**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

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**FORM 10-K**

**ANNUALREPORTPURSUANT TO SECTIONS 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

**(Mark One)**

| **S**      | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**      |
|------------|----------------------------------------------------------------------------------------------------------|
| ** ** | **For the fiscal year ended December 31, 2005**                                                     |
| ** ** | **OR**                                                                                                   |
| **£** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
| ** ** | **For the transition period from______________to_______________**                                        |

 

**Commissionfile number**001-32593

**Global Partners LP**

(ExactName of Registrant as Specified in Its Charter)

| **Delaware**                    |   | **74-3140887**                       |
|---------------------------------|--------|--------------------------------------|
| (State or Other Jurisdiction of |   | (I.R.S. Employer Identification No.) |
| Incorporation or Organization)  |   | ** **                           |

 

**P.O. Box 9161800 South StreetWaltham, Massachusetts 02454-9161**(Address of Principal Executive Offices, Including Zip Code)

**(781) 894-8800******(Registrant’s Telephone Number, Including Area Code)

Securitiesregistered pursuant to section 12(b) of the Act:

|                                                          | Title  of Each Class |                         |   |  | Name  of Each Exchange on Which Registered |   |
|----------------------------------------------------------|----------------------|------------------------------|--------|--|--------------------------------------------|--------|
| **Common  Units representing limited partner interests** |                 | **New York  Stock Exchange** |

 

Securities registered pursuant to section 12(b) ofthe Act:   **None**

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yeso   No x

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.    Yes o   No x

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.   Yes x   No o

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K.   o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer in Rule 12b-2of the Exchange Act. (Check one):

Large acceleratedfiler   o         Accelerated filer   o         Non-accelerated filer   x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).    Yeso   No x

The aggregate market value of common units held bynon-affiliates of the registrant (treating directors and executive officers ofthe registrant’s general partner and holders of 10% or more of the common unitsoutstanding, for this purpose, as if they were affiliates of the registrant) asof October 4, 2005 was $132,812,877 computed based on a price per commonunit of $23.91, the price at which the common units were last sold as reportedon the New York Stock Exchange on such date.

*Note—*If a determination as to whether a particular person orentity is an affiliate cannot be made without involving unreasonable effort andexpense, the aggregate market value of the common stock held by non-affiliatesmay be calculated on the basis of assumptions reasonable under thecircumstances, provided that the assumptions are set forth in this Form.

As of March 17, 2006, 5,642,424 common units and5,642,424 subordinated units were outstanding.

 

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**TABLE OF CONTENTS**

| PART I     |   | 4                                                                                                                  |   |
|-----------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|
| Items 1. and 2. |   | Business and Properties.                                                                                           |   | 4 |   |
| Item 1A.        |   | Risk  Factors                                                                                                      |   | 16 |   |
| Item 1B.        |   | Unresolved Staff Comments.                                                                                         |   | 32 |   |
| Item  3.        |   | Legal  Proceedings.                                                                                                |   | 32 |   |
| Item 4.         |   | Submission of Matters to a Vote of Security Holders.                                                               |   | 33 |   |
| PART II    |   | 34                                                                                                                 |   |
| Item 5.         |   | Market For Registrant’s Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities |   | 34 |   |
| Item  6.        |   | Selected  Financial Data                                                                                           |   | 38 |   |
| Item 7.         |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                        |   | 42 |   |
| Item 7A.        |   | Quantitative and Qualitative Disclosures about Market  Risk                                                        |   | 58 |   |
| Item 8.         |   | Financial Statements and Supplementary Data.                                                                       |   | 60 |   |
| Item 9.         |   | Changes in and Disagreements With Accountants on  Accounting and Financial Disclosure.                             |   | 60 |   |
| Item 9A.        |   | Controls and Procedures.                                                                                           |   | 60 |   |
| Item  9B.       |   | Other  Information.                                                                                                |   | 60 |   |
| PART III   |   | 61                                                                                                                 |   |
| Item 10.        |   | Directors and Executive Officers of the Registrant.                                                                |   | 61 |   |
| Item 11.        |   | Executive Compensation.                                                                                            |   | 64 |   |
| Item 12.        |   | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters.                   |   | 70 |   |
| Item 13.        |   | Certain Relationships and Related Transactions.                                                                    |   | 72 |   |
| Item 14.        |   | Principal Accountant Fees and Services.                                                                            |   | 75 |   |
| PART IV    |   | 76                                                                                                                 |   |
| Item 15.        |   | Exhibits and Financial Statement Schedules                                                                         |   | 76 |   |

 

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**Forward-LookingStatements**

Thisannual report on Form 10-K contains certain “forward-lookingstatements” within the meaning of the federal securities laws. Theseforward-looking statements are identified as any statements that do not relatestrictly to historical or current facts and can generally be identified by theuse of forward-looking terminology including “may,” “believe,” “expect,” “anticipate,”“estimate,” “continue” or other similar words. Such statements may discussfuture expectations for or contain projections of results of operations,financial condition or our ability to make distributions to unitholders orstate other “forward-looking” information. Forward-looking statements are notguarantees of performance. Although we believe these forward-looking statementsare based on reasonable assumptions, statements made regarding future resultsare subject to a number of assumptions, uncertainties and risks, many of whichare beyond our control, which may cause future results to be materially differentfrom the results stated or implied in this document. These risks anduncertainties include, among other things:

·       Wemay not have sufficient cash from operations to enable us to pay the minimumquarterly distribution following establishment of cash reserves and payment offees and expenses, including payments to our general partner.

·       Warmerweather conditions could adversely affect our results of operations and cashavailable for distribution to our unitholders.

·       Ourrisk management policies cannot eliminate all commodity risk. In addition, anynon-compliance with our risk management policies could result in significantfinancial losses.

·       Weare exposed to trade credit risk in the ordinary course of our businessactivities.

·       Dueto our lack of asset and geographic diversification, adverse developments inthe terminals that we use or in our operating areas could reduce our ability tomake distributions to our unitholders.

·       Weare exposed to performance risk in our supply chain.

·       Ourgeneral partner and its affiliates have conflicts of interest and limitedfiduciary duties, which may permit them to favor their own interests to thedetriment of unitholders.

·       Unitholdershave limited voting rights and are not entitled to elect our general partner orits directors or initially to remove our general partner without its consent,which could lower the trading price of our common units.

·       Unitholdersmay be required to pay taxes on their share of our income even if they do notreceive any cash distributions from us.

Additional informationabout risks and uncertainties that could cause actual results to differmaterially from forward-looking statements is contained in “Item 1A. RiskFactors” in this annual report on Form 10-K.

All forward-lookingstatements included in this Form 10-K and all subsequent written ororal forward-looking statements attributable to us or persons acting on ourbehalf are expressly qualified in their entirety by these cautionary statements.The forward-looking statements speak only as of the date made, other than asrequired by law, and we undertake no obligation to publicly update or reviseany forward-looking statements, whether as a result of new information, futureevents or otherwise.

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**AvailableInformation**

We make available free ofcharge, through our website, www.globalp.com, our annual reports on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-Kand amendments to those reports filed or furnished pursuant to Section 13(a) or15(d) of the Exchange Act as soon as reasonably practicable after weelectronically file or furnish such material with the Securities and ExchangeCommission (“SEC”). These documents are also available at the SEC’s website atwww.sec.gov. Our website also includes our Code of Business Conduct and Ethics,our Governance Guidelines and the charters of our Audit Committee andCompensation Committee.

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**PART I**

*References in this Annual Report on Form 10-Kto “Global Partners LP,” “we,” “our,” “us” or like terms when used in ahistorical context refer to the business of Global Companies LLC and itsaffiliates, Glen Hes Corp., Global Montello Group LLC, and Chelsea Sandwich LLC(collectively, “Global Companies LLC and Affiliates.”)  When used in the present tense orprospectively, those terms refer to Global Partners LP and its subsidiaries.*

**Items 1. and 2.**              Businessand Properties.

**Overview**

On October 4, 2005 we completed the initialpublic offering of our common units representing limited partner interests. Wehave four operating subsidiaries which are wholly owned by Global OperatingLLC, a wholly owned subsidiary of ours: Global Companies LLC, its subsidiary, Glen Hes Corp., Global MontelloGroup Corp. and Chelsea Sandwich LLC. Global GP LLC manages our operations andactivities and employs our officers and personnel.

We own, control or have access to one of the largestterminal networks of refined petroleum products in New England. We are one ofthe largest wholesale distributors of distillates (such as home heating oil,diesel and kerosene), gasoline, and residual oil and bunker fuel towholesalers, retailers and commercial customers in New England. We are also oneof the largest wholesale marketers of home heating oil in New England. We own,lease or maintain dedicated storage facilities at 18 refined petroleum productbulk terminals, including 12 located throughout New England, that are suppliedprimarily by marine transport, pipeline or truck and that collectively haveapproximately 6.2 million barrels of storage capacity. We also havethroughput or exchange agreements at six bulk terminals and 33 inland storagefacilities.

We purchase our refinedpetroleum products primarily from domestic and foreign refiners, traders andproducers and sell these products in two segments, Wholesale and Commercial. In2005, our Wholesale sales accounted for approximately 90% of our total salesand our Commercial sales accounted for approximately 10%**.**

**Business Strategies**

Our primarybusiness objective is to increase distributable cash flow per unit bycontinuing to execute the following strategies:

·       *Expand Within and Beyond Our Core New England Market.  *Wecontinue to pursue strategic and accretive acquisitions of assets and marketingbusinesses both within our existing area of operations and in new geographicareas. Consistent with this strategy, we have acquired terminals in SouthPortland, Maine and Wethersfield, Connecticut that complement our existingterminal asset base and marketing business, and we have expanded into LongIsland and Albany, New York and Trenton, New Jersey. We target businesses with (1) physicalassets, (2) a marketing division that has, among other attributes,consistent cash flows and stable customer lists or (3) a combination ofthese attributes. We assign value to the marketing opportunities associatedwith physical assets, terminals in particular. Because of our interest inpurchasing marketing businesses as well as physical assets, we believe we havea competitive advantage over bidders interested in purchasing only physicalassets. In addition, we continue to seek strategic relationships with companiesthat are looking to outsource their wholesale marketing business, as theseopportunities allow us to leverage our strengths in marketing infrastructureand credit fundamentals. We currently have marketing arrangements with a majorsupplier of unbranded gasoline in several northeastern states as well as onedistillate supplier in the Northeast. We also continue to develop our bunkeringoperations in 

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New England, New York andMaryland, and in the future we expect to enter into new bunkering markets inother significant Atlantic ports.

·       *Serve as a Preferred Supplier to Our Customers.  *Webelieve that our customers value dependability and quality of supply. We striveto maintain a level of inventory to ensure that the supply needs of ourcustomers are always satisfied. During periods of product shortages, we havehistorically succeeded in sustaining a supply of product sufficient to meet theneeds of our customers while many of our competitors have not. We own, controlor have access to bulk terminals and inland storage facilities that arestrategically located for ease of access by our customers. Such access reducesour customers’ transportation costs and maximizes the number of deliveries theycan make. Additionally, we satisfy specific customer needs by customizing ourproducts such as diesel and home heating oil by blending and injectingadditives.

·       *Focus on Credit Fundamentals of Our Customers.  *Wemanage our trade credit exposure through conservative management practices:

·        pre-approvingcustomers up to certain credit limits;

·        seekingsecondary sources of repayment for trade credit, such as letters of credit orguarantees;

·        notoffering to extend credit as a marketing tool to attract customers; and

·        placingmany of our customers on automatic debit systems for payment.

·        Asa result of these practices, in each of the past five years the amount ofaccount receivables that we wrote off was less than five one-hundredths of onepercent (0.05%) of sales. Our ability to manage our trade credit exposure helpsus to expand our marketing business and has allowed us to enter into marketingarrangements with third parties where we assume the sales credit risk and thethird party retains the commodity risk.

·        *Minimize our Exposure to Commodity Price Volatility.  *Althoughwe take title to the products we sell, we actively manage our business tominimize commodity price exposure by using hedging techniques. We seek tomaintain a position that is substantially balanced between purchases and salesby establishing an offsetting sales position with a positive margin each timewe commit to purchase a volume of product.

**Product Sales**

***General***

We sell our refined petroleum products in twosegments, Wholesale and Commercial. The majority of products we sell can begrouped into three categories: distillates, gasoline and residual oil andbunker fuel. Of our total volume sold in 2005, distillates accounted forapproximately 52%, gasoline approximately 32% and residual oil and bunker fuelapproximately 16%.

*Distillates.**  *Distillates are further dividedinto home heating oil, diesel and kerosene. In 2005, sales of home heating oilaccounted for approximately 82**%** of totalvolume of distillates sold, diesel approximately 16% and kerosene approximately2%**.**

We sell generic home heating oil and Heating Oil Plus®, our proprietary premium brandedheating oil. Heating Oil Plus® is electronically blended at the deliveryfacility and is designed to reduce fuel related service calls by reducing theproblems associated with today’s fuel quality, such as plugged nozzles andclogged filters and pump screens. Of the volume of home heating oil we sell towholesale resellers, approximately 6% is Heating Oil Plus®. In addition, we sell to some wholesaleresellers the additive used to create Heating Oil Plus®, make available special injection systemsand provide technical support to 

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assist them with blending.We also educate the sales force of our customers to better prepare them formarketing our products to their customers.

We sell generic diesel and Diesel One®, our proprietary premiumdiesel product, to unbranded motor fuel stations, diesel-consuming truck fleetsand other end users. We also have the ability to blend diesel according tocustomers’ specifications. Diesel One® is formulated to achieve consistent, highquality fuel performance with the following benefits for all diesel engineapplications: better fuel quality, increased horsepower, lower maintenancecosts, longer engine life and maximum cold weather operability. We offermarketing and technical support for those customers who purchase Diesel One®. Of the volume of diesel wesell to wholesale resellers, approximately 38% is Diesel One®.

*Gasoline.**  *We sell grades of unbrandedgasoline that comply with seasonal and geographical requirements in the areasin which we market. We have the ability to blend gasoline, and we sellconventional gasoline and ethanol blended gasoline in the markets that requiresuch products.

*Residual Oil and BunkerFuel.**  *Weare one of two primary residual oil marketers in New England. We speciallyblend bunker fuel for users in accordance with their individual power plantspecifications.

***Wholesale***

In the Wholesale segment we sell home heating oil,diesel, kerosene, unbranded gasoline and residual oil to wholesalers, retailersand commercial customers. Generally, customers use their own vehicles orcontract carriers to take delivery of the product at bulk terminals and inlandstorage facilities that we own or control or with which we have throughputarrangements. Please read “—Storage.”

In 2005, we sold home heating oil, including HeatingOil Plus®, toover 875 wholesale distributors and retailers. We have a fixed price salesprogram that we market primarily to wholesale distributors and retailers whichuses the New York Mercantile Exchange (“NYMEX”) heating oil contract as thepricing benchmark as a vehicle to manage the commodity risk. Please read “—CommodityRisk Management.” Approximately 45% of our home heating oil volume is soldusing fixed price forward contracts. A fixed price forward contract requiresour customer to purchase a specific volume during a specific price period. Theremaining home heating oil is sold on either a posted price or a price based onvarious indices which, in both instances, reflect current market conditions.

In 2005, we sold unbranded gasoline, diesel and/orDiesel One® to approximately 670 wholesalers and retailgasoline station operators, vehicles, fleet and marine users and other endusers throughout the Northeast.

We have marketing arrangements with a major supplierof unbranded gasoline in several northeastern states as well as a distillatesupplier in the Northeast. We are responsible for marketing and we bear thecredit risk.

We sell residual oil toapproximately 25 wholesale distributors. Approximately 30% of our Wholesaleresidual oil sales is accomplished through fixed price forward contracts. Theremaining residual oil is sold using market-related prices, either postedprices or indexed prices to reflect current market conditions.

***Commercial***

Our Commercial segment includes sales of home heatingoil, diesel, kerosene, unbranded gasoline and residual oil to customers in thepublic sector through competitive bidding and to large commercial andindustrial customers. Our Commercial segment also includes custom blendedresidual oil and distillates delivered by bunker barges or from a terminaldock. In 2005, this segment accounted for approximately 14% of our total volumefor all refined petroleum products sold.

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Our Commercial customers include federal and stateagencies, municipalities, large industrial companies, many autonomousauthorities, such as transportation authorities and water resource authorities,colleges and universities and a select group of small utilities. Unlike ourWholesale segment, in our Commercial segment, we generally arrange the deliveryof the product to the customer’s designated location. We typically hirethird-party common carriers to deliver the product. Please read “—Storage.”

In this segment we respond to publicly issued requestsfor product proposals and quotes. As of December 31, 2005, wecurrently have contracts as a result of this public bidding process with theU.S. government and the states of Massachusetts, New Hampshire and RhodeIsland. We also have contracts with more than 50 municipalities, seven autonomousauthorities and six institutional customers in New England to meet theirvarious fuel requirements.

The average term of contracts in our bid business isfor one year. The volume of these contracts range from 40,000 to 8 milliongallons. We offer both fixed and indexed (floating) price and volume contractsto customers. The majority of bid activity is priced using an indexed pricewith the index typically chosen by the issuing authority in its solicitationfor the bid proposal. The index prices are usually referenced to one of fiveindustry publications and/or the utilization of regulated exchanges.

In addition to these products, our Commercial segmentincludes sales of a small amount of natural gas which is delivered through apipeline. In 2005, sales of natural gas accounted for approximately 6% of thetotal sales generated in our Commercial segment.

Our Commercial customers also include cruise ships,dry and wet bulk carriers, fishing fleets and other marine equipment. We blendthe fuel to the customers’ specifications at the terminal facility or on thebunker barge and then deliver the resulting bunker fuel directly to the ship orbarge.

We are the largestbunkering provider in New England. In addition, we are the dominant bunkeringoperator in Boston Harbor where we are the only marine-based provider of bunkerfuel.

**Supply**

Our products come fromsome of the major energy companies in the world. Cargos are sourced from theUnited States, Canada, South America, the former Soviet Republics, Europe andoccasionally from Asia. During 2005, we purchased an average of approximately174,000 barrels per day of refined petroleum products from approximately 80suppliers. In 2005, our top eight suppliers were ExxonMobil Corporation, MorganStanley Capital Group, Vitol S.A., ConocoPhillips Co., Giant Industries, Inc.,Petróleos de Venezuela, S.A., Citgo Petroleum Corporation and Irving OilLimited,****and accounted for 68% of our productpurchases by volume. We enter into supply agreements with these suppliers on aterm basis or a spot basis. With respect to trade terms, our supply purchasesvary depending on the particular contract from prompt payment (usually threedays) to net 30 days. Please read “—Commodity Risk Management.”

**Commodity Risk Management**

Since we take title to the refined petroleum productsthat we sell, we are exposed to commodity risk. Commodity risk describes therisk of unfavorable market fluctuations in the price of commodities such asrefined petroleum products. We endeavor to minimize commodity risk inconnection with our daily operations. Generally, as we purchase and/or storerefined petroleum products, we reduce commodity risk and establish a margin byselling the product for physical delivery to third parties. Products aregenerally purchased and sold at fixed prices or at indexed prices. While we usethese transactions to seek to maintain a position that is substantiallybalanced between purchased volumes versus sales volumes through regulated exchangesor derivatives, we may experience net unbalanced positions for short periods oftime as a result of variances in daily sales and transportation and deliveryschedules as well as logistical issues associated with inclement weatherconditions. In connection with managing these positions and 

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maintaining a constantpresence in the marketplace, both necessary for our business, we engage in acontrolled trading program for up to an aggregate of 250,000 barrels of refinedpetroleum products on any day. Our general policy is not to hold refinedpetroleum products, futures contracts or other derivative products andinstruments for the sole purpose of speculating on price change. While ourpolicies are designed to minimize market risk, some degree of exposure tounforeseen fluctuations in market conditions remains.

Operating results are sensitive to a number offactors. Such factors include commodity location, grades of product, individualcustomer demand for grades or location of product, localized market pricestructures, availability of transportation facilities, daily delivery volumesthat vary from expected quantities and timing and costs to deliver thecommodity to the customer. The term “basis risk” is used to describe theinherent market price risk created when a commodity of certain grade orlocation is purchased, sold or exchanged versus a purchase, sale or exchange ofa like commodity of varying location or grade including, without limitation,timing differential. We attempt to reduce our exposure to basis risk bygrouping our purchase and sale activities by geographical region in order tostay balanced within such designated region. However, there can be no assurancethat all basis risk is or will be eliminated.

With respect to the pricing of commodities, we enterinto future contracts to minimize or hedge the impact of market fluctuations onour purchase and fixed forward sales of refined petroleum products. Any hedgeineffectiveness is reflected in our results of operations. We utilize theNYMEX, which is a regulated exchange for energy products that it trades,thereby reducing potential delivery and supply risks. Generally, our practiceis to close all NYMEX positions rather than to make or receive physicaldeliveries. With respect to other energy products, we enter into derivativeagreements with counterparties that we believe have a strong credit profile, inorder to hedge market fluctuations and/or lock-in margins relative to ourcommitments.

We monitor processes andprocedures to prevent unauthorized trading by our personnel and to maintainsubstantial balance between purchases and sales or future delivery obligations.We can provide no assurance, however, that these steps will detect and preventall violations of such trading policies and procedures, particularly ifdeception or other intentional misconduct is involved.

**Storage**

Bulk terminals and inland storage facilities play akey role in the distribution of product to our customers. We own four bulkterminals in the New England area, lease the entirety of two bulk terminals inMassachusetts that we operate exclusively for our business and maintaindedicated storage facilities at another 12 bulk terminals. Collectively, thesebulk terminals provide us with approximately 6.2 million barrels of storagecapacity, and our throughput volume at these facilities was approximately1.4 billion gallons in 2005. Additionally, we have throughput or exchangeagreements with another six bulk terminals and 33 inland storage facilities.

Throughput arrangements allow us to store product atterminals owned by others. Our customers can load product at these terminalsand we pay the owners of these terminals fees for services rendered inconnection with the receipt, storage and handling of such product. Compensationto the terminal owners may be fixed, or it may be based upon the volume of ourproduct that is delivered at the terminal.

Exchange agreements also allow our customers to takedelivery of product at a terminal that is not owned or leased by us. Anexchange is a contractual agreement where the parties exchange product at theirrespective terminals or facilities. For example, we (or our customers) willreceive product that is owned by our exchange partner from such party’sfacility or terminal, and we will deliver the same volume of our product tosuch party (or to such party’s customers) out of one of the terminals in ourterminal network. Generally, both sides of an exchange transaction pay ahandling fee (similar to a throughput fee), and often one party also will pay alocation differential that covers any excess transportation costs incurred by 

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the other party insupplying product to the location at which the first party receives product.Other differentials that may occur in exchanges (and result in additionalpayments) include product value differentials and timing differentials.

The bulk terminals and inland storage facilities fromwhich we distribute product are supplied by ship, barge, truck, pipeline orrail. The inland storage facilities, which we use exclusively to store distillates,are supplied with product from marine bulk terminals and delivered by truck.Our customers receive product from our network of bulk terminals and inlandstorage facilities via truck, barge, rail or pipeline.

Many of our bulk terminals operate 24 hours a dayand consist of multiple storage tanks and automated truck loading equipment.These automated systems monitor terminal access, volumetric allocations, creditcontrol and carrier certification through the remote identification ofcustomers. In addition, some of the bulk terminals at which we market areequipped with truck loading racks capable of providing automated blending andadditive packages which meet our customers’ specific requirements.

The locations of the inland storage facilities that weuse, eight of which are exclusive to us, provide convenience to our customersand allow them to reduce their transportation costs by reducing their traveltime (to and from a marine facility), thus enhancing their ability to make moredeliveries per day. We have longstanding relationships with many of the ownersof the inland storage facilities that we use. We also consider the use ofadditional and alternative inland storage facilities as new opportunitiesbecome available and frequently explore potential arrangements with the ownersof other facilities.

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***Bulk Terminals ThatWe Own or Operate or at Which We Maintain Dedicated Storage***

The following table lists the bulk terminals that weown or operate or at which we maintain dedicated storage facilities:

| **Bulk  Terminal**                                               | ** ** | ** **    | ** ** | **Total  Storage  Capacity  (barrels)** | ** ** | **Approximate  Product Capacity/Use** | ** ** | **Supply  Source** | ** ** | **Mode  of Delivery** |
|------------------------------------------------------------------|------------|---------------|------------|-----------------------------------------|------------|---------------------------------------|------------|--------------------|------------|-----------------------|
| ***Owned by Us***                                                |       |          |       |                                    |       |                                  |       |               |
| Global Chelsea Terminal  (Chelsea, MA)                           |       | 684,600       |       | 46% Distillate;                         |       | Marine; Truck                         |       | Marine; Truck      |
|                                                             |       |          |       | 54% Residual Oil                        |       |                                  |       |               |
| Global South Portland Terminal  (South Portland, ME)             |       | 657,700       |       | 63% Distillate;                         |       | Marine; Truck;                        |       | Marine; Truck      |
|                                                             |       |          |       | 37% Residual Oil                        |       | Rail                                  |       |               |
| Global Wethersfield Terminal  (Wethersfield, CT)                 |       | 168,700       |       | 100% Distillate                         |       | Pipeline; Truck                       |       | Truck              |
| Global Sandwich Terminal  (Sandwich, MA)                         |       | 95,400        |       | 100% Distillate                         |       | Marine; Truck                         |       | Truck              |
| **Subtotal**                                                     |       | **1,606,400** |       |                                    |       |                                  |       |               |
| ***Leased  and Operated by Us***                                 |       |          |       |                                    |       |                                  |       |               |
| New Bedford Terminal  (New Bedford, MA)(1)                       |       | 249,800       |       | 23% Distillate;                         |       | Marine; Truck                         |       | Marine; Truck      |
|                                                             |       |          |       | 77% Residual Oil                        |       |                                  |       |               |
| Joffe Terminal  (Springfield, MA)(1)                             |       | 54,000        |       | 100% Distillate                         |       | Pipeline; Truck                       |       | Truck              |
| **Subtotal**                                                     |       | **303,800**   |       |                                    |       |                                  |       |               |
| ***Dedicated  Storage Maintained by Us and Operated by Others*** |       |          |       |                                    |       |                                  |       |               |
| Revere Terminal  (Revere, MA)(1)(2)                              |       | 2,086,700     |       | 69% Distillate;                         |       | Marine;                               |       | Marine;            |
|                                                             |       |          |       |                                    |       | Pipeline;                             |       | Pipeline;          |
|                                                             |       |          |       | 31% Gasoline                            |       | Rail; Truck                           |       | Truck              |
| Capital Terminal  (East Providence, RI)(1)                       |       | 835,000       |       | 100% Distillate                         |       | Marine;                               |       | Marine;            |
|                                                             |       |          |       |                                    |       | Pipeline;                             |       | Pipeline;          |
|                                                             |       |          |       |                                    |       | Truck                                 |       | Truck              |
| Gateway Terminal  (New Haven, CT)(1)                             |       | 511,400       |       | 76% Distillate;                         |       | Marine; Truck;                        |       | Marine; Truck;     |
|                                                             |       |          |       | 24% Residual Oil                        |       | Pipeline                              |       | Pipeline           |
| ExxonMobil  (Everett, MA)                                        |       | 175,000       |       | 100% Distillate                         |       | Marine                                |       | Marine; Truck      |
| United Oil Recovery  (Portland, CT)                              |       | 12,000        |       | 100% Distillate                         |       | Pipeline; Truck                       |       | Truck              |
| Taylor Energy  (Broad Brook, CT)                                 |       | 36,900        |       | 100% Distillate                         |       | Pipeline; Truck                       |       | Truck              |
| Cibro Petroleum Products  (Albany, NY)                           |       | 310,000       |       | 100% Residual Oil                       |       | Marine; Rail;                         |       | Marine; Rail;      |
|                                                             |       |          |       |                                    |       | Truck                                 |       | Truck              |
| Intercontinental Terminal Company  (Deer Park, TX)               |       | 110,000       |       | 100% Blendstock                         |       | Marine;                               |       | Marine;            |
|                                                             |       |          |       |                                    |       | Pipeline;                             |       | Pipeline;          |
|                                                             |       |          |       |                                    |       | Truck                                 |       | Rail; Truck        |
| Hess Bayonne  (Bayonne, NJ)                                      |       | 72,000        |       | 100% Residual Oil                       |       | Marine                                |       | Marine             |
| Hess Baltimore  (Baltimore, MD)                                  |       | 112,000       |       | 100% Residual Oil                       |       | Marine                                |       | Marine             |
| Plains Marketing, L.P.  (Ingleside, TX)                          |       | 50,000        |       | 100% Petrochemical                      |       | Truck                                 |       | Marine             |
|                                                             |       |          |       | Feedstock                               |       |                                  |       |               |
| Commander Terminals LLC  (Oyster Bay, NY)                        |       | 5,000         |       | 100% Distillate                         |       | Marine; Truck                         |       | Marine; Truck      |
| **Subtotal**                                                     |       | **4,316,000** |       |                                    |       |                                  |       |               |
| **Total**                                                        |       | **6,226,200** |       |                                    |       |                                  |       |               |
|                                                                  |            |               |            |                                         |            |                                       |            |                    |            |                       |  |

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(1)              We are the sole marketer at this facility.

(2)              We have entered into a terminallingagreement with a third party that has reserved approximately 230,000 barrels ofthroughput and/or storage capabilities at this facility.

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***Bulk Terminals with Throughput or Exchange Agreements***

Thefollowing table shows the bulk terminals with which we have throughput orexchange agreements. Our products are stored at these facilities on acommingled basis and volumes vary. 

| ** **                                           | **Throughput or  Exchange  Bulk Terminal(1)** | ** **   | ** ** | **Contracted  Storage Capacity (barrels)** | ** ** | **Approximate  Product Capacity/Use** | ** ** | **Supply Source** | ** ** | **Mode of  Delivery** |
|------------------------------------------------------|-----------------------------------------------|--------------|------------|--------------------------------------------|------------|---------------------------------------|------------|-------------------|------------|-----------------------|
| Irving  Oil, Inc.  (Portsmouth, NH)             |                                          | 50,000       |       | 100% Distillates                           |       | Marine;                               |       | Marine;           |
|                                                 |                                          |         |       |                                       |       | Truck                                 |       | Truck             |
| Connecticut  Petroleum Wholesalers  (Bridgeport, CT) |                                          | As Available |       | 100% Distillates                           |       | Marine;                               |       | Marine;           |
|                                                 |                                          |         |       |                                       |       | Truck                                 |       | Truck             |
| Commander  Terminals LLC (Oyster Bay, NY)            |                                          | As Available |       | 100% Distillates                           |       | Marine;                               |       | Marine;           |
|                                                 |                                          |         |       |                                       |       | Truck                                 |       | Truck             |
| Consumers Oil Co.  (Trenton, NJ)                     |                                          | As Available |       | 100% Distillates                           |       | Pipeline;                             |       | Truck             |
|                                                 |                                          |         |       |                                       |       | Truck                                 |       |              |
| CITGO Petroleum  Corp. (Braintree, MA)               |                                          | As Available |       | 100% Gasoline                              |       | Marine;                               |       | Marine;           |
|                                                 |                                          |         |       |                                       |       | Truck                                 |       | Truck             |
| Springfield  Terminal, Inc. (Springfield, MA)   |                                          | As Available |       | 100% Distillates                           |       | Pipeline;                             |       | Truck             |
|                                                 |                                          |         |       |                                       |       | Truck                                 |       |              |

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(1)           In February 2006, we entered into anagreement with Metro Terminals Corp. in Brooklyn, NY for the throughputting ofdistillates.

**Competition**

We encounter varyingdegrees of competition based on product and geographic locations. Ourcompetitors include terminal companies, major integrated oil companies andtheir marketing affiliates and independent marketers of varying sizes,financial resources and experience. In our core market of New England, SpragueEnergy Corp. competes with us in virtually all product lines and for allcustomers. In the residual oil markets, however, we face less competitionbecause of the strategic locations of our storage facilities and bunkeringassets. Residual oil is heated when stored and cannot be delivered longdistances. Bunkering requires facilities at ports to service vessels. Within BostonHarbor, we have at Chelsea the largest storage capacity in Massachusettscommitted to marine fuels, and furthermore, the Chelsea facility hasmulti-grade residual fuels. In various other geographic markets, particularlythe unbranded gasoline and distillates markets, we compete with integratedrefiners, merchant refiners and regional marketing companies.

**Environmental**

***General***

Our business of supplying refined petroleum productsinvolves a number of activities that are subject to extensive and stringentenvironmental laws. As part of our business, we own and operate variouspetroleum storage and distribution facilities, and must comply withenvironmental laws at the federal, state and local levels, which increases thecost of operating terminals and our business generally.

Our operations also utilize a number of petroleumstorage facilities and distribution facilities that we do not own or operate,but at which refined petroleum products are stored. We utilize these facilities

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through several different contractualarrangements, including leases, throughput and terminalling servicesagreements. If facilities with whom we contract that are owned and operated bythird parties fail to comply with environmental laws, they could be shut down,requiring us to incur costs to use alternative facilities.

Environmental laws and regulations can restrict orimpact our business activities in many ways, such as:

·       requiringremedial action to mitigate releases of hydrocarbons, hazardous substances orwastes caused by our operations or attributable to former operators;

·       requiring capitalexpenditures to comply with environmental control requirements; and

·       enjoiningthe operations of facilities deemed in non-compliance with environmental lawsand regulations.

Failure to comply with environmental laws andregulations may trigger a variety of administrative, civil and criminalenforcement measures, including the assessment of monetary penalties, theimposition of remedial requirements and the issuance of orders enjoining futureoperations. Certain environmental statutes impose strict, joint and severalliability for costs required to clean up and restore sites where hydrocarbons,hazardous substances or wastes have been released or disposed of. Moreover,neighboring landowners and other third parties may file claims for personalinjury 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 morerestrictions and limitations on activities that may affect the environment. Asa result, there can be no assurance as to the amount or timing of futureexpenditures for environmental compliance or remediation, and actual futureexpenditures may be different from the amounts we currently anticipate. We tryto anticipate future regulatory requirements that might be imposed and to planaccordingly to remain in compliance with changing environmental laws andregulations and to minimize the costs of such compliance.

We do not believe thatcompliance with federal, state or local environmental laws and regulations willhave a material adverse effect on our business, financial position or resultsof operations. We can provide no assurance, however, that future events, such aschanges in existing laws (including changes in the interpretation of existinglaws), the promulgation of new laws, or the development or discovery of newfacts or conditions will not cause us to incur significant costs.

***Hazardous Materials and Waste Handling***

In most instances, the environmental laws andregulations affecting our business relate to the release of hazardoussubstances into the water or soils, and include measures to control pollutionof the environment. For instance, the Comprehensive Environmental Response,Compensation, and Liability Act, as amended, also known as CERCLA or theSuperfund law, and comparable state laws impose liability, without regard tofault or the legality of the original conduct, on certain classes of personswho are considered to be responsible for the release of hazardous substancesinto the environment. These persons include the owner or operator of the sitewhere the release occurred and companies that disposed or arranged for thedisposal of the hazardous substances. Under the Superfund law, these personsmay be subject to joint and several liability for the costs of cleaning uphazardous substances that have been released into the environment, for damagesto natural resources and for the costs of certain health studies. The Superfundlaw also authorizes the U.S. Environmental Protection Agency (“EPA”), and insome instances third parties, to act in response to threats to the publichealth or the environment and to seek to recover from the responsible personsthe costs they incur. It is possible for neighboring landowners and other thirdparties to file claims for personal injury and property damage allegedly causedby hazardous substances or other pollutants released into the environment. Inthe course of our ordinary operations, we may generate, store or otherwisehandle materials and wastes that fall within the Superfund law’s 

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definition of a hazardoussubstance, and as a result, we may be jointly and severally liable under theSuperfund law for all or part of the costs required to clean up sites at whichthose hazardous substances have been released into the environment.

We currently own, lease or utilize storage ordistribution facilities where hydrocarbons are being or have been handled formany years. Although we have utilized operating and disposal practices thatwere standard in the industry at the time, hydrocarbons or other wastes mayhave been disposed of or released on, under or from the properties owned orleased by us or on or under other locations where we have contractualarrangements or where these wastes have been taken for disposal. In addition,many of these properties have been operated by third parties whose treatmentand disposal or release of hydrocarbons or other wastes was not under ourcontrol. These properties and wastes disposed thereon may be subject to theSuperfund law or other federal and state laws. Under these laws, we could berequired to remove or remediate previously disposed wastes, including wastesdisposed of or released by prior owners or operators, to clean up contaminatedproperty, including groundwater contaminated by prior owners or operators, orto make capital improvements to prevent future contamination.

Our operations generate a variety of wastes, includingsome hazardous wastes that are subject to the federal Resource Conservation andRecovery Act, as amended (“RCRA”) and comparable state laws. By way of summary,these regulations impose detailed requirements for the handling, storage,treatment and disposal of hazardous waste. Our operations also generate solidwastes which are regulated under state law or the less stringent solid wasterequirements of the federal Solid Waste Disposal Act. We believe that we are inmaterial compliance with the existing requirements of RCRA, the Solid WasteDisposal Act, and similar state and local laws, and the cost involved incomplying with these requirements is not material.

We are incurring ongoingcosts for monitoring groundwater and/or remediation of contamination at severalfacilities that we operate. Assuming that we will be able to continue to usecommon remedial and monitoring methods or associated engineering orinstitutional controls to demonstrate compliance with applicable regulatoryrequirements, as we have in the past and regulations currently allow, webelieve that these costs will not have a material impact on our financialcondition or results of operations.

***Above Ground Storage Tanks***

Above-ground tanks that contain petroleum and otherhazardous substances are subject to comprehensive regulation underenvironmental laws. Generally, these laws impose liability for releases, andrequire secondary containment systems for tanks or that the operators takealternative precautions to ensure that no contamination results from tank leaksor spills. We believe we are in material compliance with environmental laws andregulations applicable to above ground storage tanks.

The Oil Pollution Act of 1990 (“OPA”) addresses threeprincipal areas of oil pollution—prevention, containment and cleanup. In orderto handle, store or transport oil, we are required to file oil spill responseplans with either the United States Coast Guard (for marine facilities) or theEPA. States in which we operate have enacted laws similar to OPA. Under OPA andcomparable state laws, responsible parties for a regulated facility from whichoil is discharged may be subject to strict, joint and several liability forremoval costs and certain other consequences of an oil spill such as naturalresource damages, where the spill is into navigable waters or along shorelines.We believe that we are in material compliance with regulations pursuant to OPAand similar state laws.

Under the authority of thefederal Clean Water Act, the EPA imposes specific requirements for Spill Prevention,Control, and Countermeasure (“SPCC”) plans that are designed to prevent, andminimize the impacts of, releases from above ground storage tanks. We believethat we are in substantial compliance with these requirements.

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***Water Discharges***

The federal Clean WaterAct imposes restrictions regarding the discharge of pollutants into navigablewaters. This law and comparable state laws require permits for dischargingpollutants into state and federal waters and impose substantial liabilities fornoncompliance. EPA regulations also require us to obtain permits to dischargecertain storm water runoff. Storm water discharge permits also may be requiredby certain states in which we operate. We believe that we hold the requiredpermits and operate in material compliance with those permits. While we haveexperienced permit discharge****exceedences atsome of our terminals, we do not expect any non-compliance with existingpermits and foreseeable new permit requirements to have a material adverseeffect on our financial position or results of operations.

***Air Emissions***

Our operations are subject to the federal Clean AirAct and comparable state and local laws. Under such laws, permits are typicallyrequired to emit pollutants into the atmosphere. We believe that we currentlyhold or have applied for all necessary air permits and that we are in materialcompliance with applicable air laws and regulations. Although we can give noassurances, we are aware of no changes to air quality regulations that willhave a material adverse effect on our financial condition or results ofoperations.

Various federal, state and local agencies have theauthority to prescribe product quality specifications for the refined petroleumproducts that we sell, largely in an effort to reduce air pollution. Failure tocomply with these regulations can result in substantial penalties. Although wecan give no assurances, we believe that we are currently in substantialcompliance with these regulations.

Changes in product qualityspecifications could require us to incur additional handling costs or reduceour throughput volume. For instance, different product specifications fordifferent markets could require the construction of additional storage. Also,states in which we are operating have considered limiting the sulfur content ofhome heating oil. If such regulations are enacted, this could restrict thesupply of available heating oil, which could increase our costs to purchasesuch oil or limit our ability to sell heating oil.

***Environmental Insurance***

We maintain insurancewhich may cover in whole or in part certain costs relating to the clean up ofreleases of refined petroleum products. We maintain insurance policies withinsurers in amounts and with coverage and deductibles as our general partner believesare reasonable and prudent. These policies may not cover all environmentalrisks and costs, and may not provide sufficient coverage in the event anenvironmental claim is made against us.

**Security Regulation**

On September 11, 2001, the United States was thetarget of terrorist attacks of unprecedented scale. Since the September 11attacks, the U.S. government has issued warnings that energy infrastructureassets may be future targets of terrorist organizations. These developmentshave subjected our operations to increased risks. Increased security measurestaken by us as a precaution against possible terrorist attacks have resulted inincreased costs to our business. Where required by federal or local laws, wehave prepared security plans for storage and distribution facilities weoperate. Terrorist attacks aimed at our facilities could adversely affect ourbusiness, and any global and domestic economic repercussions from terroristactivities could adversely affect our business. For instance, terrorist activitycould lead to increased volatility in prices for home heating oil, gasoline andother products we sell.

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Insurance carriers arecurrently required to offer coverage for terrorist activities as a result ofthe federal Terrorism Risk Insurance Act of 2002, also known as “TRIA.” We haveopted to purchase this coverage with respect to our property and casualtyinsurance programs, which resulted in additional insurance premiums. Pursuantto the Terrorism Risk Insurance Extension Act of 2005, the TRIA has beenextended through December 31, 2007. Although we cannot determine thefuture availability and cost of insurance coverage for terrorist acts, we donot expect the availability and cost of such insurance to have a materialadverse effect on our financial condition or results of operations.

**Employee Safety**

We are subject to therequirements of the Occupational Safety and Health Act (“OSHA”) and comparablestate statutes that regulate the protection of the health and safety ofworkers. In addition, the OSHA hazard communication standard requires thatinformation be maintained about hazardous materials used or produced inoperations and that this information be provided to employees, state and localgovernment authorities and citizens. We believe that our operations are insubstantial compliance with the OSHA requirements.

With respect to thetransportation of refined petroleum products by truck, we only operate alimited number of trucks, as most of the trucks that distribute products wesell are owned and operated by third parties. We are subject to regulationspromulgated under the Federal Motor Carrier Safety Act for those trucks that wedo operate. These regulations cover the transportation of hazardous materialsand are administered by the U.S. Department of Transportation. We conductongoing training programs to help ensure that our operations are in compliancewith applicable regulations.

**Titleto Properties, Permits and Licenses**

We believe that we haveall leases, permits and licenses necessary for us to operate our business inall material respects. With respect to any consents, permits or authorizationsthat have not been obtained, we believe that the failure to obtain theseconsents, permits or authorizations will have no material adverse effect on theoperation of our business.

We believe that we havesatisfactory title to all of our assets. Title to property may be subject toencumbrances. We believe that none of these encumbrances will materiallydetract from the value of our properties or from our interest in theseproperties, nor will they materially interfere with the use of these propertiesin the operation of our business.

We believe that we haveall of the assets needed, including all permits and licenses, to conduct ouroperations in all material respects.

**Facilities**

We lease office space forour principal executive office in Waltham, Massachusetts. The lease expires on December 31,2008.

**Employees**

To carry out ouroperations, our general partner and certain of our operating subsidiaries employapproximately 172 full-time employees. Ten of the employees assigned to ourterminal in Chelsea, Massachusetts are employed under collective bargainingagreements that expire in 2008. We believe we have good relations with theemployees.

We have two sharedservices agreements, one with Global Petroleum Corp. and another with AllianceEnergy Corp. The services provided among these entities by any employees sharedpursuant to these agreements will not limit the ability of such employees toprovide all services necessary to properly run our business. Please read “Item13. Certain Relationships and Related Transactions—Shared Services Agreements.”

