacks that occurred on September 11, 2001, and the threat of future terrorist attacks, on theenergy transportation industry in general, and on us in particular, is impossible to predict. Increased security measures that we have taken as aprecaution against possible terrorist attacks have resulted in increased costs to our business. Uncertainty surrounding continued hostilities in the MiddleEast or other sustained military campaigns may affect our operations in unpredictable ways, including the possibility that infrastructure facilities couldbe direct targets of, or indirect casualties of, an act of terrorism. We are not fully insured against all risks incident to our business, and could incur substantial liabilities as a result. We may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions,premiums and deductibles for certain of our insurance policies have increased substantially, and could escalate further. In some instances, certaininsurance could become unavailable or available only for reduced amounts of coverage. For example, our insurance carriers require broad exclusions forlosses due to terrorist acts. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on ourfinancial condition. In accordance with typical industry practice, we do not have any property or title insurance on the Razorback and Diamondbackpipelines. We share insurance policies, including our general liability and pollution policies, with TransMontaigne Inc. These policies contain caps on theinsurer's maximum liability under the policy, and claims made by either of TransMontaigne Inc. or us are applied against the caps. In the event we reachthe cap, we would seek to acquire additional insurance in the marketplace; however, we can provide no assurance that such insurance would be availableor if available, at a reasonable cost. The possibility exists that, in any event in which we wish to make a claim under a shared insurance policy, our claimcould be denied or only partially satisfied due to claims made by TransMontaigne Inc. against the policy cap.33Table of Contents Many of our storage tanks and portions of our pipeline system have been in service for several decades that could result in increasedmaintenance or remediation expenditures, which could adversely affect our results of operations and our ability to pay cash distributions. Our pipeline and storage assets are generally long-lived assets. As a result, some of those assets have been in service for many decades. The ageand condition of these assets could result in increased maintenance or remediation expenditures. Any significant increase in these expenditures couldadversely affect our results of operations, financial position and cash flows, as well as our ability to pay cash distributions.Risks Inherent in an Investment in Us We may not have sufficient cash from operations to enable us to maintain or grow the distribution to our unitholders followingestablishment of cash reserves and payment of fees and expenses, including payments to our general partner. The amount of cash we can distribute on our common units principally depends upon the amount of cash we generate from our operations, whichwill fluctuate from quarter to quarter based on, among other things:•the level of consumption of products in the markets in which we operate; •the prices we obtain for our services; •the level of our operating costs, including payments to our general partner; and •prevailing economic conditions. Additionally, the actual amount of cash we have available for distribution to our unitholders depends on other factors such as:•the level of capital expenditures we make; •the restrictions contained in our debt instruments and our debt service requirements; •fluctuations in our working capital needs; and •the amount, if any, of reserves, including reserves for future capital expenditures and other matters, established by our general partner inits discretion. The amount of cash we have available for distribution to our unitholders depends primarily on our cash flow, including cash flow from operationsand working capital borrowings, and not solely on profitability, which will be affected by non-cash items. As a result, we may make cash distributionsto our unitholders during periods when we incur net losses and may not make cash distributions to our unitholders during periods when we generate netearnings. We may not be able to obtain debt or equity financing on terms that are favorable to us, if at all, and we may be required to fund our workingcapital requirements principally on cash generated by our operations and borrowings under our senior secured credit facility. As a result, we may not beable to maintain or grow our quarterly distribution to our unitholders. TransMontaigne Inc. controls our general partner, which has sole responsibility for conducting our business and managing ouroperations. TransMontaigne Inc. and Morgan Stanley Capital Group have conflicts of interest and limited fiduciary duties, which may permitthem to favor their own interests to our detriment. TransMontaigne GP L.L.C. is our general partner and manages our operations and activities. TransMontaigne GP L.L.C. is an indirect whollyowned subsidiary of TransMontaigne Inc. Likewise, TransMontaigne Services Inc. is an indirect wholly owned subsidiary of TransMontaigne Inc. and34Table of Contentsemploys the personnel who provide support to TransMontaigne Inc.'s operations, as well as our operations. TransMontaigne Inc., in turn, is whollyowned by Morgan Stanley Capital Group, which is the principal commodities trading arm of Morgan Stanley. Neither our general partner nor its boardof directors is elected by our unitholders and our unitholders have no right to elect our general partner or its board of directors on an annual or othercontinuing basis. Furthermore, unitholders may be unable to remove our general partner without its consent because our general partner and its affiliatesown units representing approximately 22.5% of our aggregate outstanding limited partner interests. The vote of the holders of at least 662/3% of alloutstanding common units, including any common units owned by our general partner and its affiliates, but excluding the general partner interest, votingtogether as a single class, is required to remove our general partner. Additionally, any or all of the provisions of our omnibus agreement with TransMontaigne Inc., other than the indemnification provisions, will beterminable by TransMontaigne Inc. at its option if our general partner is removed without cause and common units held by our general partner and itsaffiliates are not voted in favor of that removal. Cause is narrowly defined in the omnibus agreement to mean that a court of competent jurisdiction hasentered a final, non-appealable judgment finding our general partner liable for actual fraud or willful or wanton misconduct in its capacity as our generalpartner. Cause does not include most cases of charges of poor management of the business. All of the executive officers of our general partner are affiliated with TransMontaigne Inc. and three of our general partner's directors are affiliatedwith Morgan Stanley Capital Group. Therefore, conflicts of interest may arise between TransMontaigne Inc. and its affiliates, including Morgan StanleyCapital Group and our general partner, on the one hand, and us and our unitholders, on the other hand. In resolving those conflicts of interest, ourgeneral partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. The following are potential conflicts of interest:•TransMontaigne Inc. and Morgan Stanley Capital Group, as users of our pipeline and terminals, have economic incentives not to causeus to seek higher tariffs or higher terminaling service fees, even if such higher rates or terminaling service fees would reflect rates thatcould be obtained in arm's-length, third-party transactions. •Morgan Stanley Capital Group, TransMontaigne Inc. and their affiliates may engage in competition with us under certain circumstances. •Neither our partnership agreement nor any other agreement requires TransMontaigne Inc. or Morgan Stanley Capital Group to pursue abusiness strategy that favors us. This entitles our general partner to consider only the interests and factors that it desires, and it has noduty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner.TransMontaigne Inc.'s and Morgan Stanley Capital Group's respective directors and officers have fiduciary duties to make decisions inthe best interests of those companies, which may be contrary to our interests or the interests of our other customers. •Our general partner is allowed to take into account the interests of parties other than us, such as TransMontaigne Inc. and MorganStanley Capital Group, in resolving conflicts of interest. Specifically, in determining whether a transaction or resolution is "fair andreasonable," our general partner may consider the totality of the relationships between the parties involved, including other transactionsthat may be particularly advantageous or beneficial to us. •Officers of TransMontaigne Inc. who provide services to us also devote significant time to the businesses of TransMontaigne Inc., andare compensated by TransMontaigne Inc. for the services rendered to it.35Table of Contents•Our general partner has limited its liability and reduced its fiduciary duties, and also has restricted the remedies available to ourunitholders for actions that, without the limitations, might constitute breaches of fiduciary duty. Our general partner will not have anyliability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning itbelieved that its decision was in the best interests of our partnership. •Our general partner determines the amount and timing of acquisitions and dispositions, capital expenditures, borrowings, issuance ofadditional partnership securities, and reserves, each of which can affect the amount of cash that is distributed to our unitholders. •Our general partner determines the amount and timing of any capital expenditures by our partnership and whether a capital expenditure isa maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduceoperating surplus. That determination can affect the amount of cash that is distributed to our unitholders. •Our general partner may use an amount, equal to $33.2 million as of December 31, 2009, which would not otherwise constituteoperating surplus, in order to permit the payment of cash distributions, $10.3 million of which would go to TransMontaigne Inc. andMorgan Stanley Capital Group in the form of distributions on their common units, general partner interest and incentive distributionrights. •Our general partner determines which out-of-pocket costs incurred by TransMontaigne Inc. are reimbursable by us. •Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to usor entering into additional contractual arrangements with any of these entities on our behalf. •Our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for anyacts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining thatour general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct. •Our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates, including the terminalingservices agreements with TransMontaigne Inc. and Morgan Stanley Capital Group. •Our general partner decides whether to retain separate counsel, accountants, or others to perform services on our behalf. Cost reimbursements, which will be determined by our general partner, and fees due our general partner and its affiliates for servicesprovided are and will continue to be substantial and will reduce our cash available for distribution to unitholders. Payments to our general partner are and will continue to be substantial and will reduce the amount of available cash for distribution to unitholders.For the year ended December 31, 2009, we paid TransMontaigne Inc. and its affiliates an administrative fee of approximately $10.0 million, anadditional insurance reimbursement of approximately $2.9 million and $1.2 million as partial reimbursement for grants to key employees ofTransMontaigne Inc. and its affiliates under the TransMontaigne Services Inc. savings and retention plan. Both the administrative fee and the insurancereimbursement are subject to increase in the event we acquire or construct facilities to be managed and operated by TransMontaigne Inc. Our generalpartner and its affiliates will continue to be entitled to reimbursement for all other direct expenses they incur on our behalf, including the salaries of andthe cost of employee benefits for employees working on-site at our terminals and pipelines. Our general36Table of Contentspartner will determine the amount of these expenses. Our general partner and its affiliates also may provide us other services for which we will becharged fees as determined by our general partner. The Omnibus Agreement expires on December 31, 2014, subject to our right to extend the agreementfor an additional seven years if Morgan Stanley Capital Group elects to renew the terminaling services agreement for the Southeast terminals. If we areunable to renew the Omnibus Agreement on terms that are satisfactory to us or if we are required to pay a higher administrative fee, our results ofoperations and financial condition could be adversely affected. The control of our general partner may be transferred to a third party without unitholder consent. Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without theconsent of the unitholders. Furthermore, our partnership agreement does not restrict the ability of the members of our general partner from transferringtheir respective limited liability company interests in our general partner to a third party. The new members of our general partner could then be in aposition to replace the board of directors and officers of our general partner with their own choices and to control the decisions taken by the board ofdirectors and officers. Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price. If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, but not theobligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the common units held by unaffiliated persons at aprice not less than their then-current market price. As a result, unitholders may be required to sell their common units at an undesirable time or price andmay not receive any return on their investment. Unitholders may also incur a tax liability upon a sale of their common units. At February 26, 2010,affiliates of our general partner own approximately 22.5% of our aggregate outstanding common units representing limited partner interests.Tax Risks Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as not being subject to a material amountof entity-level taxation by states. If the Internal Revenue Service were to treat us as a corporation or if we were to become subject to a materialamount of entity-level taxation for state tax purposes, then our cash available for distribution to unitholders would be substantially reduced. The anticipated after-tax benefit of an investment in the common units depends largely on our being treated as a partnership for federal income taxpurposes. If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our income at the corporate tax rate,which is currently a maximum of 35%. In such a circumstance, distributions to our unitholders would generally be taxed again as corporate distributions(if such distributions were less than our earnings and profits) and no income, gains, losses, deductions or credits would flow through to ourunitholders. Imposition of a corporate tax would substantially reduce our cash flows and after-tax return to our unitholders. This likely would cause asubstantial reduction in the value of the common units. Any modification to the U.S. federal income tax laws and interpretations thereof may or may not be applied retroactively and could make it moredifficult or impossible to meet the qualifying income requirements, affect or cause us to change our business activities, affect the tax considerations of aninvestment in us, change the character or treatment of portions of our income and adversely affect an investment in our common units. For example, inresponse to certain recent developments, members of Congress are considering substantive changes to the definition of qualifying income under37Table of ContentsSection 7704(d) of the Internal Revenue Code and the treatment of certain types of income earned from profits interests in partnerships. It is possiblethat these efforts could result in changes to the existing U.S. tax laws that affect publicly traded partnerships, including us. We are unable to predictwhether any of these changes or other proposals will ultimately be enacted. Any such changes could negatively impact the value of an investment in ourcommon units. In addition, because of widespread state budget deficits, several states are evaluating ways to subject partnerships to entity-level taxation throughthe imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us as an entity, our cash flows would bereduced. For example, under current legislation, we are subject to an entity-level tax on the portion of our total revenue (as that term is defined in thelegislation) that is generated in Texas. For the year ended December 31, 2009, we recognized a liability of approximately $150,000 for the Texas margintax, which is imposed at a maximum effective rate of 0.7% of our total revenue from Texas. Imposition of such a tax on us by Texas, or any other state,will reduce the cash available for distribution to our unitholders. The partnership agreement provides that if a law is enacted or existing law is modifiedor interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal, state or local incometax purposes, then the minimum quarterly distribution amount and the target distribution amounts will be reduced to reflect the impact of that law on us. If the Internal Revenue Service were to successfully challenge our use of a calendar year end for federal income tax purposes, the challengemay result in adjustments to the federal income tax liability of our unitholders, and the imposition of tax penalties on us, and we may havedifficulty providing our unitholders with all of the information necessary to timely file their federal income tax returns. As a result, the market forour common units may be adversely affected and our relations with our unitholders could suffer. Under the Internal Revenue Code and applicable Treasury Regulations, we are required to use a taxable year that is determined by reference to thetaxable years of our partners. If holders of a majority of the interests in our capital and profits use a single taxable year, we must use that year. If there isno such "majority interest taxable year," and if no person with a taxable year different from that of our general partner and its affiliates owns a 5% orgreater interest in our capital or profits, then we must use the same taxable year as our general partner and its affiliates. If there is no majority interesttaxable year and there is an owner, other than our general partner and its affiliates, of 5% or more of our capital or profits that has a taxable yeardifferent from that of our general partner and its affiliates, we must use the taxable year that produces the "least aggregate deferral" to holders ofpartnership interests. In general, these determinations are made on the first day of each taxable year. Our initial taxable year ended on June 30, 2005, because our general partner and its affiliates, who used a June 30 taxable year at the time we wereorganized, initially owned all of the interests in our profits and capital. We have taken the position that we were required to change our taxable year tothe calendar year as of July 1, 2005, on the basis that the calendar year was our "majority interest taxable year" due to public ownership of our commonunits by calendar year taxpayers. In view of the factual and legal uncertainties regarding the taxable year that we are required to use, our position that weare required to use the calendar year as our taxable year is also based in part upon the fact that the calendar year is (i) the simplest and mostadministrable taxable year for a publicly traded partnership, (ii) to our knowledge, the taxable year used by all other publicly traded partnerships and(iii) the default taxable year originally provided by the Internal Revenue Code for partnerships in certain other circumstances. Based upon that position,we used the calendar year as our taxable year for 2006 and 2007. Effective December 31, 2007, we implemented a holding structure that caused ourgeneral partner and most of our affiliate-held units to be owned by entities using the calendar year as their taxable year. Effective December 31, 2008,Morgan Stanley and all of its subsidiaries elected to use a calendar year as their taxable year. Nevertheless, the IRS could disagree with the position wehave taken with respect to our taxable years.38Table of Contents If we are required to change our taxable year to a year other than the calendar year, we may have difficulty providing certain unitholders withinformation about our income, gain, loss and deduction for our taxable year in a manner that allows those unitholders to timely file their federal incometax returns for the years in which they are required to include their share of our income, gain, loss and deduction. In addition, if we are required tochange our taxable year as a result of an IRS challenge of our use of the calendar year for a taxable year as to which we and our unitholders havealready filed a federal income tax return, the change may result in an adjustment to a unitholder's federal income tax liability and we could be subject topenalties. In that event, our relations with our unitholders could suffer. Moreover, if we were not allowed to use a calendar year end for tax purposes,many existing and potential unitholders that have a calendar tax year may not be willing to purchase our units, which could adversely affect the marketprice of our units and limit our ability to raise capital through public or private offerings of our units in the future. If the sale or exchange of 50% or more of our capital and profit interests occurs within a 12-month period, we would experience a deemedtermination of our partnership for federal income tax purposes. The sale or exchange of 50% or more of the partnership's units within a 12-month period would result in a deemed "technical" termination of ourpartnership for federal income tax purposes. Such an event would not terminate a unitholder's interest in the partnership, nor would it terminate thecontinuing business operations of the partnership. However, it would, among other things, result in the closing of our taxable year for all unitholdersand would result in a deferral of depreciation and cost recovery deductions allowable in computing our taxable income for future tax years. Thepartnership previously experienced a deemed "technical" termination for the period ending December 30, 2007, due to the implementation of theDecember 31, 2007 holding structure referred to above. If our partnership were deemed terminated for federal income tax purposes, this deferral of costrecovery deductions would impact each unitholder through allocations of an increased amount of federal taxable income (or reduced amount of allocatedloss) for the year in which the partnership is deemed terminated and for subsequent years as a percentage of the cash distributed to the unitholder withrespect to that period. We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each monthbased upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit istransferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among ourunitholders. For administrative purposes and consistent with other publicly traded partnerships, we generally prorate our items of income, gain, loss, anddeduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of eachmonth, instead of on the basis of the date a particular common unit is transferred. The use of this proration method may not be permitted under existingTreasury Regulations. If the IRS were to challenge this method or new Treasury Regulations were issued, we may be required to change the allocationof items of income, gain, loss and deduction among our unitholders. A unitholder whose units are loaned to a "short seller" to cover a short sale of units may be considered as having disposed of those units. Ifso, the unitholder would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and mayrecognize gain or loss from the disposition. Because a unitholder whose units are loaned to a "short seller" to cover a short sale of units may be considered as having disposed of the loanedunits, the unitholder may no longer be treated for tax purposes as a partner with respect to those units during the period of the loan to the short seller and39Table of Contentsthe unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain,loss or deduction with respect to those units may not be reportable by the unitholder and any cash distributions received by the unitholder as to thoseunits could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loanto a short seller are urged to modify any applicable brokerage account agreements to prohibit their brokers from loaning their units.ITEM 1B. UNRESOLVED STAFF COMMENTS None.ITEM 3. LEGAL PROCEEDINGS TransMontaigne Inc. has agreed to indemnify us for any losses we may suffer as a result of legal claims for actions that occurred prior to theclosing of our initial public offering on May 27, 2005. We currently are not a party to any material litigation. Our operations are subject to a variety of risks and disputes normally incident to ourbusiness. As a result, at any given time we may be a defendant in various legal proceedings and litigation arising in the ordinary course of business. Weare a beneficiary of various insurance policies TransMontaigne Inc. maintains with insurers in amounts and with coverage and deductibles that ourgeneral partner believes are reasonable and prudent. However, we cannot assure that this insurance will be adequate to protect us from all materialexpenses related to potential future claims for personal and property damage or that the levels of insurance will be available in the future at economicalprices.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the security holders, through solicitation of proxies or otherwise, during the period covered by this annualreport.Part II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON UNITS, RELATED UNITHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES MARKET FOR COMMON UNITS The common units are listed and traded on the New York Stock Exchange under the symbol "TLP." On February 26, 2010, there wereapproximately 29 unitholders of record of our common units. This number does not include unitholders whose units are held in trust by other entities.The actual number of unitholders is greater than the number of unitholders of record. The following table sets forth, for the periods indicated, the range of high and low per unit sales prices for our common units as reported on theNew York Stock Exchange.40 Low High January 1, 2008 through March 31, 2008 $24.88 $32.10 April 1, 2008 through June 30, 2008 $25.69 $32.85 July 1, 2008 through September 30, 2008 $15.95 $27.47 October 1, 2008 through December 31, 2008 $11.27 $21.39 January 1, 2009 through March 31, 2009 $13.23 $20.29 April 1, 2009 through June 30, 2009 $16.60 $23.51 July 1, 2009 through September 30, 2009 $20.33 $28.66 October 1, 2009 through December 31, 2009 $23.32 $29.07 Table of ContentsDISTRIBUTIONS OF AVAILABLE CASH The following table sets forth the distribution declared per common unit attributable to the periods indicated: Within approximately 45 days after the end of each quarter, we will distribute all of our available cash, as defined in our partnership agreement, tounitholders of record on the applicable record date. Available cash generally means all cash on hand at the end of the quarter:•less the amount of cash reserves established by our general partner to: •provide for the proper conduct of our business; •comply with applicable law, any of our debt instruments, or other agreements; or •provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters; •plus, if our general partner so determines, all or a portion of cash on hand on the date of determination of available cash for the quarter. The terms of our senior secured credit facility may limit our ability to distribute cash under certain circumstances as discussed under "Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" of this annual report.Distributions of Available Cash During and After the Subordination Period Prior to the expiration of the subordination period or the earlier conversion of the subordinated units following satisfaction of the financial tests setforth in the partnership agreement, which occurred on November 13, 2009 with respect to the quarter ended September 30, 2009 as described below,the common units were entitled to receive distributions from operating surplus of $0.40 per unit per quarter, which we refer to as the minimum quarterlydistribution, or $1.60 per unit per year, plus any arrearages in the payment of the minimum quarterly distribution from prior quarters, before any suchdistributions are paid on our subordinated units. During the subordination period, we were required to make distributions of available cash from operating surplus for any quarter during thesubordination period in the following manner:•First, 98% to the common unitholders, pro rata, and 2% to our general partner, until we distribute for each outstanding common unit anamount equal to the minimum quarterly distribution for that quarter; •Second, 98% to the common unitholders, pro rata, and 2% to our general partner, until we distribute for each outstanding common unitan amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters duringthe subordination period;41 Distribution January 1, 2008 through March 31, 2008 $0.57 April 1, 2008 through June 30, 2008 $0.58 July 1, 2008 through September 30, 2008 $0.59 October 1, 2008 through December 31, 2008 $0.59 January 1, 2009 through March 31, 2009 $0.59 April 1, 2009 through June 30, 2009 $0.59 July 1, 2009 through September 30, 2009 $0.59 October 1, 2009 through December 31, 2009 $0.59 Table of Contents•Third, 98% to the subordinated unitholders, pro rata, and 2% to our general partner, until we distribute for each subordinated unit anamount equal to the minimum quarterly distribution for that quarter; and •Thereafter, cash in excess of the minimum quarterly distributions is distributed to unitholders and the general partner in the mannerdescribed under "—Incentive Distribution Rights" below. On November 13, 2008, approximately 0.8 million subordinated units converted into an equal number of common units. On May 7, 2009,approximately 0.8 million subordinated units converted into an equal number of common units. On November 13, 2009, the remaining approximately1.7 million subordinated units converted into an equal number of common units. After each such conversion, the newly issued common units participatepro rata with the other common units in distributions of available cash. Accordingly, we make distributions of available cash for any quarter after thesubordination period or the earlier conversion of the subordinated units in the following manner:•First, 98% to all unitholders, pro rata, and 2% to our general partner until we distribute for each outstanding unit an amount equal to theminimum quarterly distribution for that quarter; and •Thereafter, in the manner described under "—Incentive Distribution Rights" below.Incentive Distribution Rights Incentive distribution rights are non-voting limited partner interests that represent the right to receive an increasing percentage of quarterlydistributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Ourgeneral partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest, subject torestrictions in the partnership agreement. The following table illustrates the percentage allocations of the additional available cash from operating surplus between the unitholders and ourgeneral partner up to the various target distribution levels. The amounts set forth under "Marginal percentage interest in distributions" are the percentageinterests of our general partner and the unitholders in any available cash from operating surplus we distribute up to and including the correspondingamount in the column "Total per unit quarterly distribution," until available cash from operating surplus we distribute reaches the next target distributionlevel, if any. The percentage interests shown for the unitholders and our general partner for the minimum quarterly distribution are also applicable toquarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partnerinclude its 2% general partner interest and assume our general partner has contributed any additional capital to maintain its 2% general partner interestand has not transferred its incentive distribution rights. There is no guarantee that we will be able to pay the minimum quarterly distribution on the common units in any quarter, and we will be prohibitedfrom making any distributions to unitholders if it would cause an event of default, or an event of default is existing, under our senior secured creditfacility.42 Marginal percentageinterest in distributions Total per unitquarterly distribution Unitholders General partner Minimum quarterly distribution $0.40 98% 2%First target distribution up to $0.44 98% 2%Second target distribution above $0.44 up to $0.50 85% 15%Third target distribution above $0.50 up to $0.60 75% 25%Thereafter Above $0.60 50% 50%Table of ContentsCommon Unit Repurchases for the quarter ended December 31, 2009 Purchases of Securities. The following table covers the purchases of our common units by, or on behalf of, Partners during the three monthsended December 31, 2009. All repurchases were made in the open market pursuant to a program announced on May 7, 2007 for the repurchase, from time to time, of ouroutstanding common units for purposes of making subsequent grants of restricted phantom units under the TransMontaigne Services Inc. long-termincentive plan to independent directors of our general partner. Pursuant to the terms of the repurchase plan, we anticipate repurchasing annually up to10,000 common units. During the three months ended December 31, 2009, we repurchased 1,875 common units with approximately $49,000 ofaggregate market value for this purpose. Unless we choose to terminate the repurchase program earlier, the repurchase program terminates on the earlierto occur of May 31, 2012; our liquidation, dissolution, bankruptcy or insolvency; the public announcement of a tender or exchange offer for thecommon units; or a merger, acquisition, recapitalization, business combination or other occurrence of a "Change of Control" under the TransMontaigneServices Inc. long-term incentive plan.43Period Total number ofcommon unitspurchased Average pricepaid percommon unit Total number ofcommon unitspurchased as part ofpublicly announcedplans or programs Maximum numberof common units thatmay yet be purchasedunder the plans orprograms October 625 $26.76 625 4,365 November 625 $25.86 625 3,740 December 625 $25.95 625 3,115 1,875 $26.19 1,875 Table of ContentsITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected historical consolidated financial data of TransMontaigne Partners for the periods and as of the datesindicated. The following selected financial data for each of the years in the four-year period ended December 31, 2009, six months ended December 31,2005 and year ended June 30, 2005, has been derived from our consolidated financial statements. We adopted a December 31 year end for financial andtax reporting purposes effective December 31, 2005; we previously maintained a June 30 year end. You should not expect the results for any priorperiods to be indicative of the results that may be achieved in future periods. You should read the following information together with our historicalconsolidated financial statements and related notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations"included elsewhere in this annual report. Years ended December 31, Six MonthsEndedDecember 31, YearendedJune 30, 2009 2008(5) 2007 2006(3)(4) 2005(1)(2) 2005 (dollars in thousands) Statement ofOperationsData: Revenue $142,547 $138,140 $131,651 $71,669 $22,908 $36,093 Direct operatingcosts andexpenses (64,968) (61,850) (60,686) (32,508) (7,896) (15,175)Direct general andadministrativeexpenses (3,242) (4,138) (2,991) (6,453) (1,267) (79)Allocated generalandadministrativeexpenses (10,040) (10,030) (9,901) (5,431) (1,588) (2,800)Allocatedinsuranceexpense (2,900) (2,835) (2,837) (1,525) (500) (1,000)Reimbursementof