**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,D.C.  20549**

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**FORM 10-K**

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**(Mark One)**
| **x**      | ** ** | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                           |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** |                                                                                                                                                                                                                                                                                                          |
| ** ** | ** ** | **For the fiscal year ended  December 31, 2006**                                                                                                                                                                                                                                                         |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                    |
| ** ** | ** ** | **OR**                                                                                                                                                                                                                                                                                                        |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                    |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                       |
| ** ** | ** ** |                                                                                                                                                                                                                                                                                                          |
| ** ** | ** ** | **For the transition period  from                      to                      ** |

 

**Commission file number**001-32593

**GlobalPartners 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 9161**

**800 South Street**

**Waltham, Massachusetts 02454-9161**

(Addressof principal executive offices, including zip code)

**(781) 894-8800******(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) ofthe 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(g) ofthe Act:

**None**

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

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

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.   Yesx   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 thisForm 10-K or 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.  See definition of “accelerated filer andlarge accelerated filer in Rule 12b-2 of the Exchange Act.:

Large accelerated filer   o         Accelerated filer   x         Non-accelerated filer   o

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).Yes o   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 June 30, 2006 wasapproximately $97,835,184, based on a price per common unit of $20.43, theprice at which the common units were last sold as reported on the New YorkStock Exchange on such date.

Asof March 1, 2007, 5,642,424 common units and 5,642,424 subordinated unitswere outstanding.

 

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

 

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Forward-Looking Statements

This Annual Reporton Form 10-K contains certain “forward-looking statements” withinthe meaning of the federal securities laws. These forward-looking statements are identified as any statements thatdo not relate strictly to historical or current facts and can generally beidentified by the use of forward-looking terminology, including “may,” “believe,”“expect,” “anticipate,” “estimate,” “continue” or other similar words.  Such statements may discuss futureexpectations for, or contain projections of, results of operations, financialcondition or our ability to make distributions to unitholders or state other “forward-looking”information.  Forward-looking statementsare not guarantees of performance. Although we believe these forward-looking statements are based onreasonable assumptions, statements made regarding future results are subject toa number of assumptions, uncertainties and risks, many of which are beyond ourcontrol, which may cause future results to be materially different from theresults stated or implied in this document. These risks and uncertainties include, among other things:

·       We may not have sufficientcash from operations to enable us to pay the minimum quarterly distributionfollowing establishment of cash reserves and payment of fees and expenses,including payments to our general partner.

·       Warmer weather conditionscould adversely affect our results of operations and cash available fordistribution to our unitholders.

·       Our risk managementpolicies cannot eliminate all commodity risk. In addition, any noncompliance with our risk management policies couldresult in significant financial losses.

·       We are exposed to tradecredit risk in the ordinary course of our business activities.

·       Due to our lack of assetand geographic diversification, adverse developments in the terminals that weuse or in our operating areas could reduce our ability to make distributions toour unitholders.

·       We are exposed toperformance risk in our supply chain.

·       Our general partner and itsaffiliates have conflicts of interest and limited fiduciary duties, which maypermit them to favor their own interests to the detriment of unitholders.

·       Unitholders have limitedvoting 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.

·       Unitholders may be requiredto pay taxes on their share of our income even if they do not receive any cashdistributions from us.

Additional information about risks and uncertaintiesthat could cause actual results to differ materially from forward-lookingstatements is contained in Item 1A, “Risk Factors” in this Annual Report onForm 10-K.

All forward-looking statements included in this AnnualReport on Form 10-K and all subsequent written or oralforward-looking statements attributable to us or persons acting on our behalfare expressly qualified in their entirety by these cautionary statements.  The forward-looking statements speak only asof the date made, other than as required by law, and we undertake no obligationto publicly update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise.

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**Available Information**

We make available free of charge through our website,www.globalp.com, our Annual Reports on Form 10-K, Quarterly Reportson Form 10-Q, Current Reports on Form 8-K and amendmentsto those reports filed or furnished pursuant to Section 13(a) or15(d) of the Securities Exchange Act of 1934 as soon as reasonablypracticable after we electronically file or furnish such material with theSecurities and Exchange Commission (“SEC”). These documents are also available at the SEC’s website atwww.sec.gov.  Our website also includesour Code of Business Conduct and Ethics, our Governance Guidelines and thecharters of our Audit Committee and Compensation Committee.

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**PART I**

*References in thisAnnual Report on Form 10-K to “Global Partners LP,” “we,” “our,” “us”or like terms when used in a historical context refer to the business of GlobalCompanies LLC and its affiliates, Glen Hes Corp., Global Montello Group LLC andChelsea 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.**                  Business andProperties.

**Overview**

We are a publicly traded Delaware limited partnershipformed in March 2005.  On October 4,2005, we completed the initial public offering of our common units representinglimited partner interests.  We have fouroperating subsidiaries which are wholly owned by Global Operating LLC, a whollyowned subsidiary of ours:  GlobalCompanies LLC, its subsidiary, Glen Hes Corp., Global Montello Group Corp. andChelsea Sandwich LLC.  Global GP LLC, ourgeneral partner, manages our operations and activities and employs our officersand substantially all of our personnel.

We own, control or have access to one of the largestterminal networks of refined petroleum products in the Northeast.  We are one of the largest wholesaledistributors of gasoline, distillates (such as home heating oil, diesel andkerosene) and residual oil to wholesalers, retailers and commercial customersin the Northeast.  In 2006, we soldapproximately $4.5 billion in refined petroleum products.  In 2006, we owned, leased or maintaineddedicated storage facilities at 16 refined petroleum product bulk terminals,each with the capacity of more than 50,000 barrels, including 10 locatedthroughout New England that are supplied primarily by marine transport,pipeline or truck and that collectively have approximately 6.9 millionbarrels of storage capacity.  We alsohave throughput or exchange agreements at six bulk terminals and 34 inlandstorage facilities.

We purchase our refined petroleum products primarilyfrom domestic and foreign refiners, traders and producers and sell theseproducts in two segments, Wholesale and Commercial.  In 2006, our Wholesale sales accounted forapproximately 91% of our total sales and our Commercial sales accounted forapproximately 9%**.**

As demand for some of our refined petroleum products,specifically home heating oil and residual oil for space heating purposes, isgenerally greater during the winter months, sales are generally higher duringthe first and fourth quarters of the calendar year which may result insignificant fluctuations in our quarterly operating results.  However, our results of operations are lessweather sensitive than they have been in the past.  In 2006, our volume in transportation fuels,which represents a growing portion of our sales and are not impacted by weatherconditions, exceeded our heating oil volumes. The increase in the non-weather sensitive components of our businesshelps to partially offset the economic impact that warmer weather conditionsmay have on our home heating oil and residual oil sales.  In addition, substantial portions of ourheating oil are sold on a forward fixed basis.

**BusinessStrategies**

Our primary business objective is to increasedistributable cash flow per unit by continuing to execute the followingstrategies:

·       *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, in2006, we acquired terminals in Bridgeport, Connecticut and Macungie,Pennsylvania that complement our existing terminal asset base and marketingbusiness and continued to expand into Long Island and Albany, New York.  We target businesses with (1) terminalassets, (2) a marketing division that has, among other attributes,consistent cash flow and stable customer lists or (3) a combination ofthese attributes.  We assign value to themarketing opportunities associated with terminal assets.  Because of our interest in purchasingmarketing businesses as well as physical assets, we believe we have acompetitive advantage over bidders interested in purchasing only physicalassets.  In addition, we continue to seekstrategic 

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relationships withcompanies that are looking to outsource their wholesale marketing business, asthese opportunities allow us to leverage our strengths in marketinginfrastructure and credit fundamentals. We currently have marketing arrangements with a major supplier ofunbranded gasoline in several northeastern states as well as one distillatesupplier in the Northeast.

·       *Serve as a Preferred Supplier to Our Customers.  *Webelieve that our customers value dependability and quality of supply.  We strive to maintain a level of inventory toensure that the supply needs of our customers 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, control or have access to bulkterminals and inland storage facilities that are strategically located for easeof access by our customers.  Such accessreduces our customers’ transportation costs and maximizes the number ofdeliveries they can make.  Additionally,we satisfy specific customer needs by customizing our products, such as dieseland home heating oil, by blending and injecting additives.

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

·       pre-approving customers upto certain credit limits;

·       seeking secondary sourcesof repayment for trade credit, such as letters of credit or guarantees;

·       not offering to extendcredit as a marketing tool to attract customers; and

·       placing many of ourcustomers on automatic debit systems for payment.

As a result of thesepractices, in each of the past six years the amount of account receivables thatwe wrote off was less than one percent of sales.  Our ability to manage our trade creditexposure helps us to expand our marketing business and allowed us to enter intomarketing arrangements with third parties where we assume the sales credit riskand the third 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 to maintain a position that issubstantially balanced between purchases and sales by establishing anoffsetting sales position with a positive margin each time we commit topurchase a volume of product.

**Product Sales**

***General***

We sell our refined petroleum products in twosegments, Wholesale and Commercial.  Themajority of products we sell can be grouped into three categories, distillates,gasoline and residual oil.  In 2006,distillates, gasoline and residual oil accounted for approximately 50%, 36% and14%, respectively, of our total volume sold.

*Distillates.**  *Distillates are further dividedinto home heating oil, diesel and kerosene. In 2006, sales of home heating oil, diesel and kerosene accounted forapproximately 76%, 22% and 2%, respectively, of our total volume of distillatessold.

We sell generic home heating oil and Heating Oil Plus®, our proprietary premiumbranded heating 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.  In 2006,approximately 7% of the volume of home heating oil we sold to wholesaleresellers was Heating Oil Plus®.  In addition, we sell to some wholesaleresellers the additive used to create Heating Oil Plus®, make special injection systems availableto them and provide technical support to assist them with blending.  We also educate the sales force of ourcustomers to better prepare them for marketing our products to their customers.

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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 theability to blend diesel according to customers’ specifications.  Diesel One® isformulated to achieve consistent, high-quality fuel performance with thefollowing benefits for all diesel engine applications:  better fuel quality, increased horsepower,lower maintenance costs, longer engine life and maximum cold weatheroperability.  We offer marketing andtechnical support for those customers who purchase Diesel One®. In 2006, approximately 40% of the volume of diesel we sold to wholesaleresellers was Diesel One®.

*Gasoline.**  *We sell grades of unbrandedgasoline that comply with seasonal and geographical requirements in the areasin which we market.  We have the abilityto blend gasoline, and we sell conventional gasoline and ethanol blendedgasoline in the markets that require such products.

*ResidualOil.**  *Weare one of two primary residual oil marketers in New England.  We specially blend residual oil for users inaccordance with their individual power plant specifications.

***Wholesale***

In the Wholesale segment, we sell gasoline, homeheating oil, diesel, kerosene and residual oil to unbranded retail gasolinestations and other resellers of transportations fuels, home heating oilretailers and wholesale distributors. Generally, customers use their own vehicles or contract carriers to takedelivery of the product at bulk terminals and inland storage facilities that weown or control or with which we have throughput arrangements.  Please read “—Storage.”

In 2006, we sold home heating oil, including HeatingOil Plus®, toover 900 wholesale distributors and retailers. We have a fixed price sales program that we market primarily towholesale distributors and retailers which uses the New York MercantileExchange (“NYMEX”) heating oil contract as the pricing benchmark as a vehicleto manage the commodity risk.  Pleaseread “—Commodity Risk Management.”  In2006, approximately 45% of our home heating oil volume was sold using forwardfixed price contracts.  A forward fixedprice contract requires our customer to purchase a specific volume at aspecific price during a specific period. The remaining home heating oil was sold on either a posted price or aprice based on various indices which, in both instances, reflect current marketconditions.

In 2006, we sold unbranded gasoline and diesel,including Diesel One®,to approximately 750 wholesalers and retail gasoline station operators,vehicles, fleet and marine users and other end users 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 areresponsible for marketing and we bear the credit risk.

In 2006, we sold residual oil to approximately 25wholesale distributors.  Our Wholesaleresidual oil sales were accomplished through forward fixed contracts or byusing market-related prices, either posted prices or indexed prices to reflectcurrent market conditions.

Financial information with respect to the Wholesalesegment, including information concerning revenues, gross profit, net productmargin and total assets may be found under Item 7, “Management’s Discussion andAnalysis and Results of Operations” and in Note 16 of Notes to FinancialStatements included elsewhere in this Annual Report on Form 10-K.

***Commercial***

Our Commercial segment includes sales of unbrandedgasoline, home heating oil, diesel, kerosene and residual oil to customers inthe public sector through competitive bidding and to large commercial andindustrial customers.  Our Commercialsegment also includes custom blended residual oil and distillates delivered bybarges or from a terminal dock.  In 2006,this segment accounted for approximately 12% of our total volume for allrefined 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 our Wholesale segment, in ourCommercial segment, we generally arrange the delivery of the product to thecustomer’s designated location.  Wetypically hire third-party common carriers to deliver the product.  Please read “—Storage.”

In this segment, we respond to publicly-issuedrequests for product proposals and quotes. As of December 31, 2006, we had contracts as a result of thispublic bidding process with the U.S. government and the states ofMassachusetts, New Hampshire and Rhode Island. We also had contracts with more than 43 municipalities,4 autonomous authorities and 13 institutional customers in NewEngland to meet their various fuel requirements.

A majority of the contracts in our bid business arefor a term of one year.  The volumes ofthese contracts range from 7,500 to 11 million gallons annually. We offer bothfixed and indexed (floating) price and volume contracts to customers.  The majority of bid activity is priced usingan indexed price with the index typically chosen by the issuing authority inits solicitation for the bid proposal. The indexed prices are usually referenced to one of five industrypublications 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 2006, sales of natural gasaccounted for approximately 10% of the total sales generated in our Commercialsegment.

Our commercial customers also include cruise ships,dry and wet bulk carriers, fishing fleets and other marine vessels.  We blend the fuel to the customers’specifications at the terminal facility or on the barge and then deliver theresulting bunker fuel directly to the ship or barge.

Financial information with respect to the Commercialsegment, including information concerning revenues, gross profit, net productmargin and total assets may be found under Item 7, “Management’s Discussion andAnalysis and Results of Operations” and in Note 16 of Notes to Financial Statementsincluded elsewhere in this Annual Report on Form 10-K.

**Supply**

Our products come from some of the major energycompanies in the world.  Cargos aresourced from the United States, Canada, South America, the former SovietRepublics, Europe and occasionally from Asia. During 2006, we purchased an average of approximately 162,000 barrelsper day of refined petroleum products from approximately 85 suppliers.  In 2006, our top eight suppliers wereExxonMobil Corporation, Morgan Stanley Capital Group, Petróleos de Venezuela,S.A., Citgo Petroleum Corporation, ConocoPhillips Co., GiantIndustries, Inc., Vitol S.A. and Repsol YPF Trading & Transport,S.A.,****and accounted for 73% of our productpurchases by volume.  We enter intosupply agreements with these suppliers on a term basis or a spot basis.  With respect to trade terms, our supplypurchases vary depending on the particular contract from prompt payment(usually three days) to net 30 days. Please read “—Commodity Risk Management.”

**Commodity RiskManagement**

Since we take title to the refined petroleum productsthat we sell, we are exposed to commodity risk. Commodity risk describes the risk of unfavorable market fluctuations inthe price of commodities such as refined petroleum products.  We endeavor to minimize commodity risk inconnection with our daily operations. Generally, as we purchase and/or store refined petroleum products, wereduce commodity risk and establish a margin by selling the product forphysical delivery to third parties, selling forward contracts on regulatedexchanges or using derivatives.  Productsare generally purchased and sold at fixed prices or at indexed prices.  While we use these transactions to seek tomaintain a position that is substantially balanced between purchased volumesversus sales volumes through regulated exchanges or derivatives, 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 connection with managing these positionsand maintaining a constant presence in the marketplace, both necessary for ourbusiness, we engage in a

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controlled tradingprogram for up to an aggregate of 250,000 barrels of refined petroleum productson any day.  Our general policy is not tohold refined petroleum products, futures contracts or other derivative productsand instruments for the sole purpose of speculating on price change.  While our policies are designed to minimizemarket risk, some degree of exposure to unforeseen fluctuations in marketconditions remains.

Operating results are sensitive to a number offactors.  Such factors include commoditylocation, grades of product, individual customer demand for grades or locationof product, localized market price structures, availability of transportationfacilities, daily delivery volumes that vary from expected quantities andtiming and costs to deliver the commodity 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 toreduce our exposure to basis risk by grouping our purchase and sale activitiesby geographical region in order to stay balanced within such designatedregion.  However, there can be noassurance that 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 forward fixed sales of refined petroleum products.  Any hedge ineffectiveness is reflected in ourresults 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 practice is to close all NYMEXpositions rather than make 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-in marginsrelative to our commitments.

We monitor processes and procedures to preventunauthorized trading by our personnel and to maintain substantial balancebetween purchases and sales or future delivery obligations.  We can provide no assurance, however, thatthese steps will detect and prevent all violations of such trading policies andprocedures, particularly if deception or other intentional misconduct isinvolved.

**Storage**

Bulk terminals and inland storage facilities play akey role in the distribution of product to our customers.  We own six bulk terminals in the Northeast,lease the entirety of one bulk terminal in Massachusetts that we operateexclusively for our business and maintain dedicated storage facilities atanother 9 bulk terminals.  Collectively,these bulk terminals provide us with approximately 6.9 million barrels ofstorage capacity, and our throughput volume at these facilities wasapproximately 1.3 billion gallons in 2006. Additionally, we have throughput or exchange agreements with another sixbulk terminals and 34 inland storage facilities.

Throughput arrangements allow us to store product atterminals owned by others.  Our customerscan load product at these terminals, and we pay the owners of these terminalsfees for services rendered in connection with the receipt, storage and handlingof such product.  Compensation to theterminal owners may be fixed or based upon the volume of our product that isdelivered at the terminal.

Exchange agreements also allow our customers to takedelivery of product at a terminal that is not owned or leased by us.  An exchange is a contractual agreement wherethe parties exchange product at their respective terminals or facilities.  For example, we (or our customers) receiveproduct that is owned by our exchange partner from such party’s facility orterminal, and we deliver the same volume of our product to such party (or tosuch party’s customers) out of one of the terminals in our terminalnetwork.  Generally, both sides of anexchange transaction pay a handling fee (similar to a throughput fee), andoften one party also pays a location differential that covers any excesstransportation costs incurred by the other party in supplying product to thelocation at which the first party receives product.  Other differentials that may occur in exchanges(and result in additional payments) include product value differentials andtiming 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 frommarine bulk terminals and delivered by truck. Our customers receive product from our network of bulk terminals andinland storage facilities via truck, barge, rail or pipeline.

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Many of our bulk terminals operate 24 hours a dayand consist of multiple storage tanks and automated truck loadingequipment.  These automated systemsmonitor terminal access, volumetric allocations, credit control and carriercertification through the remote identification of customers.  In addition, some of the bulk terminals atwhich we market are equipped with truck loading racks capable of providingautomated blending and additive packages which meet our customers’ specificrequirements.

The locations of the inland storage facilities that weuse, seven 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 longstandingrelationships with many of the owners of the inland storage facilities that weuse.  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 That We Own or Operate or at Which We Maintain DedicatedStorage***

The following table lists the bulk terminals that we owned or operatedor at which we maintained dedicated storage facilities of more than 50,000barrels as of December 31, 2006:
| **Bulk Terminal**                                           | ** **   | **Total  Storage  Capacity  (barrels)** | ** **   | **Products**                                       | ** **   | **Supply Source**        | ** **   | **Mode of Delivery**      |
|------------------------------------------------------------------|--------------|-----------------------------------------|--------------|----------------------------------------------------|--------------|-------------------------------|--------------|-------------------------------------|
| ***Owned  by Us***                                               | *** *** | *** ***                            | *** *** | *** ***                                       | *** *** | *** ***                  | *** *** | *** ***                        |
| Global Chelsea  Terminal (Chelsea, MA)                           |         | 684,600                                 |         | Distillate; Residual Oil                           |         | Marine; Truck                 |         | Marine; Truck                       |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Global South  Portland Terminal (South Portland, ME)             |         | 657,700                                 |         | Distillate; Residual Oil                           |         | Marine; Truck; Rail           |         | Marine; Truck                       |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Global  Wethersfield Terminal (Wethersfield, CT)                 |         | 183,700                                 |         | Distillate                                         |         | Pipeline; Truck               |         | Truck                               |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Global Sandwich  Terminal  (Sandwich, MA)                        |         | 95,400                                  |         | Distillate                                         |         | Marine; Truck                 |         | Truck                               |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Global Macungie  Terminal  (Macungie, PA)                        |         | 170,300                                 |         | Distillate; Gasoline                               |         | Pipeline; Truck               |         | Truck                               |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Global Bridgeport  Terminal  (Bridgeport, CT)                    |         | 109,800                                 |         | Distillate                                         |         | Marine; Pipeline; Truck       |         | Pipeline; Truck                     |
| **Subtotal**                                                     | ** **   | **1,901,500**                           | ** **   | ** **                                         | ** **   | ** **                    | ** **   | ** **                          |
| *** ***                                                     | *** *** | *** ***                            | *** *** | *** ***                                       | *** *** | *** ***                  | *** *** | *** ***                        |
| ***Leased  and Operated by Us***                                 | *** *** | *** ***                            | *** *** | *** ***                                       | *** *** | *** ***                  | *** *** | *** ***                        |
| Joffe Terminal  (Springfield, MA)(1)                             |         | 54,000                                  |         | Distillate                                         |         | Pipeline; Truck               |         | Truck                               |
| **Subtotal**                                                     | ** **   | **54,000**                              | ** **   | ** **                                         | ** **   | ** **                    | ** **   | ** **                          |
| *** ***                                                     | *** *** | *** ***                            | *** *** | *** ***                                       | *** *** | *** ***                  | *** *** | *** ***                        |
| ***Dedicated  Storage Maintained by Us and Operated by Others*** | *** *** | *** ***                            | *** *** | *** ***                                       | *** *** | *** ***                  | *** *** | *** ***                        |
| Revere Terminal  (Revere, MA)(1)(2)                              |         | 2,086,700                               |         | Distillate; Gasoline                               |         | Marine; Pipeline; Rail; Truck |         | Marine; Pipeline; Truck             |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Capital Terminal  (East Providence, RI)(1)                       |         | 1,011,200                               |         | Distillate                                         |         | Marine; Pipeline; Truck       |         | Marine; Pipeline; Truck             |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Gateway Terminal  (New Haven, CT)(1)                             |         | 511,400                                 |         | Distillate; Residual Oil                           |         | Marine; Pipeline; Truck;      |         | Marine; Pipeline; Truck;            |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| ExxonMobil  (Everett, MA)                                        |         | 297,000                                 |         | Distillate                                         |         | Marine                        |         | Marine; Truck                       |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Cibro Petroleum  Products (Albany, NY)                      |         | 694,400                                 |         | Distillate; Residual Oil                           |         | Marine; Rail; Truck           |         | Marine; Rail; Truck                 |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Intercontinental  Terminal Company (Deer Park, TX)               |         | 110,000                                 |         | Refinery Feedstock and Petrochemical and Feedstock |         | Marine; Pipeline; Truck       |         | Marine; Pipeline; Rail; Rail; Truck |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Hess Bayonne  (Bayonne, NJ)                                      |         | 72,000                                  |         | Residual Oil                                       |         | Marine                        |         | Marine                              |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Hess Baltimore  (Baltimore, MD)                                  |         | 112,000                                 |         | Residual Oil                                       |         | Marine                        |         | Marine                              |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| Plains Marketing,  L.P. (Ingleside, TX)                          |         | 50,000                                  |         | Petrochemical Feedstock                            |         | Truck                         |         | Marine                              |
|                                                             |         |                                    |         |                                               |         |                          |         |                                |
| **Subtotal**                                                     | ** **   | **4,944,700**                           |         |                                               |         |                          |         |                                |
| **Total**                                                        | ** **   | **6,900,200**                           |         |                                               |         |                          |         |                                |

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

(2)             We entered into a terminalling agreement witha third party that reserved approximately 230,000 barrels of throughput and/orstorage capabilities at this facility.