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**Item 1A.**                RiskFactors

**Risks Inherent in Our Business**

***We may not have sufficient cash from operations toenable us to pay the minimum quarterly distribution following establishment ofcash reserves and payment of fees and expenses, including payments to ourgeneral partner.***

We may not havesufficient available cash each quarter to pay the minimum quarterlydistribution. The amount of cash we can distribute on our units principallydepends upon the amount of cash we generate from our operations, which will fluctuatefrom quarter to quarter based on, among other things:

·       seasonalvariation in temperatures, which affects demand for home heating oil andresidual oil to the extent that it is used for space heating;

·       competitionfrom other companies that sell refined petroleum products in New England;

·       demandfor refined petroleum products in the markets we serve;

·       thelevel of our operating costs, including payments to our general partner; and

·       prevailingeconomic conditions.

In addition, theactual amount of cash we will have available for distribution will depend onother factors such as:

·       thelevel of capital expenditures we make;

·       therestrictions contained in our credit agreement;

·       ourdebt service requirements;

·       thecost of acquisitions, if any;

·       fluctuationsin our working capital needs;

·       ourability to borrow under our credit agreement to make distributions to ourunitholders; and

·       theamount, if any, of cash reserves established by our general partner.

The amount of cash we haveavailable for distribution depends primarily on our cash flow, including cashflow from financial reserves and working capital borrowings, and not solely onprofitability, which will be affected by non-cash items. As a result, we maymake cash distributions during periods when we record losses and may not makecash distributions during periods when we record net income.

***Warmer weather conditions could adversely affect ourresults of operations and cash available for distribution to our unitholders.***

Because we have retail distributorswhose customers depend on home heating oil and residual oil for space heatingpurposes during the winter, weather conditions have a significant impact on thedemand for both home heating oil and residual oil. Furthermore, warmer thannormal temperatures during the winter in one or more regions in which weoperate can significantly decrease the total volume we sell and the grossprofit realized on those sales and, consequently, our results of operations andcash available for distribution to our unitholders. In 2002, temperatures weresignificantly warmer than normal for the areas in which we sell home heatingoil and residual oil, which adversely affected our results of operations.

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***Our financial results are seasonal and generally lowerin the second and third quarters of the calendar year, which is likely toresult in our need to borrow money in order to make distributions to ourunitholders during these quarters.***

Demand for some of ourrefined petroleum products, specifically our home heating oil and residual oil,is generally higher during November through March than during April throughOctober. We obtain a significant portion of our sales during these wintermonths. As a result, our results of operations for the second and thirdcalendar quarters are generally lower than for the first and fourth calendarquarters. With lower cash flow during the second and third calendar quarters,we may be required to borrow money in order to pay the minimum quarterlydistribution to our unitholders. Any restrictions on our ability to borrowmoney could restrict our ability to pay the minimum quarterly distribution toour unitholders.

***Our risk management policies cannot eliminate allcommodity risk. In addition, any non-compliance with our risk managementpolicies could result in significant financial losses.***

While our hedging policies are designed to minimizecommodity risk, some degree of exposure to unforeseen fluctuations in marketconditions remains. For example, we change our hedged position daily in responseto movements in our inventory. If we overestimate or underestimate our salesfrom inventory, we may be unhedged for the amount of the overestimate orunderestimate. Also, significant increases in the costs of refined petroleumproducts can materially increase our costs to carry inventory. We use ourcredit facility as our primary source of financing to carry inventory and maybe limited on the amounts we can borrow to carry inventory.

We use the NYMEX to hedge our commodity risk withrespect to pricing of energy products traded on the NYMEX. Physical deliveriesunder NYMEX contracts are made in New York Harbor. To the extent we need suchdeliveries in other ports, such as Boston Harbor, we may have basis risk. “Basisrisk” describes the inherent market price risk created when a commodity ofcertain grade or location is purchased, sold or exchanged versus a purchase,sale or exchange of a like commodity of varying location or grade.Transportation costs and timing differential are components of basis risk.

We monitor processes andprocedures to prevent unauthorized trading and to maintain substantial balancebetween purchases and sales or future delivery obligations. We can provide noassurance, however, that these steps will detect and prevent all violations ofsuch risk management policies and procedures, particularly if deception orother intentional misconduct is involved.

***We are exposed to trade credit risk in the ordinarycourse of our business activities.***

We are exposed to risks ofloss in the event of nonperformance by our customers and by counterparties ofour forward contracts, options and swap agreements. Some of our customers andcounterparties may be highly leveraged and subject to their own operating andregulatory risks. Even if our credit review and analysis mechanisms workproperly, we may experience financial losses in our dealings with otherparties. Any increase in the nonpayment or nonperformance by our customersand/or counterparties could reduce our ability to make distributions to ourunitholders.

***Some of our competitors have capital resources manytimes greater than ours and control greater supplies of refined petroleumproducts.***

Our competitors includeterminal companies, major integrated oil companies and their marketingaffiliates and independent marketers of varying sizes, financial resources andexperience. Some of our competitors have capital resources many times greaterthan ours and control greater supplies of refined petroleum products. If we areunable to compete effectively, we may lose existing customers or fail toacquire new customers, which could have a material adverse effect on ourresults of operations and cash available for distribution to our unitholders.For example, if a competitor attempts to increase market 

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share byreducing prices, our operating results and cash available for distribution toour unitholders could be adversely affected. We may not be able to competesuccessfully with these companies. Please read “Items 1. and 2. Business andProperties—Competition.”

***Some of our residual oil volumes are subject tocustomers switching to natural gas which could result in loss of customers,which in turn could have an adverse effect on our results of operations andcash available for distribution to our unitholders.***

Our residual oil businesscompetes for customers with suppliers of natural gas. Those end users who aredual-fuel users have the ability to switch from residual oil to natural gas.During a period of increasing residual oil prices relative to the prices ofnatural gas, dual-fuel using customers may switch to natural gas. Suchswitching could have an adverse effect on our results of operations and cashavailable for distribution to our unitholders. We could face additional competitionfrom alternative energy sources such as natural gas as a result ofgovernment-mandated controls or regulation promoting the use of cleaner fuels.Residual oil consumption has steadily declined over the last three decades.

***Energy efficiency and new technology may reduce thedemand for our products and adversely affect our operating results and cashavailable for distribution to our unitholders.***

Increased conservation andtechnological advances, including installation of improved insulation and the developmentof more efficient furnaces and other heating devices, have adversely affectedthe demand for home heating oil and residual oil. Future conservation measuresor technological advances in heating, conservation, energy generation or otherdevices might reduce demand and adversely affect our operating results and cashavailable for distribution to our unitholders.

***We are exposed to performance risk in our supplychain.***

We rely upon our suppliersto timely produce the volumes and types of refined petroleum products for whichthey contract with us. In the event one or more of our suppliers does notperform in accordance with its contractual obligations, we may be required topurchase product on the open market to satisfy forward contracts we have enteredinto with our customers in reliance upon such supply arrangements. We purchaserefined petroleum products from a variety of suppliers under term contracts andon the spot market. In times of extreme market demand, we may be unable tosatisfy our supply requirements. Furthermore, a significant portion of oursupply comes from other countries, which could be disrupted by politicalevents. In the event that such supply becomes scarce, whether as a result ofpolitical events, natural disaster or otherwise, we may not be able to satisfyour supply requirements. If any of these events were to occur, we may berequired to pay more for product that we purchase on the open market, whichcould result in financial losses and adversely affect our results of operationsand cash available for distribution to our unitholders.

***If we do not make acquisitions on economicallyacceptable terms, our future growth may be limited.***

Our ability to growsubstantially depends on our ability to make acquisitions that result in anincrease in operating surplus per unit. We may be unable to make such accretiveacquisitions for any of the following reasons:

·       weare unable to identify attractive acquisition candidates or negotiateacceptable purchase contracts for them;

·       weare unable to raise financing for such acquisitions on economically acceptableterms; or

·       weare outbid by competitors.

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In addition, we may consummate acquisitions, which atthe time of consummation we believe will be accretive, but which ultimately maynot be accretive.

If any of these eventsoccurred, our future growth would be limited. In particular, competition formidstream assets and businesses has intensified, and as a result such assetsand businesses have become more costly.

***Our acquisition strategy involves risks that couldreduce our ability to make distributions to our unitholders.***

Even if weconsummate acquisitions that we believe will be accretive, they may in factresult in no increase or even a decrease in cash available for distribution toour unitholders. Any acquisition involves potential risks, including:

·       performancefrom the acquired assets and businesses that is below the forecasts we used inevaluating the acquisition;

·       asignificant increase in our indebtedness and working capital requirements;

·       theinability to timely and effectively integrate the operations of recentlyacquired businesses or assets, particularly those in new geographic areas or innew lines of business;

·       theincurrence of substantial unforeseen environmental and other liabilitiesarising out of the acquired businesses or assets, including liabilities arisingfrom the operation of the acquired businesses or assets prior to ouracquisition, for which we are not indemnified or for which the indemnity isinadequate;

·       customeror key employee loss from the acquired businesses; and

·       diversionof our management’s attention from other business concerns.

If any acquisitions weultimately consummate do not generate expected increases in cash available fordistribution to our unitholders, our ability to make such distributions will bereduced.

***We may not be able to renew our leases or ouragreements for dedicated storage when they expire.***

The bulk terminals that weown or lease or at which we maintain dedicated storage facilities play a keyrole in moving product to our customers. We lease the entirety of two bulkterminals that we operate exclusively for our business and maintain dedicatedstorage facilities at another 12 bulk terminals. The agreements governing thesearrangements are subject to expiration at various dates. The expiration datesrange from 2006 to 2013. These arrangements may not be renewed when theyexpire, or if renewed, may not be renewed at rates and on terms at least asfavorable. If these agreements are not renewed or we are unable to renew theseagreements at rates and on terms at least as favorable, it could have anadverse effect on our results of operations and cash available for distributionto our unitholders.

***A material amount of our terminalling capacity iscontrolled by one of our affiliates. Loss of that capacity could have anadverse effect on our results of operations and cash available for distributionto our unitholders.***

We currently have anexclusive throughput arrangement for the Revere terminal with one of ouraffiliates, Global Petroleum Corp. This facility accounts for approximately 34%of our storage capacity. We store distillates and gasoline at this facility.The throughput agreement for this facility expires in 2013. After expiration ofthe agreement, we can provide no assurance that Global Petroleum Corp. willcontinue to grant us exclusive use of the terminal or that the terms of arenegotiated agreement will be as favorable to us as the agreement it replaces.If we are unable to renew the agreement or unable to renew on terms at least asfavorable, it could have a material adverse effect on our results of operationsand cash available for 

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distributionto our unitholders. Our general partner has no fiduciary duty to consider ourinterests in determining whether to renew the throughput arrangement.

***Our sales are generated under contracts that must berenegotiated or replaced periodically. If we are unable to successfullyrenegotiate or replace these contracts, then our results of operations and cashavailable for distribution to our unitholders could be adversely affected.***

Our sales are generatedunder contracts that must be periodically renegotiated or replaced. Most of ourarrangements with our customers are for a single season or on a spot basis. Asthese contracts expire, they must be renegotiated or replaced. We may be unableto renegotiate or replace these contracts when they expire, and the terms ofany renegotiated contracts may not be as favorable as the contracts theyreplace. Whether these contracts are successfully renegotiated or replaced isoften times subject to factors beyond our control. Such factors includefluctuations in refined petroleum product prices, counterparty ability to payfor or accept the contracted volumes and a competitive marketplace for theservices offered by us. If we cannot successfully renegotiate or replace ourcontracts or must renegotiate or replace them on less favorable terms, salesfrom these arrangements could decline and our ability to make distributions toour unitholders could be adversely affected.

***Due to our lack of asset and geographicdiversification, adverse developments in the terminals that we use or in ouroperating areas would reduce our ability to make distributions to ourunitholders.***

We rely exclusively onsales generated from products distributed from the terminals we own or controlor to which we have access. Furthermore, almost all our assets and operationsare located in New England. Due to our lack of diversification in asset typeand location, an adverse development in these businesses or areas, includingadverse developments due to catastrophic events or weather and decreases indemand for refined petroleum products, could have a significantly greaterimpact on our results of operations and cash available for distribution to ourunitholders than if we maintained more diverse assets and locations.

***Our operations are subject to operational hazards andunforeseen interruptions for which we may not be adequately insured.***

Our operations are subject to operational hazards andunforeseen interruptions such as natural disasters, adverse weather, accidents,fires, explosions, hazardous materials releases, mechanical failures and otherevents beyond our control. If any of these events were to occur, we could incursubstantial losses because of personal injury or loss of life, severe damage toand destruction of property and equipment, and pollution or other environmentaldamage resulting in curtailment or suspension of our related operations.

We are not fully insured against all risks incident toour business. Prior to the formation of our partnership, certain of theinsurance policies covering entities being contributed to our partnership andtheir operations also provided coverage to entities that are not beingcontributed to our partnership as a part of this transaction. The coverageavailable under the insurance policies has been allocated among our partnershipand these affiliates. This allocation may result in limiting the amount ofrecovery available to us for purposes of covered losses.

Furthermore, we may be unable to maintain or obtaininsurance of the type and amount we desire at reasonable rates. As a result ofmarket conditions, premiums and deductibles for certain of our insurance policieshave increased and could escalate further. In some instances, certain insurancecould become unavailable or available only for reduced amounts of coverage. Ifwe were to incur a significant liability for which we were not fully insured,it could have a material adverse effect on our financial position and abilityto make distributions to unitholders.

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***Our operations aresubject to federal, state, and local laws and regulations relating toenvironmental protection and operational safety that could require us to incursubstantial costs.***

The risk of substantial environmental costs andliabilities is inherent in terminal operations, and we may incur substantialenvironmental costs and liabilities. Our operations involving the receipt,storage and redelivery of refined petroleum products are subject to stringentfederal, state and local laws and regulations governing the discharge ofmaterials into the environment, or otherwise relating to the protection of theenvironment, operational safety and related matters. Compliance with these lawsand regulations increases our overall cost of business, including our capitalcosts to maintain and upgrade equipment and facilities. We utilize a number ofterminals that are owned and operated by third parties who are also subject tothese stringent federal, state and local environmental laws in theiroperations. Their compliance with these requirements could increase the cost ofdoing business with these facilities.

In addition, our operations could be adverselyaffected if shippers of refined petroleum products incur additional costs orliabilities associated with marine environmental regulations. These shipperscould increase their charges to us or discontinue service altogether.

Various governmental authorities, including the EPA,have the power to enforce compliance with these regulations and the permitsissued under them, and violators are subject to administrative, civil andcriminal penalties, including fines, injunctions or both. Joint and severalliability may be incurred, without regard to fault or the legality of theoriginal conduct, under federal and state environmental laws for theremediation of contaminated areas at our facilities and those where we dobusiness. Private parties, including the owners of properties located near ourterminal facilities and those with whom we do business, also may have the rightto pursue legal actions against us to enforce compliance with environmentallaws, as well as seek damages for personal injury or property damage. We mayalso be held liable for damages to natural resources.

The possibility existsthat new, stricter laws, regulations or enforcement policies couldsignificantly increase our compliance costs and the cost of any remediationthat may become necessary, some of which may be material. Our insurance may notcover all environmental risks and costs or may not provide sufficient coveragein the event an environmental claim is made against us. We may incur increasedcosts because of stricter pollution control requirements or liabilitiesresulting from non-compliance with required operating or other regulatorypermits. New environmental regulations might adversely affect our products andactivities, including the storage of refined product, as well as wastemanagement and our control of air emissions. Federal and state agencies alsocould impose additional safety regulations to which we would be subject.Because the laws and regulations applicable to our operations are subject tochange, we cannot provide any assurance that compliance with future laws andregulations will not have a material effect on our results of operations orearnings. Please read “Items 1. and 2. Business and Properties—Environmental”for more information.

***Any terroristattacks aimed at our facilities and any global and domestic economicrepercussions from terrorist activities and the government’s response couldreduce our ability to make distributions to our unitholders.***

On September 11, 2001, the United States was thetarget of terrorist attacks of unprecedented scale. Since the September 11attacks, the U.S. government has issued warnings that energy assets may befuture targets of terrorist organizations. These developments have subjectedour operations to increased risks. We have incurred costs for providingfacility security and may incur additional costs in the future with respect tothe receipt, storage and distribution of our products. Additional securitymeasures could also restrict our ability to distribute refined petroleumproducts. Any future terrorist attack on our facilities, or those of ourcustomers, could have a material adverse effect on our business and reduce ourability to make distributions to our unitholders.

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Terrorist activity couldlead to increased volatility in prices for home heating oil, gasoline and otherproducts we sell, which could decrease our customers’ demand for these products.Insurance carriers are required to offer coverage for terrorist activities as aresult of federal legislation. We have opted to purchase this coverage withrespect to our property and casualty insurance programs. This additionalcoverage has resulted in additional insurance premiums, which could increasefurther in the future.

***We are subject tofederal, state and local laws and regulations that govern the product qualityspecifications of the refined petroleum products that we purchase, store, transportand sell.***

Various federal, state,and local agencies have the authority to prescribe specific product qualityspecifications to the sale of commodities. Our business includes suchcommodities. Changes in product quality specifications, such as reduced sulfurcontent in refined petroleum products, or other more stringent requirements forfuels, could reduce our ability to procure product and our sales volume,require us to incur additional handling costs, and/or require the expenditureof capital. For instance, different product specifications for differentmarkets could require additional storage. If we are unable to procure productor to recover these costs through increased sales, we may not be able to meetour financial obligations. Failure to comply with these regulations couldresult in substantial penalties. Please read “Item 3. Legal Proceedings—Environmental”for more information.

***We depend on keypersonnel for the success of our business and some of those persons faceconflicts in the allocation of their time to our business.***

We depend on the services of our senior managementteam and other key personnel. The loss of the services of any member of seniormanagement or key employee could have an adverse effect on our business andreduce our ability to make distributions to our unitholders. We may not be ableto locate or employ on acceptable terms qualified replacements for seniormanagement or other key employees if their services were no longer available.Except with respect to Eric Slifka, neither we, our general partner nor anyaffiliate thereof has entered into an employment agreement with, or carry keyman life insurance on, any member of our senior management team or other keypersonnel. Please read “Item 11. Executive Compensation—Employment Agreement.”

All of the executiveofficers of our general partner will perform services for certain of ouraffiliates. Please read “Item 13. Certain Relationships and RelatedTransactions—Relationship of Management with Global Petroleum Corp. andAlliance Energy Corp.”

***We depend onunionized labor for the operation of our terminal in Chelsea, Massachusetts andat the facility in Revere, Massachusetts which is controlled and operated byone of our affiliates. Any work stoppages or labor disturbances at these facilitiescould disrupt our business.***

Certain of our employeesat the terminal in Chelsea, Massachusetts and truck drivers directly employedby us are employed under collective bargaining agreements that expire in 2008.Certain of Global Petroleum Corp.’s employees at the Revere, Massachusettsfacility are similarly employed under a collective bargaining agreement. Pleaseread “Items 1. and 2. Business and Properties—Employees.” Any work stoppages orother labor disturbances at these facilities or by these drivers could have anadverse effect on our business and reduce our ability to make distributions toour unitholders. In addition, employees who are not currently represented bylabor unions may seek union representation in the future, and any renegotiationof current collective bargaining agreements may result in terms that are lessfavorable to us.

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**Risks Inherent in an Investment in Us**

***Our general partnerand its affiliates have conflicts of interest and limited fiduciary duties,which may permit them to favor their own interests to the detriment of ourunitholders.***

Affiliates of ourgeneral partner, including directors and executive officers of our generalpartner, own a 49.8% limited partner interest in us and the 2.0% generalpartner interest. Although our general partner has a fiduciary duty to manageus in a manner beneficial to us and our unitholders, the directors and officersof our general partner have a fiduciary duty to manage our general partner in amanner beneficial to its owners. Furthermore, certain directors and officers ofour general partner are directors or officers of affiliates of our generalpartner. Conflicts of interest may arise between our general partner and itsaffiliates, on the one hand, and us and our unitholders, on the other hand. Asa result of these conflicts, our general partner may favor its own interestsand the interests of its affiliates over the interests of our unitholders.Please read “—Our partnership agreement limits our general partner’s fiduciaryduties to unitholders and restricts the remedies available to unitholders foractions taken by our general partner that might otherwise constitute breachesof fiduciary duty.” These conflicts include, among others, the following situations:

·       ourgeneral partner is allowed to take into account the interests of parties otherthan us, such as affiliates of its members, in resolving conflicts of interest,which has the effect of limiting its fiduciary duty to our unitholders;

·       affiliatesof our general partner may engage in competition with us under certaincircumstances. See “—Certain members of the Slifka family and their affiliatesmay engage in activities that compete directly with us”;

·       neitherour partnership agreement nor any other agreement requires owners of ourgeneral partner to pursue a business strategy that favors us. Directors andofficers of our general partner’s owners have a fiduciary duty to make thesedecisions in the best interest of their owners which may be contrary to ourinterests;

·       someofficers of our general partner who will provide services to us will devotetime to affiliates of our general partner and may be compensated for servicesrendered to such affiliate;

·       ourgeneral partner has limited its liability and reduced its fiduciary dutiesunder the partnership agreement, while also restricting the remedies availableto our unitholders for actions that, without these limitations, mightconstitute breaches of fiduciary duty. As a result of purchasing common units,unitholders consent to some actions and conflicts of interest that mightotherwise constitute a breach of fiduciary or other duties under applicablestate law;

·       ourgeneral partner determines the amount and timing of asset purchases and sales,capital expenditures, borrowings, issuances of additional partnershipsecurities and reserves, each of which can affect the amount of cash that isavailable for distribution to our unitholders;

·       ourgeneral partner determines the amount and timing of any capital expendituresand whether a capital expenditure is a maintenance capital expenditure, whichreduces operating surplus, or a capital expenditure for acquisitions or acapital improvement expenditure, which does not, and determination can affectthe amount of cash that is distributed to our unitholders and the ability ofthe subordinated units to convert to common units;

·       insome instances, our general partner may cause us to borrow funds in order topermit the payment of cash distributions, even if the purpose or effect of theborrowing is to make a distribution on the subordinated units, to makeincentive distributions or to accelerate the expiration of the subordinationperiods;

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·       ourgeneral partner determines which costs incurred by it and its affiliates arereimbursable by us;

·       ourpartnership agreement does not restrict our general partner from causing us topay it or its affiliates for any services rendered on terms that are fair andreasonable to us or entering into additional contractual arrangements with anyof these entities on our behalf;

·       ourgeneral partner intends to limit its liability regarding our contractual andother obligations;

·       ourgeneral partner may exercise its limited right to call and purchase commonunits if it and its affiliates own more than 80% of the common units;

·       ourgeneral partner controls the enforcement of obligations owed to us by it andits affiliates; and

·       our general partner decideswhether to retain separate counsel, accountants or others to perform servicesfor us.

**Pleaseread “Item 13. Certain Relationships and Related Transactions—OmnibusAgreement.”**

***Our partnershipagreement limits our general partner’s fiduciary duties to unitholders andrestricts the remedies available to unitholders for actions taken by ourgeneral partner that might otherwise constitute breaches of fiduciary duty.***

Our partnershipagreement contains provisions that reduce the standards to which our generalpartner would otherwise be held by state fiduciary duty law. For example, ourpartnership agreement:

·       permitsour general partner to make a number of decisions in its individual capacity,as opposed to in its capacity as our general partner. This entitles our generalpartner to consider only the interests and factors that it desires, and it hasno duty or obligation to give any consideration to any interest of, or factorsaffecting, us, our affiliates or any limited partner. Examples include theexercise of its limited call right, its voting rights with respect to the unitsit owns, its registration rights and its determination whether or not toconsent to any merger or consolidation of us;

·       providesthat our general partner shall not have any liability to us or our unitholdersfor decisions made in its capacity as general partner so long as it acted ingood faith, meaning it believed that the decision was in our best interests;

·       generallyprovides that affiliated transactions and resolutions of conflicts of interestnot approved by the conflicts committee of the board of directors of ourgeneral partner and not involving a vote of unitholders must be on terms noless favorable to us than those generally being provided to or available fromunrelated third parties or be “fair and reasonable” to us and that, indetermining whether a transaction or resolution is “fair and reasonable,” ourgeneral partner may consider the totality of the relationships between theparties involved, including other transactions that may be particularlyadvantageous or beneficial to us; and

·       providesthat our general partner and its officers and directors will not be liable formonetary damages to us, our limited partners or assignees for any acts oromissions unless there has been a final and non-appealable judgment entered bya court of competent jurisdiction determining that the general partner or thoseother persons acted in bad faith or engaged in fraud or willful misconduct.

By purchasing a commonunit, a common unitholder will become bound by the provisions of thepartnership agreement, including the provisions described above.

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***Unitholders havelimited voting rights and are not entitled to elect our general partner or itsdirectors or initially to remove our general partner without its consent, whichcould lower the trading price of our common units.***

Unlike the holders of common stock in a corporation,unitholders have only limited voting rights on matters affecting our businessand, therefore, limited ability to influence management’s decisions regardingour business. Unitholders will have no right to elect our general partner orits board of directors on an annual or other continuing basis. The board ofdirectors of our general partner is chosen entirely by its members and not bythe unitholders. Furthermore, if the unitholders are dissatisfied with theperformance of our general partner, they will have limited ability to removeour general partner. As a result of these limitations, the price at which thecommon units will trade could be diminished because of the absence or reductionof a takeover premium in the trading price.

The unitholders are currently unable to remove ourgeneral partner without its consent because affiliates of our general partnerown sufficient units to be able to prevent removal of our general partner. Thevote of the holders of at least 662/3%of all outstanding common and subordinated units voting together as a singleclass is required to remove our general partner. The holders of the 230,303general partner units do not participate in any vote to remove our generalpartner. Without regard to their ownership of the general partner units, as ofDecember 31, 2005 affiliates of our general partner, including directorsand executive officers of our general partner, owned 50.8% of our common andsubordinated units. Also, if our general partner is removed without causeduring the subordination period and units held by our general partner and itsaffiliates are not voted in favor of that removal, all remaining subordinatedunits will automatically be converted into common units and any existingarrearages on the common units will be extinguished. A removal of our generalpartner under these circumstances would adversely affect the common units byprematurely eliminating their distribution and liquidation preference over thesubordinated units, which would otherwise have continued until we had metcertain distribution and performance tests.

Cause is narrowly definedin our partnership agreement to mean that a court of competent jurisdiction hasentered a final, non-appealable judgment finding our general partner liable foractual fraud or willful or wanton misconduct in its capacity as our generalpartner. Cause does not include most cases of charges of poor management of thebusiness, so the removal of our general partner during the subordinationperiods because of the unitholders’ dissatisfaction with our general partner’sperformance in managing our partnership will most likely result in thetermination of the subordination period.

***We may issueadditional units without unitholder approval, which would dilute unitholders’ownership interests.***

At any time, we mayissue an unlimited number of limited partner interests of any type without theapproval of our unitholders. The issuance by us of additional common units orother equity securities of equal or senior rank will have the followingeffects:

·       ourunitholders’ proportionate ownership interest in us will decrease;

·       theamount of cash available for distribution on each unit may decrease;

·       becausea lower percentage of total outstanding units will be subordinated units, therisk that a shortfall in the payment of the minimum quarterly distribution willbe borne by our common unitholders will increase;

·       therelative voting strength of each previously outstanding unit may be diminished;and

·       the market price of the commonunits may decline.

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***Our general partnerhas a limited call right that may require unitholders to sell their commonunits at an undesirable time or price.***

If at any time our generalpartner and its affiliates own more than 80% of the common units, our generalpartner will have the right, but not the obligation, which it may assign to anyof its affiliates or to us, to acquire all, but not less than all, of thecommon units held by unaffiliated persons at a price not less than theirthen-current market price. As a result, unitholders may be required to selltheir common units at an undesirable time or price and may not receive anyreturn on their investment. Unitholders may also incur a tax liability upon asale of their units. Our general partner is not obligated to obtain a fairnessopinion regarding the value of the common units to be repurchased by it uponexercise of the limited call right. There is no restriction in our partnershipagreement that prevents our general partner from issuing additional commonunits and exercising its call right. If our general partner exercised itslimited call right, the effect would be to take us private and, if the unitswere subsequently deregistered, we would no longer be subject to the reportingrequirements of the Securities Exchange Act of 1934.

***Our partnershipagreement restricts the voting rights of unitholders owning 20% or more of ourcommon units.***

Our partnership agreementrestricts unitholders’ voting rights by providing that any units held by aperson that owns 20% or more of any class of units then outstanding, other thanour general partner, its affiliates, their transferees and persons who acquiredsuch units with the prior approval of the board of directors of our generalpartner, cannot vote on any matter. Our partnership agreement also containsprovisions limiting the ability of unitholders to call meetings or to acquireinformation about our operations, as well as other provisions limiting theunitholders’ ability to influence the manner or direction of management.

***Our debt levels maylimit our flexibility in obtaining additional financing and in pursuing otherbusiness opportunities.***

We have asignificant amount of debt. As of December 31, 2005, our total debt wasapproximately $183.5 million. We have the ability to incur additional debt,including the capacity to borrow up to $500.0 million under our creditfacilities, subject to limitations in our credit agreement. Our level ofindebtedness could have important consequences to us, including the following:

·       ourability to obtain additional financing, if necessary, for working capital,capital expenditures, acquisitions or other purposes may be impaired or suchfinancing may not be available on favorable terms;

·       covenantscontained in our existing and future credit and debt arrangements will requireus to meet financial tests that may affect our flexibility in planning for andreacting to changes in our business, including possible acquisitionopportunities;

·       wewill need a substantial portion of our cash flow to make principal and interestpayments on our indebtedness, reducing the funds that would otherwise beavailable for operations, future business opportunities and distributions tounitholders;

·       ourdebt level will make us more vulnerable than our competitors with less debt tocompetitive pressures or a downturn in our business or the economy generally;and

·       ourdebt level may limit our flexibility in responding to changing business andeconomic conditions.

Our ability to service ourindebtedness will depend upon, among other things, our future financial andoperating performance, which will be affected by prevailing economic conditionsand financial, business, regulatory and other factors, some of which are beyondour control. If our operating results are not sufficient to service our currentor future indebtedness, we will be forced to take actions such as reducing 

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distributions,reducing or delaying our business activities, acquisitions, investments and/orcapital expenditures, selling assets, restructuring or refinancing ourindebtedness, or seeking additional equity capital or bankruptcy protection. Wemay not be able to effect any of these remedies on satisfactory terms, or atall.

***Our creditagreement contains operating and financial restrictions that may restrict ourbusiness and financing activities.***

The operating andfinancial restrictions and covenants in our credit agreement and any futurefinancing agreements could restrict our ability to finance future operations orcapital needs or to engage, expand or pursue our business activities. Forexample, our credit agreement restricts our ability to:

·       grantliens;

·       makecertain loans or investments;

·       incuradditional indebtedness or guarantee other indebtedness;

·       makeany material change to the nature of our business or undergo a fundamentalchange;

·       makeany material dispositions;

·       acquireanother company;

·       enterinto a merger, consolidation, sale leaseback transaction or purchase of assets;

·       makedistributions if any potential default or event of default occurs; or

·       makecapital expenditures in excess of specified levels.

Our ability to comply withthe covenants and restrictions contained in our credit agreement may beaffected by events beyond our control, including prevailing economic, financialand industry conditions. If market or other economic conditions deteriorate,our ability to comply with these covenants may be impaired. If we violate anyof the restrictions, covenants, ratios or tests in our credit agreement, asignificant portion of our indebtedness may become immediately due and payable,and our lenders’ commitment to make further loans to us may terminate. We mightnot have, or be able to obtain, sufficient funds to make these acceleratedpayments. In addition, our obligations under our credit agreement will besecured by substantially all of our assets, and if we are unable to repay ourindebtedness under our credit agreement, the lenders could seek to foreclose onsuch assets.

***Restrictions in ourcredit agreement limit our ability to pay distributions upon the occurrence ofcertain events.***

Our payment ofprincipal and interest on our debt will reduce cash available for distributionon our units. Our credit agreement limits our ability to pay distributions uponthe occurrence of the following events, among others:

·       failureto pay any principal when due or any interest, fees or other amounts when due;

·       failureof any representation or warranty to be true and correct in any materialrespect;

·       failureto perform or otherwise comply with the covenants in the credit agreement or inother loan documents to which we are a borrower;

·       anydefault in the performance of any obligation or condition beyond the applicablegrace period relating to any other indebtedness of more than $2.0 million ifthe effect of the default is to permit or cause the acceleration of theindebtedness;

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·       ajudgment default for monetary judgments exceeding $2.0 million or a defaultunder any non-monetary judgment if such default could have a material adverse effecton us;

·       achange in management or ownership control;

·       anERISA violation or a bankruptcy or insolvency event involving us, our generalpartner or any of our subsidiaries; and

·       failureto comply with an annual “clean-down” provision in our $15.0 millionrevolving credit facility.

Any subsequent refinancingof our current debt or any new debt could have similar restrictions. For moreinformation regarding our credit agreement, please read “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Liquidityand Capital Resources—Credit Agreement.”

***We can borrow moneyunder our credit agreement to pay distributions, which would reduce the amountof credit available to operate our business.***

Our partnership agreementallows us to make working capital borrowings under our credit agreement to paydistributions. Accordingly, we can make distributions on all our units eventhough cash generated by our operations may not be sufficient to pay suchdistributions. We are required to reduce our borrowings to zero under thatportion of our credit agreement that is available to pay the minimum quarterlydistribution for a period of at least 30 consecutive days once each 12-monthperiod. For more information, please read “Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations—Liquidity and CapitalResources—Credit Agreement.”

***Cost reimbursementsdue our general partner and its affiliates will reduce cash available fordistribution to our unitholders.***

Prior to making anydistribution on the common units, we will reimburse our general partner and itsaffiliates for all expenses they incur on our behalf, which will be determinedby our general partner in its sole discretion. These expenses will include allcosts incurred by the general partner and its affiliates in managing andoperating us, including costs for rendering corporate staff and supportservices to us. We are managed and operated by directors and executive officersof our general partner. In addition, the majority of our operating personnelare employees of our general partner. Please read “Item 13. CertainRelationships and Related Transactions.” The reimbursement of expenses andpayment of fees, if any, to our general partner and its affiliates couldadversely affect our ability to pay cash distributions to our unitholders.

***Unitholders may nothave limited liability if a court finds that unitholder action constitutescontrol of our business.***

A general partnerof a partnership generally has unlimited liability for the obligations of thepartnership, except for those contractual obligations of the partnership thatare expressly made without recourse to the general partner. Our partnership isorganized under Delaware law, and we conduct business in a number of otherstates. The limitations on the liability of holders of limited partnerinterests for the obligations of a limited partnership have not been clearlyestablished in some of the other states in which we do business. A unitholdercould be liable for our obligations as if he were a general partner if:

·       acourt or government agency determined that we were conducting business in astate but had not complied with that particular state’s partnership statute; or

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·       your right to act withother unitholders to remove or replace the general partner, to approve someamendments to our partnership agreement or to take other actions under ourpartnership agreement constitute “control” of our business.

***Unitholders mayhave liability to repay distributions.***

Under certaincircumstances, unitholders may have to repay amounts wrongfully returned ordistributed to them. Under Section 17-607 of the Delaware RevisedUniform Limited Partnership Act, we may not make a distribution to unitholdersif the distribution would cause our liabilities to exceed the fair value of ourassets. Delaware law provides that for a period of three years from the date ofthe impermissible distribution, limited partners who received the distributionand who knew at the time of the distribution that it violated Delaware law willbe liable to the limited partnership for the distribution amount. Purchasers ofunits who become limited partners are liable for the obligations of thetransferring limited partner to make contributions to us that are known to thepurchaser of units at the time it became a limited partner and for unknownobligations if the liabilities could be determined from the partnershipagreement. Liabilities to partners on account of their partnership interestsand liabilities that are non-recourse to us are not counted for purposes ofdetermining whether a distribution is permitted.

***The control of ourgeneral partner may be transferred to a third party without unitholder consent.***

Our general partner maytransfer its general partner interest to a third party in a merger or in a saleof all or substantially all of its assets without the consent of theunitholders. Furthermore, there is no restriction in the partnership agreementon the ability of the members of our general partner from transferring theirrespective membership interests in our general partner to a third party. Thenew members of our general partner would then be in a position to replace theboard of directors and officers of our general partner with their own choicesand to control the decisions taken by the board of directors and officers ofour general partner.

***Certain members ofthe Slifka family and their affiliates may engage in activities that competedirectly with us.***

Certain members of theSlifka family and their affiliates are subject to the noncompete provisions inthe omnibus agreement. The omnibus agreement will not prohibit certainaffiliates of our general partner from owning certain assets or engaging incertain businesses that compete directly or indirectly with us. Please read “Item13. Certain Relationships and Related Transactions—Omnibus Agreement.”

***We will incurincreased costs as a result of being a public company.***

We became a public companyon September 28, 2005. Prior to that, we had no history operating as apublic company. As a public company, we will incur significant legal,accounting and other expenses that we did not incur as a private company. Inaddition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequentlyimplemented by the Securities and Exchange Commission and the New York StockExchange, have required changes in corporate governance practices of publiccompanies. We expect these new rules and regulations to increase our legaland financial compliance costs and to make activities more time-consuming andcostly. For example, as a result of becoming a public company, we are requiredto have three independent directors, create additional board committees andadopt policies regarding internal controls and disclosure controls andprocedures, including the preparation of reports on internal controls overfinancial reporting. In addition, we will incur additional costs associatedwith our public company reporting requirements. We also expect these new rules andregulations to make it more difficult and more expensive for our generalpartner to obtain director and officer liability insurance and it may berequired to accept reduced policy limits and coverage or incur substantiallyhigher costs to obtain the same or similar coverage. As a result, it may bemore difficult for our general partner to attract and retain qualified personsto serve on its board of directors or as executive officers. We are currentlyevaluating and 

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monitoringdevelopments with respect to these new rules, and we cannot estimate the amountof additional costs we may incur or the timing of such costs.

**Tax Risks**

***Our tax treatment depends on our status as apartnership for federal income tax purposes, as well as our not being subjectto entity-level taxation by individual states. If the IRS were to treat us as acorporation or if we were to become subject to entity-level taxation for statetax purposes, then our cash available for distribution to unitholders would besubstantially reduced.***

The anticipated after-taxeconomic benefit of an investment in the common units depends largely on ourbeing treated as a partnership for federal income tax purposes. We have notrequested, and do not plan to request, a ruling from the Internal RevenueService (“IRS”) on this or any other tax matter affecting us.

If we were treated as acorporation for federal income tax purposes, we would pay federal income tax onour taxable income at the corporate tax rate, which is currently a maximum of35%, and would likely pay state tax at varying rates. Distributions tounitholders would generally be taxed again as corporate distributions, and noincome, gains, losses, deductions or credits would flow through to unitholders.Because a tax would be imposed upon us as a corporation, our cash available fordistribution to unitholders would be substantially reduced. Thus, treatment ofus as a corporation would result in a material reduction in the anticipatedcash flow and after-tax return to unitholders, likely causing a substantialreduction in the value of the common units.

Current law may change,causing us to be treated as a corporation for federal income tax purposes orotherwise subjecting us to entity-level taxation. For example, because ofwidespread state budget deficits, several states are evaluating ways to subjectpartnerships to entity-level taxation through the imposition of state income,franchise or other forms of taxation. If any state were to impose a tax upon usas an entity, the cash available for distribution to unitholders would bereduced. The partnership agreement provides that if a law is enacted orexisting law is modified or interpreted in a manner that subjects us totaxation as a corporation or otherwise subjects us to entity-level taxation forfederal, state or local income tax purposes, then the minimum quarterlydistribution amount and the target distribution amounts will be adjusted toreflect the impact of that law on us.

***We have a subsidiary that will be treated as acorporation for federal income tax purposes and subject to corporate-levelincome taxes.***

We will conduct all or aportion of our operations of our end-user business through a subsidiary that isorganized as a corporation. We may elect to conduct additional operationsthrough this corporate subsidiary in the future. This corporate subsidiary willbe subject to corporate-level tax, which will reduce the cash available fordistribution to us and, in turn, to unitholders. If the IRS were tosuccessfully assert that this corporation has more tax liability than weanticipate or legislation was enacted that increased the corporate tax rate,our cash available for distribution to unitholders would be further reduced.

***If the IRS contests the federal income tax positionswe take, the market for our common units may be adversely impacted, and thecosts of any contest will reduce our cash available for distribution tounitholders.***

We have not requested anyruling from the IRS with respect to our treatment as a partnership for federalincome tax purposes or any other matter affecting us. The IRS may adoptpositions that differ from the tax positions we take. It may be necessary toresort to administrative or court proceedings to sustain some or all of thepositions we take. A court may not agree with some or all of the positions wetake. Any contest with the IRS may materially and adversely impact the marketfor our common units and the price at which they trade. In addition, the costsof any contest with the IRS, because the cost will be borne indirectly by our unitholdersand our general partner, will result in a reduction in cash available fordistribution.

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***Unitholders may berequired to pay taxes on their share of our income even if they do not receiveany cash distributions from us.***

Because unitholders willbe treated as partners to whom we will allocate taxable income, which could bedifferent in amount than the cash we distribute, unitholders will be requiredto pay federal income taxes and, in some cases, state and local income taxes ontheir share of our taxable income, whether or not they receive cashdistributions from us. Unitholders may not receive cash distributions from usequal to their share of our taxable income or even equal to the actual taxliability that results from their share of our taxable income.

***Tax gain or loss on the disposition of our commonunits could be different than expected.***

If a unitholder sells hiscommon units, he will recognize a gain or loss equal to the difference betweenthe amount realized and his tax basis in those common units. Priordistributions to a unitholder in excess of the total net taxable income he wasallocated for a common unit, which decreased his tax basis in that common unit,will, in effect, become taxable income to him if the common unit is sold at aprice greater than his tax basis in that common unit, even if the price hereceives is less than his original cost. A substantial portion of the amountrealized, whether or not representing gain, may be ordinary income to theunitholder. In addition, if a unitholder sells his units, he may incur a taxliability in excess of the amount of cash he receives from the sale.

***Tax-exempt entitiesand foreign persons face unique tax issues from owning common units that mayresult in adverse tax consequences to them.***

Investment in common unitsby tax-exempt entities, such as individual retirement accounts (known as IRAs),and non-U.S. persons raises issues unique to them. For example, virtually allof our income allocated to organizations exempt from federal income tax,including individual retirement accounts and other retirement plans, will beunrelated business taxable income and will be taxable to them. Distributions tonon-U.S. persons will be reduced by withholding taxes at the highest applicableeffective tax rate, and non-U.S. persons will be required to file the U.S.federal income tax returns and pay tax on their share of our taxable income.

***We will treat eachpurchaser of common units as having the same tax benefits without regard to theactual common units purchased. The IRS may challenge this treatment, whichcould decrease the value of the common units.***

Because we cannot matchtransferors and transferees of common units, we will adopt depreciation andamortization positions that may not conform with all aspects of existingTreasury Regulations. A successful IRS challenge to those positions coulddecrease the amount of tax benefits available to unitholders. It also couldaffect the timing of these tax benefits or the amount of gain from a unitholder’ssale of common units and could have a negative impact on the value of ourcommon units or result in audit adjustments to unitholders’ tax returns.

***The sale orexchange of 50% or more of our capital and profits interests during anytwelve-month period will result in the termination of our partnership forfederal income tax purposes.***

We will be considered tohave terminated for federal income tax purposes if there is a sale or exchangeof 50% or more of the total interests in our capital and profits within atwelve-month period. Our termination would, among other things, result in theclosing of our taxable year for all unitholders and could result in a deferralof depreciation deductions allowable in computing our taxable income.

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***Unitholders willlikely be subject to state and local taxes and return filing requirements injurisdictions where they do not live as a result of investing in our commonunits.***

In addition to federalincome taxes, unitholders will likely be subject to other taxes, such as stateand local income taxes, unincorporated business taxes and estate, inheritanceor intangible taxes that are imposed by the various jurisdictions in which wedo business or own property even if they do not live in any of thosejurisdictions. Unitholders will likely be required to file state and localincome tax returns and pay state and local income taxes in some or all of thesevarious jurisdictions. Further, unitholders may be subject to penalties forfailure to comply with those requirements. As of December 31, 2005, weconducted business in 16 states, some of which may impose a state incometax. We may own property or conduct business in other states or foreigncountries in the future. It is the unitholder’s responsibility to file allfederal, state and local tax returns.

**Item 1B.**               UnresolvedStaff Comments.

None.