bonusawards (1,237) (1,500) (1,125) — — — Depreciation andamortization (26,306) (23,316) (21,432) (11,750) (3,461) (6,154)Gain ondisposition ofassets, net 1 2 — — — — Operatingincome 33,855 34,473 32,679 14,002 8,196 10,885 Other income(expense): Interest income 7 38 214 37 4 — Interest expense (5,486) (6,007) (6,515) (3,356) (969) (167) Amortization ofdeferredfinancingcosts (598) (599) (1,236) (810) (92) (15) Unrealized losson derivativeinstrument (562) (2,128) — — — — Foreigncurrency44 transactiongain (loss) 36 (179) — — — — Net earnings $27,252 $25,598 $25,142 $9,873 $7,139 $10,703 Other FinancialData: Net cash providedby operatingactivities $72,045 $53,488 $56,406 $25,251 $7,833 $18,517 Net cash (used in)investingactivities $(37,742)$(53,406)$(155,550)$(163,797)$(3,042)$(3,686)Net cash providedby (used in)financingactivities $(32,534)$3,200 $97,286 $141,310 $(4,334)$(14,592)Balance SheetData: Property, plantand equipment,net $459,598 $447,753 $417,827 $401,613 $125,884 $116,281 Total assets $515,535 $507,039 $460,818 $441,684 $131,036 $119,573 Long-term debt $165,000 $165,500 $132,000 $189,621 $28,000 $28,307 Partners' equity $303,125 $307,579 $312,830 $245,331 $100,013 $87,425 (1)The consolidated financial statements include the results of operations of the Mobile, Alabama terminal facility from the closingdate of its acquisition by TransMontaigne Inc. (August 1, 2005). (2)The consolidated financial statements include the results of operations of the Oklahoma City terminal from the closing date of ouracquisition (October 31, 2005).Table of ContentsITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the accompanyingconsolidated financial statements included elsewhere in this annual report.OVERVIEW We are a refined petroleum products terminaling and pipeline transportation company formed by TransMontaigne Inc. At December 31, 2009, ouroperations are composed of:•seven refined product terminals located in Florida, with an aggregate active storage capacity of approximately 7.1 million barrels, thatprovide integrated terminaling services to Marathon, Morgan Stanley Capital Group, other distribution and marketing companies and theUnited States government; •one refined product terminal located in Mobile, Alabama with aggregate active storage capacity of approximately 163,000 barrels thatprovides integrated terminaling services to TransMontaigne Inc.; •a 67-mile, interstate refined products pipeline, which we refer to as the Razorback pipeline, that currently transports gasolines anddistillates for Morgan Stanley Capital Group from Mt. Vernon, Missouri to Rogers, Arkansas; •two refined product terminals, one located in Mt. Vernon, Missouri and the other located in Rogers, Arkansas, with an aggregate activestorage capacity of approximately 406,000 barrels, that are connected to the Razorback pipeline and provide integrated terminalingservices to Morgan Stanley Capital Group; •one refined product terminal located in Oklahoma City, Oklahoma, with aggregate active storage capacity of approximately 158,000barrels, that provides integrated terminaling services to a major oil company; •one refined product terminal located in Brownsville, Texas with aggregate active storage capacity of approximately 2.2 million barrelsthat provides integrated terminaling services to TransMontaigne Inc., Morgan Stanley Capital Group, Valero, PMI Trading Ltd. andother distribution and marketing companies; •one refined product terminal located in Matamoros, Mexico with aggregate active LPG storage capacity of approximately 7,000 barrelsthat provides integrated terminaling services to TransMontaigne Inc.; •a pipeline from our Brownsville facilities to our terminal in Matamoros, Mexico, which we refer to as the Diamondback pipeline, thatcurrently transports LPG for TransMontaigne Inc.;45(3)The consolidated financial statements include the results of operations of the Brownsville and River terminal facilities from theclosing date of Morgan Stanley Capital Group Inc.'s acquisition of TransMontaigne Inc. (September 1, 2006). (4)The consolidated financial statements include the results of operations of the Southeast terminal facilities from the closing date ofMorgan Stanley Capital Group Inc.'s acquisition of TransMontaigne Inc. (September 1, 2006). See Note 3 of Notes toconsolidated financial statements. (5)The consolidated financial statements include the results of operations of the Mexican LPG operations from the closing date ofour acquisition (December 31, 2007). See Note 3 of Notes to consolidated financial statements.Table of Contents•twelve refined product terminals located along the Mississippi and Ohio rivers ("River terminals") with aggregate active storage capacityof approximately 2.5 million barrels and the Baton Rouge, Louisiana dock facility that provide integrated terminaling services to Valeroand other distribution and marketing companies; and •twenty-two refined product terminals located along the Colonial and Plantation pipelines ("Southeast terminals") with aggregate activestorage capacity of approximately 9.1 million barrels that provides integrated terminaling services to Morgan Stanley Capital Group andthe United States government. We provide integrated terminaling, storage, transportation and related services for customers engaged in the distribution and marketing of lightrefined petroleum products, heavy refined petroleum products, crude oil, chemicals, fertilizers and other liquid products. Light refined products includegasolines, diesel fuels, heating oil and jet fuels. Heavy refined products include residual fuel oils and asphalt. We do not take ownership of or market products that we handle or transport and, therefore, we are not directly exposed to changes in commodityprices, except for the value of product gains and losses arising from certain of our terminaling services agreements with our customers. The volume ofproduct that is handled, transported through or stored in our terminals and pipeline is directly affected by the level of supply and demand in thewholesale markets served by our terminals and pipeline. Overall supply of refined products in the wholesale markets is influenced by the products'absolute prices, the availability of capacity on delivering pipelines and vessels, fluctuating refinery margins and the markets' perception of future productprices. The demand for gasoline typically peaks during the summer driving season, which extends from April to September, and declines during the falland winter months. The demand for marine fuels typically peaks in the winter months due to the increase in the number of cruise ships originating fromthe Florida ports. Despite these seasonalities, the overall impact on the volume of product throughput in our terminals and pipelines is not material. The majority of our business is devoted to providing terminaling and transportation services to TransMontaigne Inc. and Morgan Stanley CapitalGroup. TransMontaigne Inc. and Morgan Stanley Capital Group, in the aggregate, accounted for approximately 65%, 64% and 59% of our revenue forthe years ended December 31, 2009, 2008 and 2007, respectively. TransMontaigne Inc., formed in 1995, is a terminaling, distribution and marketingcompany that distributes and markets refined petroleum products to wholesalers, distributors, marketers and industrial and commercial end usersthroughout the United States, primarily in the Gulf Coast, Midwest and Southeast regions. Morgan Stanley Capital Group, a wholly owned subsidiaryof Morgan Stanley, is the principal commodities trading arm of Morgan Stanley. Morgan Stanley Capital Group is a leading global commodity traderinvolved in proprietary and counterparty-driven trading in numerous commodities including crude oil, refined petroleum products, natural gas andnatural gas liquids, coal, electric power, base and precious metals, and others. Morgan Stanley Capital Group engages in trading physical commodities,like the refined petroleum products that we handle in our terminals, and exchange or over-the-counter commodities derivative instruments.TransMontaigne Inc. and Morgan Stanley Capital Group currently rely on us to provide substantially all the integrated terminaling services they requireto support their operations along the Gulf Coast, in Brownsville, Texas, along the Mississippi and Ohio rivers, along the Colonial and Plantationpipelines, and in the Midwest. Pursuant to the terms of terminaling services agreements we have executed with TransMontaigne Inc. and MorganStanley Capital Group, we expect to continue to derive a majority of our revenue from TransMontaigne Inc. and Morgan Stanley Capital Group for theforeseeable future. We are controlled by our general partner, TransMontaigne GP L.L.C., which is an indirect wholly owned subsidiary of TransMontaigne Inc.Effective September 1, 2006, Morgan Stanley Capital Group purchased all of the issued and outstanding capital stock of TransMontaigne Inc. As aresult of46Table of ContentsMorgan Stanley's acquisition of TransMontaigne Inc., Morgan Stanley became the indirect owner of our general partner. TransMontaigne Inc. andMorgan Stanley have a significant interest in our partnership through their indirect ownership of a 22.1% limited partner interest, a 2% general partnerinterest and the incentive distribution rights.REGULATORY MATTERS On September 21, 2008, Morgan Stanley obtained the approval of the Board of Governors of the Federal Reserve System (the "FRB") to becomea bank holding company upon the conversion of its wholly owned indirect subsidiary, Morgan Stanley Bank, from a Utah industrial bank to a nationalbank. On September 23, 2008, the Office of the Comptroller of the Currency (the "OCC") authorized Morgan Stanley Bank to commence business as anational bank, operating as Morgan Stanley Bank, N.A. Concurrently with this conversion, Morgan Stanley became a financial holding company underthe Bank Holding Company Act, as amended (the "BHC Act"). As a result, Morgan Stanley has become subject to the consolidated supervision andregulation of the FRB and Morgan Stanley Bank, N.A. has become subject to the supervision and regulation of the OCC. As a financial holding company, Morgan Stanley will be able to engage in any activity that is financial in nature, incidental to a financial activity, orcomplementary to a financial activity. The BHC Act, by its terms, provides any company, such as Morgan Stanley, that becomes a financial holdingcompany a two-year grace period to conform its existing nonfinancial activities and investments to the requirements of the BHC Act with the possibilityof three one-year extensions. The BHC Act grandfathers "activities related to the trading, sale or investment in commodities and underlying physicalproperties" provided that Morgan Stanley conducted any of such type of activities as of September 30, 1997 and provided that certain other conditionsare satisfied, which conditions are reasonably within the control of Morgan Stanley. In addition, the BHC Act permits the FRB to determine byregulation or order that certain activities are complementary to a financial activity and do not pose a risk to safety and soundness. The FRB haspreviously determined that a range of commodities activities are either financial in nature, incidental to a financial activity, or complementary to afinancial activity. During April 2009, Morgan Stanley advised us that it has conducted an internal review and has concluded that, based upon its review, all of ouractivities and investments are permissible under the BHC Act. The FRB has not yet completed its review of these activities and investments. The FRB could conclude that certain of our activities or investmentswill not be deemed permissible under the BHC Act. If so, Morgan Stanley (i) may cause us to discontinue any such activity or divest any suchinvestment or (ii) may transfer control of our general partner to an unaffiliated third party, prior to the end of the referenced grace period. We are unableto predict whether, if either of these actions is required, it would have a material adverse impact on our financial condition or results of operations.SIGNIFICANT DEVELOPMENTS DURING THE YEAR ENDED DECEMBER 31, 2009 On January 16, 2009, we announced a distribution of $0.59 per unit for the period from October 1, 2008 through December 31, 2008, payable onFebruary 10, 2009 to unitholders of record on January 30, 2009. On February 5, 2009, we executed an additional interest rate swap agreement with Wachovia Bank, N.A. This interest rate swap agreement has anotional amount of $25.0 million that expires May 2010. Pursuant to the terms of the interest rate swap agreement, we pay a fixed rate of 1.145% andreceive an interest payment based on the one-month LIBOR.47Table of Contents On February 26, 2009, Javed Ahmed notified the board of directors of our general partner of his intention to resign from the boards of directors ofour general partner and TransMontaigne Inc., each to be effective March 31, 2009. The resignations follow Mr. Ahmed's decision on February 9, 2009to resign as a Managing Director of Morgan Stanley effective May 10, 2009. To fill the vacancy resulting from Mr. Ahmed's resignation, on March 3,2009, we announced the appointment of Randall P. O'Connor to serve as a member of the board of directors of our general partner, effective March 31,2009. Mr. O'Connor is a Managing Director at Morgan Stanley, working in the firm's Commodities Group and currently serves as head of the StrategicTransactions Group. On April 17, 2009, we announced a distribution of $0.59 per unit for the period from January 1, 2009 through March 31, 2009, payable onMay 5, 2009 to unitholders of record on April 30, 2009. On May 7, 2009, approximately 0.8 million subordinated units converted into an equal number of common units. On June 10, 2009, we combined our interest rate swap agreements into a single interest rate swap agreement with Wachovia Bank, N.A. with anotional amount of $150 million that expires June 2011. On July 17, 2009, we announced a distribution of $0.59 per unit for the period from April 1, 2009 through June 30, 2009, payable on August 11,2009 to unitholders of record on July 31, 2009. On August 4, 2009, Randall J. Larson notified Partners of his intention to resign as Chief Executive Officer of our general partner and asPresident, Chief Executive Officer and member of the board of directors of TransMontaigne Inc., and the other subsidiaries of Partners andTransMontaigne Inc., each to be effective August 5, 2009. The board of directors of our general partner appointed Charles L. Dunlap to serve as ChiefExecutive Officer of our general partner, effective August 10, 2009. Mr. Dunlap was also appointed to serve as the President and Chief ExecutiveOfficer of TransMontaigne Inc., effective August 10, 2009. As a result of this appointment, Mr. Dunlap ceased to qualify as an independent director ofthe board of directors of our general partner and therefore tendered his resignation from the board of directors of our general partner, also effectiveAugust 10, 2009. On October 16, 2009, we announced a distribution of $0.59 per unit for the period from July 1, 2009 through September 30, 2009, payable onNovember 10, 2009 to unitholders of record on October 30, 2009. On November 13, 2009, the remaining approximately 1.7 million subordinated units converted into an equal number of common units.SUBSEQUENT DEVELOPMENTS On January 15, 2010, we announced a distribution of $0.59 per unit for the period from October 1, 2009 through December 31, 2009, payable onFebruary 9, 2010 to unitholders of record on January 29, 2010. On January 6, 2010, Duke R. Ligon notified Partners of his intention to resign from the board of directors of our general partner, effectiveJanuary 7, 2010. To fill the vacancy resulting from Mr. Ligon's resignation, the board of directors appointed Henry M. Kuchta to serve as anindependent member of the board of directors of our general partner, effective January 7, 2010. Mr. Kuchta was also appointed to serve as a member ofthe Audit Committee and Conflicts Committee of our general partner, also effective January 7, 2010. On January 15, 2010, we issued, pursuant to an underwritten public offering, 1,750,000 common units representing limited partner interests at apublic offering price of $26.60 per common unit. On January 15, 2010, the underwriters of our secondary offering exercised in full their over-allotmentoption to purchase an additional 262,500 common units representing limited partnership interests at a48Table of Contentsprice of $26.60 per common unit. The net proceeds from the offering were approximately $51.1 million, after deducting underwriting discounts,commissions, and offering expenses of approximately $0.2 million. Additionally, TransMontaigne GP L.L.C., our general partner, made a cashcontribution of approximately $1.1 million to us to maintain its 2% general partner interest. The net proceeds from the offering and cash contributionwere used to repay outstanding borrowings under our senior secured credit facility.NATURE OF REVENUE AND EXPENSES We derive revenue from our terminal and pipeline transportation operations by charging fees for providing integrated terminaling, transportationand related services. The fees we charge, our other sources of revenue and our direct operating costs and expenses are described below. Terminaling Services Fees, Net. We generate terminaling services fees, net by distributing and storing products for our customers. Terminalingservices fees, net include throughput fees based on the volume of product distributed from the facility, injection fees based on the volume of productinjected with additive compounds and storage fees based on a rate per barrel of storage capacity per month. Pipeline Transportation Fees. We earn pipeline transportation fees at our Razorback pipeline and Diamondback pipeline based on the volume ofproduct transported and the distance from the origin point to the delivery point. The Federal Energy Regulatory Commission regulates the tariff on theRazorback pipeline and the Diamondback pipeline. Management Fees and Reimbursed Costs. We manage and operate certain tank capacity at our Port Everglades (South) terminal for a major oilcompany and receive a reimbursement of its proportionate share of operating and maintenance costs. We manage and operate for an affiliate of Mexico'sstate-owned petroleum company a bi-directional products pipeline connected to our Brownsville, Texas terminal facility and receive a management feeand reimbursement of costs. We also manage and operate for another major oil company two terminals that are adjacent to our Southeast facilities andreceive a reimbursement of its proportionate share of operating and maintenance costs. Other Revenue. We provide ancillary services including heating and mixing of stored products and product transfer services. Pursuant toterminaling services agreements with our throughput customers, we are entitled to the volume of product gained resulting from differences in themeasurement of product volumes received and distributed at our terminaling facilities. Consistent with recognized industry practices, measurementdifferentials occur as the result of the inherent variances in measurement devices and methodology. We recognize as revenue the net proceeds from thesale of the product gained. Direct Operating Costs and Expenses. The direct operating costs and expenses of our operations include the directly related wages andemployee benefits, utilities, communications, maintenance and repairs, property taxes, rent, vehicle expenses, environmental compliance costs, materialsand supplies. Direct General and Administrative Expenses. The direct general and administrative expenses of our operations include accounting and legalcosts associated with annual and quarterly reports and tax return and Schedule K-1 preparation and distribution, independent director fees andamortization of deferred equity-based compensation.CRITICAL ACCOUNTING POLICIES AND ESTIMATES A summary of the significant accounting policies that we have adopted and followed in the preparation of our historical consolidated financialstatements is detailed in Note 1 of Notes to consolidated financial statements. Certain of these accounting policies require the use of estimates. We haveidentified the following estimates that, in our opinion, are subjective in nature, require the49Table of Contentsexercise of judgment, and involve complex analyses. These estimates are based on our knowledge and understanding of current conditions and actionsthat we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequentchanges in these estimates may have a significant impact on our financial condition and results of operations. Allowance for Doubtful Accounts. At December 31, 2009, our allowance for doubtful accounts was approximately $0.4 million. Our allowancefor doubtful accounts represents the amount of trade receivables that we do not expect to collect. The valuation of our allowance for doubtful accounts isbased on our analysis of specific individual customer balances that are past due and, from that analysis, we estimate the amount of the receivable balancethat we do not expect to collect. That estimate is based on various factors, including our experience in collecting past due amounts from the customerbeing evaluated, the customer's current financial condition, the current economic environment and the economic outlook for the future. Changes in ourestimates and assumptions may occur as a result of the passage of time and the occurrence of future events. Accrued Environmental Obligations. At December 31, 2009, we have an accrued liability of approximately $5.6 million representing our bestestimate of the undiscounted future payments we expect to pay for environmental costs to remediate existing conditions. Estimates of our environmentalobligations are subject to change due to a number of factors and judgments involved in the estimation process, including the early stage of investigationat certain sites, the lengthy time frames required to complete remediation, technology changes affecting remediation methods, alternative remediationmethods and strategies, and changes in environmental laws and regulations. Changes in our estimates and assumptions may occur as a result of thepassage of time and the occurrence of future events. Costs incurred to remediate existing contamination at the terminals we acquired from TransMontaigne Inc. have been, and are expected in thefuture to be, insignificant. Pursuant to agreements with TransMontaigne Inc., TransMontaigne Inc. retained 100% of these liabilities and indemnified usagainst certain potential environmental claims, losses and expenses associated with the operation of the acquired terminal facilities and occurring beforeour date of acquisition from TransMontaigne Inc., up to a maximum liability (not to exceed $15.0 million for the Florida and Midwest terminalsacquired on May 27, 2005, not to exceed $15.0 million for the Brownsville and River terminals acquired on December 29, 2006, and not to exceed$15.0 million for the Southeast terminals acquired on December 31, 2007) for these indemnification obligations. Goodwill. At December 31, 2009, the carrying amount of our goodwill was approximately $24.7 million. Goodwill is required to be tested forimpairment annually unless events or changes in circumstances indicate it is more likely than not that an impairment loss has been incurred at an interimdate. Our annual test for the impairment of goodwill is performed as of December 31. The impairment test is performed at the reporting unit level. Ourreporting units are our operating segments (see Note 17 of Notes to consolidated financial statements). At December 31, 2009, our reporting units withgoodwill were the Brownsville terminal and the River terminals. Approximately $16.2 million of the goodwill was assigned to our Brownsville terminaland approximately $8.5 million was assigned to our River terminals (see Note 7 of Notes to consolidated financial statements). Management exercisesjudgment in determining the estimated fair values of the Partnership's reporting units. At December 31, 2009, we estimated the fair value of ourreporting units using a discounted cash flow technique. We believe that our estimates of the future cash flows and related assumptions would beconsistent with those used by market participants (that is, potential buyers of the reporting unit) at December 31, 2009. The cash flows represented ourbest estimate of the future revenues, expenses and capital expenditures to maintain the facilities associated with each of our reporting units. The cashflows did not anticipate future expenditures to expand the facilities beyond the expenditures necessary to complete expansion projects approved prior toDecember 31, 2009. The cash flows attributed to our50Table of Contentsreporting units included only a portion of our historical general and administrative expenses under the assumption that market participants would onlyinclude limited amounts of general and administrative expenses in their estimates of future cash flows because market participants would likely havepre-existing management and back office capabilities (that is, a market participant synergy). At December 31, 2009, the fair value of our reporting unitswith goodwill exceeded their carrying amount. Accordingly, we did not recognize any goodwill impairment charges during the year endedDecember 31, 2009. A significant decline in the price of our common units with a resulting increase in our weighted average cost of capital, the loss of asignificant customer, or an unforeseen increase in the costs to operate and maintain our terminals and pipelines, may result in the recognition of animpairment charge in the future. Changes in our estimates and assumptions may occur as a result of the passage of time and the occurrence of futureevents.RESULTS OF OPERATIONS—YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 In reviewing our historical results of operations, you should be aware that the accompanying consolidated financial statements include the assets,liabilities and results of operations of certain TransMontaigne Inc. terminal operations prior to their acquisition by us from TransMontaigne Inc. Theresults of operations of TransMontaigne Inc.'s terminals prior to being acquired by us are reflected in the accompanying consolidated financialstatements as being attributable to TransMontaigne Inc. ("Predecessor"). The acquired assets and liabilities have been recorded at TransMontaigne Inc.'scarryover basis. On December 31, 2007, we acquired from TransMontaigne Inc. 22 terminals along the Colonial and Plantation pipelines (the"Southeast terminals") for a cash payment of approximately $118.6 million. The acquisition of terminal operations from TransMontaigne Inc. have beenaccounted for as transactions among entities under common control and, accordingly, prior periods include the activity of the acquired terminaloperations since September 1, 2006 (the date of Morgan Stanley Capital Group Inc.'s acquisition of TransMontaigne Inc.) for acquisitions made by uson or after September 1, 2006. The historical results of operations reflect the impact of the following acquisitions:•The purchase of the Southeast terminals by Morgan Stanley Capital Group, completed in September 2006 when it acquiredTransMontaigne Inc., and subsequent acquisition by us from TransMontaigne Inc. in December 2007; and •Our December 2007 acquisition from Rio Vista Energy Partners L.P. ("Rio Vista") of a terminal facility in Matamoros, Mexico, theDiamondback pipeline from Brownsville, Texas to Matamoros, Mexico, with associated rights of way and easements and 47 acres ofland, together with a permit to distribute liquefied petroleum gas, or LPG, to Mexico's state-owned petroleum company.51Table of Contents Selected results of operations data for each of the quarters in the years ended December 31, 2009, 2008 and 2007, are summarized below (inthousands): 52 Three months ended March 31,2009 June 30,2009 September 30,2009 December 31,2009 Year endedDecember 31,2009 Revenue $34,402 $35,849 $35,370 $36,926 $142,547 Direct operating costs andexpenses (15,544) (15,430) (16,915) (17,079) (64,968)Direct general andadministrative expenses (1,099) (705) (606) (832) (3,242)Allocated general andadministrative expenses (2,510) (2,510) (2,510) (2,510) (10,040)Allocated insuranceexpense (725) (725) (725) (725) (2,900)Reimbursement of bonusawards (309) (309) (309) (310) (1,237)Depreciation andamortization (6,355) (6,450) (6,541) (6,960) (26,306)Gain on disposition ofassets — 1 — — 1 Operating income 7,860 9,721 7,764 8,510 33,855 Other expense, net (1,438) (1,812) (2,065) (1,288) (6,603) Net earnings $6,422 $7,909 $5,699 $7,222 $27,252 Three months ended March 31,2008 June 30,2008 September 30,2008 December 31,2008 Year endedDecember 31,2008 Revenue $33,824 $35,092 $35,204 $34,020 $138,140 Direct operating costs andexpenses (15,467) (15,320) (16,331) (14,732) (61,850)Direct general andadministrative expenses (1,073) (1,317) (705) (1,043) (4,138)Allocated general andadministrative expenses (2,507) (2,508) (2,508) (2,507) (10,030)Allocated insuranceexpense (713) (704) (708) (710) (2,835)Reimbursement of bonusawards (375) (375) (375) (375) (1,500)Depreciation andamortization (5,733) (5,772) (5,794) (6,017) (23,316)Gain on disposition ofassets — — — 2 2 Operating income 7,956 9,096 8,783 8,638 34,473 Other expense, net (1,754) (1,471) (1,819) (3,831) (8,875) Net earnings $6,202 $7,625 $6,964 $4,807 $25,598 Table of ContentsANALYSIS OF REVENUE Total Revenue. We derive revenue from our terminal and pipeline transportation operations by charging fees for providing integratedterminaling, transportation and related services. Our total revenue by category was as follows (in thousands): See discussion below for a detailed analysis of terminaling services fees, net, pipeline transportation fees, management fees and reimbursed costs,and other revenue included in the table above. We operate our business and report our results of operations in five principal business segments: (i) Gulf Coast terminals, (ii) Midwest terminalsand pipeline system, (iii) Brownsville terminals, (iv) River terminals and (v) Southeast terminals. The aggregate revenue of each of our businesssegments was as follows (in thousands): Three months ended March 31,2007 June 30,2007 September 30,2007 December 31,2007 Year endedDecember 31,2007 Revenue $32,700 $32,204 $31,921 $34,826 $131,651 Direct operating costs andexpenses (13,945) (15,262) (14,414) (17,065) (60,686)Direct general andadministrative expenses (894) (461) (288) (1,348) (2,991)Allocated general andadministrative expenses (2,456) (2,467) (2,489) (2,489) (9,901)Allocated insuranceexpense (717) (717) (717) (686) (2,837)Reimbursement of bonusawards — (375) (375) (375) (1,125)Depreciation andamortization (4,965) (5,430) (5,481) (5,556) (21,432) Operating income 9,723 7,492 8,157 7,307 32,679 Other expense, net (3,911) (3,279) (242) (105) (7,537) Net earnings $5,812 $4,213 $7,915 $7,202 $25,142 Total Revenue by Category Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Terminaling services fees, net $118,024 $111,313 $109,906 Pipeline transportation fees 4,375 4,020 1,996 Management fees and reimbursed costs 2,124 1,905 1,724 Other 18,024 20,902 18,025 Revenue $142,547 $138,140 $131,651 Total Revenue by Business Segment Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Gulf Coast terminals $52,123 $49,315 $44,669 Midwest terminals and pipeline system 6,711 5,476 5,797 Brownsville terminals 22,258 20,693 15,672 River terminals 17,395 19,606 19,511 Southeast terminals 44,060 43,050 46,002 Revenue $142,547 $138,140 $131,651 53 Table of Contents Total revenue by business segment is presented and further analyzed below by category of revenue. In addition to the detailed discussion andanalysis of revenue by category and business segment, our results of operations reflect:•Our acquisition, effective December 31, 2007, of the Southeast terminals, which are included in our results of operations for the entiretyof 2007 because the acquisition is accounted for as a transaction among entities under common control; and •Our acquisition of the Mexican LPG operations from Rio Vista, effective December 31, 2007, which are included in our results ofoperations from such date. For the years ended December 31, 2009, 2008 and 2007, revenue attributable to our Brownsville terminalsincluded revenue from the Mexican LPG operations of approximately $1.5 million, $2.1 million and $nil, respectively. Terminaling Services Fees, Net. Pursuant to terminaling services agreements with our customers, which range from one month to ten years induration, we generate fees by distributing and storing products for our customers. Terminaling services fees, net include throughput fees based on thevolume of product distributed from the facility, injection fees based on the volume of product injected with additive compounds, and storage fees basedon a rate per barrel of storage capacity per month. The terminaling services fees, net by business segments were as follows (in thousands): The increase in terminaling services fees, net for the year ended December 31, 2009 as compared to the year ended December 31, 2008 includes anincrease of approximately $2.9 million resulting from newly constructed tank capacity placed into service at certain of our Gulf Coast terminals, anincrease of approximately $2.2 million resulting from completion of ethanol blending functionality at certain of our Southeast terminals, and an increaseof approximately $0.7 million resulting from newly constructed LPG tank capacity placed into service at our Brownsville terminals. In connection with our acquisition of the Mexican LPG operations, we amended the existing LPG terminaling services agreement withTransMontaigne Inc., resulting in a decrease in the rates charged to TransMontaigne Inc. on volumes throughput at the Brownsville LPG terminal inexchange for an increase in pipeline transportation fees related to the volume of product transported through the Diamondback pipeline. For the yearsended December 31, 2009 and 2008, the change in the rates charged on volumes throughput at the Brownsville LPG terminal resulted in a reduction ofapproximately $(0.9) million and $(0.8) million, respectively, of terminaling services fees, net. Included in terminaling services fees, net for the years ended December 31, 2009, 2008 and 2007 are fees charged to Morgan Stanley CapitalGroup of approximately $69.7 million, $63.9 million and $27.1 million, respectively, and fees charged to TransMontaigne Inc. of approximately$7.0 million, $6.3 million and $36.1 million, respectively. Effective January 1, 2008, we entered into a terminaling services agreement with MorganStanley Capital Group relating to our Southeast facilities that replaced54 Terminaling Services Fees, Net,by Business Segment Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Gulf Coast terminals $43,798 $39,750 $38,555 Midwest terminals and pipeline system 3,640 3,466 2,976 Brownsville terminals 14,755 13,103 11,799 River terminals 16,864 18,868 18,942 Southeast terminals 38,967 36,126 37,634 Terminaling services fees, net $118,024 $111,313 $109,906 Table of Contentscertain capacity previously utilized by TransMontaigne Inc. The increase in fees charged to Morgan Stanley Capital Group therefore offset the decreasein fees charged to TransMontaigne Inc. Our terminaling services agreements are structured as either throughput agreements or storage agreements. Certain throughput agreements containprovisions that require our customers to throughput a minimum volume of product at our facilities over a stipulated period of time, which results in afixed amount of revenue to be recognized by us. Our storage agreements require our customers to make minimum payments based on the volume ofstorage capacity available to the customer under the agreement, which results in a fixed amount of revenue to be recognized by us. We refer to the fixedamount of revenue recognized pursuant to our terminaling services agreements as being "firm commitments." Revenue recognized in excess of firmcommitments and revenue recognized based solely on the volume of product distributed or injected are referred to as "variable." The "firmcommitments" and "variable" revenue included in terminaling services fees, net were as follows (in thousands): Under the terminaling services agreement we entered into with Morgan Stanley Capital Group, effective January 1, 2008, Morgan Stanley CapitalGroup agreed to throughput a minimum volume of product at our Southeast facilities resulting in affiliated "firm commitments" during the year endedDecember 31, 2008. The Morgan Stanley Capital Group terminaling services agreement replaced