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***Bulk Terminalswith Throughput or Exchange Agreements***

We also have throughput or exchange agreements for thestorage of our products on a commingled basis at six bulk terminals.

**Competition**

We encounter varying degrees of competition based onproduct and geographic locations.  Ourcompetitors include terminal companies, major integrated oil companies andtheir marketing affiliates and independent marketers of varying sizes,financial resources and experience.  Inour core market of New England, Sprague Energy Corp. competes with us invirtually all product lines and for all customers.  In the residual oil markets, however, we faceless competition because of the strategic locations of our storage facilities.  Residual oil is heated when stored and cannotbe delivered long distances.  Bunkeringrequires facilities at ports to service vessels.  Within Boston Harbor, we have at Chelsea thelargest storage capacity in Massachusetts committed to marine fuels and,furthermore, the Chelsea facility has multi-grade residual fuels.  In various other geographic markets,particularly the unbranded gasoline and distillates markets, we compete withintegrated refiners, 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 ourbusiness, we own and operate various petroleum storage and distributionfacilities and must comply with environmental laws at the federal, state andlocal levels, which increases the cost of operating terminals and our businessgenerally.

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 through severaldifferent contractual arrangements, including leases, throughput andterminalling services agreements.  Iffacilities with which we contract that are owned and operated by third partiesfail to comply with environmental laws, they could be shut down, requiring usto 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;

·       requiringcapital expenditures to comply with environmental control requirements; and

·       enjoining the operations offacilities deemed in noncompliance with environmental laws and 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 environmentalstatutes impose strict, joint and several liability for costs required to cleanup and restore sites where hydrocarbons, hazardous substances or wastes havebeen 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 theenvironment.  As a result, there can beno assurance as to the amount or timing of future expenditures for environmentalcompliance or remediation, and actual future expenditures may be different fromthe amounts we currently anticipate.  Wetry to anticipate future regulatory requirements that might be imposed and planaccordingly to remain in compliance with changing environmental laws andregulations and minimize the costs of such compliance.

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We do not believe that compliance with federal, stateor local environmental laws and regulations will have a material adverse effecton our business, financial position or results of operations.  We can provide no assurance, however, thatfuture events, such as changes in existing laws (including changes in theinterpretation of existing laws), the promulgation of new laws, or the developmentor discovery of new facts or conditions will not cause us to incur significantcosts.

***HazardousMaterials 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 pollution ofthe environment.  For instance, theComprehensive Environmental Response, Compensation, and Liability Act, asamended, also known as CERCLA or the Superfund law, and comparable state lawsimpose liability, without regard to fault or the legality of the originalconduct, on certain classes of persons who are considered to be responsible forthe release of hazardous substances into the environment.  These persons include the owner or operatorof the site where the release occurred and companies that disposed or arrangedfor the disposal of the hazardous substances. Under the Superfund law, these persons may be subject to joint andseveral liability for the costs of cleaning up hazardous substances that havebeen released into the environment, for damages to natural resources and forthe costs of certain health studies.  TheSuperfund law also authorizes the U.S. Environmental Protection Agency (“EPA”),and in some instances third parties, to act in response to threats to the publichealth or the environment and seek to recover from the responsible persons thecosts they incur.  It is possible forneighboring landowners and other third parties to file claims for personalinjury and property damage allegedly caused by hazardous substances or otherpollutants released into the environment. In the course of our ordinary operations, we may generate, store orotherwise handle materials and wastes that fall within the Superfund law’sdefinition of a hazardous substance and, as a result, we may be jointly andseverally liable under the Superfund law for all or part of the costs requiredto clean up sites at which those hazardous substances have been released intothe environment.

We currently own, lease or utilize storage ordistribution facilities where hydrocarbons are being or have been handled formany years.  Although we have utilizedoperating and disposal practices that were standard in the industry at thetime, hydrocarbons or other wastes may have been disposed of or released on,under or from the properties owned or leased by us or on or under otherlocations where we have contractual arrangements or where these wastes havebeen 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 wastesdisposed thereon may be subject to the Superfund law or other federal and statelaws.  Under these laws, we could berequired to remove or remediate previously disposed wastes, including wastesdisposed of or released by prior owners or operators, clean up contaminatedproperty, including groundwater contaminated by prior owners or operators ormake 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 imposedetailed requirements for the handling, storage, treatment and disposal ofhazardous waste.  Our operations alsogenerate solid wastes which are regulated under state law or the less stringentsolid waste requirements of the federal Solid Waste Disposal Act.  We believe that we are in material compliancewith the existing requirements of RCRA, the Solid Waste Disposal Act, andsimilar state and local laws, and the cost involved in complying with theserequirements is not material.

We incur ongoing costs for monitoring groundwaterand/or remediation of contamination at several facilities that we operate.  Assuming that we will be able to continue touse common 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.

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***Above GroundStorage Tanks***

Above-ground tanks that contain petroleum and otherhazardous substances are subject to comprehensive regulation underenvironmental laws.  Generally, theselaws impose liability for releases and require secondary containment systemsfor tanks or that the operators take alternative precautions to ensure that nocontamination results from tank leaks or spills.  We believe we are in material compliance withenvironmental laws and regulations applicable to above ground storage tanks.

The Oil Pollution Act of 1990 (“OPA”) addresses threeprincipal areas of oil pollution—prevention, containment and cleanup.  In order to handle, store or transport oil,we are required to file oil spill response plans with either the United StatesCoast Guard (for marine facilities) or the EPA. States in which we operate have enacted laws similar to OPA.  Under OPA and comparable state laws,responsible parties for a regulated facility from which oil is discharged maybe subject to strict, joint and several liability for removal costs and certainother consequences of an oil spill such as natural resource damages, where thespill is into navigable waters or along shorelines.  We believe we are in material compliance withregulations pursuant to OPA and similar state laws.

Under the authority of the federal Clean Water Act,the EPA imposes specific requirements for Spill Prevention, Control andCountermeasure (“SPCC”) plans that are designed to prevent, and minimize theimpacts of, releases from above ground storage tanks.  We believe we are in substantial compliancewith these requirements.

***Water Discharges***

The federal Clean Water Act imposes restrictionsregarding the discharge of pollutants into navigable waters.  This law and comparable state laws requirepermits for discharging pollutants into state and federal waters and imposesubstantial liabilities for noncompliance. EPA regulations also require us to obtain permits to discharge certainstorm water runoff.  Storm waterdischarge permits also may be required by certain states in which weoperate.  We believe that we hold therequired permits and operate in material compliance with those permits.  While we have experienced permit discharge****exceedences at some of our terminals, we do not expect anynoncompliance with existing permits and foreseeable new permit requirements tohave a material adverse effect on our financial position or results ofoperations.

***Air Emissions***

Our operations are subject to the federal Clean AirAct and comparable state and local laws. Under such laws, permits are typically required to emit pollutants intothe atmosphere.  We believe that wecurrently hold or have applied for all necessary air permits and that we are inmaterial compliance with applicable air laws and regulations.  Although we can give no assurances, we areaware of no changes to air quality regulations that will have a materialadverse effect on our financial condition or results of operations.

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 to comply with these regulations canresult in substantial penalties.  Althoughwe can give no assurances, we believe we are currently in substantialcompliance with these regulations.

Changes in product quality specifications couldrequire us to incur additional handling costs or reduce our throughputvolume.  For instance, different productspecifications for different markets could require the construction ofadditional storage.  Also, states inwhich we operate have considered limiting the sulfur content of home heatingoil.  If such regulations are enacted,this could restrict the supply of available heating oil, which could increaseour costs to purchase such oil or limit our ability to sell heating oil.

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***EnvironmentalInsurance***

We maintain insurance which may cover, in whole or inpart, certain costs relating to the clean up of releases of refined petroleumproducts.  We maintain insurance policieswith insurers in amounts and with coverage and deductibles as our generalpartner believes are reasonable and prudent. These policies may not cover all environmental risks and costs and maynot provide sufficient coverage in the event an environmental claim is madeagainst us.

**SecurityRegulation**

Since the September 11, 2001 terrorist attacks onthe United States, the U.S. government has issued warnings that energyinfrastructure assets may be future targets of terrorist organizations.  These developments have subjected ouroperations to increased risks.  Increasedsecurity measures taken by us as a precaution against possible terroristattacks have resulted in increased costs to our business.  Where required by federal or local laws, wehave prepared security plans for the storage and distribution facilities weoperate.  Terrorist attacks aimed at ourfacilities could adversely affect our business, and any global and domesticeconomic repercussions from terrorist activities could adversely affect ourbusiness.  For instance, terroristactivity could lead to increased volatility in prices for home heating oil,gasoline and other products we sell.

Insurance carriers are currently required to offercoverage for terrorist activities as a result of the federal Terrorism RiskInsurance Act of 2002 (“TRIA”).  Wepurchased this coverage with respect to our property and casualty insuranceprograms, which resulted in additional insurance premiums.  Pursuant to the Terrorism Risk InsuranceExtension Act of 2005, TRIA has been extended 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 the requirements of the OccupationalSafety and Health Act (“OSHA”) and comparable state statutes that regulate theprotection of the health and safety of workers. In addition, OSHA’s hazard communication standards require thatinformation be maintained about hazardous materials used or produced inoperations and that this information be provided to employees, state and localgovernment authorities and citizens.  Webelieve that we are in substantial compliance with the applicable OSHArequirements.

With respect to the transportation of refinedpetroleum products by truck, we only operate a limited number of trucks, asmost of the trucks that distribute products we sell are owned and operated bythird parties.  We are subject toregulations promulgated under the Federal Motor Carrier Safety Act for thosetrucks that we do operate.  Theseregulations cover the transportation of hazardous materials and areadministered by the U.S. Department of Transportation.  We conduct ongoing training programs to helpensure that our operations are in compliance with applicable regulations.

**Title toProperties, Permits and Licenses**

We believe we have all leases, permits and licensesnecessary for us to operate our business in all material respects.  With respect to any consents, permits orauthorizations that have not been obtained, we believe that the failure toobtain these consents, permits or authorizations will have no material adverseeffect on the operation of our business.

We believe we have satisfactory title to all of ourassets.  Title to property may be subjectto encumbrances.  We believe that none ofthese encumbrances will materially detract from the value of our properties orfrom our interest in these properties, nor will they materially interfere withthe use of these properties in the operation of our business.

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We believe we have all of the assets needed, includingall permits and licenses, to conduct our operations in all material respects.

The name GLOBAL, our logos and the name GlobalPetroleum Corp. are trademarks of Global Companies LLC.  In addition, we have trademarks for ourpremium fuels and additives, Diesel One, Heating Oil Plus and SubZero.

**Facilities**

We lease office space for our principal executiveoffice in Waltham, Massachusetts.  Thelease expires on December 31, 2008.

**Employees**

To carry out our operations, our general partner andcertain of our operating subsidiaries employ approximately 180 full-timeemployees.  Eleven of the employeesassigned to our terminal in Chelsea, Massachusetts are employed undercollective bargaining agreements that expire in March 2008.  We believe we have good relations with theemployees.

We have two shared services agreements, one with GlobalPetroleum Corp. and another with Alliance Energy Corp.  The services provided among these entities byany employees shared pursuant to these agreements does not limit the ability ofsuch employees to provide all services necessary to properly run ourbusiness.  Please read Item 13, “CertainRelationships and Related Transactions, and Director Independence—SharedServices Agreements.”

**Item1A.**                 RiskFactors

**Risks Inherent inOur 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 candistribute on our units principally depends upon the amount of cash we generatefrom our operations, which will fluctuate from quarter to quarter based on,among other things:

·       competition from othercompanies that sell refined petroleum products in New England;

·       demand for refinedpetroleum products in the markets we serve;

·       seasonal variation intemperatures, which affects demand for home heating oil and residual oil to theextent that it is used for space heating;

·       the level of our operatingcosts, including payments to our general partner; and

·       prevailing economicconditions.

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

·       the level of capitalexpenditures we make;

·       the restrictions containedin our credit agreement;

·       our debt servicerequirements;

·       the cost of acquisitions;

·       fluctuations in our workingcapital needs;

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·       our ability to borrow underour credit agreement to make distributions to our unitholders; and

·       the amount of cash reservesestablished by our general partner, if any.

The amount of cash we have available for distributiondepends primarily on our cash flow, including cash flow from financial reservesand working capital borrowings, and not solely on profitability, which will beaffected by non-cash items.  As a result,we may make cash distributions during periods when we record losses and may notmake cash distributions during periods when we record net income.

***Our financial results are seasonal and generally lowerin the second and third quarters of the calendar year, which may result in ourneed to borrow money in order to make distributions to our unitholders duringthese quarters.***

Demand for some refined petroleum products,specifically home heating oil and residual oil for space heating purposes, isgenerally higher during November through March than duringApril through October.  We obtain asignificant portion of our sales of home heating oil and residual oil for spaceheating purposes during these winter months. Therefore, our results of operations for the first and fourth calendarquarters are generally better than for 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.  Any restrictions on our ability to borrowmoney could restrict our ability to make quarterly distributions to ourunitholders.

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

Weather conditions have an impact on the demand forboth home heating oil and residual oil. Because we supply distributors whose customers depend on home heating oiland residual oil for space heating purposes during the winter,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, ourresults of operations and cash available for distributions to our unitholders.

***Our risk management policies cannot eliminate allcommodity risk.  In addition, anynoncompliance with our risk management policies could result in significantfinancial losses.***

While our hedging policies are designed to minimizecommodity risk, some degree of exposure to unforeseen fluctuations in marketconditions remains.  For example, wechange our hedged position daily in response to movements in ourinventory.  If we overestimate orunderestimate our sales from inventory, we may be unhedged for the amount ofthe overestimate or underestimate.  Also,significant increases in the costs of refined petroleum products can materiallyincrease our costs to carry inventory. We use our credit facility as our primary source of financing to carryinventory and may be 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 deliveries under NYMEX contracts aremade in New York Harbor.  To the extentwe need such deliveries in other ports, such as Boston Harbor, we may havebasis risk.  Basis risk describes 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. Transportation costs and timing differential are components of basisrisk.

We monitor processes and procedures to preventunauthorized trading and to maintain substantial balance between purchases andsales or future delivery obligations.  Wecan provide no assurance, however, that these steps will detect and/or preventall violations of such risk management policies and procedures, particularly ifdeception or other intentional misconduct is involved.

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

We are exposed to risks of loss in the event ofnonperformance by our customers and by counterparties of our forward contracts,options and swap agreements.  Some of ourcustomers and counterparties may be highly leveraged and subject to their ownoperating and regulatory risks.  Even ifour credit review and analysis mechanisms work properly, we may experiencefinancial losses in our dealings with other parties.  Any increase in the nonpayment ornonperformance by our customers and/or counterparties could reduce our abilityto make distributions to our unitholders.

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

Our competitors include terminal companies, majorintegrated oil companies and their marketing affiliates and independentmarketers of varying sizes, financial resources and experience.  Some of our competitors have capitalresources many times greater than ours and control greater supplies of refinedpetroleum products.  If we are unable tocompete effectively, we may lose existing customers or fail to acquire newcustomers, which could have a material adverse effect on our results ofoperations and cash available for distribution to our unitholders.  For example, if a competitor attempts toincrease market share by reducing prices, our operating results and cashavailable for distribution to our unitholders could be adversely affected.  We may not be able to compete successfullywith these companies.

***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 business competes for customers withsuppliers of natural gas.  Those endusers who are dual-fuel users have the ability to switch from residual oil tonatural gas.  During a period ofincreasing residual oil prices relative to the prices of natural gas, dual-fuelusing customers may switch to natural gas. Such switching could have an adverse effect on our results of operationsand cash available for distribution to our unitholders.  We could face additional competition from alternativeenergy sources, such as natural gas, as a result of government-mandatedcontrols or regulation promoting the use of cleaner fuels.  Residual oil consumption has steadilydeclined over the last three decades.

***Energy efficiency, new technology and alternativefuels, natural gas in particular, could reduce demand for our products andadversely affect our operating results and financial condition.***

Increased conservation and technological advances,including installation of improved insulation and the development of moreefficient furnaces and other heating devices, have adversely affected thedemand for home heating oil and residual oil. Future conservation measures or technological advances in heating,conservation, energy generation or other devices might reduce demand andadversely affect our operating results and cash available for distribution toour unitholders.

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

We rely upon our suppliers to timely produce thevolumes and types of refined petroleum products for which they contract withus.  In the event one or more of oursuppliers does not perform in accordance with its contractual obligations, wemay be required to purchase product on the open market to satisfy forwardcontracts we have entered into with our customers in reliance upon such supplyarrangements.  We purchase refinedpetroleum products from a variety of suppliers under term contracts and on thespot market.  In times of extreme marketdemand, we may be unable to satisfy our supply requirements.  Furthermore, a significant portion of oursupply comes from other countries, which could be disrupted by politicalevents.  In the event such supply becomesscarce, whether as a result of political events, natural disaster or otherwise,we may not be able to satisfy our supply requirements.  If any of these events were to occur, we maybe required 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.

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***If we do not make acquisitions oneconomically-acceptable terms, our future growth may be limited.***

Our ability togrow substantially depends on our ability to make acquisitions that result inan increase in operating surplus per unit. We may be unable to make such accretive acquisitions for any of thefollowing reasons:

·       we are unable to identifyattractive acquisition candidates or negotiate acceptable purchase contractswith them;

·       we are unable to raisefinancing for such acquisitions on economically-acceptable terms; or

·       we are outbid bycompetitors.

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

If any of these events were to occur, our futuregrowth would be limited.  In particular,competition for midstream assets and businesses has intensified and, as aresult, such assets and 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 acquisitioninvolves potential risks, including:

·       performance from theacquired assets and businesses that is below the forecasts we used inevaluating the acquisition;

·       a significant increase inour indebtedness and working capital requirements;

·       the inability to timely andeffectively integrate the operations of recently acquired businesses or assets,particularly those in new geographic areas or in new lines of business;

·       the incurrence ofsubstantial unforeseen environmental and other liabilities arising out of theacquired businesses or assets, including liabilities arising from the operationof the acquired businesses or assets prior to our acquisition, for which we arenot indemnified or for which the indemnity is inadequate;

·       customer or key employeeloss from the acquired businesses; and

·       diversion of our management’sattention from other business concerns.

If any acquisitions we ultimately consummate do notgenerate expected increases in cash available for distribution to ourunitholders, our ability to make such distributions will be reduced.

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

The bulk terminals we own or lease or at which wemaintain dedicated storage facilities play a key role in moving product to ourcustomers.  We lease the entirety of onebulk terminal that we operate exclusively for our business and maintaindedicated storage facilities at another 9 bulk terminals.  The agreements governing these arrangementsare subject to expiration at various dates through 2013.  These arrangements may not be renewed whenthey expire or, if renewed, may not be renewed at rates and on terms at leastas favorable.  If these agreements arenot renewed or we are unable to renew these agreements at rates and on terms atleast as favorable, it could have an adverse effect on our results ofoperations and cash available for distribution to our unitholders.

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***A material amount of our terminalling capacity iscontrolled by one of our affiliates. Loss of that capacity could have an adverse effect on our results ofoperations and cash available for distribution to our unitholders.***

We currently have an exclusive throughput arrangementfor the Revere terminal with one of our affiliates, Global Petroleum Corp.  This facility accounts for approximately 30%of our storage capacity.  We storedistillates and gasoline at this facility. The throughput agreement for this facility expires in 2013.  After expiration of the agreement, we canprovide no assurance that Global Petroleum Corp. will continue to grant usexclusive use of the terminal or that the terms of a renegotiated agreementwill be as favorable to us as the agreement it replaces.  If we are unable to renew the agreement orunable to renew on terms at least as favorable, it could have a materialadverse effect on our results of operations and cash available for distributionto our unitholders.  Our general partnerhas no fiduciary duty to consider our interests in determining whether to renewthe throughput arrangement.