**Item 3.**                        LegalProceedings.

***General***

Although we may, from timeto time, be involved in litigation and claims arising out of our operations inthe normal course of business, we do not believe that we are a party to anylitigation that will have a material adverse impact on our financial conditionor results of operations. Except as described below, we are not aware of anysignificant legal or governmental proceedings against us, or contemplated to bebrought against us. We maintain insurance policies with insurers in amounts andwith coverage and deductibles as our general partner believes are reasonableand prudent. However, we can provide no assurance that this insurance will beadequate to protect us from all material expenses related to potential futureclaims for personal and property damage or that these levels of insurance willbe available in the future at economical prices.

***Environmental***

Global Companies LLC, in addition to severalaffiliates, has been named as one of over 50 defendants in two lawsuitsalleging methyl tertiary-butyl ether (“MTBE”) contamination of groundwater inMassachusetts. MTBE is an oxygenate that has been used extensively to reducemotor vehicle tailpipe emissions. In the cases of Town of Duxbury, et al. v.Amerada Hess Corp., et al., filed December 31, 2003, and City of Lowell v.Amerada Hess Corp., et al., filed December 30, 2004, plaintiffs allegethat manufacturers, refiners and others involved in the distribution ofgasoline containing MTBE are liable for the costs of investigating possibleMTBE groundwater contamination, treating such contaminated groundwater wherefound, and related relief including treble damages and injunctive relief. Theplaintiffs in these cases generally claim to be public water providers ormunicipal or other government authorities. These cases have been consolidatedin multi-district litigation with over 60 other MTBE cases in federal court inthe Southern District of New York. We intend to vigorously defend these cases.We do not believe that these cases will have a material impact on ouroperations although we can provide no assurances in this regard.

On November 29, 2004,a consent decree was lodged by the U.S. Department of Justice in the federalDistrict Court for Massachusetts whereby Global Companies LLC and GlobalPetroleum Corp. settled alleged violations of Clean Air Act regulations relatedto fuel quality specifications. This consent decree was entered by the court onJanuary 21, 2005. As part of this settlement, Global Companies LLC haspaid a $500,000 civil penalty and instituted a compliance program for threeyears to ensure compliance with Clean Air Act fuel quality specifications. Thealleged violations stemmed from the importation of finished 

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conventionalgasoline, which was not a substantial part of our operations at the time of thealleged violations. We do not believe that compliance with the terms of theconsent decree will result in material costs.

***Other***

On September 15, 2005, the Office of the AttorneyGeneral of the Commonwealth of Massachusetts issued a Civil InvestigativeDemand to us in connection with an investigation of gasoline distributors andretailers in Massachusetts in the wake of Hurricane Katrina. We believe thatthe Attorney General’s office has issued similar demands to other distributorsand retailers. We have taken steps to comply with the demand. While we cannotpredict the outcome of the investigation, we do not expect that the outcomewill have a material adverse effect on us.

On November 22, 2005,the U.S. Federal Trade Commission issued a Civil Investigative Demand to us inconnection with an investigation of petroleum products pricing by refiners anddistributors. We believe that the Federal Trade Commission has issued similardemands to the major petroleum products refiners and other distributors. Wehave taken steps to comply with the demand. While we cannot predict the outcomeof the investigation, we do not expect that the outcome will have a materialadverse effect on us.

**Item 4.**                        Submissionof Matters to a Vote of Security Holders.

No matter was submitted to a vote of security holdersduring the fourth quarter of 2005.

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**PART II**

**Item 5.**                        MarketFor Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities

Ourcommon units began trading on the New York Stock Exchange under the symbol “GLP”commencing with our initial public offering on September 29, 2005. At theclose of business on March 17, 2006, based upon information received fromour transfer agent and brokers and nominees, we had approximately 2,310 commonunitholders, including beneficial owners of common units held in street name. Thefollowing table sets forth the range of the daily high and low sales prices percommon unit, cash distributions to common unitholders and the trading volume ofcommon units for the period indicated.

| ** **                                           | ** ** | **Price Range** | ** ** | **Cash Distribution ** | ** ** |
|------------------------------------------------------|------------|----------------------|------------|----------------------------------|------------|
| **Year Ended December 31, 2005** | ** ** | ** **           | ** ** | **High**                         | ** ** | **Low** | ** ** | **Per Common Unit**(1) | ** ** |
| Fourth Quarter                                       |       | $                    | 24.68      |                             | $          | 18.15 |   |   | $ | 0.4111 |   |   |
|                                                      |            |                      |            |                                  |            |  |  |  |  |  |  |  |  |  |

----

(1)          On January 24,2006, the board of directors of our general partner increased our quarterlycash distribution for the fourth quarter of 2005 by 3% to $0.425 per unit from$0.4125 per unit. The distribution for the quarter ended December 31, 2005was paid on February 14, 2006, and reflects the pro rata portion of thequarterly distribution rate of $0.425, covering the period from the closing ofthe initial public offering, October 4, 2005 through December 31,2005.

We intend to consider cash distributions tounitholders on a quarterly basis, although there is no assurance as to thefuture cash distributions since they are dependent upon future earnings, cashflows, capital requirements, financial condition and other factors. Our creditagreement prohibits us from making cash distributions if any potential defaultor event of default, as defined in the credit agreement, occurs or would resultfrom the cash distribution.

Within 45 daysafter the end of each quarter, we will distribute all of our available cash (asdefined in our partnership agreement) to unitholders of record on theapplicable record date. The amount of available cash generally is all cash onhand at the end of the quarter

·       lessthe amount of cash reserves established by our general partner to provide forthe proper conduct of our business;

·        complywith applicable law, any of our debt instruments, or other agreements; or

·        providefunds for distributions to our unitholders and to our general partner for anyone or more of the next four quarters;

·       plusall cash on hand on the date of determination of available cash for the quarterresulting from working capital borrowings made after the end of the quarter.

Working capital borrowings (as defined in ourpartnership agreement) are generally borrowings that are made under ourrevolving credit facility and in all cases are used solely for working capitalpurposes or to pay distributions to partners.

Upon the closing of our initial public offering,affiliates of the Slifka family received 5,642,424 subordinated units. Duringthe subordination period, the common units will have the right to receivedistributions of available cash from operating surplus in an amount equal tothe minimum quarterly distribution of $0.4125 per quarter, plus any arrearagesin the payment of the minimum quarterly distribution on the common units fromprior quarters, before any distributions of available cash from operatingsurplus may be made on the subordinated units. These units are deemed “subordinated”units because for a period of time, referred to as the subordination period,the subordinated units will not be entitled to receive any distributions untilthe common units have received the minimum quarterly 

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distribution and anyarrearages from prior quarters. Furthermore, no arrearages will be paid on thesubordinated units. The practical effect of the subordinated units is toincrease the likelihood that during the subordination period there will beavailable cash to be distributed on the common units.

The subordination period will extend until the firstday of any quarter beginning after September 30, 2010 that each of thefollowing tests are met:  (1) distributionsof available cash from operating surplus on each of the outstanding commonunits and subordinated units and general partner units equaled or exceeded theminimum quarterly distribution for each of the three consecutive,non-overlapping four-quarter periods immediately preceding that date; (2) the“adjusted operating surplus” (as defined in our partnership agreement)generated during each of the three consecutive, non-overlapping four-quarterperiods immediately preceding that date equaled or exceeded the sum of theminimum quarterly distributions on all of the outstanding common units andsubordinated units during those periods on a fully diluted basis and therelated distribution on the general partner units during those periods; and (3) thereare no arrearages in payment of the minimum quarterly distribution on thecommon units. If the unitholders remove the general partner without cause, thesubordination period may end before September 30, 2010.

In addition, if the tests for ending the subordinationperiod are satisfied for any three consecutive four-quarter periods ending onor after September 30, 2008, 25% of the subordinated units will convertinto an equal number of common units. Similarly, if those tests are alsosatisfied for any three consecutive four-quarter periods ending on or after September 30,2009, an additional 25% of the subordinated units will convert into an equalnumber of common units. The second early conversion of subordinated units maynot occur, however, until at least one year following the end of the period forthe first early conversion of subordinated units.

We will make distributions of available cash fromoperating surplus for any quarter during any subordination period in thefollowing manner: firstly, 98% to the common unitholders, pro rata, and 2% tothe general partner, until we distribute for each outstanding common unit anamount equal to the minimum quarterly distribution for that quarter; secondly,98% to the common unitholders, pro rata, and 2% to the general partner, untilwe distribute for each outstanding common unit an amount equal to anyarrearages in payment of the minimum quarterly distribution on the common unitsfor any prior quarters during the subordination period; thirdly, 98% to thesubordinated unitholders, pro rata, and 2% to the general partner, until wedistribute for each subordinated unit an amount equal to the minimum quarterlydistribution for that quarter; and thereafter, cash in excess of the minimumquarterly distributions is distributed to the unitholders and the generalpartner based on the percentages below.

Thegeneral partner, Global GP LLC, is entitled to incentive distributions if theamount we distribute with respect to any quarter exceeds specified targetlevels shown below: 

| ** **                      | ** ** | **Total Quarterly Distribution** | ** ** | **Marginal Percentage  Interest in Distributions** | ** ** |
|---------------------------------|------------|--------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                      | ** ** | **Target Amount**                     | ** ** | **Unitholders**                                                   | ** ** | **General Partner** | ** ** |
| Minimum Quarterly  Distribution |       | $0.4125                                    |       |                                                              | 98         | % |   |   | 2 | % |   |
| First Target  Distribution      |       | up  to $0.4625                             |       |                                                              | 98         | % |   |   | 2 | % |   |
| Second Target  Distribution     |       | above  $0.4625 up to $0.5375               |       |                                                              | 85         | % |   |   | 15 | % |   |
| Third Target  distribution      |       | above  $0.5375 up to $0.6625               |       |                                                              | 75         | % |   |   | 25 | % |   |
| Thereafter                      |       | above $0.6625                              |       |                                                              | 50         | % |   |   | 50 | % |   |

 

The equity compensationplan information required by Item 201(d) of Regulation S-K inresponse to this item is incorporated by reference into “Item 12. SecurityOwnership of Certain Beneficial Owners and Management—Equity Compensation PlanTable.”

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**RecentSales of Unregistered Securities**

On March 2, 2005, inconnection with our formation, we issued (1) to Global GP LLC the 2%general partner interest in us for $40 and (2) to Global Petroleum Corp.the 98% limited partner interest in us for $1,960. Global GP LLC is whollyowned by affiliates of the Slifka family. Upon the closing of our initialpublic offering on October 4, 2005, affiliates of the Slifka familyreceived 742,424 common units (before taking into account the redemption of735,000 common units with the proceeds from the exercise of the underwriters’option to purchase additional common units) and 5,642,424 subordinated units inexchange for the contribution by the affiliates of the Slifka family of 100% ofthe ownership interests in Global Companies LLC (which owns Glen Hes Corp.),Global Montello Group LLC and Chelsea Sandwich LLC to Global Partners LP. Eachof these offerings was exempt from registration under Section 4(2) ofthe Securities Act of 1933. Each of the subordinated units will convert into acommon unit as described above. There have been no other sales of unregisteredsecurities of Global Partners LP within the past three years.

**Useof Proceeds From Registered Securities**

On September 28, 2005, our registration statementon Form S-1 (File No. 333-124755) was declared effectiveby the Securities and Exchange Commission in connection with our initial publicoffering of 5,635,000 common units (including 735,000 common units purchased bythe underwriters upon the exercise of their option to purchase additionalcommon units) representing a 48.9% limited partner interest in us at an initialpublic offering price of $22.00 per unit, which closed on October 4, 2005.Our initial public offering did not terminate prior to the sale of allsecurities registered. The underwriters of the offering were Lehman BrothersInc., Key Banc Capital Markets, a Division of McDonald Investments Inc.,Raymond James & Associates, Inc., RBC Capital Markets Corporationand Banc of America Securities LLC. Total proceeds from the sale of the commonunits was $124.0 million before underwriting discounts and offering expenses. Affiliatesof our general partner, including directors and executive officers of ourgeneral partner, own 87,724 common units and 5,642,424 subordinated unitsrepresenting a 49.8% limited partner interest in us.

In connection withthe closing of this offering, the following transactions occurred:

·       GlobalCompanies LLC distributed $45.3 million in cash to those affiliates of theSlifka family holding 100% of the ownership interests in Global Companies LLC;

·       affiliatesof the Slifka family conveyed 100% of the ownership interests in GlobalCompanies LLC (which owns Glen Hes Corp.), Global Montello Group LLC andChelsea Sandwich LLC to us in exchange for 742,424 common units (before takinginto account the redemption of 735,000 common units with the proceeds from theexercise of the underwriters’ option to purchase additional common units),5,642,424 subordinated units ) and the general partner interest (230,303general partner units representing a 2% interest in us);

·       weissued to our general partner, Global GP LLC, a 2% general partner interest inus and all of our incentive distribution rights, which entitle our generalpartner to increasing percentages of the cash we distribute in excess of$0.4625 per unit per quarter; and

·       weentered into a new credit agreement and repaid the remaining outstandingborrowings under our then-existing revolving credit facility. Please read “Item7. Management’s Discussion and Analysis of Financial Conditions and Results ofOperations—Liquidity—Credit Agreement.”

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Thefollowing is a summary of the proceeds received from the sale of our commonunits and the use of proceeds (in millions):

| Proceeds received  from sale of common units                                                                                                    |   | $      | 124.0  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Use of proceeds                                                                                                                                 |   |   |   |
| Underwriting discounts                                                                                                                          |   | $      | 8.6    |   |
| Offering expenses                                                                                                                               |   | 4.0    |   |
| Repayment of term loan                                                                                                                          |   | 51.0   |   |
| Repayment of borrowings under credit facility                                                                                                   |   | 45.3   |   |
| Redemption of common units from affiliates of the  Slifka family as a result of the underwriters’ exercise of their  over-allotment option |   | 15.1   |   |
| Total                                                                                                                                           |   | $      | 124.0  |   |

 

 

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**Item 6.**                        SelectedFinancial Data

The following table presents selected historicalfinancial and operating data of Global Partners LP for the periods and as ofthe dates indicated. The selected historical financial data is derived from thehistorical consolidated financial statements of Global Partners LP.

This table should be read in conjunction with “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and the historical consolidated financial statements of Global PartnersLP included elsewhere in this report.

The following table presents a non-GAAP financialmeasure, EBITDA, which we use in our business. EBITDA means earnings beforeinterest, taxes, depreciation and amortization. This measure is not calculatedor presented in accordance with generally accepted accounting principles, orGAAP. We explain this measure below and reconcile it to its most directlycomparable financial measures calculated and presented in accordance with GAAPin ‘‘—Non-GAAP Financial Measure’’ below.

We define maintenance capital expenditures as thosecapital expenditures required to maintain, including over the long term, theoperating capacity of or sales generated by our capital assets, which includeour terminals, office premises and computer hardware and software. We definecapital improvement expenditures as those capital expenditures that increasethe operating capacity of or sales generated by our capital assets, such asconstruction of additional tankage or addition of new terminals.

The following tableincludes information about “degree days” for each of the periods indicated. A “degreeday” is an industry measurement of temperature designed to evaluate energydemand and consumption. Degree days are based on how far the average temperaturedeparts from a human comfort level of 65°F. Each degree of temperature above65°F is counted as one cooling degree day, and each degree of temperature below65°F is counted as one heating degree day. Degree days are accumulated each dayover the course of a year and can be compared to a monthly or a long-term(multi-year) average, or normal, to see if a month or a year was warmer orcooler than usual. Degree days are officially observed by the National WeatherService and officially archived by the National Climatic Data Center. Forpurposes of evaluating our results of operations, we use the normal heatingdegree day amount as reported by the National Weather Service at its LoganInternational Airport station in Boston, Massachusetts.

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| ** **                                                    | ** ** | **Combined(1)**                                                                 | ** ** | **Successor**                                  | ** ** | **Predecessor**                              | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                    | ** ** | **Year Ended  December 31,**                                          | ** ** | **October 4  through  December 31,** | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended December 31,** | ** ** |
| ** **                                                    | ** ** | **2005**                                                                        | ** ** | **2005**                                       | ** ** | **2005**                                     | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                                    | ** ** | **(dollars in millions except per unit amounts)** | ** ** |
| **Statement  of Income Data:**                                |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                                                         |       |                                                                            | $          | 4,045.8                                        |       |                                         |       | $ | 1,248.9 |   |   |   | $ | 2,796.9 |   |   | $ | 3,187.6 |   | $ | 2,478.5 |   | $ | 1,594.1 |   | $ | 1,753.6 |   |
| Cost of sales                                                 |       |                                                                            | 3,954.1    |                                           |       |                                         | 1,220.0    |   |   |   | 2,734.1 |   |   | 3,111.7 |   | 2,411.4 |   | 1,538.9 |   | 1,691.1 |   |
| Gross profit                                                  |       |                                                                            | 91.7       |                                           |       |                                         | 28.9       |   |   |   | 62.8 |   |   | 75.9 |   | 67.1 |   | 55.2 |   | 62.5 |   |
| Selling, general  and administrative expenses                 |       |                                                                            | 40.3       |                                           |       |                                         | 10.5       |   |   |   | 29.8 |   |   | 33.5 |   | 30.3 |   | 27.5 |   | 26.8 |   |
| Operating expenses                                            |       |                                                                            | 19.7       |                                           |       |                                         | 4.9        |   |   |   | 14.8 |   |   | 19.6 |   | 18.8 |   | 17.7 |   | 15.8 |   |
| Amortization  expense                                         |       |                                                                            | 1.6        |                                           |       |                                         | 0.4        |   |   |   | 1.2 |   |   | 0.8 |   | — |   | — |   | — |   |
| Total operating costs and expenses                            |       |                                                                            | 61.6       |                                           |       |                                         | 15.8       |   |   |   | 45.8 |   |   | 53.9 |   | 49.1 |   | 45.2 |   | 42.6 |   |
| Operating income                                              |       |                                                                            | 30.1       |                                           |       |                                         | 13.1       |   |   |   | 17.0 |   |   | 22.0 |   | 18.0 |   | 10.0 |   | 19.9 |   |
| Interest expense                                              |       |                                                                            | 10.0       |                                           |       |                                         | 2.7        |   |   |   | 7.3 |   |   | 4.7 |   | 2.0 |   | 2.2 |   | 3.0 |   |
| Other income  (expense)                                       |       |                                                                            | (1.0       | )                                              |       |                                         | —     |   |   |   | (1.0 | ) |   | — |   | — |   | 1.1 |   | — |   |
| Write-off  investment(2)                                      |       |                                                                            | —     |                                           |       |                                         | —     |   |   |   | — |   |   | — |   | — |   | 2.9 |   | — |   |
| Income before  income tax expense and discontinued operations |       |                                                                            | 19.1       |                                           |       |                                         | 10.4       |   |   |   | 8.7 |   |   | 17.3 |   | 16.0 |   | 6.0 |   | 16.9 |   |
| Income tax  expense(3)                                        |       |                                                                            | 1.0        |                                           |       |                                         | 1.0        |   |   |   | — |   |   | — |   | — |   | — |   | — |   |
| Discontinued  operations:                                     |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Branded Gas Division—income from operations(4)           |       |                                                                            | —     |                                           |       |                                         | —     |   |   |   | — |   |   | — |   | — |   | — |   | 0.9 |   |
| Branded Gas Division—gain on sale(5)                     |       |                                                                            | —     |                                           |       |                                         | —     |   |   |   | — |   |   | — |   | — |   | — |   | 2.8 |   |
| Net Income                                                    |       |                                                                            | $          | 18.1                                           |       |                                         |       | $ | 9.4 |   |   |   | $ | 8.7 |   |   | $ | 17.3 |   | $ | 16.0 |   | $ | 6.0 |   | $ | 20.6 |   |
| **Cash  Flow Data:**                                          |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided  by (used in)                               |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating activities                                          |       |                                                                            | $          | (28.4                                          | )          |                                         |       | $ | (34.1 | ) |   |   | $ | 5.7 |   |   | $ | (82.0 | ) | $ | 38.6 |   | $ | 27.6 |   | $ | 27.4 |   |
| Investment activities                                         |       |                                                                            | (1.6       | )                                              |       |                                         | (0.7       | ) |   |   | (0.9 | ) |   | 1.2 |   | (2.2 | ) | (3.3 | ) | 1.2 |   |
| Financing activities(6)                                       |       |                                                                            | 28.4       |                                           |       |                                         | 31.4       |   |   |   | (3.0 | ) |   | 83.0 |   | (33.6 | ) | (24.9 | ) | (31.2 | ) |
| **Other  Financial Data:**                                    |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EBITDA(7)                                                     |       |                                                                            | $          | 33.0                                           |       |                                         |       | $ | 14.1 |   |   |   | $ | 18.9 |   |   | $ | 25.2 |   | $ | 20.4 |   | $ | 10.4 |   | $ | 25.1 |   |
| Maintenance  capital expenditures                        |       |                                                                            | 1.8        |                                           |       |                                         | 0.7        |   |   |   | 1.1 |   |   | 1.3 |   | 2.2 |   | 1.6 |   | 2.8 |   |
| Capital  improvement expenditures                        |       |                                                                            | —     |                                           |       |                                         | —     |   |   |   | — |   |   | 0.7 |   | — |   | 1.7 |   | 4.9 |   |
| Total capital  expenditures                                   |       |                                                                            | $          | 1.8                                            |       |                                         |       | $ | 0.7 |   |   |   | $ | 1.1 |   |   | $ | 2.0 |   | $ | 2.2 |   | $ | 3.3 |   | $ | 7.7 |   |
| **Operating  Data:**                                          |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Normal heating  degree days(8)                                |       |                                                                            | 5,630      |                                           |       |                                         | 1,875      |   |   |   | 3,755 |   |   | 5,630 |   | 5,630 |   | 5,630 |   | 5,630 |   |
| Actual heating  degree days                                   |       |                                                                            | 5,875      |                                           |       |                                         | 1,876      |   |   |   | 3,999 |   |   | 5,748 |   | 6,028 |   | 5,279 |   | 5,243 |   |
| Variance from  normal heating degree days                     |       |                                                                            | 4.4        | %                                              |       |                                         | —     |   |   |   | 6.5 | % |   | 2.1 | % | 7.1 | % | (6.2 | )% | (6.9 | )% |
| Variance from  prior year actual heating degree days          |       |                                                                            | 2.2        | %                                              |       |                                         | 0.6        | % |   |   | 3.0 | % |   | (4.6 | )% | 14.2 | % | 0.7 | % | (8.6 | )% |
| Total gallons sold  (in millions)                             |       |                                                                            | 2,673.9    |                                           |       |                                         | 757.6      |   |   |   | 1,916.3 |   |   | 2,928.8 |   | 2,850.6 |   | 2,202.8 |   | 2,338.3 |   |
| Variance in volume  sold from prior year                      |       |                                                                            | (8.7       | )%                                             |       |                                         | —     |   |   |   | — |   |   | 2.8 | % | 29.4 | % | (5.8 | )% | (14.1 | )% |
| **Balance  Sheet Data (at period end):**                      |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                    |       |                                                                            | $          | 1.8                                            |       |                                         |       | $ | 1.8 |   |   |   | n/a |   |   | $ | 3.3 |   | $ | 3.5 |   | $ | 0.6 |   | $ | 1.2 |   |
| Property and  equipment, net                                  |       |                                                                            | 22.0       |                                           |       |                                         | 22.0       |   |   |   | n/a |   |   | 22.6 |   | 14.8 |   | 15.0 |   | 13.9 |   |
| Total assets                                                  |       |                                                                            | 554.7      |                                           |       |                                         | 554.7      |   |   |   | n/a |   |   | 393.0 |   | 304.3 |   | 263.2 |   | 248.1 |   |
| Total liabilities                                             |       |                                                                            | 478.4      |                                           |       |                                         | 478.4      |   |   |   | n/a |   |   | 369.8 |   | 261.7 |   | 230.7 |   | 201.0 |   |
| Total debt(6)                                                 |       |                                                                            | 183.5      |                                           |       |                                         | 183.5      |   |   |   | n/a |   |   | 193.0 |   | 50.8 |   | 78.4 |   | 82.8 |   |
| Equity                                                        |       |                                                                            | 76.3       |                                           |       |                                         | 76.3       |   |   |   | n/a |   |   | 23.2 |   | 42.6 |   | 32.5 |   | 47.1 |   |

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(1)             Combined results for the year ended December 31,2005 is a non-GAAP measure and is presented here to provide the investor withadditional information for comparing year-over-year information.

(2)             Write-off of our investment in our on-line shippingbrokerage platform.

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(3)             We became subject to income tax expense upon theconversion of Global Montello Group LLC, a pass-through entity for federalincome tax purposes, to Global Montello Group Corp., a taxable entity forfederal income tax purposes, on October 5, 2005.

(4)             The sale of the Partnership’s Branded Gas Division toAlliance Energy Corp. in December 2001 for total cash proceeds of $6.0 millionresulted in a gain of approximately $2.8 million.

(5)             December 2001 sale of Branded Gas Division toAlliance Energy Corp. for total cash proceeds of $6.0 million and resulted in again of approximately $2.8 million.

(6)             In July 2004, Global Petroleum Corp. and certainother Slifka family entities executed a $51.0 million term loan agreement underwhich Global Companies LLC and Affiliates were guarantors. The proceeds of theloan were used, in part, to (a) finance the acquisition by GlobalPetroleum Corp. and certain other Slifka family entities of the ownershipinterests in Global Companies LLC and Affiliates from RYTTSA USA, Inc. and(b) refinance certain loans secured by the real estate assets of GlobalPetroleum Corp. and certain other Slifka family entities, including GlobalCompanies LLC and Affiliates. The term loan and associated financing costs andinterest expense are included in the financial statements of Global Partners LPincluded elsewhere in this report. Please read Note 8 of the Notes to thefinancial statements of Global Partners LP.

(7)             EBITDA is a non-GAAP financial measure which isdiscussed further below.

(8)             In July 2002, the National WeatherService at the Logan International Airport station in Boston, Massachusettsupdated its “normal heating degree day” measure. For comparison purposes, weare using the updated measure for periods prior to July 2002.

**Non-GAAP Financial Measure**

EBITDA is used as asupplemental financial measure by management and by external users of ourfinancial statements, such as investors, commercial banks and researchanalysts, to assess:

·       ourcompliance with certain financial covenants included in our debt agreements;

·       ourfinancial performance without regard to financing methods, capital structure,income taxes or historical cost basis;

·       ourability to generate cash sufficient to pay interest on our indebtedness and tomake distributions to our partners;

·       ouroperating performance and return on invested capital as compared to those ofother companies in the wholesale marketing and distribution of refinedpetroleum products business, without regard to financing methods and capitalstructure; and

·       theviability of acquisitions and capital expenditure projects and the overallrates of return of alternative investment opportunities.

EBITDA should not be considered an alternative to netincome, operating income, cash flow from operating activities or any othermeasure of financial performance or liquidity presented in accordance withGAAP. EBITDA excludes some, but not all, items that affect net income andoperating income, and these measures may vary among other companies. Therefore,EBITDA as presented below may not be comparable to similarly titled measures ofother companies.

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Thefollowing table presents a reconciliation of EBITDA to the most directlycomparable GAAP financial measures on a historical basis for each of the yearsindicated:

| ** **                                                             | ** ** | **Combined (1)**                                                           | ** ** | **Successor**                                  | ** ** | **Predecessor**                              | ** ** |
|------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                             | ** ** | **Year Ended  December 31,**                                          | ** ** | **October 4  through  December 31,** | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended December 31,** | ** ** |
| ** **                                                             | ** ** | **2005**                                                                        | ** ** | **2005**                                       | ** ** | **2005**                                     | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                                             | ** ** | **(dollars in millions except per unit amounts)** | ** ** |
| **Reconciliation of EBITDA to net income:**                            |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                             |       |                                                                            | $          | 18.1                                           |       |                                         |       | $ | 9.4 |   |   |   | $ | 8.7 |   |   | $ | 17.3 |   | $ | 16.0 |   | $ | 6.0 |   | $ | 20.6 |   |
| Add                                                                    |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                          |       |                                                                            | 3.9        |                                           |       |                                         | 1.0        |   |   |   | 2.9 |   |   | 3.2 |   | 2.4 |   | 2.2 |   | 1.5 |   |
| Interest expense                                                       |       |                                                                            | 10.0       |                                           |       |                                         | 2.7        |   |   |   | 7.3 |   |   | 4.7 |   | 2.0 |   | 2.2 |   | 3.0 |   |
| Income tax expense                                                     |       |                                                                            | 1.0        |                                           |       |                                         | 1.0        |   |   |   | — |   |   | — |   | — |   | — |   | — |   |
| EBITDA                                                                 |       |                                                                            | $          | 33.0                                           |       |                                         |       | $ | 14.1 |   |   |   | $ | 18.9 |   |   | $ | 25.2 |   | $ | 20.4 |   | $ | 10.4 |   | $ | 25.1 |   |
| **Reconciliation of EBITDA to cash flows from  operating activities:** |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flow from operating activities                                    |       |                                                                            | $          | (28.4                                          | )          |                                         |       | $ | (34.1 | ) |   |   | $ | 5.7 |   |   | $ | (82.0 | ) | $ | 38.6 |   | $ | 27.6 |   | $ | 27.4 |   |
| Add                                                                    |       |                                                                            |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in working capital                                 |       |                                                                            | 61.4       |                                           |       |                                         | 48.2       |   |   |   | 13.2 |   |   | 107.2 |   | (18.2 | ) | (17.2 | ) | (2.3 | ) |
| EBITDA                                                                 |       |                                                                            | $          | 33.0                                           |       |                                         |       | $ | 14.1 |   |   |   | $ | 18.9 |   |   | $ | 25.2 |   | $ | 20.4 |   | $ | 10.4 |   | $ | 25.1 |   |

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(1)          Combined results for theyear ended December 31, 2005 is a non-GAAP measure and is presented here toprovide the investor with additional information for comparing year-over-yearinformation.

Please read “Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations—Liquidity and CapitalResources—Cash Flows” for additional information.

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**Item 7.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations

*Thefollowing discussion and analysis of financial condition and results ofoperations of Global Partners LP should be read in conjunction with thehistorical consolidated financial statements of Global Partners LP and thenotes thereto included elsewhere in this report.*

**Overview**

***General***

We own, control or have access to one of the largestterminal networks of refined petroleum products in New England. We are one ofthe largest wholesale distributors of distillates (such as home heating oil,diesel and kerosene), gasoline, and residual oil and bunker fuel towholesalers, retailers and commercial customers in New England. We are also oneof the largest wholesale marketers of home heating oil in New England.

We purchase our refined petroleum products primarilyfrom domestic and foreign refiners, traders and producers and sell theseproducts in two segments, Wholesale and Commercial. Like most independentmarketers of refined petroleum products, we base our pricing on spot physicalprices and routinely use the NYMEX or derivatives to hedge our commodity riskinherent in buying and selling energy commodities. Through the use of regulatedexchanges or derivatives, we maintain a position that is substantially balancedbetween purchased volumes and sales volumes or future delivery obligations. Weearn a margin by selling the product for physical delivery to third parties.

On October 4, 2005, we closed our initial publicoffering of 5,635,000 common units (including 735,000 common units issuedpursuant to the underwriters’ exercise of their over-allotment option)representing a 48.9% limited partner interest in us. In connection with theclosing of this offering, (1) Global Companies LLC distributed $45.3million in cash to those affiliates of the Slifka family holding 100% of theownership interests in Global Companies LLC and (2) Global PetroleumCorp., Montello Oil Corporation, Larea Holdings, LLC, Larea Holdings II, LLC,Chelsea Terminal Limited Partnership and Sandwich Terminal, L.L.C. contributedall of their ownership interests in Global Companies LLC and Affiliates to us.

Proceeds from the sale of common units in the initialpublic offering were used in part to repay $45.3 million of borrowings underour then-existing revolving credit facility and $51.0 million of outstandingindebtedness under a term loan of Global Petroleum Corp. and certain otherSlifka family entities guaranteed by affiliates of Global Petroleum Corp.,including Global Companies LLC and Affiliates. Please read “Item 5. Market ForRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities—Use of Proceeds From Registered Securities.”

At October 3, 2005 wehad a terminal facility agreement with Global Petroleum Corp. expiring on December 31,2008. In connection with the initial public offering, the term of thisagreement was extended until December 31, 2013. Pursuant to a shared servicesagreement, Global Petroleum Corp. provides certain terminal operatingmanagement services to us, and we provide certain administrative, accountingand information processing services to Global Petroleum Corp.

***Products and Operational Structure***

Our products include distillates, gasoline andresidual oil and bunker fuel. The distillates we sell are used primarily forspace heating of residential and commercial buildings and as fuel for trucksand off-road construction equipment. We sell unbranded gasoline, diesel andheating oil under agreements with major suppliers of refined petroleum products.We sell residual oil to major housing units, such as public housingauthorities, colleges and hospitals and large industrial facilities that useprocessed steam in their 

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manufacturing processes. Wesell bunker fuel, which we can custom blend, to cruise ships, bulk carriers andfishing fleets.

Our business isdivided into two segments:

·        *Wholesale.*This segment includes sales ofdistillates, unbranded gasoline and residual oil to home heating oil retailers,retail gasoline station operators and wholesale distributors.

·        *Commercial.*This segment includes salesand deliveries of distillates, unbranded gasoline, residual oil and smallamounts of natural gas to customers in the public sector and to largecommercial and industrial customers, either through a competitive biddingprocess or through contracts of various terms. This segment also purchases,custom blends, sells and delivers bunker fuel and diesel to cruise ships, bulkcarriers and fishing fleets delivered by bunker barges.

Our business activitiesare substantially comprised of purchasing, terminalling, storing and sellingrefined petroleum products. We believe that the combination of our terminallingand storage activities, together with our marketing activities, provides abalance that has a stabilizing effect on our results of operations and cashflow. In a contango market (when product prices for future deliveries arehigher than for current deliveries), we may use our storage capacity to improveour margins by storing products we have purchased at lower prices in thecurrent month for delivery to customers at higher prices in future months. In abackwardated market (when product prices for future deliveries are lower thanfor current deliveries) because of our high turnover of inventory, we are ableto minimize our inventories and commodity risk while attempting to maintain orincrease net product margins.

***Outlook***

Thissection identifies certain risks and certain economic or industry-widefactors that may affect our financial performance and results of operations inthe future, both in the short-term and in the long-term. Our primary short-termconcerns and uncertainties are as follows:

·        *As a public company, we will incur significant legal, accounting andother expenses that we did not incur as a private company.* We becamea public company on September 28, 2005. Prior to that, we had no historyoperating as a public company. In addition, the Sarbanes-Oxley Act of 2002, aswell as new rules subsequently implemented by the Securities and ExchangeCommission and the New York Stock Exchange, has required changes in corporategovernance practices of public companies. We also expect these new rules andregulations to make it more difficult and more expensive for our generalpartner to obtain director and officer liability insurance, and we may have toreduce policy limits and coverage or incur substantially higher costs to obtainthe same or similar coverage as we have obtained historically. We are currentlyevaluating and monitoring developments with respect to these new rules, and wecannot predict or estimate the amount of additional costs we may incur or thetiming of such costs.

·        *We commit substantial resources to pursuing acquisitions, though thereis no certainty that we will successfully complete any acquisitions or receivethe economic results we anticipate from completed acquisitions.* Consistentwith our business strategy, we are continuously engaged in discussions withpotential sellers of terminalling, storage and/or marketing assets and relatedbusinesses. In an effort to prudently and economically leverage our asset base,knowledge base and skill sets, management has also expanded its efforts to pursuebusinesses that are closely related to or significantly intertwined with ourexisting lines of business. Growth in our cash flow per unit may depend on ourability to make accretive acquisitions. We may be unable to make such accretiveacquisitions for a number of reasons, including the following: (1) we areunable to identify attractive acquisition candidates or negotiate acceptablepurchase contracts with them; (2) we are unable to raise financing forsuch acquisitions on economically acceptable terms; or (3) we are outbidby competitors. In addition, we 

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may consummateacquisitions, which at the time of consummation we believe will be accretive,but which ultimately may not be accretive. If any of these events were tooccur, our future growth would be limited. We can give no assurance that ourcurrent or future acquisition efforts will be successful or that any suchacquisition will be completed on terms that are favorable to us. Our results ofoperations and financial condition, as well as those of our competitors, willdepend in part upon certain economic or industry-wide factors, including thefollowing:

·        *Warmer weather conditions could adversely affect ourresults of operations and financial condition.*Because we supplydistributors whose customers depend on home heating oil and residual oil forspace heating purposes during the winter, weather conditions have a significantimpact on the demand for both home heating oil and residual oil. As a result,warmer than normal temperatures during the first and fourth calendar quartersin one or more regions in which we operate can decrease the total volume wesell and the gross profit realized on those sales and, consequently, couldadversely affect our results of operations.

·        *Our financial results are seasonal and generallybetter in the first and fourth quarters of the calendar year.*Demandfor some of our refined petroleum products, specifically home heating oil andresidual oil for space heating purposes, is generally higher during November throughMarch than during April through October. We obtain a significantportion of our sales during these winter months. Therefore, our results ofoperations for the first and fourth calendar quarters are generally better thanfor the second and third quarters. With lower cash flow during the second andthird calendar quarters, we may be required to borrow money in order to pay theminimum quarterly distribution to our unitholders.

·        *Energy efficiency, new technology and alternativefuels, natural gas in particular, could reduce demand for our products.*Increasedconservation and technological advances have adversely affected the demand forhome heating oil and residual oil. Consumption of residual oil has steadilydeclined over the last three decades. We could face additional competition fromalternative energy sources as a result of future government-mandated controlsor regulation further promoting the use of cleaner fuels. Due in part tosupport for conversion to natural gas on environmental grounds, some industrialresidual oil users have switched to natural gas. Those end users who aredual-fuel users have the ability to switch between residual oil and natural gas.During a period of increasing residual oil prices relative to the prices ofnatural gas, dual-fuel customers may switch to natural gas, or over thelong-term, may convert to natural gas. Such switching or conversion could havean adverse effect on our results of operations and financial condition.

·        *New, stricter environmental laws and regulations could significantlyincrease our costs, which could adversely affect our results of operations andfinancial condition.* Our operations are subject to federal, stateand local laws and regulations regulating product quality specifications andother environmental matters. The trend in environmental regulation is towardsmore restrictions and limitations on activities that may affect theenvironment. Our business may be adversely affected by increased costs andliabilities resulting from such stricter laws and regulations. We try toanticipate future regulatory requirements that might be imposed and to planaccordingly to remain in compliance with changing environmental laws andregulations and to minimize the costs of such compliance. However, there can beno assurances as to the timing and type of such changes in existing laws or thepromulgation of new laws or the amount of any required expenditures associatedtherewith.

·        *Consolidation of the New England supply network.*Inrecent years, major terminals have been acquired and their former owners havereduced or eliminated operations in the wholesale market. The largestterminals, which form the core of the region’s supply network, are stilloperating but are owned by fewer companies.

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**Results ofOperations**

***Evaluating Our Resultsof Operations***

Our management uses a variety of financial andoperational measurements to analyze our performance. These measurementsinclude: (1) net product margin, (2) gross profit, (3) operatingexpenses, (4) selling, general and administrative expenses (“SG&A”), (5) heatingdegree days, (6) EBITDA and (7) distributable cash flow.

*Net Product Margin*

We view net product marginas an important performance measure of the core profitability of our operations.We review net product margin monthly for consistency and trend analysis. Wedefine net product margin as our sales minus product costs. Sales include salesof distillates, unbranded gasoline, residual oil and bunker fuel and naturalgas. Product costs include the cost of acquiring the refined petroleum productsthat we sell and all associated costs including shipping and handling costs tobring such products to the point of sale.

*Gross Profit*

We define gross profit asour sales minus product costs and terminal depreciation expense allocated tocost of sales. Sales include sales of distillates, unbranded gasoline, residualoil and bunker fuel and natural gas. Product costs include the cost ofacquiring the refined petroleum products that we sell and all associated coststo bring such products to the point of sale.

*Operating Expenses*

Operating expenses arecosts associated with the operation of the terminals used in our business. Leasepayments and storage expenses, maintenance and repair, utilities, taxes, laborand labor-related expenses comprise the most significant portion of ouroperating expenses. These expenses remain relatively stable independent of thevolumes through our system but fluctuate slightly depending on the activitiesperformed during a specific period.

*Selling, General and Administrative Expenses*

Our SG&A expensesinclude marketing costs, corporate overhead, employee salaries and benefits,pension and 401(k) plan expenses, discretionary bonuses, non-interestfinancing costs, professional fees and information technology expenses. Employee-relatedexpenses including employee salaries, discretionary bonuses and related payrolltaxes, and benefits, pension and 401(k) plan expenses are paid by ourgeneral partner which, in turn, is reimbursed for these expenses by us. We willincur additional expenses related to being a public company, most of which willbe the result of increased accounting and legal expenses.

*Degree Day*

A “degree day” is anindustry measurement of temperature designed to evaluate energy demand andconsumption. Degree days are based on how far the average temperature departsfrom a human comfort level of 65°F. Each degree of temperature above 65°F iscounted as one cooling degree day, and each degree of temperature below 65°F iscounted as one heating degree day. Degree days are accumulated each day overthe course of a year and can be compared to a monthly or a long-term(multi-year) average, or normal, to see if a month or a year was warmer orcooler than usual. Degree days are officially observed by the National Weather Serviceand officially archived by the National Climatic Data Center. For purposes ofevaluating our results of operations, we use the normal heating degree dayamount as reported by the National Weather Service at its Logan InternationalAirport station in Boston, Massachusetts.

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*EBITDA*

EBITDA is used as asupplemental financial measure by management and by external users of ourfinancial statements, such as investors, commercial banks and researchanalysts, to assess:

·        ourcompliance with certain financial covenants included in our debt agreements;

·        ourfinancial performance without regard to financing methods, capital structure,income taxes or historical cost basis;

·        ourability to generate cash sufficient to pay interest on our indebtedness and tomake distributions to our partners;

·        ouroperating performance and return on invested capital as compared to those ofother companies in the wholesale marketing and distribution of refinedpetroleum products business, without regard to financing methods and capitalstructure; and

·        theviability of acquisitions and capital expenditure projects and the overallrates of return of alternative investment opportunities.

EBITDA should not beconsidered an alternative to net income, operating income, cash flow from operatingactivities or any other measure of financial performance or liquidity presentedin accordance with GAAP. EBITDA excludes some, but not all, items that affectnet income and operating income, and these measures may vary among othercompanies. Therefore, EBITDA as presented below may not be comparable tosimilarly titled measures of other companies.

*Distributable CashFlow*

Distributable cash flowalso is an important non-GAAP financial measure for our limited partners sinceit serves as an indicator of our success in providing a cash return on theirinvestment. Specifically, this financial measure indicates to investors whetheror not we are generating cash flows at a level that can sustain or support anincrease in our quarterly cash distribution. Distributable cash flow is also aquantitative standard used by the investment community with respect to publiclytraded partnerships. However, distributable cash flow is not a generallyaccepted accounting principle financial measure and should not be considered asan alternative to net income, cash flow from operations, or any other measureof financial performance presented in accordance with accounting principlesgenerally accepted in the United States. In addition, our distributable cashflow may not be comparable to distributable cash flow or similarly titledmeasures of other companies. The generally accepted accounting measure mostdirectly comparable to distributable cash flow is net cash provided byoperating activities.

***Years Ended December 31, 2005, 2004 and 2003***

·        Inthe year ended December 31, 2005, we completed our initial publicoffering, generating $124.0 million in gross proceeds from the sale of over 5.6million common units representing limited partner interests of us (includingcommon units sold upon exercise of the underwriters’ over-allotment option). Wehad increased gross profits and improved margins across both our wholesale andcommercial segments. Commodity prices continued to rise in 2005. From December 31,2004 to December 31, 2005, published prices for distillates, gasoline andresidual oil increased 41%, 57% and 77%, respectively. Temperatures were 4.4%lower than normal as measured by aggregate heating degree days. During 2005 wecontinued to concentrate on expanding our distillate, gasoline, residual oiland bunker fuel businesses. In accordance with this initiative, in December 2005,we entered into an agreement to purchase a refined petroleum products terminalin Bridgeport, Connecticut from Connecticut Petroleum Wholesalers and one ofits affiliates.  This terminal hasstorage for 109,000 

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barrels of refinedproducts, including distillates and additional products. The acquisition isexpected to close by the second quarter of 2006, subject to due diligence andother customary conditions.

The year ended December 31, 2004 can becharacterized as a year of consolidation in an environment of rising productprices and temperatures that were 2.1% lower than normal as measured byaggregate heating degree days. During this period, we concentrated on expandingour distillate, gasoline and residual oil businesses in the markets that we hadentered into during 2003.