certain capacity utilized under our prior terminalingservices agreement with TransMontaigne Inc. related to our Southeast facilities. The terms of the previous agreement with TransMontaigne Inc. resultedin affiliated "variable" revenue during the year ended December 31, 2007. At December 31, 2009, the remaining terms on the terminaling services agreements that generated "firm commitments" for the year endedDecember 31, 2009 were as follows (in thousands):55 Firm Commitments and Variable Revenue Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Firm commitments: External customers $36,341 $35,816 $38,394 Affiliates 77,633 70,574 34,716 Total 113,974 106,390 73,110 Variable: External customers 4,870 5,287 8,321 Affiliates (820) (364) 28,475 Total 4,050 4,923 36,796 Terminaling services fees, net $118,024 $111,313 $109,906 AtDecember 31,2009 Remaining terms on terminaling services agreements that generated "firmcommitments:" Less than 1 year remaining $13,434 More than 1 year but less than 3 years remaining 21,200 More than 3 years but less than 5 years remaining 77,762 More than 5 years remaining 1,578 Total firm commitments for the year ending December 31, 2009 $113,974 Table of Contents Pipeline Transportation Fees. We earn pipeline transportation fees at our Razorback pipeline and Diamondback pipeline based on the volume ofproduct transported and the distance from the origin point to the delivery point. The Federal Energy Regulatory Commission regulates the tariff on theRazorback pipeline and the Diamondback pipeline. The pipeline transportation fees by business segments were as follows (in thousands): Effective December 31, 2007, we acquired the Mexican LPG operations, including the Diamondback pipeline, from Rio Vista. For the year endedDecember 31, 2009 and 2008, the Mexican LPG operations generated approximately $2.4 million and $2.9 million, respectively, of pipelinetransportation fees attributable to our Brownsville terminals. Included in pipeline transportation fees for the years ended December 31, 2009, 2008 and 2007 are fees charged to Morgan Stanley Capital Groupof approximately $2.0 million, $1.1 million and $1.0 million, respectively, and fees charged to TransMontaigne Inc. of approximately $2.4 million,$2.9 million and $1.0 million, respectively. Management Fees and Reimbursed Costs. We manage and operate for a major oil company certain tank capacity at our Port Everglades (South)terminal and receive reimbursement of their proportionate share of operating and maintenance costs. We manage and operate for an affiliate of Mexico'sstate-owned petroleum company a bi-directional products pipeline connected to our Brownsville, Texas terminal facility and receive a management feeand reimbursement of costs. We also manage and operate for another major oil company two terminals that are adjacent to our Southeast facilities andreceive a reimbursement of their proportionate share of operating and maintenance costs. The management fees and reimbursed costs by businesssegments were as follows (in thousands):56 Pipeline Transportation Feesby Business Segment Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Gulf Coast terminals $— $— $— Midwest terminals and pipeline system 1,981 1,130 1,996 Brownsville terminals 2,394 2,890 — River terminals — — — Southeast terminals — — — Pipeline transportation fees $4,375 $4,020 $1,996 Management Fees and Reimbursed Costsby Business Segment Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Gulf Coast terminals $63 $141 $165 Midwest terminals and pipeline system — — — Brownsville terminals 1,739 1,449 1,171 River terminals — — — Southeast terminals 322 315 388 Management fees and reimbursed costs $2,124 $1,905 $1,724 Table of Contents Other Revenue. We provide ancillary services including heating and mixing of stored products, product transfer services, railcar handling,wharfage fees and vapor recovery fees. Pursuant to terminaling services agreements with our throughput customers, we are entitled to the volume ofproduct gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities. Consistent withrecognized industry practices, measurement differentials occur as the result of the inherent variances in measurement devices and methodology. Werecognize as revenue the net proceeds from the sale of the product gained. Other revenue is composed of the following (in thousands): For the years ended December 31, 2009, 2008 and 2007, we sold approximately 130,000, 139,000 and 134,000 barrels, respectively, of productgained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities at average prices of $72,$97 and $78 per barrel, respectively. Pursuant to our terminaling services agreement related to the Southeast terminals, we agreed to rebate to MorganStanley Capital Group 50% of the proceeds we receive annually in excess of $4.2 million from the sale of product gains at our Southeast terminals. AtDecember 31, 2009 and 2008, we have accrued a liability due to Morgan Stanley Capital Group of approximately $0.5 million and $2.2 million,respectively, representing our rebate liability. Other revenue from steam heating fees decreased during the year ended December 31, 2009 as compared to the year ended December 31, 2008 byapproximately $1.6 million due principally to a decrease in utility charges rebilled to customers for the heating of stored products. Included in other revenue for the years ended December 31, 2009, 2008 and 2007 are amounts charged to Morgan Stanley Capital Group ofapproximately $11.5 million, $13.2 million and $2.9 million, respectively, and amounts charged to TransMontaigne Inc. of approximately $0.2 million,$0.1 million and $8.9 million, respectively. The increase in amounts charged to Morgan Stanley Capital Group, and the corresponding decrease inamounts charged to TransMontaigne Inc., primarily resulted from the shift of the terminaling services agreement for the Southeast terminals, formerlywith TransMontaigne Inc. to Morgan Stanley Capital Group. The other revenue by business segments were as follows (in thousands):57 Principal Components of Other Revenue Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Product gains $8,927 $11,272 $10,509 Steam heating fees 3,828 5,389 4,391 Product transfer services 766 762 679 Railcar handling 1,022 865 567 Other 3,481 2,614 1,879 Other revenue $18,024 $20,902 $18,025 Other Revenue by Business Segment Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Gulf Coast terminals $8,262 $9,424 $5,949 Midwest terminals and pipeline system 1,090 880 825 Brownsville terminals 3,370 3,251 2,702 River terminals 531 738 569 Southeast terminals 4,771 6,609 7,980 Other revenue $18,024 $20,902 $18,025 Table of ContentsANALYSIS OF COSTS AND EXPENSES Costs and Expenses. The direct operating costs and expenses of our operations include the directly related wages and employee benefits,utilities, communications, maintenance and repairs, property taxes, rent, vehicle expenses, environmental compliance costs, materials and supplies. Thedirect operating costs and expenses of our operations were as follows (in thousands): The direct operating costs and expenses of our business segments were as follows (in thousands): Effective December 31, 2007, we acquired the Southeast terminals from TransMontaigne Inc. The Southeast terminals are included in our resultsof operations for the entirety of 2007 because the acquisition is accounted for as a transaction among entities under common control. Effective December 31, 2007, we acquired the Mexican LPG operations from Rio Vista. For the years ended December 31, 2009, 2008 and 2007,the Mexican LPG operations incurred approximately $0.7 million, $0.8 million and $nil, respectively, of direct operating costs and expenses attributableto our Brownsville terminals. The direct general and administrative expenses of our operations include accounting and legal costs associated with annual and quarterly reportsand tax return and Schedule K-1 preparation and58 Direct Operating Costs and Expenses Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Wages and employee benefits $21,370 $20,786 $18,189 Utilities and communication charges 7,642 9,304 7,290 Repairs and maintenance 23,952 19,725 22,116 Office, rentals and property taxes 6,307 6,103 5,989 Vehicles and fuel costs 1,050 1,507 2,575 Environmental compliance costs 3,319 2,989 3,754 Other 1,328 1,436 824 Less—property and environmentalinsurance recoveries — — (51) Direct operating costs and expenses $64,968 $61,850 $60,686 Direct Operating Costs andExpenses by Business Segment Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Gulf Coast terminals $20,986 $21,774 $18,711 Midwest terminals and pipeline system 2,428 1,500 2,519 Brownsville terminals 11,916 11,510 9,039 River terminals 8,912 7,858 6,716 Southeast terminals 20,726 19,208 23,701 Direct operating costs and expenses $64,968 $61,850 $60,686 Table of Contentsdistribution, independent director fees and amortization of deferred equity-based compensation. Direct general and administrative expenses were asfollows (in thousands): The accompanying consolidated financial statements include allocated general and administrative charges from TransMontaigne Inc. for allocationsof indirect corporate overhead to cover costs of centralized corporate functions such as legal, accounting, treasury, insurance administration and claimsprocessing, health, safety and environmental, information technology, human resources, credit, payroll, taxes, engineering and other corporate services.The allocated general and administrative expenses for the years ended December 31, 2009, 2008 and 2007 were approximately $10.0 million,$10.0 million and $9.9 million, respectively. The accompanying consolidated financial statements also include allocated insurance charges from TransMontaigne Inc. for allocations ofinsurance premiums to cover costs of insuring activities such as property, casualty, pollution, automobile, directors' and officers', and other insurablerisks. The allocated insurance expense for the years ended December 31, 2009, 2008 and 2007 were approximately $2.9 million, $2.8 million and$2.8 million, respectively. The accompanying consolidated financial statements also include amounts paid to TransMontaigne Services Inc. as a partial reimbursement ofbonus awards granted by TransMontaigne Services Inc. to certain key officers and employees that vest over future service periods. The reimbursementswere approximately $1.2 million, $1.5 million and $1.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Depreciation and amortization for the years ended December 31, 2009, 2008 and 2007 were approximately $26.3 million, $23.3 million and$21.4 million, respectively.LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs are to fund our working capital requirements, distributions to unitholders and capital expenditures. We believe that wewill be able to generate sufficient cash from operations in the future to meet our liquidity needs to fund our working capital requirements and to fund ourdistributions to unitholders. We expect to fund our capital expenditures with additional borrowings under our senior secured credit facility.59 Direct General and Administrative Expenses Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Accounting and tax expenses $1,368 $1,799 $1,268 Legal expenses 747 1,087 1,054 Independent director fees and investorrelations expenses 285 447 322 Amortization of deferred equity-basedcompensation 213 35 66 Provision for potentially uncollectibleaccounts receivable — 289 83 Other 629 481 198 Direct general and administrativeexpenses $3,242 $4,138 $2,991 Table of Contents Excluding acquisitions, our capital expenditures for the year ended December 31, 2009 were approximately $37.7 million for terminal and pipelinefacilities and assets to support these facilities. Management and the board of directors of our general partner approved capital projects that currently areor will be under construction with estimated completion dates that extend through March 31, 2011. At December 31, 2009, the remaining capitalexpenditures to complete the approved capital projects are estimated to range from $29 million to $33 million. We expect to fund our capitalexpenditures with additional borrowings under our senior secured credit facility. The budgeted capital projects include the following: Pursuant to existing terminaling services agreements with Morgan Stanley Capital Group, we expect to receive payments through December 31,2010 from Morgan Stanley Capital Group in the range of $4 million to $8 million, which are due and payable upon completion of certain of the capitalprojects referred to above. At December 31, 2009, our senior secured credit facility provides for a maximum borrowing line of credit equal to $200 million. At December 31,2009, our outstanding borrowings were approximately $165 million, resulting in available capacity of approximately $35 million. Upon payment of theremaining capital expenditures to complete the approved capital projects, receipt of payments from Morgan Stanley Capital Group upon completion ofcertain of the capital projects and a reduction in our outstanding borrowings under the senior secured credit facility considering the net proceeds andcash contribution of approximately $52.1 million from our January 15, 2010 equity offering, we currently expect to have approximately $60 million inavailable capacity under our senior secured credit facility. In addition, at our request, the revolving loan commitment can be increased up to an additional$100 million, in the aggregate, without the approval of the lenders, but subject to the approval of the administrative agent and the receipt of additionalcommitments from one or more lenders. The terms of the senior secured credit facility also permit us to borrow up to approximately $25 million fromother lenders, including our general partner and its affiliates. Future capital expenditures will depend on numerous factors, including the availability,economics and cost of appropriate acquisitions which we identify and evaluate; the economics, cost and required regulatory approvals with respect tothe expansion and enhancement of existing systems and facilities; customer demand for the services we provide; local, state and federal governmentalregulations; environmental compliance requirements; and the availability of debt financing and equity capital on acceptable terms. Senior Secured Credit Facility. At December 31, 2009, the senior secured credit facility provides for a maximum borrowing line of credit equalto the lesser of (i) $200 million and (ii) four times Consolidated EBITDA (as defined: $241.6 million at December 31, 2009). We may elect to haveloans under the senior secured credit facility bear interest either (i) at a rate of LIBOR plus a margin ranging from 1.5% to 2.5% depending on the totalleverage ratio then in effect, or (ii) at a base rate (the greater of (a) the federal funds rate plus 0.5% or (b) the prime rate) plus a margin ranging from0.5% to 1.5% depending on the total leverage ratio then in effect. We also pay a commitment fee ranging from 0.3% to 0.5% per annum, depending onthe total leverage ratio then in effect, on the total amount of unused commitments. Our obligations under the senior secured credit facility are secured bya first priority security interest in favor of the lenders in our assets, including cash, accounts receivable, inventory, general intangibles, investmentproperty, contract rights and real property.60Terminal Description of project Incrementalstoragecapacity Expectedcompletion (in Bbls) Tampa Improve truck rack capacity and functionality 1st half 2010Southeast Renewable fuels blending functionality 2nd half 2010Brownsville Build truck rack 2nd half 2010Collins/Purvis Increase light oil tank capacity 700,000 1st half 2011Table of Contents The terms of the senior secured credit facility include covenants that restrict our ability to make cash distributions and acquisitions. We may makedistributions of cash to the extent of our "available cash" as defined in our partnership agreement. We may make acquisitions meeting the definition of"permitted acquisitions" which include: acquisitions in which the consideration paid for such acquisition, together with the consideration paid for otheracquisitions in the same fiscal year, does not exceed $25 million; acquisitions that arise from the exercise of options under the omnibus agreement withTransMontaigne Inc.; and acquisitions in which we have (1) provided the agent prior written documentation in form and substance reasonablysatisfactory to the agent demonstrating our pro forma compliance with all financial and other covenants contained in the senior secured credit facilityafter giving effect to such acquisition and (2) satisfied all other conditions precedent to such acquisition which the agent may reasonably require inconnection therewith. The principal balance of loans and any accrued and unpaid interest are due and payable in full on the maturity date, December 22,2011. The senior secured credit facility also contains customary representations and warranties (including those relating to organization and authorization,compliance with laws, absence of defaults, material agreements and litigation) and customary events of default (including those relating to monetarydefaults, covenant defaults, cross defaults and bankruptcy events). The primary financial covenants contained in the senior secured credit facility are (i) atotal leverage ratio test (not to exceed 4.5 times), (ii) a senior secured leverage ratio test (not to exceed 4.0 times), and (iii) a minimum interest coverageratio test (not less than 2.75 times). These financial covenants are based on a defined financial performance measure within the senior secured creditfacility known as "Consolidated EBITDA." The calculation of the "total leverage ratio," "senior secured leverage ratio" and "interest coverage ratio"contained in the senior secured credit facility is as follows (in thousands, except ratios): Three months ended YearendedDecember 31,2009 March 31,2009 June 30,2009 September 30,2009 December 31,2009 Financial performancedebt covenant test: Consolidated EBITDA forthe total leverage ratio, asstipulated in the creditfacility $14,228 $16,241 $14,357 $15,583 $60,409 Consolidated fundedindebtedness $165,000 Total leverage ratio andsenior secured leverageratio 2.73x Consolidated EBITDA forthe interest coverage ratio $14,228 $16,241 $14,357 $15,583 $60,409 Consolidated interestexpense, as stipulated inthe credit facility $1,275 $1,439 $1,349 $1,416 $5,479 Interest coverage ratio 11.03x Reconciliation ofconsolidated EBITDAto cash flows providedby operating activities: Consolidated EBITDA $14,228 $16,241 $14,357 $15,583 $60,409 Consolidated interestexpense (1,275) (1,439) (1,349) (1,416) (5,479)Amortization of deferredrevenue (326) (562) (764) (809) (2,461)Amounts due under long-term terminaling servicesagreements, net (478) (386) 25 (627) (1,466)Change in operating assetsand liabilities 3,191 11,017 5,553 1,281 21,042 Cash flows provided by61operating activities $15,340 $24,871 $17,822 $14,012 $72,045 Table of Contents If we were to fail either financial performance covenant, or any other covenant contained in the senior secured credit facility, we would seek awaiver from our lenders under such facility. If we were unable to obtain a waiver from our lenders and the default remained uncured after any applicablegrace period, we would be in breach of the senior secured credit facility, and the lenders would be entitled to declare all outstanding borrowingsimmediately due and payable. On January 15, 2010, we issued, pursuant to an underwritten public offering, 1,750,000 common units representing limited partner interests at apublic offering price of $26.60 per common unit. On January 15, 2010, the underwriters of our secondary offering exercised in full their over-allotmentoption to purchase an additional 262,500 common units representing limited partnership interests at a price of $26.60 per common unit. The netproceeds from the offering were approximately $51.1 million, after deducting underwriting discounts, commissions, and offering expenses ofapproximately $0.2 million. Additionally, TransMontaigne GP L.L.C., our general partner, made a cash contribution of approximately $1.1 million to usto maintain its 2% general partner interest. The net proceeds from the offering and cash contribution were used to repay outstanding borrowings underour senior secured credit facility. Contractual Obligations and Contingencies. We have contractual obligations that are required to be settled in cash. The amounts of ourcontractual obligations at December 31, 2009 are as follows (in thousands): Off-Balance Sheet Arrangements. At December 31, 2009, our outstanding letters of credit were $nil. See Notes 2, 9, 10, 11 and 14 of Notes to consolidated financial statements for additional information regarding our contractual obligations andoff-balance sheet arrangements that may affect our results of operations and financial condition. We believe that our future cash expected to be provided by operating activities, available borrowing capacity under our senior secured creditfacility, and our relationship with institutional lenders and equity investors should enable us to meet our planned capital and liquidity requirementsthrough at least the maturity date of our credit facility (December 2011).ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risk to which we are exposed isinterest rate risk associated with borrowings under our senior secured credit facility. Borrowings under our senior secured credit facility bear interest ata variable rate based on LIBOR or the lender's base rate. At December 31, 2009, we had outstanding borrowings of $165.0 million under our seniorsecured credit facility.62 Years ending December 31, 2010 2011 2012 2013 2014 Thereafter Additions to property, plant and equipment undercontract $5,502 $— $— $— $— $— Operating leases—property and equipment 1,509 1,433 812 717 621 5,804 Long-term debt — 165,000 — — — — Interest expense on debt(1) 6,600 6,600 — — — — Total contractual obligations to be settled in cash $13,611 $173,033 $812 $717 $621 $5,804 (1)Assumes that our outstanding long-term debt at December 31, 2009 remains outstanding until its maturity date and we incurinterest expense at 4.0%, which considers the effect of our interest rate swaps.Table of Contents We manage a portion of our interest rate risk with interest rate swaps, which reduce our exposure to changes in interest rates by converting variableinterest rates to fixed interest rates. At December 31, 2009, we were party to an interest rate swap agreement with Wachovia Bank, N.A with a notionalamount of $150.0 million that expires June 2011. Pursuant to the terms of the interest rate swap agreement, we pay a fixed rate of approximately 2.2%and receive an interest payment based on the one-month LIBOR. The net difference to be paid or received under the interest rate swap agreement issettled monthly and is recognized as an adjustment to interest expense. Based on the outstanding balance of our variable-interest-rate debt at December 31, 2009, the terms of our interest rate swap agreement with anotional amount of $150.0 million, and assuming market interest rates increase or decrease by 100 basis points, the potential annual increase or decreasein interest expense is approximately $0.2 million. We do not purchase or market products that we handle or transport and, therefore, we do not have material direct exposure to changes incommodity prices, except for the value of product gains and losses arising from certain of our terminaling services agreements with our customers.Pursuant to our terminaling services agreement related to the Southeast terminals, we agreed to rebate to Morgan Stanley Capital Group 50% of theproceeds we receive annually in excess of $4.2 million from the sale of product gains at our Southeast terminals. We do not use derivative commodityinstruments to manage the commodity risk associated with the product we may own at any given time. Generally, to the extent we are entitled to retainproduct pursuant to terminaling services agreements with our customers, we sell the product to Morgan Stanley Capital Group and other marketing anddistribution companies on a monthly basis; the sales price is based on industry indices. For the years ended December 31, 2009, 2008 and 2007, we sold approximately 130,000, 139,000 and 134,000 barrels, respectively, of productgained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities at average prices of $72,$97 and $78 per barrel, respectively.63Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements should be read in conjunction with "Management's Discussion and Analysis of FinancialCondition and Results of Operations" included elsewhere in this annual report.TransMontaigne Partners L.P. and Subsidiaries:64Report of Independent Registered Public Accounting Firm 65Consolidated balance sheets as of December 31, 2009 and 2008 66Consolidated statements of operations for the years ended December 31, 2009, 2008 and 2007 67Consolidated statements of partners' equity and comprehensive income for the years ended December 31, 2009,2008 and 2007 68Consolidated statements of cash flows for the years ended December 31, 2009, 2008 and 2007 69Notes to consolidated financial statements 70Table of ContentsReport of Independent Registered Public Accounting Firm The Board of Directors and MemberTransMontaigne GP L.L.C.: We have audited the accompanying consolidated balance sheets of TransMontaigne Partners L.P. and subsidiaries (the Partnership) as ofDecember 31, 2009 and 2008, and the related consolidated statements of operations, partners' equity and comprehensive income, and cash flows foreach of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility ofTransMontaigne GP L.L.C.'s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position ofTransMontaigne Partners L.P. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each ofthe years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. As discussed in note 1 to the accompanying consolidated financial statements, effective January 1, 2009, the Partnership adopted Emerging IssuesTask Force Issue 07-4, Application of the Two-Class Method Under FASB Statement No. 128 to Master Limited Partnerships (FASB AccountingStandards Codification 260). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness ofTransMontaigne Partners L.P. and subsidiaries' internal control over financial reporting as of December 31, 2009, based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our reportdated March 8, 2010 expressed an unqualified opinion on the effectiveness of the Partnership's internal control over financial reporting.KPMG LLPDenver, ColoradoMarch 8, 201065Table of ContentsTransMontaigne Partners L.P. and subsidiaries Consolidated balance sheets (Dollars in thousands) See accompanying notes to consolidated financial statements.66 December 31,2009 December 31,2008 ASSETS Current assets: Cash and cash equivalents $6,568 $4,795 Trade accounts receivable, net 6,317 6,694 Due from TransMontaigne Inc. — 761 Due from Morgan Stanley Capital Group 2,148 5,641 Other current assets 7,706 8,870 Total current assets 22,739 26,761 Property, plant and equipment, net 459,598 447,753 Goodwill 24,682 24,667 Other assets, net 8,516 7,858 $515,535 $507,039 LIABILITIES AND EQUITY Current liabilities: Trade accounts payable $11,007 $7,327 Due to TransMontaigne Inc. 168 — Accrued liabilities 19,235 21,814 Total current liabilities 30,410 29,141 Other liabilities 17,000 4,819 Long-term debt 165,000 165,500 Total liabilities 212,410 199,460 Partners' equity: Common unitholders (12,444,566 and 9,952,867 units issued and outstanding atDecember 31, 2009 and 2008, respectively) 249,160 249,264 Subordinated unitholders (nil and 2,491,699 units issued and outstanding atDecember 31, 2009 and 2008, respectively) — 4,449 General partner interest (2% interest with 253,971 equivalent units outstanding atDecember 31, 2009 and 2008, respectively) 54,434 54,450 Accumulated other comprehensive loss (469) (584) Total partners' equity 303,125 307,579 $515,535 $507,039 Table of ContentsTransMontaigne Partners L.P. and subsidiaries Consolidated statements of operations (In thousands, except per unit amounts) See accompanying notes to consolidated financial statements.67 Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Revenue: External customers $49,697 $50,705 $54,711 Affiliates 92,850 87,435 76,940 142,547 138,140 131,651 Costs and expenses: Direct operating costs and expenses (64,968) (61,850) (60,686) Direct general and administrative expenses (3,242) (4,138) (2,991) Allocated general and administrative expenses (10,040) (10,030) (9,901) Allocated insurance expense (2,900) (2,835) (2,837) Reimbursement of bonus awards (1,237) (1,500) (1,125) Depreciation and amortization (26,306) (23,316) (21,432) Gain on disposition of assets 1 2 — Operating income 33,855 34,473 32,679 Other income (expenses): Interest income 7 38 214 Interest expense (5,486) (6,007) (6,515) Amortization of deferred financing costs (598) (599) (1,236) Unrealized loss on derivative instrument (562) (2,128) — Foreign currency transaction gain (loss) 36 (179) — Total other income (expenses), net (6,603) (8,875) (7,537) Net earnings 27,252 25,598 25,142 Less: Net earnings attributable to predecessor — — (10,044) Earnings allocable to general partner interest including incentivedistribution rights (2,451) (2,226) (757) Net earnings allocable to limited partners $24,801 $23,372 $14,341 Net earnings per limited partner unit—basic $1.99 $1.88 $1.38 Net earnings per limited partner unit—diluted $1.99 $1.88 $1.38 Weighted average limited partner units outstanding—basic 12,438 12,442 10,400 Weighted average limited partner units outstanding—diluted 12,441 12,442 10,401 Table of ContentsTransMontaigne Partners L.P. and subsidiaries Consolidated statements of partners' equity and comprehensive income (Dollars in thousands) Predecessor Commonunits Subordinatedunits Generalpartnerinterest Accumulatedothercomprehensiveloss Total Balance December 31,2006 $167,466 $72,852 $10,427 $(5,414)$— $245,331 Proceeds fromsecondary offeringof 5,149,800common units, netof underwriters'discounts andoffering expenses of$9,567 — 179,946 — — — 179,946 Contribution of cashbyTransMontaigne GPto maintain its 2%general partnerinterest — — — 3,867 — 3,867 Contribution byTransMontaigne Inc.of capitalimprovements to theBrownsville andRiver terminals — — — 6,273 — 6,273 Distributions tounitholders — (12,712) (6,311) (656) — (19,679) Amortization ofdeferred equity-based compensationrelated to restrictedphantom units — 66 — — — 66 Repurchase of 1,680common units byour long-termincentive plan — (54) — — — (54) Acquisition ofSoutheast terminalsfrom Predecessor inexchange for$118.6 million (168,047) — — 49,448 — (118,599) Distributions andrepayments, net toPredecessor (9,463) — — — — (9,463) Net earnings for yearended December 31,2007 10,044 10,616 3,725 757 — 25,142 Balance December 31,2007 — 250,714 7,841 54,275 — 312,830 Distributions tounitholders — (20,636) (7,509) (2,051) — (30,196) Amortization ofdeferred equity-based compensationrelated to restrictedphantom units — 84 — — — 84 Reversal of previouslyrecognized equity-based compensationdue to repurchase ofunvested restrictedphantom units — (49) — — — (49) Repurchase of 4,180common units byour long-termSee accompanying notes to consolidated financial statements.68 incentive plan — (104) — — — (104) Issuance of 1,000common units byour long-termincentive plan dueto vesting ofrestricted phantomunits — — — — — — Conversion of 830,567subordinated unitsinto common units — 1,741 (1,741) — — — Net earnings for yearended December 31,2008 — 17,514 5,858 2,226 — 25,598 Foreign currencytranslationadjustments — — — — (584) (584) Comprehensiveincome 25,014 Balance December 31,2008 — 249,264 4,449 54,450 (584) 307,579 Distributions tounitholders — (24,514) (4,900) (2,467) — (31,881) Amortization ofdeferred equity-based compensationrelated to restrictedphantom units — 213 — — — 213 Repurchase of 6,885common units byour long-termincentive plan — (153) — — — (153) Issuance of 3,000common units byour long-termincentive plan dueto vesting ofrestricted phantomunits — — — — — — Conversion of2,491,699subordinated unitsinto common units — 2,719 (2,719) — — — Net earnings for yearended December 31,2009 — 21,631 3,170 2,451 — 27,252 Foreign currencytranslationadjustments — — — — 115 115 Comprehensiveincome 27,367 Balance December 31,2009 $— $249,160 $— $54,434 $(469)$303,125 Table of ContentsTransMontaigne Partners L.P. and subsidiaries Consolidated statements of cash flows (In thousands) Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Cash flows from operating activities: Net earnings $27,252 $25,598 $25,142 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 26,306 23,316 21,432 Gain on disposition of assets (1) — — Amortization of deferred equity-based compensation 213 84 66 Reversal of previously recognized equity-based compensation — (49) — Amortization of deferred financing costs 598 599 1,236 Amortization of deferred revenue (2,461) — — Amounts due under long-term terminaling services agreements, net (1,466) (1,425) (724) Unrealized loss on derivative instrument 562 2,128 — Changes in operating assets and liabilities, net of effects from acquisitions: Trade accounts receivable, net 377 (2,285) (2,796) Due from TransMontaigne Inc. 896 1,169 3,385 Due from Morgan Stanley Capital Group. 18,069 (1,093) — Other current assets 1,174 188 (1,772) Trade accounts payable 3,684 4,788 (102) Accrued liabilities (3,158) 470 10,539 Net cash provided by operating activities 72,045 53,488 56,406 Cash flows from investing activities: Acquisition of terminal facilities, net of cash acquired — — (127,560) Additions to property, plant and equipment—expansion of facilities (30,245) (48,614) (18,390) Additions to property, plant and equipment—maintain existing facilities (7,468) (4,765) (9,600) Proceeds from sale of assets 2 — — Other (31) (27) — Net cash (used in) investing activities (37,742) (53,406) (155,550) Cash flows from financing activities: Net proceeds from issuance of common units — — 179,946 Contribution of cash by TransMontaigne GP — — 3,867 Net borrowings (payments) under credit facility (500) 33,500 (57,621) Distributions paid to unitholders (31,881) (30,196) (19,679) Cash paid for deferred financing costs — — (1,027) Repurchase of common units by our long-term incentive plan (153) (104) (54) Distributions and repayments to TransMontaigne Inc., net — — (8,146) Net cash provided by (used in) financing activities (32,534) 3,200 97,286 Increase (decrease) in cash and cash equivalents 1,769 3,282 (1,858)Foreign currency exchange effect on cash 4 (91) — Cash and cash equivalents at beginning of period 4,795 1,604 3,462 Cash and cash equivalents at end of period $6,568 $4,795 $1,604 Supplemental disclosures of cash flow information: Cash paid for interest $6,769 $6,092 $6,678 See accompanying notes to consolidated financial statements.69 Non-cash distributions to TransMontaigne Inc., net $— $— $(1,317) Table of ContentsNotes to Consolidated Financial Statements Years ended December 31, 2009, 2008 and 2007 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Nature of business TransMontaigne Partners L.P. ("Partners") was formed in February 2005 as a Delaware master limited partnership initially to own and operaterefined petroleum products terminaling and transportation facilities. We conduct our operations primarily in the United States along the Gulf Coast, inthe Southeast, in Brownsville, Texas, along the Mississippi and Ohio rivers, and in the Midwest. We provide integrated terminaling, storage,transportation and related services for companies engaged in the distribution and marketing of refined petroleum products, crude oil, chemicals,fertilizers and other liquid products, including TransMontaigne Inc. and Morgan Stanley Capital Group Inc. We are controlled by our general partner, TransMontaigne GP L.L.C. ("TransMontaigne GP"), which is a wholly-owned subsidiary ofTransMontaigne Inc. Effective September 1, 2006, Morgan Stanley Capital Group Inc. ("Morgan Stanley Capital Group"), a wholly-owned subsidiaryof Morgan Stanley, purchased all of the issued and outstanding capital stock of TransMontaigne Inc. Morgan Stanley Capital Group is the principalcommodities trading arm of Morgan Stanley. As a result of Morgan Stanley's acquisition of TransMontaigne Inc., Morgan Stanley became the indirectowner of our general partner. At February 26, 2010, TransMontaigne Inc. and Morgan Stanley have a significant interest in our partnership throughtheir indirect ownership of a 22.1% limited partner interest, a 2% general partner interest and the incentive distribution rights.