***Our sales are generated under contracts that must berenegotiated or replaced periodically. If we are unable to successfully renegotiate or replace these contracts,our results of operations and cash available for distribution to ourunitholders could be adversely affected.***

Our sales are generated under contracts that must beperiodically renegotiated or replaced. Most of our arrangements with our customers are for a single season oron a spot basis.  As these contractsexpire, they must be renegotiated or replaced. We may be unable to renegotiate or replace these contracts when theyexpire, and the terms of any renegotiated contracts may not be as favorable asthe contracts they replace.  Whetherthese contracts are successfully renegotiated or replaced is often timessubject to factors beyond our control. Such factors include fluctuations in refined petroleum product prices,counterparty ability to pay for or accept the contracted volumes and acompetitive marketplace for the services offered by us.  If we cannot successfully renegotiate or replaceour contracts or 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 assetand geographic diversification, adverse developments in the terminals we use orin*** our operating areas would reduce our ability tomake distributions to our unitholders.

We rely exclusively on sales generated from productsdistributed from the terminals we own or control or to which we haveaccess.  Furthermore, almost all ourassets and operations are located in New England.  Due to our lack of diversification in assettype and location, an adverse development in these businesses or areas,including adverse developments due to catastrophic events or weather anddecreases in demand for refined petroleum products, could have a significantlygreater impact on our results of operations and cash available for distributionto our unitholders 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 ofthese events were to occur, we could incur substantial losses because ofpersonal injury or loss of life, severe damage to and destruction of propertyand equipment, and pollution or other environmental damage resulting incurtailment or suspension of our related operations.

We are not fully insured against all risks incident toour business.  Prior to the formation ofour partnership, certain of the insurance policies covering entities that werecontributed to us and our operations also provided coverage to entities thatwere not contributed to us as a part of our initial public offering.  The coverage available under those insurancepolicies has been allocated among our partnership and those entities that werenot contributed to us.  This allocationmay result in limiting the amount of recovery available to us for purposes ofcovered losses.

Furthermore, we may be unable to maintain or obtaininsurance of the type and amount we desire at reasonable rates.  As a result of market conditions, premiumsand deductibles for certain of our insurance policies

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have increased and couldescalate further.  In some instances,certain insurance could become unavailable or available only for reducedamounts of coverage.  If we were to incura significant liability for which we are not fully insured, it could have amaterial adverse effect on our financial position and ability to makedistributions to unitholders.

***New, stricter environmental laws andregulations could significantly increase our costs, which could adverselyaffect our results of operations and financial condition.***

Our operations are subject to federal, state and locallaws and regulations regulating product quality specifications and otherenvironmental matters.  The trend inenvironmental regulation is towards more restrictions and limitations onactivities that may affect the environment. Our business may be adversely affected by increased costs andliabilities resulting from such stricter laws and regulations.  We try to anticipate future regulatoryrequirements that might be imposed and to plan accordingly to remain incompliance with changing environmental laws and regulations and to minimize thecosts of such compliance.  However, therecan be no assurances as to the timing and type of such changes in existing lawsor the promulgation of new laws or the amount of any required expendituresassociated therewith.

***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.  Ouroperations involving the receipt, storage and redelivery of refined petroleumproducts are subject to stringent federal, state and local laws and regulationsgoverning the discharge of materials into the environment, or otherwiserelating to the protection of the environment, operational safety and relatedmatters.  Compliance with these laws andregulations increases our overall cost of business, including our capital coststo maintain and upgrade equipment and facilities.  We utilize a number of terminals that areowned and operated by third parties who are also subject to these stringentfederal, state and local environmental laws in their operations.  Their compliance with these requirementscould increase the cost of doing business with these facilities.

In addition, our operations could be adverselyaffected if shippers of refined petroleum products incur additional costs orliabilities associated with environmental regulations.  These shippers could increase their chargesto 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 several liability may be incurred,without regard to fault or the legality of the original conduct, under federaland state environmental laws for the remediation of contaminated areas at ourfacilities and those where we do business. 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 may also be held liable for damages tonatural resources.

The possibility exists that new, stricter laws,regulations or enforcement policies could significantly increase our compliancecosts and the cost of any remediation that may become necessary, some of whichmay 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 increased costs because ofstricter pollution control requirements or liabilities resulting fromnoncompliance with required operating or other regulatory permits.  New environmental regulations might adverselyaffect our products and activities, including the storage of refined product,as well as waste management and our control of air emissions.  Federal and state agencies also could imposeadditional safety regulations to which we would be subject.  Because the laws and regulations applicableto our operations are subject to change, we cannot provide any assurance thatcompliance with future laws and regulations will not have a material effect onour results of operations.  Please read “Items1. and 2. Business and Properties—Environmental” for more information.

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

Various federal, state and local agencies have theauthority to prescribe specific product quality specifications to the sale ofcommodities.  Our business includes suchcommodities.  Changes in product qualityspecifications, such as reduced sulfur content in refined petroleum products,or other more stringent requirements for fuels, could reduce our ability toprocure product and our sales volume, require us to incur additional handlingcosts and/or require the expenditure of capital.  For instance, different productspecifications for different markets could require additional storage.  If we are unable to procure product orrecover these costs through increased sales, we may not be able to meet ourfinancial obligations.  Failure to complywith these regulations could result in substantial penalties.  Please read “Item 3. LegalProceedings—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.***

Since the September 11, 2001 terrorist attacks onthe United States, the U.S. government has issued warnings that energy assetsmay be future targets of terrorist organizations.  These developments have subjected ouroperations to increased risks.  Weincurred costs for providing facility security and may incur additional costsin the future with respect to the receipt, storage and distribution of ourproducts.  Additional security measurescould also restrict our ability to distribute refined petroleum products.  Any future terrorist attack on ourfacilities, or those of our customers, could have a material adverse effect onour business and reduce our ability to make distributions to our unitholders.

Terrorist activity could lead to increased volatilityin prices for home heating oil, gasoline and other products we sell, whichcould decrease our customers’ demand for these products.  Insurance carriers are required to offercoverage for terrorist activities as a result of federal legislation.  We purchased this coverage with respect toour property and casualty insurance programs. This additional coverage resulted in additional insurance premiums whichcould increase further in the future.

***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 lossof the services of any member of senior management or key employee could havean adverse effect on our business and reduce our ability to make distributionsto 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 longeravailable.  Except with respect to EricSlifka, Thomas Hollister and Edward Faneuil, neither we, our general partnernor any affiliate thereof entered into an employment agreement with, or, exceptfor Eric Slifka, carry key man life insurance on, any member of our seniormanagement team or other key personnel.

All of the executive officers of our general partnerperform services for certain of our affiliates. Please read Item 13, “Certain Relationships and Related Transactions,and Director Independence—Relationship of Management with Global PetroleumCorp. and Alliance Energy Corp.”

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***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 workstoppages or labor disturbances at these facilities could disrupt ourbusiness.***

Certain of our employees at the terminal in Chelsea,Massachusetts and truck drivers directly employed by us are employed undercollective bargaining agreements that expire in 2008.  Certain of Global Petroleum Corp.’s employeesat the Revere, Massachusetts facility are similarly employed under a collectivebargaining agreement.  Please read Items1 and 2, “Business and Properties—Employees.” Any work stoppages or other labor disturbances at these facilities or bythese drivers could have an adverse effect on our business and reduce ourability to make distributions to our unitholders.  In addition, employees who are not currentlyrepresented by labor unions may seek union representation in the future, andany renegotiation of current collective bargaining agreements may result interms that are less favorable to us.

**Risks Inherent inan Investment in Us**

***Our generalpartner and its affiliates have conflicts of interest and limited fiduciaryduties, which may permit them to favor their own interests to the detriment ofour unitholders.***

Affiliates of ourgeneral partner, including directors and executive officers of our generalpartner, own a 49.5% limited partner interest in us and the 2.0% generalpartner interest.  Although our generalpartner has a fiduciary duty to manage us in a manner beneficial to us and ourunitholders, the directors and officers of our general partner have a fiduciaryduty to manage our general partner in a manner beneficial to its owners.  Furthermore, certain directors and officersof our general partner are directors or officers of affiliates of our generalpartner.  Conflicts of interest may arisebetween our general partner and its affiliates, on the one hand, and us and ourunitholders, on the other hand.  As aresult of these conflicts, our general partner may favor its own interests andthe interests of its affiliates over the interests of our unitholders.  Please read “—Our partnership agreementlimits our general partner’s fiduciary duties to unitholders and restricts theremedies available to unitholders for actions taken by our general partner thatmight otherwise constitute breaches of fiduciary duty.”  These conflicts include, among others, thefollowing situations:

·       Our general partner isallowed to take into account the interests of parties other than us, such asaffiliates of its members, in resolving conflicts of interest, which has theeffect of limiting its fiduciary duty to our unitholders.

·       Affiliates of our generalpartner may engage in competition with us under certain circumstances.  See    “—Certain members of theSlifka family and their affiliates may engage in activities that competedirectly with us.”

·       Neither our partnershipagreement nor any other agreement requires owners of our general partner topursue a business strategy that favors us. Directors and officers of our general partner’s owners have a fiduciaryduty to make these decisions in the best interest of such owners which may becontrary to our interests.

·       Some officers of ourgeneral partner who provide services to us devote time to affiliates of ourgeneral partner.

·       Our general partner haslimited its liability and reduced its fiduciary duties under the partnershipagreement, while also restricting the remedies available to our unitholders foractions that, without these limitations, might constitute breaches of fiduciaryduty.  As a result of purchasing commonunits, unitholders consent to some actions and conflicts of interest that mightotherwise constitute a breach of fiduciary or other duties under applicablestate law.

·       Our general partnerdetermines the amount and timing of asset purchases and sales, capitalexpenditures, borrowings, issuances of additional partnership securities andreserves, each of which can affect the amount of cash available fordistribution to our unitholders.

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·       Our general partnerdetermines the amount and timing of any capital expenditures and whether acapital expenditure is a maintenance capital expenditure, which reducesoperating surplus, or a capital expenditure for acquisitions or a capitalimprovement expenditure, which does not, and determination can affect theamount of cash distributed to our unitholders and the ability of thesubordinated units to convert to common units.

·       In some instances, ourgeneral partner may cause us to borrow funds in order to permit the payment ofcash distributions, even if the purpose or effect of the borrowing is to make adistribution on the subordinated units, make incentive distributions or acceleratethe expiration of the subordination periods.

·       Our general partnerdetermines which costs incurred by it and its affiliates are reimbursable byus.

·       Our partnership agreementdoes not restrict our general partner from causing us to pay it or its affiliatesfor any services rendered on terms that are fair and reasonable to us orentering into additional contractual arrangements with any of these entities onour behalf.

·       Our general partner intendsto limit its liability regarding our contractual and other obligations.

·       Our general partner mayexercise its limited right to call and purchase common units if it and itsaffiliates own more than 80% of the common units.

·       Our general partnercontrols the enforcement of obligations owed to us by it and its affiliates.

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

**Please read Item 13, “CertainRelationships and Related Transactions, and Director Independence—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, our partnership agreement:

·       permits our general partnerto make a number of decisions in its individual capacity, as opposed to in itscapacity as our general partner.  Thisentitles our general partner to consider only the interests and factors that itdesires, and it has no duty or obligation to give any consideration to any interestof, or factors affecting, us, our affiliates or any limited partner.  Examples include the exercise of its limitedcall right, its voting rights with respect to the units it owns, itsregistration rights and its determination whether or not to consent to anymerger or consolidation of us;

·       provides that our generalpartner shall not have any liability to us or our unitholders for decisionsmade in its capacity as general partner so long as it acted in good faith,meaning it believed that the decision was in our best interests;

·       generally provides thataffiliated transactions and resolutions of conflicts of interest not approvedby the conflicts committee of the board of directors of our general partner andnot involving a vote of unitholders must be on terms no less favorable to usthan those generally being provided to or available from unrelated thirdparties or be “fair and reasonable” to us and that, in determining whether atransaction or resolution is “fair and reasonable,” our general partner mayconsider the totality of the relationships between the parties involved,including other transactions that may be particularly advantageous orbeneficial to us; and

·       provides that our generalpartner and its officers and directors will not be liable for monetary damagesto us, our limited partners or assignees for any acts or omissions unless therehas been a final and

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non-appealablejudgment entered by a court of competent jurisdiction determining that thegeneral partner or those other persons acted in bad faith or engaged in fraudor willful misconduct.

By purchasing a common unit, a common unitholder willbecome bound by the provisions of the partnership agreement, including theprovisions described above.

***Unitholders havelimited voting rights and are not entitled to elect our general partner or itsdirectors or initially 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 have no rightto elect our general partner or its board of directors on an annual or othercontinuing basis.  The board of directorsof our general partner is chosen entirely by its members and not by theunitholders.  Furthermore, if theunitholders are dissatisfied with the performance of our general partner, theyhave limited ability to remove our general partner.  As a result of these limitations, the priceat which the common units trade could diminish because of the absence orreduction of 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.  The vote of the holders of at least 662/3% of all outstanding common and subordinated units votingtogether as a single class is required to remove our general partner.  The holders of the 230,303 general partnerunits do not participate in any vote to remove our general partner.  Without regard to their ownership of thegeneral partner units, as of December 31, 2006, affiliates of our generalpartner, including directors and executive officers of our general partner,owned 50.5% of our common and subordinated units.  Also, if our general partner is removedwithout cause during the subordination period, as defined in the partnershipagreement, and units held by our general partner and its affiliates are notvoted in favor of that removal, all remaining subordinated units willautomatically be converted into common units, and any existing arrearages onthe common units will be extinguished.  Aremoval of our general partner under these circumstances would adversely affectthe common units by prematurely eliminating their distribution and liquidationpreference over the subordinated units, which would otherwise have continueduntil we had met certain distribution and performance tests.

Cause is narrowly defined in our partnership agreementto mean that a court of competent jurisdiction has entered a final,non-appealable judgment finding our general partner liable for actual fraud orwillful or wanton misconduct in its capacity as our general partner.  Cause does not include most cases of chargesof poor management of the business, so the removal of our general partnerduring the subordination periods because of the unitholders’ dissatisfactionwith our general partner’s performance in managing our partnership will mostlikely result in the termination of the subordination period.

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

At any time, wemay issue an unlimited number of limited partner interests of any type withoutthe approval of our unitholders.  Theissuance by us of additional common units or other equity securities of equalor senior rank will have the following effects:

·       our unitholders’ proportionateownership interest in us will decrease;

·       the amount of cashavailable for distribution on each unit may decrease;

·       because a lower percentageof total outstanding units will be subordinated units, the risk that ashortfall in the payment of the minimum quarterly distribution borne by ourcommon unitholders will increase;

·       the relative votingstrength of each previously outstanding unit may be diminished; and

·       the market price of thecommon units may decline.

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***Our generalpartner has a limited call right that may require unitholders to sell theircommon units at an undesirable time or price.***

If at any time our general partner and its affiliatesown more than 80% of the common units, our general partner will have the right,but not the obligation, which it may assign to any of its affiliates or to us,to acquire all, but not less than all, of the common units held by unaffiliatedpersons at a price not less than their then-current market price.  As a result, unitholders may be required tosell their common units at an undesirable time or price and may not receive anyreturn on their investment.  Unitholdersmay also incur a tax liability upon a sale of their units.  Our general partner is not obligated toobtain a fairness opinion regarding the value of the common units to berepurchased by it upon exercise 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.  Ifour general partner exercises its limited call right, the effect would be totake us private and, if the units were subsequently deregistered, we would nolonger be subject to the reporting requirements of the Securities Exchange Actof 1934.

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

Our partnership agreement restricts unitholders’voting rights by providing that any units held by a person that owns 20% ormore of any class of units then outstanding, other than our general partner,its affiliates, their transferees and persons who acquired such units with theprior approval of the board of directors of our general partner, cannot vote onany matter.  Our partnership agreementalso contains provisions limiting the ability of unitholders to call meetingsor acquire information about our operations, as well as other provisionslimiting the unitholders’ ability to influence the manner or direction ofmanagement.

***Our debt levelsmay limit our flexibility in obtaining additional financing and in pursuingother business opportunities.***

We have asignificant amount of debt.  As ofDecember 31, 2006, our total debt was approximately $272.3 million.  We have the ability to incur additional debt,including the capacity to borrow up to $600.0 million under our creditfacilities, subject to limitations in our credit agreement.  Our level of indebtedness could haveimportant consequences to us, including the following:

·       our ability to obtainadditional financing, if necessary, for working capital, capital expenditures,acquisitions or other purposes may be impaired or such financing may not beavailable on favorable terms;

·       covenants contained in ourexisting and future credit and debt arrangements will require us to meetfinancial tests that may affect our flexibility in planning for and reacting tochanges in our business, including possible acquisition opportunities;

·       we will need a substantialportion of our cash flow to make principal and interest payments on ourindebtedness, reducing the funds that would otherwise be available foroperations, future business opportunities and distributions to unitholders;

·       our debt level will make usmore vulnerable than our competitors with less debt to competitive pressures ora downturn in our business or the economy generally; and

·       our debt level may limitour flexibility in responding to changing business and economic conditions.

Our ability to service our indebtedness depends upon,among other things, our financial and operating performance, which will beaffected by prevailing economic conditions and financial, business, regulatoryand other factors, some of which are beyond our control.  If our operating results are not sufficientto service our current or future indebtedness, we will be forced to takeactions, such as reducing distributions, reducing or delaying our businessactivities, acquisitions, investments and/or capital expenditures, sellingassets, restructuring or refinancing our indebtedness, or seeking additionalequity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactoryterms, or at all.

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***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.  For example, our credit agreement restrictsour ability to:

·       grant liens;

·       make certain loans orinvestments;

·       incur additionalindebtedness or guarantee other indebtedness;

·       make any material change tothe nature of our business or undergo a fundamental change;

·       make any materialdispositions;

·       acquire another company;

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

·       make distributions if anypotential default or event of default occurs; or

·       make capital expendituresin excess of specified levels.

Our ability to comply with the covenants andrestrictions contained in our credit agreement may be affected by events beyondour control, including prevailing economic, financial and industryconditions.  If market or other economicconditions deteriorate, our ability to comply with these covenants may beimpaired.  If we violate any of therestrictions, covenants, ratios or tests in our credit agreement, a significantportion of our indebtedness may become immediately due and payable, and ourlenders’ commitment to make further loans to us may terminate.  We might not have, or be able to obtain,sufficient funds to make these accelerated payments.  In addition, our obligations under our creditagreement are secured by substantially all of our assets, and if we are unableto repay our indebtedness under our credit agreement, the lenders could seek toforeclose on such assets.

***Restrictions inour credit agreement limit our ability to pay distributions upon the occurrenceof certain events.***

Our payment ofprincipal and interest on our debt reduces cash available for distribution onour units.  Our credit agreement limitsour ability to pay distributions upon the occurrence of the following events,among others:

·       failure to pay anyprincipal when due or any interest, fees or other amounts when due;

·       failure of anyrepresentation or warranty to be true and correct in any material respect;

·       failure to perform orotherwise comply with the covenants in the credit agreement or in other loandocuments to which we are a borrower;

·       any default in theperformance of any obligation or condition beyond the applicable grace periodrelating to any other indebtedness of more than $2.0 million if the effect ofthe default is to permit or cause the acceleration of the indebtedness;

·       a judgment default formonetary judgments exceeding $2.0 million or a default under any non-monetaryjudgment if such default could have a material adverse effect on us;

·       a change in management orownership control;

·       a violation of the EmployeeRetirement Income Security Act, or ERISA, or a bankruptcy or insolvency eventinvolving us, our general partner or any of our subsidiaries; and

·       failure to comply with anannual “clean-down” provision in our $15.0 million revolving creditfacility.

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Any subsequent refinancing of our current debt or anynew debt could have similar restrictions. For more information regarding our credit agreement, please read Item 7,“Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources—Credit Agreement” and Note 9 ofNotes to Financial Statements.

***We can borrowmoney under our credit agreement to pay distributions, which would reduce theamount of credit available to operate our business.***

Our partnership agreement allows us to make workingcapital borrowings under our credit agreement to pay distributions.  Accordingly, we can make distributions on allour units even though cash generated by our operations may not be sufficient topay such distributions.  We are requiredto reduce our borrowings to zero under that portion of our credit agreementthat is available to pay the minimum quarterly distribution for a period of atleast 30 consecutive days once each 12-month period.  For more information, please read Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources—Credit Agreement” and Note 9 ofNotes to Financial Statements.

***Costreimbursements due our general partner and its affiliates will reduce cashavailable for distribution to our unitholders.***

Prior to making any distribution on the common units,we reimburse our general partner and its affiliates for all expenses they incuron our behalf, which is determined by our general partner in its solediscretion.  These expenses 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 andoperated by directors and executive officers of our general partner.  In addition, the majority of our operatingpersonnel are employees of our general partner. Please read Item 13, “Certain Relationships and Related Transactions,and Director Independence.”  Thereimbursement of expenses and payment of fees, if any, to our general partnerand its affiliates could adversely affect our ability to pay cash distributionsto our unitholders.

***Unitholders maynot have 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 is organized under Delawarelaw, and we conduct business in a number of other states.  The limitations on the liability of holdersof limited partner interests for the obligations of a limited partnership havenot been clearly established in some of the other states in which we dobusiness.  A unitholder could be liablefor our obligations as if he were a general partner if:

·       a court or governmentagency determined that we were conducting business in a state but had notcomplied with that particular state’s partnership statute; or

·       a unitholder’s right to actwith other unitholders to remove or replace the general partner, approve someamendments to our partnership agreement or take other actions under our partnershipagreement constitute “control” of our business.

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

Under certain circumstances, unitholders may have torepay amounts wrongfully returned or distributed to them.  Under Section 17-607 of the DelawareRevised Uniform Limited Partnership Act, we may not make a distribution tounitholders if the distribution would cause our liabilities to exceed the fairvalue of our assets.  Delaware lawprovides that for a period of three years from the date of the impermissibledistribution, limited partners who received the distribution and who knew atthe time of the distribution that it violated Delaware law will be liable tothe limited partnership for the distribution amount.  Purchasers of units who become limitedpartners are liable for the obligations of the transferring limited partner tomake contributions to us that are known to the purchaser of units at the timeit became a limited partner and for unknown obligations if the

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liabilities could bedetermined from the partnership agreement. Liabilities to partners on account of their partnership interests andliabilities 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 may transfer its general partnerinterest to a third party in a merger or in a sale of all or substantially allof its assets without the consent of the unitholders.  Furthermore, there is no restriction in thepartnership agreement on the ability of the members of our general partner fromtransferring their respective membership interests in our general partner to athird party.  The new members of ourgeneral partner would then be in a position to replace the board of directorsand officers of our general partner with their own choices and control thedecisions taken by the board of directors and officers of our general partner.