Rising product prices have been a significant factorin our sales increases. From December 31, 2003 to December 31, 2004,published prices for distillates, gasoline and residual oil increasedapproximately 35%, 15% and 6%, respectively.

Thefollowing table presents our EBITDA and distributable cash flow, our grossprofit, sales, volume and net product margin by segment, and information on theweather conditions for the years ended December 31, 2005, 2004 and 2003:

| ** **                                           | ** ** | **Combined(1)**                                           | ** ** | **Successor**         | ** ** | **Predecessor**     | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------|------------|---------------------|------------|
| ** **                                           | ** ** | ** **                                                | ** ** | **October 4**    | ** ** | **January 1**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | **Year Ended**                                       | ** ** | **through**           | ** ** | **through**         | ** ** | **Year Ended** | ** ** |
| ** **                                           | ** ** | **December 31,**                                     | ** ** | **December 31,** | ** ** | **October 3,** | ** ** | **December 31,** | ** ** |
| ** **                                           | ** ** | **2005**                                                  | ** ** | **2005**              | ** ** | **2005**            | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                           | ** ** | **(gallons and dollars in millions)** | ** ** |
| EBITDA(2)                                            |       |                                                      | $          | 33.0                  |       |                |       | $ | 14.1 |   |   |   | $ | 18.9 |   |   |   | $ | 25.2 |   |   | $ | 20.4 |   |
| Distributable cash flow(3)                           |       |                                                      | $          | 9.6                   |       |                |       | $ | 9.6 |   |   |   | — |   |   |   | — |   |   | — |   |
| **Wholesale Segment:**                               |       |                                                      |       |                  |       |                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Volume (gallons)                                     |       |                                                      | 2,309.3    |                  |       |                | 660.2      |   |   |   | 1,649.1 |   |   |   | 2,539.5 |   |   | 2,467.1 |   |
| Sales                                                |       |                                                      | $          | 3,622.8               |       |                |       | $ | 1,115.2 |   |   |   | $ | 2,507.6 |   |   |   | $ | 2,863.2 |   |   | $ | 2,170.1 |   |
| Net product margin(4)                                |       |                                                      |       |                  |       |                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Distillates                                          |       |                                                      | $          | 41.9                  |       |                |       | $ | 16.4 |   |   |   | $ | 25.5 |   |   |   | $ | 36.2 |   |   | $ | 30.1 |   |
| Gasoline                                             |       |                                                      | 14.0       |                  |       |                | 2.4        |   |   |   | 11.6 |   |   |   | 9.6 |   |   | 5.0 |   |
| Residual oil                                         |       |                                                      | 22.9       |                  |       |                | 7.1        |   |   |   | 15.8 |   |   |   | 16.4 |   |   | 18.8 |   |
| Total                                                |       |                                                      | $          | 78.8                  |       |                |       | $ | 25.9 |   |   |   | $ | 52.9 |   |   |   | $ | 62.2 |   |   | 53.9 |   |
| **Commercial Segment:**                              |       |                                                      |       |                  |       |                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Volume (gallons)                                     |       |                                                      | 364.6      |                  |       |                | 97.4       |   |   |   | 267.2 |   |   |   | 389.3 |   |   | 383.5 |   |
| Sales                                                |       |                                                      | $          | 423.0                 |       |                |       | $ | 133.7 |   |   |   | $ | 289.3 |   |   |   | $ | 324.4 |   |   | $ | 308.4 |   |
| Net product margin(4)                                |       |                                                      | 14.6       |                  |       |                | 3.4        |   |   |   | 11.2 |   |   |   | 15.1 |   |   | 14.4 |   |
| **Combined sales and net product margin:**           |       |                                                      |       |                  |       |                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                                                |       |                                                      | $          | 4,045.8               |       |                |       | $ | 1,248.9 |   |   |   | $ | 2,796.9 |   |   |   | $ | 3,187.6 |   |   | $ | 2,478.5 |   |
| Net product margin(4)                                |       |                                                      | 93.4       |                  |       |                | 29.3       |   |   |   | 64.1 |   |   |   | 77.3 |   |   | 68.3 |   |
| Depreciation allocated to cost of sales              |       |                                                      | 1.7        |                  |       |                | 0.4        |   |   |   | 1.3 |   |   |   | 1.4 |   |   | 1.2 |   |
| **Combined  gross profit:**                          |       |                                                      | $          | 91.7                  |       |                |       | $ | 28.9 |   |   |   | $ | 62.8 |   |   |   | $ | 75.9 |   |   | $ | 67.1 |   |
| **Weather conditions:**                              | ** ** |                                                      |       |                  |       |                |       |   |   |   |   |   | ** ** |   |   |   | ** ** | ** ** | ** ** |
| Normal heating  degree days                          |       |                                                      | 5,630      |                  |       |                | 1,875      |   |   |   | 3,755 |   |   |   | 5,630 |   |   | 5,630 |   |
| Actual heating  degree days                          |       |                                                      | 5,875      |                  |       |                | 1,876      |   |   |   | 3,999 |   |   |   | 5,748 |   |   | 6,028 |   |
| Variance from  normal heating degree days            |       |                                                      | 4.4%       |                  |       |                | —     |   |   |   | 6.5% |   |   |   | 2.1% |   |   | 7.1% |   |
| Variance from prior year  actual heating degree days |       |                                                      | 2.2%       |                  |       |                | 0.6%       |   |   |   | 3.0% |   |   |   | (4.6%) |   |   | 14.2% |   |

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(1)          Combined results for theyear ended December 31, 2005 is a non-GAAP measure and is presented hereto provide the investor with additional information for comparingyear-over-year information.

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(2)          EBITDA is a non-GAAPfinancial measure which is discussed in Item 6. Selected Financial Data.

(3)          On October 4, 2005,we completed our initial public offering of common units. Accordingly,distributable cash flow is presented for the period from October 4, 2005through December 31, 2005.

Thefollowing table presents a reconciliation of distributable cash flow to themost directly comparable GAAP financial measures, on a historical basis foreach of the periods indicated:

| ** **                                                    | ** ** | **Combined***                          | ** ** | **Successor**                                  | ** ** | **Predecessor**                              | ** ** |
|---------------------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------|------------|----------------------------------------------|------------|
| ****                                                          | ** ** | **Year Ended  December 31,** | ** ** | **October 4  through  December 31,** | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                                                    | ** ** | **2005**                               | ** ** | **2005**                                       | ** ** | **2005**                                     | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                    | ** ** | **(dollars in millions)**    | ** ** |
| **Reconciliation of distributable cash flow to net  income:** |       |                                   |       |                                           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                    |       |                                   | $          | 9.4                                            |       |                                         |       | $ | 9.4 |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |
| Depreciation and amortization                                 |       |                                   | 1.0        |                                           |       |                                         | 1.0        |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |
| Capital expenditures                                          |       |                                   | (0.8       | )                                              |       |                                         | (0.8       | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |
| Distributable  cash flow                                      |       |                                   | $          | 9.6                                            |       |                                         |       | $ | 9.6 |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |

 

*                    Combined resultsfor the year ended December 31, 2005 is a non-GAAP measure and ispresented here to provide the investor with additional information forcomparing year-over-year information.

(4)          Net product margin is asupplemental non-GAAP financial measure used by management and external usersof our financial statements to assess product costs associated with ourbusiness. The table above reconciles net product margin on a combined basis togross profit, a directly comparable GAAP measure.

In 2005 as compared to 2004, our sales increased by$858.2 million, or 27%, to $4,045.8 million. The increase was driven by anincrease in refined petroleum product prices despite a 254.9 million gallon, or8.7% decrease, to 2,673.9 million gallons in aggregate volume of product sold. Thedecrease in aggregate volume sold includes a 250.3 million gallon decrease indistillates, a 3.9 million gallon increase in gasoline and a 5.5 million gallondecrease in residual oil. Our gross profit for 2005 as compared to 2004increased by $15.8 million, or 20.8%, to $91.7 million.

In 2004 as compared to 2003, our sales increased by$709.1 million, or 28.6%, to $3,187.6 million. The increase wasdriven by an increase in refined petroleum product prices and a78.1 million gallon, or 2.7%, increase to 2,928.8 million gallons inaggregate volume of product sold. The increase in aggregate volume soldconsists in part of a 65 million gallon increase in gasoline soldresulting from a joint marketing arrangement that we entered into in 2003 witha major integrated oil company. Growth in sales to both new and existingcustomers helped to offset the impact of a year that was approximately 4.6%warmer than the previous year. Our gross profit in 2004 increased by$8.8 million, or 13.1%, to $75.9 million. The increase primarilyresulted from growth in volume sold and an improvement in our gross profit pergallon primarily as a result of lower distillate supply costs.

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*Wholesale Segment*

*Distillates.*   In2005 as compared to 2004, Wholesale distillate sales increased by 22.2% due toan increase in distillate prices despite a 14.8% decrease in distillate volumesold. We attribute the decrease in volume sold to the expiration of supplycontracts in the ordinary course of business and a reduction in bulk salestransactions in various markets. Our net product margin contribution fromdistillate sales increased by $5.7 million, or 15.7%, to $41.9 million as aresult of increased blending activities and our ability to pass through tocustomers our increased costs related to sales. Additionally, although thetwelve month period ended December 31, 2005 was 2.2% colder than the sametwelve month period in 2004, the three month period ended March 31, 2005,which comprises approximately one-half of the winter heating oil season in NewEngland, was 1.7% warmer than the three month period ended March 31, 2004.

In 2004 as compared to2003, our Wholesale distillate sales increased by 27% due to an increase indistillate prices and a 3% increase in distillate volume sold. We attribute theincrease in volume sold to our expansion into Portland, Maine, Long Island andAlbany, New York continued growth within our existing customer base in the Northeastand a wider network of inland terminals within New England. The resulting gainin volume sold offset the impact of a warmer year. Net product margincontribution from distillate sales increased by $6.1 million, or 20.3%, to$36.2 million due to the conversion of lower grade heating oil productsthrough custom blending processes into products meeting customer specificationsand to the increase in volume of distillates sold.

*Gasoline.*   In2005 as compared to 2004, Wholesale gasoline sales increased by 32.6% due to anincrease in gasoline prices. Our net product margin from gasoline salesincreased by $4.4 million, or 45.8%, to $14.0 million. We attribute thisincrease in net product margin to an increase in our volume of sales as well asa focus on sales to higher margin customers and our expanded use of our bulkstorage capacity to store product in a contango market.

During 2002, our Wholesalegasoline business was marketed predominantly out of the Revere terminal. Our2003 joint marketing arrangement allowed us to market gasoline through anetwork of terminals located throughout New England and to decrease ourinventory holdings at the Revere terminal. In 2004, we expanded our joint gasolinemarketing efforts to encompass virtually the entire New England marketingregion.

In 2004 as compared to2003, our Wholesale gasoline sales increased by 43% due to an increase ingasoline prices and a 5% increase in gasoline volume sold. We attribute theincrease in volume sold to the expansion of our joint gasoline marketingefforts. Net product margin contribution from gasoline sales increased by$4.6 million, or 92.0%, to $9.6 million which we attribute to theincrease in volume of gasoline sold and the effects of the joint marketingarrangement entered into in 2003.

*Residual Oil.*   In2005 as compared to 2004, Wholesale residual oil sales increased by 58.9% as aresult of an increase in residual oil prices and a 7.7% increase in residualoil volume sold. Net product margin contribution from residual oil salesincreased by $6.5 million, or 39.6%, to $22.9 million, primarily due to theincrease in our per unit margin of residual oil sold.

In 2004 as compared to2003, our Wholesale residual oil sales were unchanged as a result of anincrease in residual oil prices and a 12% decrease in residual oil volume sold.We attribute the decline in volume of residual oil sold to reduced customerheat load requirements due to warmer weather conditions and reduced demand forour products due to the closure of plants and/or reductions in production bycertain cyclical industry participants, such as paper mills, in our territory.

*Commercial Segment*

In our Commercial segment,residual oil accounted for approximately 84.1%, 81.8% and 87.8% of total volumesold in 2005, 2004 and 2003, respectively. Distillates, gasoline and naturalgas accounted for the remainder of the total volume sold.

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In 2005 as compared to2004, our Commercial residual oil sales increased by 33.4% due to an increasein the price of residual oil despite a 3.7% decrease in volume sold. Weattribute the decline in volume sold to the closure of plants and/or reductionsin production by certain cyclical industry participants in our territory. Thisdecrease in volume sold was offset in part by an increase in the volume ofbunker fuel sold as a result of our continuing efforts to develop our currentbunker business and expand into new bunker markets.

In 2004 as compared to2003, our Commercial residual oil sales decreased by 5% due to a 5% decrease involume sold. We attribute the decline in volume sold to the closure of plantsand/or reductions in production by certain cyclical industry participants, suchas paper mills, in our territory and the impact of a warmer year during whichtemperatures averaged 4.6% higher than in 2003. This decrease in volume soldwas offset in part by an increase in the volume of bunker fuel sold as a resultof our continuing efforts to develop and expand our bunker business. The effectsof switching from residual oil to natural gas in 2004 were immaterial asnatural gas prices remained high relative to residual oil prices.

*Expenses*

In 2005 as compared to2004, our operating expenses increased by $0.1 million, or 0.5%, to $19.7 million.The primary factors contributing to this****increaseinclude $0.4 million of operating expenses at the terminal in Chelsea,Massachusetts and a $0.5 million increase in rent for additional tankage at theCapitol Terminal in East Providence, Rhode Island. These expenses were in partoffset by a $0.3 million decrease in real estate taxes at New Bedford andrental income of $0.5 million at the terminal in Revere, Massachusetts.

In 2004 as compared to2003, our operating expenses increased by $0.8 million, or 4.3%, to$19.6 million. The primary factors contributing to this increase include$0.5 million of new operating expenses at the Wethersfield terminal, whichwe acquired in 2004, a real estate tax commitment of $0.3 million withrespect to the New Bedford terminal operations and a $0.2 million rentincrease for the Gateway terminal.

In 2005 as compared to2004, our SG&A expense increased by $6.9 million, or 20.5%, to $40.3million, due primarily to the payment by our predecessor, Global Companies,LLC, of approximately $3.1 million as a special bonus for services rendered bycertain officers and employees in connection with the organization of GlobalPartners LP. In addition, bonuses, executive salaries and owner-relatedexpenses increased by $2.1 million, legal, consulting and banking services andfees increased by $0.4 million, an additional $0.5 million was incurred foremployee expenses related to expansion of marketing operations, and anadditional $0.1 million was incurred for the natural gas marketing operation. Employee-relatedexpenses including employee salaries, discretionary bonuses and related payrolltaxes, and benefits, pension and 401(k) plan expenses are paid by ourgeneral partner which in turn, is reimbursed for these expenses by us. SG&Aexpense for the twelve months ended December 31, 2004 was diminished by a$0.3 million gain on the sale of a residence used to house a foreign executiveofficer prior to the purchase by Global Petroleum Corp. and certain otherSlifka family entities of the ownership interests in Global Companies LLC andAffiliates from RYTTSA USA, Inc. Of the foregoing increases in expenses,$3.1 million of a special bonus for services rendered by certain officers anddirectors, $0.3 million of legal, consulting and banking services and fees, and$0.1 million of expenses related to the expansion of our marketing operationsare non-recurring expenses.

In 2004 as compared to2003, our SG&A expense increased by $3.2 million, or 10.6%, to $33.5 milliondue to increases in discretionary bonuses and executive salaries of$1.5 million, an additional $0.5 million incurred for the expansionof marketing operations, an additional $0.8 million incurred due to thefirst full year of operations of the natural gas marketing business, a$0.5 million settlement paid to the U.S. Environmental Protection Agencyand $0.2 million of increases in health insurance costs, partially offsetby 

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a$1.1 million decrease in 2004 due to the discontinuation of a project todevelop an on-line shipping brokerage platform. Please read “Item 3. LegalProceedings.”

In 2005 as compared to2004, our amortization expense increased by $0.8 million to $1.6 million. Thisincrease is a result of the purchase by Global Petroleum Corp. and certainother Slifka family entities of the ownership interests in Global Companies LLCand Affiliates from RYTTSA USA, Inc.

In 2004 as compared to2003, our amortization expense increased by $0.8 million to$0.8 million. This increase is a result of push down accountingadjustments, as required by GAAP, related to the purchase by Global PetroleumCorp. and certain other Slifka family entities of the ownership interests inGlobal Companies LLC and Affiliates from RYTTSA USA, Inc.

In 2005 as compared to2004, our interest expense****increasedby $5.3 million, or 112%, to $10.0 million. We attribute $4.2 million of thisincrease to a rise in the market prices for products and the resultingincreased costs of carrying inventory and accounts receivable and, as a resultof Push Down Accounting adjustments, as required by GAAP, we attribute $1.1million to interest expense on the $51.0 million term loan that was used byGlobal Petroleum Corp. and certain other Slifka family entities to financetheir acquisition of ownership interests in Global Companies LLC and Affiliatesfrom RYTTSA USA, Inc.

In 2004 as compared to2003, our interest expense in 2004 increased by $2.7 million, or 134.1%,to $4.7 million. We attribute this change to increases in market pricesfor products and the resulting increased costs of carrying inventory andaccounts receivable. Our interest expense in 2003 as compared to 2002 wassubstantially unchanged. Our average weekly balance of borrowings in 2004 underour then-existing revolving credit facility was $97.2 million.

*Other Expenses*

Certain affiliates of theSlifka family acquired certain outstanding interests in certain split dollarlife insurance policies from Global Companies LLC and Affiliates for theaggregate amount of premiums that had been paid on these policies by GlobalCompanies LLC and Affiliates on behalf of certain directors and their immediatefamily members. Additionally, one split dollar life insurance policy was surrendered.At the time of surrender, the cash value of the policy was less than the amountof premiums paid on it by Global Companies LLC and Affiliates, resulting in aloss of approximately $1.1 million in the quarter ended December 31, 2005.

**Liquidityand Capital Resources**

***Liquidity***

In connection with theclosing of our initial public offering on October 4, 2005, we, our generalpartner, our operating company and Global Companies LLC and Affiliates enteredinto a four-year senior secured credit agreement in an aggregate principalamount of up to $400.0 million and repaid the remaining outstanding borrowingsunder our then-existing revolving credit facility. In November 2005, thecredit agreement was amended to increase availability thereunder to anaggregate of $500.0 million. Please read “—Credit Agreement.”

Our primary liquidityneeds are to fund our capital expenditures and our working capitalrequirements. Cash generated from operations and our working capital revolvingcredit facility provides our primary sources of liquidity. At December 31,2005, we had working capital of approximately $228.7 million.

On February 14, 2006,we paida cash distribution of $4.7 million for the fourth quarter of 2005 to ourcommon and subordinated unitholders of record as of the close of business on February 3,2006. The distribution that was paid to unitholders was prorated to $0.4111 perunit, reflecting the reduced period of time from the closing of our initialpublic offering on October 4, 2005 through December 31, 2005.

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In December 2005, weentered into an agreement to purchase a refined petroleum products terminal inBridgeport, Connecticut from Connecticut Petroleum Wholesalers and one of itsaffiliates. The acquisition is expected to close by the second quarter of 2006,subject to due diligence and other customary conditions.

***ContractualObligations***

We have contractualobligations that are required to be settled in cash. The amounts of ourcontractual obligations at December 31, 2005 are as follows:

| ** **                   | ** ** | **Payments due by period** | ** ** |
|------------------------------|------------|-------------------------------------------|------------|
| ** **                   | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **More than  5 years** | ** ** |
| ** **                   | ** ** | **(dollars in thousands)**      | ** ** |
| Revolver loan  obligations   |       | $                                         | 217,965.4  |   | $ | 9,697.4 |   | $ | 19,394.9 |   | $ | 188,873.1 |   | $ | — |   |
| Long-term debt  obligations  |       | 2,109.9                                   |       | 418.0 |   | 1,691.9 |   | — |   | — |   |
| Operating lease  obligations |       | 69,997.0                                  |       | 13,027.7 |   | 20,250.8 |   | 14,703.7 |   | 22,014.8 |   |
| Other long-term  liabilities |       | 7,401.9                                   |       | 325.8 |   | 711.5 |   | 936.4 |   | 5,428.2 |   |
| Total                        |       | $                                         | 297,474.2  |   | $ | 23,468.9 |   | $ | 42,049.1 |   | $ | 204,513.2 |   | $ | 27,443.0 |   |

 

In addition to theobligations described in the above table, we have minimum volume purchaserequirements at December 31, 2005. Pricing is based on spot prices at timeof purchase. Please read Note 11, Commitments and Contingencies,****of the notes to the financial statementswith respect to purchase commitments and sublease information related tocertain lease agreements.

***CapitalExpenditures***

Our terminallingoperations require investments to expand, upgrade or enhance existingoperations and to meet environmental and operations regulations. Our capitalrequirements primarily consist of maintenance capital expenditures and capitalimprovement expenditures. Maintenance capital expenditures represent capitalexpenditures to replace partially or fully depreciated assets to maintain theoperating capacity of, or sales generated by, existing assets and extend theiruseful lives such as expenditures required to maintain equipment reliability,tankage and pipeline integrity and safety, and to address environmental regulations.Capital improvement expenditures include expenditures to acquire assets to growour business and to expand existing facilities, such as projects that increaseoperating capacity by increasing tankage or adding terminals. Repair andmaintenance expenses associated with existing assets that are minor in natureand do not extend the useful life of existing assets are charged to operatingexpenses as incurred.

During the twelve monthsended December 31, 2005, we incurred a total of $1.8 million in maintenancecapital expenditures, of which approximately 16% was related to environmentalmatters.

We anticipate that thesemaintenance capital expenditures will be funded with cash generated byoperations. We anticipate that future capital improvement requirements will beprovided through long-term borrowings or other debt financings and/or equityofferings. We believe that we have sufficient liquid assets, cash flow fromoperations and borrowing capacity under our credit agreement to meet ourfinancial commitments, debt service obligations, contingencies and anticipatedcapital expenditures. However, we are subject to business and operational risksthat could adversely affect our cash flow. A material decrease in our cashflows would likely produce a corollary adverse effect on our borrowingcapacity.

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***Cash Flows***

| ** **                                           | ** ** | **Combined(1)**                      | ** ** | **Successor**         | ** ** | **Predecessor**     | ** ** |
|------------------------------------------------------|------------|--------------------------------------|------------|-----------------------|------------|---------------------|------------|
| ** **                                           | ** ** | ** **                           | ** ** | **October 4**    | ** ** | **January 1**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | **Year Ended**                  | ** ** | **through**           | ** ** | **through**         | ** ** | **Year Ended** | ** ** |
| ** **                                           | ** ** | **December 31,**                | ** ** | **December 31,** | ** ** | **October 3,** | ** ** | **December 31,** | ** ** |
| ** **                                           | ** ** | **2005**                             | ** ** | **2005**              | ** ** | **2005**            | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                           | ** ** | **(dollars in thousands)** | ** ** |
| Net cash (used  in) provided by operating activities |       |                                 | $          | (28,352               | )          |                |       | $ | (34,062 | ) |   |   | $ | 5,710 |   |   | $ | (81,953 | ) | $ | 38,582 |   |
| Net cash used in  investment activities              |       |                                 | $          | (1,628                | )          |                |       | $ | (748 | ) |   |   | $ | (880 | ) |   | $ | (1,166 | ) | $ | (2,157 | ) |
| Net cash provided by  (used in) financing activities |       |                                 | $          | 28,443                |       |                |       | $ | 31,444 |   |   |   | $ | (3,001 | ) |   | $ | 82,970 |   | $ | (33,628 | ) |

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(1)          Combined results for theyear ended December 31, 2005 is a non-GAAP measure and is presented hereto provide the investor with additional information for comparingyear-over-year information.

Net cash used in operating activities for the twelvemonths ended December 31, 2005 reflects the continued expansion of ourbalance sheet from increases in the carrying value of accounts receivable andinventories, which were partially offset by an increase in accounts payable, asa result of continuing increasesin product prices. Year end prices of No. 2 home heating oil, whichproduct accounts for the largest portion of our sales and inventories, asreflected on NYMEX increased by 41% from December 31, 2004 to December 31,2005 and by 35% from December 31,2003 to December 31, 2004. Year end prices of residual oil asreflected in a leading industry publication increased by 77% from December 31,2004 to December 31, 2005 and by5% from December 31, 2003 to December 31, 2004.

Net cash provided by financing activities for thetwelve months ended December 31, 2005 reflects increased trade credit andborrowings under our revolving credit facility to finance our businessactivities discussed in the preceding paragraph, as well as the use of ourrevolving credit facility to finance business expansion and to assist GlobalPetroleum Corp. and other Slifka family entities consistent with priorpractices in the payment of their taxes on income derived from their ownershipinterests in our predecessor, Global Companies LLC and Affiliates.

Net cash used in operatingactivities for the year ended December 31, 2004 reflects increased tradecredit as we expanded our business during a period of increased product prices.Net cash provided by financing activities for the year ended December 31,2004 reflects the use of our revolving credit facility to finance businessexpansion, as well as the purchase by Global Petroleum Corp. and other Slifkafamily entities of the ownership interests in Global Companies LLC andAffiliates from RYTTSA USA, Inc. and the refinancing of approximately$10.0 million of debt related to terminal financing.

***Credit Agreement***

In connection with the closing of our initial publicoffering on October 4, 2005, we, our general partner, our operatingcompany and our operating subsidiaries entered into a four-year senior securedcredit agreement in an aggregate principal amount of up to $400.0 million andrepaid the remaining outstanding borrowings under our then-existing revolvingcredit facility. Effective November 10, 2005, we, our general partner, ouroperating company and our operating subsidiaries amended the four-year seniorsecured credit agreement to increase total available commitments thereunder from$400.0 million to $500.0 million.  The working capital revolving credit facilitywas increased by $100.0 million, comprising a $50.0 million increase inthe permanent working capital revolving credit facility commitment and a newseasonal overline facility of $50.0 million (which is available each year onlyduring the period between September 1st and June 30th.)  As of December 31, 2005 we hadborrowings outstanding under our working capital revolving credit facility of$181.6 million and outstanding letters of credit of $132.5 million, for a totalindebtedness of $314.1 million.

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The creditfacilities are available to fund working capital, make acquisitions and providepayment for general partnership purposes. There are three facilities under ourcredit agreement:

·       aworking capital revolving credit facility to be used for working capitalpurposes and letters of credit in the principal amount equal to the lesser ofour borrowing base and $450.0 million, of which two $50.0 million seasonaloverline facilities are available each year only during the period between September 1stand June 30th;

·       a$35.0 million acquisition facility to be used for funding acquisitions similarto our business line that have a purchase price of $25.0 million or less or$35.0 million or less in the aggregate in any 12-month period; and

·       a$15.0 million revolving credit facility to be used for general purposes,including payment of distributions to our unitholders.

Our obligations under thecredit agreement are secured by substantially all of our assets and the assetsof our operating comapny and operating subsidiaries.

Indebtedness under the credit agreement is guaranteedby our general partner. Pursuant to the agreement, interest on borrowings underour working capital revolving credit, acquisition credit, and revolving creditfacilities is payable at (1) the Eurodollar rate, plus 1%, 13⁄4% or 11⁄2 %,respectively, (2) the cost of funds rate,****plus1%, 13⁄4% or 11⁄2 %, respectively**,** or (3) thebank’s base rate, at our option (the 2005 average rate was approximately 5.1%).We incur a letter of credit fee of 1.00% per annum or a minimum of $400 foreach letter of credit issued. In addition, we incur a commitment fee on the unusedportion of the three facilities (including any seasonal overline facilityexercised by us) under the credit agreement at a rate of 25 basis points perannum, a facility fee of 10 basis points per annum on any unexercised seasonaloverline facility during the period between September 1st and June 30th, and a seasonal overlinefee of $30,000 each time we elect to exercise either of the seasonal overlinefacilities. The credit agreement will mature in 2009. At that time, thecredit agreement will terminate and all outstanding amounts thereunder will bedue and payable, unless the credit agreement is amended.

The creditagreement prohibits us from making distributions to unitholders if anypotential default or event of default, as defined in the credit agreement,occurs or would result from the distribution. In addition, the credit agreementcontains various covenants that may limit, among other things, our ability to:

·       grantliens;

·       makecertain loans or investments;

·       incuradditional indebtedness or guarantee other indebtedness;

·       makeany material change to the nature of our business or undergo a fundamentalchange;

·       makeany material dispositions;

·       acquireanother company;

·       enterinto a merger, consolidation, sale leaseback transaction or purchase of assets;

·       makedistributions if any potential default or event of default occurs; or

·       makecapital expenditures in excess of specified levels.

The credit agreement also contains financial covenantsrequiring us to maintain

·       minimumworking capital of $25.0 million through March 31, 2006 and $30.0 millionthereafter;

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·       minimumEBITDA (as defined in the credit agreement) of $20.0 million;

·       aminimum EBITDA less capital expenditures to interest coverage ratio of 2.75 to1; and

·       amaximum leverage to minimum EBITDA ratio of 2.5 to 1 with respect to theaggregate amount of borrowings outstanding under the $15.0 million revolvingcredit facility and the $35.0 million acquisition facility and other fundedindebtedness.

If an event ofdefault exists under the credit agreement, the lenders are able to acceleratethe maturity of the credit agreement and exercise other rights and remedies. Eachof the following could be an event of default:

·       failureto pay any principal when due or any interest, fees or other amounts when due;

·       failureof any representation or warranty to be true and correct in any material respect;

·       failureto perform or otherwise comply with the covenants in the credit agreement or inother loan documents to which we are a borrower;

·       anydefault in the performance of any obligation or condition beyond the applicablegrace period relating to any other indebtedness of more than $2.0 million ifthe effect of the default is to permit or cause the acceleration of theindebtedness;

·       ajudgment default for monetary judgments exceeding $2.0 million or a defaultunder any nonmonetary judgment if such default could have a material adverseeffect on us;

·       achange in management or ownership control; and

·       anERISA violation or a bankruptcy or insolvency event involving us, our generalpartner or any of our subsidiaries.

The credit agreement limits distributions to ourunitholders to available cash, and borrowings to fund such distributions areonly permitted under the $15.0 million revolving credit facility. The $15.0million revolving credit facility is subject to an annual “clean-down” period,requiring us to reduce the amount outstanding under the $15.0 million revolvingcredit facility to $0 for 30 consecutive calendar days in each calendar year.

***Off-Balance Sheet Arrangements***

We have no off-balancesheet arrangements.

**Impact of Inflation**

Inflation in the UnitedStates has been relatively low in recent years and did not have a materialimpact on our results of operations for the years ended December 31, 2005,2004 and 2003.

**Environmental Matters**

Our business of supplyingrefined petroleum products involves a number of activities that are subject toextensive and stringent environmental laws. For a complete discussion of theenvironmental laws and regulations affecting our business, please read “Items1. and 2. Business and Properties—Environmental.”

**CriticalAccounting Policies and Estimates**

A summary of thesignificant accounting policies that we have adopted and followed in thepreparation of financial statements is detailed in Note 2 of the Notes to thefinancial statements. Certain of these accounting policies require the use ofestimates. We have identified the following estimates that, in our opinion, aresubjective in nature, require the exercise of judgment, and involve complexanalysis. These 

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estimatesare based on our knowledge and understanding of current conditions and actionsthat we may take in the future. Changes in these estimates will occur as aresult of the passage of time and the occurrence of future events. Subsequentchanges in these estimates may have a significant impact on our financialcondition and results of operations.

***Inventory***

Inventories are valued atthe lower of cost or market based on the first-in, first-out method. We hedgesubstantially all of our inventory purchases through futures, options and swapagreements. In addition to our own inventory, we have exchange agreements withunrelated third party suppliers, whereby we may draw inventory from these othersuppliers and replace it at a later date. Similarly, these suppliers may drawinventory from us and replace it at a later date. Positive exchange balancesare accounted for as accounts receivable. Negative exchange balances areaccounted for as accounts payable. Exchange transactions are valued usingcurrent quoted market prices.

***Leases***

We have a throughput agreement with Global PetroleumCorp., one of our affiliates, with respect to the Revere terminal in Revere,Massachusetts. This agreement is accounted for as an operating lease. Pleaseread “Item 13. Certain Relationships and Related Transactions—ThroughputAgreement with Global Petroleum Corp.” We also have entered into terminal andthroughput lease arrangements with various unrelated oil terminals, certain ofwhich arrangements have minimum usage requirements.  Please read “Items 1. and 2. Business andProperties—Storage.” We have future commitments, principally for office spaceand computer equipment, under the terms of operating lease arrangements, and wehave lease income from office space leased to an unrelated third party at oneof our terminals. Our leases are accounted for under the provisions of SFAS No.13, “Accounting for Leases,” as amended, which requires that leases beevaluated and classified as operating or capital leases for financial reportingpurposes. The lease term used for lease evaluation includes option periods onlyin instances in which the exercise of the option period can be reasonablyassured and failure to exercise such options would result in an economicpenalty.

***Revenue Recognition***

Sales relate primarily to the sale of refinedpetroleum products and natural gas and are recognized along with the relatedreceivable upon delivery, net of applicable provisions for discounts andallowances. Allowances for cash discounts are recorded as a reduction of salesat the time of sale based on the estimated future outcome. The Partnership alsoprovides for shipping costs at the time of sale, which costs are included incost of sales. The amounts recorded for bad debts are generally based upon historicallyderived percentages while also factoring in any new business conditions thatmight impact the historical analysis such as market conditions and bankruptciesof particular customers. Bad debt provisions are included in selling, generaland administrative expense.

Revenue is not recognizedon exchange agreements, which are entered into primarily to acquire variousrefined petroleum products of a desired quality or to reduce transportationcosts by taking delivery of products closer to the Partnership’s end markets.Any net differential for exchange agreements is recorded as an adjustment ofinventory costs in the purchases component of cost of sales in the statement ofincome based upon the concepts set forth in APB Opinion No. 29, “Accountingfor Nonmonetary Transactions.”

***Derivative Financial Instruments***

Statement of Financial Accounting Standards No. 133,“Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS133”), establishes accounting and reporting standards for 

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derivative instruments andhedging activities. SFAS 133 requires that an entity recognize derivatives, aseither assets or liabilities, on the balance sheet and measure the instrumentsat fair value. Changes in the fair value of the derivative are to be recognizedcurrently in earnings, unless specific hedge accounting criteria are met.

We recognize all changesin the fair value of derivatives currently in earnings. The fair value ofderivatives is determined through the use of independent markets and is basedupon the prevailing market prices of such instruments at the date of valuation.We enter into futures contracts for the receipt or delivery of refinedpetroleum products in future periods. The contracts are entered into in thenormal course of business to reduce risk of loss on inventory on hand, whichcould result through fluctuations in market prices. Changes in the fair valueof these contracts as well as the offsetting gain or loss on the hedgedinventory item are recognized currently in earnings as either an increase ordecrease in cost of sales. We also use futures contracts and swaps to hedgeexposure under forward purchase and sale commitments. These agreements areintended to hedge the cost component of virtually all of our forwardcommitments. Changes in the fair value of these contracts are recognizedcurrently in earnings as an increase or decrease in cost of sales. We alsomarket and sell natural gas. We conduct business by entering into forwardpurchase commitments for natural gas only when we simultaneously enter intoarrangements for the sale of product for physical delivery to third party users.Through these transactions, which establish an immediate margin, we seek tomaintain a position that is substantially balanced between firm forward purchaseand sales commitments. Natural gas is generally purchased and sold at fixedprices and quantities. Current price quotes from actively traded markets areused in all cases to determine the contracts’ fair value. Changes in the fairvalue of these contracts are recognized currently in earnings as an increase ordecrease in cost of sales.

***Environmental and Other Liabilities***

We record accrued liabilities for all direct costsassociated with the estimated resolution of contingencies at the earliest dateat which it is deemed probable that a liability has been incurred and theamount of such liability can be reasonably estimated. Costs accrued areestimated based upon an analysis of potential results, assuming a combinationof litigation and settlement strategies and outcomes.

We provide for losses associated with environmentalremediation obligations when such losses are probable and reasonably estimable.Estimated losses from environmental remediation obligations generally arerecognized no later than completion of the remedial feasibility study. Lossaccruals are adjusted as further information becomes available or circumstanceschange. Costs of future expenditures for environmental remediation obligationsare not discounted to their present value. Recoveries of environmentalremediation costs from other parties are recognized as assets when theirreceipt is deemed probable.

We are subject to othercontingencies, including legal proceedings and claims arising out of ourbusinesses that cover a wide range of matters, including, among others,environmental matters, contract and employment claims. Environmental and otherlegal proceedings may also include matters with respect to businesses wepreviously owned. Further, due to the lack of adequate information and thepotential impact of present regulations and any future regulations, there arecertain circumstances in which no range of potential exposure may be reasonablyestimated.

**Recent Accounting Pronouncements**

***SFAS No. 123 (revised) “Share-Based Payment”***

In December 2004, the Financial AccountingStandards Board (“FASB”) issued SFAS No. 123 (revised), “Share-BasedPayment” (“SFAS 123 (revised)”.)  Thisrevision prescribes the accounting for a wide range of equity-basedcompensation arrangements, including share options, restricted share plans, 

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performance-based awards,share appreciation rights and employee share purchase plans, and generallyrequires the fair value of equity-based awards to be expensed on the incomestatement. SFAS 123 (revised) allows for either modified prospectiverecognition of compensation expense or modified retrospective recognition. Webelieve the adoption of this standard will not have a material effect on ourfinancial condition, results of operations or cash flows as there currently areno awards outstanding and we do not currently expect to make significant grantsof equity awards during 2006.

***SFAS No. 153 “Exchanges of Nonmonetary Assets anamendment of APB Opinion No. 29”***

In December 2004, the FASB issued SFAS No. 153 “Exchangesof Nonmonetary Assets an amendment of APB Opinion No. 29”. SFAS No. 153 amendsAPB Opinion No. 29 to eliminate the exception for nonmonetary exchanges ofsimilar productive assets and replaces it with a general exception forexchanges of nonmonetary assets that do not have commercial substance. Anonmonetary exchange has commercial substance if the future cash flows of theentity are expected to change significantly as a result of the exchange. Thisstatement becomes effective for nonmonetary asset exchanges occurring in fiscalperiods beginning after June 15, 2005. The adoption of SFAS No. 153 did nothave a material effect on the Partnership’s financial position or results ofoperations.

***EITF Issue No. 04-13 “Accounting forPurchases and Sales of Inventory with the Same Counterparty”***

In September 2005 theEITF issued Issue No. 04-13 (“EITF 04-13”), “Accounting forPurchases and Sales of Inventory with the Same Counterparty.”  The EITF concluded that inventory purchasesand sales transactions with the same counterparty should be combined foraccounting purposes if entered into in contemplation of each other. The EITFprovided indicators to be considered for purposes of determining whether suchtransactions are entered into in contemplation of each other. Guidance was alsoprovided on the circumstances under which nonmonetary exchanges of inventorywithin the same line of business should be recognized at fair value. EITF 04-13will be effective in reporting periods beginning after March 13, 2006. Webelieve the adoption of EITF 04-13 will not have a material impact to ourfinancial condition, results of operations or cash flows as we already recordexchange transactions on a combined basis.

**Item7A.**                Quantitative andQualitative Disclosures about Market Risk

Market risk is the risk ofloss arising from adverse changes in market rates and prices. The principalmarket risks to which we are exposed are interest rate risk and commodity risk.We utilize various derivative instruments to manage exposure to commodity risk.Because the outstanding amount under our credit facility fluctuates due tocommodity prices and the seasonality of our business, we have chosen currentlyand historically not to enter into any hedging instruments related to ourvariable rate debt.

***Interest Rate Risk***

We utilize variable ratedebt and are exposed to market risk due to the floating interest rates on ourcurrent credit facility and term loan. Therefore, from time to time we mayutilize interest rate swaps and collars to hedge interest obligations on specificand anticipated debt issuances. We hadno interest rate hedging instruments outstanding as of December 31, 2005. Borrowingsunder our working capital revolving credit, acquisition credit and revolvingcredit facilities currently bear interest at our option at (1) theEurodollar rate, plus 1%, 13⁄4% or 11⁄2 %, respectively, (2) the cost of fundsrate, plus 1%, 13⁄4% or 11⁄2 %, respectively, or (3) the bank’s base rate, atour option. As of December 31, 2005 we had borrowings outstanding underour working capital revolving credit facility of $181.6 million. The impact ofa 1% increase in the interest rate on this amount of debt would have resultedin an increase in interest expense, and a corresponding decrease in our resultsof operations, of approximately $1.8 million annually, assuming, however,that our indebtedness remained constant throughout the year.

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***Commodity Risk***

We hedge our exposure to price fluctuations withrespect to refined petroleum products in storage and expected purchases andsales of these commodities. The derivative instruments utilized consistprimarily of futures and option contracts traded on the NYMEX andover-the-counter transactions, including swap contracts entered into withestablished financial institutions and other credit-approved energy companies. Ourpolicy is generally to purchase only products for which we have a market and tostructure our sales contracts so that price fluctuations do not materiallyaffect the profit we receive. While our policies are designed to minimizemarket risk, some degree of exposure to unforeseen fluctuations in marketconditions remains. Except for the controlled trading program discussed below,we do not acquire and hold futures contracts or other derivative products forthe purpose of speculating on price changes that might expose us toindeterminable losses.

While we seek to maintain a position that issubstantially balanced within our product purchase activities, we mayexperience net unbalanced positions for short periods of time as a result ofvariances in daily sales and transportation and delivery schedules as well aslogistical issues associated with inclement weather conditions. In connectionwith managing these positions and maintaining a constant presence in the marketplace,both necessary for our business, we engage in a controlled trading program forup to an aggregate of 250,000 barrels of refined petroleum products.

We enter into future contracts to minimize or hedgethe impact of market fluctuations on our purchase and fixed forward sales ofrefined petroleum products. Any hedge ineffectiveness is reflected in ourresults of operations. We utilize the NYMEX, which is a regulated exchange forenergy products that it trades, thereby reducing potential delivery and supplyrisks. Generally, our practice is to close all NYMEX positions rather than tomake or receive physical deliveries. With respect to other energy products, weenter into derivative agreements with counterparties that we believe have astrong credit profile, in order to hedge market fluctuations and/or lock-inmargins relative to our commitments.

At December 31, 2005 the fair value of all of ourcommodity risk derivative instruments and the change in fair value that wouldbe expected from a 10% price decrease are shown in the table below:

Gain(loss):

| ** **                     | ** ** | **Fair Value at**     | ** ** | **Effect of**               | ** ** |
|--------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| ** **                     | ** ** | **December 31, 2005** | ** ** | **10% Price Decrease** | ** ** |
| NYMEX contracts                |       |                            | $          | 554,957                          |       |   |   | $ | (9,734,424 | ) |   |
| Swaps, options  and other, net |       |                            | 2,513,732  |                             |       |   | 1,704,772 |   |   |
|                           |       |                            | $          | 3,068,689                        |       |   |   | $ | (8,029,652 | ) |   |

 

The fair values of the futures contracts are based onquoted market prices obtained from the NYMEX. The fair value of the swaps andoption contracts are estimated based on quoted prices from various sources suchas independent reporting services, industry publications and brokers. Thesequotes are compared to the contract price of the swap, which approximates thegain or loss that would have been realized if the contracts had been closed outat year end. For positions where independent quotations are not available, anestimate is provided, or the prevailing market price at which the positionscould be liquidated is used. All hedge positions offset physical exposures tothe spot market; none of these offsetting physical exposures are included inthe above table. Price-risk sensitivities were calculated by assuming anacross-the-board 10% decrease in price regardless of term or historicalrelationships between the contractual price of the instruments and theunderlying commodity price. In the event of an actual 10% change in promptmonth prices, the fair value of our derivative portfolio would typically changeless than that shown in the table due to lower volatility in out-month prices. Wehave a daily margin requirement to maintain a cash deposit with our brokerbased on the prior day’s market results on open futures contracts. 

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The balance of thisdeposit will fluctuate based on our open market positions and the commodityexchange’s requirements. The required brokerage margin balance was $9,210,000at December 31, 2005.

We are exposed to creditloss in the event of nonperformance by counterparties of forward contracts,options and swap agreements, but do not anticipate nonperformance by any ofthese counterparties. Futures contracts, the primary derivative instrument utilized,are traded on regulated exchanges, greatly reducing potential credit risks. Exposureon swap and certain option agreements is limited to the amount of the recordedfair value as of the balance sheet dates. We utilize primarily one broker forall derivative transactions and the right of offset exists. Accordingly, thefair value of all derivative instruments is displayed on a net basis.