(b) Basis of presentation and use of estimates Our accounting and financial reporting policies conform to accounting principles and practices generally accepted in the United States of America.The accompanying consolidated financial statements include the accounts of TransMontaigne Partners L.P., a Delaware limited partnership, and itscontrolled subsidiaries. All significant inter-company accounts and transactions have been eliminated in the preparation of the accompanyingconsolidated financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and thereported amounts of revenue and expenses during the reporting periods. The following estimates, in management's opinion, are subjective in nature,require the exercise of judgment, and involve complex analyses: allowance for doubtful accounts, accrued environmental obligations and determiningthe fair value of our reporting units when performing our annual goodwill impairment analysis. Changes in these estimates and assumptions will occuras a result of the passage of time and the occurrence of future events. Actual results could differ from these estimates. The accompanying consolidated financial statements include the assets, liabilities and results of operations of certain terminal and pipelineoperations prior to their acquisition by us from TransMontaigne Inc. The acquired assets and liabilities have been recorded at TransMontaigne Inc.'scarryover basis. At the closing of our initial public offering on May 27, 2005, we acquired from TransMontaigne Inc. seven Florida terminals, includingterminals located in Tampa, Port Manatee, Fisher Island, Port Everglades (North), Port Everglades (South), Cape Canaveral, and Jacksonville; and theRazorback pipeline system, including the terminals located at Mt. Vernon, Missouri and Rogers, Arkansas in exchange for 120,000 common units,2,872,266 subordinated units, a 2% general partner interest, and a cash payment of approximately $111.5 million. On January 1, 2006, we acquiredfrom70Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)TransMontaigne Inc. the Mobile, Alabama terminal in exchange for a cash payment of approximately $17.9 million. On December 29, 2006, weacquired from TransMontaigne Inc. the Brownsville, Texas terminal, 12 terminals along the Mississippi and Ohio rivers ("River terminals"), and theBaton Rouge, Louisiana dock facility in exchange for a cash payment of approximately $135 million. On December 31, 2007, we acquired fromTransMontaigne Inc. twenty-two terminals along the Colonial and Plantation pipelines ("Southeast terminals") in exchange for a cash payment ofapproximately $118.6 million (See Note 3 of Notes to consolidated financial statements). The acquisitions of terminal and pipeline operations fromTransMontaigne Inc. have been accounted for as transactions among entities under common control and, accordingly, prior periods include the activityof the acquired terminal and pipeline operations since the date they were purchased by TransMontaigne Inc. for acquisitions made by us prior toSeptember 1, 2006, and since September 1, 2006 (the date of Morgan Stanley Capital Group's acquisition of TransMontaigne Inc.) for acquisitionsmade by us on or after September 1, 2006. The accompanying consolidated financial statements include allocated general and administrative charges from TransMontaigne Inc. for indirectcorporate overhead to cover costs of functions such as legal, accounting, treasury, engineering, environmental safety, information technology, and othercorporate services (see Note 2 of Notes to consolidated financial statements). The allocated general and administrative expenses were approximately$10.0 million, $10.0 million and $9.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. The accompanying consolidatedfinancial statements also include allocated insurance charges from TransMontaigne Inc. for insurance premiums to cover costs of insuring activities suchas property, casualty, pollution, automobile, directors' and officers' liability, and other insurable risks. The allocated insurance charges wereapproximately $2.9 million, $2.8 million and $2.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. Management believesthat the allocated general and administrative charges and insurance charges are representative of the actual costs and expenses incurred byTransMontaigne Inc. for managing Partners' operations. The accompanying consolidated financial statements also include reimbursement of bonusawards paid to TransMontaigne Services Inc. (a wholly-owned subsidiary of TransMontaigne Inc.) towards bonus awards granted by TransMontaigneServices Inc. to certain key officers and employees that vest over future periods. The reimbursement of bonus awards was approximately $1.2 million,$1.5 million and $1.1 million for the years ended December 31, 2009, 2008 and 2007, respectively.(c) Accounting for terminal and pipeline operations In connection with our terminal and pipeline operations, we utilize the accrual method of accounting for revenue and expenses. We generaterevenue in our terminal and pipeline operations from terminaling services fees, transportation fees, management fees and cost reimbursements, fees fromother ancillary services and gains from the sale of refined products. Terminaling services revenue is recognized ratably over the term of the agreementfor storage fees and minimum revenue commitments that are fixed at the inception of the agreement and when product is delivered to the customer forfees based on a rate per barrel throughput; transportation revenue is recognized when the product has been delivered to the customer at the specifieddelivery location; management fee revenue and cost reimbursements are recognized as the services are performed or as the costs are incurred; ancillaryservice revenue is recognized as the services are performed; and gains from the sale of refined products are recognized when the title to the product istransferred.71Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)(d) Cash and cash equivalents We consider all short-term investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents.(e) Property, plant and equipment Depreciation is computed using the straight-line method. Estimated useful lives are 15 to 25 years for plant, which includes buildings, storagetanks, and pipelines, and 3 to 25 years for equipment. All items of property, plant and equipment are carried at cost. Expenditures that increase capacityor extend useful lives are capitalized. Repairs and maintenance are expensed as incurred. We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not berecoverable based on expected undiscounted future cash flows attributable to that asset. If an asset is impaired, the impairment loss to be recognized isthe excess of the carrying amount of the asset over its estimated fair value.(f) Environmental obligations We accrue for environmental costs that relate to existing conditions caused by past operations when estimable (see Note 9 of Notes to consolidatedfinancial statements). Environmental costs include initial site surveys and environmental studies of potentially contaminated sites, costs for remediationand restoration of sites determined to be contaminated and ongoing monitoring costs, as well as fines, damages and other costs, including direct legalcosts. Liabilities for environmental costs at a specific site are initially recorded, on an undiscounted basis, when it is probable that we will be liable forsuch costs, and a reasonable estimate of the associated costs can be made based on available information. Such an estimate includes our share of theliability for each specific site and the sharing of the amounts related to each site that will not be paid by other potentially responsible parties, based onenacted laws and adopted regulations and policies. Adjustments to initial estimates are recorded, from time to time, to reflect changing circumstances andestimates based upon additional information developed in subsequent periods. Estimates of our ultimate liabilities associated with environmental costsare difficult to make with certainty due to the number of variables involved, including the early stage of investigation at certain sites, the lengthy timeframes required to complete remediation, technology changes, alternatives available and the evolving nature of environmental laws and regulations. Weperiodically file claims for insurance recoveries of certain environmental remediation costs with our insurance carriers under our comprehensive liabilitypolicies (see Note 5 of Notes to consolidated financial statements). We recognize our insurance recoveries as a credit to income in the period that weassess the likelihood of recovery as being probable (i.e., likely to occur). TransMontaigne Inc. has indemnified us through May 27, 2010 against certain potential environmental claims, losses and expenses associated withthe operation of the Florida and Midwest terminal facilities and occurring before May 27, 2005, up to a maximum liability not to exceed $15.0 millionfor this indemnification obligation (see Note 2 of Notes to consolidated financial statements). TransMontaigne Inc. has indemnified us throughDecember 31, 2011 against certain potential environmental claims, losses and expenses associated with the operation of the Brownsville and Riverterminals and occurring before December 31, 2006, up to a maximum liability not to exceed $15.0 million for this indemnification obligation (see Note 2of Notes to consolidated financial statements). TransMontaigne Inc. has indemnified us through December 31, 2012 against certain72Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)potential environmental claims, losses and expenses associated with the operation of the Southeast terminals and occurring before December 31, 2007,up to a maximum liability not to exceed $15.0 million for this indemnification obligation (see Note 2 of Notes to consolidated financial statements).(g) Asset retirement obligations Asset retirement obligations are legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction,development or normal use of the asset. Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" orFASB Accounting Standards Codification ("ASC") 410, "Asset Retirement and Environmental Obligations," requires that the fair value of a liabilityrelated to the retirement of long-lived assets be recorded at the time a legal obligation is incurred. Once an asset retirement obligation is identified and aliability is recorded, a corresponding asset is recorded, which is depreciated over the remaining useful life of the asset. After the initial measurement, theliability is adjusted to reflect changes in the asset retirement obligation's fair value. If and when it is determined that a legal obligation has been incurred,the fair value of any liability is determined based on estimates and assumptions related to retirement costs, future inflation rates and interest rates. Ourlong-lived assets consist of above-ground storage facilities and underground pipelines. We are unable to predict if and when our long-lived assets willbecome completely obsolete and require dismantlement. Accordingly, we have not recorded an asset retirement obligation, or corresponding asset,because the future dismantlement and removal dates of our long-lived assets, and the amount of any associated costs, are indeterminable. Changes in ourestimates and assumptions may occur as a result of the passage of time and the occurrence of future events.(h) Equity-based compensation plan We account for our equity-based compensation awards pursuant to the provisions of Statement of Financial Accounting Standards No. 123 (R),"Share-Based Payment" or FASB ASC 718, "Compensation—Stock Compensation." This Statement requires us to measure the cost of servicesreceived in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the periodduring which a board member or employee is required to provide service in exchange for the award. We are required to estimate the number of equityinstruments that are expected to vest in measuring the total compensation cost to be recognized over the related service period. Compensation cost isrecognized over the service period on a straight-line basis.(i) Foreign currency translation and transactions The functional currency of Partners and its U.S.-based subsidiaries is the U.S. Dollar. The functional currency of our foreign subsidiaries,including Penn Octane de Mexico, S. de R.L. de C.V., Termatsal, S. de R.L. de C.V., and Tergas, S. de R.L. de C.V., is the Mexican Peso. The assetsand liabilities of our foreign subsidiaries are translated at period-end rates of exchange, and revenue and expenses are translated at average exchangerates prevailing for the period. The resulting translation adjustments, net of related income taxes, are recorded as a component of other comprehensiveincome in partners' equity. Gains and losses from the remeasurement of foreign currency transactions (transactions denominated in a currency other thanthe entity's functional currency) are included in the consolidated statements of operations in other income (expenses).73Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)(j) Accounting for Derivative Instruments We account for our derivative instruments pursuant to the provisions of Statement of Financial Accounting Standards No. 133, "Accounting forDerivative Instruments and Hedging Activities" or FASB ASC 815, "Derivatives and Hedging." This Statement requires us to recognize all derivativeinstruments at fair value in the consolidated balance sheet as assets or liabilities (see Note 9 of Notes to consolidated financial statements). Changes inthe fair value of our derivative instruments are recognized in earnings unless specific hedge accounting criteria are met. At December 31, 2009 and 2008, our derivative instruments were limited to interest rate swaps. We have not designated these interest rate swapsas hedges and therefore the change in the fair value of our interest rate swaps is included in the consolidated statements of operations in other income(expenses). The fair value of our interest rate swaps is determined using a pricing model based on the LIBOR swap rate and other observable marketdata. The fair value was determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both WachoviaBank N.A., the counterparty, and us. Our fair value measurement of our interest rate swaps utilizes Level 2 inputs.(k) Income taxes No provision for U.S. federal income taxes has been reflected in the accompanying consolidated financial statements because Partners is treated asa partnership for federal income taxes. As a partnership, all income, gains, losses, expenses, deductions and tax credits generated by Partners flowthrough to the unitholders of the partnership. Partners is a taxable entity under certain U.S. state jurisdictions. We are subject to income taxes in the state of Texas. Certain of our Mexicansubsidiaries are corporations for Mexican tax purposes and, therefore, are subject to Mexican federal and provincial income taxes. Partners accounts for U.S. state income taxes and Mexican federal and provincial income taxes under the asset and liability method pursuant toStatement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" or FASB ASC 740, "Income Taxes." Currently, Mexicanfederal and provincial income taxes and U.S. state income taxes are not significant.(l) Net earnings per limited partner unit Emerging Issues Task Force ("EITF") Issue 07-4, "Application of the Two-Class Method Under FASB Statement No. 128 to Master LimitedPartnerships" or FASB ASC 260, "Earnings Per Share," addresses the computation of earnings per limited partnership unit for master limitedpartnerships that consist of publicly traded common units held by limited partners, a general partner interest, and incentive distribution rights that areaccounted for as equity interests. Partners' incentive distribution rights are owned by our general partner. Distributions are declared from available cash(as defined by our partnership agreement) and the incentive distribution rights are not entitled to distributions other than from available cash. Theconsensus states that any excess of distributions over earnings shall be allocated to the limited partners and general partner interest based on theirrespective sharing of losses specified in the partnership agreement. Partners has allocated the excess of distributions over earnings to the limited partnersand general partner interest based on their ownership percentages of 98% and 2%, respectively. Incentive distribution rights do not share in losses underour partnership agreement.74Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)The earnings allocable to the general partner interest, including the incentive distribution rights, for the period represents distributions declared afterperiod end on behalf of the general partner interest and incentive distribution rights less the allocated excess of distributions over earnings for the period(see Note 15 of Notes to consolidated financial statements). Partners adopted the consensus reached on EITF Issue 07-4 effective January 1, 2009, andapplied it retrospectively to all periods presented. The following is a summary of the impact of the adoption of the consensus reached on EITF Issue 07-4 on our consolidated statements of partners'equity and comprehensive income as of December 31, 2008, 2007 and 2006 (in thousands):75 Predecessor Commonunits Subordinatedunits Generalpartnerinterest Accumulatedothercomprehensiveloss Total BalancepreviouslyreportedDecember 31,2006 $167,466 $72,852 $10,427 $(5,414)$— $245,331 Impact ofadoption — — — — — — BalanceDecember 31,2006 $167,466 $72,852 $10,427 $(5,414)$— $245,331 BalancepreviouslyreportedDecember 31,2007 $— $250,351 $8,659 $53,820 $— $312,830 Impact ofadoption — 363 (818) 455 — — BalanceDecember 31,2007 $— $250,714 $7,841 $54,275 $— $312,830 BalancepreviouslyreportedDecember 31,2008 $— $249,681 $5,779 $52,703 $(584)$307,579 Impact ofadoption — (417) (1,330) 1,747 — — BalanceDecember 31,2008 $— $249,264 $4,449 $54,450 $(584)$307,579 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The following is a summary of the impact of the adoption of the consensus reached on EITF Issue 07-4 on our consolidated statements ofoperations for the years ended December 31, 2008 and 2007 (in thousands except per unit amounts): Basic earnings per limited partner unit are computed by dividing net earnings allocable to limited partners by the weighted average number oflimited partnership units outstanding during the period, excluding restricted phantom units. Diluted earnings per limited partner unit are computed bydividing net earnings allocable to limited partners by the weighted average number of limited partnership units outstanding during the period and, whendilutive, restricted phantom units. Net earnings allocable to limited partners are net of the earnings allocable to the general partner interest includingincentive distribution rights.(m) Reclassifications Certain amounts in the prior periods have been reclassified to conform to the current period's presentation. Net earnings and total partners' equityand comprehensive income have not been affected by these reclassifications. Acquisitions of terminals from TransMontaigne Inc. during the years ended December 31, 2007 and 2006 have been recorded at carryover basis ina manner similar to a reorganization of entities under common control (see Note 3 of Notes to consolidated financial statements). The difference ofapproximately $50.0 million between the consideration paid to TransMontaigne Inc. and the carryover basis of the net assets acquired was previouslyreflected in the consolidated statements of partners' equity and comprehensive income as being attributed to the subordinated units. We are controlled byour general partner, TransMontaigne GP L.L.C., which is an indirect wholly-owned subsidiary of TransMontaigne Inc. TransMontaigne Inc.'sownership of our general partner results in the entities being under common control. As a result, during the year ended December 31, 2008, we changedthe presentation in the consolidated statements of partners' equity and comprehensive income to attribute this difference to the general partner interest.The adjustment to change the presentation is considered an immaterial correction to the accompanying consolidated balance sheets and consolidatedstatements of partners' equity and comprehensive income.76 Year endedDecember 31,2008 Year endedDecember 31,2007 Earnings allocable to general partner interest including incentive distribution rightspreviously reported $934 $302 Impact of adoption 1,292 455 Earnings allocable to general partner interest including incentive distribution rights $2,226 $757 Net earnings allocable to limited partners previously reported $24,664 $14,796 Impact of adoption (1,292) (455) Net earnings allocable to limited partners $23,372 $14,341 Net earnings per limited partner unit—basic and diluted previously reported $1.98 $1.42 Impact of adoption (0.10) (0.04) Net earnings per limited partner unit—basic and diluted $1.88 $1.38 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(2) TRANSACTIONS WITH TRANSMONTAIGNE INC. AND MORGAN STANLEY CAPITAL GROUP Omnibus Agreement. We have an omnibus agreement with TransMontaigne Inc. that will expire in December 2014, unless extended. Under theomnibus agreement we pay TransMontaigne Inc. an administrative fee for the provision of various general and administrative services for our benefit.Effective January 1, 2010, the annual administrative fee payable to TransMontaigne Inc. will be approximately $10.3 million. If we acquire or constructadditional facilities, TransMontaigne Inc. will propose a revised administrative fee covering the provision of services for such additional facilities. If theconflicts committee of our general partner agrees to the revised administrative fee, TransMontaigne Inc. will provide services for the additional facilitiespursuant to the agreement. The administrative fee includes expenses incurred by TransMontaigne Inc. to perform centralized corporate functions, suchas legal, accounting, treasury, insurance administration and claims processing, health, safety and environmental, information technology, humanresources, credit, payroll, taxes and engineering and other corporate services, to the extent such services are not outsourced by TransMontaigne Inc. The omnibus agreement further provides that we pay TransMontaigne Inc. an insurance reimbursement for premiums on insurance policiescovering our facilities and operations. Effective January 1, 2010, the annual insurance reimbursement payable to TransMontaigne Inc. will beapproximately $3.2 million. We also reimburse TransMontaigne Inc. for direct operating costs and expenses that TransMontaigne Inc. incurs on ourbehalf, such as salaries of operational personnel performing services on-site at our terminals and pipelines and the cost of their employee benefits,including 401(k) and health insurance benefits. We also agreed to reimburse TransMontaigne Inc. and its affiliates for a portion of the incentive payment grants to key employees ofTransMontaigne Inc. and its affiliates under the TransMontaigne Services Inc. savings and retention plan, provided the compensation committee of ourgeneral partner determines that an adequate portion of the incentive payment grants are allocated to an investment fund indexed to the performance ofour common units. For the year ending December 31, 2010, we have agreed to reimburse TransMontaigne Inc. and its affiliates approximately$1.25 million. The omnibus agreement provides us with a right of first offer to purchase all of TransMontaigne Inc.'s and its subsidiaries' right, title and interestin the Pensacola, Florida refined petroleum products terminal and any assets acquired in an asset exchange transaction that replace the Pensacola assets.This right of first offer is exercisable through December 2010. The omnibus agreement also provides TransMontaigne Inc. a right of first refusal to purchase our assets, provided that TransMontaigne Inc.agrees to pay no less than 105% of the purchase price offered by the third party bidder. Before we enter into any contract to sell such terminal orpipeline facilities, we must give written notice of all material terms of such proposed sale to TransMontaigne Inc. TransMontaigne Inc. will then havethe sole and exclusive option, for a period of 45 days following receipt of the notice, to purchase the subject facilities for no less than 105% of thepurchase price on the terms specified in the notice. TransMontaigne Inc. also has a right of first refusal to contract for the use of any petroleum product storage capacity that (i) is put into commercialservice after January 1, 2008, or (ii) was subject to a terminaling services agreement that expires or is terminated (excluding a contract renewable solelyat the option of our customer), provided that TransMontaigne Inc. agrees to pay 105% of the fees offered by the third party customer.77Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(2) TRANSACTIONS WITH TRANSMONTAIGNE INC. AND MORGAN STANLEY CAPITAL GROUP (Continued) Environmental Indemnification. In connection with our acquisition of the Florida and Midwest terminals, TransMontaigne Inc. agreed toindemnify us through May 27, 2010, against certain potential environmental liabilities associated with the operation of the Florida and Midwestterminals that occurred on or prior to May 27, 2005. TransMontaigne Inc.'s maximum liability for this indemnification obligation is $15.0 million.TransMontaigne Inc. has no obligation to indemnify us for losses until such aggregate losses exceed $250,000. TransMontaigne Inc. has noindemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgatedafter May 27, 2005. In connection with our acquisition of the Brownsville and River terminals, TransMontaigne Inc. agreed to indemnify us through December 31,2011, against certain potential environmental liabilities associated with the operation of the Brownsville and River terminals that occurred on or prior toDecember 31, 2006. Our environmental losses must first exceed $250,000 and TransMontaigne Inc.'s indemnification obligations are capped at$15.0 million. The cap amount does not apply to any environmental liabilities known to exist as of December 31, 2006. TransMontaigne Inc. has noindemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgatedafter December 31, 2006. In connection with our acquisition of the Southeast terminals, TransMontaigne Inc. agreed to indemnify us through December 31, 2012, againstcertain potential environmental liabilities associated with the operation of the Southeast terminals that occurred on or prior to December 31, 2007. Ourenvironmental losses must first exceed $250,000 and TransMontaigne Inc.'s indemnification obligations are capped at $15.0 million. The cap amountdoes not apply to any environmental liabilities known to exist as of December 31, 2007. TransMontaigne Inc. has no indemnification obligations withrespect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after December 31, 2007. Terminaling Services Agreement—Florida Terminals and Razorback Pipeline System. We have a terminaling services agreement with MorganStanley Capital Group relating to our Florida, Mt. Vernon, Missouri and Rogers, Arkansas terminals. Effective June 1, 2008, we amended theterminaling services agreement to include renewable fuels blending functionality at the Florida Terminals. The initial term expires on May 31, 2014 forthe Florida terminals and on May 31, 2012 for the Razorback pipeline system. After the initial term, the terminaling services agreement willautomatically renew for subsequent one-year periods, subject to either party's right to terminate with six months' notice prior to the end of the initial termor the then current renewal term. Under this agreement, Morgan Stanley Capital Group agreed to throughput a volume of refined product that will, at thefee and tariff schedule contained in the agreement, result in minimum throughput payments to us of approximately $36.3 million for the contract yearending May 31, 2010 (approximately $36.6 million for the contract year ending May 31, 2011); with stipulated annual increases in throughputpayments each contract year thereafter. Morgan Stanley Capital Group's minimum annual throughput payment is reduced proportionately for anydecrease in storage capacity due to out-of-service tank capacity. If a force majeure event occurs that renders performance impossible with respect to an asset for at least 30 consecutive days, Morgan StanleyCapital Group's obligations would be temporarily suspended with respect to that asset. If a force majeure event continues for 30 consecutive days ormore and results in a diminution in the storage capacity we make available to Morgan Stanley Capital Group,78Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(2) TRANSACTIONS WITH TRANSMONTAIGNE INC. AND MORGAN STANLEY CAPITAL GROUP (Continued)Morgan Stanley Capital Group's minimum revenue commitment would be reduced proportionately for the duration of the force majeure event. Morgan Stanley Capital Group may not assign the terminaling services agreement without our consent. Upon termination of the agreement,Morgan Stanley Capital Group has a right of first refusal to enter into a new terminaling services agreement with us, provided they pay no less than105% of the fees offered by any third party. Revenue Support Agreement—Oklahoma City Terminal. We have a revenue support agreement with TransMontaigne Inc. that provides that inthe event any current third-party terminaling agreement should expire, TransMontaigne Inc. agrees to enter into a terminaling services agreement thatwill expire no earlier than November 1, 2012. The terminaling services agreement will provide that TransMontaigne Inc. agrees to throughput suchvolume of refined product as may be required to guarantee minimum revenue of approximately $0.8 million per year. If TransMontaigne Inc. fails tomeet its minimum revenue commitment in any year, it must pay us the amount of any shortfall within 15 business days following receipt of an invoicefrom us. In exchange for TransMontaigne Inc.'s minimum revenue commitment, we will agree to provide TransMontaigne Inc. approximately 153,000barrels of light oil storage capacity at our Oklahoma City terminal. TransMontaigne Inc.'s minimum revenue commitment currently is not in effectbecause a major oil company is under contract through March 31, 2011, for the utilization of the light oil storage capacity at the terminal. Terminaling Services Agreement—Mobile Terminal. We have a terminaling and transportation services agreement with TransMontaigne Inc. thatwill expire on December 31, 2012. Under this agreement, TransMontaigne Inc. agreed to throughput at our Mobile terminal a volume of refinedproducts that will, at the fee schedule contained in the agreement, result in minimum revenue to us of approximately $2.5 million for the contract yearending December 31, 2010. Terminaling Services Agreement—Brownsville Terminals. We have a terminaling and transportation services agreement with Morgan StanleyCapital Group, relating to our Brownsville, Texas terminal complex that will expire on October 31, 2010. Under this agreement, Morgan Stanley CapitalGroup agreed to store a specified minimum amount of fuel oils at our terminals that will result in minimum revenue to us of approximately $2.2 millionper year. In exchange for its minimum revenue commitment, we agreed to provide Morgan Stanley Capital Group a minimum amount of storagecapacity for such fuel oils. Effective November 1, 2009, we amended the terminaling services agreement with Morgan Stanley Capital Group to reduceMorgan Stanley Capital Group's minimum revenue commitment to approximately $1.3 million per year in exchange for Morgan Stanley Capital Groupreturning approximately 200,000 barrels of storage capacity. Terminaling Services Agreement—Brownsville LPG. We have a terminaling and transportation services agreement with TransMontaigne Inc.relating to our Brownsville, Texas facilities that will expire on March 31, 2010. Under this agreement, TransMontaigne Inc. agreed to throughput at ourBrownsville facilities certain minimum volumes of natural gas liquids that will result in minimum revenue to us of approximately $1.4 million per year.In exchange for TransMontaigne Inc.'s minimum throughput commitment, we agreed to provide TransMontaigne Inc. approximately 15,000 barrels ofstorage capacity at our Brownsville facilities. During 2008, we amended the terminaling and transportation services agreement withTransMontaigne Inc. to reduce TransMontaigne Inc.'s minimum79Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(2) TRANSACTIONS WITH TRANSMONTAIGNE INC. AND MORGAN STANLEY CAPITAL GROUP (Continued)revenue commitment to approximately $0.7 million per year in exchange for entering into terminaling and transportation agreements to deliver naturalgas liquids to Matamoros, Mexico. During October 2008, TransMontaigne Inc.'s minimum revenue commitment increased to approximately$1.6 million per year when we increased the LPG storage capacity at our Brownsville LPG terminal to approximately 33,000 barrels. Terminaling Services Agreement—Matamoros LPG. During 2008, we entered into a terminaling and transportation services agreement withTransMontaigne Inc. relating to our natural gas liquids storage facility in Matamoros, Mexico that will expire on March 31, 2010. Under this agreement,TransMontaigne Inc. agreed to throughput a volume of natural gas liquids that will, at the fee schedule contained in the agreement, result in minimumthroughput payments to us of approximately $0.6 million per year. In exchange for TransMontaigne Inc.'s minimum throughput payments, we agreed toprovide TransMontaigne Inc. approximately 7,000 barrels of natural gas liquids storage capacity. Terminaling Services Agreement—Brownsville and River Terminals. We have a terminaling and transportation services agreement withTransMontaigne Inc. relating to certain renewable fuels capacity at our Brownsville and River terminals that will expire on May 31, 2012. Under thisagreement, TransMontaigne Inc. agreed to throughput at these terminals certain minimum volumes of renewable fuels that will, at the fee schedulecontained in the agreement, result in minimum revenue to us of approximately $0.6 million per year. In exchange for TransMontaigne Inc.'s minimumthroughput commitment, we agreed to provide TransMontaigne Inc. approximately 116,000 barrels of storage capacity at these terminals. Terminaling Services Agreement—Southeast Terminals. We have a terminaling and transportation services agreement with Morgan StanleyCapital Group relating to our Southeast terminals. The terminaling services agreement commenced on January 1, 2008 and has a seven-year termexpiring on December 31, 2014, subject to a seven-year renewal option at the election of Morgan Stanley Capital Group. Under this agreement, MorganStanley Capital Group agreed to throughput a volume of refined product at our Southeast terminals that will, at the fee schedule contained in theagreement, result in minimum throughput payments to us of approximately $33.1 million for the contract year ending December 31, 2010; withstipulated annual increases in throughput payments each contract year thereafter. Morgan Stanley Capital Group's minimum annual throughput paymentis reduced proportionately for any decrease in storage capacity due to out-of-service tank capacity. In exchange for its minimum throughputcommitment, we agreed to provide Morgan Stanley Capital Group approximately 8.7 million barrels of light oil storage capacity at our Southeastterminals. Under this agreement we also agreed to undertake certain capital projects to provide renewable fuels blending functionality at certain of ourSoutheast terminals with estimated completion dates that extend through December 31, 2010. Upon completion of each of the projects, Morgan StanleyCapital Group has agreed to pay us an ethanol blending fee. At December 31, 2009, we had received payments totaling approximately $17 million andwe expect to receive future payments through December 31, 2010 from Morgan Stanley Capital Group in the range of $4 million to $8 million. If a force majeure event occurs that renders performance impossible with respect to an asset for at least 30 consecutive days, Morgan StanleyCapital Group's obligations would be temporarily suspended with respect to that asset. If a force majeure event continues for 30 consecutive days ormore and results in a diminution in the storage capacity we make available to Morgan Stanley Capital Group,80Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(2) TRANSACTIONS WITH TRANSMONTAIGNE INC. AND MORGAN STANLEY CAPITAL GROUP (Continued)Morgan Stanley Capital Group's minimum revenue commitment would be reduced proportionately for the duration of the force majeure event. Morgan Stanley Capital Group may not assign the terminaling services agreement without our consent.