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

Certain members of the Slifka family and theiraffiliates are subject to the noncompete provisions in the omnibusagreement.  The omnibus agreement doesnot prohibit certain affiliates of our general partner from owning certainassets or engaging in certain businesses that compete directly or indirectlywith us.  Please read Item 13, “CertainRelationships and Related Transactions, and Director Independence—OmnibusAgreement.”

**Tax Risks**

***Our tax treatmentdepends on our status as a partnership for federal income tax purposes, as wellas our not being subject to a material amount of entity-level taxation byindividual states.  If the InternalRevenue Service were to treat us as a corporation or if we were to becomesubject to a material amount of entity-level taxation for state tax purposes,our cash available for distribution to unitholders would be substantiallyreduced.***

The anticipated after-tax economic benefit of aninvestment in the common units depends largely on our being treated as apartnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from theInternal Revenue Service (“IRS”) on this or any other tax matter affecting us.

If we were treated as a corporation for federal incometax purposes, we would pay federal income tax on our taxable income at thecorporate tax rate, which is currently a maximum of 34 %, and would likely paystate tax at varying rates. Distributions to unitholders would generally be taxed again as corporatedistributions, and no income, gains, losses, deductions or credits would flowthrough to unitholders.  Because a taxwould be imposed upon us as a corporation, our cash available for distributionto unitholders would be substantially reduced. Thus, treatment of us as a corporation would result in a materialreduction in the anticipated cash flow and after-tax return to unitholders,likely causing a substantial reduction in the value of the common units.

Current law may change, causing us to be treated as acorporation for federal income tax purposes or otherwise subjecting us toentity-level taxation.  For example,because of widespread state budget deficits and other reasons, several statesare evaluating ways to subject partnerships to entity-level taxation throughthe imposition of state income, franchise or other forms of taxation.  If any state were to impose a tax upon us asan entity, the cash available for distribution to unitholders would be reduced.  The partnership agreement provides that if alaw is enacted or existing law is modified or interpreted in a manner thatsubjects us to taxation as a corporation or otherwise subjects us toentity-level taxation for federal, state or local income tax purposes, theminimum quarterly distribution amount and the target distribution amounts willbe adjusted to reflect the impact of that law on us.

***We have asubsidiary that is treated as a corporation for federal income tax purposes andsubject to corporate-level income taxes.***

We conduct all or a portion of our operations of ourend-user business through a subsidiary that is organized as a corporation.  We may elect to conduct additional operationsthrough this corporate subsidiary in the future.  This corporate subsidiary is subject tocorporate-level tax, which reduces the cash available for distribution to usand, in turn, to unitholders.  If the IRSwere to successfully assert that this corporation has more tax liability than

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we anticipate orlegislation was enacted that increased the corporate tax rate, our cashavailable for distribution to unitholders would be further reduced.

***If the IRScontests the federal income tax positions we take, the market for our commonunits may be adversely impacted, and the costs of any contest will reduce ourcash available for distribution to unitholders.***

We have not requested any ruling from the IRS withrespect to our treatment as a partnership for federal income tax purposes orany other matter affecting us.  The IRSmay adopt positions that differ from the tax positions we take.  It may be necessary to resort toadministrative or court proceedings to sustain some or all of the positions wetake.  A court may not agree with some orall of the positions we take.  Any contestwith the IRS may materially and adversely impact the market for our commonunits and the price at which they trade. In addition, because the costs will be borne indirectly by ourunitholders and our general partner, the costs of any contest with the IRS willresult in a reduction in cash available for distribution.

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

Because unitholders are treated as partners to whom weallocate taxable income, which could be different in amount than the cash wedistribute, unitholders are required to pay federal income taxes and, in somecases, state and local income taxes on their share of our taxable income,whether or not they receive cash distributions from us.  Unitholders may not receive cashdistributions from us equal to their share of our taxable income or even equalto the actual tax liability that results from their share of our taxableincome.

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

If a unitholder sells his common units, he willrecognize a gain or loss equal to the difference between the amount realizedand his tax basis in those common units. Because distributions to a unitholder in excess of the unitholder’sallocable share of our net taxable income decreases the unitholder’s tax basisin his common units, the amount of such prior excess distributions will, ineffect, become taxable income to him if the common units are sold at a pricegreater than his tax basis in the common units, even if the price he receivesis less than his original cost. Furthermore, a substantial portion of the amount realized, whether ornot representing gain, may be taxed as ordinary income to the unitholder due topotential recapture items, including depreciation recapture.  In addition, because the amount realizedincludes a unitholder’s share of our non-recourse liabilities, if a unitholdersells his units, he may incur a tax liability in excess of the amount of cashhe receives from the sale.

***Tax-exemptentities and foreign persons face unique tax issues from owning common unitsthat may result in adverse tax consequences to them.***

Investment in common units by tax-exempt entities,such as individual retirement accounts (known as IRAs), and non-U.S. personsraises issues unique to them.  Forexample, virtually all of our income allocated to organizations exempt fromfederal income tax, including IRAs and other retirement plans, are unrelatedbusiness taxable income and taxable to them. Distributions to non-U.S. persons are reduced by withholding taxes atthe highest applicable effective tax rate, and non-U.S. persons are required tofile the U.S. federal income tax returns and pay tax on their share of ourtaxable income.

***We treat eachpurchaser of common units as having the same tax benefits without regard to theactual common units purchased.  The IRSmay challenge this treatment, which could decrease the value of the commonunits.***

Because we cannot match transferors and transferees ofcommon units, we adopted depreciation and amortization positions that may notconform with all aspects of existing Treasury Regulations.  A successful IRS challenge to those positionscould decrease the amount of tax benefits available to unitholders.  It also could affect the timing of these taxbenefits or the amount of gain from a unitholder’s sale of common units andhave a negative impact on the value of our common units or result in auditadjustments to unitholders’ tax returns.

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***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 to have terminated for federalincome tax purposes if there is a sale or exchange of 50% or more of the totalinterests in our capital and profits within a twelve-month period.  Our termination would, among other things,result in the closing of our taxable year for all unitholders and could resultin a deferral of depreciation deductions allowable in computing our taxableincome.

***Unitholders may besubject to state and local taxes and return filing requirements injurisdictions where they do not live as a result of investing in our common units.***

In addition to federal income taxes, unitholders maybe subject to other taxes, such as state and local income taxes, unincorporatedbusiness taxes and estate, inheritance or intangible taxes that are imposed bythe various jurisdictions in which we do business or own property even if theydo not live in any of those jurisdictions. Unitholders may be required to file state and local income tax returnsand pay state and local income taxes in some or all of these variousjurisdictions.  Further, unitholders maybe subject to penalties for failure to comply with those requirements.  As of December 31, 2006, we conductedbusiness in 12 states, some of which may impose a state income tax.  We may own property or conduct business inother states or foreign countries in the future.  It is the unitholder’s responsibility to fileall federal, state and local tax returns.

**Item1B.**                 UnresolvedStaff Comments.

***None.***

**Item3.**                          LegalProceedings.

***General***

Although we may, from time to time, be involved inlitigation and claims arising out of our operations in the normal course ofbusiness, we do not believe that we are a party to any litigation that willhave a material adverse impact on our financial condition or results ofoperations.  Except as described below,we are not aware of any significant legal or governmental proceedings againstus, or contemplated to be brought against us. We maintain insurance policies with insurers in amounts and withcoverage and deductibles as our general partner believes are reasonable andprudent.  However, we can provide noassurance that this insurance will be adequate to protect us from all materialexpenses related to potential future claims for personal and property damage orthat these levels of insurance will be available in the future at economicalprices.

***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 thathas been used extensively to reduce motor 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 where found,and related relief including treble damages and injunctive relief.  The plaintiffs in these cases generally claimto be public water providers or municipal or other government authorities.  These cases have been consolidated inmulti-district litigation with over 60 other MTBE cases in federal court in theSouthern District of New York.  We intendto vigorously defend these cases.  We donot believe that these cases will have a material impact on our operationsalthough we can provide no assurances in this regard.

On November 29, 2004, a consent decree was lodgedby the U.S. Department of Justice in the federal District Court forMassachusetts whereby Global Companies LLC and Global Petroleum Corp. settledalleged violations of Clean Air Act regulations related to fuel qualityspecifications.  This consent decree wasentered by the court on January 21, 2005. As part of this settlement, Global Companies LLC has paid a $500,000civil

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penalty and instituted acompliance program for three years to ensure compliance with Clean Air Act fuelquality specifications.  The allegedviolations stemmed from the importation of finished conventional gasoline,which was not a substantial part of our operations at the time of the allegedviolations.  We do not believe thatcompliance with the terms of the consent decree will result in material costs.

In November 2006, the EPA, Region III (“EPA, RegionIII”) notified Global Companies LLC, as the operator of a petroleum marketingand bulk storage terminal in Macungie, Pennsylvania of EPA’s intention tonegotiate an Administrative Order on Consent (“AOC”) with Global Companies LLCand the previous owner and owners of an adjacent terminal to investigate andremediate petroleum in the soil and groundwater at the two sites.  We are continuing to work with the othercompanies, including the previous owner of our terminal, to negotiate an AOCwith EPA.  While we cannot predict theoutcome of these negotiations and any subsequent environmental investigation ofthese sites, we do not expect that this outcome will have a material adverseeffect on us.

***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 that the Attorney General’s officehas issued similar demands to other distributors and retailers.  We have taken steps to comply with thedemand.  While we cannot predict theoutcome of the investigation, we do not expect that the outcome will have amaterial adverse effect on us.

**Item4.**                          Submissionof Matters to a Vote of Security Holders.

No matter was submitted to a vote of security holdersduring the fourth quarter of 2006.

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**PART II**

**Item 5.****           Market for Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities**

Our common units trade onthe New York Stock Exchange under the symbol “GLP.”  The closing sale price per common unit onMarch 1, 2007 was $29.07.  At the closeof business on March 1, 2007, based upon information received from ourtransfer agent and brokers and nominees, we had approximately 4,300 commonunitholders, including beneficial owners of common units held in streetname.  The following table sets forth therange of the daily high and low sales prices per common unit as quoted on theNew York Stock Exchange and the cash distributions per common unit for theperiods indicated.

 
|                | ** ** | **Price Range** | ** ** | **Cash Distribution** | ** ** |
|----------------|------------|----------------------|------------|----------------------------|------------|
| ** **     | ** ** | **High**             | ** ** | **Low**                    | ** ** | **Per Common Unit(1)** | ** ** |
| **2006**       |       |                 |       |                       |       |   |   |
| Fourth Quarter |       | $                    | 26.70      |                       | $          | 21.70 |   | $ | 0.4550 | (2) |
| Third Quarter  |       | 22.80                |       | 19.93                      |       | 0.4450 |   |
| Second Quarter |       | 21.75                |       | 19.90                      |       | 0.4375 |   |
| First Quarter  |       | 21.80                |       | 18.94                      |       | 0.4250 |   |
|           |       |                 |       |                       |       |   |   |
| **2005**       | ** ** | ** **           | ** ** | ** **                 | ** ** | ** ** | ** ** |
| Fourth Quarter |       | $                    | 24.68      |                       | $          | 18.15 |   | $ | 0.4111 | (3) |

 

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(1)          Cash distributions declared in one calendarquarter are paid in the following calendar quarter.

(2)          On January 24, 2007, the board ofdirectors of our general partner declared this distribution for the period fromOctober 1, 2006 through December 31, 2006 which was paid on February 14,2007.

(3)          This distribution reflects the pro rataportion of the quarterly distribution rate of $0.425, covering the period fromthe closing of the initial public offering, October 4, 2005 throughDecember 31, 2005.

We intend to considercash distributions to unitholders on a quarterly basis, although there is noassurance as to the future cash distributions since they are dependent uponfuture earnings, cash flow, capital requirements, financial condition and otherfactors.  Our credit agreement prohibitsus from making cash distributions if any potential default or event of default,as defined in the credit agreement, occurs or would result from the cashdistribution.

Within45 days after the end of each quarter, we will distribute all of ouravailable cash (as defined in our partnership agreement) to unitholders ofrecord on the applicable record date. The amount of available cash generally is all cash on hand at the end ofthe quarter:

·          less the amount of cash reserves establishedby our general partner to:

·        provide for the properconduct of our business;

·        comply with applicablelaw, any of our debt instruments, or other agreements; or

·        provide funds fordistributions to our unitholders and to our general partner for any one or moreof the next four quarters;

·       plus all cash on hand onthe date of determination of available cash for the quarter resulting fromworking capital borrowings made after the end of the quarter.

Working capitalborrowings (as defined in our partnership agreement) are generally borrowingsthat are made under our revolving credit facility and in all cases are usedsolely for working capital purposes or to pay distributions to partners.

Affiliates of the Slifkafamily own 5,642,424 subordinated units. During the subordination period, the common units will have the right toreceive distributions of available cash from operating surplus in an amountequal to the minimum quarterly distribution of $0.4125 per quarter, plus any arrearagesin the payment of the

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minimum quarterlydistribution on the common units from prior quarters, before any distributionsof available cash from operating surplus may be made on the subordinatedunits.  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 distribution and anyarrearages from prior quarters. Furthermore, no arrearages will be paid on the subordinated units.  The practical effect of the subordinatedunits is to increase the likelihood that during the subordination period therewill be available 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) distributions of available cash from operating surplus on eachof the outstanding common units and subordinated units and general partnerunits equaled or exceeded the minimum quarterly distribution for each of thethree consecutive, non-overlapping four-quarter periods immediately precedingthat date; (2) the “adjusted operating surplus” (as defined in ourpartnership agreement) generated during each of the three consecutive,non-overlapping four-quarter periods immediately preceding that date equaled orexceeded the sum of the minimum quarterly distributions on all of theoutstanding common units and subordinated units during those periods on a fullydiluted basis and the related distribution on the general partner units duringthose periods; and (3) there are no arrearages in payment of the minimumquarterly distribution on the common 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 also satisfied for any three consecutivefour-quarter periods ending on or after September 30, 2009, an additional25% of the subordinated units will convert into an equal number of commonunits.  The second early conversion ofsubordinated units may not occur, however, until at least one year followingthe end of the period for the 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 thecommon unitholders, pro rata, and 2% to the general partner, until wedistribute for each outstanding common unit an amount equal to the minimumquarterly distribution for that quarter; secondly, 98% to the commonunitholders, pro rata, and 2% to the general partner, until we distribute foreach outstanding common unit an amount equal to any arrearages in payment ofthe minimum quarterly distribution on the common units for any prior quartersduring the subordination period; thirdly, 98% to the subordinated unitholders,pro rata, and 2% to the general partner, until we distribute for each subordinatedunit an amount equal to the minimum quarterly distribution for that quarter;and thereafter, cash in excess of the minimum quarterly distributions isdistributed to the unitholders and the general partner based on the percentagesbelow.

The generalpartner, Global GP LLC, is entitled to incentive distributions if the amount wedistribute with respect to any quarter exceeds specified target levels shownbelow: 
| ** **                      | ** ** | **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 compensation plan information required byItem 201(d) of Regulation S-K in response to this item isincorporated by reference from Item 12, “Security Ownership of CertainBeneficial Owners and Management—Equity Compensation Plan Table.”

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**Recent Sales ofUnregistered Securities**

There were no unregistered securities sold by usduring the fiscal year ended December 31, 2006.

**Issuer Purchasesof Equity Securities**

We did not repurchase any of our common units duringthe fourth quarter ended December 31, 2006.

**Item6.**                          SelectedFinancial Data

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

This table should be read in conjunction withItem 7, “Management’s Discussion and Analysis of Financial Condition andResults of Operations” and the historical consolidated financial statements ofGlobal Partners LP and the notes thereto included elsewhere in thisreport.  In addition, this table presentsnon-GAAP financial measures which we use in our business.  These measures are not calculated orpresented in accordance with generally accepted accounting principles in theUnited States (“GAAP”).  We explain thesemeasures and present reconciliations to their most directly comparablefinancial measures calculated in accordance with GAAP in Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”

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| ** **                                                                   | ** ** | **Consolidated**                                                                | ** ** | **Combined(1)**                        | ** ** | **Successor**                                  | ** ** | **Predecessor**                              | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                   | ** ** | **Year Ended  December 31,**                                          | ** ** | **Year Ended  December 31,** | ** ** | **October 4  through  December 31,** | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended December 31,** | ** ** |
| ** **                                                                   | ** ** | **2006**                                                                        | ** ** | **2005**                               | ** ** | **2005**                                       | ** ** | **2005**                                     | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                   | ** ** | **(dollars in millions except per unit amounts)** | ** ** |
| **Statement  of Income Data:**                                               | ** ** | ** **                                                                      | ** ** | ** **                             | ** ** | ** **                                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Sales                                                                        |       | $                                                                               | 4,472.4    |                                   | $          | 4,045.8                                        |       | $                                            | 1,248.9    |   | $ | 2,796.9 |   | $ | 3,187.6 |   | $ | 2,478.5 |   | $ | 1,594.1 |   |
| Cost of sales                                                                |       | 4,359.2                                                                         |       | 3,954.1                                |       | 1,220.0                                        |       | 2,734.1                                      |       | 3,111.7 |   | 2,411.4 |   | 1,538.9 |   |
| Gross profit                                                                 |       | 113.2                                                                           |       | 91.7                                   |       | 28.9                                           |       | 62.8                                         |       | 75.9 |   | 67.1 |   | 55.2 |   |
| Selling, general  and administrative expenses                                |       | 43.0                                                                            |       | 40.4                                   |       | 10.5                                           |       | 29.9                                         |       | 33.5 |   | 30.3 |   | 27.5 |   |
| Operating expenses                                                           |       | 22.2                                                                            |       | 19.7                                   |       | 4.9                                            |       | 14.8                                         |       | 19.6 |   | 18.8 |   | 17.7 |   |
| Amortization  expense                                                        |       | 1.5                                                                             |       | 1.6                                    |       | 0.4                                            |       | 1.2                                          |       | 0.8 |   | — |   | — |   |
| Total operating costs and expenses                                           |       | 66.7                                                                            |       | 61.7                                   |       | 15.8                                           |       | 45.9                                         |       | 53.9 |   | 49.1 |   | 45.2 |   |
| Operating income                                                             |       | 46.5                                                                            |       | 30.0                                   |       | 13.1                                           |       | 16.9                                         |       | 22.0 |   | 18.0 |   | 10.0 |   |
| Interest expense                                                             |       | (11.9                                                                           | )          | (10.0                                  | )          | (2.7                                           | )          | (7.3                                         | )          | (4.7 | ) | (2.0 | ) | (2.2 | ) |
| Other income  (expense), net                                                 |       | 0.5                                                                             |       | (0.9                                   | )          | —                                         |       | (0.9                                         | )          | — |   | — |   | 1.1 |   |
| Write-off  investment(2)                                                     |       | —                                                                          |       | —                                 |       | —                                         |       | —                                       |       | — |   | — |   | (2.9 | ) |
| Income before  income tax expense                                            |       | 35.1                                                                            |       | 19.1                                   |       | 10.4                                           |       | 8.7                                          |       | 17.3 |   | 16.0 |   | 6.0 |   |
| Income tax expense(3)                                                        |       | (1.6                                                                            | )          | (1.0                                   | )          | (1.0                                           | )          | —                                       |       | — |   | — |   | — |   |
| Net Income                                                                   |       | 33.5                                                                            |       | $                                      | 18.1       |                                           | 9.4        |                                         | $          | 8.7 |   | $ | 17.3 |   | $ | 16.0 |   | $ | 6.0 |   |
| Less: General  partners’ interest in net income                         |       | (0.7                                                                            | )          | —                                 |       | (0.2                                           | )          | —                                       |       | — |   | — |   | — |   |
| Limited  partners’ interest in net income                               |       | $                                                                               | 32.8       |                                   | —     |                                           | $          | 9.2                                          |       | — |   | — |   | — |   | — |   |
| Net income per  limited partner unit, basic and diluted(4)                   |       | $                                                                               | 2.46       |                                   | —     |                                           | $          | 0.70                                         |       | — |   | — |   | — |   | — |   |
| Weighted average  limited partner’ units outstanding, basic and diluted |       | 11.3                                                                            |       | —                                 |       | 11.3                                           |       | —                                       |       | — |   | — |   | — |   |
| **Cash  Flow Data:**                                                         | ** ** | ** **                                                                      | ** ** | ** **                             | ** ** | ** **                                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net cash  provided by (used in)                                              |       |                                                                            |       |                                   |       |                                           |       |                                         |       |   |   |   |   |   |   |
| Operating activities                                                         |       | $                                                                               | (54.5      | )                                      | $          | (28.4                                          | )          | $                                            | (34.1      | ) | $ | 5.7 |   | $ | (82.0 | ) | $ | 38.6 |   | $ | 27.6 |   |
| Investment activities                                                        |       | (12.4                                                                           | )          | (1.6                                   | )          | (0.7                                           | )          | (0.9                                         | )          | 1.2 |   | (2.2 | ) | (3.3 | ) |
| Financing activities(5)                                                      |       | 69.0                                                                            |       | 28.4                                   |       | 31.4                                           |       | (3.0                                         | )          | 83.0 |   | (33.6 | ) | (24.9 | ) |
| **Other Financial  Data:**                                                   | ** ** | ** **                                                                      | ** ** | ** **                             | ** ** | ** **                                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| EBITDA(6)                                                                    |       | $                                                                               | 51.5       |                                   | $          | 33.0                                           |       | $                                            | 14.1       |   | $ | 18.9 |   | $ | 25.2 |   | $ | 20.4 |   | $ | 10.4 |   |
| Distributable  cash flow(7)                                                  |       | 36.0                                                                            |       | —                                 |       | 10.0                                           |       | —                                       |       | — |   | — |   | — |   |
| Maintenance  capital expenditures(8)                                         |       | 2.0                                                                             |       | 1.8                                    |       | 0.7                                            |       | 1.1                                          |       | 1.3 |   | 2.2 |   | 1.6 |   |
| Capital  improvement expenditures(8)                                         |       | 3.9                                                                             |       | —                                 |       | —                                         |       | —                                       |       | — |   | — |   | 1.7 |   |
| Cash  distributions declared(9)                                              |       | 1.72                                                                            |       | —                                 |       | —                                         |       | —                                       |       | — |   | — |   | — |   |
| **Operating  Data:**                                                         | ** ** | ** **                                                                      | ** ** | ** **                             | ** ** | ** **                                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Normal heating  degree days(10)                                              |       | 5,630                                                                           |       | 5,630                                  |       | 1,875                                          |       | 3,755                                        |       | 5,630 |   | 5,630 |   | 5,630 |   |
| Actual heating  degree days                                                  |       | 5,007                                                                           |       | 5,875                                  |       | 1,876                                          |       | 3,999                                        |       | 5,748 |   | 6,028 |   | 5,279 |   |
| Variance from  normal heating degree days                                    |       | (11                                                                             | )%         | 4                                      | %          | —                                         |       | 7                                            | %          | 2 | % | 6 | % | (6 | )% |
| Variance from  prior year actual degree days                                 |       | (15                                                                             | )%         | 2                                      | %          | 1                                              | %          | 3                                            | %          | (5 | )% | 14 | % | 1 | % |
| Total gallons  sold (in millions)                                            |       | 2,486                                                                           |       | 2,674                                  |       | 758                                            |       | 1,916                                        |       | 2,929 |   | 2,851 |   | 2,203 |   |
| Variance in  volume sold from prior year                                     |       | (7                                                                              | )%         | 9                                      | %          | —                                         |       | —                                       |       | 3 | % | 29 | % | (6 | )% |
| **Balance  Sheet Data (at period end):**                                     | ** ** | ** **                                                                      | ** ** | ** **                             | ** ** | ** **                                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash and cash  equivalents                                                   |       | $                                                                               | 3.9        |                                   | $          | 1.8                                            |       | $                                            | 1.8        |   | — |   | $ | 3.3 |   | $ | 3.5 |   | $ | 0.6 |   |
| Property and  equipment, net                                                 |       | 31.7                                                                            |       | 22.0                                   |       | 22.0                                           |       | —                                       |       | 22.6 |   | 14.8 |   | 15.0 |   |
| Total assets                                                                 |       | 638.9                                                                           |       | 554.7                                  |       | 554.7                                          |       | —                                       |       | 393.0 |   | 304.3 |   | 263.2 |   |
| Total debt                                                                   |       | 272.3                                                                           |       | 183.5                                  |       | 183.5                                          |       | —                                       |       | 193.0 |   | 50.8 |   | 78.4 |   |
| Total  liabilities                                                           |       | 535.7                                                                           |       | 478.4                                  |       | 478.4                                          |       | —                                       |       | 369.8 |   | 261.7 |   | 230.7 |   |
| Equity                                                                       |       | 103.2                                                                           |       | 76.3                                   |       | 76.3                                           |       | —                                       |       | 23.2 |   | 42.6 |   | 32.5 |   |

 

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(1)    Combined resultsfor the year ended December 31, 2005 is a non-GAAP financial measure andis presented here to provide additional information for comparingyear-over-year information.