**Item 8.**                        FinancialStatements and Supplementary Data.

The information requiredhere is included in the report as set forth in the “Index to FinancialStatements” on page F-1.

**Item 9.**                        Changesin and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

**Item 9A.**                Controlsand Procedures.

In designing and evaluating controls and procedures,our management recognizes that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving thedesired control objectives, and management is required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of ourprincipal executive officer and principal financial officer, evaluated theeffectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”))as of December 31, 2005. Based on this evaluation, our principal executiveofficer and principal financial officer have concluded that our disclosurecontrols and procedures are effective to ensure that the information requiredto be disclosed by us in the reports we file or submit under the Exchange Actis recorded, processed, summarized and reported within the time periodsspecified in SEC rules and forms.

There has not been any changein our internal control over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act) that occurred during the fiscal quarter ended December 31,2005 that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

**Item 9B.**               OtherInformation.

None.

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**PART III**

**Item 10.**                 Directorsand Executive Officers of the Registrant.

Global GP LLC, our general partner, manages ouroperations and activities on our behalf. Our general partner is not elected byour unitholders and will not be subject to re-election on a regular basis inthe future. Affiliates of the Slifka family own 100% of the ownership interestsin our general partner. Our general partner is controlled by Alfred A. Slifkaand Richard Slifka through their beneficial ownership of entities that own ownershipinterests in our general partner. Eric Slifka beneficially owns an interest inour general partner. Unitholders will not be entitled to elect the directors ofour general partner or directly or indirectly participate in our management oroperation. Our general partner owes a fiduciary duty to our unitholders. Ourgeneral partner will be liable, as general partner, for all of our debts (tothe extent not paid from our assets), except for indebtedness or otherobligations that are made specifically nonrecourse to it. Whenever possible,our general partner intends to incur indebtedness or other obligations that arenonrecourse.

Three members of the board of directors of our generalpartner serve on a conflicts committee to review specific matters that the boardbelieves may involve conflicts of interest. The conflicts committee determinesif the resolution of the conflict of interest is fair and reasonable to us. Membersof the conflicts committee may not be officers or employees of our generalpartner or directors, officers or employees of its affiliates and must meet theindependence and experience standards established by the New York StockExchange and the Securities Exchange Act of 1934. Any matters approved by theconflicts committee will be conclusively deemed to be fair and reasonable tous, approved by all of our partners, and not a breach by our general partner ofany duties it may owe us or our unitholders. In addition, we have an auditcommittee and a compensation committee. The three independent members of theboard of directors of our general partner, Messrs. McKown, McCool andWatchmaker, serve as members of the conflicts, audit and compensationcommittees.

Even though most companies listed on the New YorkStock Exchange are required to have a majority of independent directors servingon the board of directors of the listed company and to establish and maintainan audit committee, a compensation committee and a nominating/corporategovernance committee each consisting solely of independent directors, the NewYork Stock Exchange does not require a listed limited partnership like us tohave a majority of independent directors on the board of directors of ourgeneral partner or to establish a compensation committee or anominating/corporate governance committee.

No member of the audit committee is an officer oremployee of our general partner or director, officer or employee of anyaffiliate of our general partner. Furthermore, each member of the auditcommittee is independent as defined in the listing standards of the New YorkStock Exchange. The board of directors of our general partner has determinedthat a member of the audit committee, namely Kenneth Watchmaker, is an “auditcommittee financial expert”**asdefined by the SEC.

Among other things, the audit committee is responsiblefor reviewing our external financial reporting, including reports filed withthe SEC, engaging and reviewing our independent auditors and reviewingprocedures for internal auditing and the adequacy of our internal accountingcontrols. On March 22, 2006, the audit committee adopted a new writtencharter which replaces the previous charter and is posted on our website at *www.globalp.com*. The March 22, 2006 charter becameeffective upon its adoption.

We are managed and operated by the directors andexecutive officers of our general partner. Our operating personnel areemployees of our general partner or certain of our operating subsidiaries.

All of our executive officers devote substantially allof their time managing our business and affairs, but from time to time performservices for certain of our affiliates. Messrs. Eric Slifka, McManmon,Faneuil and Rudinsky will spend a portion of their time providing services tocertain of our affiliates. 

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Please read “—Relationshipof Management with Global Petroleum Corp. and Alliance Energy Corp.” Ournon-executive directors devote as much time as is necessary to prepare for andattend board of directors and committee meetings.

Thefollowing table shows information for the directors and executive officers ofour general partner. 

| **Name**                     | ** ** | ** ** | ** ** | **Age** | ** ** | **Position with Global GP LLC**      | ** ** |
|------------------------------|------------|------------|------------|---------|------------|----------------------------------------------------------|------------|
| Alfred A. Slifka             |       |       | 73         |    |       | Chairman                                                 |       |
| Richard Slifka               |       |       | 65         |    |       | Vice Chairman                                            |       |
| Eric Slifka                  |       |       | 40         |    |       | President, Chief Executive  Officer and Director         |       |
| Thomas A. McManmon, Jr. |       |       | 62         |    |       | Executive Vice President and  Chief Financial Officer    |       |
| Edward J. Faneuil            |       |       | 53         |    |       | Executive Vice President, General  Counsel and Secretary |       |
| Charles A. Rudinsky          |       |       | 58         |    |       | Senior Vice President and Chief  Accounting Officer      |       |
| David K. McKown              |       |       | 68         |    |       | Director                                                 |       |
| Robert J. McCool             |       |       | 67         |    |       | Director                                                 |       |
| Kenneth I. Watchmaker        |       |       | 63         |    |       | Director                                                 |       |

 

*AlfredA. Slifka* was elected Chairman of the Board of ourgeneral partner in March 2005. He has been employed with Global CompaniesLLC or its predecessors for over fifty years. Mr. Slifka served asChairman of the Board of Global Companies LLC since its formation in December 1998.

*RichardSlifka* was elected Vice Chairman of the Board of ourgeneral partner in March 2005. He has been employed with Global CompaniesLLC or its predecessors since 1963. Mr. Slifka served as Treasurer anddirector of Global Companies LLC since its formation in December 1998.Alfred A. Slifka and Richard Slifka are brothers.

*EricSlifka* was elected President, Chief Executive Officerand director of our general partner in March 2005. He has been employedwith Global Companies LLC or its predecessors since 1987. Mr. Slifkaserved as President and Chief Executive Officer and director of GlobalCompanies LLC since July 2004 and as Chief Operating Officer and directorof Global Companies LLC from its formation in December 1998 to July 2004.Prior to 1998, Mr. Slifka held various senior positions in the accounting,supply, distribution and marketing departments of the predecessors to GlobalCompanies LLC. Mr. Slifka is the son of Alfred A. Slifka and the nephew ofRichard Slifka.

*ThomasA. McManmon, Jr.* was elected Executive VicePresident and Chief Financial Officer of our general partner in March 2005.He has been employed with Global Companies LLC or its predecessors since 1977. Mr. McManmonserved as Senior Vice President and Chief Financial Officer of Global CompaniesLLC since its formation in December 1998.

*EdwardJ. Faneuil* was elected Executive Vice President,General Counsel and Secretary of our general partner in March 2005. He hasbeen employed with Global Companies LLC or its predecessors since 1991. Mr. Faneuilserved as General Counsel and Secretary of Global Companies LLC since itsformation in December 1998.

*CharlesA. Rudinsky* was elected Senior Vice President andChief Accounting Officer of our general partner in March 2005. He has beenemployed with Global Companies LLC or its predecessors since 1988. Mr. Rudinskyserved as Assistant Controller from 1988 to 1997 and as the Senior Controllerand Chief Accounting Officer of Global Companies LLC since its formation in December 1998.

*DavidK. McKown* was elected to serve as a director of ourgeneral partner and as a member of the conflicts committee, the compensationcommittee and the audit committee of the board of directors of our generalpartner in October 2005. He has been a Senior Advisor to Eaton VanceManagement, whose principal business is creating, marketing and managinginvestment funds and providing investment 

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management services to institutionsand individuals, since 2000. Mr. McKown retired in March 2000 havingserved as a Group Executive with BankBoston since 1993. Mr. McKown hasbeen in the banking industry for 41 years, worked for BankBoston for over32 years and had previously been the head of BankBoston’s real estatedepartment and corporate finance department and a managing director ofBankBoston’s private equity unit.

*RobertJ. McCool* was elected to serve as a director of ourgeneral partner and as a member of the conflicts committee, the compensationcommittee and the audit committee of the board of directors of our generalpartner in October 2005. He has been an Advisor to Tetco Inc., aprivately held company in the energy industry, since 1967. Mr. McCool hasbeen in the refined petroleum industry for 40 years. He worked for MobilOil for 33 years and retired in 1998 having served as Executive VicePresident being responsible for North and South America’s marketing andrefining business.

*Kenneth I. Watchmaker*was elected to serve as a director of our general partner and as a member ofthe conflicts committee, the compensation committee and the audit committee ofthe board of directors of our general partner in October 2005. He servedas Executive Vice President and Chief Financial Officer of ReebokInternational Ltd. from 1996 until March 2006, when he elected toretire in connection with the sale of Reebok International Ltd toadidas-Salomon AG. Mr. Watchmaker joined Reebok International Ltd. inJuly 1992 as Executive Vice President, Operations and Finance, of theReebok Brand. Prior to joining Reebok International Ltd., he was an auditpartner at Ernst & Young LLP. He also serves as a director of AmericanBiltrite Inc.

**Section 16(a) BeneficialOwnership Reporting Compliance**

Section 16(a) ofthe Securities Exchange Act of 1934 requires directors and executive officersof our general partner and persons who beneficially own more than 10% of aclass of our equity securities registered pursuant to Section 12 of theSecurities Exchange Act of 1934 to file certain reports with the SEC and theNew York Stock Exchange concerning their beneficial ownership of suchsecurities. Based solely upon a review of the copies of reports on Forms 3, 4and 5 and amendments thereto furnished to us, or written representations thatno reports on Forms 5 were required, we believe that during the year ended December 31,2005, the officers and directors of our general partner and beneficial ownersof more than 10% of our equity securities registered pursuant to Section 12were in compliance with the applicable requirements of Section 16(a),except for the following:  (1) ThomasA. McManmon, Jr. was late in reporting an acquisition of common units by amember of his family on one Form 4 and (2) Alfred A. Slifka was latein reporting an acquisition of common units on one Form 4.

**Code of Ethics**

Our general partner has adopted a code of businessconduct and ethics that applies to all officers, directors and employees of ourgeneral partner, including the principal executive officer, principal financialofficer and principal accounting officer.

A copy of our code ofbusiness conduct and ethics is available on our website at *www.globalp.com*or may be obtained without charge upon written request to the General Counsel at:Global Partners LP, P.O. Box 9161, 800 South Street, Suite 200,Waltham, Massachusetts 02454-9161.

**Corporate Governance Matters**

The certifications of ourgeneral partner’s Chief Executive Officer and Chief Financial Officer requiredby Section 302 of the Sarbanes-Oxley Act have been included as exhibits tothis annual report on Form 10-K.

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**Item11.**                 ExecutiveCompensation.

**Reimbursementof Expenses of the General Partner**

Our general partner doesnot receive any management fee or other compensation for its management ofGlobal Partners LP. Our general partner and its affiliates are reimbursed forexpenses incurred on our behalf. These expenses include the costs of employee,officer and director compensation and benefits properly allocable to GlobalPartners LP, and all other expenses necessary or appropriate to the conduct ofthe business of, and allocable to, Global Partners LP. Our partnershipagreement provides that our general partner will determine the expenses thatare allocable to Global Partners LP.

**ExecutiveCompensation**

Global Partners LP and ourgeneral partner were formed in March 2005. We are managed and operated bythe directors and executive officers of our general partner. Officers of ourgeneral partner may participate in employee benefit plans and arrangementssponsored by our general partner or its affiliates, including plans that may beestablished by our general partner or its affiliates in the future.

The following table setsforth certain information with respect to compensation of the Chief ExecutiveOfficer and the three other most highly compensated executive officers during2005. We and our general partner were formed in March 2005 but conductedno business until October 2005. As such, the compensation set forth belowincludes compensation paid to each of the named executive officers for theperiod from October 4, 2005 through December 31, 2005.

**SUMMARY COMPENSATION TABLE**

| ** **                                               | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** |
|----------------------------------------------------------|------------|------------|------------|------------------------------|------------|
| ** **                                               | ** ** | **Year**   | ** ** | **Salary(1)**                | ** ** | **Bonus(2)** | ** ** | **Other Annual  Compensation(3)** | ** ** |
| **Name And Principal Positions**          | ** ** | ** ** | ** ** | ** **                   | ** ** | **($)** | ** ** | **($)** | ** ** | **($)** | ** ** |
| Eric Slifka                                              |       |       |       |                         |       |   |   |   |   | ** ** |   |
| President, Chief  Executive Officer and Director         |       | 2005       |       | $                            | 243,800    |   | $ | 1,486,700 |   |   | — | ** ** |   |
| Thomas A.  McManmon, Jr.                            |       |       |       |                         |       |   |   |   |   | ** ** |   |
| Executive Vice President  and Chief Financial Officer    |       | 2005       |       | $                            | 104,000    |   | $ | 130,000 |   |   | — | ** ** |   |
| Edward J. Faneuil                                        |       |       |       |                         |       |   |   |   |   | ** ** |   |
| Executive Vice  President, General Counsel and Secretary |       | 2005       |       | $                            | 79,400     |   | $ | 130,000 |   |   | — | ** ** |   |
| Charles A. Rudinsky                                      |       |       |       |                         |       |   |   |   |   | ** ** |   |
| Senior Vice President and Chief Accounting Officer       |       | 2005       |       | $                            | 57,100     |   | $ | 130,000 |   |   | — | ** ** |   |
|                                                          |            |            |            |                              |            |  |  |  |  |  |  |  |  |  |  |

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(1)          Salariesset forth in the preceding table represent the amounts paid to the listedexecutives by our general partner for the period October 4, 2005 through December 31,2005. Our general partner is reimbursed by us for employee salaries.

(2)          Thebonuses set forth in the preceding table represent the amounts paid to thelisted executives by our general partner in 2006 as bonuses for service in 2005.Our general partner is reimbursed by us for employee bonuses. Mr. Slifka’sbonus was earned pursuant to his employment agreement with our general partner,as adjusted by our general partner’s compensation committee. The discretionarybonuses paid to Messrs. McManmon, Faneuil and Rudinsky were awarded by ourgeneral partner’s compensation committee and paid from our 2005****bonus pool. We accrued for the 2005 bonus pool expenses onour financial statements. Prior to the completion of our initial publicoffering, our predecessor, Global Companies LLC, accrued for a portion of thebonuses that were paid by our general partner in 2006 for service in 2005.

(3)          Any perquisites or otherpersonal benefits received were less than $50,000.

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It is expected that for 2006, Mr. Eric Slifkawill receive an annual base salary of $1.0 million pursuant to hisemployment agreement, and Messrs. McManmon, Faneuil and Rudinsky willreceive $426,500, $325,500 and $234,100, respectively. In addition, it isexpected that each of these individuals will receive cash bonuses with respectto 2006, which bonuses may be material in amount as compared to their basesalaries. Our general partner entered into a deferred compensation arrangementwith Edward J. Faneuil pursuant to which Mr. Faneuil will receive $70,000per year for 15 years. Officers of our general partner, its affiliates orour operating subsidiaries may participate in employee benefit plans andarrangements sponsored by our general partner or its affiliates, includingplans that may be established by our general partner or its affiliates in thefuture. Except with respect to Eric Slifka, neither we, our general partner,nor any affiliate thereof has entered into an employment agreement with anofficer or director of our general partner. Please read “—Employment Agreement.”

The following table sets forth the estimated annualpension benefits payable upon retirement under the Global Partners LP PensionPlan formula to persons in the specified compensation and years of serviceclassifications:

| ** **                                                          | ** ** | **Estimated Annual Pension   for Representative Years of Credited Service** | ** ** |
|---------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|
| **Highest Consecutive 5-Year  Average Compensation** | ** ** | **5 Years**                                                                                                    | ** ** | **10 Years** | ** ** | **15 Years** | ** ** | **20 Years** | ** ** | **25 Years** | ** ** | **30 Years &  Over** | ** ** |
| **$**                                                               | ** ** | **$**                                                                                                               | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** |
| 125,000                                                             |       | 7,036                                                                                                               |       |   | 14,072 |   |   |   | 21,108 |   |   |   | 28,144 |   |   |   | 35,180 |   |   |   | 42,216 |   |   |
| 150,000                                                             |       | 8,807                                                                                                               |       |   | 17,614 |   |   |   | 26,420 |   |   |   | 35,227 |   |   |   | 44,034 |   |   |   | 52,841 |   |   |
| 175,000                                                             |       | 10,578                                                                                                              |       |   | 21,155 |   |   |   | 31,733 |   |   |   | 42,311 |   |   |   | 52,888 |   |   |   | 63,466 |   |   |
| 200,000                                                             |       | 12,348                                                                                                              |       |   | 24,697 |   |   |   | 37,045 |   |   |   | 49,394 |   |   |   | 61,742 |   |   |   | 74,091 |   |   |
| 220,000 and above                                                   |       | 13,765                                                                                                              |       |   | 27,530 |   |   |   | 41,295 |   |   |   | 55,061 |   |   |   | 68,826 |   |   |   | 82,591 |   |   |

 

Benefits under the formulaare based upon the employee’s highest consecutive five-year averagecompensation and are not subject to offset for social security benefits. Compensationfor such purposes means compensation including overtime, but excluding bonuses,commissions, any program of deferred compensation, employee benefits, movingexpense, transportation allowances, salary continuation, and additional formsof remuneration. As of January 1, 2006, the years of credited service wereas follows for the following officers:  Mr. Faneuil,15 years; Mr. McManmon, 27 years; Mr. Rudinsky, 22 years; and Mr. Slifka,19 years.

**Compensation of Directors**

Officers or employees ofour general partner or an affiliate thereof who also serve as directors do notreceive additional compensation. Directors who are not officers or employees ofour general partner or an affiliate thereof (1) receive: (a) $30,000annual cash retainer; (b) $1,000 for each meeting of the board ofdirectors attended; (c) $2,000 for each audit committee meeting attended(limited to payment for one committee meeting per day); and (d) $1,000 foreach committee meeting other than the audit committee meeting attended (limitedto payment for one committee meeting per day) and (2) are eligible toparticipate in the Global Partners LP Long-Term Incentive Plan. In addition,each director is reimbursed for out-of-pocket expenses in connection withattending meetings of the board of directors or committees. Each director willbe fully indemnified by us for actions associated with being a director to theextent permitted under Delaware law.

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**EmploymentAgreement**

Eric Slifka entered into an employment agreement withour general partner on October 4, 2005. Pursuant to the employmentagreement, Mr. Slifka will serve as President and Chief Executive Officerof our general partner. The employment agreement provides that Mr. Slifkawill have powers and duties and responsibilities that are customary to thisposition and that are assigned to him by the board of directors of our generalpartner in connection with his general management and supervision of theoperations of our general partner. He will report only to the board ofdirectors of our general partner.

Unless earlier terminated, the employment agreementhas a term ending on December 31, 2008. The employment agreement includesa confidentiality provision, which generally will continue for two yearsfollowing Mr. Slifka’s termination of employment, and is subject to thenoncompetition provisions included in the omnibus agreement and may beterminated earlier pursuant to the terms of the employment agreement. Pleaseread “Item 13.—Certain Relationships and Related Transactions—OmnibusAgreement.” The agreement provides for an annual base salary of$1.0 million, subject to annual price index increases beginning in 2007.In addition, Mr. Slifka is eligible to receive annual cash bonuses basedon (1) our results of operations and financial condition for each of 2005and 2006 and (2) an amount to be determined by the compensation committeeof the board of directors of our general partner for the years after 2005.Mr. Slifka is entitled to participate in the Global Partners LP Long-TermIncentive Plan as described below under “—Long-Term Incentive Plan.”Mr. Slifka is also entitled to participate in such other benefit plans andprograms as our general partner may provide for its employees in general.

The employment agreement may be terminated at any timeby either party with proper notice. If Mr. Slifka’s employment isterminated without cause or due to our general partner’s breach of theemployment agreement or is constructively terminated, then our general partner(1) will pay Mr. Slifka his salary through December 31, 2008,any bonus earned and a severance amount equal to 75% of the sum ofMr. Slifka’s salary and the average of bonuses earned in the two yearspreceding the termination date and (2) will provide Mr. Slifkabenefits through December 31, 2008. Mr. Slifka may elect to forfeitall or a portion of the foregoing amounts and benefits, and in exchange theperiod of time in which he is subject to the noncompetition provisions includedin the omnibus agreement will be shortened.

If Mr. Slifka terminates his employment pursuantto a change of control of our general partner, then our general partner willpay Mr. Slifka an additional amount equal to one year of his currentsalary. Such a change of control will occur when none of Alfred A. Slifka,Richard Slifka, Eric Slifka or any affiliates thereof, individually or in theaggregate, owns a majority of the member interests in our general partner.

If the agreement has nototherwise terminated, then if, as of December 31, 2008, our generalpartner and Mr. Slifka have not agreed that Mr. Slifka will beemployed as our general partner’s President and Chief Executive Officerbeginning January 1, 2009 and have not entered into an agreement effectingthe same, then our general partner will pay Mr. Slifka an amount equal to75% of the sum of Mr. Slifka’s salary and the average of bonuses earned inthe two years preceding the termination date.

**Long-Term Incentive Plan**

Our general partner has adopted the Global Partners LPLong-Term Incentive Plan for employees, consultants and directors of ourgeneral partner and employees and consultants of our affiliates who performservices for us. The long-term incentive plan consists of four components:restricted units, phantom units, unit options and unit appreciation rights. Thelong-term incentive plan limits the number of units that may be deliveredpursuant to awards to 564,242 common units. Units withheld to satisfy exerciseprices or tax withholding obligations are available for delivery pursuant toother awards. The plan is administered by the board of directors of our generalpartner or a committee thereof, which we refer to as the plan administrator.

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The plan administrator may terminate or amend thelong-term incentive plan at any time with respect to any units for which agrant has not yet been made. The plan administrator also has the right to alteror amend the long-term incentive plan or any part of the plan from time totime, including increasing the number of units that may be granted subject tounitholder approval as required by the exchange upon which the common units arelisted at that time. However, no change in any outstanding grant may be madethat would materially reduce the benefits of the participant without theconsent of the participant. The plan expires when units are no longer availableunder the plan for grants or, if earlier, its termination by the planadministrator.

As of December 31,2005, no units had been purchased by our general partner for grants under theplan, and no awards of any kind had been granted under the plan.

***Restricted Units***

A restricted unit is a common unit that vests over aperiod of time and that during such time is subject to forfeiture. We do notexpect to grant restricted units under the long-term incentive plan at thistime. In the future, the plan administrator may determine to make grants ofrestricted units under the plan to our employees, consultants and directors andemployees and consultants of our affiliates containing such terms as the planadministrator shall determine. The plan administrator will determine the periodover which restricted units granted to participants will vest. The planadministrator, in its discretion, may base its determination upon theachievement of specified financial objectives. In addition, the restrictedunits will vest upon a change of control of our company, as defined in theplan, unless provided otherwise by the plan administrator. Distributions madeon restricted units may be subjected to the same vesting provisions as therestricted unit. If a grantee’s employment, consulting or membership on theboard of directors terminates for any reason, the grantee’s restricted unitswill be automatically forfeited unless, and to the extent, the planadministrator or the terms of the award agreement provide otherwise.

Common units to be delivered as restricted units maybe common units acquired by us in the open market, common units acquired by usfrom any other person or any combination of the foregoing. If we issue newcommon units upon the grant of the restricted units, the total number of commonunits outstanding will increase.

We intend the restrictedunits under the plan to serve as a means of incentive compensation forperformance and not primarily as an opportunity to participate in the equityappreciation of our common units. Therefore, plan participants will not pay anyconsideration for the common units they receive, and we will receive no remunerationfor the units.

***Phantom Units***

A phantom unit entitles the grantee to receive acommon unit upon the vesting of the phantom unit or, in the discretion of theplan administrator, cash equivalent to the value of a common unit. We do notexpect to grant phantom units under the long-term incentive plan at this time.In the future, the plan administrator may determine to make grants of phantomunits under the plan to our employees, consultants and directors and employeesand consultants of our affiliates containing such terms as the planadministrator shall determine. The plan administrator will determine the periodover which phantom units granted to participants will vest. The planadministrator, in its discretion, may base its determination upon the achievementof specified financial objectives. In addition, the phantom units will vestupon a change of control of our company, unless provided otherwise by the planadministrator. If a grantee’s employment, consulting or membership on the boardof directors terminates for any reason, the grantee’s phantom units will beautomatically forfeited unless, and to the extent, the plan administrator orthe terms of the award agreement provide otherwise.

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Common units to be delivered upon the vesting ofphantom units may be common units acquired by us in the open market, commonunits acquired by us from any other person or any combination of the foregoing.If we issue new common units upon vesting of the phantom units, the totalnumber of common units outstanding will increase. The plan administrator, inits discretion, may grant tandem distribution equivalent rights with respect tophantom units that entitle the holder to receive cash equal to any cashdistributions made on common units while the phantom units are outstanding.

We intend the issuance ofany common units upon vesting of the phantom units under the plan to serve as ameans of incentive compensation for performance and not primarily as anopportunity to participate in the equity appreciation of our common units.Therefore, plan participants will not pay any consideration for the commonunits they receive, and we will receive no remuneration for the units.

***Unit Options***

The long-term incentive plan permits the grant ofoptions covering common units. The plan administrator may make grants under theplan to our employees, consultants and directors and employees and consultantsof our affiliates containing such terms as the plan administrator shalldetermine. Unit options will have an exercise price that may be more or lessthan the fair market value of the units on the date of grant, in the discretionof the plan administrator. In general, unit options granted will becomeexercisable over a period determined by the plan administrator. In addition,the unit options will become exercisable upon a change of control of us, unlessprovided otherwise by the plan administrator. If a grantee’s employment,consulting or membership on the board of directors terminates for any reason,the grantee’s unvested unit options will be automatically forfeited unless, andto the extent, the option agreement or the plan administrator providesotherwise.

Upon exercise of a unitoption, we will issue new common units, acquire common units on the open marketor directly from any person or use any combination of the foregoing, in theplan administrator’s discretion. If we issue new common units upon exercise ofthe unit options (or a unit appreciation right settled in common units), thetotal number of common units outstanding will increase. The availability ofunit options is intended to furnish additional compensation to planparticipants and to align their economic interests with those of commonunitholders.

***Unit Appreciation Rights***

The long-term incentive plan permits the grant of unitappreciation 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 unitappreciation right. Such excess will be paid in cash or common units. We do notexpect to grant unit appreciation rights under our long-term incentive plan atthis time. In the future, the plan administrator may determine to make grantsof unit appreciation rights under the plan to our employees, consultants anddirectors and employees and consultants of our affiliates containing such termsas the plan administrator shall determine. Unit appreciation rights will havean exercise price that may be more or less than the fair market value of thecommon units on the date of grant, in the discretion of the plan administrator.In general, unit appreciation rights granted will become exercisable over aperiod determined by the plan administrator. In addition, the unit appreciationrights will become exercisable upon a change in control of our company, unlessprovided otherwise by the plan administrator. If a grantee’s employment,consulting or membership on the board of directors terminates for any reason,the grantee’s unvested unit appreciation rights will be automatically forfeitedunless, and to the extent, the grant agreement or plan administrator providesotherwise.

Upon exercise of a unitappreciation right, we will issue new common units, acquire common units on theopen market or directly from any person or use any combination of theforegoing, in the plan 

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administrator’sdiscretion. If we issue new common units upon exercise of the unit appreciationright, the total number of common units outstanding will increase. The availabilityof unit appreciation rights is intended to furnish additional compensation toplan participants and to align their economic interests with those of commonunitholders.

***Distribution Equivalent Rights***

The plan administratormay, in its discretion, grant distribution equivalent rights (“DERs”) withrespect to awards other than Restricted Units. DERs entitle the participant toreceive cash equal to the amount of any cash distributions made by us duringthe period the award is outstanding. Payment of a DER may be subject to thesame vesting terms as the award to which it relates.

**401(k) Savingsand Profit Sharing Plan**

Our predecessor, GlobalCompanies LLC, adopted a 401(k) Savings and Profit Sharing Plan for thebenefit of employees of Global Companies LLC and their affiliates, which planwas transferred to our general partner for our benefit in connection with ourinitial public offering. Our general partner will maintain the401(k) Savings and Profit Sharing Plan. The plan permits all eligible employeesto make voluntary pre-tax contributions to the plan, subject to applicable taxlimitations. Our general partner may make a discretionary matching contributionto the plan for each eligible employee equal to 50% of each employee’scontribution, up to a maximum contribution of 3% of the employee’s pre-taxannual compensation, subject to certain limitations under federal law. Eligibleemployees may elect to contribute up to 25% of their compensation to the planfor each plan year. Employee contributions are subject to annual dollarlimitations, which are periodically adjusted by the cost of living index.Participants in the plan are always fully vested in any matching contributionsunder the plan; however, additional discretionary contributions are subject tovesting. The plan is intended to be tax-qualified underSection 401(a) of the Internal Revenue Code so that contributions tothe plan, and income earned on plan contributions, are not taxable to employeesuntil withdrawn from the plan, and so that contributions, if any, will bedeductible when made.

**Pension Plan**

Our predecessor, Global Companies LLC, adopted aPension Plan for the benefit of employees of Global Companies LLC and theiraffiliates, which plan was transferred to our general partner for our benefitin connection with our initial public offering. Our general partner willmaintain the Pension Plan. If our general partner becomes unable to satisfy itsobligations under the Pension Plan, then we and our subsidiaries might becomeliable for such obligations. All employees who (1) are 21 years ofage or older, (2) are not covered by a collective bargaining agreement,(3) have been employed by our predecessor, our general partner or one ofour operating subsidiaries for one year prior to enrollment in the plan and(4) have worked for our predecessor, our general partner or one of ouroperating subsidiaries at least 1,000 hours during the applicable planyear are eligible to participate in the plan. An employee is fully vested inbenefits under the plan after completing five years of service or upontermination due to death, disability or retirement. When an employee retires atage 65, the employee can elect to receive either a lump sum distribution ormonthly benefit payments under the plan equal to (1) 23% of the employee’saverage monthly compensation for the five consecutive calendar years duringwhich the employee received the highest amount of pay (“Average Compensation”)plus (2) 19.5% of the employee’s Average Compensation in excess of hismonthly “covered compensation” for Social Security purposes, as provided in theplan. However, if an employee completes less than 30 years of service onhis termination at or after reaching age 65, the monthly benefit will bereduced by 1/30th for each year less than 30 years completed by theemployee. If an employee is terminated before age 65, his benefit beginning atage 65 would be based on his Average Compensation multiplied by a fraction, thenumerator of which is a number of years 

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of service at termination(not to exceed 30) and the denominator of which is the number of yearssuch employee would have served (not to exceed 30) had he stayed until age65. An employee who is terminated after completing at least five years ofservice will be eligible for an early retirement benefit determined asdescribed in the preceding sentence.

We also have anon-qualified deferred compensation plan for one executive officer. Please readNote 10 of the Notes to our financial statements for further detail.

**Item 12.**                 SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters.

Thefollowing table sets forth as of March 17, 2006 the beneficial ownershipof units of Global Partners LP held by beneficial owners of 5% or more of theunits, by each director and named executive officer of our general partner andby all directors and executive officers of our general partner as a group:

| **Name of Beneficial Owner(1)**               | ** ** | ** ** | ** ** | **Common  Units  Beneficially  Owned** | ** ** | **Percentage of  Common  Units  Beneficially  Owned** | ** ** | **Subordinated  Units  Beneficially  Owned** | ** ** | **Percentage of  Subordinated  Units  Beneficially  Owned** | ** ** | **Percentage  of Total  Units  Beneficially  Owned** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|----------------------------------------|------------|------------------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| Global Petroleum  Corp.(2)                                   |       |       | 2,267      |                                   |       |                                                       | *          |                                         |       |                                                             | 1,723,196  |                                                      |       |   | 30.5 | % |   |   | 15.3 | % |   |
| Larea Holdings  LLC(3)                                       |       |       | 742        |                                   |       |                                                       | *          |                                         |       |                                                             | 564,242    |                                                      |       |   | 10.0 | % |   |   | 5.0 | % |   |
| Larea Holdings II  LLC(4)                                    |       |       | 371        |                                   |       |                                                       | *          |                                         |       |                                                             | 282,121    |                                                      |       |   | 5.0 | % |   |   | 2.5 | % |   |
| Montello Oil  Corporation(5)                                 |       |       | 3,086      |                                   |       |                                                       | *          |                                         |       |                                                             | 2,344,992  |                                                      |       |   | 41.6 | % |   |   | 20.8 | % |   |
| Sandwich  Terminal, L.L.C.(6)                                |       |       | 11         |                                   |       |                                                       | *          |                                         |       |                                                             | 8,464      |                                                      |       |   | * |   |   |   | * |   |   |
| Chelsea Terminal  Limited Partnership(7)                     |       |       | 947        |                                   |       |                                                       | *          |                                         |       |                                                             | 719,409    |                                                      |       |   | 12.8 | % |   |   | 6.4 | % |   |
| Amy Cook(4)                                                  |       |       | 6,171      |                                   |       |                                                       | *          |                                         |       |                                                             | 282,121    |                                                      |       |   | 5.0 | % |   |   | 2.6 | % |   |
| Karen Dattilo(4)                                             |       |       | 6,171      |                                   |       |                                                       | *          |                                         |       |                                                             | 282,121    |                                                      |       |   | 5.0 | % |   |   | 2.6 | % |   |
| Andrew Slifka(4)                                             |       |       | 6,171      |                                   |       |                                                       | *          |                                         |       |                                                             | 282,121    |                                                      |       |   | 5.0 | % |   |   | 2.6 | % |   |
| Alfred A.  Slifka(2)(5)(6)(7)(8)                             |       |       | 6,411      |                                   |       |                                                       | *          |                                         |       |                                                             | 4,796,061  |                                                      |       |   | 85.0 | % |   |   | 42.6 | % |   |
| Richard  Slifka(2)(5)(6)(7)(8)                               |       |       | 6,311      |                                   |       |                                                       | *          |                                         |       |                                                             | 4,796,061  |                                                      |       |   | 85.0 | % |   |   | 42.6 | % |   |
| Eric Slifka(3)                                               |       |       | 26,242     |                                   |       |                                                       | *          |                                         |       |                                                             | 564,242    |                                                      |       |   | 10.0 | % |   |   | 5.2 | % |   |
| Thomas A.  McManmon, Jr.(9)                             |       |       | 32,500     |                                   |       |                                                       | *          |                                         |       |                                                             | —     |                                                      |       |   | — |   |   |   | * |   |   |
| Edward J. Faneuil                                            |       |       | 12,400     |                                   |       |                                                       | *          |                                         |       |                                                             | —     |                                                      |       |   | — |   |   |   | * |   |   |
| Charles A.  Rudinsky                                         |       |       | 5,000      |                                   |       |                                                       | *          |                                         |       |                                                             | —     |                                                      |       |   | — |   |   |   | * |   |   |
| David K. McKown                                              |       |       | 0          |                                   |       |                                                       | —     |                                         |       |                                                             | —     |                                                      |       |   | — |   |   |   | — |   |   |
| Robert J. McCool                                             |       |       | 4,800      |                                   |       |                                                       | *          |                                         |       |                                                             | —     |                                                      |       |   | — |   |   |   | * |   |   |
| Kenneth I. Watchmaker                                        |       |       | 0          |                                   |       |                                                       | —     |                                         |       |                                                             | —     |                                                      |       |   | — |   |   |   | — |   |   |
| All directors and  executive officers as a group (9 persons) |       |       | 87,353     |                                   |       |                                                       | *          |                                         |       |                                                             | 5,360,303  |                                                      |       |   | 95.0 | % |   |   | 48.3 | % |   |

----

*                    Less than 1%

(1)          The address for eachperson or entity listed is P.O. Box 9161, 800 South Street,Suite 200, Waltham, Massachusetts 02454-9161.

(2)          ASRS Global GeneralPartnership owns 100% of the ownership interests in Global Petroleum Corp.Alfred A. Slifka and Richard Slifka are equal owners of ASRS Global GeneralPartnership. As general partners of ASRS Global General Partnership, Alfred A.Slifka and Richard Slifka share voting and investment power with respect to,and therefore may be deemed to beneficially own the units owned by GlobalPetroleum Corp.

(3)          Eric Slifka owns 100% ofthe ownership interests in Larea Holdings LLC and has sole voting and investmentpower with respect to units owned by Larea Holdings LLC. Eric Slifka may,therefore, be 

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deemed to beneficially ownthe units held by Larea Holdings LLC. Eric Slifka is the son of Alfred A.Slifka.

(4)          Amy Cook, Karen Dattiloand Andrew Slifka each has a 33 1/3% ownership interest in Larea Holdings IILLC and share proportionate voting and investment power with respect to unitsowned by Larea Holdings II LLC. Each of Amy Cook, Karen Dattilo and AndrewSlifka may, therefore, be deemed to beneficially own the units held by LareaHoldings II LLC. Amy Cook, Karen Dattilo and Andrew Slifka are the children ofRichard Slifka.

(5)          ASRS Montello GeneralPartnership owns 72.8% of the ownership interests in Montello Oil Corporation.Alfred A. Slifka and Richard Slifka are equal owners of ASRS Montello GeneralPartnership. Alfred A. Slifka and Richard Slifka share voting and investmentpower with respect to, and therefore, may be deemed to beneficially own, theunits owned by Montello Oil Corporation. Alfred Slifka Montello IrrevocableTrust (“AS Montello”) owns 13.6% of Montello. Alfred A. Slifka is thebeneficial owner of AS Montello. Richard Slifka Montello Irrevocable Trust (“RSMontello”) owns 13.6% of Montello. Richard Slifka is the beneficial owner of RSMontello.

(6)          Alfred A. Slifka andRichard Slifka are equal owners of Sandwich Terminal, L.L.C. and share votingand investment power with respect to, and therefore, may be deemed tobeneficially own, the units owned by Sandwich Terminal, L.L.C.

(7)          Chelsea Terminal Corp.is the general partner of Chelsea Terminal Limited Partnership. Alfred A.Slifka and Richard Slifka are equal owners of Chelsea Terminal Corp. and eachowns a 50% limited partner interest in Chelsea Terminal Limited Partnership.Alfred A. Slifka and Richard Slifka share voting and investment power withrespect to, and therefore, may be deemed to beneficially own, the units ownedby Chelsea Terminal Limited Partnership.

(8)          Beneficially owned unitamounts for each of Alfred A. Slifka and Richard Slifka consist of the unitsowned by Global Petroleum Corp., Montello Oil Corporation, Sandwich Terminal,L.L.C. and Chelsea Terminal Limited Partnership. Alfred A. Slifka and RichardSlifka are brothers.

(9)          31,000common units are owned directly by the reporting person. 1,500 common units areowned indirectly by the reporting person’s son. The reporting person disclaimsbeneficial ownership of the securities owned by his son.

**Equity Compensation Plan Table**

Thefollowing table summarizes information about our equity compensation plans asof December 31, 2005:

| ** **                                                  | ** ** | **Number of Securities  to be issued   upon exercise of  outstanding options,  warrants and right** | ** ** | **Weighted average  exercise price of  outstanding options,  warrants and rights** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation plans  (excluding securities  reflected in column (a))** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **(a)**                                                                                                                                               | ** ** | **(b)**                                                                                                          | ** ** | **(c)**                                                                                                                                                                                                          | ** ** |
| Equity  compensation plans approved by security holders     |       |                                                                                                                                                  | —     |                                                                                                             |       |                                                                                                                                                                                                             | —     |   |   |   | — |   |   |
| Equity  compensation plans not approved by security holders |       |                                                                                                                                                  | —     |                                                                                                             |       |                                                                                                                                                                                                             | —     |   |   |   | 564,242 |   |   |
| Total                                                       |       |                                                                                                                                                  | —     |                                                                                                             |       |                                                                                                                                                                                                             | —     |   |   |   | 564,242 |   |   |

 

For more information aboutour Long-Term Incentive Plan, which did not require approval by our limitedpartners, refer to “Item 11. Executive Compensation—Long-Term IncentivePlan.”

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**Item 13.**                 CertainRelationships and Related Transactions.

Affiliates of our generalpartner, including directors and executive officers of our general partner, own87,724 common units and 5,642,424 subordinated units representing a 49.8%limited partner interest in us. In addition, our general partner owns a 2%general partner interest in us.

**Distributionsand Payments to Our General Partner and Its Affiliates**

The following tablesummarizes the distributions and payments to be made by us to our generalpartner and its affiliates in connection with the ongoing operation andliquidation of Global Partners LP. These distributions and payments weredetermined by and among affiliated entities and, consequently, are not theresult of arm’s-length negotiations.

***Operational Stage***

| Distributions of  available cash to our general  partner and its affiliates |   | We will generally make cash distributions 98% to the unitholders, including  affiliates of our general partner (including directors and executive officers  of our general partner), as the holders of an aggregate of 87,724 common  units and all of the subordinated units, and 2% to our general partner. In  addition, if distributions exceed the minimum quarterly distribution and  other higher target levels, our general partner will be entitled to  increasing percentages of the distributions, up to 50% of the distributions  above the highest target level. |
|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                  |   | Assuming we have  sufficient available cash to pay the full minimum quarterly distribution on  all of our outstanding units for four quarters, our general partner and its  affiliates, including directors and executive officers of our general  partner, would receive an annual distribution of approximately $0.4 million  on the 2% general partner interest and $9.5 million on their common units and  subordinated units.                                                                                                                                            |
| Payments to our general  partner and its affiliates                         |   | Our general  partner will not receive a management fee or other compensation for its  management of Global Partners LP. Our general partner and its affiliates will  be reimbursed for expenses incurred on our behalf. Our partnership agreement  provides that our general partner will determine the amount of these  expenses.                                                                                                                                                                                                                                            |
| Withdrawal or removal of our general partner                                |   | If our general partner  withdraws or is removed, its general partner interest and its incentive  distribution rights will either be sold to the new general partner for cash  or converted into common units, in each case for an amount equal to the fair  market value of those interests.                                                                                                                                                                                                                                                                                  |

 

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***Liquidation Stage***

| Liquidation |   | Upon our liquidation,  the partners, including our general partner, will be entitled to receive  liquidating distributions according to their particular capital account  balances. |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**AgreementsEntered into in Connection with our Initial Public Offering**

We entered into variousdocuments and agreements in connection with our formation and our initialpublic offering. These agreements were not the result of arm’s-lengthnegotiations, and they, or any of the transactions that they provide for, maynot have been effected on terms at least as favorable to the parties to theseagreements as could have been obtained from unaffiliated third parties.

**Omnibus Agreement**

Upon the closing ofour initial public offering, we entered into an omnibus agreement with certainmembers of the Slifka family and our general partner that will address thefollowing matters:

·       theagreement of certain members of the Slifka family not to compete with us and tocause their affiliates not to compete with us under certain circumstances; and

·       theobligation of Global Petroleum Corp. and certain of its affiliates to indemnifyus for certain liabilities.

This agreement is not theresult of arm’s-length negotiations and may not have been effected on terms atleast as favorable to the parties to this agreement as could have been obtainedfrom unaffiliated third parties.

***Noncompetition***

Each of Alfred A.Slifka and Richard Slifka agreed, and caused their affiliates to agree, for solong as such individual, Eric Slifka or controlled affiliates thereof,individually or as part of a group, control our general partner, and EricSlifka agreed, and caused his affiliates to agree, through December 31,2010, unless his obligation is terminated earlier pursuant to the terms of hisemployment agreement with our general partner, not to engage in, acquire orinvest in any business having assets engaged in the following businesses;(1) the wholesale marketing, sale, distribution and transportation (otherthan transportation by truck) of refined petroleum products in the UnitedStates, provided such activity generates qualifying income (as defined inSection 7704 of the Internal Revenue Code); (2) the storage ofrefined petroleum products in connection with any of the activities describedin (1); and (3) bunkering. These restrictions will not apply to:

·       anyassets not contributed to us in connection with this offering, including anyreplacements and natural extensions thereof;

·       theownership, individually or collectively, of up to 9.9% in a publicly tradedentity that competes with us as long as none of Alfred A., Richard or EricSlifka are on the board of directors of the publicly traded entity;

·       anyinvestment in or acquisition of any restricted business in an aggregate amountof up to $5.0 million per year; and

·       any investment in oracquisition of any restricted business in excess of an aggregate amount of$5.0 million per year with the approval of our conflicts committee.

