Overview

(e) On December 31, 2008, we finalized the compensation arrangements (including the underlying documentation) for our three senior executives, Grant E. Sims, Chief Executive Officer, Joseph A. Blount, Jr., President and Chief Operating Officer, and Robert V. Deere, Chief Financial Officer. Messrs. Sims and Blount joined us on August 8, 2006, and Mr. Deere joined us on October 6, 2008. These arrangements are intended to incentivize our senior management team to create value for our equity holders by maintaining and increasing (over time) the distribution rate we pay on our common units, and completely replace those originally contemplated when Messrs. Sims and Blount were hired in August 2006. Under the original formulation, our senior executives would have been rewarded to the extent we acquired (from third parties) $1.5 billion in assets that earned a specified minimum rate of return, which acquisitions would have resulted in an increase in the distribution rate we pay on our common units. Under the current formulation, our senior executives will be rewarded based on increased shares of the cash distributions attributable to our incentive distribution rights (or IDRs) to the extent we increase Cash Available Before Reserves, or CABR (defined below) (from which we pay distributions on our common units) above specified targets, excluding increases attributable to CABR generated from transactions with our general partner and its affiliates (including Denbury Resources Inc.). CABR generally means net income as adjusted for specific items, the most significant of which are the elimination of gains and losses on asset sales (except those from the sale of surplus assets), the addition of non-cash expenses (such as depreciation), the substitution of cash generated by our joint ventures in lieu of our equity income attributable to our joint ventures, and the subtraction of maintenance capital expenditures, which are expenditures that are necessary to sustain existing (but not to provide new sources of) cash flows; CABR is generally equivalent to the amount of our Operating Surplus (as defined in our partnership agreement).

In summary, each of our top three existing senior executive officers has received an equity interest in our general partner and is entitled to receive a base salary and customary fringe benefits, such as health, medical and severance benefits, along with awards under a deferred compensation plan. The equity interest-a Class B Membership Interest-effectively provides each senior executive with an economic interest that tracks the performance of our IDRs, all of which are owned by our general partner, but the Class B Membership Interest does not provide any senior executive with a direct interest in any assets (including IDRs) owned by our general partner. During his employment with our general partner, each senior executive will be entitled to receive quarterly distributions in respect of his Class B Membership Interest from our general partner in amounts equal to a percentage of the distributions we pay in respect of our IDRs. Each senior executive's quarterly distribution percentage of our IDRs may vary from quarter-to-quarter based on the amount by which the CABR for an annual period ending with the current quarter exceeds specified per unit targets, which actual and target CABR excludes that portion of CABR attributable to transactions with our general partner or any of its affiliates. In addition, upon the occurrence of specified event and circumstances, our general partner will redeem a senior executive's Class B Membership Interest when that executive's employment with our general partner is terminated or when a change of control occurs. The redemption payment amount will depend on the timing and nature of the triggering event, as described in detail below.

The structure of our senior executive compensation arrangement is comprised of the following four components, each of which is described in more detail below:

1. a Class B Membership Interest in our general partner for all three senior executive officers;

2. a deferred compensation plan and related awards, which provide each of Messrs. Sims and Blount the right to receive up to $1,007,229 and $866,685, respectively, in cash (or, in certain circumstances, common units) under the same circumstances for which he would receive a redemption payment in respect of his Class B Membership Interest;

3. a cash bonus paid to each of Messrs. Sims ($107,751) and Blount ($97,600); and

4. an employment agreement, which addresses, among other things, salary, fringe benefits and non-competition requirements for all three senior executive officers.

Our general partner has agreed that it will not seek reimbursement (on behalf of itself or its affiliates) under our partnership agreement for the costs of these senior executive compensation arrangements to the extent relating to their ownership of Class B Membership Interests (including current cash distributions made by the general partner out of its IDRs and payment of redemption amounts for those IDRs) and the deferred compensation amounts, although our general partner has retained its right to (and intends to) seek reimbursement for the costs of these senior executive compensation arrangements to the extent relating to the employment agreements (including base salary and fringe benefits) and the cash bonuses, which costs will be borne by the Partnership.

The Class B Membership Interest in Our General Partner

Our general partner has earmarked a portion of its equity interest in us to be used as long-term incentive compensation for our senior executives. It has established a Class B Membership Interest, which effectively provides the holders thereof with an economic interest that tracks the performance of up to 20% of our IDRs, all of which are owned by our general partner but the Class B Membership Interest does not provide any senior executive with a direct interest in any assets (including our IDRs) owned by our general partner. Each holder of a Class B Membership Interest is entitled (a) to receive from our general partner quarterly cash distributions in an amount equal to a varying percentage of the distributions of available cash we make in respect of our IDRs during his employment, and (b) upon the occurrence of specified events and circumstances, to receive from our general partner a payment of cash (or, in certain circumstances, our common units) in redemption of such Class B Membership Interest.