(2)    Write-off of our investment in our on-lineshipping brokerage platform.

(3)    We became subject to income tax expense uponthe conversion 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)    SeeNote 2 of Notes to Financial Statements included elsewhere in this report fornet income per limited partner unit calculation.

(5)    In July 2004, Global Petroleum Corp. andcertain other Slifka family entities executed a $51.0 million term loanagreement under which Global Companies LLC and Affiliates were guarantors.  The proceeds of the loan were used, in part,to (a) finance the acquisition by Global Petroleum Corp. and certain otherSlifka family entities of the ownership interests in Global Companies LLC andAffiliates from RYTTSA USA, Inc. and (b) refinance certain loanssecured by the real estate assets of Global Petroleum Corp. and certain otherSlifka family entities, including Global Companies LLC and Affiliates.  The term loan and associated financing costsand interest expense are included in the financial statements of GlobalPartners LP included elsewhere in this report.

(6)    Earnings before interest, taxes, depreciationand amortization (“EBITDA”) is a non-GAAP financial measure which is discussedabove under “Non-GAAP Financial Measures” and reconciled to its most directlycomparable GAAP financial measures in Item 7, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations.”

(7)    Distributable cash flow is a non-GAAPfinancial measure which is discussed above under “Non-GAAP Financial Measures”and reconciled to its most directly comparable GAAP financial measures in Item7, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations.”

(8)    Maintenance capital expenditures and capitalimprovement expenditures are discussed in Item 7, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and in Note 15 ofNotes to Financial Statements included elsewhere in this report.

(9)    Cash distributions declared in one calendarquarter are paid in the following calendar quarter.  This amount is based on cash distributionspaid during 2006.  See Note 13 to Notesof Financial Statements included elsewhere in this report.

(10)  Degree days is an industry measurement oftemperature designed to evaluate energy demand and consumption which is furtherdiscussed in Item 7, “Management’s Discussion and Analysis of FinancialCondition and Results of Operations.”

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**Item7.**                          Management’sDiscussion and Analysis of Financial Condition and Results of Operations

*The following discussion and analysis of financialcondition and results of operations of Global Partners LP should be read inconjunction with the historical consolidated financial statements of GlobalPartners LP and the notes 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 the Northeast.  We are one of the largest wholesaledistributors of gasoline, distillates (such as home heating oil, diesel andkerosene) and residual oil to wholesalers, retailers and commercial customersin the Northeast.  In 2006, we sold approximately$4.5 billion of refined petroleum products and small amounts of natural gas.

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 independent marketers of refinedpetroleum products, we base our pricing on spot physical prices and routinelyuse the NYMEX or derivatives to hedge our commodity risk inherent in buying andselling energy commodities.  Through theuse of regulated exchanges or derivatives, we maintain a position that issubstantially balanced between purchased volumes and sales volumes or futuredelivery obligations.  We earn a marginby selling the product for physical delivery to third parties.

***Products andOperational Structure***

Our products include gasoline, distillates andresidual oil.  We sell gasoline tounbranded retail gasoline stations and resellers.  The distillates we sell are used primarilyfor fuel for trucks and off-road construction equipment and for space heatingof residential and commercial buildings. We sell residual oil to major housing units, such as public housingauthorities, colleges and hospitals and large industrial facilities that useprocessed steam in their manufacturing processes.  In addition, we sell bunker fuel, which wecan custom blend, to cruise ships, bulk carriers and fishing fleets.

Our business isdivided into two segments:

·           *Wholesale. *Thissegment includes sales of gasoline, distillates and residual oil to unbrandedretail gasoline stations and other resellers of transportation fuels, homeheating oil retailers and wholesale distributors.

·           *Commercial. *Thissegment includes sales and deliveries of unbranded gasoline, distillates,residual oil and small amounts of natural gas to customers in the public sectorand to large commercial and industrial customers, either through a competitivebidding process or through contracts of various terms.  This segment also purchases, custom blends,sells and delivers bunker fuel and diesel to cruise ships, bulk carriers andfishing fleets generally by barges.

Our business activities are substantially comprised ofpurchasing, terminalling, storing and selling refined petroleum products.  We believe that the combination of ourterminalling and storage activities, together with our marketing activities,provides a balance that has a stabilizing effect on our results of operationsand cash flow.  Our results of operationsare less weather sensitive than they have been in the past.  In 2006, our volume in transportation fuels,which represents a growing portion of our sales and is not impacted by weatherconditions, exceeded our home heating oil volumes.  The increase in the non-weather sensitivecomponents of our business helps to partially offset the economic impact that warmerweather conditions may have on our home heating oil and residual oilsales.  In addition, substantial portionsof our heating oil are sold on a forward fixed basis.  In a contango market (when product prices forfuture deliveries are higher than for current deliveries), we may use ourstorage capacity to improve our margins by storing products we have purchasedat lower prices in the current month for delivery to customers at higher pricesin future months.  In a backwardatedmarket (when product prices for future deliveries are lower than for currentdeliveries) because of our high turnover of inventory, we are

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able to minimize ourinventories and commodity risk while attempting to maintain or increase netproduct margins.

***Outlook***

This section identifies certain risks and certaineconomic or industry-wide factors that may affect our financial performance andresults of operations in the future, both in the short-term and in thelong-term.  Our results of operations andfinancial condition depend in part upon the following:

·       *We commitsubstantial resources to pursuing acquisitions, though there is no certaintythat we will successfully complete any acquisitions or receive the economicresults we anticipate from completed acquisitions.*  Consistent with our business strategy, we arecontinuously engaged in discussions with potential sellers of terminalling,storage and/or marketing assets and related businesses.  In an effort to prudently and economicallyleverage our asset base, knowledge base and skill sets, management has alsoexpanded its efforts to pursue businesses that are closely related to orsignificantly intertwined with our existing lines of business.  Our growth may depend on our ability to makeaccretive acquisitions.  We may be unableto make such accretive acquisitions for a number of reasons, including, but notlimited to, the following: (1) we are unable to identify attractiveacquisition candidates or negotiate acceptable purchase contracts with them;(2) we are unable to raise financing for such acquisitions on economicallyacceptable terms; or (3) we are outbid by competitors.  In addition, we may consummate acquisitionsthat at the time of consummation we believe will be accretive, but that ultimatelymay not be accretive.  If any of theseevents were to occur, our future growth would be limited.  We can give no assurance that our current orfuture acquisition efforts will be successful or that any such acquisition willbe completed on terms that are favorable to us.

·       *Our financial results are generally better in the first and fourthquarters of the calendar year.*  Demand for some refined petroleumproducts, specifically home heating oil and residual oil for space heatingpurposes, is generally higher during November through March than duringApril through October.  We obtain asignificant portion of our sales during these winter months.  Therefore, our results of operations for thefirst and fourth calendar quarters are generally better than for the second andthird quarters.  With lower cash flowduring the second and third calendar quarters, we may be required to borrowmoney in order to pay the minimum quarterly distribution to our unitholders.

·       *Warmer weather conditions could adversely affect our results ofoperations and financial condition. * Weather conditions generally have an impact onthe demand for both home heating oil and residual oil.  Because we supply distributors whosecustomers depend on home heating oil and residual oil for space heatingpurposes during the winter, warmer-than-normal temperatures during the firstand fourth calendar quarters in one or more regions in which we operate candecrease the total volume we sell and the gross profit realized on those sales.

·       *Energy efficiency, new technology and alternative fuels, natural gas inparticular, could reduce demand for our products. *Increased conservation andtechnological advances have adversely affected the demand for home heating oiland residual oil.  Consumption ofresidual oil has steadily declined 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 to support for conversion tonatural gas on environmental grounds, some industrial residual oil users haveswitched to natural gas.  Those end userswho are dual-fuel users have the ability to switch between residual oil andnatural gas.  During a period ofincreasing residual oil prices relative to the prices of natural gas, dual-fuelcustomers may switch to natural gas or, over the long-term, may convert tonatural gas.  Such switching orconversion could have an adverse effect on our results of operations and financialcondition.

·       *New,stricter environmental laws and regulations could significantly increase ourcosts, which could adversely affect our results of operations and financialcondition.*  Our operations aresubject to federal, state and local laws and regulations regulating productquality specifications and other environmental

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matters.  The trend in environmental regulation istowards more restrictions and limitations on activities that may affect theenvironment.  Our business may beadversely affected by increased costs and liabilities resulting from suchstricter laws and regulations.  We try toanticipate future regulatory requirements that might be imposed and planaccordingly to remain in compliance with changing environmental laws andregulations and to minimize the costs of such compliance.  However, there can be no assurances as to thetiming and type of such changes in existing laws or the promulgation of newlaws or the amount of any required expenditures associated therewith.

**Results ofOperations**

***Evaluating OurResults of Operations***

Ourmanagement uses a variety of financial and operational measurements to analyzeour performance.  Thesemeasurements include:  (1) netproduct margin, (2) gross profit, (3) selling, general andadministrative expenses (“SG&A”), (4) operating expenses,(5) heating degree days, (6) adjusted net income per diluted limitedpartner unit, (7) EBITDA and (8) distributable cash flow.

*Net Product Margin*

We view net product margin as an important performancemeasure of the core profitability of our operations.  We review net product margin monthly forconsistency and trend analysis.  Wedefine net product margin as our sales minus product costs.  Sales include sales of unbranded gasoline,distillates, residual oil and natural gas. Product costs include the cost of acquiring the refined petroleumproducts that we sell and all associated costs including shipping and handlingcosts to bring such products to the point of sale.

*Gross Profit*

We define gross profit as our sales minus productcosts and terminal depreciation expense allocated to cost of sales.  Sales include sales of unbranded gasoline,distillates, residual oil and natural gas. Product costs include the cost of acquiring the refined petroleumproducts that we sell and all associated costs to bring such products to thepoint of sale.

*Selling, General and Administrative Expenses*

Our SG&A expenses include marketing costs,corporate overhead, employee salaries and benefits, pension and401(k) plan expenses, discretionary bonuses, non-interest financing costs,professional fees and information technology expenses.  Employee-related expenses including employeesalaries, discretionary bonuses and related payroll taxes, and benefits,pension and 401(k) plan expenses are paid by our general partner which, inturn, is reimbursed for these expenses by us.

*Operating Expenses*

Operating expenses are costs associated with theoperation of the terminals used in our business.  Lease payments and storage expenses,maintenance and repair, utilities, taxes, labor and labor-related expensescomprise the most significant portion of our operating expenses.  These expenses remain relatively stableindependent of the volumes through our system but fluctuate slightly dependingon the activities performed during a specific period.

*Degree Day*

A “degree day” is an industry measurement oftemperature designed to evaluate energy demand and consumption.  Degree days are based on how far the averagetemperature departs from 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 over the course of a year and canbe compared to a monthly or a long-term (multi-year) average, or normal, to seeif a month or a year was warmer or cooler than usual.  Degree days are officially observed by theNational Weather

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Service and officiallyarchived by the National Climatic Data Center. For purposes of evaluating our results of operations, we use the normalheating degree day amount as reported by the National Weather Service at itsLogan International Airport station in Boston, Massachusetts.

*Adjusted Net Income Per Diluted Limited Partner Unit*

We use adjusted net income per diluted limited partnerunit to measure our financial performance on a per-unit basis.  Adjusted net income per diluted limitedpartner unit is defined as net income after adding back the theoretical amountallocated to the general partner’s interest as provided under Emerging IssuesTask Force (“EITF”) 03-06, “Participating Securities and the Two-ClassMethod under FASB Statement No. 128” (“EITF 03-06”), divided by theweighted average number of outstanding diluted limited partner units during theperiod.  Net income per diluted limitedpartner unit as dictated by EITF 03-06 is theoretical and pro formain nature and does not reflect the economic probabilities of whether earningsfor an accounting period would or could be distributed to unitholders.  The partnership agreement does not providefor the quarterly distribution of net income; rather, it provides for thedistribution of available cash, which is a contractually defined term thatgenerally means all cash on hand at the end of each quarter after establishmentof sufficient cash reserves required to operate our business.  Accordingly, the distributions wehistorically paid and will pay in future periods are not impacted by net incomeper diluted limited partner unit as dictated by EITF 03-06.  However, adjusted net income per dilutedlimited partner unit is a non-GAAP financial measure and should not beconsidered as an alternative to net income per diluted limited partner unit orany other measure of financial performance presented in accordance with GAAP.  In addition, our adjusted net income perdiluted limited partner unit may not be comparable to the adjusted net incomerper diluted limited partner unit or similarly titled measure of othercompanies.

*EBITDA*

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

·       our compliance with certainfinancial covenants included in our debt agreements;

·       our financial performancewithout regard to financing methods, capital structure, income taxes orhistorical cost basis;

·       our ability to generatecash sufficient to pay interest on our indebtedness and to make distributionsto our partners;

·       our operating performanceand return on invested capital as compared to those of other companies in thewholesale marketing and distribution of refined petroleum products business,without regard to financing methods and capital structure; and

·       the viability ofacquisitions and capital expenditure projects and the overall rates of returnof 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 and operating income, and these measures may varyamong other companies.  Therefore, EBITDAmay not be comparable to similarly titled measures of other companies.

*DistributableCash Flow*

Distributable cash flow also is an important non-GAAPfinancial measure for our limited partners since it serves as an indicator ofour success in providing a cash return on their investment.  Specifically, this financial measure indicatesto investors whether or not we are generating cash flow at a level that cansustain or support an increase 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 a

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non-GAAP financialmeasure and should not be considered as an alternative to net income, cash flowfrom operations, or any other measure of financial performance presented inaccordance with GAAP.  In addition, ourdistributable cash flow may not be comparable to distributable cash flow orsimilarly titled measures of other companies.

***Years EndedDecember 31, 2006, 2005 and 2004***

In the year ended December 31, 2006, we continued toexpand our higher margin product lines and broaden the non-weather sensitivecomponents of our business.  We completedtwo acquisitions in 2006:  (1) ourBridgeport, Connecticut terminal has storage capacity of more than 100,000barrels of refined products and is used as a distribution point for diesel andhome heating oil, and (2) our Macungie, Pennsylvania terminal has storagecapacity of approximately 170,000 barrels of refined products and is used as adistribution point for diesel, gasoline, specialty fuel additives and homeheating oil.  Commodity prices rosethroughout most of 2006 but experienced significant declines in September andDecember.  For the year ended December31, 2006, prices for gasoline, distillates and residual oil decreased 6%, 8%and 24%, respectively.  Temperatures were11% warmer than normal for 2006.

In the year ended December 31, 2005, we completedour initial public offering, generating $124.0 million in gross proceeds fromthe sale of over 5.6 million common units representing limited partnerinterests of us (including common units sold upon exercise of the underwriters’over-allotment option).  We had increasedgross profits and improved margins across both our wholesale and commercialsegments.  Commodity prices continued torise 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% lower than normal asmeasured by aggregate heating degree days. During 2005, we continued to concentrate on expanding our distillate,gasoline and residual oil businesses.

The year ended December 31, 2004 can becharacterized as a year of consolidation in an environment of rising productprices and temperatures that were 2% lower than normal as measured by aggregateheating degree days.  During this period,we concentrated on expanding our distillate, gasoline and residual oilbusinesses in the markets that we had entered into during 2003.

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***Key PerformanceIndicators***

The following table provides a summary of some of thekey performance indicators that may be used to assess our results ofoperations.  These comparisons are notnecessarily indicative of future results (dollars in thousands, except per unitamounts): 
| ** **                                               | ** ** | **Consolidated**                             | ** ** | **Combined(1)**                              | ** ** | **Successor**                                        | ** ** | **Predecessor**                                    | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                               | ** ** | **Year Ended  December 31,  2006** | ** ** | **Year Ended  December 31,  2005** | ** ** | **October 4  through  December 31,  2005** | ** ** | **January 1  through  October 3,  2005** | ** ** | **Year Ended  December 31,  2004** | ** ** |
| Adjusted net income per  diluted limited partner unit(2) |       | $                                            | 2.91       |                                         | $          | —                                               |       | $                                                  | 0.82       |   | $ | — |   | $ | — |   |
| EBITDA(3)                                                |       | $                                            | 51,541     |                                         | $          | 33,535                                               |       | $                                                  | 14,425     |   | $ | 19,110 |   | $ | 25,622 |   |
| Distributable cash  flow(4)                              |       | $                                            | 36,003     |                                         | —     |                                                 | $          | 9,993                                              |       | — |   | — |   |
|                                                     |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
| **Wholesale Segment:**                                   | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                           | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Volume (gallons)                                         |       | 2,196,978                                    |       | 2,309,294                                    |       | 660,156                                              |       | 1,649,138                                          |       | 2,539,549 |   |
| Sales                                                    |       | $                                            | 4,071,608  |                                         | $          | 3,622,873                                            |       | $                                                  | 1,115,251  |   | $ | 2,507,622 |   | $ | 2,863,173 |   |
| Net product  margin(5)                                   |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
| Distillates                                              |       | $                                            | 58,285     |                                         | $          | 41,945                                               |       | $                                                  | 16,484     |   | $ | 25,461 |   | $ | 36,237 |   |
| Gasoline                                                 |       | 22,812                                       |       | 13,974                                       |       | 2,372                                                |       | 11,602                                             |       | 9,609 |   |
| Residual oil                                             |       | 20,896                                       |       | 22,890                                       |       | 7,096                                                |       | 15,794                                             |       | 16,378 |   |
| Total                                                    |       | $                                            | 101,993    |                                         | $          | 78,809                                               |       | $                                                  | 25,952     |   | $ | 52,857 |   | $ | 62,224 |   |
|                                                     |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
| **Commercial Segment:**                                  | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                           | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Volume (gallons)                                         |       | 288,970                                      |       | 364,572                                      |       | 97,391                                               |       | 267,181                                            |       | 389,269 |   |
|                                                     |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
|                                                     |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
|                                                     |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
| Sales                                                    |       | $                                            | 400,810    |                                         | $          | 422,985                                              |       | $                                                  | 133,648    |   | $ | 289,337 |   | $ | 324,396 |   |
| Net product  margin(5)                                   |       | 13,151                                       |       | 14,570                                       |       | 3,368                                                |       | 11,202                                             |       | 15,094 |   |
| **Combined sales and net product  margin:**              | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                           | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Sales                                                    |       | $                                            | 4,472,418  |                                         | $          | 4,045,858                                            |       | $                                                  | 1,248,899  |   | $ | 2,796,959 |   | $ | 3,187,569 |   |
| Net product  margin(5)                                   |       | $                                            | 115,144    |                                         | $          | 93,379                                               |       | $                                                  | 29,320     |   | $ | 64,059 |   | $ | 77,318 |   |
| Depreciation  allocated to cost of sales                 |       | 1,918                                        |       | 1,662                                        |       | 412                                                  |       | 1,250                                              |       | 1,446 |   |
|                                                     |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
| **Combined gross profit:**                               |       | $                                            | 113,226    |                                         | $          | 91,717                                               |       | $                                                  | 28,908     |   | $ | 62,809 |   | $ | 75,872 |   |
| ** **                                               |       |                                         |       |                                         |       |                                                 |       |                                               |       |   |   |
| **Weather conditions:**                                  | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                           | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Normal heating degree  days                              |       | 5,630                                        |       | 5,630                                        |       | 1,875                                                |       | 3,755                                              |       | 5,630 |   |
| Actual heating degree  days                              |       | 5,007                                        |       | 5,875                                        |       | 1,876                                                |       | 3,999                                              |       | 5,748 |   |
| Variance from normal  heating degree days                |       | (11                                          | )%         | 4                                            | %          | —                                               |       | 6                                                  | %          | 2 | % |
| Variance from prior year actual heating degree days      |       | (15                                          | )%         | 2                                            | %          | 1                                                    | %          | 3                                                  | %          | (5 | )% |

 

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(1)             Combined results for the year endedDecember 31, 2005 is a non-GAAP measure and is presented here to provideadditional information for comparing year-over-year information.