73

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***Indemnification***

Under the omnibus agreement, Global Petroleum Corp.and certain of its affiliates and our general partner (collectively, the“Indemnitors”) will indemnify us for five years after the closing of thisoffering against certain potential environmental liabilities associated withthe operation of the assets and occurring before the closing date of ourinitial public offering and indefinitely against claims for coveredenvironmental liabilities made before the fifth anniversary of the closing of ourinitial public offering and indefinitely against potential liabilitiesresulting from the two lawsuits alleging MTBE contamination in the groundwaterin Massachusetts in which Global Companies LLC is a named defendant. Pleaseread “Items 1. and 2. Business and Properties—Legal Proceedings—Environmental.”The obligation of the Indemnitors will not exceed $7.5 million and they donot have any indemnification obligation in any 12-month period (startingwith the closing date of the offering) until our losses for that period exceed$400,000 in the aggregate and then only to the extent such aggregate lossesexceed $400,000. Any unused amounts, including carried over unused amounts,will be carried over to the next 12-month period. After the fifthanniversary of the closing of our initial public offering, the annualdeductible (not including carried over amounts) will be reduced to $150,000.The Indemnitors have no indemnification obligations with respect toenvironmental matters for claims made as a result of changes in environmentallaws promulgated after the closing date of our initial public offering.

Additionally, theIndemnitors will indemnify us for losses attributable to title defects,retained assets and liabilities (including environmental liabilities at theRevere terminal) and income taxes attributable to pre-closing operations andthe formation transactions. Furthermore, we will indemnify the Indemnitors forall losses attributable to the post-closing operations of the assetscontributed to us, to the extent not subject to their indemnificationobligations.

**Shared Services Agreements**

We are party to shared services agreements with GlobalPetroleum Corp. and with Alliance Energy Corp. We believe the terms of theseagreements are at least as favorable as could have been obtained fromunaffiliated third parties. Under each agreement, we provide Global PetroleumCorp. and Alliance Energy Corp. with certain accounting, treasury, legal,information technology, human resources and financial operations support forwhich Global Petroleum Corp. and Alliance Energy Corp., as applicable, pay usan amount based upon the cost associated with provision of such services. Inaddition, Global Petroleum Corp. provides us with certain terminal,environmental and operational support services, for which we pay a fee based onan agreed assessment of the cost associated with provision of such services.Pursuant to these agreements, for the year ended December 31, 2005, wepaid to Global Petroleum Corp. a net total of $67,000, and for the year endedDecember 31, 2005, we received from Alliance Energy Corp. a total of$320,000.

**ThroughputAgreement with Global Petroleum Corp.**

We have an exclusive throughput agreement with GlobalPetroleum Corp., one of our affiliates, with respect to the Revere terminal inRevere, Massachusetts. We believe the terms of this agreement are at least asfavorable as could have been obtained from unaffiliated third parties. Thisagreement provides for more than two million barrels of storage capacity for ourrefined petroleum products. We retain the title of all products stored at thisterminal. Please also see “Items 1. and 2. Business and Properties—Storage—BulkTerminals That We Own or Operate or at Which We Maintain Dedicated Storage—RevereTerminal (Revere, Massachusetts)” for more information. The term of thisagreement ends December 31, 2013. The agreement automatically renewsannually unless it is terminated by either party by giving 90 days notice.We pay a monthly fee to Global Petroleum Corp., which is adjusted according tothe Consumer Price Index for the Northeast region and for certain contractualcosts. Pursuant to this agreement, for the year ended December 31, 2005,we paid (including increases in certain contractual costs but excluding 

74

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amortization of deferredrent) to Global Petroleum Corp. a total of $7.7 million. Throughout the term ofthe Throughput Agreement with Global Petroleum Corp., we will have a right offirst refusal through September 30, 2014 to purchase or lease the Revereterminal if Global Petroleum Corp. desires to sell or lease the Revere terminalto a third party.

**Relationship ofManagement with Global Petroleum Corp. and Alliance Energy Corp.**

Some members of our management team are also officersand/or directors of two of our affiliates, Global Petroleum Corp. and AllianceEnergy Corp. Global Petroleum Corp. is wholly owned by ASRS Global GeneralPartnership, an entity that is owned equally by Alfred A. and Richard Slifka. Messrs. McManmon,Faneuil and Rudinsky spend a portion of their time providing services to GlobalPetroleum Corp. under a shared services agreement. Please read “—SharedServices Agreements.”

Alliance Energy Corp. is90% owned by members of the Slifka family. Alfred A. and Richard Slifka eachown 15% of Alliance Energy Corp., and they together control another 60% of thisentity through voting trusts for the benefit of their six children, each ofwhom owns 10% of Alliance Energy Corp. In addition, Mr. McManmon owns 5%of Alliance Energy Corp., and the remaining 5% ownership interest is held by aformer employee of Global Companies LLC, Willard Poires. Under a sharedservices agreement, Messrs. Eric Slifka, McManmon, Faneuil and Rudinskyspend a portion of their time providing services to Alliance Energy Corp., and Mr. McManmonis compensated for such services by Alliance Energy Corp. Please read “—SharedServices Agreements.”

**Item 14.**                 PrincipalAccountant Fees and Services.

The audit committee of the board of directors ofGlobal GP LLC selected Ernst & Young LLP, Independent RegisteredPublic Accounting Firm, to audit the books, records and accounts of GlobalPartners LP for the 2005 calendar year. The audit committee’s charter which isavailable on our website at www.globalp.com requires the audit committee toapprove in advance all audit and non-audit services to be provided by ourindependent registered public accounting firm. All services reported in theaudit, audit-related, tax and all other fees categories below with respect tothis Annual Report on Form 10-K for the year ended December 31,2005 were approved by the audit committee.

Feespaid to Ernst & Young LLP for 2005 are as follows: 

| Audit Fees(1)       |   | $       | 1,421,900 |   |
|---------------------|--------|---------|-----------|--------|
| Audit Related  Fees |   | 40,600  |      |
| Tax Fees            |   | 328,900 |      |
| All Other Fees      |   | —  |      |
| Total               |   | $       | 1,791,400 |   |

----

(1)          Represents fees forprofessional services provided in connection with the audit of our annualfinancial statements, review of our quarterly financial statements, and auditsperformed as part of our registration filings.

75

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**PART IV**

**Item 15.  Exhibits and Financial Statement Schedules**

(a);(c)           The following Financial Statementsand Financial Statement Schedules are filed herewith:
| 1.     | Financial statements:                                                                                                                                                                                                                                                                                                                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | See the “Index to Financial Statements” on  page F-1.                                                                                                                                                                                                                                                                                                                  |
| 2.     | Financial statement  schedules:                                                                                                                                                                                                                                                                                                                                                       |
|   | The following financial statement schedule is  included pursuant to Item 15(c): Schedule II—Valuation and Qualifying  Accounts. All other schedules for which provision is made in the applicable  accounting regulation of the Securities and Exchange Commission are not  required under the related instructions or are inapplicable and, therefore,  have been omitted. |
| 3.     | Exhibits:                                                                                                                                                                                                                                                                                                                                                                             |
|   | The exhibit index is incorporated by reference  herein.                                                                                                                                                                                                                                                                                                                               |

 

(b)                 The following documents arefiled as exhibits to this report:
| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1             | —     | First Amended and  Restated Agreement of Limited Partnership of Global Partners LP dated  October 4, 2005 (incorporated herein by reference to Exhibit 3.1 to  Form 8-K (File No. 001-32593) for Global Partners LP  filed on October 11, 2005).                                                                                                                                                                                                                                                                          |
| 10.1            | —     | Omnibus Agreement, dated  October 4, 2005, by and among Global Petroleum Corp., Montello Oil  Corporation, Global Revco Dock, L.L.C., Global Revco Terminal, L.L.C., Global  South Terminal, L.L.C., Sandwich Terminal, L.L.C., Chelsea Terminal Limited  Partnership, Global GP LLC, Global Partners LP, Global Operating LLC, Alfred  A. Slifka, Richard Slifka and Eric Slifka (incorporated herein by reference  to Exhibit 10.1 to Form 8-K (File No. 001-32593)  for Global Partners LP filed on October 11, 2005). |
| 10.2^           | —     | Global Partners GP  Long-Term Incentive Plan effective as of October 4, 2005 (incorporated  herein by reference to Exhibit 10.4 to Amendment No. 1 to  Form S-1 (File No. 333-124755) for Global Partners LP  filed on July 1, 2005).                                                                                                                                                                                                                                                                                |
| 10.3            | —     | Amended and Restated  Services Agreement, dated October 4, 2005, by and among Global Petroleum  Corp., Global Companies LLC, Global Montello Group LLC, and Chelsea Sandwich  LLC (incorporated herein by reference to Exhibit 10.3 to Form 8-K  (File No. 001-32593) for Global Partners LP filed on  October 11, 2005).                                                                                                                                                                                                 |
| 10.4            | —     | Amended and Restated  Services Agreement, dated October 4, 2005, by and between Alliance  Energy Corp. and Global Companies LLC (incorporated herein by reference to  Exhibit 10.4 to Form 8-K (File No. 001-32593) for  Global Partners LP filed on October 11, 2005).                                                                                                                                                                                                                                                   |
| 10.5            | —     | Second Amended and  Restated Terminal Storage and Throughput Agreement, dated October 4,  2005 by and among Global Petroleum Corp., Global Companies LLC and Global  Montello Group LLC (incorporated herein by reference to Exhibit 10.5 to  Form 8-K (File No. 001-32593) for Global Partners LP  filed on October 11, 2005).                                                                                                                                                                                           |
| 10.6^           | —     | Employment Agreement  dated October 4, 2005, by and between Global GP LLC and Eric Slifka  (incorporated herein by reference to Exhibit 10.6 to Form 8-K  (File No. 001-32593) for Global Partners LP filed on  October 11, 2005).                                                                                                                                                                                                                                                                                        |

76

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| 10.7       | — | Contribution, Conveyance  and Assumption Agreement, dated October 4, 2005, by and among Global GP  LLC, Global Partners LP, Global Operating LLC, Global Companies LLC, Global  Montello Group LLC, Chelsea Sandwich LLC, Global Petroleum Corp., Larea  Holdings LLC, Larea Holdings II LLC, Chelsea Terminal Limited Partnership,  Sandwich Terminal, L.L.C. and Montello Oil Corporation (incorporated herein  by reference to Exhibit 10.7 to Form 8-K (File No. 001-32593)  for Global Partners LP filed on October 11, 2005). |
|------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.8       | — | Credit Agreement, dated  October 4, 2005, among Global Operating LLC, Global Companies LLC,  Global Montello Group LLC, Glen Hes Corp. and Chelsea Sandwich LLC, as  borrowers, Global Partners LP and Global GP LLC, as guarantors, each lender  from time to time party thereto and Bank of America, N.A., as administrative  agent and L/C issuer (incorporated herein by reference to Exhibit 10.8  to Form 8-K (File No. 001-32593) for Global Partners LP  filed on October 11, 2005).                                        |
| 10.9       | — | First Amendment to  Credit Agreement, dated as of November 10, 2005, among Global Operating  LLC, Global Companies LLC, Global Montello Group Corp., Glen Hes Corp. and  Chelsea Sandwich LLC, as borrowers, Global Partners LP, Global GP LLC, as  guarantors, each lender from time to time party thereto and Bank of America,  N.A., as administrative agent and L/C issuer (incorporated herein by  reference to Exhibit 10.1 to Form 8-K (File No. 001-32593)  for Global Partners LP filed on November 14, 2005).             |
| 10.10^*    | — | Description of the  deferred compensation arrangement by and between Global GP LLC and Edward J.  Faneuil.                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 21.1       | — | List of Subsidiaries of  Global Partners LP (incorporated by reference to Exhibit 21.1 to  Form S-1/A (File No. 333-124755) for Global Partners LP  filed on July 1, 2005.                                                                                                                                                                                                                                                                                                                                                               |
| 31.1*      | — | Rule 13a-14(a)/15d-14(a) Certification  of Principal Executive Officer of Global GP LLC, general partner of Global  Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2*      | — | Rule 13a-14(a)/15d-14(a) Certification  of Principal Financial Officer of Global GP LLC, general partner of Global  Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1† | — | Section 1350  Certification of Chief Executive Officer of Global GP LLC, general partner of  Global Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 32.2† | — | Section 1350  Certification of Chief Financial Officer of Global GP LLC, general partner of  Global Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                                                        |

----

^              Management contractor compensatory plan or arrangement.

*                    Filedherewith.

†                    Not deemed “filed”for purposes of Section 18 of the Securities Exchange Act of 1934 orotherwise subject to the liability of that section.

77

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.

| ** **                  | **GLOBAL PARTNERS LP** |
|-----------------------------|------------------------|
|                        | By:                    | Global GP LLC, |
|                        |                   | its general partner |
| Dated: March 31,  2006 |                   | By: | /s/ ERIC SLIFKA |
|                        |                   |   | Eric Slifka |
|                        |                   |   | President and Chief Executive Officer |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities indicated on March 31, 2006. 

|                                  | **Signature** | ** **                                           | ** ** |  | **Title** | ** ** |
|----------------------------------|---------------|------------------------------------------------------|------------|--|-----------|------------|
| /s/ ERIC  SLIFKA                 |          | President, Chief Executive Officer and Director      |
| Eric  Slifka                     |          | (Principal  Executive Officer)                       |
| /s/ THOMAS A. MCMANMON, JR. |          | Executive Vice President and Chief Financial Officer |
| Thomas  A. McManmon, Jr.    |          | (Principal  Financial Officer)                       |
| /s/ CHARLES A.  RUDINSKY         |          | Senior Vice President and Chief Accounting Officer   |
| Charles  A. Rudinsky             |          | (Principal  Accounting Officer)                      |
| /s/ ALFRED A. SLIFKA             |          | Chairman                                             |
| Alfred  A. Slifka                |          |                                                 |
| /s/ RICHARD  SLIFKA              |          | Vice Chairman                                        |
| Richard  Slifka                  |          |                                                 |
| /s/ DAVID K.  MCKOWN             |          | Director                                             |
| David  K. McKown                 |          |                                                 |
| /s/ ROBERT J.  MCCOOL            |          | Director                                             |
| Robert  J. McCool                |          |                                                 |
| /s/ KENNETH I.  WATCHMAKER       |          | Director                                             |
| Kenneth I.  Watchmaker           |          |                                                 |

 

 

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**INDEXTO FINANCIAL STATEMENTS**

| **GLOBAL PARTNERS LP FINANCIAL STATEMENTS**                                                                                                                                                                                               |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Report of Independent Registered Public Accounting  Firm                                                                                                                                                                                  |   | F-2    |   |
| Consolidated/Combined Balance Sheets as of  December 31, 2005 and 2004                                                                                                                                                               |   | F-3    |   |
| Consolidated/Combined Statements of Income for periods  from October 4, 2005 through December 31, 2005 and from  January 1, 2005 through October 3, 2005 and the Years Ended  December 31, 2004 and 2003         |   | F-4    |   |
| Consolidated/Combined Statements of Cash Flows for the  periods from October 4, 2005 through December 31, 2005 and from  January 1, 2005 through October 3, 2005 and the Years Ended  December 31, 2004 and 2003 |   | F-5    |   |
| Consolidated/Combined Statements of Partners’/Members’  Equity for the Years Ended December 31, 2003, 2004 and 2005                                                                                                        |   | F-6    |   |
| Notes to Financial Statements                                                                                                                                                                                                             |   | F-7    |   |

 

F-1

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**Report of Independent Registered Public AccountingFirm**

The Board of Directors of Global GP LLCand Unitholders of Global Partners LP

We have audited the accompanying consolidated balancesheet of Global Partners LP (“the Partnership”) as of December 31, 2005,the combined balance sheet as of December 31, 2004 (predecessor), and therelated consolidated statements of income, partners’ equity and cash flows forthe period from October 4, 2005 through December 31, 2005 (successor)and the combined statements of income, members’ equity, and cash flows for theperiod from January 1, 2005 through October 3, 2005 (predecessor),and the years ended December 31, 2004 (predecessor) and December 31,2003 (predecessor). Our audits also included the financial statement schedulelisted in the Index at Item 15(c). These financial statements and scheduleare the responsibility of the Partnership’s management. Our responsibility isto express an opinion on these financial statements and schedule based on ouraudits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. We were not engaged to perform an audit of the Partnership’sinternal control over financial reporting. Our audits included procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Partnership’s internal control overfinancial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, and evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In ouropinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Global Partners LP at December 31,2005 and 2004, and the results of its operations and its cash flows for theperiod from October 4, 2005 through December 31, 2005 (successor),the period from January 1, 2005 through October 3, 2005(predecessor), and the years ended December 31, 2004 (predecessor) and December 31,2003 (predecessor), in conformity with U.S. generally accepted accountingprinciples. Also, in our opinion, the related financial statement schedule,when considered in relation to the basic financial statements taken as a whole,presents fairly in all material respects the information set forth therein.

|  | /s/  ERNST & YOUNG LLP |
|--|---------------------------------|

 

Boston, MassachusettsMarch 10, 2006

F-2

----

**GLOBAL PARTNERS LPCONSOLIDATED/COMBINEDBALANCE SHEETS**

| ** **                                                                                                                  | ** ** | **Successor**               | ** **  | *** *** | *** *** | **Predecessor**             | ** ** | ** **  |
|-----------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|-------------|--------------|--------------|-----------------------------|------------|-------------|
| ** **                                                                                                                  | ** ** | **December 31,  2005** | ** **  | *** *** | *** *** | **December 31,  2004** | ** ** | ** **  |
| **Assets**                                                                                                                  | ** ** | ***Consolidated***          | ** **  | *** *** | *** *** | ***Combined***              | ** ** | ** **  |
| Current assets:                                                                                                             |       |                        |        |         |         |                        |       |        |
| Cash and cash equivalents                                                                                                   |       | $                           | 1,769,293   |         |         |                        | $          | 3,305,873   |   |   |
| Accounts receivable, less allowance of $2,084,000 as  of December 31, 2005 and $1,862,000 as of December 31, 2004 |       | 237,860,842                 |        |         |         | 162,433,931                 |       |        |
| Accounts receivable—affiliates                                                                                         |       | 2,005,116                   |        |         |         | 2,081,057                   |       |        |
| Inventories                                                                                                                 |       | 260,714,077                 |        |         |         | 165,585,877                 |       |        |
| Brokerage margin deposits                                                                                                   |       | 9,210,001                   |        |         |         | 8,537,748                   |       |        |
| Deferred income taxes                                                                                                       |       | 190,493                     |        |         |         | —                      |       |        |
| Prepaid expenses and other current assets                                                                                   |       | 7,589,949                   |        |         |         | 3,580,587                   |       |        |
| Total current assets                                                                                                        |       | 519,339,771                 |        |         |         | 345,525,073                 |       |        |
| Property and equipment, net                                                                                                 |       | 21,975,029                  |        |         |         | 22,630,437                  |       |        |
| Intangible assets, net                                                                                                      |       | 10,602,603                  |        |         |         | 12,225,407                  |       |        |
| Accounts receivable—affiliates                                                                                         |       | —                      |        |         |         | 4,096,505                   |       |        |
| Notes and advances receivable                                                                                               |       | 17,419                      |        |         |         | 5,881,958                   |       |        |
| Deferred income taxes                                                                                                       |       | 23,220                      |        |         |         | —                      |       |        |
| Other assets                                                                                                                |       | 2,797,746                   |        |         |         | 2,602,138                   |       |        |
| Total assets                                                                                                                |       | $                           | 554,755,788 |         |         |                        | $          | 392,961,518 |   |   |
| **Liabilities  and partners’/members’ equity**                                                                    |       |                        |        |         |         |                        |       |        |
| Current liabilities:                                                                                                        |       |                        |        |         |         |                        |       |        |
| Revolving line of credit                                                                                                    |       | $                           | —      |         |         |                        | $          | 139,900,000 |   |   |
| Accounts payable                                                                                                            |       | 259,462,832                 |        |         |         | 140,484,950                 |       |        |
| Notes payable, other—current portion                                                                                   |       | 297,506                     |        |         |         | 5,277,449                   |       |        |
| Income taxes payable                                                                                                        |       | 1,200,000                   |        |         |         | —                      |       |        |
| Accrued expenses and other current liabilities                                                                              |       | 28,615,020                  |        |         |         | 25,154,404                  |       |        |
| Obligations on forward fixed price contracts and  other derivatives                                                         |       | 1,037,640                   |        |         |         | 6,488,363                   |       |        |
| Total current liabilities                                                                                                   |       | 290,612,998                 |        |         |         | 317,305,166                 |       |        |
| Revolving line of credit                                                                                                    |       | 181,600,000                 |        |         |         | —                      |       |        |
| Notes payable, other—less current portion                                                                              |       | 1,558,374                   |        |         |         | 47,855,879                  |       |        |
| Other long-term liabilities                                                                                                 |       | 4,675,920                   |        |         |         | 4,638,064                   |       |        |
| Commitments and contingencies (See Note 11)                                                                                 |       | —                      |        |         |         | —                      |       |        |
| **Partners’/members’  equity**                                                                                    |       |                        |        |         |         |                        |       |        |
| Predecessor members’ equity                                                                                            |       | —                      |        |         |         | 23,162,409                  |       |        |
| Common unitholders  (5,642,424 units issued and outstanding at December 31, 2005)                                      |       | 97,512,118                  |        |         |         | —                      |       |        |
| Subordinated unitholders  (5,642,424 units issued and outstanding at December 31, 2005)                                |       | (20,372,107                 | )           |         |         | —                      |       |        |
| General partner interest  (2% interest with 230,303 equivalent units outstanding at  December 31, 2005)                |       | (831,515                    | )           |         |         | —                      |       |        |
| Total partners’/members’ equity                                                                                   |       | 76,308,496                  |        |         |         | 23,162,409                  |       |        |
| Total liabilities  and partners’/members’ equity                                                                  |       | $                           | 554,755,788 |         |         |                        | $          | 392,961,518 |   |   |

 

The accompanying notes are an integral part of these financial statements.

F-3

----

**GLOBAL PARTNERS LPCONSOLIDATED/COMBINEDSTATEMENTS OF INCOME**

| ** **                                                                                                                     | ** **   | **Successor**                                  | ** **    | ** **   | ** **   | **Predecessor**                              | ** **   |
|--------------------------------------------------------------------------------------------------------------------------------|--------------|------------------------------------------------|---------------|--------------|--------------|----------------------------------------------|--------------|
| ** **                                                                                                                     | ** **   | **October 4  through  December 31,** | ** **    | ** **   | ** **   | **January 1  through  October 3,** | ** **   | **Year Ended  December 31,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                                                                                                                     | ** **   | **2005**                                       | ** **    | ** **   | ** **   | **2005**                                     | ** **   | **2004** | ** ** | **2003** | ** ** |
| *** ***                                                                                                                   | *** *** | ***Consolidated***                             | *** ***  | *** *** | *** *** | ***Combined***                               | *** *** | ***Combined*** | *** *** | ***Combined*** | ** ** |
| Sales                                                                                                                          |         | $                                              | 1,248,899,258 |         |         |                                         | $            | 2,796,958,348 |   | $ | 3,187,568,928 |   | $ | 2,478,457,112 |   |
| Cost of sales                                                                                                                  |         | 1,219,991,250                                  |          |         |         | 2,734,149,396                                |         | 3,111,696,974 |   | 2,411,405,842 |   |
| Gross profit                                                                                                                   |         | 28,908,008                                     |          |         |         | 62,808,952                                   |         | 75,871,954 |   | 67,051,270 |   |
| Selling, general  and administrative expenses                                                                                  |         | 10,515,464                                     |          |         |         | 29,782,087                                   |         | 33,429,589 |   | 30,221,623 |   |
| Operating  expenses                                                                                                            |         | 4,923,567                                      |          |         |         | 14,775,111                                   |         | 19,608,132 |   | 18,754,187 |   |
| Amortization  expenses                                                                                                         |         | 389,193                                        |          |         |         | 1,233,611                                    |         | 824,734 |   | 26,664 |   |
| Operating income                                                                                                               |         | 13,079,784                                     |          |         |         | 17,018,143                                   |         | 22,009,499 |   | 18,048,796 |   |
| Interest expense                                                                                                               |         | 2,685,622                                      |          |         |         | 7,274,773                                    |         | 4,700,240 |   | 2,007,369 |   |
| Other expenses                                                                                                                 |         | —                                         |          |         |         | 1,049,969                                    |         | — |   | — |   |
| Income before  income tax expense                                                                                              |         | 10,394,162                                     |          |         |         | 8,693,401                                    |         | 17,309,259 |   | 16,041,427 |   |
| Income tax  expense                                                                                                            |         | 986,287                                        |          |         |         | —                                       |         | — |   | — |   |
| Net income                                                                                                                     |         | $                                              | 9,407,875     |         |         |                                         | $            | 8,693,401 |   | $ | 17,309,259 |   | $ | 16,041,427 |   |
| Less:                                                                                                                          |         |                                           |          |         |         |                                         |         |   |   |   |   |
| General partners’  interest in net income                                                                                 |         | 188,157                                        |          |         |         |                                         |         |   |   |   |   |
| Limited partners’  interest in net income                                                                                 |         | $                                              | 9,219,718     |         |         |                                         |         |   |   |   |   |   |
| Net income per  limited partner unit—basic and diluted (See Note 2, Net Income Per  Limited Partner Unit)  |         | $                                              | 0.70          |         |         |                                         |         |   |   |   |   |   |
| Weighted average limited  partners’ units outstanding—basic and diluted                                              |         | 11,284,848                                     |          |         |         |                                         |         |   |   |   |   |

 

The accompanying notes are an integral part of these financial statements.

F-4

----

**GLOBAL PARTNERS LP**

**CONSOLIDATED/COMBINEDSTATEMENTS OF CASH FLOWS**

| ** **                                                                                                                                       | ** ** | **Successor**                                        | ** **   | ** **   | ** **   | **Predecessor**                                    | ** **   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|--------------|--------------|--------------|----------------------------------------------------|--------------|
| ** **                                                                                                                                       | ** ** | **October 4  through  December 31,  2005** | ** **   | ** **   | ** **   | **January 1  through  October 3,  2005** | ** **   | **Year Ended  December 31,  2004** | ** ** | **Year Ended  December 31,  2003** | ** ** |
| ** **                                                                                                                                       | ** ** | ***Consolidated***                                   | *** *** | *** *** | *** *** | ***Combined***                                     | *** *** | ***Combined*** | *** *** | ***Combined*** | ** ** |
| **Cash flows from operating  activities**                                                                                                        |       |                                                 |         |         |         |                                               |         |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                       |       | $                                                    | 9,407,875    |         |         |                                               | $            | 8,693,401 |   |   | $ | 17,309,259 |   |   |   | $ | 16,041,427 |   |   |
| Adjustments to reconcile  net income to net cash provided by (used in) operating activities:                                                     |       |                                                 |         |         |         |                                               |         |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                                                                    |       | 953,034                                              |         |         |         | 2,921,793                                          |         |   | 3,232,285 |   |   |   | 2,400,572 |   |   |
| Loss on surrender of split dollar insurance policies                                                                                             |       | —                                               |         |         |         | 1,049,969                                          |         |   | — |   |   |   | — |   |   |
| Write-offs and amortization of deferred financing  costs                                                                                         |       | 392,299                                              |         |         |         | 220,521                                            |         |   | 381,418 |   |   |   | 214,480 |   |   |
| Changes  in operating assets and liabilities, net of acquisition:                                                                                |       |                                                 |         |         |         |                                               |         |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                                                                              |       | (62,122,495                                          | )            |         |         | (17,304,416                                        | )            |   | (40,523,251 | ) |   |   | 11,106,667 |   |   |
| Accounts receivable—affiliate                                                                                                               |       | 4,340,643                                            |         |         |         | (168,197                                           | )            |   | (3,863,584 | ) |   |   | (1,731,311 | ) |   |
| Inventories                                                                                                                                      |       | 14,338,833                                           |         |         |         | (109,467,033                                       | )            |   | (17,887,286 | ) |   |   | (48,216,428 | ) |   |
| (Gain) loss on sale of property and equipment                                                                                                    |       | (2,832                                               | )            |         |         | 33,842                                             |         |   | (298,709 | ) |   |   | 24,505 |   |   |
| Prepaid expenses, all other current assets and other  assets                                                                                     |       | 14,580,810                                           |         |         |         | (14,445,997                                        | )            |   | (6,185,015 | ) |   |   | 547,697 |   |   |
| Accounts payable                                                                                                                                 |       | 61,478,214                                           |         |         |         | 57,499,668                                         |         |   | (20,828,581 | ) |   |   | 51,808,068 |   |   |
| Accrued expenses and all other current liabilities                                                                                               |       | (78,876,534                                          | )            |         |         | 76,886,427                                         |         |   | (13,810,806 | ) |   |   | 6,591,718 |   |   |
| Income taxes payable                                                                                                                             |       | 1,200,000                                            |         |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| Other long-term liabilities                                                                                                                      |       | 248,050                                              |         |         |         | (210,194                                           | )            |   | 521,726 |   |   |   | (205,015 | ) |   |
| Net cash (used in) provided by operating activities                                                                                              |       | (34,062,103                                          | )            |         |         | 5,709,784                                          |         |   | (81,952,544 | ) |   |   | 38,582,380 |   |   |
| **Cash flows from investment  activities**                                                                                                       |       |                                                 |         |         |         |                                               |         |   |   |   |   |   |   |   |   |
| Proceeds from sale of property and equipment                                                                                                     |       | 12,750                                               |         |         |         | 144,000                                            |         |   | 859,348 |   |   |   | 42,195 |   |   |
| Purchase of property and equipment                                                                                                               |       | (760,489                                             | )            |         |         | (1,023,885                                         | )            |   | (2,025,869 | ) |   |   | (2,199,608 | ) |   |
| Net cash (used in) investment activities                                                                                                         |       | (747,739                                             | )            |         |         | (879,885                                           | )            |   | (1,166,521 | ) |   |   | (2,157,413 | ) |   |
| **Cash flows from financing  activities**                                                                                                        |       |                                                 |         |         |         |                                               |         |   |   |   |   |   |   |   |   |
| Issuance of common units, net of underwriter discount                                                                                            |       | 115,289,280                                          |         |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| Offering costs                                                                                                                                   |       | (4,001,550                                           | )            |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| Redemptions of common units from the predecessor  members as a result of over-allotment option exercise concurrent with initial  public offering |       | (15,098,371                                          | )            |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| Distributions to the predecessor members concurrent  with initial public offering                                                                |       | (45,250,000                                          | )            |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| Payments of deferred financing costs                                                                                                             |       | (1,024,000                                           | )            |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| Proceeds from revolving line of credit under Current  Credit Facility, net                                                                       |       | 181,600,000                                          |         |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| (Payments on) proceeds from revolving line of credit  under Former Credit Facility, net                                                          |       | (149,000,000                                         | )            |         |         | 9,100,000                                          |         |   | 97,500,200 |   |   |   | (27,400,000 | ) |   |
| Payments to RYTTSA (Note 1)                                                                                                                 |       | —                                               |         |         |         | —                                             |         |   | (43,230,329 | ) |   |   | — |   |   |
| Payment of term loan                                                                                                                             |       | (51,000,000                                          | )            |         |         | —                                             |         |   | — |   |   |   | — |   |   |
| Proceeds from (payments on) note payable to bank                                                                                                 |       | —                                               |         |         |         | —                                             |         |   | (6,000,000 | ) |   |   | — |   |   |
| Proceeds from term loan                                                                                                                          |       | —                                               |         |         |         | —                                             |         |   | 51,000,000 |   |   |   | — |   |   |
| Payments on note payable, other                                                                                                                  |       | (71,188                                              | )            |         |         | (206,260                                           | )            |   | (258,744 | ) |   |   | (241,300 | ) |   |
| Distributions to members                                                                                                                         |       | —                                               |         |         |         | (11,894,548                                        | )            |   | (16,041,427 | ) |   |   | (5,986,589 | ) |   |
| Net cash provided by (used in) financing activities                                                                                              |       | 31,444,171                                           |         |         |         | (3,000,808                                         | )            |   | 82,969,700 |   |   |   | (33,627,889 | ) |   |
| **Cash and cash equivalents**                                                                                                                    |       |                                                 |         |         |         |                                               |         |   |   |   |   |   |   |   |   |
| (Decrease) increase in cash and cash equivalents                                                                                                 |       | (3,365,671                                           | )            |         |         | 1,829,091                                          |         |   | (149,565 | ) |   |   | 2,797,078 |   |   |
| Cash and cash equivalents at beginning of period                                                                                                 |       | 5,134,964                                            |         |         |         | 3,305,873                                          |         |   | 3,455,438 |   |   |   | 658,360 |   |   |
| Cash and cash equivalents at end of period                                                                                                       |       | $                                                    | 1,769,293    |         |         |                                               | $            | 5,134,964 |   |   | $ | 3,305,873 |   |   |   | $ | 3,455,438 |   |   |
| **Supplemental information**                                                                                                                     |       |                                                 |         |         |         |                                               |         |   |   |   |   |   |   |   |   |
| Cash paid during  the year for interest                                                                                                          |       | $                                                    | 2,609,481    |         |         |                                               | $            | 7,969,053 |   |   | $ | 4,119,214 |   |   |   | $ | 2,068,319 |   |   |

 

The accompanying notes are an integral part of these financial statements.

F-5

----

**GLOBAL PARTNERS LP**

**CONSOLIDATED/COMBINEDSTATEMENTS OF PARTNERS’/MEMBERS’ EQUITY**

| ** **                                                                                                                                  | ** ** | **Predecessor**                                 | ** ** | ** ** | ** ** | **Successor**           | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|------------|------------|-------------------------|------------|
| ** **                                                                                                                                  | ** ** | **Global  Companies  LLC and  Affiliates** | ** ** | ** ** | ** ** | **Common  Unitholders** | ** ** | **Subordinated  Unitholders** | ** ** | **General  Partner  Interest** | ** ** | **Total  Partners’  Equity** | ** ** |
| **Predecessor:**                                                                                                                            |       |                                            |       |       |       |                    |       |   |   |   |   |   |   |
| *Combined*                                                                                                                                  |       |                                            |       |       |       |                    |       |   |   |   |   |   |   |
| **Balance December 31, 2002**                                                                                                          |       | $                                               | 32,509,696 |       |       |                    | $          | — |   | $ | — |   | $ | — |   | $ | 32,509,696 |   |
| Net income and total  comprehensive income                                                                                                  |       | 16,041,427                                      |       |       |       | —                  |       | — |   | — |   | 16,041,427 |   |
| Distribution to members                                                                                                                     |       | (5,986,589                                      | )          |       |       | —                  |       | — |   | — |   | (5,986,589 | ) |
| **Balance December 31, 2003**                                                                                                          |       | 42,564,534                                      |       |       |       | —                  |       | — |   | — |   | 42,564,534 |   |
| Net income and total  comprehensive income                                                                                                  |       | 17,309,259                                      |       |       |       | —                  |       | — |   | — |   | 17,309,259 |   |
| Distribution to members                                                                                                                     |       | (16,041,427                                     | )          |       |       | —                  |       | — |   | — |   | (16,041,427 | ) |
| Effect of RYTTSA  transaction                                                                                                               |       | (20,669,957                                     | )          |       |       | —                  |       | — |   | — |   | (20,669,957 | ) |
| **Balance December 31, 2004**                                                                                                          |       | 23,162,409                                      |       |       |       | —                  |       | — |   | — |   | 23,162,409 |   |
| Distribution to members                                                                                                                     |       | (11,894,548                                     | )          |       |       | —                  |       | — |   | — |   | (11,894,548 | ) |
| Net income and total  comprehensive income through October 3, 2005                                                                     |       | 8,693,401                                       |       |       |       | —                  |       | — |   | — |   | 8,693,401 |   |
| **Balance October 3, 2005**                                                                                                            |       | 19,961,262                                      |       |       |       | —                  |       | — |   | — |   | 19,961,262 |   |
| **Successor:**                                                                                                                              |       |                                            |       |       |       |                    |       |   |   |   |   |   |   |
| *Consolidated*                                                                                                                              |       |                                            |       |       |       |                    |       |   |   |   |   |   |   |
| Allocation of net  predecessor investment to unitholders                                                                                    |       | (19,961,262                                     | )          |       |       | 2,240,269               |       | 17,026,052 |   | 694,941 |   | — |   |
| Proceeds from initial  public offering, net of underwriter discount                                                                         |       | —                                          |       |       |       | 115,289,280             |       | — |   | — |   | 115,289,280 |   |
| Offering costs                                                                                                                              |       | —                                          |       |       |       | (4,001,550              | )          | — |   | — |   | (4,001,550 | ) |
| Distributions to the  predecessor members concurrent with initial public offering                                                           |       | —                                          |       |       |       | (5,078,446              | )          | (38,596,199 | ) | (1,575,355 | ) | (45,250,000 | ) |
| Redemption of common  units from predecessor members as a result of over-allotment option exercise  concurrent with initial public offering |       |                                            |       |       |       | (15,098,371             | )          |   |   |   |   | (15,098,371 | ) |
| Elimination of  intercompany balance concurrent with initial public offering                                                                |       | —                                          |       |       |       | (448,923                | )          | (3,411,819 | ) | (139,258 | ) | (4,000,000 | ) |
| Net income and total  comprehensive income from October 4, 2005 through December 31, 2005                                         |       | —                                          |       |       |       | 4,609,859               |       | 4,609,859 |   | 188,157 |   | 9,407,875 |   |
| **Balance December 31, 2005**                                                                                                          |       | $                                               | —     |       |       |                    | $          | 97,512,118 |   | $ | (20,372,107 | ) | $ | (831,515 | ) | $76,308,496 |   |
|                                                                                                                                             |            |                                                 |            |            |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |

 

The accompanying notes are an integral part of these financial statements.

F-6

----

**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**1.**                 Organizationand Nature of Business

Global Partners LP (the “Partnership”) is a publiclyheld master limited partnership that engages in the wholesale and commercialdistribution of refined petroleum products, natural gas and ancillary servicesto companies domestically and, on a limited basis, internationally. ThePartnership commenced operations on October 4, 2005 upon the completion ofits initial public offering of common units (the “IPO”). (See *The Partnership’s IPO*below for more information regardingthe IPO.)

The Partnership has four operating subsidiaries:  Global Companies LLC, its subsidiary, GlenHes Corp., Global Montello Group Corp. and Chelsea Sandwich LLC (the fouroperating subsidiaries, collectively, the “Companies”). The Companies are whollyowned by Global Operating LLC, a wholly owned subsidiary of the Partnership.

The Partnership’s 2% general partner interest is heldby Global GP LLC (the “General Partner”). The General Partner, which is ownedby affiliates of the Slifka family, manages the Partnership’s operations andactivities and employs its officers and personnel. Affiliates of the GeneralPartner, including its directors and executive officers, own 87,724 commonunits and 5,642,424 subordinated units, representing a combined 49.8% limitedpartner interest.

References to “Global Partners LP” or “the Partnership”or “the General Partner” as it relates to the combined financial statements andthese accompanying notes as of December 31, 2004 and with respect to theperiod from January 1, 2005 through October 3, 2005 and the yearsended December 31, 2004 and 2003 refer to the business of Global CompaniesLLC and its affiliates, Glen Hes Corp., Global Montello Group LLC and ChelseaSandwich LLC (collectively, the “Predecessor”).

Immediately after becominga master limited partnership, the Partnership converted Global Montello GroupLLC (the predecessor to Global Montello Group Corp.) into a taxable corporation. References to “the Companies” in thePartnership’s combined financial statements and these accompanying notesinclude Global Montello Group LLC as of December 31, 2004 and with respectto the period from January 1, 2005 through October 3, 2005 and theyears ended December 31, 2004 and 2003, and Global Montello Group Corp. asof and with respect to the period from October 4, 2005 through December 31,2005 and the year ended December 31, 2005.

***The Partnership’s IPO***

On October 4, 2005, the Partnership completed aninitial public offering of 5,635,000 common units at a price of $22.00 per commonunit, which included a 735,000 common unit over-allotment option that wasexercised by the underwriters. Proceeds from the sale of the common units were$111,287,730 net of offering costs and underwriting discounts. The net proceedsfrom the exercise of the underwriters’ over-allotment option of $15,098,371were used to redeem common units from affiliates of the General Partner. TheIPO represented the sale of a 48.9% interest in the Partnership.

In connection with the completion of the Partnership’sIPO, the owners of the Companies conveyed their respective interests in theCompanies to the Partnership in exchange for (a) 742,424 common units, (b) 5,642,424subordinated units, (c) the general partner interest (230,303 generalpartner units representing a 2% interest in the Partnership), and (d) theassumption of $51.0 million of debt by the Partnership. As a result of theabove-described transactions, the Companies became wholly-owned subsidiaries ofGlobal Operating LLC pursuant to a Contribution, Conveyance and AssumptionAgreement by and among the General Partner, Global Operating LLC, theCompanies, GPC, Larea 

F-7

----

**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**1.**                 Organizationand Nature of Business—*The Partnership’s IPO*(continued)

Holdings LLC and Larea Holdings II LLC (collectively “Larea”),Chelsea Terminal Limited Partnership, Sandwich Terminal, L.L.C. and MontelloOil Corporation (the “Contribution, Conveyance and Assumption Agreement”.) Thetransfer of ownership of assets from the Predecessor to the Partnership wasrecorded at historical costs in accordance with Emerging Issues Task Force (“EITF”)Issue No. 87-21, “Change in Accounting Basis in Master LimitedPartnership Transactions.”

The following tablepresents the net assets of the Predecessor immediately prior to contributingsuch assets and liabilities to the Partnership:

| ** **                                                          | ** ** | **October 3,  2005** | ** ** |
|---------------------------------------------------------------------|------------|---------------------------|------------|
| Cash and cash  equivalents                                          |       | $                         | 5,134,964  |   |
| Accounts  receivable—trade                                     |       | 179,865,527               |       |
| Accounts  receivable—affiliates                                |       | 6,345,759                 |       |
| Inventories                                                         |       | 275,052,910               |       |
| Broker margin  deposits                                             |       | 13,861,000                |       |
| Prepaid expenses  and other current assets                          |       | 14,699,628                |       |
| Property and  equipment, net                                        |       | 21,783,827                |       |
| Intangible  assets, net                                             |       | 10,996,268                |       |
| Other assets                                                        |       | 5,217,309                 |       |
| Total assets                                                        |       | $532,957,192              |       |
| Revolving line of credit                                            |       | 149,000,000               |       |
| Accounts payable                                                    |       | 198,111,798               |       |
| Notes payable,  other—current portion                          |       | 51,277,449                |       |
| Accrued expenses  and other current liabilities                     |       | 21,514,480                |       |
| Obligations on  forward fixed price contracts and other derivatives |       | 87,014,714                |       |
| Notes payable,  other—less current portion                     |       | 1,649,619                 |       |
| Other long term  liabilities                                        |       | 4,427,870                 |       |
| Total liabilities                                                   |       | $512,995,930              |       |
| Net assets                                                          |       | $                         | 19,961,262 |   |

 

Also in connectionwith the IPO:

(a)          The Partnership, theGeneral Partner and certain Slifka family affiliates entered into an OmnibusAgreement pursuant to which the Partnership became entitled to certainnon-competition and indemnification protections;

(b)         ThePartnership entered into a new four-year senior secured credit agreement (the “CurrentCredit Facility”) in an aggregate principal amount of up to $400.0 million andrepaid the then outstanding borrowings under the then existing revolving creditfacility of the Companies. There are three facilities under the Current CreditFacility:

·                     aworking capital revolving credit facility to be used for working capitalpurposes and letters of credit in the principal amount equal to the lesser ofthe Partnership’s borrowing base and $350.0 million, of which $50.0 million isavailable each year only during the period between September 1st and June 30th;

F-8

----

**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**1.**                 Organizationand Nature of Business—*The Partnership’s IPO*(continued)

·                     a$35.0 million acquisition facility to be used for funding acquisitions similarto the Partnership’s business lines that have a purchase price of $25.0 millionor less or $35.0 million or less in the aggregate in any 12-monthperiod; and

·                     a$15.0 million revolving credit facility to be used for the Partnership’sgeneral partnership purposes, including payment of distributions tounitholders.