Our Board of Directors has made the following awards of Class B Membership Interests:

                               Class B Membership         Potential
Senior Executive              Interest Percentage       IDR Percentage
Grant E. Sims                                 38.7 %               7.74 %
Joseph A. Blount                              33.3                 6.66
Robert V. Deere                               14.0                 2.80
Total Awarded                                 86.0                 17.2
Available for Future Awards                   14.0                  2.9
Total                                        100.0 %               20.0 %

Our general partner is not obligated to award the remaining 14.0% of the unissued Class B Membership Interest.

The potential IDR percentage will be subject to the effects of vesting and the differing target percentage for each senior executive officer, as discussed below, in determining the amount of the general partner's IDRs distributable to them.

The amount of the quarterly cash distribution, if any, a Class B Membership Interest holder is entitled to receive from our general partner will vary depending on the amount of cash we distribute in respect of our IDRs and the amount by which the CABR for an annual period ending with the current quarter (on a per unit basis) exceeds specified targets. For purposes of determining a holder's quarterly distribution amount, those actual and target CABR per unit rates will exclude all CABR attributable to transactions with our general partner and any of its affiliates. In other words, all other things being equal, as our CABR per unit increases (other than from transactions with our general partner and its affiliates) above specified thresholds and our distribution rate on our common units increases above specified thresholds, each Class B Membership Interest holder will be entitled to receive distributions from our general partner that constitute a larger share of our IDR distributions.

Each holder will be entitled to receive a quarterly distribution in an amount equal to the product of (i) the IDR distributions made by us and attributable to the applicable quarter, (ii) that holder's Class B Membership Interest percentage and (iii) the percentage associated with the CABR per common unit rate target actually achieved for an annual period ending with the current quarter. The CABR per unit rate targets, as well as the related target percentages, are set forth below. At December 31, 2008, the target percentages were 12% for Messrs. Sims and Blount and zero for Mr. Deere. For purposes of determining the applicable target percentage for a relevant quarter, Messrs. . . .

On December 29, 2008, our general partner, Genesis Energy, Inc., was converted from a Delaware corporation to a Delaware limited liability company named "Genesis Energy, LLC" pursuant to Section 18-214 of the Delaware Limited Liability Company Act. Its certificate of conversion, certificate of formation, and limited liability agreement are filed herewith (as Exhibits 3.1, 3.2, and 3.3), and incorporated herein by reference.

(a) Financial statements of businesses acquired.

Not applicable

(b) Pro forma financial information.

Not applicable.

(c) Exhibits

The following materials are filed as exhibits to this Current Report on Form 8-K.

Exhibits.

  3.1      Certificate of Conversion of Genesis Energy, Inc., a Delaware
           corporation, into Genesis Energy, LLC, a Delaware limited
           liability company.
  3.2      Certificate of Formation of Genesis Energy, LLC.
  3.3      Limited Liability Company Agreement of Genesis Energy, LLC dated
           December 29, 2008.
  3.4      First Amendment to Limited Liability Company Agreement of
           Genesis Energy, LLC dated December 31, 2008.
  10.1     Employment Agreement by and between Genesis Energy, LLC and
           Grant E. Sims, dated December 31, 2008.
  10.2     Employment Agreement by and between Genesis Energy, LLC and
           Joseph A. Blount, Jr., dated December 31, 2008.
  10.3     Employment Agreement by and between Genesis Energy, LLC and
           Robert V. Deere, dated December 31, 2008.
  10.4     Genesis Energy, LLC Deferred Compensation Plan, effective
           December 31, 2008.
  10.5     Genesis Energy, LLC Award - Individual Class B Interest for
           Grant E. Sims dated December 31, 2009
  10.6     Genesis Energy, LLC Award - Individual Class B Interest for
           Joseph A. Blount, Jr. dated December 31, 2009
  10.7     Genesis Energy, LLC Award - Individual Class B Interest for
           Robert V. Deere dated December 31, 2009
  10.8     Deferred Compensation Grant - Genesis Energy, LLC - Grant E.
           Sims
  10.9     Deferred Compensation Grant - Genesis Energy, LLC - Joseph A.
           Blount, Jr.