(2)             Adjusted net income per diluted limitedpartner unit is a non-GAAP financial measure which is discussed above under “EvaluatingOur Operating Results.”  The table belowpresents a reconciliation of adjusted net income per diluted limited partnerunit to the most directly comparable GAAP financial measure.

(3)             EBITDA is a non-GAAP financial measure whichis discussed above under “Evaluating Our Operating Results.”  The table below presents reconciliations ofEBITDA to the most directly comparable GAAP financial measures.

(4)             Distributable cash flow is a non-GAAPfinancial measure which is discussed above under “Evaluating Our OperatingResults.”  On October 4, 2005, wecompleted our initial public offering of common units.  Accordingly, distributable cash flow is presentedfor the year ended December 31, 2006 and for the period from October 4,2005 through December 31, 2005.  Thetable below presents reconciliations of distributable cash flow to the mostdirectly comparable GAAP financial measures.

(5)             Net product margin is a non-GAAP financialmeasure which is discussed above under “Evaluating Our Operating Results.”  The table above reconciles net product marginon a combined basis to gross profit, a directly comparable GAAP financialmeasure.

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The following table presents a reconciliation ofadjusted net income per diluted limited partner unit to the most directlycomparable GAAP financial measure on a historical basis:
| ** **                                                                                                                   | ** ** | **Consolidated**      | ** ** | **Successor(1)**      | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                                                                   | ** ** | ** **            | ** ** | **October 4**    | ** ** |
| ** **                                                                                                                   | ** ** | **Year Ended**   | ** ** | **through**           | ** ** |
| ** **                                                                                                                   | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                                   | ** ** | **2006**              | ** ** | **2005**              | ** ** |
| **Reconciliation  of net income per diluted limited partner unit to adjusted net income per  diluted limited partner unit:** |       |                  |       |                  |       |
| Net income per diluted limited partner unit under  EITF 03-06                                                                |       | $                     | 2.46       |                  | $          | 0.70 |   |
| Dilutive impact of theoretical distribution of  earnings                                                                     |       | 0.45                  |       | 0.12                  |       |
| Adjusted net  income per diluted limited partner unit                                                                        |       | $                     | 2.91       |                  | $          | 0.82 |   |

 

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(1)                                  On October 4, 2005, we completed our initialpublic offering.  Accordingly, net incomeper diluted limited partner unit is presented for the period from October 4,2005 through December 31, 2005.

The followingtable presents reconciliations of EBITDA to the most directly comparable GAAPfinancial measures on a historical basis (in thousands):
| ** **                                                                         | ** ** | **Consolidated**      | ** ** | **Combined(1)**       | ** ** | **Successor**         | ** ** | **Predecessor**     | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|---------------------|------------|
| ** **                                                                         | ** ** | ** **            | ** ** | ** **            | ** ** | **October 4**    | ** ** | **January 1**  | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | **Year Ended**   | ** ** | **Year Ended**   | ** ** | **through**           | ** ** | **through**         | ** ** | **Year Ended** | ** ** |
| ** **                                                                         | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **October 3,** | ** ** | **December 31,** | ** ** |
| ** **                                                                         | ** ** | **2006**              | ** ** | **2005**              | ** ** | **2005**              | ** ** | **2005**            | ** ** | **2004** | ** ** |
| **Reconciliation  of net income to EBITDA**                                        |       |                  |       |                  |       |                  |       |                |       |   |   |
| Net income                                                                         |       | $                     | 33,461     |                  | $          | 18,101                |       | $                   | 9,408      |   | $ | 8,693 |   | $ | 17,309 |   |
| Add:                                                                               |       |                  |       |                  |       |                  |       |                |       |   |   |
| Depreciation and amortization                                                      |       | 4,513                 |       | 4,487                 |       | 1,345                 |       | 3,142               |       | 3,613 |   |
| Interest expense                                                                   |       | 11,901                |       | 9,961                 |       | 2,686                 |       | 7,275               |       | 4,700 |   |
| Income tax expense                                                                 |       | 1,666                 |       | 986                   |       | 986                   | ** ** | **—**          | ** ** | **—** | ** ** |
| EBITDA                                                                             |       | $                     | 51,541     |                  | $          | 33,535                |       | $                   | 14,425     |   | 19,110 |   | $ | 25,622 |   |
|                                                                               |       |                  |       |                  |       |                  |       |                |       |   |   |
| **Reconciliation  of cash flow (used in) provided by operating activities EBITDA** | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **          | ** ** | ** ** | ** ** |
| Cash flow (used in) provided by operating activities                               |       | $                     | (54,479    | )                     | $          | (28,352               | )          | $                   | (34,062    | ) | $ | 5,710 |   | $ | (81,953 | ) |
| Add:                                                                               |       |                  |       |                  |       |                  |       |                |       |   |   |
| Increase in operating assets and liabilities                                       |       | 92,453                |       | 50,940                |       | 44,815                |       | 6,125               |       | 102,875 |   |
| Interest expense                                                                   |       | 11,901                |       | 9,961                 |       | 2,686                 |       | 7,275               |       | 4,700 |   |
| Income tax expense                                                                 |       | 1,666                 |       | 986                   |       | 986                   | ** ** | **—**          | ** ** | **—** | ** ** |
| EBITDA                                                                             |       | $                     | 51,541     |                  | $          | 33,535                |       | $                   | 14,425     |   | $ | 19,110 |   | $ | 25,622 |   |

 

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(1)             Combined results for the year ended December31, 2005 is a non-GAAP measure and is presented here to provide additionalinformation for comparing year-over-year information.

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The following table presents reconciliations ofdistributable cash flow to the most directly comparable GAAP financial measureson a historical basis (in thousands):
| ** **                                                                               | ** ** | **Consolidated**      | ** ** | **Successor(1)**      | ** ** |
|------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                               | ** ** | ** **            | ** ** | **October 4**    | ** ** |
| ** **                                                                               | ** ** | **Year Ended**   | ** ** | **through**           | ** ** |
| ** **                                                                               | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                               | ** ** | **2006**              | ** ** | **2005**              | ** ** |
| **Reconciliation  of net income to distributable cash flow**                             | ** ** | ** **            | ** ** | ** **            | ** ** |
| Net income                                                                               |       | $                     | 33,461     |                  | $          | 9,408 |   |
| Add: Depreciation and amortization                                                       |       | 4,513                 |       | 1,345                 |       |
| Less:Maintenance capital expenditures                                                    |       | (1,971                | )          | (760                  | )          |
| Distributable cash flow                                                                  |       | $                     | 36,003     |                  | $          | 9,993 |   |
|                                                                                     |       |                  |       |                  |       |
| **Reconciliation  of cash flow used in operating activities to distributable cash flow** | ** ** | ** **            | ** ** | ** **            | ** ** |
| Cash flow used in operating activities                                                   |       | $                     | (54,479    | )                     | $          | (34,062 | ) |
| Add: Increase in operating assets and liabilities                                        |       | 92,453                |       | 44,815                |       |
| Less:Maintenance capital expenditures                                                    |       | (1,971                | )          | (760                  | )          |
| Distributable  cash flow                                                                 |       | $                     | 36,003     |                  | $          | 9,993 |   |

 

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(1)             On October 4, 2005, we completed our initialpublic offering.  Accordingly,distributable cash flow is presented for the period from October 4, 2005through December 31, 2005.

*Consolidated Sales*

Our total sales for 2006 increased by $426.6 million,or 11%, to $4,472.4 million compared to $4,045.8 million for 2005.  The increase was due to our 2006 acquisitionsof the Bridgeport, Connecticut and Macungie, Pennsylvania terminals and higherrefined petroleum product prices during most of 2006, despite a decrease ofapproximately 188 million gallons, or 7%, to 2,486 million gallons in aggregatevolume of product sold.  The decrease inaggregate volume sold was primarily attributable to decreases of 154 millionand 73 million gallons in distillates and residual oil, respectively, offset bya 35 million gallon increase in gasoline. The number of actual heating degree days declined 15% in 2006 to 5,007compared to 5,875 for 2005.  Our grossprofit for 2006 was $113.2 million, an increase of $21.5 million, or23%, compared to $91.7 million for 2005. The increase was primarily due to higher net product margins in ourWholesale segment.

In 2005 as compared to 2004, our sales increased by$858.2 million, or 27%, to $4,045.8 million from $3,187.6 million.  The increase was driven by an increase inrefined petroleum product prices, despite a decrease of approximately255 million gallons, or 9%, to 2,674 million gallons in aggregate volumeof product sold for 2005 compared to 2004. The decrease in aggregate volume sold was primarily attributable todecreases of 250 million and 6 million gallons in distillates andresidual oil, respectively, offset by a 4 million gallon increase ingasoline.  Our gross profit for 2005 was$91.7 million, an increase of $15.8 million, or 21%, compared to 2004.

*Wholesale Segment*

*Distillates**.*   Wholesale distillate sales for 2006increased by $126.9 million, or 6%, to $2,313.6 million from$2,186.7 million for 2005.  Theincrease was due to our 2006 acquisitions of the Bridgeport, Connecticut andMacungie, Pennsylvania terminals and higher distillate prices during most of2006, despite a decrease of 11% in distillate volume sold for 2006 compared to2005.  We attribute the decrease involume sold to a reduction in bulk sales transactions and the expiration ofsupply contracts in the ordinary course of business.  Our net product margin contribution fromdistillate sales increased in 2006 by $16.4 million, or 39%, to$58.3 million compared to 2005.  Theincrease was, in part, the result of our ability to pass through to customersour increased costs related to sales and the introduction of specialty fuels(ethanol and lower sulfur grades of diesel fuel) into our marketplaces.

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In 2005 as compared to 2004, Wholesale distillatesales increased by 22% due to an increase in distillate prices, despite a 15%decrease in distillate volume sold.  Weattribute the decrease in volume sold to the expiration of supply contracts inthe ordinary course of business and a reduction in bulk sales transactions invarious markets.  Our net product margincontribution from distillate sales increased by $5.7 million, or 16%, to$41.9 million as a result of increased blending activities and our abilityto pass through to customers our increased costs related to sales.  Additionally, although the twelve monthperiod ended December 31, 2005 was 2% colder than the same twelve monthperiod in 2004, the three month period ended March 31, 2005, whichcomprises approximately one-half of the winter heating oil season in NewEngland, was 2% warmer than the three month period ended March 31, 2004.

*Gasoline*.   Wholesale gasoline sales for 2006 were$1,654.4 million compared to $1,344.4 million for 2005.  The increaseof $310.0 million, or 23%,was due to our 2006 acquisition of the Macungie, Pennsylvania terminal,higher gasoline prices for most of 2006and an increase of 4% in volume sold.  Ournet product margin from gasoline sales increased$8.8 million, or 63%, to $22.8 million for 2006 compared to 2005.  We attribute the increase in net product margin to an increase in our volume of sales,sales to higher margin customers and market dislocation associated with theintroduction of ethanol.

In 2005 as compared to 2004, Wholesale gasoline salesincreased by 33% due to an increase in gasoline prices.  Our net product margin from gasoline salesincreased by $4.4 million, or 46%, to $14.0 million.  We attribute the increase in net productmargin to an increase in our volume of sales as well as a focus on sales tohigher margin customers and our expanded use of our bulk storage capacity to storeproduct in a contango market.

*ResidualOil*.   Wholesaleresidual oil sales for 2006 were $103.6 million compared to $91.7 millionfor 2005.  The increase of $11.9 million,or 13%, was the result of higherresidual oil prices for most of 2006. Our net product margin contribution from residual oil salesdecreased by $2.0 million, or 9%, to $20.9 million for 2006, primarily dueto a per unit margin reduction.

In 2005 as compared to 2004, Wholesale residual oilsales increased by 59% as a result of an increase in residual oil prices and an8% increase in residual oil volume sold. Net product margin contribution from residual oil sales increased by$6.5 million, or 40%, to $22.9 million, primarily due to the increase inour per unit margin of residual oil sold.

*Commercial Segment*

In our Commercial segment, residual oil accounted forapproximately 80%, 84% and 82% of total volume sold in 2006, 2005 and 2004,respectively.  Distillates, gasoline andnatural gas accounted for the remainder of the total volume sold.

Commercial residual oil sales for 2006 decreased 21%compared to 2005 due to a 34% decrease in volume sold.  We attribute the decrease in volume sold tothe competitive pricing from natural gas, warmer-than-normal weatherconditions, reductions in production by certain cyclical industry participantsin our territory and closure of plants.

In 2005 as compared to 2004, our Commercial residualoil sales increased by 33% due to an increase in the price of residual oildespite a 4% 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.

*Selling, General and Administrative Expenses*

SG&A expenses increased by $2.6 million, or 6%, to$43.0 million for 2006 compared to $40.4 million for 2005.  During the third quarter of 2005, we paid$3.1 million in special bonuses to certain officers and employees in connectionwith our initial public offering.  During2006, we had increases in accrued discretionary bonuses of $1.5 million,professional and consulting fees of $0.4 million, information technologyexpenses of $0.3 million, insurance related fees of $0.3 million,pension and deferred compensation expenses of $0.2 million and expensesassociated with becoming a public company, including increases in audit and taxreview fees of approximately $1.0 million, expenses related to

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Sarbanes-Oxley 404compliance, planning and documentation of $1.1 million, director andofficer insurance and fees of $0.5 million and Schedule K-1 preparationand distribution expenses of $0.4 million.

In 2005 as compared to 2004, our SG&A expenseincreased by $7.0 million, or 21%, to $40.4 million from $33.4 million,due primarily to the payment by our predecessor, Global Companies LLC, ofapproximately $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-related expenses increased by $2.1 million, anadditional $0.5 million was incurred for employee expenses related to expansionof marketing operations, legal, consulting and banking services and feesincreased by $0.4 million and an additional $0.1 million was incurred forthe natural gas marketing operation. Employee-related expenses including employee salaries, discretionarybonuses and related payroll taxes, and benefits, pension and 401(k) planexpenses are paid by our general partner which, in turn, is reimbursed forthese expenses by us.  Of the foregoingincreases in expenses, $3.1 million of a special bonus for services rendered bycertain officers and employees, $0.3 million of legal, consulting and bankingservices and fees, and $0.1 million of expenses related to the expansion of ourmarketing operations are non-recurring expenses.

*Operating Expenses*

Operating expenses for 2006 increased by $2.5 million,or 12%, to $22.2 million compared to $19.7 million for 2005.  The increase was primarily due to $1.1million in costs associated with operating our newly acquired Bridgeport,Connecticut and Macungie, Pennsylvania facilities and the expansion of storageand delivery systems at an alternative location in New Bedford,Massachusetts.  We also had a$0.8 million increase in rent for additional tankage at the Capitol Terminalin East Providence, Rhode Island and $0.4 million and $0.1 million inpipeline repair expenses and other repair and maintenance expenses,respectively, at the terminal in Chelsea, Massachusetts.

In 2005 as compared to 2004, our operating expenses increasedby $0.1 million, or 0.5%, to $19.7 million. The primary factors contributing to this****increase included a $0.5 million increase in rent foradditional tankage at the Capitol Terminal in East Providence, Rhode Island and$0.4 million of operating expenses at the terminal in Chelsea,Massachusetts.  These expenses were inpart offset by rental income of $0.5 million at the terminal in Revere,Massachusetts and a $0.3 million decrease in real estate taxes at the formerNew Bedford, Massachusetts terminal location.

*Amortization Expense*

Amortization expense was $1.5 million, $1.6 millionand $0.8 million for the years ended December 31, 2006, 2005 and 2004,respectively.  The $0.8 million increasein 2005 compared to 2004 was the result of the purchase by Global PetroleumCorp. and certain other Slifka family entities of the ownership interests inGlobal Companies LLC and Affiliates from RYTTSA USA, Inc.

*Interest Expense*

Interest expense for 2006 increased by $1.9 million,or 19%, to $11.9 million compared to $10.0 million for 2005.  We attribute the increase to a rise inproduct prices for purchases throughout most of 2006 and the resultingincreased costs of carrying inventory and accounts receivable.

In 2005 as compared to 2004, our interest expense****increased by $5.3 million, or 112%, to$10.0 million from $4.7 million.  Weattributed $4.2 million of this increase to a rise in the product prices forpurchases and the resulting increased costs of carrying inventory and accountsreceivable.  As a result of Push DownAccounting adjustments required by GAAP, we allocated $1.1 million to interestexpense on the $51.0 million term loan that was used by Global Petroleum Corp.and certain other Slifka family entities to finance their acquisition ofownership interests in Global Companies LLC and Affiliates from RYTTSAUSA, Inc.

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*Other Expense*

In 2005, certain affiliates of the Slifka familyacquired certain outstanding interests in certain split dollar life insurancepolicies from Global Companies LLC and Affiliates for the aggregate amount ofpremiums that had been paid on these policies by Global Companies LLC andAffiliates on behalf of certain directors and their immediate familymembers.  Additionally, one split dollar lifeinsurance policy was surrendered in 2005. At the time of surrender, the cash value of the policy was less than theamount of premiums paid on it by Global Companies LLC and Affiliates, resultingin a loss of approximately $1.1 million in the fourth quarter endedDecember 31, 2005.

*Other Income*

Other income of approximately $515,000, $150,000 and$9,000 for the year ended December 31, 2006, for the period January 1,2005 through October 3, 2005 and for the year ended December 31,2004, respectively, represented dividend income from our ownership interest inour NYMEX seats and related holdings. Other income was not recognized for the period October 4, 2005through December 31, 2005.

**Liquidity andCapital Resources**

*Liquidity*

Our primary liquidity needs are to fund our capitalexpenditures and our working capital requirements.   Cash generated from operations and ourworking capital revolving credit facility provides our primary sources ofliquidity.  Working capital was$148.3 million at December 31, 2006 compared to $132.9 millionDecember 31, 2005.

On February 8, 2007, we and certain of oursubsidiaries filed a universal shelf registration statement on Form S-3with the SEC to register the issuance and sale, from time to time and in suchamounts as is determined by market conditions and our needs, of up to$400.0 million of our common units and debt securities of both us andcertain of our subsidiaries.  We will usethe net proceeds from the sale of the securities covered by the shelfregistration for general partnership purposes, which may include debtrepayment, future acquisitions, capital expenditures and additions to workingcapital.  As of March 16, 2007, theregistration statement on Form S-3 had not been declared effective by the SEC.

On February 14, 2007, we paid a cash distribution of $5.2million for the fourth quarter of 2006 to our common and subordinatedunitholders of record as of the close of business on February 5, 2007.

*ContractualObligations*

We have contractual obligations that are required tobe settled in cash.  The amounts of ourcontractual obligations at December 31, 2006 are as follows (inthousands):
| ** **                       | ** ** | **Payments due by period** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|
| ** **                       | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **More than  5 years** | ** ** |
| Revolver loan  obligations(1)(2) |       | $                                         | 296,861    |   | $ | 205,797 |   | $ | 91,064 |   | $ | — |   | $ | — |   |
| Long-term debt  obligations      |       | 1,685                                     |       | 418 |   | 1,267 |   | — |   | — |   |
| Operating lease  obligations     |       | 64,181                                    |       | 15,161 |   | 18,363 |   | 15,186 |   | 15,471 |   |
| Other long-term  liabilities     |       | 9,282                                     |       | 336 |   | 872 |   | 1,132 |   | 6,942 |   |
| Total                            |       | $                                         | 372,009    |   | $ | 221,712 |   | $ | 111,566 |   | $ | 16,318 |   | $ | 22,413 |   |

 

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(1)             Includes principal and interest on ourrevolving line of credit at December 31, 2006.

(2)    Therevolving credit facility has a contractual maturity of October 2, 2009 and nopayments are required prior to that date. However, we repay amounts outstanding and reborrow funds based on ourworking capital requirements.  Therefore,the current portion of the revolving credit facility included in theaccompanying balance sheets is the amount we expect to pay down during thecourse of the year, and the long-term portion of the revolver is the amount weexpect to be outstanding during the entire year.

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In addition to the obligations described in the abovetable, we have minimum volume purchase requirements at December 31,2006.  Pricing is based on spot prices attime of purchase.  Please readNote 12, Commitments and Contingencies,****ofNotes to Financial Statements with respect to purchase commitments and subleaseinformation related to certain lease agreements.

*CapitalExpenditures*

Our terminalling operations require investments toexpand, upgrade or enhance existing operations and to meet environmental andoperations regulations.  Our capitalrequirements primarily consist of maintenance capital expenditures and capitalimprovement expenditures.  Maintenancecapital expenditures represent capital expenditures to replace partially orfully depreciated assets to maintain the operating capacity of, or salesgenerated by, existing assets and extend their useful lives, such asexpenditures required to maintain equipment reliability, tankage and pipelineintegrity and safety, and to address environmental regulations. We hadapproximately $2.0 million, $1.0 million, $0.8 million and$1.3 million in maintenance capital expenditures for the year endedDecember 31, 2006, for the period January 1, 2005 throughOctober 3, 2005, for the period October 4, 2005 through December 31,2005 and for the year ended December 31, 2004, respectively. Approximately6%, 16% and 18% of the total maintenance capital expenditures was related toenvironmental matters for the years ended December 31, 2006, 2005 and 2004,respectively.

Capital improvement expenditures include expendituresto acquire assets to grow our business and to expand existing facilities, suchas projects that increase operating capacity by increasing tankage or addingterminals.  We had approximately $10.4million in capital improvement expenditures for the year endedDecember 31, 2006 to increase our operating capacity andcapabilities.  We did not incur capitalimprovement expenditures in the years ended December 31, 2005 and 2004.  Repair and maintenance expenses associatedwith existing assets that are minor in nature and do not extend the useful lifeof existing assets are charged to operating expenses as incurred.