On November 10,2005, the Current Credit Facility was amended to increase total availablecommitments thereunder from $400.0 million to $500.0 million. The workingcapital revolving credit facility was increased by $100.0 million, of whichthere is (i) a $50.0 million increase in the permanent working capitalrevolving credit facility commitment, and (ii) an additional seasonaloverline facility of $50.0 million that is available each year only during theperiod between September 1st and June 30th;

(c)           Using net proceeds fromthe sale of common units in the IPO, the Partnership (i) repaid $51.0 millionof outstanding indebtedness assumed by the Partnership under the Contribution,Conveyance and Assumption Agreement, (ii) repaid $45.3 million ofborrowings under the Partnership’s then current credit facility; (iii) paid$4.0 million of offering expenses; and (iv) distributed $15.1 million toredeem common units from affiliates of the Slifka family as a result of theunderwriters’ exercise of their over-allotment option;

(d)          Effective from and afterOctober 4, 2005, the General Partner employs substantially all of theCompanies’ employees and charges the Companies for their services;

(e)           Global Montello GroupLLC converted to a Delaware corporation known as Global Montello Group Corp.;

(f)             The Partnership’sLong-Term Incentive Plan became effective for employees, consultants anddirectors of the General Partner and employees and consultants of affiliates ofthe Partnership who perform services for the Partnership;

(g)           The Partnership enteredinto an Amended and Restated Shared Services Agreement with GPC pursuant towhich the Partnership committed to provide GPC with certain accounting,treasury, legal, information technology, human resources and financialoperations support, and GPC committed to provide the Partnership with certainterminal, environmental and operational support services;

(h)          The Partnership andAlliance Energy Corp. (“Alliance”) entered into an Amended and Restated SharedServices Agreement pursuant to which Global Companies LLC committed to provideAlliance with certain accounting, treasury, legal, information technology,human resources and financial operations support; and

(i)             ThePartnership and GPC entered into a Second Amended and Restated Terminal StorageRental and Throughput Agreement with respect to the refined petroleum productsstorage terminal located in Revere, Massachusetts that is owned by GPC and itsaffiliates.

F-9

----

**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**1.**                 Organizationand Nature of Business (continued)

***The Predecessor***

Immediately prior to the IPO, Global Companies LLC, alimited liability company formed in 1998, and its three affiliates, GlobalMontello Group LLC, Chelsea Sandwich LLC and Glen Hes Corp., conducted thebusiness now conducted by the Partnership.

On July 2, 2004, RYTTSA USA Inc. (“RYTTSA”) soldits ownership interests in the Companies to Global Petroleum Corp. (“GPC”) andcertain of GPC’s affiliates and Larea (the “Transaction”). Upon completion ofthe Transaction on July 2, 2004, RYTTSA no longer had an ownershipinterest in the Companies.

At the time of the Transaction, the membershipstructure of the Companies consisted of two classes of interests; voting andnon-voting interests. Except for voting rights and percentages of ownershipinterests, each membership interest was identical to each other membershipinterest with respect to rights and privileges. Upon completion of theTransaction, ownership interests in the Companies were as follows: GPC andcertain of its affiliates 85% (100% voting interest) and Larea 15% (no votinginterest). The Companies (other than Glen Hes Corp.) were each managed by aboard of governors that was selected by the members holding voting membershipinterests in such Companies.

The Companies accounted for the Transaction inaccordance with the provisions of Statement of Financial Accounting Standards (“SFAS”)No. 141, “Business Combinations,” and EITF Issue No. 88-16, “Basisin Leveraged Buyout Transactions” (“EITF 88-16”). As provided under SECStaff Accounting Bulletin No. 54, “Push Down Basis of Accounting Requiredin Certain Limited Circumstances” (“SAB 54”), the Companies have reflectedall applicable purchase accounting adjustments recorded by GPC and certain ofits affiliates in the Companies’ combined financial statements for all periodssubsequent to the Transaction (“Push Down Accounting”). Push Down Accountingrequired the Companies to establish a new basis for the proportionate share ofthe assets and liabilities acquired based on the amount paid for this ownershipinterest on July 2, 2004. In accordance with EITF 88-16, theacquired assets and liabilities have been recorded at fair value based on theinterests acquired from RYTTSA.

Theaggregate purchase price of RYTTSA’s interest, $43,230,000 was allocated to theassets and liabilities based on their relative fair values at the time ofacquisition as determined by an independent appraisal firm. The following tablepresents the allocation of purchase price reflected in the accompanyingcombined financial statements on a Push Down Accounting basis:

| Original carrying  value of net assets acquired |   | $           | 20,669,957 |   |
|-------------------------------------------------|--------|-------------|------------|--------|
| Fair Market Value  Adjustments:                 |   |        |       |
| Property and  equipment                         |   | 8,841,782   |       |
| Intangible assets                               |   | 12,776,795  |       |
| Other assets                                    |   | 941,466     |       |
| Total                                           |   | $22,560,043 |       |
| Total purchase price                            |   | $           | 43,230,000 |   |

 

F-10

----

**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**2.**                 Summaryof Significant Accounting Policies

***Basis of Presentation***

The accompanying consolidated financial statements asof December 31, 2005 and for the period October 4, 2005 through December 31,2005 reflect the accounts of the Partnership. All intercompany balances andtransactions have been eliminated.

The accompanying combinedfinancial statements as of December 31, 2004 and for the years ended December 31,2004 and 2003 and for the period January 1, 2005 through October 3,2005 reflect the accounts of Global Companies LLC, Global Montello Group LLC**,** Chelsea Sandwich LLC and Glen Hes Corp. as well as thePush Down Accounting related to the Transaction. The Companies were affiliatedthrough, and managed by, common ownership and were co-signors and guarantorsalong with certain of their owners, on the Companies’ bank line agreement (SeeNote 8). All intercompany balances and transactions have been eliminated.

***Use of Estimates***

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities, at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

***Cash and Cash Equivalents***

The Partnership uses a controlled disbursement accountas part of its cash management program. The Partnership had sufficient fundsavailable to fund its outstanding checks when they were presented for payment.

The Partnership considershighly liquid investments with original maturities of three months or less attime of purchase to be cash equivalents. The carrying value of cash and cashequivalents approximates fair value.

***Inventories***

Inventories are valued at the lower of cost or marketbased on the first-in, first-out method (FIFO).

Inventoriesconsist of the following:

| ** **                                    | ** ** | **Successor**               | ** **  | ** ** | ** ** | **Predecessor**             | ** ** |
|-----------------------------------------------|------------|-----------------------------|-------------|------------|------------|-----------------------------|------------|
| ** **                                    | ** ** | **December 31,  2005** | ** **  | ** ** | ** ** | **December 31,  2004** | ** ** |
| Distillates;  light oil, diesel, and kerosene |       | $                           | 195,170,437 |       |       |                        | $          | 116,292,321 |   |
| Gasoline                                      |       | 19,311,410                  |        |       |       | 17,052,432                  |       |
| Blend stock                                   |       | 6,781,900                   |        |       |       | 10,619,578                  |       |
| Residual oil                                  |       | 39,450,330                  |        |       |       | 21,621,546                  |       |
|                                          |       | $                           | 260,714,077 |       |       |                        | $          | 165,585,877 |   |

 

F-11

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**2.**                 Summaryof Significant Accounting Policies—*Inventories*(continued)

The Partnership hedges substantially all of itsinventory purchases through futures, options and swap agreements. In additionto its own inventory, the Partnership has exchange agreements with unrelatedthird-party suppliers, whereby it may draw inventory from these other suppliers(See *Revenue Recognition*). Positive exchangebalances are accounted for as accounts receivable. Negative exchange balancesare accounted for as accounts payable. Exchange transactions are valued usingcurrent quoted market prices. The impact of exchange agreements was notmaterial to the Partnership’s financial statements at December 31, 2005and December 31, 2004.

***Property and Equipment***

Propertyand equipment are stated at cost. Expenditures for routine maintenance, repairsand renewals are charged to expense as incurred; major improvements arecapitalized. Depreciation is charged to operations over the estimated usefullives of the applicable assets, using principally straight-line methods. Theestimated useful lives are as follows:

| Buildings, docks,  terminal facilities and improvements |   | 15-39 years |
|---------------------------------------------------------|--------|-------------|
| Fixtures, equipment and automobiles                     |   | 3-7 years   |

 

***Long-Lived Assets***

SFAS No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), addressesfinancial accounting and reporting for the impairment or disposal of long-livedassets other than goodwill or indefinite lived intangible assets. Accordingly,the Partnership evaluates for impairment whenever indicators of impairment areidentified. The impairment evaluation is based on the projected cash flows ofthe particular asset. No such indicators of impairment were identified during 2005and 2004.

***Environmental and Other Liabilities***

The Partnership records accrued liabilities for alldirect costs associated with the estimated resolution of contingencies at theearliest date at which it is deemed probable that a liability has been incurredand the amount of such liability can be reasonably estimated. Costs accrued areestimated based upon an analysis of potential results, assuming a combinationof litigation and settlement strategies and outcomes.

The Partnership provides for losses associated withenvironmental remediation obligations when such losses are probable andreasonably estimable. Estimated losses from environmental remediationobligations generally are recognized no later than completion of the remedialfeasibility study. Loss accruals are adjusted as further information becomesavailable or circumstances change. Costs of future expenditures forenvironmental remediation obligations are not discounted to their presentvalue.

Recoveries ofenvironmental remediation costs from other parties are recognized as assetswhen their receipt is deemed probable.

F-12

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**2.**                 Summaryof Significant Accounting Policies—*Environmental and OtherLiabilities* (continued)

The Partnership is subject to other contingencies,including legal proceedings and claims arising out of its businesses that covera wide range of matters, including, among others, environmental matters,contract and employment claims. Environmental and other legal proceedings mayalso include matters with respect to businesses previously owned. Further, dueto the lack of adequate information and the potential impact of presentregulations and any future regulations, there are certain circumstances inwhich no range of potential exposure may be reasonably estimated.

***Leases***

The Partnership leases office space and computerequipment and also has entered into terminal and throughput lease arrangementswith various unrelated oil terminals. Leases are accounted for under theprovisions of SFAS No. 13, “Accounting for Leases,” as amended, whichrequires that leases be evaluated and classified as operating or capital leasesfor financial reporting purposes. The lease term used for lease evaluationincludes option periods only in instances in which the exercise of the optionperiod can be reasonably assured and failure to exercise such options wouldresult in an economic penalty.

***RevenueRecognition***

Sales relate primarily to the sale of refinedpetroleum products and natural gas and are recognized along with the relatedreceivable upon delivery, net of applicable provisions for discounts andallowances. Allowances for cash discounts are recorded as a reduction of salesat the time of sale based on the estimated future outcome. The Partnership alsoprovides for shipping costs at the time of sale, which costs are included incost of sales. The amounts recorded for bad debts are generally based uponhistorically derived percentages while also factoring in any new businessconditions that might impact the historical analysis such as market conditionsand bankruptcies of particular customers. Bad debt provisions are included inselling, general and administrative expense.

Revenue is not recognizedon exchange agreements, which are entered into primarily to acquire variousrefined petroleum products of a desired quality or to reduce transportationcosts by taking delivery of products closer to the Partnership’s end markets.Any net differential for exchange agreements is recorded as an adjustment ofinventory costs in the purchases component of cost of sales in the statement ofincome based upon the concepts set forth in APB Opinion No. 29, “Accountingfor Nonmonetary Transactions.”

***Income Taxes***

Section 7704 of the Internal Revenue Codeprovides that publicly traded partnerships will, as a general rule, be taxed ascorporations. However, an exception, referred to as the “Qualifying IncomeException,” exists under Section 7704(c) with respect to publicly tradedpartnerships of which 90% or more of the gross income for every taxable yearconsists of “qualifying income.” Qualifying income includes income and gainsderived from the transportation, storage and marketing of crude oil, naturalgas and products thereof. Other types of qualifying income include interest(other than from a financial business), dividends, gains from the sale of realproperty and gains from the sale or other disposition of capital assets heldfor the production of income that otherwise constitutes qualifying income. 

Substantially all of the Partnership’s income is “qualifyingincome” for federal and state income tax purposes, and therefore is not subjectto federal and state income taxes at the partnership level. Accordingly, noprovision has been made for income taxes on the qualifying income in thePartnership’s financial statements. Net income for financial statement purposesmay differ significantly from taxable 

F-13

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**2.**                 Summaryof Significant Accounting Policies—*Income Taxes*(continued)

income reportable to unitholders as a result ofdifferences between the tax bases and financial reporting bases of assets andliabilities and the taxable income allocation requirements under the FirstAmended and Restated Agreement of Limited Partnership of Global Partners LP, asamended. Individual unitholders have different investment bases depending uponthe timing and price at which they acquired their Partnership units. Further,each unitholder’s tax accounting, which is partially dependent upon theunitholder’s tax position, differs from the accounting followed in thePartnership’s consolidated financial statements. Accordingly, the aggregatedifference in the basis of the Partnership’s net assets for financial and tax reportingpurposes cannot be readily determined because information regarding eachunitholder’s tax attributes in the Partnership is not available to thePartnership.

Effective as of October 5,2005, Global Montello Group Corp. (the successor by conversion to GlobalMontello Group LLC) is a taxable entity for federal and state income tax purposes.Current and deferred income taxes are recognized on the separate earnings ofGlobal Montello Group Corp. from October 5, 2005 through December 31,2005. The after-tax earnings of Global Montello Group Corp. are included in theearnings of the Partnership. Deferred income taxes reflect the net tax effectsof temporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts used for income tax purposesfor Global Montello Group Corp.

***Concentration of Credit Risk***

Financial instruments that potentially subject thePartnership to concentration of credit risk consist primarily of cash, cashequivalents, accounts receivable, notes and advances receivable, firmcommitments and, under certain circumstances, futures contracts, options andswap agreements. The Partnership invests excess cash primarily ininvestment-grade securities and, by policy, limits the amount of creditexposure to any one financial institution. The Partnership provides credit, inthe normal course of business, primarily to other wholesale and retailpetroleum companies, and generally does not require collateral. The Partnershipperforms ongoing credit evaluations of its customers and provides for creditlosses based on specific information and historical trends. Credit risk ontrade receivables is minimized, as a result of the Partnership’s large customerbase. Losses have historically been within management’s expectations. Risk ofcredit loss related to futures contracts, options and swap agreements isdiscussed in Note 3.

No single customer accounted for 10% or more of sales,or 10% or more of accounts receivable, for the years ended December 31,2005 and 2004.

***Derivative Financial Instruments***

SFAS No. 133, “Accounting for Derivative Instrumentsand Hedging Activities,” as amended (“SFAS 133”), establishes accountingand reporting standards for derivative instruments and hedging activities. SFAS133 requires that an entity recognize derivatives, as either assets orliabilities, on the balance sheet and measure the instruments at fair value.Changes in the fair value of the derivative are to be recognized currently inearnings, unless specific hedge accounting criteria are met.

The Partnership recognizes all changes in the fairvalue of derivatives currently in earnings. The fair value of derivatives isdetermined through the use of independent markets and is based upon theprevailing market prices of such instruments at the date of valuation.

F-14

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**2.**                 Summaryof Significant Accounting Policies—*Derivative FinancialInstruments*(continued)

The Partnership alsomarkets and sells natural gas. The Partnership conducts business by enteringinto forward purchase commitments for natural gas when it simultaneously entersinto arrangements for the sale of product for physical delivery to third-partyusers. Through these transactions, which establish an immediate margin, thePartnership seeks to maintain a position that is substantially balanced betweenfirm forward purchase and sales commitments. Natural gas is generally purchasedand sold at fixed prices and quantities. Current price quotes from activelytraded markets are used in all cases to determine the contracts’ fair value.Changes in the fair value of these contracts are recognized currently inearnings as an increase or decrease in cost of sales.

***Financial Instruments***

The fair value of thePartnership’s financial instruments approximated carrying value as of December 31,2005 and December 31, 2004, in each case due to the short-term and thevariable interest rate nature of the financial instruments.

***Net Income Per Limited Partner Unit***

The computation of net income per limited partner unitis based on the weighted average number of common and subordinated units outstandingduring the year. Basic and diluted net income per limited partner unit isdetermined by dividing net income after deducting the amount allocated to thegeneral partner interest (including its incentive distribution in excess of its2% interest) by the weighted average number of outstanding limited partnerunits during the period in accordance with EITF 03-06, “ParticipatingSecurities and the Two-Class Method under FASB Statement No. 128,’’ (“EITF03-06”.) EITF 03-06 addresses the computation of earnings per share (inthe Partnership’s case, per unit) by an entity that has issued securities otherthan common stock that contractually entitle the holder to participate individends and earnings of the entity when, and if, it declares dividends on itscommon stock. Essentially, EITF 03-06 provides that in any accountingperiod where the Partnership’s aggregate net income exceeds its aggregatedistribution for such period, the Partnership is required to present earningsper unit as if all of the earnings for the periods were distributed, regardlessof whether those earnings would actually be distributed during a particularperiod from an economic or practical perspective. EITF 03-06 does notimpact the Partnership’s overall net income or other financial results;however, for periods in which the Partnership’s aggregate net income exceedsits aggregate distributions for such period, it will have the impact ofreducing the earnings per limited partner unit. This result occurs as a largerportion of the Partnership’s aggregate earnings is allocated to the incentivedistribution rights held by the General Partner, as if distributed, even thoughthe Partnership makes cash distributions on the basis of cash available fordistributions, not earnings, in any given accounting period. In accountingperiods where aggregate net income does not exceed aggregate distributions forsuch period, EITF 03-06 does not have any impact on the Partnership’searnings per unit calculation.

F-15

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**2.**                 Summary ofSignificant Accounting Policies—*Net Income Per LimitedPartner Unit*(continued)

Thefollowing sets forth the net income allocation using this method:

| ** **                                                                | ** ** | **Successor**                                                       | ** ** |
|---------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                                                | ** ** | **October 4, 2005  through  December 31, 2005** | ** ** |
| ** **                                                                | ** ** | **$**                                                               | ** ** | **Per Llmited   Partner Unit** | ** ** |
| Net income                                                                |       | $                                                                   | 9,407,875  |   |   |   |   |   |
| Less:                                                                     |       |                                                                |       |   |   |   |   |
| General partner’s incentive distribution paid                        |       | —                                                              |       |   |   |   |   |
| Subtotal                                                                  |       | 9,407,875                                                           |       |   |   |   |   |
| General partner 2% ownership                                              |       | (188,157                                                            | )          |   |   |   |   |
| Net income available to limited partners                                  |       | 9,219,718                                                           |       |   | 0.82 |   |   |
| Pro forma additional general partner’s incentive  distribution  |       | (1,297,295                                                          | )          |   | (0.12 | ) |   |
| Net income  available to limited partners under EITF 03-06           |       | $                                                                   | 7,922,423  |   |   | $ | 0.70 |   |   |
|                                                                           |            |                                                                     |            |  |  |  |  |  |  |

 

***The Partnership did not declareadditional cash distributions during the period October 4, 2005 throughDecember 31, 2005 which would result in an incentive distribution to theGeneral Partner as indicated above.***

***Recent Accounting Pronouncements***

*SFAS No. 123(revised) “Share-Based Payment”*

In December 2004, theFinancial Accounting Standards Board (“FASB”) issued SFAS No. 123(revised), “Share-Based Payment” (“SFAS 123 (revised).”)  This revision prescribes the accounting for awide range of equity-based compensation arrangements, including share options,restricted share plans, performance-based awards, share appreciation rights andemployee share purchase plans, and generally requires the fair value ofequity-based awards to be expensed on the income statement. SFAS 123 (revised)allows for either modified prospective recognition of compensation expense ormodified retrospective recognition. The Partnership believes the adoption ofthis standard will not have a material effect on its financial condition,results of operations or cash flows as there currently are no awardsoutstanding and the Partnership does not currently expect to make significantgrants of equity awards during 2006.

*SFAS No. 153 “Exchangesof Nonmonetary Assets an amendment of APB Opinion No. 29”*

In December 2004,the FASB issued SFAS No. 153 “Exchanges of Nonmonetary Assets an amendmentof APB Opinion No. 29.” SFAS No. 153 amends APB Opinion No. 29to eliminate the exception for nonmonetary exchanges of similar productiveassets and replaces it with a general exception for exchanges of nonmonetaryassets that do not have commercial substance. A nonmonetary exchange hascommercial substance if the future cash flows of the entity are expected tochange significantly as a result of the exchange. This statement becomeseffective for nonmonetary asset exchanges occurring in fiscal periods beginningafter June 15, 2005. The adoption of SFAS No. 153 did not have amaterial effect on the Partnership’s financial position or results ofoperations.

F-16

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**2.**                 Summary ofSignificant Accounting Policies—*Recent AccountingPronouncements*(continued)

*EITF Issue No. 04-13“Accounting for Purchases and Sales of Inventory with the Same Counterparty”*

In September 2005 the EITF issued Issue No. 04-13(“EITF 04-13”), “Accounting for Purchases and Sales of Inventory with theSame Counterparty.” The EITF concluded that inventory purchases and salestransactions with the same counterparty should be combined for accountingpurposes if entered into in contemplation of each other. The EITF providedindicators to be considered for purposes of determining whether suchtransactions are entered into in contemplation of each other. Guidance was alsoprovided on the circumstances under which nonmonetary exchanges of inventorywithin the same line of business should be recognized at fair value. EITF 04-13will be effective in reporting periods beginning after March 13, 2006. ThePartnership believes the adoption of EITF 04-13 will not have a materialimpact to its financial condition, results of operations or cash flows as thePartnership already records exchange transactions on a combined basis. See *Revenue Recognition* above for the Partnership’s accountingpolicy for exchange transactions.

**3.**                 DerivativeFinancial Instruments

The composition andfair value of (obligations on) derivative instruments consist of the following:

| ** **                     | ** ** | **Successor**               | ** ** | ** ** | ** ** | **Predecessor**                   | ** ** |
|--------------------------------|------------|-----------------------------|------------|------------|------------|-----------------------------------|------------|
| ** **                     | ** ** | **December 31,  2005** | ** ** | ** ** | ** ** | **December  31,  2004** | ** ** |
| Forward contracts              |       | $                           | 4,587,056  |       |       |                              | $          | (6,959,780 | ) |
| Swaps, options  and other, net |       | (5,624,696                  | )          |       |       | 471,417                           |       |
|                           |       | $                           | (1,037,640 | )          |       |                              | $          | (6,488,363 | ) |

 

The Partnership formally documents all relationshipsbetween hedging instruments and hedged items, after its risk managementobjectives and strategy for undertaking the hedge are determined. ThePartnership calculates hedge effectiveness on a quarterly basis.

This process includes specific identification of thehedging instrument and the hedged transaction, the nature of the risk beinghedged and how the hedging instrument’s effectiveness will be assessed. Both atthe inception of the hedge and on an ongoing basis, the Partnership assesseswhether the derivatives that are used in hedging transactions are highly effectivein offsetting changes in fair value of hedged items. The derivative instrumentsthat qualify for hedge accounting are fair value hedges.

The Partnership has a daily margin requirement withits broker, based on the prior day’s market results on open futures contracts.The required brokerage margin balance was $9,210,001 and $8,537,748 at December 31,2005 and 2004, respectively.

The Partnership is exposedto credit loss in the event of nonperformance by counter parties of forwardcontracts, options and swap agreements, but the Partnership has no currentreason to expect any material nonperformance by any of these counter parties.Futures contracts, the primary derivative instrument utilized by thePartnership, are traded on regulated exchanges, greatly reducing potentialcredit risks. Exposure on swap and certain option agreements is limited to theamount of the recorded fair value as of the balance sheet dates. ThePartnership utilizes primarily one broker for all derivative transactions andthe right of offset exists. Accordingly, the fair value of all derivativeinstruments is displayed on a net basis on the balance sheets.

F-17

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**4.**                 IncomeTaxes

Areconciliation of the difference between the statutory federal income tax rateand the effective income tax rate for the period October 4, 2005 to December 31,2005 is as follows:

| ** **                                         | ** ** | **October 4, 2005  through  December 31, 2005** | ** ** |
|----------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| Federal statutory  income tax rate                 |       |                                                                | 34.0       | % |   |
| State income tax  rate, net of federal tax benefit |       |                                                                | 6.3        | % |   |
| Partnership  income not subject to tax             |       |                                                                | (30.8      | )% |   |
| Effective income tax  rate                         |       |                                                                | 9.5        | % |   |

 

Thecomponents of the provision for income taxes are as follows:

| ** **     | ** ** | **October 4, 2005  through  December 31, 2005** | ** ** |
|----------------|------------|---------------------------------------------------------------------|------------|
| Current:       |       |                                                                |       |   |   |
| Federal        |       |                                                                | $          | 917,790 |   |   |
| State          |       |                                                                | 282,210    |   |   |
| Total current  |       |                                                                | 1,200,000  |   |   |
| Deferred:      |       |                                                                |       |   |   |
| Federal        |       |                                                                | (163,296   | ) |   |
| State          |       |                                                                | (50,417    | ) |   |
| Total deferred |       |                                                                | (213,713   | ) |   |
| Total          |       |                                                                | $          | 986,287 |   |   |

 

The****Partnership’sdeferred taxes consist of deferred tax assets of $213,713 representing thedifference between tax and book amortization for the period October 4,2005 through December 31, 2005.

Areconciliation of the differences between income before income tax expense and incomesubject to income tax expense for the period October 4, 2005 through December 31,2005 is as follows:

| ** **                            | ** ** | **October 4, 2005  through  December 31, 2005** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------------|------------|
| Income before  income tax expense     |       |                                                                | $          | 10,394,162 |   |   |
| Non-taxable  income                   |       |                                                                | (7,954,241 | ) |   |
| Income subject to income  tax expense |       |                                                                | $          | 2,439,921 |   |   |

 

The Partnership made noincome tax payments during 2005.

F-18

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**5.**                 Propertyand Equipment

Propertyand equipment consists of the following:

| ** **                                            | ** ** | **Successor**               | ** ** | ** ** | ** ** | **Predecessor**             | ** ** |
|-------------------------------------------------------|------------|-----------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                            | ** ** | **December 31,  2005** | ** ** | ** ** | ** ** | **December 31,  2004** | ** ** |
| Land                                                  |       | $                           | 4,372,816  |       |       |                        | $          | 4,372,616 |   |
| Building, dock,  terminal facilities and improvements |       | 18,698,050                  |       |       |       | 18,275,671                  |       |
| Fixtures,  equipment and automobiles                  |       | 1,687,918                   |       |       |       | 1,267,161                   |       |
|                                                  |       |   24,758,784           |       |       |       |   23,915,448           |       |
| Less accumulated  depreciation                        |       | (2,783,755                  | )          |       |       | (1,285,011                  | )          |
|                                                  |       | $                           | 21,975,029 |       |       |                        | $          | 22,630,437 |   |

 

In June 2004, the Partnership sold property andequipment related to RYTTSA’s involvement with the Partnership forapproximately $850,000. The Partnership realized a net gain from the sale ofapproximately $304,000, which is classified in selling, general andadministrative expenses in the accompanying statement of income.

In April 2004, thePartnership acquired a terminal in Wethersfield, Connecticut from an unrelatedthird party in an asset purchase for approximately $226,000 and incurredapproximately $93,000 of buyer related costs for an aggregate purchase price ofapproximately $319,000.

Depreciation expenseallocated to cost of sales was approximately $1,250,000 for the period from January 1,2005 through October 3, 2005, $412,000 for the period from October 4,2005 through December 31, 2005, and $1,446,000 and $1,234,000,respectively, for the years ended December 31, 2004 and 2003. Depreciationexpense allocated to selling, general and administrative expenses wasapproximately $438,000 for the period from January 1, 2005 through October 3,2005, $152,000 for the period from October 4, 2005 through December 31,2005, and $962,000 and $1,140,000, respectively, for the years ended December 31,2004 and 2003.

During the period from January 1,2005 through October 3, 2005, the Partnership wrote off approximately$608,000 of fully depreciated assets which were no longer in service. Duringthe years ended December 31, 2004 and 2003, respectively, the Partnershipwrote off approximately $790,000 and $872,000 of fully depreciated assets whichwere no longer in service.

F-19

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**6.**                 Intangible Assets

Intangibleassets consist principally of customer relationships, acquired in connectionwith the Transaction, and are being amortized on a straight-line basis over aweighted average estimated useful life of approximately nine years.Amortization of intangible assets charged to operations amounted toapproximately $1,234,000 for the period from January 1, 2005 through October 3,2005, $389,000 for the period from October 4, 2005 through December 31,2005, and $825,000 and $27,000, respectively, for the years ended December 31,2004 and 2003. The table that follows presents the major components ofintangible assets as of December 31, 2004 and December 31, 2005:

| ** **                   | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net Intangible  Assets** | ** **  | **Remaining Useful  Lives** | ** ** |
|------------------------------|------------|---------------------------------|------------|-------------------------------|------------|---------------------------------|-------------|----------------------------------|------------|
| ***Successor***              |       |                            |       |                          |       |                            |        |                             |       |   |   |   |   |
| **December 31,  2005:** |       |                            |       |                          |       |                            |        |                             |       |   |   |   |   |
| Customer  relationships      |       |                            | $          | 11,461,691                    |       |                            | $           | (2,002,553                       | )          | $ | 9,459,138 |   |   | 8-12 years |   |   |
| Customer  contracts          |       |                            | 306,621    |                          |       | (229,966                        | )           | 76,655                           |       |   | 2 years |   |   |
| Brand names                  |       |                            | 269,571    |                          |       | —                          |        | 269,571                          |       |   | Indefinite |   |   |
| Software                     |       |                            | 1,138,912  |                          |       | (341,673                        | )           | 797,239                          |       |   | 5 years |   |   |
|                         |       |                            | $          | 13,176,795                    |       |                            | ($2,574,192 | )                                | $          | 10,602,603 |   |   |   |   |   |
| ***Predecessor***            |       |                            |       |                          |       |                            |        |                             |       |   |   |   |   |
| **December 31,  2004:** |       |                            |       |                          |       |                            |        |                             |       |   |   |   |   |
| Customer  relationships      |       |                            | $          | 11,461,691                    |       |                            | $           | (760,842                         | )          | $ | 10,700,849 |   |   | 8-12 years |   |   |
| Customer  contracts          |       |                            | 306,621    |                          |       | (76,655                         | )           | 229,966                          |       |   | 2 years |   |   |
| Brand names                  |       |                            | 269,571    |                          |       | —                          |        | 269,571                          |       |   | Indefinite |   |   |
| Software                     |       |                            | 1,138,912  |                          |       | (113,891                        | )           | 1,025,021                        |       |   | 5 years |   |   |
|                         |       |                            | $          | 13,176,795                    |       |                            | $           | (951,388                         | )          | $ | 12,225,407 |   |   |   |   |   |

 

F-20

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**6.**                 IntangibleAssets (continued)

As ofDecember 31, 2005, the estimated annual intangible asset amortizationexpense for each of the succeeding five years is as follows:

| **Year Ending  December 31,** | ** ** | ** ** | ** ** | **Annual  Amortization  Expense** | ** ** |
|-----------------------------------------|------------|------------|------------|-----------------------------------|------------|
| 2006                                    |       |       | $          | 1,527,000                         |       |   |
| 2007                                    |       |       | 1,432,000  |                              |       |
| 2008                                    |       |       | 1,432,000  |                              |       |
| 2009                                    |       |       | 1,317,000  |                              |       |
| 2010                                    |       |       | 1,203,000  |                              |       |
| Thereafter                              |       |       | 3,422,000  |                              |       |

 

**7.**                 Notesand Advances Receivable

Notesand advances receivable consist of the following:

| ** **                                                                                                                     | ** ** | **Successor**               | ** ** | ** ** | ** ** | **Predecessor**             | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                                                                                                     | ** ** | **December 31,  2005** | ** ** | ** ** | ** ** | **December 31,  2004** | ** ** |
| Split-dollar  life insurance premiums paid on behalf of, and collateralized by, certain  members’ life insurance policies |       |                        | $          | —     |       |                        |       |   |   | $ | 5,861,834 |   |   |
| Other notes  receivable                                                                                                        |       |                        | 17,419     |       |       |                        |       |   | 20,124 |   |   |
| Total notes and advances  receivable                                                                                           |       |                        | $          | 17,419     |       |                        |       |   |   | $ | 5,881,958 |   |   |

 

GPC acquired certainoutstanding interests in certain split dollar life insurance policies from thePredecessor for the aggregate amount of premiums that had been paid on thesepolicies by the Predecessor on behalf of certain directors and their immediatefamily members. Additionally, one split dollar life insurance policy wassurrendered. At the time of surrender, the cash value of the policy was lessthan the amount of premiums paid on it by the Predecessor, resulting in a lossof approximately $1,050,000 during the period from January 1, 2005 throughOctober 3, 2005.

F-21

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**8.**                 Debt

***Term Loan***

In July of 2004 andin conjunction with the Transaction disclosed in Note 1, *ThePredecessor*, the members of the Companies entered into a $51,000,000term loan agreement with a bank to finance the acquisition of RYTTSA’sownership interest in the Companies and to refinance certain outstanding debt.As required by SEC Staff Accounting Bulletin No. 73, “Push Down of ParentCompany Debt” (“SAB 73”) the Partnership reflected the term loan obligation andassociated financing costs and interest expense in the combined financialstatements beginning July 2, 2004. The proceeds of the debt were expendedas follows:

| Payment to RYTTSA USA  Inc.                                                 |   | $         | 43,000,000 |   |
|-----------------------------------------------------------------------------|--------|-----------|------------|--------|
| Advance to Global  Petroleum Corp. (proceeds used to pay term note payable) |   | 4,000,000 |       |
| Repayment of the  Partnership’s note payable(1)                        |   | 3,545,000 |       |
| Financing fees                                                              |   | 455,000   |       |
| Total                                                                       |   | $         | 51,000,000 |   |

----

(1)          See *Term Note,*below.

Interest on the term loan was payable at theEurodollar rate, plus 3%, or the bank’s base rate, plus 1%, at the Partnership’soption (the 2005 average rate was approximately 6.0% and the 2004 average ratewas approximately 4.7%). The term loan was subsequently amended to change thecommencement of repayment date to November 2005 and the final balloonpayment was due in July 2009. Costs directly associated with the financingof the term loan were capitalized and were being amortized over the life of theobligation. This term loan was paid off in October 2005, at which timeunamortized deferred financing costs of approximately $200,000 were writtenoff.

***Current Credit Facility***

In connection with the closing of the IPO, thePartnership entered into a four-year senior secured credit agreement (the “CurrentCredit Facility”) in an aggregate principal amount of up to $400.0 million. Initialborrowings of $198.0 million were used to repay the then outstanding borrowingsunder the Former Credit Facility discussed below.

There are three facilities under the Current CreditFacility:

·       aworking capital revolving credit facility to be used for working capitalpurposes and letters of credit in the principal amount equal to the lesser ofthe Partnership’s borrowing base and $350.0 million, of which $50.0 millionis a seasonal overline facility available each year only during the periodbetween September 1st and June 30th;

·       a$35.0 million acquisition facility to be used for funding acquisitions similarto the Partnership’s business lines that have a purchase price of $25.0 millionor less or $35.0 million or less in the aggregate in any 12-month period;and

·       a$15.0 million revolving credit facility to be used for the Partnership’sgeneral purposes, including payment of distributions to unitholders.

F-22

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**8.**                 Debt—*Current Credit Facility* (continued)

On November 10, 2005, the Current Credit Facilitywas amended to increase total available commitments thereunder from $400.0million to $500.0 million. The working capital revolving credit facility wasincreased by $100.0 million, of which there is (i) a $50.0 millionincrease in the permanent working capital revolving credit facility commitment,and (ii) an additional seasonal overline facility of $50.0 million that isavailable each year only during the period between September 1st and June 30th.

Borrowings under the Partnership’s working capitalrevolving credit, acquisition credit and revolving credit facilities currentlybear interest at the Partnership’s option at (1) the Eurodollar rate, plus1%, 13⁄4% or 11⁄2%, respectively, (2) the cost of funds rate, plus 1%, 13⁄4% or11⁄2%, respectively, or (3) the bank’s base rate, at the Partnership’soption. ThePartnership incurs a letter of credit fee of 1.00% per annum or a minimum of$400 for each letter of credit issued. In addition, the Partnership incurs acommitment fee on the unused portion of the three facilities under the CurrentCredit Facility (including the unused portion of either of the seasonaloverline facilities exercised by the Partnership) at a rate of 25 basis pointsper annum, a facility fee of 10 basis points per annum on any unexercisedseasonal overline facility during the period between September 1st and June 30th, and a seasonal overlinefee of $30,000 each time the Partnership elects to exercise either ofthe seasonal overline facilities.

The CurrentCredit Facilitywill mature in October 2009. Accordingly, the Current CreditFacility has been classified as long term in the accompanying December 31,2005 balance sheet. At December 31, 2005, availability under the CurrentCredit Facility was reduced by the outstanding balance under the workingcapital revolving credit facility of approximately $181,600,000 and by lettersof credit totaling approximately $132,500,000. The total remaining availabilityfor borrowings and letters of credit at December 31, 2005 wasapproximately $185,900,000. The average interest rate for the period from October 4,2005 through December 31, 2005 was 5.2%.

The Current Credit Facility is secured bysubstantially all of the assets of the Partnership and each of the Companiesand is guaranteed by the General Partner. The Current Credit Facility imposescertain requirements including, for example, a prohibition against distributionsif any potential default or event of default as defined in the Current CreditFacility, as amended, would occur, and limitations on the Partnership’s abilityto grant liens, make certain loans or investments, incur additionalindebtedness or guarantee other indebtedness, make any material change to thenature of the Partnership’s business or undergo a fundamental change, make anymaterial dispositions, acquire another company, enter into a merger,consolidation, sale leaseback transaction or purchase of assets, or makecapital expenditures in excess of specified levels. The Current Credit Facilityalso imposes covenants that require the Partnership to maintain certain minimumworking capital amounts, a minimum EBITDA ratio, a minimum interest coverage ratioand a maximum leverage ratio. The Partnership was in compliance with thesecovenants at December 31, 2005.

The Current Credit Facility limits distributions bythe Partnership to its unitholders to the amount of the Partnership’s availablecash and permits borrowings to fund such distributions only under the revolvingcredit facility.  The revolving creditfacility is subject to an annual “clean-down” period, requiring the Partnershipto reduce the amount outstanding under the revolving credit facility to $0 for30 consecutive calendar days in each calendar year.

F-23

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**8.**                 Debt(continued)

***Former Credit Facility***

During the period January 1, 2005 through October 3,2005 and during the years ended December 31, 2004 and 2003, thePartnership had a revolving line of credit in an aggregate principal amount ofup to $300.0 million (the “Former Credit Facility”). The Former Credit Facilitywas terminated on October 3, 2005, at which time amounts outstanding of$149,000,000 were repaid with the proceeds from the Current Credit Facility. Theaverage interest rate was 5.0% during the period January 1, 2005 through October 3,2005 and 3.2% and 2.7% during the years ended December 31, 2004 and 2003,respectively. As of December 31, 2004, outstanding borrowings wereclassified as short term as the maturity date was November 2005.

***Term Note***

The Partnership had a $6,000,000 term note which wasdue on June 30, 2008. The note was secured by a first priority securityinterest in certain properties of the Partnership. The remaining balanceoutstanding of $5,575,000 was paid in full in July 2004 with proceeds of$3,545,000 from the term loan along with a one time authorized draw on thePartnership’s Former Credit Facility for approximately $2,030,000. ThePartnership has no further obligation to the bank related to this term note. Allremaining deferred financing costs associated with this note have been writtenoff.

In 2001, the Partnership purchased the Fore RiverTerminal in South Portland, Maine. The purchase price was approximately $3,400,000and included issuance by the Partnership of a promissory note for $3,000,000with a 7% interest rate. The note is secured by the property acquired. The noteamortization commenced in June 2001 and extends through May 2008. Monthlypayments of principal and interest are approximately $34,800.

Aggregateannual maturities of debt from December 31, 2005, excluding approximately$181,600,000 due on the Partnership’s Current Credit Facility, are as followsat December 31, 2005:

| 2006   |   | $         | 297,506   |   |
|--------|--------|-----------|-----------|--------|
| 2007   |   | 319,009   |      |
| 2008   |   | 1,239,365 |      |
|   |   | $         | 1,855,880 |   |

 

**9.**                 AccruedExpenses and Other Current Liabilities

Accruedexpenses and other current liabilities consist of the following:

| ** **                                                         | ** ** | **Successor**               | ** ** | ** ** | ** ** | **Predecessor**             | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                                         | ** ** | **December 31,  2005** | ** ** | ** ** | ** ** | **December 31,  2004** | ** ** |
| Barging  transportation, product storage and other ancillary costs |       | $                           | 12,825,237 |       |       |                        | $          | 9,808,471 |   |
| Trustee taxes  (taxes other than income tax)                       |       | 8,993,779                   |       |       |       | 9,148,529                   |       |
| Employee  compensation                                             |       | 4,848,664                   |       |       |       | 3,631,172                   |       |
| Other                                                              |       | 1,947,340                   |       |       |       | 2,566,232                   |       |
|                                                               |       | $                           | 28,615,020 |       |       |                        | $          | 25,154,404 |   |

 

F-24

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**9.**                 AccruedExpenses and Other Current Liabilities (continued)

Trustee taxes consist ofvarious pass-through taxes collected from customers on behalf of taxingauthorities. Employee compensation consists of bonuses, vacation and othersalary accruals. Ancillary costs consist of cost accruals related to productexpediting and storage.

**10.**          EmployeeBenefit Plans with Related Party

The General Partner has a qualified 401(k) Savingsand Profit Sharing Plan that covers eligible employees. Contributions under theplan are determined annually, at the sole discretion of the General Partner’sBoard of Directors. The General Partner’s discretionary matching contributionsto the 401(k) Savings and Profit Sharing Plan can be equal to 50% of eachemployee’s contribution, up to a maximum contribution of 3% of the employee’scompensation. The General Partner’s matching contributions on behalf ofhigher-paid employees are subject to certain limitations under federal law.Employees may elect to contribute up to 25% of their compensation to the 401(k) Savingsand Profit Sharing Plan for each plan year. Employee contributions are subjectto annual dollar limitations, which are periodically adjusted by the cost ofliving index. For the period from October 4, 2005 through December 31,2005, the period from January 1, 2005 through October 3, 2005 and forthe years ended December 31, 2004 and 2003, this plan had expenses ofapproximately $86,000, $214,000, $286,000 and $232,000, respectively, which areincluded in the accompanying statement of income.