(3) ACQUISITIONS Mexican LPG Operations. Effective December 31, 2007, we acquired from Rio Vista Energy Partners L.P. ("Rio Vista") a terminal facility inMatamoros, Mexico, the Diamondback pipeline which runs from Brownsville, Texas to Matamoros, Mexico, with associated rights of way andeasements and 47 acres of land, together with a permit to distribute liquefied petroleum gas ("LPG") to Mexico's state-owned petroleum company for acash payment of approximately $9.0 million. These LPG assets complement our existing LPG storage facilities in Brownsville, Texas. Theaccompanying consolidated financial statements include the assets, liabilities and results of operations of the Mexican LPG operations fromDecember 31, 2007. The adjusted purchase price was allocated to the assets and liabilities acquired based upon the estimated fair value of the assets and liabilities as ofthe acquisition date. The adjusted purchase price was allocated as follows (in thousands): Southeast Terminals. Effective December 31, 2007, we acquired from TransMontaigne Inc. twenty-two refined product terminals along theColonial and Plantation pipelines with approximately 9.1 million barrels of aggregate active storage capacity for a cash payment of approximately$118.6 million. The Southeast terminals provide integrated terminaling services principally to Morgan Stanley Capital Group and the United Statesgovernment. The acquisition of the Southeast terminals from TransMontaigne Inc. has been recorded at carryover basis in a manner similar to areorganization of entities under common control. As such, prior periods include the assets, liabilities, and results of operations of the Southeastterminals from September 1, 2006, the date of acquisition by Morgan Stanley Capital Group of TransMontaigne Inc. The results of operations of theSoutheast terminals for periods prior to its actual sale to us have been allocated to TransMontaigne Inc. ("Predecessor"). The difference between theconsideration we paid to TransMontaigne Inc. of approximately $118.6 million81 MexicanLPGoperations Cash $15 Trade accounts receivable 61 Other current assets 75 Property, plant and equipment 8,892 Goodwill 1,502 Other assets 101 Trade accounts payable (266)Other accrued liabilities (904)Due to Rio Vista (500) Cash paid $8,976 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(3) ACQUISITIONS (Continued)and the carryover basis of the net assets purchased of approximately $168.0 million, has been reflected in the accompanying consolidated balance sheetand changes in partners' equity as an increase to the general partner interest. As a condition to our acquisition of the Southeast terminals, we agreed to assume all responsibilities, duties and obligations to complete theconstruction of and place into service certain projects to repair, maintain or expand the Southeast terminals that had been commenced byTransMontaigne Inc. but were not completed as of the date of closing. As a result, we recognized a liability of approximately $4.9 million as ourestimate of the costs to complete and place into service certain projects to repair, maintain or expand the Southeast terminals (see Note 9 of Notes toconsolidated financial statements). Our basis in the assets and liabilities of the Southeast terminals are as follows (in thousands):(4) CONCENTRATION OF CREDIT RISK AND TRADE ACCOUNTS RECEIVABLE Our primary market areas are located in the United States along the Gulf Coast, in the Southeast, in Brownsville, Texas, along the Mississippi andOhio rivers, and in the Midwest. We have a concentration of trade receivable balances due from companies engaged in the trading, distribution andmarketing of refined products and crude oil, and the United States government. These concentrations of customers may affect our overall credit risk inthat the customers may be similarly affected by changes in economic, regulatory or other factors. Our customers' historical financial and operatinginformation is analyzed prior to extending credit. We manage our exposure to credit risk through credit analysis, credit approvals, credit limits andmonitoring procedures, and for certain transactions we may request letters of credit, prepayments or guarantees. We maintain allowances for potentiallyuncollectible accounts receivable. Trade accounts receivable, net consists of the following (in thousands):82 December 31,2007 December 31,2006 September 1,2006 Cash $5 $5 $5 Trade accounts receivable — 2,865 2,277 Prepaid expenses and other 973 881 762 Property, plant and equipment 172,526 166,540 167,931 Other assets, net 33 33 33 Trade accounts payable — (2,585) (2,197)Due to TransMontaigne Inc. (221) — — Other accrued liabilities (5,269) (273) (373) Predecessor equity $168,047 $167,466 $168,438 December 31,2009 December 31,2008 Trade accounts receivable $6,711 $7,133 Less allowance for doubtful accounts (394) (439) $6,317 $6,694 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(4) CONCENTRATION OF CREDIT RISK AND TRADE ACCOUNTS RECEIVABLE (Continued) The following table presents a rollforward of our allowance for doubtful accounts (in thousands): The following customers accounted for at least 10% of our consolidated revenue in at least one of the periods presented in the accompanyingconsolidated statements of operations:(5) OTHER CURRENT ASSETS Other current assets are as follows (in thousands): Amounts due from insurance companies. We periodically file claims for recovery of environmental remediation costs with our insurance carriersunder our comprehensive liability policies. We recognize our insurance recoveries in the period that we assess the likelihood of recovery as beingprobable (i.e., likely to occur). At December 31, 2009 and December 31, 2008, we have recognized amounts due from insurance companies ofapproximately $4.4 million and $6.3 million, respectively, representing our best estimate of our probable insurance recoveries. During the year endedDecember 31, 2009, we received reimbursements from insurance companies of approximately $3.6 million. During the year ended December 31, 2009,we increased our estimate of insurance recoveries approximately $1.7 million as we assessed the likelihood of recovery was probable related to certainincreases in our estimate of environmental remediation obligations (see Note 9 of Notes to consolidated financial statements).83 Balanceatbeginningof period Chargedtoexpenses Deductions Balance atend ofperiod 2009 $439 $— $(45)$394 2008 $150 $494 $(205)$439 2007 $75 $83 $(8)$150 Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Morgan Stanley Capital Group 58% 57% 24%TransMontaigne Inc. 7% 7% 35%Valero Supply and Marketing Company 9% 10% 10% December 31,2009 December 31,2008 Amounts due from insurance companies $4,375 $6,250 Additive detergent 1,743 1,640 Deposits and other assets 1,588 980 $7,706 $8,870 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(6) PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net is as follows (in thousands):(7) GOODWILL Goodwill is as follows (in thousands): The acquisition of the Brownsville and River terminals from TransMontaigne Inc. has been recorded at TransMontaigne Inc.'s carryover basis in amanner similar to a reorganization of entities under common control. TransMontaigne Inc.'s carryover basis in the Brownsville and River terminals isderived from the application of pushdown accounting associated with Morgan Stanley Capital Group's acquisition of TransMontaigne Inc. onSeptember 1, 2006. Goodwill represents the excess of Morgan Stanley Capital Group's aggregate purchase price over the fair value of the identifiableassets acquired attributable to the Brownsville and River terminals. The adjusted purchase price for the acquisition of the Mexican LPG operations from Rio Vista Energy Partners L.P. was allocated to theidentifiable assets and liabilities acquired based upon the estimated fair value of the assets and liabilities as of the acquisition date (see Note 3 of Notes toconsolidated financial statements). Goodwill of approximately $1.5 million represents the excess of our adjusted purchase price over the fair value of theidentifiable assets acquired attributable to the Mexican LPG operations. Goodwill is required to be tested for impairment annually unless events or changes in circumstances indicate it is more likely than not that animpairment loss has been incurred at an interim date. Our annual test for the impairment of goodwill is performed as of December 31. The impairmenttest is performed at the reporting unit level. Our reporting units are our operating segments (see Note 17 of Notes to consolidated financial statements).If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired.84 December 31,2009 December 31,2008 Land $52,360 $52,196 Terminals, pipelines and equipment 505,055 445,875 Furniture, fixtures and equipment 1,556 1,349 Construction in progress 12,278 33,979 571,249 533,399 Less accumulated depreciation (111,651) (85,646) $459,598 $447,753 December 31,2009 December 31,2008 Brownsville terminal $14,770 $14,770 River terminals 8,465 8,465 Mexican LPG operations (includes approximately $55and $70, respectively, of foreign currency translationadjustments) 1,447 1,432 $24,682 $24,667 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(7) GOODWILL (Continued)Management exercises judgment in determining the estimated fair values of the Partnership's reporting units. At December 31, 2009, we estimated thefair value of our reporting units using a discounted cash flow technique. We believe that our estimates of the future cash flows and related assumptionswould be consistent with those used by market participants (that is, potential buyers of the reporting unit) at December 31, 2009. The cash flowsrepresented our best estimate of the future revenues, expenses and capital expenditures to maintain the facilities associated with each of our reportingunits. The cash flows did not anticipate future expenditures to expand the facilities beyond the expenditures necessary to complete expansion projectsapproved prior to December 31, 2009. The cash flows attributed to our reporting units included only a portion of our historical general andadministrative expenses under the assumption that market participants would only include limited amounts of general and administrative expenses intheir estimates of future cash flows because market participants would likely have pre-existing management and back office capabilities (that is, a marketparticipant synergy). We discounted the cash flows at our weighted average cost of capital of 8.5%, which was based on the December 31, 2009 closingprice of our common units of $27.53 and a 6.5% cost of debt. At December 31, 2009, the fair value of our reporting units with goodwill exceeded their carrying amount. Accordingly, we did not recognize anygoodwill impairment charges during the year ended December 31, 2009. A significant decline in the price of our common units with a resulting increasein our weighted average cost of capital, the loss of a significant customer, or an unforeseen increase in the costs to operate and maintain our terminalsand pipelines, may result in the recognition of an impairment charge in the future.(8) OTHER ASSETS, NET Other assets, net are as follows (in thousands): Amounts due under long-term terminaling services agreements. We have long-term terminaling services agreements with certain of ourcustomers that provide for minimum payments that increase over the terms of the respective agreements. We recognize as revenue the minimumpayments under the long-term terminaling services agreements on a straight-line basis over the term of the respective agreements. At December 31,2009 and 2008, we have recognized revenue in excess of the minimum85 December 31,2009 December 31,2008 Amounts due under long-term terminaling servicesagreements: External customers $1,021 $902 Morgan Stanley Capital Group 3,433 2,020 4,454 2,922 Deferred financing costs, net of accumulated amortizationof $2,434 and $1,836, respectively 1,196 1,794 Customer relationships, net of accumulated amortizationof $1,028 and $719, respectively 2,671 2,980 Deposits and other assets 195 162 $8,516 $7,858 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(8) OTHER ASSETS, NET (Continued)payments that are due through those respective dates under the long-term terminaling services agreements resulting in a receivable of approximately$4.5 million and $2.9 million, respectively. Deferred financing costs. Deferred financing costs are amortized using the effective interest method over the term of the related credit facility (seeNote 11 of Notes to consolidated financial statements). During the year ended December 31, 2007, we repaid our $75 million term loan outstandingunder the senior secured credit facility, resulting in a charge to income of approximately $0.8 million for the write off of the associated unamortizeddeferred financing costs related to the $75 million term loan. During the year ended December 31, 2007, we incurred deferred financing costs ofapproximately $1.0 million related to our July 2007 amendment and borrowings under the senior secured credit facility for the acquisition of theSoutheast terminals. Customer relationships. Our acquisitions from TransMontaigne Inc. have been recorded at TransMontaigne Inc.'s carryover basis in a mannersimilar to a reorganization of entities under common control. Other assets, net include the carryover basis of certain customer relationships at ourBrownsville and River terminals. The carryover basis of the customer relationships is being amortized on a straight-line basis over twelve years.Expected amortization expense for the customer relationships as of December 31, 2009 is as follows (in thousands):(9) ACCRUED LIABILITIES Accrued liabilities are as follows (in thousands):86 Years ending December 31, 2010 2011 2012 2013 2014 Thereafter Amortization expense $308 $308 $308 $308 $308 $1,131 December 31,2009 December 31,2008 Customer advances and deposits: External customers $942 $1,164 Morgan Stanley Capital Group 5,924 5,581 6,866 6,745 Accrued property taxes 539 480 Accrued environmental obligations 5,582 7,012 Interest payable 254 838 Due to Rio Vista — 83 Obligations to repair, maintain or expand Southeastterminals — 222 Rebate due to Morgan Stanley Capital Group 465 2,204 Unrealized loss on derivative instrument 2,690 2,128 Accrued expenses and other 2,839 2,102 $19,235 $21,814 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(9) ACCRUED LIABILITIES (Continued) Customer advances and deposits. We bill certain of our customers one month in advance for terminaling services to be provided in the followingmonth. At December 31, 2009 and 2008, we have billed and collected from certain of our customers approximately $6.9 million and $6.7 million,respectively, in advance of the terminaling services being provided. Accrued environmental obligations. At December 31, 2009 and 2008, we have accrued environmental obligations of approximately $5.6 millionand $7.0 million, respectively, representing our best estimate of our remediation obligations. During the year ended December 31, 2009, we madepayments of approximately $4.2 million towards our environmental remediation obligations. During the year ended December 31, 2009, we increasedour remediation obligations by approximately $2.8 million to reflect a change in our estimate of our future environmental remediation costs. Changes inour estimates of our future environmental remediation obligations may occur as a result of the passage of time and the occurrence of future events. Due to Rio Vista. Effective December 31, 2007, we acquired from Rio Vista certain Mexican LPG operations for a cash payment ofapproximately $9.0 million. At December 31, 2009 and December 31, 2008, we have a liability of approximately $nil and $0.1 million, respectively, toRio Vista pursuant to the purchase price holdback provision in the acquisition agreement. Subject to certain exceptions and limitations, Rio Vista isobligated to indemnify us for claims, expenses or liabilities of the Mexican LPG operations prior to the closing date. Obligations to repair, maintain or expand Southeast terminals. As a condition to our acquisition of the Southeast terminals, we agreed toassume all responsibilities, duties and obligations to complete the construction of and place into service certain projects to repair, maintain or expand theSoutheast terminals that had been commenced by TransMontaigne Inc. but were not completed as of the date of closing. At December 31, 2009 and2008, we have recognized a liability of approximately $nil and $0.2 million, respectively, as our estimate of the costs to complete and place into servicecertain projects to repair, maintain or expand the Southeast terminals (see Note 3 of Notes to consolidated financial statements). Rebate due to Morgan Stanley Capital Group. Pursuant to our terminaling services agreement related to the Southeast terminals, we agreed torebate to Morgan Stanley Capital Group 50% of the proceeds we receive annually in excess of $4.2 million from the sale of product gains at ourSoutheast terminals. At December 31, 2009 and 2008, we have accrued a liability due to Morgan Stanley Capital Group of approximately $0.5 millionand $2.2 million, respectively. During the three months ended March 31, 2009, we paid Morgan Stanley Capital Group approximately $2.2 million forthe rebate due to Morgan Stanley Capital Group for the year ended December 31, 2008. Unrealized loss on derivative instruments. Our derivative instruments are limited to interest rate swaps. We manage a portion of our interest raterisk with interest rate swaps, which reduce our cash exposure to changes in interest rates by converting variable interest rates to fixed interest rates. AtDecember 31, 2009, we have an interest rate swap agreement with a notional amount of $150.0 million that expires June 2011. Pursuant to the terms ofthe interest rate swap agreement, we pay a fixed rate of approximately 2.2% and receive an interest payment based on the one-month LIBOR. The netdifference to be paid or received under the interest rate swap agreement is settled monthly and is recognized as an adjustment to interest expense. Duringthe years ended December 31, 2009, 2008 and 2007, we recognized net payments to the counterparty in the amount of approximately $2.6 million,87Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(9) ACCRUED LIABILITIES (Continued)$0.1 million and $nil, respectively, as an adjustment to interest expense. Our obligations under the interest rate swap agreement are secured by a firstpriority security interest in our assets, including cash, accounts receivable, inventory, general intangibles, investment property, contract rights and realproperty (see Note 11 of Notes to consolidated financial statements). At December 31, 2009 and 2008, the fair value of the interest rate swaps wasapproximately $2.7 million and $2.1 million, respectively.(10) OTHER LIABILITIES Other liabilities are as follows (in thousands): Deferred revenue-ethanol blending fees and other reimbursable projects. Pursuant to agreements with Morgan Stanley Capital Group, weagreed to undertake certain capital projects to provide renewable fuels blending functionality at certain of our Southeast terminals and other reimbursableprojects. Upon completion of the projects, Morgan Stanley Capital Group has agreed to pay us amounts that will be recognized as revenue on a straight-line basis over the remaining term of the agreements. At December 31, 2009 and 2008, we have unamortized deferred revenue of approximately$15.7 million and $3.6 million, respectively, for completed projects. During the years ended December 31, 2009, 2008 and 2007, we billed MorganStanley Capital Group approximately $14.6 million, $3.6 million, and $nil, respectively, for completed projects. During the years ended December 31,2009, 2008 and 2007, we recognized revenue on a straight-line basis of approximately $2.5 million, $nil and $nil, respectively, for completed projects. Advance payments received under long-term terminaling services agreements-Morgan Stanley Capital Group. We have long-term terminalingservices agreements with Morgan Stanley Capital Group that provide for minimum payments that decrease over the terms of the respective agreements.We recognize as revenue the minimum payments under the long-term terminaling services agreements on a straight-line basis over the term of therespective agreements. At December 31, 2009 and 2008, we have received minimum payments that are due through those respective dates in excess ofrevenue recognized under these long-term terminaling services agreements resulting in a liability of approximately $1.3 million and $1.2 million,respectively.(11) LONG-TERM DEBT Senior Secured Credit Facility. On December 22, 2006, we entered into a $225 million amended and restated senior secured credit facility("senior secured credit facility") with a consortium of lending institutions. Initially, the senior secured credit facility was composed of a $75 million termloan facility and a $150 million revolving credit facility. During the year ended December 31, 2007, we repaid the $75 million term loan outstandingunder the senior secured credit facility with a portion of the88 December 31,2009 December 31,2008 Deferred revenue—ethanol blending fees and otherreimbursable projects $15,745 $3,630 Advance payments received under long-term terminalingservices agreements-Morgan Stanley Capital Group 1,255 1,189 $17,000 $4,819 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(11) LONG-TERM DEBT (Continued)proceeds from our May 2007 secondary offering of common units (see Note 12 of Notes to consolidated financial statements). On July 12, 2007, weamended the senior secured credit facility to increase the maximum amount of the revolving credit line from $150 million to $200 million. At December 31, 2009 and 2008, our outstanding borrowings under the senior secured credit facility were approximately $165.0 million and$165.5 million, respectively. At December 31, 2009 and 2008, our outstanding letters of credit were approximately $nil and $42,000, respectively. AtDecember 31, 2009, the senior secured credit facility provides for a maximum borrowing line of credit equal to the lesser of (i) $200 million and(ii) four times Consolidated EBITDA (as defined: $241.6 million at December 31, 2009). In addition, at our request, the revolving loan commitment canbe increased up to an additional $100 million, in the aggregate, without the approval of the lenders, but subject to the approval of the administrativeagent and the receipt of additional commitments from one or more lenders. We may elect to have loans under the senior secured credit facility bearinterest either (i) at a rate of LIBOR plus a margin ranging from 1.5% to 2.5% depending on the total leverage ratio then in effect, or (ii) at a base rate(the greater of (a) the federal funds rate plus 0.5% or (b) the prime rate) plus a margin ranging from 0.5% to 1.5% depending on the total leverage ratiothen in effect. We also pay a commitment fee ranging from 0.3% to 0.5% per annum, depending on the total leverage ratio then in effect, on the totalamount of unused commitments. For the years ended December 31, 2009, 2008 and 2007, the weighted average interest rate on borrowings under oursenior secured credit facility was approximately 3.6%, 4.6% and 7.3%, respectively. Our obligations under the senior secured credit facility are securedby a first priority security interest in favor of the lenders in our assets, including cash, accounts receivable, inventory, general intangibles, investmentproperty, contract rights and real property. The terms of the senior secured credit facility include covenants that restrict our ability to make cashdistributions and acquisitions. The principal balance of loans and any accrued and unpaid interest will be due and payable in full on the maturity date,December 22, 2011. The senior secured credit facility also contains customary representations and warranties (including those relating to organization and authorization,compliance with laws, absence of defaults, material agreements and litigation) and customary events of default (including those relating to monetarydefaults, covenant defaults, cross defaults and bankruptcy events). The primary financial covenants contained in the senior secured credit facility are (i) atotal leverage ratio test (not to exceed 4.5 times), (ii) a senior secured leverage ratio test (not to exceed 4.0 times), and (iii) a minimum interest coverageratio test (not less than 2.75 times). We were in compliance with all of the covenants under our senior secured credit facility as of December 31, 2009.89Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(12) PARTNERS' EQUITY The number of units outstanding is as follows: At December 31, 2009 and 2008, common units outstanding include approximately 9,200 and 5,300 common units, respectively, held on behalf ofTransMontaigne Services Inc.'s long-term incentive plan. Prior to the expiration of the subordination period or the earlier conversion of the subordinated units following satisfaction of the financial tests setforth in the partnership agreement, the common units were entitled to receive distributions from operating surplus of $0.40 per unit per quarter, whichwe refer to as the minimum quarterly distribution, or $1.60 per unit per year, plus any arrearages in the payment of the minimum quarterly distributionfrom prior quarters, before any such distributions are paid on our subordinated units. On November 13, 2008, May 7, 2009 and November 13, 2009,approximately 0.8 million, 0.8 million and 1.7 million subordinated units, respectively, converted into an equal number of common units. On May 23, 2007, we issued, pursuant to an underwritten public offering, 4.8 million common units representing limited partner interests at apublic offering price of $36.80 per common unit. On June 20, 2007, the underwriters of our secondary offering exercised a portion of their over-allotment option to purchase an additional 349,800 common units representing limited partnership interests at a price of $36.80 per common unit. Thenet proceeds from the offering were approximately $179.9 million, after deducting underwriting discounts, commissions, and offering expenses ofapproximately $9.6 million. Additionally, TransMontaigne GP L.L.C., our general partner, made a cash contribution of approximately $3.9 million to usto maintain its 2% general partner interest. On January 15, 2010, we issued, pursuant to an underwritten public offering, 1,750,000 common units representing limited partner interests at apublic offering price of $26.60 per common unit. On January 15, 2010, the underwriters of our secondary offering exercised in full their over-allotmentoption to purchase an additional 262,500 common units representing limited partnership interests at a price of $26.60 per common unit. The netproceeds from the offering were approximately $51.1 million, after deducting underwriting discounts, commissions, and offering expenses ofapproximately $0.2 million. Additionally, TransMontaigne GP L.L.C., our general partner, made a cash contribution of approximately $1.1 million to usto maintain its 2% general partner interest.90 Common units Subordinatedunits Generalpartner units Units outstanding at December 31, 2006 3,972,500 3,322,266 148,873 Secondary public offering of common units 5,149,800 — — TransMontaigne GP to maintain its 2% general partner interest — — 105,098 Units outstanding at December 31, 2007 9,122,300 3,322,266 253,971 Conversion of subordinated units to common units 830,567 (830,567) — Units outstanding at December 31, 2008 9,952,867 2,491,699 253,971 Conversion of subordinated units to common units 2,491,699 (2,491,699) — Units outstanding at December 31, 2009 12,444,566 — 253,971 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(13) LONG-TERM INCENTIVE PLAN TransMontaigne GP is our general partner and manages our operations and activities. TransMontaigne GP is an indirect wholly owned subsidiaryof TransMontaigne Inc. TransMontaigne Services Inc. is an indirect wholly owned subsidiary of TransMontaigne Inc. TransMontaigne Services Inc.employs the personnel who provide support to TransMontaigne Inc.'s operations, as well as our operations. TransMontaigne Services Inc. adopted along-term incentive plan for its employees and consultants and independent directors of our general partner. The long-term incentive plan currentlypermits the grant of awards covering an aggregate of 989,572 units, which amount will automatically increase on an annual basis by 2% of the totaloutstanding common and subordinated units, if any, at the end of the preceding fiscal year. At December 31, 2009, 765,632 units are available for futuregrant under the long-term incentive plan. Ownership in the awards is subject to forfeiture until the vesting date, but recipients have distribution andvoting rights from the date of grant. Pursuant to the terms of the long-term incentive plan, all restricted phantom units and restricted common units vestupon a change in control of TransMontaigne Inc. The long-term incentive plan is administered by the compensation committee of the board of directorsof our general partner. On May 7, 2007, we announced a program for the repurchase of outstanding common units for purposes of making subsequentgrants of restricted phantom units to independent directors of our general partner. TransMontaigne GP, on behalf of the long-term incentive plan,anticipates repurchasing annually up to 10,000 common units for this purpose. TransMontaigne GP, on behalf of the long-term incentive plan, hasrepurchased 6,885, 4,180 and 1,680 common units pursuant to the program during the years ended December 31, 2009, 2008 and 2007, respectively. Information about restricted phantom unit activity is as follows:91 Available forfuture grant Restrictedphantomunits Grant dateprice Units outstanding at December 31, 2006 187,955 — Automatic increase in units available for future grant on January 1, 2007 145,895 — Grant on March 31, 2007 (10,000) 10,000 $35.50 Units outstanding at December 31, 2007 323,850 10,000 Automatic increase in units available for future grant on January 1, 2008 248,891 — Vesting on March 17, 2008 — (6,000) Grant on March 31, 2008 (6,000) 6,000 $28.36 Vesting on March 31, 2008 — (1,000) Grant on July 18, 2008 (2,000) 2,000 $23.05 Units outstanding at December 31, 2008 564,741 11,000 Automatic increase in units available for future grant on January 1, 2009 248,891 — Grant on March 31, 2009 (8,000) 8,000 $16.77 Vesting on March 31, 2009 — (3,000) Grant on August 10, 2009 (40,000) 40,000 $24.90 Units outstanding at December 31, 2009 765,632 56,000 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(13) LONG-TERM INCENTIVE PLAN (Continued) On March 17, 2008, we accelerated the vesting of 6,000 restricted phantom units held by Donald H. Anderson, D. Dale Shaffer and Rex L. Utslerin exchange for their resignation as members of the board of directors of our general partner and then repurchased those units for cash. The aggregateconsideration paid to the former directors of approximately $163,000 is included in direct general and administrative expenses for the three monthsended March 31, 2008. Effective August 10, 2009, Charles L. Dunlap was appointed to serve as Chief Executive Officer ("CEO") of our general partner and Presidentand CEO of TransMontaigne Inc. In connection with his appointments, on August 10, 2009, TransMontaigne Services Inc. granted Mr. Dunlap 40,000restricted phantom units under the long-term incentive plan. In accordance with the long-term incentive plan, because Mr. Dunlap continues to provideservices to our general partner as an employee, the restricted phantom units previously granted to Mr. Dunlap for his services as an independentmember of the board of directors of our general partner remain in effect and continue to vest in accordance with the four-year vesting schedule for ourindependent directors. On March 31, 2009, TransMontaigne Services Inc. granted 8,000 restricted phantom units to the independent directors of ourgeneral partner. On July 18, 2008, TransMontaigne Services Inc. granted 2,000 restricted phantom units to an independent director of our generalpartner. On March 31, 2008, TransMontaigne Services Inc. granted 6,000 restricted phantom units to the independent directors of our general partner.On March 31, 2007, TransMontaigne Services Inc. granted 10,000 restricted phantom units to the independent directors of our general partner. Overtheir respective four-year vesting periods, we will amortize deferred equity-based compensation of approximately $1.0 million, $0.1 million, $46,000,$0.2 million and $0.4 million associated with the August 2009, March 2009, July 2008, March 2008 and March 2007 grants, respectively. Amortization of deferred equity-based compensation, including the effects of the acceleration of vesting of all restricted phantom units, ofapproximately $213,000, $35,000 and $66,000 is included in direct general and administrative expenses for the years ended December 31, 2009, 2008and 2007, respectively.(14) COMMITMENTS AND CONTINGENCIES Contract Commitments. At December 31, 2009, we have contractual commitments of approximately $5.5 million for the supply of services,labor and materials related to capital projects that currently are under development. We expect that these contractual commitments will be paid during theyear ended December 31, 2010.92Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(14) COMMITMENTS AND CONTINGENCIES (Continued) Operating Leases. We lease property and equipment under non-cancelable operating leases that extend through August 2030. At December 31,2009, future minimum lease payments under these non-cancelable operating leases are as follows (in thousands): Rental expense under operating leases was approximately $1.6 million, $1.5 million and $1.0 million for the years ended December 31, 2009, 2008and 2007, respectively.(15) NET EARNINGS PER LIMITED PARTNER UNIT The following table reconciles net earnings to earnings allocable to limited partners (in thousands): Earnings allocated to the general partner interest include amounts attributable to the incentive distribution rights. Pursuant to our partnershipagreement we are required to distribute available cash (as defined by our partnership agreement) as of the end of the reporting period. Such distributionsare declared within 45 days after period end. The net earnings allocated to the general partner interest in the consolidated statements of partners' equityand comprehensive income reflects the earnings allocation included in the table above.93Years endingDecember 31: Propertyandequipment 2010 $1,509 2011 1,433 2012 812 2013 717 2014 621 Thereafter 5,804 $10,896 Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Net earnings $27,252 $25,598 $25,142 Less: Net earnings attributable to predecessor — — (10,044) Distributions payable on behalf of incentive distribution rights (1,944) (1,751) (463) Distributions payable on behalf of general partner interest (624) (592) (456) Distributions payable to the general partner interest in excess ofearnings allocable to the general partner interest 117 117 162 Earnings allocable to general partner interest including incentivedistribution rights (2,451) (2,226) (757) Net earnings allocable to limited partners $24,801 $23,372 $14,341 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(15) NET EARNINGS PER LIMITED PARTNER UNIT (Continued) The following table sets forth the distribution declared per common unit attributable to the periods indicated: The following table reconciles the computation of basic and diluted weighted average units (in thousands): For the year ended December 31, 2009, we included the dilutive effect of approximately 8,000, 1,500, 4,500, and 2,000 restricted phantom unitsgranted March 31, 2009, July 18, 2008, March 31, 2008 and March 31, 2007, respectively, in the computation of diluted earnings per limited partnerunit because the average closing market price of our common units exceeded the related unamortized deferred compensation per unvested restrictedphantom units. For the year ended December 31, 2008, we included the dilutive effect of 2,000 and 6,000 restricted phantom units granted July 18,2008 and March 31, 2008, respectively, in the computation of diluted earnings per limited partner unit because the average closing market price of ourcommon units for the period exceeded the related unamortized deferred compensation per unvested restricted phantom units. For the year endedDecember 31, 2007, we included the dilutive effect of 10,000 restricted phantom units in the computation of diluted earnings per limited partner unitbecause the average closing market price of our common units for the period exceeded the related unamortized deferred compensation per unvestedrestricted phantom units. We exclude potentially dilutive securities from our computation of diluted earnings per limited partner unit when their effect would be anti-dilutive.For the year ended December 31, 2009, we excluded the dilutive effect of 40,000 restricted phantom units granted August 10, 2009 in the computationof diluted earnings per limited partner unit because the related unamortized deferred compensation per unvested restricted phantom units exceeded theaverage closing market price of our common units for the period. For the year ended December 31, 2008, we excluded the dilutive effect of94 Distribution January 1, 2007 through March 31, 2007 $0.47 April 1, 2007 through June 30, 2007 $0.50 July 1, 2007 through September 30, 2007 $0.50 October 1, 2007 through December 31, 2007 $0.52 January 1, 2008 through March 31, 2008 $0.57 April 1, 2008 through June 30, 2008 $0.58 July 1, 2008 through September 30, 2008 $0.59 October 1, 2008 through December 31, 2008 $0.59 January 1, 2009 through March 31, 2009 $0.59 April 1, 2009 through June 30, 2009 $0.59 July 1, 2009 through September 30, 2009 $0.59 October 1, 2009 through December 31, 2009 $0.59 Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Basic weighted average units 12,438 12,442 10,400 Dilutive effect of restricted phantom units 3 — 1 Diluted weighted average units 12,441 12,442 10,401 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(15) NET EARNINGS PER LIMITED PARTNER UNIT (Continued)3,000 restricted phantom units granted March 31, 2007 in the computation of diluted earnings per limited partner unit because the related unamortizeddeferred compensation per unvested restricted phantom units exceeded the average closing market price of our common units for the period.