We anticipate that maintenance capital expenditureswill be funded with cash generated by operations.  We believe that we will have sufficientliquid assets, cash flow from operations, borrowing capacity under our creditagreement and the ability to issue additional common units and/or debt securitiesunder our shelf registration to meet our financial commitments, debt serviceobligations, contingencies and anticipated capital expenditures.  However, we are subject to business andoperational risks that could adversely affect our cash flow.  A material decrease in our cash flows would likelyproduce a corollary adverse effect on our borrowing capacity.

*Cash Flow (inthousands)*
| ** **                                           | ** ** | **Consolidated**      | ** ** | **Combined(1)**       | ** ** | **Successor**         | ** ** | **Predecessor**      | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|----------------------|------------|
| ** **                                           | ** ** | ** **            | ** ** | ** **            | ** ** | **October 4,**   | ** ** | **January 1**   | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | **Year Ended**   | ** ** | **Year Ended**   | ** ** | **Through**           | ** ** | **through**          | ** ** | **Year Ended** | ** ** |
| ** **                                           | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **October 31,** | ** ** | **December 31,** | ** ** |
| ** **                                           | ** ** | **2006**              | ** ** | **2005**              | ** ** | **2005**              | ** ** | **2005**             | ** ** | **2004** | ** ** |
| ** **                                           | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **           | ** ** | ** ** | ** ** |
| Net cash (used  in) provided by operating activities |       | $                     | (54,479    | )                     | $          | (28,352               | )          | $                    | (34,062    | ) | $ | 5,710 |   | $ | (81,953 | ) |
| Net cash used in  investment activities              |       | $                     | (12,442    | )                     | $          | (1,628                | )          | $                    | (748       | ) | $ | (880 | ) | $ | (1,166 | ) |
| Net cash provided by  (used in) financing activities |       | $                     | 69,013     |                  | $          | 28,443                |       | $                    | 31,444     |   | $ | (3,001 | ) | $ | 82,970 |   |

 

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(1)                                  Combined results for the year endedDecember 31, 2005 is a non-GAAP financial measure and is presented here toprovide additional information for comparing year-over-yearinformation.

Net cash used in operating activities increased by$26.1 million for the year ended December 31, 2006 compared to the year endedDecember 31, 2005.

Commodity prices, which have a significant impact onour cash flow, declined in 2006 compared to 2005.  Specifically, prices for gasoline,distillates and residual oil decreased 6%, 8% and 24%, respectively.  As a result, we sold and purchased ourproducts at reduced prices, which lowered our accounts receivable and accountspayable carrying values at December 31, 2006.

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Our inventories balance increased by $27.4 million atDecember 31, 2006 compared to December 31, 2005, due to product purchases forour newly acquired terminals in Bridgeport, Connecticut and Macungie,Pennsylvania and to expand our storage capacity at other locations.  In addition, we used approximately$67.1 million in cash to fund the change in the fair value of our forwardfixed purchase and sale contracts.  Theses changes were partially offset by thenet income of $33.5 million.

Net cash used in operating activities for the yearended December 31, 2005 reflected the continued expansion of our balancesheet from increases in the carrying value of accounts receivable andinventories, which were partially offset by an increase in accounts payable, asa result of continuing increases in product prices.  Year end prices of home heating oil, whichproduct accounted for the largest portion of our sales and inventories, asreflected on NYMEX increased by 41% from December 31, 2004 toDecember 31, 2005.  Year end pricesof residual oil as reflected in a leading industry publication increased by 77%from December 31, 2004 to December 31, 2005.

Net cash used in operating activities for the yearended December 31, 2004 reflected increased trade credit as we expandedour business during a period of increased product prices.

Net cash used in investing activities increased $10.8million for the year ended December 31, 2006 compared to the year endedDecember 31, 2005, primarily attributable to $6.5 million in cash used toacquire our Bridgeport, Connecticut and Macungie, Pennsylvania terminals, and$3.9 million and $2.0 million in cash used for capital improvement expendituresand maintenance capital expenditures, respectively.  For the years ended December 31, 2005 and2004, cash used in investing activities primarily represented maintenancecapital expenditures of approximately $1.8 million and $1.3 million,respectively, and $0.7 million in 2004 for a terminal acquisition.

Net cash provided by financing activities increased$40.6 million for the year ended December 31, 2006 compared to the year endedDecember 31, 2005.  During 2006, we hadproceeds of $89.1million from of our revolving credit facility to finance businessoperations and paid cash distributions of $19.8 million to our common andsubordinated unitholders.

Net cash provided by financing activities for the yearended December 31, 2005 reflected increased trade credit and borrowingsunder our then-current revolving credit facility to finance our businessactivities, as well as the use of our revolving credit facility to financebusiness expansion and to assist Global Petroleum Corp. and other Slifka familyentities consistent with prior practices in the payment of their taxes onincome derived from their ownership interests in our predecessor, GlobalCompanies LLC and Affiliates.

Net cash provided by financing activities for the yearended December 31, 2004 reflected the use of our then-current revolvingcredit facility to finance business expansion, as well as the purchase byGlobal Petroleum Corp. and other Slifka family entities of the ownershipinterests in Global Companies LLC and Affiliates from RYTTSA USA, Inc. andthe refinancing of approximately $10.0 million of debt related to terminalfinancing.

*Credit Agreement*

In August 2006, we, our general partner, our operatingcompany and our operating subsidiaries amended our four-year senior securedcredit agreement to increase the permanent working capital revolving creditfacility commitment by $100.0 million for total available commitments of $600.0million. The revolving credit facility has a contractual maturity of October 2,2009 and no payments are required prior to that date.  However, we repay amounts outstanding andreborrow funds based on our working capital requirements.  Therefore, the current portion of therevolving credit facility included in the accompanying balance sheets is theamount we expect to pay down during the course of the year, and the long-termportion of the revolver is the amount we expect to be outstanding during theentire year.

As of December 31, 2006, we had total borrowingsoutstanding under our working capital revolving credit facility of $270.7million and outstanding letters of credit of $71.9 million, for a totalindebtedness of $342.6 million.  Thetotal remaining availability for borrowings and letters of credit atDecember 31, 2006 was $157.4 million, which included the$35.0 million acquisition facility and the $15.0 million revolving creditfacility and excludes the two $50.0 million seasonal overline facilities we didnot exercise as December 31, 2006.

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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 our credit agreement:

·       a working capital revolvingcredit facility to be used for working capital purposes and letters of creditin the principal amount equal to the lesser of our borrowing base and $550.0million, of which two $50.0 million seasonal overline facilities are availableeach year only during the period between September 1st and June 30th;

·       a $35.0 million acquisitionfacility to be used for funding acquisitions similar to our business line thathave a purchase price of $25.0 million or less or $35.0 million or less in theaggregate in any 12-month period; and

·       a $15.0 million revolvingcredit facility to be used for general purposes, including payment ofdistributions to our unitholders.

Our obligations under the credit agreement are securedby substantially all of our assets and the assets of our operating company andoperating subsidiaries.

Indebtedness under the credit agreement is guaranteedby our general partner.  Pursuant to theagreement, interest on borrowings under our working capital revolving credit,acquisition credit, and revolving credit facilities is payable at our optionat:  (1) the Eurodollar rate, plus1%, 13⁄4% and 11⁄2 %, respectively, (2) the cost of funds rate,****plus 1%, 13⁄4% and 11⁄2 %, respectively**,**or (3) the bank’s base rate (the average rate for the year ended December31, 2006 was 6%).  We incur a letter ofcredit fee of 1% per annum for each letter of credit issued.  In addition, we incur a commitment fee on theunused portion of the three facilities (including any seasonal overlinefacility exercised by us) under the credit agreement at a rate of 25 basispoints per annum, a facility fee of 10 basis points per annum on anyunexercised seasonal overline facility during the period betweenSeptember 1st and June 30th, and a seasonal overline fee of $30,000each time we elect to exercise either of the seasonal overline facilities.  The credit agreement will mature in Octoberof 2009.  At that time, the creditagreement will terminate and all outstanding amounts thereunder will be due andpayable, 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 agreement contains various covenants that maylimit, among other things, our ability to:

·       grant liens;

·       make certain loans orinvestments;

·       incur additionalindebtedness or guarantee other indebtedness;

·       make any material change tothe nature of our business or undergo a fundamental change;

·       make any materialdispositions;

·       acquire another company;

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

·       make distributions if anypotential default or event of default occurs; or

·       make capital expendituresin excess of specified levels.

The credit agreement also contains financial covenantsrequiring us to maintain:

·       minimum working capital of$30.0 million;

·       minimum EBITDA (as definedin the credit agreement) of $20.0 million;

·       a minimum EBITDA lesscapital expenditures to interest coverage ratio of 2.75 to 1; and

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·       a maximum leverage tominimum EBITDA ratio of 2.5 to 1 with respect to the aggregate amount ofborrowings outstanding under the $15.0 million revolving credit facility andthe $35.0 million acquisition facility and other funded indebtedness.

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

·       failure to pay anyprincipal when due or any interest, fees or other amounts when due;

·       failure of anyrepresentation or warranty to be true and correct in any material respect;

·       failure to perform orotherwise comply with the covenants in the credit agreement or in other loandocuments to which we are a borrower;

·       any default in theperformance of any obligation or condition beyond the applicable grace periodrelating to any other indebtedness of more than $2.0 million if the effect ofthe default is to permit or cause the acceleration of the indebtedness;

·       a judgment default formonetary judgments exceeding $2.0 million or a default under any nonmonetaryjudgment if such default could have a material adverse effect on us;

·       a change in management orownership control; and

·       a violation of ERISA or abankruptcy or insolvency event involving us, our general partner or any of oursubsidiaries.

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 $15.0 million revolving credit facilityis subject to an annual “clean-down” period, requiring us to reduce the amountoutstanding under the $15.0 million revolving credit facility to $0 for 30consecutive calendar days in each calendar year.

***Off-Balance Sheet Arrangements***

We have no off-balance sheet arrangements.

**Impact ofInflation**

Inflation in the United States has been relatively lowin recent years and did not have a material impact on our results of operationsfor the years ended December 31, 2006, 2005 and 2004.

**EnvironmentalMatters**

Our business of supplying refined petroleum productsinvolves a number of activities that are subject to extensive and stringentenvironmental laws.  For a completediscussion of the environmental laws and regulations affecting our business,please read Items 1 and 2, “Business and Properties—Environmental.”

**CriticalAccounting Policies and Estimates**

A summary of the significant accounting policies thatwe have adopted and followed in the preparation of our consolidated/combinedfinancial statements is detailed in Note 2 of Notes to FinancialStatements.  Certain of these accountingpolicies require the use of estimates. We have identified the following estimates that, in our opinion, aresubjective in nature, require the exercise of judgment and involve complexanalysis.  These estimates are based onour knowledge and understanding of current conditions and actions that we maytake in the future.  Changes in theseestimates will occur as a result of the passage of time and the occurrence offuture events.  Subsequent changes inthese estimates may have a significant impact on our financial condition andresults of operations.

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***Inventory***

We hedge substantially all of our inventory purchasesthrough futures and swap agreements. Changes in the fair value of thesecontracts, as well as the offsetting gain or loss on the hedged inventory item,are recognized currently in earnings, resulting in inventory approximatinglower of cost or market on a first-in, first-out method. In addition to our owninventory, we have exchange agreements with unrelated third party suppliers,whereby we may draw inventory from these other suppliers and replace it at alater date.  Similarly, these suppliersmay draw inventory from us and replace it at a later date.  Positive exchange balances are accounted foras accounts receivable.  Negativeexchange balances are accounted 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 accountedfor as an operating lease.  Please readItem 13, “Certain Relationships and Related Transactions, and DirectorIndependence—Throughput Agreement 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 futurecommitments, principally for office space and computer equipment, under theterms of operating lease arrangements, and we have lease income from officespace leased to an unrelated third party at one of our terminals.  Our leases are accounted for under theprovisions of Statement of Financial Accounting Standards (“SFAS”) No. 13, “Accountingfor Leases,” as amended, which requires that leases be evaluated and classifiedas operating or capital leases for 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.

***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 cashdiscounts are recorded as a reduction of sales at the time of sale based on theestimated future outcome.  We alsoprovide for shipping costs at the time of sale, which are included in cost ofsales.  The amounts recorded for baddebts are generally based upon historically derived percentages while alsofactoring in any new business conditions that might impact the historicalanalysis, such as market conditions and bankruptcies of particularcustomers.  Bad debt provisions areincluded in selling, general and administrative expense.

Revenue is not recognized on exchange agreements,which are entered into primarily to acquire various refined petroleum productsof a desired quality or reduce transportation costs by taking delivery ofproducts closer to our end markets.  Inaccordance with EITF No. 04-13, “Accounting for Purchases and Sales ofInventory with the Same Counterparty,” any net differential for exchangeagreements is recorded as an adjustment of inventory costs in the purchasescomponent of cost of sales in the statement of income.

***Derivative Financial Instruments***

We account for our derivatives in accordance with SFASNo. 133, “Accounting for Derivative Instruments and Hedging Activities,”as amended (“SFAS No. 133”).  SFASNo. 133 establishes accounting and reporting standards for derivativeinstruments and hedging activities and requires that an entity recognizederivatives as either assets or liabilities on the balance sheet and measurethe instruments at fair value.  The fairvalue of our derivatives is determined through the use of independent marketsand is based upon the prevailing market prices of such instruments at the dateof valuation.  We enter into futurescontracts for the receipt or delivery of refined petroleum products in futureperiods.  The contracts are entered intoin the normal course of business to reduce risk of loss on inventory on hand,which could result through fluctuations in market prices.  Changes in the fair value of these contracts,as well as the offsetting gain or loss on the hedged inventory item, arerecognized currently in earnings.

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We also use futures contracts and swaps to hedgeexposure under forward purchase and sale commitments.  These agreements are intended to hedge thecost component of virtually all of our forward commitments.  Changes in the fair value of these contracts,as well as offsetting gains or losses on the forward fixed purchase and salecommitments, are recognized currently in earnings.  Gains and losses on net product margin fromforward fixed purchase and sale contracts are reflected in earnings as thesecontracts mature.

We also market and sell natural gas.  We generally conduct business by enteringinto forward purchase commitments for natural gas only when we simultaneouslyenter into arrangements for the sale of product for physical delivery to thirdparty users.  We generally take deliveryunder our purchase commitments at the same location as we deliver tothird-party users.  Through thesetransactions, which establish an immediate margin, we seek to maintain aposition that is substantially balanced between firm forward purchase and salescommitments.  Natural gas is generallypurchased and sold at fixed prices and quantities.  Current price quotes from actively tradedmarkets are used in all cases to determine the contracts’ fair value. Changesin the fair value of these contracts are recognized currently in earnings as anincrease or decrease 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 are estimated based upon ananalysis of potential results, assuming a combination of litigation andsettlement strategies and outcomes.

We provide for losses associated with environmentalremediation obligations when such losses are probable and reasonablyestimable.  Estimated losses fromenvironmental remediation obligations generally are recognized no later thancompletion of the remedial feasibility study. Loss accruals are adjusted as further information becomes available orcircumstances change.  Costs of futureexpenditures for environmental remediation obligations are not discounted totheir present value.  Recoveries ofenvironmental remediation costs from other parties are recognized as assetswhen their receipt is deemed probable.

We are subject to other contingencies, including legalproceedings and claims arising out of our businesses that cover a wide range ofmatters, including, among others, environmental matters, contract andemployment claims.  Environmental andother legal proceedings may also include matters with respect to businesses wepreviously owned.  Further, due to thelack of adequate information and the potential impact of present regulationsand any future regulations, there are certain circumstances in which no rangeof potential exposure may be reasonably estimated.

**Recent AccountingPronouncements**

A description and related impact expected from theadoption of certain new accounting pronouncements is provided in Note 2 ofNotes to Financial Statements included elsewhere in this report.

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**Item7A.**                 Quantitativeand Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adversechanges in market rates and prices.  Theprincipal market risks to which we are exposed are interest rate risk andcommodity risk.  We utilize variousderivative instruments to manage exposure to commodity risk.  Because the outstanding amount under ourcredit facility fluctuates due to commodity prices and the seasonality of ourbusiness, we have chosen currently and historically not to enter into anyhedging instruments related to our variable rate debt.

***Interest Rate Risk***

We utilize variable rate debt and are exposed tomarket risk due to the floating interest rates on our current credit facilityand term loan.  Therefore, from time totime, we may utilize interest rate swaps and collars to hedge interestobligations on specific and anticipated debt issuances.  Wehad no interest rate hedging instruments outstanding as of December 31,2006.  Borrowings under ourworking capital revolving credit, acquisition credit and revolving creditfacilities currently bear interest at our option at (1) the Eurodollarrate, plus 1%, 13⁄4% or 11⁄2 %, respectively, (2) the cost of funds rate, plus1%, 13⁄4% or 11⁄2 %, respectively, and (3) the bank’s base rate (the averagerate for the year ended December 31, 2006 was 6%).  As of December 31, 2006, we had totalborrowings outstanding under our working capital revolving credit facility of$270.7 million.  The impact of a 1%increase in the interest rate on this amount of debt would have resulted in anincrease in interest expense, and a corresponding decrease in our results ofoperations, of approximately $2.7 million annually, assuming, however,that our indebtedness remained constant throughout the year.

***Commodity Risk***

We hedge our exposure to price fluctuations withrespect to refined petroleum products in storage and expected purchases andsales of these commodities.  Thederivative instruments utilized consist primarily of futures and optioncontracts traded on the NYMEX and over-the-counter transactions, including swapcontracts entered into with established financial institutions and othercredit-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 ourpolicies are designed to minimize market risk, some degree of exposure tounforeseen fluctuations in market conditions remains.  Except for the controlled trading programdiscussed below, we do not acquire and hold futures contracts or otherderivative products for the purpose of speculating on price changes that mightexpose us to indeterminable 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 connection with managing these positionsand maintaining a constant presence in the marketplace, both necessary for ourbusiness, we engage in a controlled trading program for up to an aggregate of250,000 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 hedgeineffectiveness is reflected in our results of operations.  We utilize the NYMEX, which is a regulatedexchange for energy products that it trades, thereby reducing potentialdelivery and supply risks.  Generally, ourpractice is to close all NYMEX positions rather than to make or receivephysical deliveries.  With respect toother energy products, we enter into derivative agreements with counterpartiesthat we believe have a strong credit profile, in order to hedge marketfluctuations and/or lock-in margins relative to our commitments.

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At December 31, 2006, 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 (inthousands):

(Loss) gain: 
|                                | ** ** | ** **                      | ** ** | **Fair Value After**   | ** ** |
|--------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| ** **                     | ** ** | **Fair Value at**     | ** ** | **Effect of**               | ** ** |
| ** **                     | ** ** | **December 31, 2006** | ** ** | **10% Price Decrease** | ** ** |
| NYMEX contracts                |       | $                               | (32,530    | )                                | $          | (34,346 | ) |
| Swaps, options  and other, net |       | 3,152                           |       | 2,455                            |       |
|                           |       | $                               | (29,378    | )                                | $          | (31,891 | ) |

 

The fair values of the futures contracts are based onquoted market prices obtained from the NYMEX. The fair value of the swaps and option contracts are estimated based onquoted prices from various sources such as 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 December 31, 2006.  For positionswhere independent quotations are not available, an estimate is provided, or theprevailing market price at which the positions could be liquidated isused.  All hedge positions offsetphysical exposures to the spot market; none of these offsetting physical exposuresare included in the above table. Price-risk sensitivities were calculated by assuming an across-the-board10% decrease in price regardless of term or historical relationships betweenthe contractual price of the instruments and the underlying commodityprice.  In the event of an actual 10%change in prompt month prices, the fair value of our derivative portfolio wouldtypically change less than that shown in the table due to lower volatility inout-month prices.  We have a daily marginrequirement to maintain a cash deposit with our broker based on the prior day’smarket results on open futures contracts. The balance of this deposit will fluctuate based on our open marketpositions and the commodity exchange’s requirements.  The required brokerage margin balance was$0.6 million at December 31, 2006.

We are exposed to credit loss in the event ofnonperformance by counterparties of forward contracts, options and swapagreements, but do not anticipate nonperformance by any of thesecounterparties.  Futures contracts, theprimary derivative instrument utilized, are traded on regulated exchanges,greatly reducing potential credit risks. Exposure on swap and certain option agreements is limited to the amountof the recorded fair value as of the balance sheet dates.  We utilize primarily one broker, a majorfinancial institution, for all derivative transactions and the right of offsetexists.  Accordingly, the fair value ofall derivative instruments is displayed on a net basis.

**Item8.**                          FinancialStatements and Supplementary Data.

The information required here is included in thereport as set forth in the “Index to Financial Statements” on page F-1.

**Item9.**                          Changesin and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

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**Item9A.**                 Controlsand Procedures.

In designing and evaluating controls and procedures,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.

***Disclosure Controls and Procedures***

We maintain disclosure controls and procedures thatare designed to ensure that the information required to be disclosed by us inthe reports we file or submit under the Securities Exchange Act of 1934 (the “ExchangeAct”) is recorded, processed, summarized and reported within the time periodsspecified in SEC rules and forms. Under the supervision and with the participation of our principalexecutive officer and principal financial officer, management evaluated theeffectiveness of our disclosure controls and procedures (as defined inRule 13a-15(e)  of the Exchange Act).  Based on that evaluation, our principalexecutive officer and principal financial officer concluded that our disclosurecontrols and procedures were effective as of December 31, 2006.

***Internal Control Over Financial Reporting***

*Management’s Annual Report*

We are responsible for establishing and maintainingadequate internal control over financial reporting (as defined in Rule 13a-15(f)of the Exchange Act).  Internal controlover financial reporting is the process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with GAAP.  There are inherent limitations in theeffectiveness of internal control over financial reporting, including thepossibility that misstatements may not be prevented or detected.  Accordingly, even effective internal controlsover financial reporting can provide only reasonable assurance with respect tofinancial statement preparation.

Under the supervision and with the participation ofour principal executive officer and principal financial officer, managementconducted an evaluation of the effectiveness of our internal control overfinancial reporting based on the framework in *InternalControl*-*Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO).  Based on that evaluation,management believes that our internal control over financial reporting waseffective as of December 31, 2006.