In addition, the GeneralPartner has a qualified pension plan that covers all eligible employees. TheGeneral Partner accounts for its defined benefit pension plan (the “Plan”)under SFAS No. 87, “Employers’ Accounting for Pensions,” (“SFAS 87”) whichrequires the estimating of such items as the long-term average return on Planassets, the discount rate and the rate of compensation increase. Such estimatesrequire a significant amount of judgment. As a result, the General Partnerutilizes the expertise of a third-party actuarial consultant to performthe calculations of the amounts related to the Plan to be recorded by theGeneral Partner and reimbursed by the Partnership. As the Partnership is requiredto reimburse the General Partner for costs incurred under the Plan, we haveincluded the disclosures required by SFAS 87 as set forth below:

F-25

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**10.**          EmployeeBenefit Plans with Related Party (continued)

| ** **                                                     | ** ** | **Successor**               | ** ** | ** ** | ** ** | **Predecessor**             | ** ** |
|----------------------------------------------------------------|------------|-----------------------------|------------|------------|------------|-----------------------------|------------|
| ** **                                                     | ** ** | **December 31,  2005** | ** ** | ** ** | ** ** | **December 31,  2004** | ** ** |
| **Change in benefit obligation:**                              |       |                        |       |       |       |                        |       |   |   |
| Projected benefit  obligation at beginning of year             |       | $                           | 8,763,370  |       |       |                        |       | $ | 7,917,889 |   |   |
| Service cost                                                   |       | 687,096                     |       |       |       |                        | 599,474    |   |   |
| Interest cost                                                  |       | 547,544                     |       |       |       |                        | 502,717    |   |   |
| Benefits paid                                                  |       | (49,237                     | )          |       |       |                        | (176,079   | ) |   |
| Actuarial (gain)  loss                                         |       | 86,423                      |       |       |       |                        | (80,631    | ) |   |
| Projected benefit  obligation at end of year                   |       | $                           | 10,035,196 |       |       |                        |       | $ | 8,763,370 |   |   |
| **Change in plan assets:**                                     |       |                        |       |       |       |                        |       |   |   |
| Fair value of  plan assets at beginning of year                |       | $                           | 6,584,947  |       |       |                        |       | $ | 6,194,310 |   |   |
| Actual return on plan  assets                                  |       | 406,518                     |       |       |       |                        | 566,716    |   |   |
| Employer  contributions                                        |       | 255,346                     |       |       |       |                        | —     |   |   |
| Benefits paid                                                  |       | (49,237                     | )          |       |       |                        | (176,079   | ) |   |
| Fair value of  plan assets at end of year                      |       | $                           | 7,197,574  |       |       |                        |       | $ | 6,584,947 |   |   |
| **Funded status at end of year:**                              |       |                        |       |       |       |                        |       |   |   |
| Fair value of plan  assets                                     |       | $                           | 7,197,574  |       |       |                        |       | $ | 6,584,947 |   |   |
| Projected benefit  obligation                                  |       | 10,035,196                  |       |       |       |                        | 8,763,370  |   |   |
| Funded status                                                  |       | $                           | 2,837,622  |       |       |                        |       | $ | 2,178,423 |   |   |
| Unrecognized  transition obligation                            |       | —                      |       |       |       |                        | —     |   |   |
| Unrecognized  prior service cost                               |       | —                      |       |       |       |                        | —     |   |   |
| Unrecognized net  actuarial (gain) loss                        |       | 349,204                     |       |       |       |                        | 583,074    |   |   |
| Accrued benefit  cost (included in accompanying balance sheet) |       | $                           | 3,186,826  |       |       |                        |       | $ | 2,761,497 |   |   |
| Accumulated benefit  obligation                                |       | $                           | 7,481,254  |       |       |                        |       | $ | 6,406,833 |   |   |

 

Thenet periodic benefit cost for the Plan consists of the following components:

| ** **                                | ** ** | **Successor**                                  | ** ** | ** ** | ** ** | **Predecessor**                              | ** ** |
|-------------------------------------------|------------|------------------------------------------------|------------|------------|------------|----------------------------------------------|------------|
| ** **                                | ** ** | **October 4  through  December 31,** | ** ** | ** ** | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                                | ** ** | **2005**                                       | ** ** | ** ** | ** ** | **2005**                                     | ** ** | **2004** | ** ** | **2003** | ** ** |
| Components of net  periodic benefit cost: |       |                                           |       |       |       |                                         |       |   |   |   |   |   |   |
| Service cost                              |       |                                           | $          | 173,384    |       |                                         |       |   | $ | 513,712 |   | $ | 599,474 |   | $ | 577,095 |   |
| Interest cost                             |       |                                           | 142,322    |       |       |                                         |       | 405,222 |   | 502,717 |   | 481,773 |   |
| Expected return  on plan assets           |       |                                           | (141,114   | )          |       |                                         |       | (412,851 | ) | (501,567 | ) | (450,097 | ) |
| Amortization of  transition obligation    |       |                                           | —     |       |       |                                         |       | — |   | 12,546 |   | 25,092 |   |
| Amortization of  prior service cost       |       |                                           | —     |       |       |                                         |       | — |   | (14,939 | ) | (29,877 | ) |
| Net periodic  benefit cost                |       |                                           | $          | 174,592    |       |                                         |       |   | $ | 506,083 |   | $ | 598,231 |   | $ | 603,986 |   |
| Weighted-average  assumptions:            |       |                                           |       |       |       |                                         |       |   |   |   |   |   |   |
| Discount rate                             |       |                                           | 6.0        | %          |       |                                         |       | 6.0 | % | 6.0 | % | 6.5 | % |
| Expected return  on plan assets           |       |                                           | 8.0        | %          |       |                                         |       | 8.0 | % | 8.0 | % | 8.0 | % |
| Rate of compensation  increase            |       |                                           | 4.0        | %          |       |                                         |       | 4.0 | % | 4.0 | % | 4.0 | % |

 

F-26

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**10.**          EmployeeBenefit Plans with Related Party (continued)

The General Partnerexpects to contribute, and the Partnership expects to reimburse the General Partnerfor, approximately $378,000 to the Plan for the fiscal year ending December 31,2006. Expected pension benefit payments for the next five fiscal years, 2006through 2010, are approximately $144,000, $191,000, $256,000, $328,000 and$344,000. For the ensuing five years, pension benefit payments are expected tototal $3,344,000.

***Investment Policy Summary***

The fundamental investment objective of the Plan is toprovide a rate of return sufficient to fund the retirement benefits under thePlan at a reasonable cost to the General Partner, which is the Plan sponsor. Ata minimum, the rate of return should equal or exceed the discount rate assumedby the Plan’s actuaries in projecting the funding cost of the Plan underapplicable ERISA standards. To do so, the General Partner’s Pension Committee(the “Committee”) may appoint one or more investment managers to invest all orportions of the assets of the Plan in accordance with specific investmentguidelines, objectives, standards, and benchmarks.

Because the Committeeexpects the Plan’s investment income, when combined with anticipatedcontributions by the General Partner, to exceed the sum of benefit payments andexpenses over the next several years, the Committee intends that the Plan bemanaged to achieve long-term returns, with only a small percentage of the Planinvested in cash.

TheGeneral Partner’s Plan asset allocation, all of which is with unrelatedparties, at December 31, 2005, 2004 and 2003, by asset category is asfollows:

***Assets Allocation***

| ** **                 | ** ** | **December 31,** | ** ** |
|----------------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| Cash and cash  equivalents |       | 2.5                   | %          | 3.0 | % | 4.0 | % |
| Fixed income  securities   |       | 39.5                  | %          | 39.9 | % | 41.4 | % |
| Equity securities          |       | 58.0                  | %          | 57.1 | % | 54.6 | % |
|                       |       | 100.0                 | %          | 100.0 | % | 100.0 | % |

 

***Expected Long-termRate of Return on Plan Assets***

The expected long-termrate of return on assets assumption is based on historical experience andconsultation with the General Partner’s actuarial consultants. The current 8.0%assumption compares to the historical weighted average compound return of 6.6%actually achieved by the Plan assets in the Companies’ seven years of existence.Because the Plan has only been in existence since December 1998, the timeperiod over which the 6.6% return was calculated does not accurately reflectthe long-term investment return which the Plan sponsor expects to be achieved.The Plan was created in December 1998 with a transfer of assets from thepension plan of GPC and certain of its affiliates as a result of the RYTTSA’sacquisition of 51% of the Companies. Considering the investment return of thePlan from 1995 through December 1998, the calculation of the averageinvestment return would increase the 6.6% investment return to 12.2% over a 10-yearperiod.

F-27

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**10.**          EmployeeBenefit Plans with Related Party (continued)

***Non-qualifiedPension and Deferred Compensation Plans***

The Partnership has anon-qualified pension plan for a former employee, which commenced fixedpayments in November of 2003. The plan calls for payments over afifteen-year period from the commencement date. Total remaining future fixedpayments under this plan consist of $132,000 per year for the period from 2006through 2010 and an aggregate amount of $1,034,000 thereafter. The Partnershiphad a discounted obligation of approximately $1,236,000 and $1,368,000 recordedin long term liabilities at December 31, 2005 and 2004, respectively.

The General Partner alsohas a non-qualified deferred compensation arrangement for an executive officer.The arrangement calls for annual payments in the aggregate amount of $70,000for fifteen consecutive years from the commencement date. The Partnership****had a discounted obligation of approximately $100,000recorded in long term liabilities at December 31, 2005. In accordance withthe provisions of the Partnership’s partnership agreement**,**the General Partner will be reimbursed by the Partnership for payments to theexecutive officer under this non-qualified deferred compensation arrangement.

***Long Term IncentivePlan***

In October 2005, theGeneral Partner adopted a Long-Term Incentive Plan for employees, consultantsand directors of the General Partner and employees and consultants ofaffiliates of the Partnership who perform services for the Partnership. TheLong-Term Incentive Plan allows for the award of unit options, unitappreciation rights, restricted units, phantom units and distributionequivalent rights. As of December 31, 2005, no units had been purchased bythe General Partner for grants under the Long-Term Incentive Plan, and noawards of any kind had been granted under the General Partner’s Long-TermIncentive Plan.

**11.**          Commitmentsand Contingencies

The Partnership is subjectto contingencies, including legal proceedings and claims arising out of thenormal course of business that cover a wide range of matters, including, amongothers, environmental matters, contract and employment claims. During 2004, thePartnership entered into a settlement with the U.S. Department of Justice andthe Environmental Protection Agency (“EPA”) related to noncompliance withcertain alleged EPA regulations. Under the terms of the settlement, the claimis fully and completely resolved and payment was made in the first quarter of2005. The Partnership recorded the entire $500,000 for this obligation during2004.

***Leases of Office Space and Computer Equipment***

The Partnershipalso has future commitments, principally for office space and computerequipment, under the terms of operating lease arrangements. Total futureminimum payments under leases with non-cancelable terms of one year or more areas follows:

| ** ** | ** ** | **Lease  Commitments** | ** ** |
|------------|------------|------------------------|------------|
| 2006       |       |                   | $          | 1,412,633 |   |   |
| 2007       |       |                   | 1,302,633  |   |   |
| 2008       |       |                   | 1,187,476  |   |   |
| Total      |       |                   | $          | 3,902,742 |   |   |

 

F-28

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**11.**          Commitmentsand Contingencies—*Leases of Office Space and ComputerEquipment*(continued)

Total expenses under theselease arrangements amounted to approximately $997,000 during the period fromJanuary 1, 2005 through October 3, 2005, $380,000 during the periodfrom October 4, 2005 through December 31, 2005, and $1,250,000 ineach of the years ended December 31, 2004 and 2003. The Partnership alsohas lease income from office space leased at one of its owned terminals for$210,000 per year through April of 2009.

***Terminal andThroughput Leases***

ThePartnership also has entered into terminal and throughput lease arrangementswith various unrelated oil terminals. Certain arrangements have minimum usagerequirements. Future minimum lease, sublease and throughput commitments underthese arrangements with non-cancelable terms of one year or more are asfollows:

| ** ** | ** ** | **Lease and  Throughput  Commitments** | ** ** | **Sublease  Commitments** | ** ** | **Total**  | ** ** |
|------------|------------|---------------------------------------------|------------|---------------------------|------------|------------|------------|
| 2006       |       | $                                           | 5,535,992  |                      | $          | (972,756   | )          | $ | 4,563,236 |   |
| 2007       |       | 4,083,814                                   |       | (972,756                  | )          | 3,111,058  |       |
| 2008       |       | 1,032,310                                   |       | (486,378                  | )          | 545,932    |       |
| 2009       |       | 125,000                                     |       | —                    |       | 125,000    |       |
| 2010       |       | 125,000                                     |       | —                    |       | 125,000    |       |
| Thereafter |       | 229,170                                     |       | —                    |       | 229,170    |       |
| Total      |       | $                                           | 11,131,286 |                      | $          | (2,431,890 | )          | $ | 8,699,396 |   |

 

***PurchaseCommitments***

The minimum volumepurchase requirements for 2006 under the Partnership’s existing supplyagreements are 440,465,928 gallons. All existing purchase commitments expire in2006. The Partnership purchased approximately 915,277,000, 843,896,000 and519,965,000 gallons of product under the Partnership’s supply agreements for$1,250,365,000, $786,698,000 and $374,482,000 in 2005, 2004 and 2003,respectively, which included fulfillment of the minimum purchase obligationunder these commitments.

**12.**          Partners’Equity, Allocations and Cash Distributions

***Issuance of Units***

On October 4, 2005,the Partnership completed an initial public offering of 5,635,000 common units.Upon the closing of the Partnership’s IPO (and taking into account theunderwriters’ exercise of their over-allotment option), GPC and certain affiliatesof the Slifka family received an aggregate of 5,642,424 subordinated units,which constituted 49% ownership of the Partnership at that time, a 2% generalpartner interest, and 7,424 common units.

***Units Outstanding***

Partners’ equity at December 31,2005 consists of 5,642,424 common units outstanding (including 87,724 commonunits held by affiliates of the General Partner, including directors andexecutive officers), 5,642,424 subordinated units held by affiliates of theSlifka family, collectively representing a 98% effective ownership interest inthe Partnership, and 230,303 general partner units representing a 2% generalpartner interest in the Partnership. See Note 1 for discussion of therelationship with the General Partner and the effective ownership by theGeneral Partner and its affiliates.

F-29

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**12.**          Partners’Equity, Allocations and Cash Distributions (continued)

***Common Units***

During the subordinationperiod, the common units will have the right to receive distributions ofavailable cash from operating surplus in an amount equal to the minimumquarterly distribution of $0.4125 per quarter, plus any arrearages in thepayment of the minimum quarterly distribution on the common units from priorquarters, before any distributions of available cash from operating surplus maybe made on the subordinated units. The purpose of the subordinated units is toincrease the likelihood that during the subordination period there will beavailable cash to be distributed on the common units. The subordination periodwill extend until the first day of any quarter beginning after September 30,2010 that each of the following tests are met: distributions of available cash from operating surplus on each of theoutstanding common units and subordinated units equaled or exceeded the minimumquarterly distribution for each of the three consecutive, non-overlappingfour-quarter periods immediately preceding that date; the “adjusted operatingsurplus” (as defined in the Partnership’s partnership agreement) generatedduring each of the three consecutive non-overlapping four-quarter periodsimmediately preceding that date equaled or exceeded the sum of the minimumquarterly distributions on all of the outstanding common units and subordinatedunits during those periods on a fully diluted basis and the relateddistribution on the 2% general partner interest during those periods; and thereare no arrearages in payment of the minimum quarterly distribution on thecommon units. If the unitholders remove the General Partner without cause, the subordinationperiod may end before September 30, 2010.

The common units have limited voting rights as setforth in the Partnership’s partnership agreement.

Pursuant to thePartnership’s partnership agreement, if at any time the General Partner and itsaffiliates own more than 80% of the common units outstanding, the GeneralPartner has the right, but not the obligation, to “call” or acquire all, butnot less than all, of the common units held by unaffiliated persons at a pricenot less than their then-current market value. The General Partner may assign this call right to any of its affiliatesor to the Partnership.

***Subordinated Units***

During the subordination period, the subordinatedunits have no right to receive distributions of available cash from operatingsurplus until the common units receive distributions of available cash fromoperating surplus in an amount equal to the minimum quarterly distribution of$0.4125 per quarter, plus any arrearages in the payment of the minimumquarterly distribution on the common units from prior quarters. No arrearageswill be paid to subordinated units.

The subordinated units may convert to common units ona one-for-one basis when certain conditions are met, which conditions are setforth in the Partnership’s partnership agreement. The Partnership’s partnershipagreement also sets forth the calculation to be used to determine the amountand priority of cash distributions that the common unitholders, subordinatedunitholders and General Partner will receive.

The subordinated unitshave limited voting rights as set forth in the Partnership’s partnershipagreement.

F-30

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**12.**          Partners’Equity, Allocations and Cash Distributions (continued)

***General Partner Units***

The general partner units have the same rights toreceive distributions of available cash from operating surplus as the commonunits for each quarter until the Partnership distributes (a) for eachoutstanding common unit an amount equal to the minimum quarterly distributionfor that quarter plus any arrearages in payment of the minimum quarterlydistribution on the common units for any prior quarters during thesubordination period; and (b) for each outstanding subordinated unit anamount equal to the minimum quarterly distribution for that quarter. Thereafter,the general partner units have the right to receive incentive distributions ofcash in excess of the minimum quarterly distributions as discussed furtherbelow under Cash Distributions. The Partnership’s partnership agreement setsforth the calculation to be used to determine the amount and priority of cashdistributions that the common unitholders, subordinated unitholders and generalpartner will receive.

The general partner unitshave the management rights as set forth in the Partnership’s partnershipagreement.

***Allocations of Net Income***

Net income is allocatedbetween the General Partner and the common and subordinated unitholders inaccordance with the provisions of the Partnership’s partnership agreement. Netincome is generally allocated first to the General Partner and the common andsubordinated unitholders in an amount equal to the net losses allocated to theGeneral Partner and the common and subordinated unitholders in the current andprior tax years under the partnership agreement. The remaining net income isallocated to the General Partner and the common and subordinated unitholders inaccordance with their respective percentage interests of the general partnerunits, common units and subordinated units.

***Cash Distributions***

The Partnership intends to consider regular cashdistributions to unitholders on a quarterly basis, although there is noassurance as to the future cash distributions since they are dependent uponfuture earnings, cash flows, capital requirements, financial condition andother factors. The Current Credit Facility prohibits us from making cashdistributions if any potential default or event of default, as defined in theCurrent Credit Facility, occurs or would result from the cash distribution.

Within 45 days after the end of each quarter, thePartnership will distribute all of its available cash (as defined in itspartnership agreement) to unitholders of record on the applicable record date. Theamount of available cash generally is all cash on hand at the end of thequarter; less the amount of cash reserves established by the General Partner toprovide for the proper conduct of the Partnership’s business, to comply withapplicable law, any of the Partnership’s debt instruments, or other agreementsor to provide funds for distributions to unitholders and to the General Partnerfor any one or more of the next four quarters; plus all cash on hand on thedate of determination of available cash for the quarter resulting from workingcapital borrowings made after the end of the quarter. Working capitalborrowings are generally borrowings that are made under the Current CreditFacility and in all cases are used solely for working capital purposes or topay distributions to partners.

F-31

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**12.**          Partners’Equity, Allocations and Cash Distributions—*Cash Distributions*(continued)

The Partnership will make distributions of availablecash from operating surplus for any quarter during any subordination period inthe following manner: firstly, 98% to the common unitholders, pro rata, and 2%to the General Partner, until the Partnership distributes for each outstandingcommon unit an amount equal to the minimum quarterly distribution for thatquarter; secondly, 98% to the common unitholders, pro rata, and 2% to theGeneral Partner, until the Partnership distributes for each outstanding commonunit an amount equal to any arrearages in payment of the minimum quarterlydistribution on the common units for any prior quarters during thesubordination period; thirdly, 98% to the subordinated unitholders, pro rata,and 2% to the General Partner, until the Partnership distributes for eachsubordinated unit an amount equal to the minimum quarterly distribution forthat quarter; and thereafter, cash in excess of the minimum quarterlydistributions is distributed to the unitholders and the General Partner basedon the percentages below.

TheGeneral Partner is entitled to incentive distributions if the amount that thePartnership distributes with respect to any quarter exceeds specified targetlevels shown below:

| ** **                     | ** ** | **Total Quarterly Distribution** | ** ** | **Marginal Percentage Interest in  Distributions** | ** ** |
|--------------------------------|------------|--------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                     | ** ** | **Target Amount**                     | ** ** | **Unitholders**                                                   | ** ** | **General Partner** | ** ** |
| Minimum Quarterly Distribution |       | $0.4125                                    |       |                                                              | 98%        |   |   |   | 2% |   |   |
| First Target Distribution      |       | Up to  $0.4625                             |       |                                                              | 98%        |   |   |   | 2% |   |   |
| Second Target Distribution     |       | above  $0.4625 up to $0.5375               |       |                                                              | 85%        |   |   |   | 15% |   |   |
| Third Target Distribution      |       | above  $0.5375 up to $0.6625               |       |                                                              | 75%        |   |   |   | 25% |   |   |
| Thereafter                     |       | above $0.6625                              |       |                                                              | 50%        |   |   |   | 50% |   |   |

 

On January 24, 2006,the board of directors of the General Partner declared a distribution on allcommon, subordinated, and general partner units for the 4th quarter of 2005, and increased the amount ofsaid distribution by 3% over the minimum quarterly distribution, from $0.4125per unit to $0.425 per unit. On February 14, 2006, the fourth quarter 2005distribution was paid on a pro rata basis to cover the period from the closingof the Partnership’s IPO (October 4, 2005) through December 31, 2005.The aggregate amount of the distribution was approximately $4,734,000.

**13.**          Related-PartyTransactions

In connection with theconsummation of the Partnership’s IPO, the Partnership entered into a SecondAmended and Restated Terminal Storage Rental and Throughput Agreement which,among other things, extended the term of the then current non-cancelableterminal facility agreement with GPC through December 2013 (See Note 1, *The Partnership’s IPO*). The agreement is accounted for as anoperating lease. Total future minimum payments from December 31, 2005,which have an annual consumer price index adjustment, are as follows:

| 2006      |   | $          | 7,261,860  |   |
|-----------|--------|------------|------------|--------|
| 2007      |   | 7,261,860  |       |
| 2008      |   | 7,261,860  |       |
| 2009      |   | 7,261,860  |       |
| 2010      |   | 7,261,860  |       |
| 2011-2013 |   | 21,785,580 |       |
|      |   | $          | 58,094,880 |   |

 

F-32

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

 

**13.**          Related-PartyTransactions (continued)

The expense under this agreement (or the applicablepredecessor agreement with GPC, as the case may be) was $5,874,241 during theperiod from January 1, 2005 through October 3, 2005, $1,926,525during the period from October 4, 2005 through December 31, 2005, and$7,637,210 and $7,382,791, respectively, in 2004 and 2003. These expensesinclude annual consumer price index adjustments of approximately $276,468during the period from January 1, 2005 through October 3, 2005,$141,507 during the period from October 4, 2005 through December 31,2005, and $254,000 and $0, respectively, in 2004 and 2003, and deferred rentexpense of $91,692 during the period from January 1, 2005 through October 3,2005 and $29,239 during the period from October 4, 2005 through December 31,2005, as calculated under SFAS No. 13, “Accounting for Leases.”

GPC provides certain terminal operating managementservices to the Partnership and uses certain administrative, accounting andinformation processing services of the Partnership. The expense from theseservices was approximately $50,250 for the period from January 1, 2005through October 3, 2005, $16,750 during the period from October 4,2005 through December 3, 2005, and $67,000 in each of 2004 and 2003. Theseaffiliate charges have been recorded in selling, general and administrativeexpenses in the accompanying statements of operations. In connection with theconsummation of the Partnership’s IPO, the Partnership entered into an Amendedand Restated Services Agreement with GPC which, among other things, extendedthe term of the agreement through December 31, 2007.

The Partnership alsoprovides certain administrative, accounting and information processingservices, and the use of certain facilities, to Alliance Energy Corp. (“Alliance”),an affiliate of the Partnership that is 90% owned by members of the Slifkafamily. The income from these services was approximately $240,000 for theperiod from January 1, 2005 through October 3, 2005, $80,000 duringthe period from October 4, 2005 through December 3, 2005, and$320,000 in each of 2004 and 2003. These intercompany fees have been recordedas an offset to selling, general and administrative expenses in the statementsof operations. In connection with the consummation of the Partnership’s IPO,the Partnership entered into an Amended and Restated Services Agreement withAlliance which, among other things, extended the term of the agreement through December 31,2007.

ThePartnership sells refined petroleum products to Alliance and previously soldrefined petroleum products to RYTTSA at arm’s length and at prevailing marketprices at the time of delivery. The table below presents sales of refinedpetroleum products to Alliance and RYTTSA:

| ** **        | ** ** | **Successor**         | ** ** | ** ** | ** ** | **Predecessor**     | ** ** |
|-------------------|------------|-----------------------|------------|------------|------------|---------------------|------------|
| ** **        | ** ** | **October 4,**   | ** ** | ** ** | ** ** | **January 1,** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **        | ** ** | **through **     | ** ** | ** ** | ** ** | **through**         | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **        | ** ** | **December 31,** | ** ** | ** ** | ** ** | **October 3,** | ** ** | **Year Ended December 31,** | ** ** |
| ** **        | ** ** | **2005**              | ** ** | ** ** | ** ** | **2005**            | ** ** | **2004** | ** ** | **2003** | ** ** |
| Sales to Alliance |       |                  | $          | 3,829,320  |       |                |       |   | $ | 14,790,438 |   | $ | 18,138,748 |   | $ | 17,682,170 |   |
| Sales to RYTTSA   |       |                  | —     |       |       |                |       | — |   | 19,560,314 |   | 759,729 |   |
|                   |            |                       |            |            |            |                     |            |  |  |  |  |  |  |  |  |  |  |

 

F-33

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**13.**          Related-PartyTransactions (continued)

Thetable below presents receivables incurred in connection with the Amended andRestated Services Agreement (or the applicable predecessor agreement, as thecase may be) between Alliance and the Partnership, and receivables incurred inconnection with other transactions with affiliates:

| ** **                      | ** ** | **Successor**         | ** ** | ** ** | ** ** | **Predecessor**       | ** ** |
|---------------------------------|------------|-----------------------|------------|------------|------------|-----------------------|------------|
| ** **                      | ** ** | **Year Ended**   | ** ** | ** ** | ** ** | **Year Ended**   | ** ** |
| ** **                      | ** ** | **December 31,** | ** ** | ** ** | ** ** | **December 31,** | ** ** |
| ** **                      | ** ** | **2005**              | ** ** | ** ** | ** ** | **2004**              | ** ** |
| Receivables from  Alliance      |       |                  | $          | 1,747,598  |       |                  |       |   |   | $ | 1,487,230 |   |   |
| Receivables from  GPC           |       |                  | 55,971     |       |       |                  |       |   | 4,690,332 |   |   |
| Receivables from Global  GP LLC |       |                  | 201,547    |       |       |                  |       |   | — |   |   |

 

Repsol YPF Trading &Transport, S.A., the parent of RYTTSA USA Inc., previously assigned a generalmanager to assist in administration of the Partnership’s operations in Waltham,Massachusetts. The Partnership was charged by Repsol YPF Trading &Transport, S.A. for certain service costs, payroll tax expenses and otherincidental costs associated with the duties of the general manager. Such costsamounted to $360,000 in 2003. Upon completion of the Transaction, the generalmanager was relocated by RYTTSA USA Inc. and no additional costs were incurredfrom July 2, 2004.

Effective October 4,2005, the General Partner employs substantially all of the Partnership’semployees and charges the Partnership for their services. The amount chargedfor the period from October 4, 2005 through December 31, 2005 wasapproximately $3,800,000 including payroll taxes. The Partnership alsoreimburses the General Partner for its contributions under the General Partner’s401(k) Savings and Profit Sharing Plan and the General Partner’s PensionPlan. See Note 10, Employee Benefit Plans.

**14.**          SegmentReporting

The Partnership is awholesale and commercial distributor of distillates, gasoline, residual oil andbunker fuel whose business is organized within two operating segments(Wholesale and Commercial), based on the way the chief operating decision maker(CEO) manages the business and on the similarity of customers and expectedlong-term financial performance of each segment. The accounting policies of thesegments are the same as those described in Note 2, Summary of SignificantAccounting Policies.

In the Wholesale segmentthe Partnership sells home heating oil, diesel, kerosene, unbranded gasolineand residual oil to wholesalers, retailers and commercial customers. Generally,customers use their own vehicles or contract carriers to take delivery of theproduct at bulk terminals and inland storage facilities that the Partnershipowns or controls or with which it has throughput arrangements.

The Commercial segment includes (i) sales of homeheating oil, diesel, kerosene, unbranded gasoline and residual oil to customersin the public sector through competitive bidding and to large commercial andindustrial customers, (ii) custom blended residual oil and distillatesdelivered by bunker barges or from a terminal dock and (iii) customersincluding federal and state agencies, municipalities, large industrialcompanies, many autonomous authorities such as transportation authorities andwater resource authorities, colleges and universities and a limited group ofsmall utilities. Unlike the Wholesale segment, in the Commercial segment, thePartnership generally arranges the delivery of the product to the customer’sdesignated location, typically hiring third-party common carriers to deliverthe product.

F-34

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**14.**          SegmentReporting (continued)

The Partnership evaluates segment performance based onnet product margins before allocations of corporate and indirect operatingcosts, depreciation, amortization (including non-cash charges) and interest.Based on the way the chief operating decision maker manages the business, it isnot reasonably possible for the Partnership to allocate the components ofoperating costs and expenses between the reportable segments. Additionally, dueto the commingled nature and uses of the Partnership’s assets, it is notreasonably possible for the Partnership to allocate assets between the twosegments. There were no intersegment sales for any of the years of periodspresented below.

Summarizedfinancial information for the Partnership’s reportable segments is presented inthe table that follows for each of the periods presented.

| ** **                                  | ** ** | **Successor**         | ** **    | ** ** | ** ** | **Predecessor**     | ** ** |
|---------------------------------------------|------------|-----------------------|---------------|------------|------------|---------------------|------------|
| ** **                                  | ** ** | **October 4**    | ** **    | ** ** | ** ** | **January 1**  | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | **through**           | ** **    | ** ** | ** ** | **through**         | ** ** | **Year Ended** | ** ** |
| ** **                                  | ** ** | **December 31,** | ** **    | ** ** | ** ** | **October 3,** | ** ** | **December 31,** | ** ** |
| ** **                                  | ** ** | **2005**              | ** **    | ** ** | ** ** | **2005**            | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Wholesale  Segment:**                     |       |                  |          |       |       |                |       |   |   |   |   |
| Sales                                       |       | $                     | 1,115,251,553 |       |       |                | $          | 2,507,621,303 |   | $ | 2,863,172,698 |   | $ | 2,170,119,617 |   |
| Net product margin*                         |       |                  |          |       |       |                |       |   |   |   |   |
| Distillates                                 |       | $                     | 16,484,168    |       |       |                | $          | 25,460,230 |   | $ | 36,236,695 |   | $ | 30,138,187 |   |
| Gasoline                                    |       | 2,371,959             |          |       |       | 11,602,330          |       | 9,608,982 |   | 4,995,568 |   |
| Residual oil                                |       | 7,096,369             |          |       |       | 15,794,249          |       | 16,378,283 |   | 18,823,000 |   |
| Total                                       |       | $                     | 25,952,496    |       |       |                | $          | 52,856,809 |   | $ | 62,223,960 |   | $ | 53,956,755 |   |
| **Commercial  Segment:**                    |       |                  |          |       |       |                |       |   |   |   |   |
| Sales                                       |       | $                     | 133,647,705   |       |       |                | $          | 289,337,045 |   | $ | 324,396,230 |   | $ | 308,337,495 |   |
| Net product margin*                         |       | 3,367,932             |          |       |       | 11,201,959          |       | 15,093,894 |   | 14,328,544 |   |
| **Combined  sales and net product margin:** |       |                  |          |       |       |                |       |   |   |   |   |
| Sales                                       |       | $                     | 1,248,899,258 |       |       |                | $          | 2,796,958,348 |   | $ | 3,187,568,928 |   | $ | 2,478,457,112 |   |
| Net product margin*                         |       | $                     | 29,320,428    |       |       |                | $          | 64,058,768 |   | $ | 77,317,854 |   | $ | 68,285,299 |   |
| Depreciation allocated to cost of sales     |       | 412,420               |          |       |       | 1,249,816           |       | 1,445,900 |   | 1,234,029 |   |
| **Combined gross profit:**                  |       | $                     | 28,908,008    |       |       |                | $          | 62,808,952 |   | $ | 75,871,954 |   | $ | 67,051,270 |   |

----

*                     Net product margin is a supplementalnon-GAAP financial measure used by management and external users of thePartnership’s financial statements to assess product costs associated with thePartnership’s business. The table above reconciles net product margin on acombined basis to gross profit, a directly comparable GAAP measure.

F-35

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**14.**          SegmentReporting (continued)

A reconciliation ofthe totals reported for the reportable segments to the applicable line items inthe combined financial statements is as follows:

| ** **                                                              | ** ** | **Successor**         | ** ** | ** ** | ** ** | **Predecessor**     | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------|------------|------------|------------|---------------------|------------|
| ** **                                                              | ** ** | **October 4**    | ** ** | ** ** | ** ** | **January 1**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                              | ** ** | **through**           | ** ** | ** ** | ** ** | **through**         | ** ** | **Year Ended** | ** ** |
| ** **                                                              | ** ** | **December 31,** | ** ** | ** ** | ** ** | **October 3,** | ** ** | **December 31,** | ** ** |
| ** **                                                              | ** ** | **2005**              | ** ** | ** ** | ** ** | **2005**            | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Combined gross profit**                                               |       |                  | $          | 28,908,008 |       |                |       |   | $ | 62,808,952 |   | $ | 75,871,954 |   | $ | 67,051,270 |   |
| **Operating costs and expenses  not allocated to reportable segments:** |       |                  |       |       |       |                |       |   |   |   |   |   |   |
| Selling, general and administrative expenses                            |       |                  | 10,515,464 |       |       |                |       | 29,782,087 |   | 33,429,589 |   | 30,221,623 |   |
| Operating expenses                                                      |       |                  | 4,923,567  |       |       |                |       | 14,775,111 |   | 19,608,132 |   | 18,754,187 |   |
| Amortization expense                                                    |       |                  | 389,193    |       |       |                |       | 1,233,611 |   | 824,734 |   | 26,664 |   |
| **Total operating costs and Expenses**                                  |       |                  | $          | 15,828,224 |       |                |       |   | $ | 45,790,809 |   | $ | 53,862,455 |   | $ | 49,002,474 |   |
| Operating income                                                        |       |                  | $          | 13,079,784 |       |                |       |   | $ | 17,018,143 |   | $ | 22,009,499 |   | $ | 18,048,796 |   |
| Interest expense                                                        |       |                  | 2,685,622  |       |       |                |       | 7,274,773 |   | 4,700,240 |   | 2,007,369 |   |
| Other expense                                                           |       |                  | —     |       |       |                |       | 1,049,969 |   | — |   | — |   |
| Income tax expense                                                      |       |                  | 986,287    |       |       |                |       | — |   | — |   | — |   |
| **Net  income**                                                         |       |                  | $          | 9,407,875  |       |                |       |   | $ | 8,693,401 |   | $ | 17,309,259 |   | $ | 16,041,427 |   |

 

There were no foreign sales for the years ended December 31,2005 and 2004. The Partnership has no foreign assets.

**15.**          QuarterlyFinancial Data (Unaudited)

Summarizedquarterly financial data is as follows:

| ** **                                                                                           | ** ** | **Predecessor** | ** **    | ** ** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-----------------|---------------|------------|------------|
| ** **                                                                                           | ** ** | **First**       | ** **    | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** | **Total** | ** ** |
| ** **                                                                                           | ** ** | ** **      | ** **    | ** ** | ** ** | ** ** | ** ** | **(including Successor  for the period from  October 4, 2005  through  December 31, 2005)** | ** ** | ** ** | ** ** |
| **Year ended December 31,  2005:**                                                              |       |            |          |       |       |   |   |   |   |   |   |   |   |
| Sales                                                                                                |       | $               | 1,152,079,031 |       | $          | 763,197,363 |   | $ | 854,852,741 |   |   | $ | 1,275,728,471 |   |   | $ | 4,045,857,606 |   |
| Gross Profit                                                                                         |       | 28,388,094      |          | 14,491,230 |       | 18,950,148 |   |   | 29,887,488 |   |   | 91,716,960 |   |
| Net Income (loss)                                                                                    |       | $               | 11,300,359    |       | $          | (903,273 | ) | $ | (2,047,870 | ) |   | $ | 9,752,060 |   |   | $ | 18,101,276 |   |
| Limited partners’ interest in net   income(1) (See Note 2, Net Income Per Limited Partner Unit) |       |            |          |       |       |   |   |   | $ | 9,219,718 |   |   |   |   |
| Net income per limited partner unit—basic and  diluted(1)                                       |       |            |          |       |       |   |   |   | $ | 0.70 |   |   |   |   |
| ** **                                                                                           | ** ** | **Predecessor** | ** **    |
| **Year ended December 31,  2004:**                                                              |       |            |          |       |       |   |   |   |   |   |   |   |   |
| Sales                                                                                                |       | $               | 866,039,357   |       | $          | 645,196,949 |   | $ | 670,268,348 |   |   | $ | 1,006,064,274 |   |   | $ | 3,187,568,928 |   |
| Gross Profit                                                                                         |       | 25,238,904      |          | 13,728,408 |       | 12,342,789 |   |   | 24,561,853 |   |   | 75,871,954 |   |
| Net Income (loss)                                                                                    |       | $               | 11,385,705    |       | $          | 1,366,439 |   | $ | (2,200,888 | ) |   | $ | 6,758,003 |   |   | $ | 17,309,259 |   |
| Net income per  limited partner unit—basic and diluted                                          |       | —          |          | —     |       | — |   |   | — |   |   | — |   |

----

(1)             Calculated for the period beginning withthe Partnerhsip’s initial public offering on October 4, 2005.

F-36

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**GLOBAL PARTNERS LP NOTES TO FINANCIAL STATEMENTS**

**16.**          SubsequentEvents

On February 14, 2006, the Partnership paid a cash distribution ofapproximately $4,734,000 to its common and subordinated unitholders of recordas of the close of business on February 3, 2006. The distribution that waspaid to unitholders was prorated to $0.4111 per unit, reflecting the reducedperiod of time from the closing of the Partnership’s IPO on October 4,2005 through December 31, 2005.

In December 2005, the Partnership entered into anagreement to purchase a refined petroleum products terminal in Bridgeport,Connecticut from Connecticut Petroleum Wholesalers and one of its affiliates.The acquisition is expected to close by the second quarter of 2006, subject todue diligence and other customary conditions.

F-37

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**Item15(c)**

**SCHEDULEII—VALUATION AND QUALIFYING ACCOUNTSGLOBAL PARTNERS LPFOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003**

| ** **                                                 | **Description** | ** ** | ** ** | **Balance at  Beginning  of Period** | ** ** | **Charged to  Costs and  Expenses** | ** ** | **Recoveries** | ** ** | **Write Offs** | ** ** | **Balance at  End  of Period** | ** ** |
|------------------------------------------------------------|-----------------|------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|----------------|------------|---------------------|------------|------------------------------------------|------------|
| **October 4, 2005 to December 31, 2005**         |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| ***(Successor)***                                          |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| Allowance for doubtful accounts— accounts receivable  |            | $          | 2,006,000  |                                           |       | $                                             | 128,000    |           |       |                | $          | 7,000                                    |       |   | $ | (57,000 | ) | $ | 2,084,000 |   |
| **January 1, 2005 to October 3, 2005**           |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| ***(Predecessor)***                                        |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| Allowance for doubtful accounts— accounts receivable  |            | $          | 1,862,000  |                                           |       | $                                             | 207,000    |           |       |                | $          | 35,000                                   |       |   | $ | (98,000 | ) | $ | 2,006,000 |   |
| **2004**                                                   |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| ***(Predecessor)***                                        |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| Allowance for doubtful accounts— accounts receivable  |            | $          | 2,001,000  |                                           |       | $                                             | 320,000    |           |       |                | $          | 9,000                                    |       |   | $ | (468,000 | ) | $ | 1,862,000 |   |
| **2003**                                                   |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| ***(Predecessor)***                                        |            |       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |   |   |
| Allowance for  doubtful accounts— accounts receivable |            | $          | 2,062,000  |                                           |       | $                                             | 200,000    |           |       |                | $          | —                                   |       |   | $ | (261,000 | ) | $ | 2,001,000 |   |

 

F-38

----

**INDEX TO EXHIBITS**

| Exhibit  Number | ** ** | ** ** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------------|------------|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   3.1 |       | —     |       | First Amended and  Restated Agreement of Limited Partnership of Global Partners LP dated  October 4, 2005 (incorporated herein by reference to Exhibit 3.1 to  Form 8-K (File No. 001-32593) for Global Partners LP  filed on October 11, 2005).                                                                                                                                                                                                                                                                                    |
| 10.1            |       | —     |       | Omnibus Agreement, dated  October 4, 2005, by and among Global Petroleum Corp., Montello Oil  Corporation, Global Revco Dock, L.L.C., Global Revco Terminal, L.L.C., Global  South Terminal, L.L.C., Sandwich Terminal, L.L.C., Chelsea Terminal Limited  Partnership, Global GP LLC, Global Partners LP, Global Operating LLC, Alfred  A. Slifka, Richard Slifka and Eric Slifka (incorporated herein by reference  to Exhibit 10.1 to Form 8-K (File No. 001-32593)  for Global Partners LP filed on October 11, 2005).           |
| 10.2^           |       | —     |       | Global Partners GP  Long-Term Incentive Plan effective as of October 4, 2005 (incorporated  herein by reference to Exhibit 10.4 to Amendment No. 1 to  Form S-1 (File No. 333-124755) for Global Partners LP  filed on July 1, 2005).                                                                                                                                                                                                                                                                                          |
| 10.3            |       | —     |       | Amended and Restated  Services Agreement, dated October 4, 2005, by and among Global Petroleum  Corp., Global Companies LLC, Global Montello Group LLC, and Chelsea Sandwich  LLC (incorporated herein by reference to Exhibit 10.3 to Form 8-K  (File No. 001-32593) for Global Partners LP filed on  October 11, 2005).                                                                                                                                                                                                           |
| 10.4            |       | —     |       | Amended and Restated  Services Agreement, dated October 4, 2005, by and between Alliance  Energy Corp. and Global Companies LLC (incorporated herein by reference to  Exhibit 10.4 to Form 8-K (File No. 001-32593) for  Global Partners LP filed on October 11, 2005).                                                                                                                                                                                                                                                             |
| 10.5            |       | —     |       | Second Amended and  Restated Terminal Storage and Throughput Agreement, dated October 4,  2005 by and among Global Petroleum Corp., Global Companies LLC and Global  Montello Group LLC (incorporated herein by reference to Exhibit 10.5 to  Form 8-K (File No. 001-32593) for Global Partners LP  filed on October 11, 2005).                                                                                                                                                                                                     |
| 10.6^           |       | —     |       | Employment Agreement  dated October 4, 2005, by and between Global GP LLC and Eric Slifka  (incorporated herein by reference to Exhibit 10.6 to Form 8-K  (File No. 001-32593) for Global Partners LP filed on  October 11, 2005).                                                                                                                                                                                                                                                                                                  |
| 10.7            |       | —     |       | Contribution, Conveyance  and Assumption Agreement, dated October 4, 2005, by and among Global GP  LLC, Global Partners LP, Global Operating LLC, Global Companies LLC, Global  Montello Group LLC, Chelsea Sandwich LLC, Global Petroleum Corp., Larea  Holdings LLC, Larea Holdings II LLC, Chelsea Terminal Limited Partnership,  Sandwich Terminal, L.L.C. and Montello Oil Corporation (incorporated herein  by reference to Exhibit 10.7 to Form 8-K (File No. 001-32593)  for Global Partners LP filed on October 11, 2005). |
| 10.8            |       | —     |       | Credit Agreement, dated  October 4, 2005, among Global Operating LLC, Global Companies LLC,  Global Montello Group LLC, Glen Hes Corp. and Chelsea Sandwich LLC, as  borrowers, Global Partners LP and Global GP LLC, as guarantors, each lender  from time to time party thereto and Bank of America, N.A., as administrative  agent and L/C issuer (incorporated herein by reference to Exhibit 10.8  to Form 8-K (File No. 001-32593) for Global Partners LP  filed on October 11, 2005).                                        |

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| Exhibit  Number | ** ** | ** ** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------|------------|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.9            |       | —     |       | First Amendment to Credit Agreement, dated as of  November 10, 2005, among Global Operating LLC, Global Companies LLC,  Global Montello Group Corp., Glen Hes Corp. and Chelsea Sandwich LLC, as  borrowers, Global Partners LP, Global GP LLC, as guarantors, each lender from  time to time party thereto and Bank of America, N.A., as administrative agent  and L/C issuer (incorporated herein by reference to Exhibit 10.1 to  Form 8-K (File No. 001-32593) for Global Partners LP  filed on November 14, 2005). |
| 10.10^*         |       | —     |       | Description of the deferred compensation arrangement  by and between Global GP LLC and Edward J. Faneuil.                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 21.1            |       | —     |       | List of Subsidiaries of Global Partners LP  (incorporated by reference to Exhibit 21.1 to Form S-1/A  (File No. 333-124755) for Global Partners LP filed on July 1,  2005.                                                                                                                                                                                                                                                                                                                                                   |
| 31.1*           |       | —     |       | Rule 13a-14(a)/15d-14(a) Certification  of Principal Executive Officer of Global GP LLC, general partner of Global  Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2*           |       | —     |       | Rule 13a-14(a)/15d-14(a) Certification  of Principal Financial Officer of Global GP LLC, general partner of Global  Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.1†      |       | —     |       | Section 1350  Certification of Chief Executive Officer of Global GP LLC, general partner of  Global Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 32.2†      |       | —     |       | Section 1350  Certification of Chief Financial Officer of Global GP LLC, general partner of  Global Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

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^              Management contractor compensatory plan or arrangement.

*                    Filedherewith.

†                    Not deemed “filed”for purposes of Section 18 of the Securities Exchange Act of 1934 orotherwise subject to the liability of that section.

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