(16) DISCLOSURES ABOUT FAIR VALUE Statement of Financial Accounting Standards No. 157, "Fair Value Measurements," or FASB ASC 820, "Fair Value Measurements andDisclosures," defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Thisstatement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair valuehierarchy are: (1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; (2) Level 2 inputs are inputs other thanquoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and (3) Level 3 inputs are unobservableinputs for the asset or liability. The fair values of the following financial instruments represent our best estimate of the amounts that would be received to sell those assets or thatwould be paid to transfer those liabilities in an orderly transaction between market participants at that date. Our fair value measurements maximize theuse of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fairvalue measurement reflects our judgments about the assumptions that market participants would use in pricing the asset or liability based on the bestinformation available in the circumstances. The following methods and assumptions were used to estimate the fair value of financial instruments atDecember 31, 2009 and 2008. Cash and Cash Equivalents, Trade Receivables and Trade Accounts Payable. The carrying amount approximates fair value because of the short-term maturity of these instruments. Derivative instruments. The fair value of our interest rate swap is determined using a pricing model based on the LIBOR swap rate and otherobservable market data. The fair value was determined after considering the potential impact of collateralization, adjusted to reflect nonperformance riskof both Wachovia Bank N.A., the counterparty, and us. Our fair value measurement of our interest rate swap utilizes Level 2 inputs. Debt. The carrying amount of the senior secured credit facility approximates fair value since borrowings under the senior secured credit facilitybear interest at current market interest rates.(17) BUSINESS SEGMENTS We provide integrated terminaling, storage, transportation and related services to companies engaged in the trading, distribution and marketing ofrefined petroleum products, crude oil, chemicals, fertilizers and other liquid products. Our chief operating decision maker is our general partner's CEO.Our general partner's CEO reviews the financial performance of our business segments using disaggregated financial information about "net margins"for purposes of making operating decisions and assessing financial performance. "Net margins" is composed of revenue less direct operating costs andexpenses. Accordingly, we present "net margins" for each of our business segments: (i) Gulf Coast terminals, (ii) Midwest terminals and pipelinesystem, (iii) Brownsville terminals (iv) River terminals and (v) Southeast terminals.95Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(17) BUSINESS SEGMENTS (Continued) The financial performance of our business segments is as follows (in thousands): Year endedDecember 31,2009 Year endedDecember 31,2008 Year endedDecember 31,2007 Gulf Coast Terminals: Terminaling services fees, net $43,798 $39,750 $38,555 Other 8,325 9,565 6,114 Revenue 52,123 49,315 44,669 Direct operating costs and expenses (20,986) (21,774) (18,711) Net margins 31,137 27,541 25,958 Midwest Terminals and Pipeline System: Terminaling services fees, net 3,640 3,466 2,976 Pipeline transportation fees 1,981 1,130 1,996 Other 1,090 880 825 Revenue 6,711 5,476 5,797 Direct operating costs and expenses (2,428) (1,500) (2,519) Net margins 4,283 3,976 3,278 Brownsville Terminals: Terminaling services fees, net 14,755 13,103 11,799 Pipeline transportation fees 2,394 2,890 — Other 5,109 4,700 3,873 Revenue 22,258 20,693 15,672 Direct operating costs and expenses (11,916) (11,510) (9,039) Net margins 10,342 9,183 6,633 River Terminals: Terminaling services fees, net 16,864 18,868 18,942 Other 531 738 569 Revenue 17,395 19,606 19,511 Direct operating costs and expenses (8,912) (7,858) (6,716) Net margins 8,483 11,748 12,795 Southeast Terminals: Terminaling services fees, net 38,967 36,126 37,634 Other 5,093 6,924 8,368 Revenue 44,060 43,050 46,002 Direct operating costs and expenses (20,726) (19,208) (23,701) Net margins 23,334 23,842 22,301 Total net margins 77,579 76,290 70,965 Direct general and administrative expenses (3,242) (4,138) (2,991) Allocated general and administrative expenses (10,040) (10,030) (9,901) Allocated insurance expense (2,900) (2,835) (2,837) Reimbursement of bonus awards (1,237) (1,500) (1,125) Depreciation and amortization (26,306) (23,316) (21,432)96 Depreciation and amortization (26,306) (23,316) (21,432) Gain on disposition of assets 1 2 — Operating income 33,855 34,473 32,679 Other expense, net (6,603) (8,875) (7,537) Net earnings $27,252 $25,598 $25,142 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(17) BUSINESS SEGMENTS (Continued) Supplemental information about our business segments is summarized below (in thousands): Year ended December 31, 2009 Gulf CoastTerminals MidwestTerminalsandPipelineSystem BrownsvilleTerminals RiverTerminals SoutheastTerminals Total Revenue: External customers $11,373 $1,653 $16,930 $16,232 $3,509 $49,697 Morgan StanleyCapital Group 36,333 5,058 432 829 40,551 83,203 TransMontaigne Inc. 4,417 — 4,896 334 — 9,647 Revenue $52,123 $6,711 $22,258 $17,395 $44,060 $142,547 Identifiable assets $147,660 $11,062 $77,740 $66,536 $180,339 $483,337 Capital expenditures $18,300 $255 $7,129 $1,688 $10,341 $37,713 Year ended December 31, 2008 Gulf CoastTerminals MidwestTerminalsandPipelineSystem BrownsvilleTerminals RiverTerminals SoutheastTerminals Total Revenue: External customers $12,276 $1,863 $14,143 $18,955 $3,468 $50,705 Morgan StanleyCapital Group 32,899 3,602 1,694 388 39,582 78,165 TransMontaigne Inc. 4,140 11 4,856 263 — 9,270 Revenue $49,315 $5,476 $20,693 $19,606 $43,050 $138,140 Identifiable assets $135,925 $11,708 $74,701 $65,226 $181,615 $469,175 Capital expenditures $25,355 $2,370 $14,800 $1,591 $9,263 $53,379 Year ended December 31, 2007 Gulf CoastTerminals MidwestTerminalsandPipelineSystem BrownsvilleTerminals RiverTerminals SoutheastTerminals Total Revenue: External customers $13,024 $1,075 $11,190 $19,549 $9,873 $54,711 Morgan StanleyCapital Group 17,658 2,359 2,113 13 8,842 30,985 TransMontaigne Inc. 13,987 2,363 2,369 (51) 27,287 45,955 Revenue $44,669 $5,797 $15,672 $19,511 $46,002 $131,651 Identifiable assets $117,651 $10,103 $62,197 $66,960 $173,532 $430,443 97 Capital expenditures $7,108 $112 $5,517 $1,152 $14,101 $27,990 Table of ContentsNotes to Consolidated Financial Statements (Continued)Years ended December 31, 2009, 2008 and 2007(18) FINANCIAL RESULTS BY QUARTER (UNAUDITED) 98 Three months ended March 31,2009 June 30,2009 September 30,2009 December 31,2009 Year endedDecember 31,2009 (in thousands) Revenue $34,402 $35,849 $35,370 $36,926 $142,547 Net earnings $6,422 $7,909 $5,699 $7,222 $27,252 Three months ended March 31,2008 June 30,2008 September 30,2008 December 31,2008 Year endedDecember 31,2008 (in thousands) Revenue $33,824 $35,092 $35,204 $34,020 $138,140 Net earnings $6,202 $7,625 $6,964 $4,807 $25,598 Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in or disagreements with accountants on accounting and financial disclosures during the year ended December 31, 2009.ITEM 9A. CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that wefile or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported within the time periods specified by the Commission's rules and forms, and that information is accumulated and communicated to themanagement of our general partner, including our general partner's principal executive and principal financial officer (whom we refer to as the CertifyingOfficers), as appropriate to allow timely decisions regarding required disclosure. The management of our general partner evaluated, with theparticipation of the Certifying Officers, the effectiveness of our disclosure controls and procedures as of December 31, 2009, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, the Certifying Officers concluded that, as of December 31, 2009, our disclosure controlsand procedures were effective. In addition, our Certifying Officers concluded that there were no changes in our internal control over financial reportingthat occurred during the fiscal quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internalcontrol over financial reporting.Management's Report on Internal Control Over Financial Reporting The management of our general partner is responsible for establishing and maintaining adequate internal control over financial reporting. Ourinternal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherentlimitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment andbreakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper managementoverride. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal controlover financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to designinto the process safeguards to reduce, though not eliminate, this risk. The management of our general partner has used the framework set forth in the report entitled "Internal Control—Integrated Framework"published by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") to evaluate the effectiveness of our internal controlover financial reporting. Based on that evaluation, the management of our general partner has concluded that our internal control over financial reportingwas effective as of December 31, 2009. The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited byKPMG LLP, an independent registered public accounting firm, as stated in their report which appears herein.March 8, 201099Table of ContentsReport of Independent Registered Public Accounting Firm The Board of Directors and MemberTransMontaigne GP L.L.C.: We have audited TransMontaigne Partners L.P. and subsidiaries' (the Partnership) internal control over financial reporting as of December 31,2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO). TransMontaigne GP L.L.C.'s management is responsible for maintaining effective internal control over financial reporting andfor its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management's report on internal controlover financial reporting appearing under Item 9A. Our responsibility is to express an opinion on the Partnership's internal control over financialreporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that amaterial weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit alsoincluded performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis forour opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have amaterial effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate. In our opinion, TransMontaigne Partners L.P. maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheets of TransMontaigne Partners L.P. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements ofoperations, partners' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009, and ourreport dated March 8, 2010 expressed an unqualified opinion on those consolidated financial statements.KPMG LLPDenver, ColoradoMarch 8, 2010100Table of ContentsITEM 9B. OTHER INFORMATION No information was required to be disclosed in a report on Form 8-K, but not so reported, for the quarter ended December 31, 2009.Part III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF OUR GENERAL PARTNER AND CORPORATE GOVERNANCE MANAGEMENT OF TRANSMONTAIGNE PARTNERS TransMontaigne GP L.L.C. is our general partner and manages our operations and activities on our behalf. TransMontaigne Services Inc. is anindirect wholly owned subsidiary of TransMontaigne Inc. and TransMontaigne Inc., through its wholly owned subsidiaries, controls our generalpartner. TransMontaigne Inc. is a wholly owned subsidiary of Morgan Stanley Capital Group. TransMontaigne Partners has no officers or employeesand all of our management and operational activities are provided by officers and employees of TransMontaigne Services Inc. Our general partner is notelected by our unitholders and is not subject to re-election on a regular basis in the future. Unitholders are not entitled to elect directors to the board ofdirectors of our general partner or directly or indirectly participate in our management or operation. Under the Corporate Governance Guidelinesadopted by the board of directors of our general partner, the board assesses, on an annual basis, the skills and characteristics that candidates for electionto the board of directors should possess, as well as the composition of the board of directors as a whole. This assessment includes the qualificationsunder applicable independence standards and other standards applicable to the board of directors and its committees, as well as consideration of skillsand experience in the context of the needs of the board of directors as a whole. Our general partner has no formal policy regarding the diversity of boardmembers, but seeks to ensure that its board of directors collectively have the personal qualities to be able to make an active contribution to the board ofdirectors deliberations, which qualities may include relevant industry experience, financial management, reporting and control expertise and executiveand operational management experience.Board of Directors and Officers The board of directors of our general partner oversees our operations. As part of its oversight function, the board of directors monitors howmanagement operates the partnership, in part via its committee structure. When granting authority to management, approving strategies and receivingmanagement reports, the board of directors considers, among other things, the risks and vulnerabilities we face. The audit committee of the board ofdirectors considers risk issues associated with our overall accounting, financial reporting and disclosure process. Except for executive sessions heldwith unaffiliated directors, all members of the board of directors are invited to and generally attend the meetings of the audit committee. The conflictscommittee of our general partner reviews specific matters that the board believes may involve conflicts of interests. As of the date of this report, there are six members of the board of directors of our general partner, three of whom, Messrs. Kuchta, Masters andPeters, are independent as defined under the independence standards established by the New York Stock Exchange (the "NYSE") The NYSE does notrequire a listed limited partnership, like TransMontaigne Partners, to have a majority of independent directors on the board of directors of its generalpartner or to establish a compensation committee or a nominating or governance committee. The Governance Guidelines of our general partner providethat at least three directors will be independent and one additional director will not be employed by, serve as a director of or have a significantcommercial relationship with, TransMontaigne, Inc. or its affiliates at the time of his or her election to the board of directors or while101Table of Contentsserving thereon. As of the date of this report, there is one vacancy on the board of directors to be filled by an unaffiliated or independent director. The officers of our general partner manage the day-to-day affairs of our business. All of the officers listed below split their time between managingour business and affairs and the business and affairs of TransMontaigne Inc. The officers of our general partner may face a conflict regarding theallocation of their time between our business and the other business interests of TransMontaigne Inc. TransMontaigne Inc. intends to seek to cause theofficers to devote as much time to the management of our operations as is necessary for the proper conduct of our business and affairs.DIRECTORS AND EXECUTIVE OFFICERS The following table shows information for the directors and reporting officers of TransMontaigne GP L.L.C. under Section 16 of the SecuritiesExchange Act of 1934: Stephen R. Munger was appointed to serve as the Chairman of the Board of directors of our general partner, effective March 17, 2008.Mr. Munger was asked to join the board of directors, in part, based on his position at Morgan Stanley, his executive management experience and hisexperience in mergers and acquisitions. Mr. Munger has served as the Co-Chairman of the Mergers & Acquisitions Department of Morgan Stanleysince 2003, having served as the operating Co-Head from 1999 through 2003. Mr. Munger has also served as Chairman of the Morgan Stanley GlobalEnergy Group since 2004. Mr. Munger was named a Managing Director of Morgan Stanley in 1992, and joined Morgan Stanley in 1988, havingpreviously worked in the Mergers & Acquisition Department of Merrill Lynch. Mr. Munger is a graduate of Dartmouth College and the WhartonSchool of Business. Charles L. Dunlap has served as the Chief Executive Officer of our general partner since August 10, 2009 and served as a director of our generalpartner from July 8, 2008 to August 10, 2009. Mr. Dunlap has served as the President and Chief Executive Officer of TransMontaigne Inc. sinceAugust 10, 2009. Mr. Dunlap served as Chief Executive Officer and President of Pasadena Refining System, Inc. based in Houston, Texas fromJanuary 2005 to December 2008. Mr. Dunlap has also served as a director of Opti Canada, Inc. since June 2006, which is a public energy companybased in Calgary, Canada. In addition, from May 2000 to February 2004, Mr. Dunlap served as one of the founding partners of StrategicAdvisors, LLC, a management consulting firm based in Baltimore, Maryland. Prior to that time, Mr. Dunlap served in various senior management andexecutive positions at various oil and gas companies including Crown Central Petroleum Corporation, Pacific Resources, Inc., Arco Petroleum ProductsCompany and Clark Oil & Refining Corporation.102Name Age PositionStephen R. Munger 52 Chairman of the BoardCharles L. Dunlap 66 Chief Executive OfficerGregory J. Pound 57 President and Chief Operating OfficerFrederick W. Boutin 54 Executive Vice President, Chief Financial Officer andTreasurerErik B. Carlson 62 Executive Vice President, General Counsel andSecretaryDeborah A. Davis 36 Senior Vice President and Chief Accounting OfficerHenry M. Kuchta 53 DirectorJerry R. Masters 51 Director, Chairman of Audit and CompensationCommitteesRandall P. O'Connor 50 DirectorDavid A. Peters 51 Director, Chairman of Conflicts CommitteeGoran Trapp 47 DirectorTable of ContentsMr. Dunlap is a graduate of Rockhurst College and holds a Juris Doctor degree from Saint Louis University Law School and is a graduate of theHarvard Business School Advanced Management Program. Gregory J. Pound has served as the President and Chief Operating Officer of our general partner since January 2008 and served as its ExecutiveVice President from May 2007 to December 2007. Mr. Pound has served as the Executive Vice President—Asset Operations of TransMontaigne Inc.since February 2002. Mr. Pound has also served as a director of Olco Petroleum Group Inc. since December 2006. Frederick W. Boutin has served as an Executive Vice President and the Chief Financial Officer of our general partner since January 2008 and asits Treasurer since February 2005. Mr. Boutin served as the Senior Vice President of our general partner from February 2005 to December 2007.Mr. Boutin has served as the Executive Vice President of TransMontaigne Inc. since February 2008, as its Treasurer since June 2003 and served as itsSenior Vice President from September 1996 to January 2008. From 1985 to 1995, Mr. Boutin served as a Vice President of Associated NaturalGas, Inc. and its successor, Duke Energy Field Services. Erik B. Carlson has served as an Executive Vice President of our general partner since January 2008 and as its General Counsel and Secretarysince February 2005. Mr. Carlson served as the Senior Vice President of our general partner from February 2005 to December 2007. Mr. Carlson hasbeen the Executive Vice President of TransMontaigne Inc. since February 2008, as its General Counsel and Secretary since January 1998 and served asits Senior Vice President from January 1998 to January 2008. From February 1983 until January 1998, Mr. Carlson served as Senior Vice President,General Counsel and Corporate Secretary of Associated Natural Gas Corporation and its successor, Duke Energy Field Services. Deborah A. Davis has served as Senior Vice President and Chief Accounting Officer of our general partner since January 2008. Ms. Davis hasserved as Senior Vice President—Administration of TransMontaigne Inc. since February 2008 and served as Vice President, Corporate Controller ofTransMontaigne Inc. from November 2005 to January 2008. From July 2002 through October 2005, Ms. Davis held various accounting positions withTransMontaigne Inc., most recently as Executive Director, External Reporting. From September 1996 through June 2002, Ms. Davis held variouspositions in the audit department of KPMG LLP, departing as an Audit Manager. Henry M. Kuchta was elected as a director of our general partner on January 7, 2010, and serves as a member of the audit and conflictscommittees of the board of directors of our general partner. Mr. Kuchta was asked to join the board of directors, in part, based on his executivemanagement experience in the energy industry and because he qualified as an independent director. Since September 2006, Mr. Kuchta has served as aPartner in NTR Partners, LLC and served as Director, President and Chief Operating Officer of NTR Acquisition Co. from September 2006 to January2009. Mr. Kuchta served as President and Chief Operating Officer of Premcor Inc. from January 2003 through September 2005 and as Executive VicePresident of Premcor Inc. from May 2002 to December 2002. Previously, Mr. Kuchta served as Business Development Manager for Phillips 66Company from October 2001 to April 2002. Prior to that time, Mr. Kuchta served in various senior management and executive positions at ToscoCorporation from May 1993 to September 2001, as well as at Exxon Corporation from May 1980 to April 1992. Mr. Kuchta holds a Bachelor ofScience degree in Chemical Engineering from Wayne State University. Jerry R. Masters was elected as a director of our general partner on May 24, 2005, and serves as a member of the conflicts committee, and aschair of the audit and compensation committees, of the board of directors of our general partner. Mr. Masters was asked to join the board of directors, inpart, based on his executive management experience, his financial and accounting knowledge and because he qualified as an independent director.Mr. Masters is a private investor and was a part-time consultant103Table of Contentsto Microsoft Corporation from April 2000 to August 2002. From February 1991 to April 2000, Mr. Masters held various executive positions withinthe financial organization at Microsoft Corporation. In his last position as Senior Director, Mr. Masters was responsible for external financial reporting,budgeting and forecasting, and financial modeling of mergers and acquisitions. Randall P. O'Connor was elected as a director of our general partner on March 31, 2009. Mr. O'Connor was asked to join the board of directors,in part, based on his position at Morgan Stanley and his executive management experience in the oil and gas industry. Mr. O'Connor is a ManagingDirector at Morgan Stanley, working in the firm's Commodities Group and currently serves as head of the Strategic Transactions Group. He has beenwith Morgan Stanley since 2002. Prior to joining Morgan Stanley, Mr. O'Connor held numerous positions of responsibility at various energycompanies, including Chevron Corporation, Transworld Oil, Clark Oil & Refining and TransCanada Energy. In addition to being a director of ourgeneral partner, Mr. O'Connor is a director of TransMontaigne Inc. and Olco Petroleum Group Inc. Mr. O'Connor holds a B.S. in ChemicalEngineering from the University of Texas at Austin and an M.B.A. from the University of California at Berkeley. David A. Peters was elected as a director of our general partner on May 24, 2005, and serves as a member of the audit and compensationcommittees and as the chair of the conflicts committee of the board of directors of our general partner. Mr. Peters was asked to join the board ofdirectors, in part, based on his knowledge of the energy industry, his financial and accounting knowledge and because he qualified as an independentdirector. Since 1999 Mr. Peters has been a business consultant with a primary client focus in the energy sector; in addition, Mr. Peters also served as amember of the board of directors of QDOBA Restaurant Corporation from 1998 to 2003. From 1997 to 1999 Mr. Peters was a managing director of aprivate investment fund, and from 1995 to 1997 he served as an executive vice president at DukeEnergy/PanEnergy Field Services responsible fornatural gas gathering, processing and storage operations. Prior to joining DukeEnergy/PanEnergy Field Services, Mr. Peters held various positions withAssociated Natural Gas Corporation, and from 1980 to 1984 he worked in the audit department of Peat Marwick Mitchell & Co. Mr. Peters holds abachelor's degree in business administration from the University of Michigan. Goran Trapp was elected as a director of our general partner on October 22, 2008. Mr. Trapp was asked to join the board of directors, in part,based on his position at Morgan Stanley and his executive management experience in the energy commodity markets. Mr. Trapp is a Managing Directorat Morgan Stanley and has served as the Head of Global Oil Liquids in Commodities at Morgan Stanley since July 2008 and the Head of Europe,Middle East and Africa Commodities since January 2008. Mr. Trapp joined Morgan Stanley in 1990 and became a Managing Director in 1999. Earlierin his career at Morgan Stanley, Mr. Trapp served as the Head of the Europe and Asia Oil Liquids Group and the Global Chief Operating Officer of theOil Liquids Group. He has also served as a Member of the Firm's Europe, Middle East and Asia Management Committee since November 2007.Mr. Trapp holds a Master of Science degree from the Stockholm School of Economics.Compliance With Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the executive officers and directors of our general partner, and persons who ownmore than ten percent of a registered class of our equity securities (collectively, "Reporting Persons") to file with the SEC and the New York StockExchange initial reports of ownership and reports of changes in ownership of our common units and our other equity securities. Specific due dates forthose reports have been established, and we are required to report herein any failure to file reports by those due dates. Reporting Persons are alsorequired by SEC regulations to furnish TransMontaigne Partners with copies of all Section 16(a) reports they file.104Table of Contents To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports wererequired during the year ended December 31, 2009, all Section 16(a) filing requirements applicable to such Reporting Persons were complied with,except that Charles Dunlap filed his Form 5 late. The Form 5 filed late reported the reinvestment into our common units of the quarterly cashdistributions paid in 2009 on the restricted phantom units that were previously granted to Mr. Dunlap under the long-term incentive plan for his serviceas a director, which acquisitions qualified for deferred reporting on Form 5.Audit Committee The board of directors of our general partner has a standing audit committee. The audit committee currently has three members, Jerry R. Masters,David A. Peters and Henry M. Kuchta, each of whom is able to understand fundamental financial statements and at least one of whom has pastexperience in accounting or related financial management. The board has determined that each member of the audit committee is independent underSection 303A.02 of the New York Stock Exchange listing standards and Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended. Inmaking the independence determination, the board considered the requirements of the New York Stock Exchange and the Corporate GovernanceGuidelines of our general partner. Among other factors, the board considered current or previous employment with the partnership, its auditors or theiraffiliates by the director or his immediate family members, ownership of our voting securities, and other material relationships with the partnership. Theaudit committee has adopted a charter, which has been ratified and approved by the board of directors. With respect to material relationships, the following relationships are not considered to be material for purposes of assessing independence: serviceas an officer, director, employee or trustee of, or greater than five percent beneficial ownership in (a) a supplier to the partnership if the annual sales tothe partnership are less than one percent of the sales of the supplier; (b) a lender to the partnership if the total amount of the partnership's indebtedness isless than one percent of the total consolidated assets of the lender; or (c) a charitable organization if the total amount of the partnership's annualcharitable contributions to the organization are less than three percent of that organization's annual charitable receipts. Based upon his education and employment experience as more fully detailed in Mr. Masters' biography set forth above, Mr. Masters has beendesignated by the board as the audit committee's financial expert meeting the requirements promulgated by the SEC and set forth in Item 407(d)(5)(ii) ofRegulation S-K of the Securities Exchange Act of 1934.Conflicts Committee Messrs. Kuchta, Masters and Peters currently serve on the conflicts committee of the board of directors of our general partner. The conflictscommittee reviews specific matters that the board believes may involve conflicts of interest. The conflicts committee determines if the resolution of theconflict of interest is fair and reasonable to us. The members of the conflicts committee may not be officers or employees of our general partner ordirectors, officers, or employees of its affiliates, and must meet the independence standards established by the New York Stock Exchange and theSecurities Exchange Act of 1934 to serve on an audit committee of a board of directors, and certain other requirements. Any matter approved by theconflicts committee will be conclusively deemed to be fair and reasonable to us, to be approved by all of our partners, and not deemed a breach by ourgeneral partner of any duties it may owe us or our unitholders.105Table of ContentsCompensation Committee Although not required by New York Stock Exchange listing requirements, the board of directors of our general partner has a standingcompensation committee, which (1) administers the TransMontaigne Services Inc. long-term incentive plan, pursuant to which employees andindependent directors of our general partner are granted equity-based awards, and (2) which reviews the allocation of grants to certain employees ofTransMontaigne Services Inc. under the TransMontaigne Services Inc. savings and retention plan. The compensation committee has adopted a charter,which the board of directors has ratified and approved. Messrs. Masters and Peters currently serve on the compensation committee.Corporate Governance Guidelines; Code of Business Conduct and Ethics The board of directors of our general partner has adopted Corporate Governance Guidelines that outline the important policies and practicesregarding our governance. The board of directors has no policy requiring either that the positions of the Chairman of the Board and of the ChiefExecutive Officer of our general partner be separate or that they be occupied by the same individual. The board of directors believes that this issue isproperly addressed as part of the succession planning process and that a determination on this subject should be made when it elects a new chiefexecutive officer or at such other times as when consideration of the matter is warranted by circumstances. Currently, different individuals hold thepositions of Chairman of the Board and Chief Executive Officer of our general partner. We believe that separating the roles of Chairman of the Boardand Chief Executive Officer preserves the distinction between management and oversight, which in turn enhances the board's ability to oversee andevaluate management. The audit committee has adopted a Code of Business Conduct and Ethics, which the board of directors of our general partner has ratified andapproved. The Code of Business Conduct applies to all employees of TransMontaigne Services Inc. acting on behalf of our general partner and to theofficers and directors of our general partner. The audit committee has also adopted, and the board of directors of our general partner has ratified andapproved, a Code of Ethics for Senior Financial Officers of our general partner. The Code of Ethics for Senior Financial Officers applies to the seniorfinancial officers of our general partner, including the chief executive officer, the chief financial officer and the chief accounting officer or personsperforming similar functions. The Code of Business Conduct and Code of Ethics for Senior Financial Officers each require prompt disclosure of anywaiver of the code for executive officers or directors made by the general partner's board of directors or any committee thereof as required by law or theNew York Stock Exchange. Copies of our Code of Business Conduct, Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines, Audit CommitteeCharter, and Compensation Committee Charter, are available on our website at www.transmontaignepartners.com.Communications by Unitholders Pursuant to our Corporate Governance Guidelines, the board of directors of our general partner meets at the conclusion of regularly-scheduledboard meetings without the executive officers of our general partner or other employees of TransMontaigne Services Inc. present, which meetings arepresided over by Mr. Munger as Chairman of the Board. In addition, the independent members of the board of directors of our general partner meet inexecutive sessions at the conclusion of regularly-scheduled board meetings, pursuant to which, the board has chosen Mr. Peters to preside as chairmanof these executive session meetings. Unitholders and other interested parties may communicate with (1) Mr. Peters, in his capacity as chairman of the executive session meetings of theboard of directors of our general partner, (2) the independent members of the board of directors of our general partner as a group, or (3) any and allmembers of the board of directors of our general partner by transmitting correspondence by mail or106Table of Contentsfacsimile addressed to one or more directors by name or to the independent directors (or to the Chairman of the Board or any standing committee of theboard) at the following address and fax number:Name of the Director(s)c/o SecretaryTransMontaigne Partners L.P.1670 Broadway, Suite 3100Denver, Colorado 80202(303) 626-8228 The secretary of our general partner will collect and organize all such communications in accordance with procedures approved by the board. Thesecretary will forward all communications to the Chairman of the Board or to the identified director(s) as soon as practicable. However, we may handledifferently communications that are abusive, offensive or that present safety or security concerns. If we receive multiple communications on a similartopic, our secretary may, in his or her discretion, forward only representative correspondence. The Chairman of the Board will determine whether any communication addressed to the entire board should be properly addressed by the entireboard or a committee thereof if a communication is sent to the board or a committee, the Chairman of the Board or the chairman of that committee, as thecase may be, will determine whether the communication warrants a response. If a response to the communication is warranted, the content and methodof the response will be coordinated with our general partner's internal or external counsel.ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATIONCompensation Discussion and Analysis We do not directly employ any of the persons responsible for managing our business. We are managed by our general partner,TransMontaigne GP L.L.C. The executive officers of our general partner are employees of and paid by TransMontaigne Services Inc. We do not incurany direct compensation charge for the executive officers of our general partner. Instead, under the omnibus agreement we pay TransMontaigne Inc. ayearly administrative fee that is intended to compensate TransMontaigne Inc. for providing certain corporate staff and support services to us, includingservices provided to us by the executive officers of our general partner. During the year ended December 31, 2009, we paid TransMontaigne Inc. anadministrative fee of approximately $10.0 million. The administrative fee is a lump-sum payment and does not reflect specific amounts attributable to thecompensation of the executive officers of our general partner while acting on our behalf. In addition, we agreed to reimburse TransMontaigne Inc. andits affiliates at least $1.5 million for grants to key employees of TransMontaigne Inc. and its affiliates under the TransMontaigne Services Inc. savingsand retention plan, provided that (i) no less than $1.5 million of the aggregate amount of such awards granted to key employees of TransMontaigne Inc.and its affiliates will be allocated to an investment fund indexed to the performance of our common units, and (ii) the proposed allocations of suchawards among these key employees are approved by the compensation committee of our general partner to assure that an adequate portion of suchawards are deemed invested in an investment fund indexed to the performance of our common units. For the year ended December 31, 2009, wereimbursed TransMontaigne Services Inc. approximately $1.2 million for bonus awards granted to its key employees under the TransMontaigneServices Inc. savings and retention plan. Effective August 10, 2009, Charles L. Dunlap was appointed to serve as Chief Executive Officer ("CEO") ofour general partner and President and CEO of TransMontaigne Inc. In connection with his appointments and because he was not eligible to participatein the savings and retention plan then in effect, on107Table of ContentsAugust 10, 2009, TransMontaigne Services Inc. awarded Mr. Dunlap 40,000 restricted phantom units under the long-term incentive plan. We willamortize deferred equity-based compensation of approximately $1.0 million associated with this grant over its respective four-year vesting period. Neither the board of directors nor the compensation committee of our general partner plays any role in setting the compensation of the executiveofficers of our general partner, all of which is determined by TransMontaigne Inc. The compensation committee of our general partner, however,determines the amount, timing and terms of all equity awards granted to our independent directors under TransMontaigne Services Inc.'s long-termincentive plan. To the extent that awards of phantom units granted under TransMontaigne Services Inc.'s long-term incentive plan are replaced withcommon units purchased by TransMontaigne Services Inc. on the open market, we will reimburse TransMontaigne Services Inc. for the purchase priceof such units. The primary elements of TransMontaigne Inc.'s compensation program are a combination of annual cash and long-term equity-basedcompensation. During 2009, elements of compensation for our executive officers consisted of the following:•Annual base salary; •Discretionary annual cash awards; •Long-term equity-based compensation; and •Other compensation, including very limited perquisites. We do not provide any perquisites to the executive officers of our general partner. TransMontaigne Services Inc. expects to continue its policy ofcovering very limited perquisites allocable to its executive officers. TransMontaigne Services Inc. makes matching contributions under its 401(k) planfor the benefit of its executive officers in the same manner as for its other employees. The elements of TransMontaigne Inc.'s compensation program, along with TransMontaigne Inc.'s other rewards (for example, benefits, workenvironment, career development), are intended to provide a total rewards package designed to drive performance and reward contributions in supportof the business strategies of TransMontaigne Inc. During 2009, TransMontaigne Inc. did not use any elements of compensation based on specificperformance-based criteria and did not have any other specific performance-based objectives. Although neither the board of directors nor thecompensation committee of our general partner plays any role in setting the compensation of the executive officers of our general partner, we are notaware of any compensation elements of TransMontaigne Inc.'s compensation program which are reasonably likely to have a material adverse effect onus. We believe that TransMontaigne Inc.'s compensation policies allow it to attract, motivate and retain high quality, talented individuals with the skillsand competencies we require. In addition, the TransMontaigne Services Inc.'s savings and retention plan and long-term incentive plan are intended toalign the long-term interests of the executive officers of our general partner with those of our unitholders to the extent a portion of the bonus awardsunder the savings and retention plan is deemed invested in our common units.Employment and Other Agreements We have not entered into any employment agreements with any officers of our general partner.108Table of ContentsCompensation Committee Report The compensation committee has reviewed and discussed with our management the Compensation Discussion and Analysis under "Item 11.Executive Compensation" of this annual report. Based on such review and discussions, the Compensation Committee recommended to the board ofdirectors of our general partner that the Compensation Discussion and Analysis be included in this annual report.COMPENSATION COMMITTEEJerry R. Masters, ChairDavid A. PetersCOMPENSATION OF DIRECTORS Employees of our general partner or its affiliates (including employees of Morgan Stanley and its affiliates) who also serve as directors of ourgeneral partner will not receive additional compensation. Independent directors will receive a $30,000 annual cash retainer and an annual grant of 2,000restricted phantom units, which will vest in 25% increments on March 31 and each of the succeeding three anniversaries (with vesting to be acceleratedupon a change of control). Upon vesting, the restricted phantom units will be replaced with our common units on a one-for-one basis, as the commonunits are acquired in the open market by the plan, or paid out in cash based upon the closing market price of the common units on the date of vesting, atthe option of the plan administrator. Dividends are paid on restricted phantom units at the same rate as on our unrestricted common units. In addition,each director will be reimbursed for out-of-pocket expenses in connection with attending meetings of the board of directors or committees. Each directorwill be fully indemnified by us for actions associated with being a director to the extent permitted under Delaware law. The following table provides information concerning the compensation of our general partner's directors for 2009.Director Compensation Table for 2009109Name(a) Fees earned orpaid in cash ($)(b) Stock awards ($)(c) All othercompensation ($)(g) Total ($)(h) Stephen R. Munger(1) — — — — Randall P. O'Connor(1) — — — — Goran Trapp(1) — — — — Charles L. Dunlap(2) $22,500 $33,540(3) — $56,040 Duke R. Ligon(4) $30,000 $33,540(3) — $63,540 Jerry R. Masters $30,000 $33,540(3) — $63,540 David A. Peters $30,000 $33,540(3) — $63,540 (1)Because Messrs. Munger, O'Connor and Trapp are employees of an affiliate of our general partner, none of them receivescompensation for service as a director of our general partner. At December 31, 2009, none of the foregoing directors held anyrestricted phantom or other limited partnership interests. (2)The board of directors of our general partner appointed Charles L. Dunlap to serve as Chief Executive Officer of our generalpartner, effective August 10, 2009. Mr. Dunlap was also appointed to serve as the President and Chief Executive Officer ofTransMontaigne Inc., effective August 10, 2009. As a result of this appointment, Mr. Dunlap ceased to qualify as an independentdirector of the board of directors of our general partner and therefore tendered his resignation from the board of directors of ourgeneral partner, also effective August 10, 2009. Because Mr. DunlapTable of ContentsCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During the year ended December 31, 2009, Messrs. Masters and Peters were the only persons who served on the compensation committee of ourgeneral partner. During 2009, none of the members of the compensation committee was an officer or employee of our general partner or any of oursubsidiaries or served as an officer of any company with respect to which any of the executive officers of our general partner served on such company'sboard of directors.SAVINGS AND RETENTION PLAN The board of directors of TransMontaigne Inc. adopted the savings and retention plan of TransMontaigne Services Inc. effective January 1, 2007,which was subsequently amended and restated as of January 29, 2010 to revise certain age and length of service thresholds that had previouslyexcluded a number of TransMontaigne Services Inc. employees, including the recently appointed Chief Executive Officer, the President and theExecutive Vice President, General Counsel of our general partner, from participation in the plan. The plan is administered by the compensationcommittee of TransMontaigne Inc. The purpose of the plan is to provide for the reward and retention of certain key employees of TransMontaigneServices Inc. by providing them with bonus awards that vest over future service periods. Awards under the plan generally become vested as to 50% ofa participant's annual award as of the January 1 that falls closest to the second anniversary of the grant date, and the remaining 50% as of the January 1that falls closest to the third anniversary of the grant date, subject to earlier vesting upon a participant's retirement, death or disability, involuntarytermination without cause, or termination of a participant's employment following a change of control of Morgan Stanley or TransMontaigne Inc., ortheir affiliates, as specified in the plan. Pursuant to the new provisions of the January 29, 2010 amended and restated plan, once participating employeesof TransMontaigne Services Inc. reach the age and length of service thresholds set forth below, subsequent annual awards are immediately vested andpayable as to 50% of a participant's annual award in the month containing the second anniversary of the grant date, and the remaining 50% in the monthcontaining the third anniversary of the grant date, subject to earlier payment upon the participant's retirement, death or disability, involuntary terminationwithout cause, or termination of a participant's employment following a change of control of Morgan Stanley or TransMontaigne Inc., or their affiliates,as specified in the plan. In addition, the vested awards remain subject to forfeiture as specified in the plan. A person will satisfy the age and length ofservice thresholds of the plan upon the attainment of the earliest of (a) age sixty, (b) age fifty-five and ten years of service as an officer ofTransMontaigne Inc. or its affiliates, or (c) age fifty and twenty years of service as an employee of TransMontaigne Inc. or its affiliates. For the awardsgranted under the plan in 2010, the Chief Executive Officer, President and Executive Vice President, General Counsel of our general partner havesatisfied the age and length of service thresholds of the plan. Generally, only senior level management of TransMontaigne Services110continues to provide services to our general partner as an employee, the restricted phantom units previously granted toMr. Dunlap for his services as an independent member of the board of directors of our general partner remain in effect andcontinue to vest in accordance with the four-year vesting schedule for our independent directors.(3)This dollar amount reflects the aggregate grant-date fair value of the restricted phantom units, computed in accordance withFASB ASC 718. The grant-date fair value is equal to $16.77, the closing price of our unrestricted common units on March 31,2009. The restricted phantom units vest in 25% increments on March 31 and each of the succeeding three anniversaries (withvesting to be accelerated upon a change of control). At December 31, 2009, Messrs. Dunlap and Ligon each held 3,500 restrictedphantom units and Messrs. Masters and Peters each held 4,500 restricted phantom units. (4)Mr. Ligon resigned from the board of directors of our general partner, effective January 7, 2010.Table of ContentsInc. will receive awards under the plan. Although no assets are segregated or otherwise set aside with respect to a participant's account, the amountultimately payable to a participant shall be the amount credited to such participant's account as if such account had been invested in some or all of theinvestment funds selected by the plan administrator. The plan administrator determines both the amount and investment funds in which the bonus award will be deemed invested for each participant.For the year ended December 31, 2009, the four investment funds that the plan administrator could select were (1) a fixed interest fund, under whichinterest accrues at a rate to be determined annually by the plan administrator; (2) a fund under which a participant's account is deemed invested in theDodge & Cox Income Fund, which invests primarily in bonds and other fixed income securities; (3) an equity index fund under which a participant'saccount is deemed invested in the SPDR Trust Series 1, which has an investment goal of tracking the performance of the Standard & Poors 500 Index,or such other equity index as the plan administrator may from time to time select; and (4) a fund under which a participant's account tracks theperformance of our common units, with all distributions automatically reinvested in common units. Upon vesting and payment, the participant shall bepaid the value of the investment funds in cash or in-kind, at the sole discretion of the plan administrator. For the year ended December 31, 2009, wereimbursed TransMontaigne Services Inc. approximately $1.2 million for bonus awards under the plan.LONG-TERM INCENTIVE PLAN Upon the consummation of our initial public offering in May 2005, TransMontaigne Services Inc. adopted a long-term incentive plan foremployees and consultants of TransMontaigne Services Inc. who provide services on our behalf, and our independent directors. Following the adoptionof the amended and restated savings and retention plan of TransMontaigne Services Inc., we do not currently anticipate that awards will be made underthe long-term incentive plan to officers or employees of TransMontaigne Services Inc., although we anticipate that annual grants to the independentdirectors of our general partner will continue to be made under the long-term incentive plan. During the year ended December 31, 2009, thecompensation committee of the board of directors of our general partner awarded 8,000 restricted phantom units to the independent directors of ourgeneral partner under the plan. Effective August 10, 2009, Charles L. Dunlap was appointed to serve as Chief Executive Officer of our general partnerand President and Chief Executive Officer of TransMontaigne Inc. In connection with his appointments and because he was not eligible to participate inthe savings and retention plan than in effect, on August 10, 2009, TransMontaigne Services Inc. awarded Mr. Dunlap 40,000 restricted phantom unitsunder the long-term incentive plan. The summary of the proposed long-term incentive plan contained below does not purport to be complete, but outlines its material provisions. Thelong-term incentive plan consists of four components: restricted units, restricted phantom units, unit options and unit appreciation rights. As ofFebruary 26, 2010, the long-term incentive plan permits the grant of awards covering an aggregate of 1,238,463 units, which amount will automaticallyincrease on an annual basis by 2% of the total outstanding common and subordinated units, if any, at the end of the preceding fiscal year. As ofFebruary 26, 2010, there were 1,014,523 units available for future grant under the long-term incentive plan. The plan is administered by thecompensation committee of the board of directors of our general partner. The board of directors of our general partner, in its discretion may terminate, suspend or discontinue the long-term incentive plan at any time withrespect to any award that has not yet been granted. The board of directors also has the right to alter or amend the long-term incentive plan or any part ofthe plan from time to time, including increasing the number of units that may be granted subject to unitholder approval as required by the exchange uponwhich the common units are listed at that time. However, no change in any outstanding grant may be made that would materially impair the111Table of Contentsrights of the participant without the consent of the participant, unless the change is necessary to comply with certain tax requirements. Restricted Units and Restricted Phantom Units. A restricted unit is a common unit subject to forfeiture prior to the vesting of the award. Arestricted phantom unit is a notional unit that entitles the grantee to receive a common unit upon the vesting of the phantom unit or, in the discretion ofthe compensation committee, cash equivalent to the value of a common unit. The compensation committee may determine to make grants under the planof restricted units and restricted phantom units to employees, consultants and independent directors containing such terms as the compensationcommittee shall determine. The compensation committee will determine the period over which restricted units and restricted phantom units granted toemployees, consultants and independent directors will vest. The compensation committee may base its determination upon the achievement of specifiedfinancial objectives. In addition, the restricted units and restricted phantom units will vest upon a change of control of us, our general partner orTransMontaigne Inc. If a grantee's employment, service relationship or membership on the board of directors terminates for any reason, the grantee's restricted units andrestricted phantom units will be automatically forfeited unless, and to the extent, the compensation committee provides otherwise. Common units to bedelivered in connection with the grant of restricted units or upon the vesting of restricted phantom units may be common units acquired by our generalpartner on the open market, common units already owned by our general partner, common units acquired by our general partner directly from us or anyother person or any combination of the foregoing. TransMontaigne Services Inc. will be entitled to reimbursement by us for the cost incurred inacquiring common units. Thus, the cost of the restricted units and delivery of common units upon the vesting of restricted phantom units will be borneby us. If we issue new common units in connection with the grant of restricted units or upon vesting of the restricted phantom units, the total number ofcommon units outstanding will increase. The compensation committee, in its discretion, may grant tandem distribution rights with respect to restrictedunits and tandem distribution equivalent rights with respect to restricted phantom units. We intend the issuance of restricted units and common units upon the vesting of the restricted phantom units under the plan to serve as a means ofincentive compensation for performance and not primarily as an opportunity to participate in the equity appreciation of the common units. Therefore, atthis time it is not contemplated that plan participants will pay any consideration for restricted units or common units they receive, and at this time we donot contemplate that we will receive any remuneration for the restricted units and common units. Unit Options and Unit Appreciation Rights. The long-term incentive plan permits the grant of options covering common units and the grant ofunit appreciation rights. A unit appreciation right is an award that, upon exercise, entitles the participant to receive the excess of the fair market value of aunit on the exercise date over the exercise price established for the unit appreciation right. Such excess may be paid in common units, cash, or acombination thereof, as determined by the compensation committee in its discretion. The long-term incentive plan permits grants of unit options and unitappreciation rights to employees, consultants and independent directors containing such terms as the compensation committee shall determine. Unitoptions and unit appreciation rights may have an exercise price that is equal to or greater than the fair market value of the common units on the date ofgrant. In general, unit options and unit appreciation rights granted will become exercisable over a period determined by the compensation committee. Inaddition, the unit options and unit appreciation rights will become exercisable upon a change in control of us, our general partner or TransMontaigneInc., unless provided otherwise by the compensation committee. Upon exercise of a unit option (or a unit appreciation right settled in common units), our general partner will acquire common units on the openmarket or directly from us or any other person or use common units already owned by our general partner, or any combination of the foregoing. Ourgeneral112Table of Contentspartner will be entitled to reimbursement by us for the difference between the cost incurred by our general partner in acquiring these common units andthe proceeds received from a participant at the time of exercise. Thus, the cost of the unit options (or a unit appreciation right settled in common units)will be borne by us. If we issue new common units upon exercise of the unit options (or a unit appreciation right settled in common units), the totalnumber of common units outstanding will increase, and our general partner will pay us the proceeds it receives from an optionee upon exercise of a unitoption. The availability of unit options and unit appreciation rights is intended to furnish additional compensation to employees, consultants andindependent directors and to align their economic interests with those of common unitholders.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDUNITHOLDER MATTERS The following table sets forth certain information regarding the beneficial ownership of our limited partnership common units as of February 26,2010 by each director of our general partner, by each individual serving as an executive officer of our general partner as of February 26, 2010, by theformer Chief Executive Officer of our general partner, by each person known by us to own more than 5% of the outstanding units, and by all directors,director nominees and the named executive officers as of February 26, 2010 as a group. The information set forth below is based solely uponinformation furnished by such individuals or contained in filings made by such beneficial owners with the SEC. The calculation of the percentage of beneficial ownership is based on an aggregate of 14,457,066 limited partnership common units outstanding asof February 26, 2010. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power withrespect to the units. To our knowledge, except under applicable community property laws or as otherwise indicated, the persons named in the table havesole voting and sole investment power with respect to all units beneficially owned. Units underlying outstanding warrants or options that are currentlyexercisable or exercisable within 60 days of February 26, 2010 are deemed outstanding for the purpose of computing the percentage of beneficialownership of the person holding those options or warrants, but are not deemed outstanding for computing the percentage of beneficial ownership of any113Table of Contentsother person. The address for each named executive officer, director and director nominee is care of TransMontaigne Partners L.P., 1670 Broadway,Suite 3100, Denver, Colorado 80202.114Name of beneficial owner Commonunitsbeneficiallyowned Percentageofcommonunitsbeneficiallyowned TransMontaigne Inc.(1) 2,803,228 19.4%Morgan Stanley(2) 462,858 3.2%Swank Capital, LLC(3) 992,500 6.9%Named Executive Officers Frederick W. Boutin(4) 35,433 * Erik B. Carlson(5) 31,000 * Deborah A. Davis(4) 3,544 * Charles L. Dunlap(6) 3,640 * Gregory J. Pound(5) 21,722 * Randall J. Larson(7) 37,300 * Directors Henry M. Kuchta(8) — * Jerry R. Masters(9) 21,000 * Stephen R. Munger — * Randall P. O'Connor — * David A. Peters(9) 18,600 * Goran Trapp — * All directors, director nominees and executive officers as agroup (12 persons) 172,239 1.2%*Less than 1%. (1)The common units beneficially owned by TransMontaigne Inc. are held by TransMontaigne Services Inc.TransMontaigne Inc. is the indirect parent company of TransMontaigne Services Inc. and may, therefore, bedeemed to beneficially own the units held by each of them. Excludes the 2% general partnership interest andrelated incentive distribution rights held by our general partner, which are not considered "units" for purposes ofour limited partnership agreement. The general partner, accordingly, is not considered a "unitholder." The addressof TransMontaigne Inc. is 1670 Broadway, Suite 3100, Denver, Colorado 80202. (2)The address of Morgan Stanley Strategic Investments, Inc., an affiliate of Morgan Stanley Capital Group Inc., is1585 Broadway, New York, New York 10036. Based on the Schedule 13D (Amendment No. 2) filed with theSecurities and Exchange Commission on November 13, 2009, Morgan Stanley ("MS"), in its capacity as parentcompany of, and indirect beneficial owner of securities held by Morgan Stanley Capital Group, Inc. ("MSCGI")(and through TransMontaigne Inc. and its subsidiaries), and Morgan Stanley Smith Barney ("MSSB"), may bedeemed to beneficially own 3,266,086 common units, or approximately 22.6% of the outstanding common units.MSCGI may be deemed to beneficially own the 2,803,228 common units, indirectly held by TransMontaigneServices Inc. Morgan Stanley Strategic Investments, Inc. ("MSSI") beneficially owns 450,000 common units.MSSB has voting and/or dispositive power over certain shares of common units held in accounts of certain of itsclients and customers and, as a result, may beTable of Contents115deemed to beneficially own up to 12,858 common units. Each of MS and MSCGI may be deemed to have sharedvoting and dispositive power with respect to 2,803,228 common units beneficially owned by TransMontaigneServices Inc.; (ii) each of MS and MSSI may be deemed to have shared voting and dispositive power with respectto 450,000 common units beneficially owned by MSSI; and (iii) each of MS and MSSB may be deemed to haveshared voting and/or dispositive power with respect to 12,858 common units beneficially owned by MSSB.(3)Based on the Schedule 13G (Amendment No. 2) filed with the Securities and Exchange Commission onFebruary 16, 2010, Swank Energy Income Advisors, LP, which we refer to as Swank Advisors, has voting anddispositive powers over 992,500 common units. Swank Capital, LLC, as the general partner of Swank Advisors,and Mr. Swank as the principal of Swank Capital, LLC, have voting and dispositive powers over the 992,500common units held by Swank Advisors. The address of each of Swank Advisors, Swank Capital, LLC andMr. Swank is 3300 Oak Lawn Avenue, Suite 650, Dallas, Texas 75219. (4)Excludes 14,332 phantom units previously granted to Mr. Boutin and 5,639 phantom units previously granted toMs. Davis pursuant to the TransMontaigne Services Inc. savings and retention plan. Mr. Boutin will vest in14,332 phantom units on July 14, 2010 upon his reaching the age and length of service thresholds under the plan.Ms. Davis' phantom units vest 50% as of the January 1 that falls closest to the second anniversary of the grantdate, with the remaining 50% vesting as of the January 1 that falls closest to the third anniversary of the grantdate. The phantom units are subject to earlier vesting as described under "—Savings and Retention Plan" above. (5)Excludes 4,227 phantom units previously granted to Mr. Carlson and 3,758 phantom units previously granted toMr. Pound pursuant to the TransMontaigne Services Inc. savings and retention plan. Each of Messrs. Carlsonand Pound have satisfied the age and length of service thresholds under the plan, therefore, the forgoing phantomunits immediately vested and will become payable as to 50% of a participant's award in the month containing thesecond anniversary of the grant date, and the remaining 50% in the month containing the third anniversary of thegrant date. The phantom units are subject to earlier payment as described under "—Savings and Retention Plan"above. At the time of payment, phantom units will be paid out, in the sole discretion of the plan administrator, incash, in common units or a combination thereof. (6)Includes 1,000 restricted phantom units granted to Mr. Dunlap under the TransMontaigne Services Inc. long-termincentive plan for his service as an independent director that will vest on March 31, 2010. Excludes 1,000restricted phantom units granted to Mr. Dunlap under the TransMontaigne Services Inc. long term incentive planfor his service as an independent director that remain subject to continued vesting over two equal annualinstallments, beginning with the next vesting date March 31, 2011. Excludes 1,500 restricted phantom unitsgranted to Mr. Dunlap under the TransMontaigne Services Inc. long term incentive plan for his service as anindependent director that remain subject to continued vesting over three equal annual installments, beginning withthe next vesting date March 31, 2011. Effective August 10, 2009, Mr. Dunlap was appointed to serve as ChiefExecutive Officer of our general partner and President and Chief Executive Officer of TransMontaigne Inc. As aresult of these appointments, Mr. Dunlap ceased to qualify as an independent director and therefore tendered hisresignation from the board of directors of our general partner, effective as of the same date. Excludes 40,000restricted phantom units granted to Mr. Dunlap under the TransMontaigne Services Inc. long term incentive planin connection with his appointments that remain subject to continuedTable of ContentsEQUITY COMPENSATION PLAN INFORMATION The following table summarizes information about our equity compensation plans as of December 31, 2009.116vesting over four equal annual installments, beginning with the first vesting date August 10, 2010.(7)Mr. Larson resigned as Chief Executive Officer of our general partner and as President, Chief Executive Officerand member of the board of directors of TransMontaigne Inc., and the other subsidiaries of Partners andTransMontaigne Inc. effective August 5, 2009. (8)Mr. Kuchta was appointed to the board of directors of our general partner, effective January 7, 2010. (9)Includes 1,500 restricted phantom units granted to each of Messrs. Masters and Peters under the TransMontaigneServices Inc. long-term incentive plan that will vest on March 31, 2010. Excludes 500 restricted phantom unitsgranted to each of Messrs. Masters and Peters under the TransMontaigne Services Inc. long term incentive planthat vest on March 31, 2011. Excludes 1,000 restricted phantom units granted to each of Messrs. Masters andPeters under the TransMontaigne Services Inc. long term incentive plan that remain subject to continued vestingover two equal annual installments, beginning with the next vesting date March 31, 2011. Excludes 1,500restricted phantom units granted to each of Messrs. Masters and Peters under the TransMontaigne Services Inc.long term incentive plan that remain subject to continued vesting over three equal annual installments, beginningwith the next vesting date March 31, 2011. Number of securities to beissued upon exercise ofoutstanding options,warrants and rights(1) Weighted averageexercise price ofoutstanding options,warrants and rights Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflectedin column (a))(1) (a) (b) (c) Equity compensation plansapproved by securityholders — — — Equity compensation plansnot approved by securityholders 56,000 — 765,632 Total 56,000 — 765,632 (1)At December 31, 2009, the long-term incentive plan permits the grant of awards covering an aggregate of 989,572 units, ofwhich 223,940 units had been granted since the inception of the plan, net of forfeitures. The number of units available for grantautomatically increase on an annual basis by 2% of the total outstanding common units at the end of the preceding fiscal year.After giving effect to the automatic increase at the beginning of the 2010 fiscal year, a total of 1,238,463 units were madeavailable for issuance under the plan, of which 1,014,523 units remain available for issuance under the plan as of February 26,2010. For more information about our long-term incentive plan, which did not require approval by our limited partners, refer to"Item 11. Executive Compensation—Long-Term Incentive Plan," and Note 13 to Notes to consolidated financial statements inItem 8 of this annual report.Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS Our general partner's conflicts committee reviews specific matters that the board of directors of our general partner believes may involve conflictsof interest and other transactions with related persons in accordance with the procedures set forth in our amended and restated limited partnershipagreement. Due to the conflicts of interest inherent in our operating structure, our general partner may, but is not required to, seek the approval of anyconflict of interest transaction from the conflicts committee. Generally, such approval is requested for material transactions, including the purchase of amaterial amount of assets from TransMontaigne Inc. or the modification of a material agreement between us and TransMontaigne Inc. or MorganStanley Capital Group. Any matter approved by the conflicts committee will be conclusively deemed fair and reasonable to us, to be approved by all ofour partners, and not to be a breach by our general partner of its fiduciary duties. The conflicts committee may consider any factors it determines in goodfaith to consider when resolving a conflict, including taking into account the totality of the relationships among the parties involved, including othertransactions that may be particularly favorable or advantageous to us. In addition the conflicts committee has the authority to engage outside advisors toassist it in makings its determinations. For example, in approving our acquisition of the Southeast facilities from TransMontaigne Inc., the conflictscommittee engaged, and obtained a fairness opinion from, an independent outside financial advisor. We also have attempted to resolve many of the conflicts of interest inherent in our operating structure by entering into various documents andagreements with TransMontaigne Inc. These agreements, and any amendments thereto, discussed below were not the result of arm's-length negotiations,and they, or any of the transactions that they provide for, may not be effected on terms at least as favorable to the parties to these agreements as theycould have been obtained from unaffiliated third parties.RELATIONSHIP AND AGREEMENTS WITH OUR AFFILIATES Morgan Stanley controls our operations through its indirect ownership of our general partner and has a significant limited partner ownershipinterest in us through its indirect ownership of our common units. As of February 26, 2010, affiliates of Morgan Stanley, in the aggregate, owned a24.1% interest in the partnership, consisting of 3,253,228 common units, 2% general partner interest and the incentive distribution rights (excluding anycommon units that Morgan Stanley may be deemed to indirectly beneficially own through investment accounts managed by its affiliates).117Table of Contents The following table summarizes the distributions and payments to be made by us to Morgan Stanley and its other affiliates in connection with ourongoing operations.Operational stageOmnibus Agreement On May 27, 2005, we entered into an omnibus agreement with TransMontaigne Inc. and our general partner, which agreement was amended andrestated on December 31, 2007. The omnibus agreement, as amended and restated, addresses the following matters:•our obligation to pay TransMontaigne Inc. an annual administrative fee, currently in the amount of $10.3 million; •our obligation to pay TransMontaigne Inc. an annual insurance reimbursement, currently in the amount of $3.2 million; •our obligation to pay TransMontaigne Inc. an annual reimbursement fee in an amount no less than $1.5 million for grants to keyemployees of TransMontaigne Inc. and its affiliates under the TransMontaigne Services Inc. savings and retention plan, provided that(i) no less than $1.5 million of the aggregate amount of such awards granted to key employees of TransMontaigne Inc. and its affiliateswill be allocated to an investment fund indexed to the performance of our common units, and (ii) the proposed allocations of suchawards among the key employees of118Distributionsof availablecash to ourgeneralpartner andits affiliates We will generally make cash distributions 98% to the unitholders and 2% to our general partner. In addition, if distributions exceedthe minimum quarterly distribution and other higher target levels, our general partner will be entitled to increasing percentages of thedistributions, up to 50% of the distributions above the highest target level. During the year ended December 31, 2009, we distributed approximately $10.3 million to Morgan Stanley and its affiliates. Assumingwe have sufficient available cash to pay the minimum quarterly distribution on all of our outstanding units for four quarters, ourgeneral partner and its affiliates would receive an annual distribution of approximately $0.4 million on the 2% general partner interestand approximately $5.2 million on their common units.Payments toour generalpartner andits affiliates For the year ended December 31, 2009, we paid Morgan Stanley and its affiliates an administrative fee of approximately $10 millionwith an additional insurance reimbursement of approximately $2.9 million for the provision of various general and administrativeservices for our benefit. We also reimbursed TransMontaigne Inc. approximately $1.2 million for grants to key employees ofTransMontaigne Inc. and its affiliates under the TransMontaigne Services Inc. savings and retention plan. For further informationregarding the administrative fee, please see "—Omnibus Agreement; Payment of general and administrative services fee" below.Table of ContentsTransMontaigne Inc. and its affiliates are approved by the compensation committee of our general partner;•our right of first offer to purchase TransMontaigne Inc.'s and its subsidiaries' right, title and interest in the Pensacola, Florida refinedpetroleum products terminal and any assets acquired in an asset exchange transaction that replace the Pensacola assets; •TransMontaigne Inc.'s right of first refusal to purchase any assets that we propose to sell; and •TransMontaigne Inc.'s right of first refusal to any storage capacity that becomes available after January 1, 2008. Any or all of the provisions of the omnibus agreement, are terminable by TransMontaigne Inc. at its option if our general partner is removedwithout cause and units held by our general partner and its affiliates are not voted in favor of that removal.Payment of general and administrative services fee and reimbursement of direct expenses Pursuant to the omnibus agreement, for the year ended December 31, 2009, we paid TransMontaigne Inc. an annual administrative fee ofapproximately $10.0 million for the provision of various general and administrative services for our benefit. The administrative fee paid in fiscal 2009partially reimburses TransMontaigne Inc. for expenses it incurred to perform centralized corporate functions, such as legal, accounting, treasury,insurance administration and claims processing, health, safety and environmental, information technology, human resources, including the services ofour executive officers, credit, payroll, taxes and engineering and other corporate services, to the extent such services were not outsourced byTransMontaigne Inc. The omnibus agreement further requires us to pay TransMontaigne Inc. an annual insurance reimbursement in the amount ofapproximately $2.9 million for premiums on insurance policies covering our terminals and pipelines. The administrative fee may be increased annuallyby the percentage increase in the consumer price index for the immediately preceding year, and the insurance reimbursement will increase in accordancewith increases in the premiums payable under the relevant policies. In addition, if we acquire or construct additional assets during the term of theagreement, TransMontaigne Inc. will propose a revised administrative fee covering the provision of services for such additional assets. If the conflictscommittee of our general partner agrees to the revised administrative fee, TransMontaigne Inc. will provide services for the additional assets pursuant tothe agreement. In addition, we agreed to reimburse TransMontaigne Inc. and its affiliates no less than $1.5 million for grants to key employees ofTransMontaigne Inc. and its affiliates under the TransMontaigne Services Inc. savings and retention plan, provided that (i) no less than $1.5 million ofthe aggregate amount of such awards granted to key employees of TransMontaigne Inc. and its affiliates will be allocated to an investment fund indexedto the performance of our common units, and (ii) the proposed allocations of such awards among the key employees of TransMontaigne Inc. and itsaffiliates are approved by the compensation committee of our general partner to assure that an adequate portion of such awards are deemed invested inan investment fund indexed to the performance of our common units. The omnibus agreement will expire on December 31, 2014. If Morgan StanleyCapital Group elects to renew the terminaling and services agreement for the Southeast terminals, we have the right to extend the term of the omnibusagreement for an additional seven years. Due to the acquisition of TransMontaigne Inc. by Morgan Stanley Capital Group on September 1, 2006, theomnibus agreement no longer requires TransMontaigne Inc. to offer us any tangible assets that it acquires or constructs after September 1, 2006 relatedto the storage, transportation or terminaling of refined products in the United States. The administrative fee did not include reimbursements for direct expenses TransMontaigne Inc. incurred on our behalf, such as salaries ofoperational personnel performing services on-site at our terminal and pipeline facilities and related employee benefit costs, including 401(k) and healthinsurance benefits. For the year ended December 31, 2009, we reimbursed TransMontaigne Inc.119Table of Contentsapproximately $21.1 million for direct expenses it incurred on our behalf, excluding reimbursements for grants to key employees ofTransMontaigne Inc. and its affiliates under the TransMontaigne Services Inc. savings and retention plan.Rights of First Offer and First Refusal Under the omnibus agreement we have a right of first offer to purchase TransMontaigne Inc.'s Pensacola, Florida refined petroleum productsterminal provided that we agree to pay no less than 105% of the purchase price offered by a third-party bidder. The omnibus agreement also providesTransMontaigne Inc. with a right of first refusal to purchase our assets that are in the same line of business in which TransMontaigne Inc. is engaged,provided that TransMontaigne Inc. agrees to pay no less than 105% of the purchase price offered by a third-party bidder. These provisions arediscussed under Item 1. "Business—Our Relationship with TransMontaigne Inc. and Morgan Stanley Capital Group" of this annual report.Terminaling Services Agreements We have entered into various terminaling services agreements with Morgan Stanley Capital Group and TransMontaigne Inc., which are discussedunder Item 1. "Business—Our Relationship with TransMontaigne Inc. and Morgan Stanley Capital Group—Terminaling Services Agreements" of thisannual report.Indemnification Under the purchase agreement for the River and Brownsville facilities, TransMontaigne Inc. has agreed to indemnify us for certain environmentalliabilities, discussed under Item 1. "Business and Properties—Environmental Matters—Site Remediation" of this annual report. In addition to theenvironmental indemnification obligations, TransMontaigne Inc. has agreed to indemnify us for any losses attributable to any breach of itsrepresentations, warranties or covenants, any retained liabilities, or any excluded assets provided that indemnifiable losses must first exceed $100,000and total indemnification is generally limited to $15.0 million. We have agreed to indemnify TransMontaigne Inc. for any losses attributable to anybreach of our representations, warranties or covenants or the operations of the Brownsville and River facilities following our acquisition of them,including any environmental liabilities occurring after December 31, 2006, to the extent not subject to TransMontaigne Inc.'s indemnificationobligations. Under the purchase agreement for the Southeast facilities, TransMontaigne Inc. has agreed to indemnify us for certain environmental liabilities,discussed under Item 1. "Business and Properties—Environmental Matters—Site Remediation" of this annual report. In addition to the environmentalindemnification obligations, TransMontaigne Inc. has agreed to indemnify us for any losses attributable to any breach of its representations, warrantiesor covenants, any retained liabilities, or any excluded assets provided that indemnifiable losses must first exceed $500,000 and total indemnification isgenerally limited to $15.0 million. We have agreed to indemnify TransMontaigne Inc. for any losses attributable to any breach of our representations,warranties or covenants or the post-closing operations of the Southeast Terminals, including any environmental liabilities occurring after December 31,2007, to the extent not subject to TransMontaigne Inc.'s indemnification obligations.120Table of ContentsITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES KPMG LLP is our independent auditor. KPMG LLP's accounting fees and services were as follows (in thousands): The audit committee of our general partner's board of directors has adopted an audit committee charter, which is available on our website atwww.transmontaignepartners.com. The charter requires the audit committee to approve in advance all audit and non-audit services to be provided byour independent registered public accounting firm. All services reported in the audit, comfort letter and consents, audit-related, tax and all other feescategories above were approved by the audit committee in advance.Part IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a)The following documents are filed as a part of this annual report. 1.Consolidated Financial Statements and Schedules: See the index to the consolidated financial statements of TransMontaignePartners L.P. and its subsidiaries that appears on page 64 of this annual report. 2.Financial Statement Schedules. Financial statement schedules are omitted because they are not required, are inapplicable or the requiredinformation is included in the financials statements or notes thereto. 3.Exhibits: The following is a list of exhibits required by Item 601 of Regulation S-K to be filed as part of this annual report:121 2009 2008 Audit fees(1) $503,000 $572,000 Comfort letter and consents(2) 36,000 — Audit-related fees — — Tax fees — — All other fees — — Total accounting fees and services $539,000 $572,000 (1)Represents fees for professional services provided in connection with the annual audit of our financial statementsand internal control over financial reporting, including Sarbanes-Oxley 404 attestation, the reviews of ourquarterly financial statements, and other services normally provided by the auditor in connection with statutoryand regulatory filings. (2)For the year ended December 31, 2009, fees include approximately $36,000 associated with our registrationstatement on Form S-3, as updated by the prospectus supplement dated January 12, 2010.ExhibitNumber Description 2.1 Facilities Sale Agreement, dated as of December 29, 2006, by and between TransMontaigne ProductServices Inc. and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 2.1 of the CurrentReport on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on January 5, 2007).Table of Contents122ExhibitNumber Description 2.2 Facilities Sale Agreement, dated as of December 28, 2007, by and between TransMontaigne ProductServices Inc. and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 2.1 of the CurrentReport on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on January 3, 2008). 3.1 Certificate of Limited Partnership of TransMontaigne Partners L.P., dated February 23, 2005 (incorporated byreference to Exhibit 3.1 of TransMontaigne Partners L.P.'s Registration Statement on Form S-1 (RegistrationNo. 333-123219) filed on March 9, 2005). 3.2 First Amended and Restated Agreement of Limited Partnership of TransMontaigne Partners L.P., datedMay 27, 2005 (incorporated by reference to Exhibit 3.1 of the Annual Report on Form 10-K filed byTransMontaigne Partners L.P. with the SEC on September 13, 2005). 3.3*First Amendment to the First Amended and Restated Agreement of Limited Partnership of TransMontaignePartners L.P. dated January 23, 2006. 3.4 Second Amendment to the First Amended and Restated Agreement of Limited Partnership of TransMontaignePartners L.P. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed byTransMontaigne Partners L.P. with the SEC on April 8, 2008). 10.1 Amended and Restated Senior Secured Credit Facility, dated December 22, 2006, by and amongTransMontaigne Operating Company L.P., a Delaware limited partnership, Wachovia Capital Markets, LLC,as sole lead arranger, manager and book-runner, Bank of America, N.A. and JPMorgan Chase Bank, N.A., assyndication agents, BNP Paribas and Société Générale, as the documentation agents, Wachovia Bank,National Association, as administrative agent, and the other lenders a party thereto (incorporated by referenceto Exhibit 10.2 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. with the SEC onJanuary 5, 2007). 10.2 First Amendment to Amended and Restated Senior Secured Credit Facility, dated July 12, 2007, by andamong TransMontaigne Operating Company L.P., a Delaware limited partnership, Bank of America, N.A.and JPMorgan Chase Bank, N.A., as syndication agents, BNP Paribas and Société Générale, as thedocumentation agents, Wachovia Bank, National Association, as administrative agent, and the other lenders aparty thereto (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed byTransMontaigne Partners L.P. with the SEC on July 18, 2007). 10.3 Increased Commitment Supplement, dated July 12, 2007, by and among TransMontaigne OperatingCompany L.P., Wachovia Bank, National Association, as administrative agent, and the other lenders a partythereto (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed by TransMontaignePartners L.P. with the SEC on July 18, 2007). 10.4 Contribution, Conveyance and Assumption Agreement, dated May 27, 2005, among TransMontaigne Inc.,TransMontaigne Partners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C.,TransMontaigne Operating Company L.P., TransMontaigne Product Services Inc. and Coastal FuelsMarketing, Inc., Coastal Terminals L.L.C., Razorback L.L.C., TPSI Terminals L.L.C. and TransMontaigneServices, Inc. (incorporated by reference to Exhibit 10.2 of the Annual Report on Form 10-K filed byTransMontaigne Partners L.P. with the SEC on September 13, 2005).Table of Contents123ExhibitNumber Description 10.5 Amended and Restated Omnibus Agreement, dated December 28, 2007, among TransMontaigne Inc.,TransMontaigne Partners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C. andTransMontaigne Operating Company L.P. (incorporated by reference to Exhibit 10.5 of the Annual Report onForm 10-K filed by TransMontaigne Partners L.P. with the SEC on March 10, 2008). 10.6 TransMontaigne Services Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 of theAnnual Report on Form 10-K filed by TransMontaigne Partners L.P. with the SEC on September 13,2005).** 10.7 Registration Rights Agreement, dated May 27, 2005, by and between TransMontaigne Partners L.P. andMSDW Morgan Stanley Strategic Investments, Inc. (formerly MSDW Bondbook Ventures Inc.)(incorporated by reference to Exhibit 10.7 of the Annual Report on Form 10-K filed by TransMontaignePartners L.P. with the SEC on September 13, 2005). 10.8 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Employee Restricted Unit Agreement(incorporated by reference to Exhibit 10.8 of Amendment No. 3 to TransMontaigne Partners L.P.'sRegistration Statement on Form S-1 (Registration No. 333-123219) filed on May 24, 2005).** 10.9 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Non-Employee Director Restricted UnitAgreement (incorporated by reference to Exhibit 10.9 of Amendment No. 3 to TransMontaigne Partners L.P.'sRegistration Statement on Form S-1 (Registration No. 333-123219) filed on May 24, 2005).** 10.10 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Employee Award Agreement (incorporatedby reference to Exhibit 10.2 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. withthe SEC on April 6, 2006).** 10.11 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Non-Employee Director Award Agreement(incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed by TransMontaignePartners L.P. with the SEC on April 6, 2006). 10.12 Terminaling Services Agreement, dated March 1, 2006, between TransMontaigne Product Services, Inc. andValero Marketing and Supply Company, assigned to TransMontaigne Partners L.P., effective December 29,2006 (incorporated by reference to Exhibit 10.13 of the Annual report on Form 10-K filed by TransMontaignepartners L.P. with the SEC on March 16, 2007).(1) 10.13 Terminaling Services Agreement, dated June 1, 2007, between TransMontaigne Partners L.P. and MorganStanley Capital Group Inc. (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Qfiled by TransMontaigne Partners L.P. with the SEC on August 9, 2007).(1) 10.14 Terminaling Services Agreement—Southeast and Collins/Purvis, dated January 1, 2008, betweenTransMontaigne Partners L.P. and Morgan Stanley Capital Group Inc. (incorporated by reference toExhibit 10.16 of the Annual Report on Form 10-K filed by TransMontaigne Partners L.P. with the SEC onMarch 10, 2008).(1) 10.15 Indemnification Agreement, dated December 28, 2007, among TransMontaigne Inc., TransMontaignePartners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C. and TransMontaigneOperating Company L.P. (incorporated by reference to Exhibit 10.17 of the Annual Report on Form 10-Kfiled by TransMontaigne Partners L.P. with the SEC on March 10, 2008).Table of Contents124ExhibitNumber Description 21.1*List of Subsidiaries of TransMontaigne Partners L.P. 23.1*Consent of Independent Registered Public Accounting Firm. 31.1*Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2*Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.*Filed with this annual report. **Identifies each management compensation plan or arrangement. (1)Certain portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidentialtreatment under Rule 24b-2 as promulgated under the Securities Exchange Act of 1934.Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities with TransMontaigne GP L.L.C., the general partner of the registrant, on the date indicated.125 TRANSMONTAIGNE PARTNERS L.P. By: TRANSMONTAIGNE GP L.L.C., its GeneralPartner By: /s/ CHARLES L. DUNLAPCharles L. DunlapChief Executive OfficerDate: March 8, 2010 Name and Signature Title Date /s/ CHARLES L. DUNLAPCharles L. Dunlap Chief Executive Officer March 8, 2010/s/ GREGORY J. POUNDGregory J. Pound President and Chief Operating Officer March 8, 2010/s/ FREDERICK W. BOUTINFrederick W. Boutin Executive Vice President, Chief FinancialOfficer and Treasurer March 8, 2010/s/ DEBORAH A. DAVISDeborah A. Davis Senior Vice President and Chief AccountingOfficer March 8, 2010/s/ STEPHEN R. MUNGERStephen R. Munger Chairman of the Board of Directors March 8, 2010/s/ RANDALL P. O'CONNORRandall P. O'Connor Director March 8, 2010/s/ GORAN TRAPPGoran Trapp Director March 8, 2010Table of Contents126Name and Signature Title Date /s/ HENRY M. KUCHTAHenry M. Kuchta Director March 8, 2010/s/ JERRY R. MASTERSJerry R. Masters Director March 8, 2010/s/ DAVID A. PETERSDavid A. Peters Director March 8, 2010Table of ContentsEXHIBIT INDEX ExhibitNumber Description 2.1 Facilities Sale Agreement, dated as of December 29, 2006, by and between TransMontaigne ProductServices Inc. and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 2.1 of the CurrentReport on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on January 5, 2007). 2.2 Facilities Sale Agreement, dated as of December 28, 2007, by and between TransMontaigne ProductServices Inc. and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 2.1 of the CurrentReport on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on January 3, 2008). 3.1 Certificate of Limited Partnership of TransMontaigne Partners L.P., dated February 23, 2005 (incorporated byreference to Exhibit 3.1 of TransMontaigne Partners L.P.'s Registration Statement on Form S-1 (RegistrationNo. 333-123219) filed on March 9, 2005). 3.2 First Amended and Restated Agreement of Limited Partnership of TransMontaigne Partners L.P., datedMay 27, 2005 (incorporated by reference to Exhibit 3.1 of the Annual Report on Form 10-K filed byTransMontaigne Partners L.P. with the SEC on September 13, 2005). 3.3*First Amendment to the First Amended and Restated Agreement of Limited Partnership of TransMontaignePartners L.P. dated January 23, 2006. 3.4 Second Amendment to the First Amended and Restated Agreement of Limited Partnership of TransMontaignePartners L.P. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed byTransMontaigne Partners L.P. with the SEC on April 8, 2008). 10.1 Amended and Restated Senior Secured Credit Facility, dated December 22, 2006, by and amongTransMontaigne Operating Company L.P., a Delaware limited partnership, Wachovia Capital Markets, LLC,as sole lead arranger, manager and book-runner, Bank of America, N.A. and JPMorgan Chase Bank, N.A., assyndication agents, BNP Paribas and Société Générale, as the documentation agents, Wachovia Bank,National Association, as administrative agent, and the other lenders a party thereto (incorporated by referenceto Exhibit 10.2 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. with the SEC onJanuary 5, 2007). 10.2 First Amendment to Amended and Restated Senior Secured Credit Facility, dated July 12, 2007, by andamong TransMontaigne Operating Company L.P., a Delaware limited partnership, Bank of America, N.A.and JPMorgan Chase Bank, N.A., as syndication agents, BNP Paribas and Société Générale, as thedocumentation agents, Wachovia Bank, National Association, as administrative agent, and the other lenders aparty thereto (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed byTransMontaigne Partners L.P. with the SEC on July 18, 2007). 10.3 Increased Commitment Supplement, dated July 12, 2007, by and among TransMontaigne OperatingCompany L.P., Wachovia Bank, National Association, as administrative agent, and the other lenders a partythereto (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed by TransMontaignePartners L.P. with the SEC on July 18, 2007). 10.4 Contribution, Conveyance and Assumption Agreement, dated May 27, 2005, among TransMontaigne Inc.,TransMontaigne Partners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C.,TransMontaigne Operating Company L.P., TransMontaigne Product Services Inc. and Coastal FuelsMarketing, Inc., Coastal Terminals L.L.C., Razorback L.L.C., TPSI Terminals L.L.C. and TransMontaigneServices, Inc. (incorporated by reference to Exhibit 10.2 of the Annual Report on Form 10-K filed byTransMontaigne Partners L.P. with the SEC on September 13, 2005).Table of ContentsExhibitNumber Description 10.5 Amended and Restated Omnibus Agreement, dated December 28, 2007, among TransMontaigne Inc.,TransMontaigne Partners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C. andTransMontaigne Operating Company L.P. (incorporated by reference to Exhibit 10.5 of the Annual Report onForm 10-K filed by TransMontaigne Partners L.P. with the SEC on March 10, 2008). 10.6 TransMontaigne Services Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 of theAnnual Report on Form 10-K filed by TransMontaigne Partners L.P. with the SEC on September 13,2005).** 10.7 Registration Rights Agreement, dated May 27, 2005, by and between TransMontaigne Partners L.P. andMSDW Morgan Stanley Strategic Investments, Inc. (formerly MSDW Bondbook Ventures Inc.)(incorporated by reference to Exhibit 10.7 of the Annual Report on Form 10-K filed by TransMontaignePartners L.P. with the SEC on September 13, 2005). 10.8 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Employee Restricted Unit Agreement(incorporated by reference to Exhibit 10.8 of Amendment No. 3 to TransMontaigne Partners L.P.'sRegistration Statement on Form S-1 (Registration No. 333-123219) filed on May 24, 2005).** 10.9 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Non-Employee Director Restricted UnitAgreement (incorporated by reference to Exhibit 10.9 of Amendment No. 3 to TransMontaigne Partners L.P.'sRegistration Statement on Form S-1 (Registration No. 333-123219) filed on May 24, 2005).** 10.10 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Employee Award Agreement (incorporatedby reference to Exhibit 10.2 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. withthe SEC on April 6, 2006).** 10.11 Form of TransMontaigne Services Inc. Long-Term Incentive Plan Non-Employee Director Award Agreement(incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed by TransMontaignePartners L.P. with the SEC on April 6, 2006). 10.12 Terminaling Services Agreement, dated March 1, 2006, between TransMontaigne Product Services, Inc. andValero Marketing and Supply Company, assigned to TransMontaigne Partners L.P., effective December 29,2006 (incorporated by reference to Exhibit 10.13 of the Annual report on Form 10-K filed by TransMontaignepartners L.P. with the SEC on March 16, 2007).(1) 10.13 Terminaling Services Agreement, dated June 1, 2007, between TransMontaigne Partners L.P. and MorganStanley Capital Group Inc. (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Qfiled by TransMontaigne Partners L.P. with the SEC on August 9, 2007).(1) 10.14 Terminaling Services Agreement—Southeast and Collins/Purvis, dated January 1, 2008, betweenTransMontaigne Partners L.P. and Morgan Stanley Capital Group Inc. (incorporated by reference toExhibit 10.16 of the Annual Report on Form 10-K filed by TransMontaigne Partners L.P. with the SEC onMarch 10, 2008).(1) 10.15 Indemnification Agreement, dated December 28, 2007, among TransMontaigne Inc., TransMontaignePartners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C. and TransMontaigneOperating Company L.P. (incorporated by reference to Exhibit 10.17 of the Annual Report on Form 10-Kfiled by TransMontaigne Partners L.P. with the SEC on March 10, 2008). 21.1*List of Subsidiaries of TransMontaigne Partners L.P. * 23.1*Consent of Independent Registered Public Accounting Firm.Table of ContentsExhibitNumber Description 31.1*Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2*Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.*Filed with this annual report. **Identifies each management compensation plan or arrangement. (1)Certain portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidentialtreatment under Rule 24b-2 as promulgated under the Securities Exchange Act of 1934.QuickLinks -- Click here to rapidly navigate through this documentExhibit 3.3 FIRST AMENDMENTTOFIRST AMENDED AND RESTATED AGREEMENTOF LIMITED PARTNERSHIP OFTRANSMONTAIGNE PARTNERS L.P. THIS FIRST AMENDMENT to First Amended and Restated Agreement of Limited Partnership of TransMontaigne Partners L.P. ("FirstAmendment") dated as of January 23, 2006 is entered into by TransMontaigne GP L.L.C., a Delaware limited liability company (the "Company"), asthe General Partner, of TransMontaigne Partners L.P., a Delaware limited partnership (the "Partnership"). In consideration of the covenants, conditionsand agreements contained herein, the parties hereto hereby agree as follows:R E C I T A L S: A. The Company previously entered into the First Amended and Restated Agreement of Limited Partnership of TransMontaigne Partners L.P.,effective as of May 27, 2005 (the "Partnership Agreement"). B. The Company has determined that it is in the best interests of the Partnership to change the Partnership's fiscal year, for financial and taxreporting purposes, from June 30 to December 31, effective as of December 31, 2005. C. Pursuant to Section 13.1(e) of the Partnership Agreement, the Company, as General Partner of the Partnership, without the approval of anypartner, has the authority to amend the Partnership Agreement to reflect a change in the fiscal year or taxable year of the Partnership and any otherchanges the Company, as General Partner of the Partnership, determines to be necessary or appropriate as a result of a change in the fiscal year ortaxable year of the Partnership. NOW, THEREFORE, in consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows: 1. Definitions. Capitalized terms, unless otherwise defined herein, shall have the meanings ascribed thereto in the Partnership Agreement. 2. Change in Fiscal Year. Section 8.2 of the Partnership Agreement is hereby amended by deleting the reference to "June 30" therein andinserting in lieu thereof "December 31." 4. Effective Time. This First Amendment shall be effective as of December 31, 2005, notwithstanding the date of execution hereof. 5. Governing Law. This First Amendment shall be subject to and governed by the laws of the State of Colorado, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this First Amendment to the laws of another state. Except as otherwise amended herein, the remaining terms and provisions of the Partnership Agreement shall remain in full force and effect.IN WITNESS WHEREOF, the Company has executed this First Amendment as of the date above set forth. TRANSMONTAIGNE GP L.L.C., generalpartner of TransMontaigne Partners L.P. By: /s/ ERIK B. CARLSON Name: Erik B. Carlson Title: Senior Vice PresidentQuickLinksExhibit 3.3FIRST AMENDMENT TO FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TRANSMONTAIGNEPARTNERS L.P.R E C I T A L SQuickLinks -- Click here to rapidly navigate through this documentExhibit 21.1 List of Subsidiaries of TransMontaigne Partners L.P. at December 31, 2009 Ownershipofsubsidiary Name of subsidiary Tradename State/Countryoforganization 100%TransMontaigne Operating GP L.L.C. None Delaware 100%TransMontaigne Terminals L.L.C. None Delaware 100%TLP Finance Corp. None Delaware 100%TLP Mex L.L.C. None Delaware 100%TPSI Terminals L.L.C. None Delaware 100%TransMontaigne Operating Company L.P. None Delaware 100%Razorback L.L.C. None Delaware 100%TLP Operating Finance Corp. None Delaware 100%TMOC Corp. None Delaware 100%TPME L.L.C. None Delaware 100%Penn Octane de Mexico, S. de R.L.de C.V. None Mexico 100%Tergas, S. de R.L. de C.V. None Mexico 100%Termatsal, S. de R.L. de C.V. None MexicoQuickLinksExhibit 21.1List of Subsidiaries of TransMontaigne Partners L.P. at December 31, 2009QuickLinks -- Click here to rapidly navigate through this documentExhibit 23.1 Consent of Independent Registered Public Accounting Firm The Board of Directors and MemberTransMontaigne GP L.L.C.: We consent to the incorporation by reference in the registration statements (Nos. 333-125209 and 333-148280) on Form S-8 and registrationstatement (No. 333-142108) on Form S-3 of TransMontaigne Partners L.P. (the Partnership) of our reports dated March 8, 2010, relating to theconsolidated balance sheets of TransMontaigne Partners L.P. and subsidiaries as of December 31, 2009 and 2008, and the related consolidatedstatements of operations, partners' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31,2009, and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear in the December 31, 2009Form 10-K of TransMontaigne Partners L.P. Our report with respect to the consolidated financial statements refers to the Partnership's adoption of Emerging Issues Task Force Issue 07-4,Application of the Two-Class Method Under FASB Statement No. 128 to Master Limited Partnerships (FASB Accounting Standards Codification260), effective January 1, 2009. KPMG LLPDenver, ColoradoMarch 8, 2010 QuickLinksExhibit 23.1Consent of Independent Registered Public Accounting FirmQuickLinks -- Click here to rapidly navigate through this documentExhibit 31.1 Certification Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Charles L. Dunlap, Chief Executive Officer of TransMontaigne GP L.L.C., a Delaware limited liability company and general partner ofTransMontaigne Partners L.P. (the "Company"), certify that:1.I have reviewed this Annual Report on Form 10-K of TransMontaigne Partners L.P. for the fiscal year ended December 31, 2009; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Date: March 8, 2010 /s/ CHARLES L. DUNLAPCharles L. DunlapChief Executive OfficerQuickLinksExhibit 31.1Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.2 Certification Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Frederick W. Boutin, Chief Financial Officer of TransMontaigne GP L.L.C., a Delaware limited liability company and general partner ofTransMontaigne Partners L.P. (the "Company"), certify that:1.I have reviewed this Annual Report on Form 10-K of TransMontaigne Partners L.P. for the fiscal year ended December 31, 2009; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Date: March 8, 2010 /s/ FREDERICK W. BOUTINFrederick W. BoutinChief Financial OfficerQuickLinksExhibit 31.2Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.1 Certification of Chief Executive Officer and Chief Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C. Section 1350) The undersigned, the Chief Executive Officer of TransMontaigne GP L.L.C., a Delaware limited liability company and general partner ofTransMontaigne Partners L.P. (the "Company"), hereby certifies that, to his knowledge on the date hereof:(a)the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2009, filed on the date hereof with theSecurities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934; and (b)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. /s/ CHARLES L. DUNLAPCharles L. DunlapChief Executive Officer March 8, 2010QuickLinksExhibit 32.1Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section1350)QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.2 Certification of Chief Executive Officer and Chief Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C. Section 1350) The undersigned, the Chief Financial Officer of TransMontaigne GP L.L.C., a Delaware limited liability company and general partner ofTransMontaigne Partners L.P. (the "Company"), hereby certifies that, to his knowledge on the date hereof:(a)the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2009, filed on the date hereof with theSecurities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934; and (b)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. /s/ FREDERICK W. BOUTINFrederick W. BoutinChief Financial Officer March 8, 2010QuickLinksExhibit 32.2Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section1350)

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