Ernst & Young LLP, our independent registered publicaccounting firm, has issued an attestation report on management’s assessment ofthe effectiveness of our internal control over financial reporting, as statedin their report which is included herein.

***Changes in Internal Control***

There has not been any change in our internal controlover financial reporting that occurred during the quarter ended December 31,2006 that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

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***Report of Independent Registered Public AccountingFirm on Internal Control over Financial Reporting***

The Board of Directors of Global GPLLCand Unitholders of Global Partners LP 

We have audited management’s assessment, included inthe accompanying Management’s Annual Report that Global Partners LP maintainedeffective internal control over financial reporting as of December 31, 2006,based on criteria established in Internal Control—Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission (theCOSO criteria).  Global Partners LP’smanagement is responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting. Our responsibility is to express an opinionon management’s assessment and an opinion on the effectiveness of the company’sinternal control over financial reporting based on our audit. 

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understandingof internal control over financial reporting, evaluating management’sassessment, testing and evaluating the design and operating effectiveness ofinternal control, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonablebasis for our opinion.

A company’s internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. Acompany’s internal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, in reasonabledetail, accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements.  Also, projectionsof any evaluation of effectiveness to future periods are subject to the riskthat controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that GlobalPartners LP maintained effective internal control over financial reporting asof December 31, 2006, is fairly stated, in all material respects, based on theCOSO criteria.  Also, in our opinion,Global Partners LP maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2006, based on the COSOcriteria.

We also have audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), theaccompanying consolidated balance sheets of Global Partners LP, as of December31, 2006 and 2005, and the related consolidated statements of income, partners’equity and cash flows for the year ended December 31, 2006 (successor) and forthe period from October 4, 2005 through December 31, 2005 (successor) and thecombined statements of income, members’ equity, and cash flows for the periodfrom January 1, 2005 through October 3, 2005 (predecessor), and the year endedDecember 31, 2004 (predecessor) and our report dated March 16, 2007 expressedan unqualified opinion thereon.  

/s/ Ernst &Young LLP

Boston, MassachusettsMarch 16, 2007

**Item9B.**                 OtherInformation.

None.

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**PART III**

**Item10.**                   Directors,Executive Officers and Corporate Governance.

Global GP LLC, our general partner, manages ouroperations and activities on our behalf. Our general partner is not elected by our unitholders and will not besubject to re-election on a regular basis in the future.  Affiliates of the Slifka family own 100% ofthe ownership interests in our general partner. Our general partner is controlled by Alfred A. Slifka and Richard Slifkathrough their beneficial ownership of entities that own ownership interests inour general partner.  Eric Slifkabeneficially owns an interest in our general partner.  Unitholders are not entitled to elect thedirectors of our general partner or directly or indirectly participate in ourmanagement or operation.  Our generalpartner owes a fiduciary duty to our unitholders.  Our general partner is liable, as generalpartner, for all of our debts (to the extent not paid from our assets), exceptfor indebtedness or other obligations that are made specifically nonrecourse toit.  Whenever possible, our generalpartner 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 theboard believes may involve conflicts of interest.  The conflicts committee determines if theresolution of the conflict of interest is fair and reasonable to us.  Members of the conflicts committee may not beofficers or employees of our general partner or directors, officers oremployees of its affiliates and must meet the independence and experiencestandards established by the New York Stock Exchange (“NYSE”) and theSecurities Exchange Act of 1934.  Anymatters approved by the conflicts committee will be conclusively deemed to befair and reasonable to us, approved by all of our partners and not a breach byour general partner of any duties it may owe us or our unitholders.  In addition, we have a separately-designatedstanding audit committee established in accordance with Section 3(a)(58)(A) ofthe Securities Exchange act of 1934, and a compensation committee.  The three independent members of the board ofdirectors of our general partner, Messrs. McKown, McCool and Watchmaker,serve as members of the conflicts, audit and compensation committees.

Even though most companies listed on the NYSE arerequired to have a majority of independent directors serving on the board ofdirectors of the listed company and establish and maintain an audit committee,a compensation committee and a nominating/corporate governance committee, eachconsisting solely of independent directors, the NYSE does not require a listedlimited partnership like us to have a majority of independent directors on theboard of directors of our general partner or establish a compensation committeeor a nominating/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 audit committee is independent asdefined in the listing standards of the NYSE. The board of directors of our general partner has determined that amember 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, theaudit committee adopted a new written charter which replaces the previouscharter 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 are employees of our general partner or certainof 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, Hollister, Faneuil and Rudinsky spend aportion of their time providing services to certain of our affiliates.  Please read Item 13, “Certain Relationshipsand Related Transactions, and Director Independence—Relationship of Managementwith Global Petroleum Corp. and Alliance Energy Corp.”  Our non-executive directors devote as muchtime as is necessary to prepare for and attend board of directors and committeemeetings.

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The following table shows information for thedirectors and executive officers of our general partner. 
| Name                  | ** ** | **Age** | ** ** | **Position with Global GP LLC**      |
|-----------------------|------------|---------|------------|----------------------------------------------------------|
| Alfred A. Slifka      |       | 74      |       | Chairman                                                 |
| Richard Slifka        |       | 66      |       | Vice  Chairman                                           |
| Eric Slifka           |       | 41      |       | President,  Chief Executive Officer and Director         |
| Thomas J. Hollister   |       | 52      |       | Executive  Vice President and Chief Financial Officer    |
| Edward J. Faneuil     |       | 54      |       | Executive  Vice President, General Counsel and Secretary |
| Charles A. Rudinsky   |       | 59      |       | Senior  Vice President and Chief Accounting Officer      |
| David K. McKown       |       | 69      |       | Director                                                 |
| Robert J. McCool      |       | 68      |       | Director                                                 |
| Kenneth I. Watchmaker |       | 64      |       | Director                                                 |

 

*AlfredA. Slifka* was elected Chairman of the Board of ourgeneral partner in March 2005.  Hehas been employed with Global Companies LLC or its predecessors for over fiftyyears.  Mr. Slifka served asChairman of the Board of Global Companies LLC since its formation inDecember 1998.

*RichardSlifka* was elected Vice Chairman of the Board of ourgeneral partner in March 2005.  Hehas been employed with Global Companies LLC or its predecessors since1963.  Mr. Slifka served asTreasurer and director of Global Companies LLC since its formation inDecember 1998.  Alfred A. Slifka andRichard Slifka are brothers.

*EricSlifka* was elected President, Chief Executive Officerand director of our general partner in March 2005.  He has been employed with Global CompaniesLLC or its predecessors since 1987. Mr. Slifka served as President and Chief Executive Officer anddirector of Global Companies LLC since July 2004 and as Chief OperatingOfficer and director of Global Companies LLC from its formation inDecember 1998 to July 2004. Prior to 1998, Mr. Slifka held various senior positions in theaccounting, supply, distribution and marketing departments of the predecessorsto Global Companies LLC.  Mr. Slifkais the son of Alfred A. Slifka and the nephew of Richard Slifka.

*ThomasJ. Hollister**was elected Executive Vice President and ChiefFinancial Officer of our general partner in July 2006, succeeding*ThomasA. McManmon, Jr., and was named Chief Operating Officer in February2007.  Mr. Hollister continues to serveas Chief Financial Officer.  From 2005 toMarch 2006, Mr. Hollister served as Vice Chairman of Citizens FinancialGroup and as Chairman, President and Chief Executive Officer of CitizensCapital, Inc., Citizens Financial Group’s private equity and venturecapital business.  From 2004 to 2005, heserved as President and Chief Executive Officer of Charter One Bank.  From 1998 to 2004 he served as President andChief Executive Officer of Citizens Bank of Massachusetts.

*EdwardJ. Faneuil* was elected Executive Vice President,General Counsel and Secretary of our general partner in March 2005.  He has been employed with Global CompaniesLLC or its predecessors since 1991. Mr. Faneuil served as General Counsel and Secretary of GlobalCompanies LLC since its formation in December 1998.

*CharlesA. Rudinsky* was elected Senior Vice President andChief Accounting Officer of our general partner in March 2005 and wasnamed Executive Vice President and Treasurer in February 2007.  Mr. Rudinsky continues to serve as ChiefAcccounting Officer.  He has been employedwith Global Companies LLC or its predecessors since 1988.  Mr. Rudinsky served as AssistantController from 1988 to 1997 and as the Senior Controller and Chief AccountingOfficer 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 hasbeen a Senior Advisor to Eaton Vance Management, whose principal business iscreating, marketing and managing investment funds and providing investmentmanagement services to institutions and individuals, since 2000.  Mr. McKown retired in March 2000having served as a Group Executive with BankBoston since 1993.  Mr. McKown has been in the bankingindustry for 41 years, worked for

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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 hasbeen an Advisor to Tetco Inc., a privately held company in the energyindustry, since 1967.  Mr. McCoolhas been in the refined petroleum industry for 40 years.  He worked for Mobil Oil for 33 years andretired in 1998 having served as Executive Vice President being responsible forNorth and South America’s marketing and refining business.

*Kenneth I. Watchmaker* waselected to serve as a director of our general partner and as a member of theconflicts committee, the compensation committee and the audit committee of theboard of directors of our general partner in October 2005.  He served as Executive Vice President andChief Financial Officer of Reebok International Ltd. from 1996 untilMarch 2006, when he elected to retire in connection with the sale ofReebok International Ltd to adidas-Salomon AG. Mr. Watchmaker joined Reebok International Ltd. inJuly 1992 as Executive Vice President, Operations and Finance, of the ReebokBrand.  Prior to joining ReebokInternational Ltd., he was an audit partner at Ernst & YoungLLP.  He also serves as a director ofAmerican Biltrite Inc.

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

Section 16(a) of the Securities Exchange Actof 1934 requires directors and executive officers of our general partner andpersons who beneficially own more than 10% of a class of our equity securitiesregistered pursuant to Section 12 of the Securities Exchange Act of 1934to file certain reports with the SEC and the NYSE concerning their beneficial ownershipof such securities.  Based solely upon areview of the copies of reports on Forms 3, 4 and 5 and amendments theretofurnished to us, or written representations that no reports on Forms 5 wererequired, we believe that during the year ended December 31, 2006, theofficers and directors of our general partner and beneficial owners of morethan 10% of our equity securities registered pursuant to Section 12 werein compliance with the applicable requirements of Section 16(a).

**Executive Sessions**

The board of directors of our general partner holdsexecutive sessions for the non-management directors on a regular basis withoutmanagement present.  Since thenon-management directors include directors who are not independent directors,the independent directors also meet in separate executive sessions without theother directors or management at least once each year to discuss such mattersas the independent directors consider appropriate.  In addition, any director may call for anexecutive session of non-management or independent directors at any boardmeeting.  A majority of the independentdirectors selects a presiding director for any such executive session.

**Communicationswith Unitholders, Employees and Others**

Unitholders, employees and other interested personswho wish to communicate with the board of directors of our general partner,non-management or independent directors as a group, a committee of the board ora specific director may do so by transmitting correspondence addressed to theBoard of Directors, Name of Director, Group or Committee, c/o CorporateSecretary, Global Partners LP, PO Box 9161, Waltham, MA 02454-9161,Fax:781-398-4165.

Letters addressed to the board of directors of ourgeneral partner in general will be reviewed by the corporate secretary andrelayed to the chairman of the board or the chair of the appropriatecommittee.  Letters addressed to thenon-management or independent directors in general will be relayed unopened tothe chair of the audit committee. Letters addressed to a committee of the board of directors or a specificdirector will be relayed unopened to the chair of the committee or the specificdirector to whom they are addressed.  Allletters regarding accounting, accounting policies, internal accounting controlsand procedures, auditing matters, financial reporting processes or disclosurecontrols and procedures are to be forwarded by the recipient director to thechair of the audit committee.

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**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 and our subsidiaries.

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

**Corporate GovernanceMatters**

The NYSE requires the Chief Executive Officer of eachlisted company to certify annually that he is not aware of any violation by thecompany of the NYSE corporate governance listing standards as of the date ofthe certification, qualifying the certification to the extent necessary.  The Chief Executive Officer of our generalpartner provided such certification to the NYSE in 2006. The certification wasqualified to reflect the inadvertent omission of certain disclosure withrespect to executive sessions and communications from unitholders, employeesand others in the Annual Report on Form 10-K for the year ended December 31,2005. The certifications of our general partner’s Chief Executive Officer andChief Financial Officer required by Rule 13a-14 of the Securities Exchange Actof 1934 are included as exhibits to this Annual Report on Form 10-K.

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**Item11.  Executive Compensation**

All of our executive officers and substantially all ofour employees are employed by our general partner.  Our general partner does not receive anymanagement fee or other compensation for its management of Global PartnersLP.  Our general partner and itsaffiliates are reimbursed for expenses incurred on our behalf. These expenses includethe costs of employee, executive officer and director compensation and benefitsproperly allocable to Global Partners LP, and all other expenses necessary orappropriate to the conduct of the business of, and allocable to, GlobalPartners LP.  Our partnership agreementprovides that our general partner will determine the expenses that areallocable to Global Partners LP.

**CompensationDiscussion and Analysis**

Global Partners LP and our general partner were formedin March 2005. We are managed and operated by the directors and executiveofficers of our general partner. Executive officers of our general partnerreceive compensation in the form of salaries and bonuses (contractual and/ordiscretionary), and they are eligible to participate in employee benefit plansand arrangements sponsored by our general partner, including plans that may beestablished by our general partner or its affiliates in the future. Our namedexecutive officers (defined below) serve (or served) as executive officers ofour general partner and each of our subsidiaries, and the compensationdescribed herein reflects their total compensation for services to us, ourgeneral partner and our subsidiaries.

Our “named executive officers” include our ChiefExecutive Officer (“CEO”), our Chief Financial Officer, the two other mosthighly compensated executive officers during 2006 and our former ChiefFinancial Officer, who served in said capacity from our date of formationthrough June 30, 2006.  Three of our fourexecutive officers and our former Chief Financial Officer currently are partiesto employment agreements with our general partner. Our Chief Accounting Officeris an employee at will with no employment agreement.

The compensation committee of the board of directorsof our general partner (the “Compensation Committee”) has direct responsibilityfor the compensation of our CEO based upon (i) contractual obligations pursuantto the employment agreement between our CEO and our general partner, and (ii)compensation parameters established by the Compensation Committee with respectto discretionary bonuses.  TheCompensation Committee has oversight and approval for the compensation of ourexecutive officers other than our CEO based upon our CEO’s recommendations andour general partner’s contractual obligations pursuant to employment agreementswith two of our current executive officers.

***CompensationPhilosophy and Policies/Objectives***

Theobjectives of our compensation program with respect to our executive officersare to attract, engage and retain individuals with the requisite knowledge,experience and skill sets to help ensure our future success, to motivate andinspire employee behavior that fosters high performance, and to support ouroverall business objectives.  To achievethese objectives, we aim to provide each executive officer with a competitivetotal compensation opportunity.  Wecurrently utilize the following compensation components:

·                  Salariesand benefits designed to attract and retain employees over time; and

·                  Annualcash bonus awards designed to focus employees on performance for a particularyear.

***CompensationMethodology***

Weuse third-party expertise to study and supply market comparable compensationdata and to assist our management and the Compensation Committee in formulatingcompetitive compensation plans.  In 2006we retained Wilson GroupTM as an independent compensation consultant to advisethe Compensation Committee on matters related to executive officer and seniormanagement compensation and general compensation programs.  Wilson GroupTM assists the CompensationCommittee by providing comparative market data on compensation practices andprograms based on an analysis of  (1) apeer group of comparable energy companies 

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that was developedin collaboration with our CEO and reflects organizations of comparable marketcapitalization, ownership structure (MLPs) and industry segment, and (2)WyattWatson Worldwide’s compensation survey market information fromapproximately 59 energy industry companies whose average gross revenue iscomparable to our annual gross revenues. Wilson GroupTM calculated a composite market reference point for each ofour executive officer positions, taking into account variations in compensationcomponents and other factors.  Forexample, many MLPs grant ownership interests in their general partners oraffiliates thereof to their executive officers as a component of compensationand we do not.  Many of the companiessurveyed are significantly larger than we are, and our executive officerpositions include responsibilities that exceed the scope of similar positionsat other companies.

Forinformational purposes, our CEO, Mr. Slifka, through his affiliatesbeneficially owns a percentage of the outstanding ownership interests in ourgeneral partner, approximately ten percent (10%) of the outstandingsubordinated units of the Partnership and less than one percent (1%) of theoutstanding common units of the Partnership. No executive officer of our general partner other than Mr. Slifka, andno directors of our general partner other than Messrs. Alfred Slifka, RichardSlifka and Eric Slifka, own any interest in our general partner.

***Elementsof Compensation***

The elements of our 2006 executive officer compensationare base salary, contractual cash bonuses tied to our performance,discretionary cash bonus awards, retirement and health benefits, andperquisites consistent with those provided to executive officers generally andas may be approved by the Compensation Committee from time to time.  Each of our executive officers is eligible toparticipate in our general partner’s health insurance, pension, 401(k) andother employee benefit plans in accordance with our general partner’s policiesand on the same general basis as other employees of our general partner.  Under our general partner’s pension plan, anemployee becomes fully vested in his or her pension benefits after completingfive years of service or upon termination due to death, disability or retirement.  See “Other Benefits, *PensionBenefits*” for information with respect to eligibility standards andcalculations of estimated annual pension benefits payable upon retirement underour general partner’s pension plan.  Ourgeneral partner’s 401(k) Savings and Profit Sharing Plan provides fordiscretionary matching contributions by our general partner equal to 50% ofeach employee’s contribution, up to a maximum contribution of 3% of theemployee’s pre-tax annual compensation, subject to certain limitations underfederal law.  See “Other Benefits, *401(k) Savings and Profit Sharing Plan*” for additionalinformation with respect to eligibility and permitted contributions to thisplan.  Additional perquisites for ourexecutive officers may include payment of premiums for supplemental life and/orlong-term disability insurance, automobile fringe benefits, club membershipdues and payment of fees for professional financial planning and/or tax advice.

Toattract, engage, retain and provide incentive to executive officers, we believethat executive compensation should provide a competitive total compensationopportunity.  Wilson GroupTM assisted ourmanagement and the Compensation Committee in determining what constitutes acompetitive total compensation opportunity.

*Salaries*

Basesalaries for four of our five named executive officers are set by theirrespective negotiated employment agreements with our general partner.  The base salary of our remaining namedexecutive officer, Mr. Rudinsky, was approved by the Compensation Committeebased upon our CEO’s recommendation. As a guide, our goal is that our executivesalaries should fall between the median (50th percentile) and 75th percentile of marketcomparable positions.  With the exceptionof our CEO, however, our executive officers have responsibilities thatgenerally exceed the scope of responsibilities that are representative of theirtitles.  Our Chief Financial Officer alsoserves as our Chief Operating Officer and, as such, has responsibilities formany operational areas that are not standard to Chief Financial Officerpositions.  Our Executive Vice Presidentand General Counsel is responsible for all our environmental compliancefunctions and many of our human resources matters, and he manages many of ourbusiness transactions in an executive as well as legal capacity.  Our Chief 

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Accounting Officer, who also serves as our Treasurer,is responsible for our information technology functions and for financialanalysis for our acquisition due diligence. Accordingly, reviewing salary levels for our executive officers’positions against executive positions at companies that we or our independentcompensation consultant have identified as peer group companies is only one ofmany factors that we consider in assessing the competitiveness andreasonableness of our executive officers’ compensation.  The results of a study undertaken by WilsonGroupTM at the request of the Compensation Committee concluded that our 2006executive cash compensation was above the median due to our comparatively highbase salaries, but our total direct compensation was below the median becauseunlike many of our competitors, we do not currently offer equity participationsin our general partner or the Partnership as part of our compensationpackage.  See “—*CompensationMethodology*” above for a discussion of our independent compensationconsultant’s role.

*AnnualBonuses – Contractual*

Twoof our five named executive officers, Messrs. Slifka and Hollister, wereeligible to receive non-discretionary contract-based bonuses in 2006.  Our CEO, Mr. Slifka, earned a 2006non-discretionary bonus of $500,000 based upon our achievement of a specifictarget identified in his employment agreement with our general partner.  Under his employment agreement, Mr. Slifkawas entitled to receive a non-discretionary cash bonus to the extent (up to$500,000) that our aggregate amount of Available Cash that is deemed to beOperating Surplus for the four consecutive calendar quarters ended December 31,2006 exceeded $19,000,000.  For purposesof determining whether the specified target was achieved, our partnershipagreement defines “Available Cash” to mean generally all cash on hand at theend of the applicable calendar quarter less the aggregate amount of cashreserves established by our general partner to (i) provide for the properconduct of our business, (ii) comply with applicable law, any of our debtinstruments, or other agreements, or (iii) provide funds for distributions toour unitholders and to our general partner for any one or more of the next fourcalendar quarters, plus all cash on hand on the date of determination ofavailable cash for the applicable calendar quarter resulting from workingcapital borrowings made after the end of the calendar quarter.  Our partnership agreement defines “OperatingSurplus” for any period to mean generally, on a cumulative basis and withoutduplication, (a) the sum of (i) $7.5 million, (ii) our cash balance on theclosing date of our initial public offering, (iii) all cash receipts for theperiod from the closing date of our initial public offering through the lastday of the applicable period, excluding cash from borrowings that are notworking capital borrowings, sales of equity and debt securities and sales orother dispositions of assets outside the ordinary course of business, and (iv)working capital borrowings made after the end of a calendar quarter but beforethe date of determination of operating surplus for the calendar quarter, less(b) the sum of (i) all operating expenditures for the period from the closingdate of our initial public offering through the last day of the applicableperiod, and (ii) the amount of cash reserves established by our general partnerto provide funds for future operating expenditures.

Mr.Hollister, our Chief Financial Officer, also earned a 2006 non-discretionarybonus based upon our achievement of a specific target identified in hisemployment agreement with our general partner. Under his employment agreement, Mr. Hollister was entitled to receive abonus of $130,000, prorated for his tenure of employment with our generalpartner, based upon our achievement of targeted annual distributable cash flowin excess of $21,000,000 for the 2006 calendar year.  For purposes of determining whether thespecified target was achieved, “distributable cash flow” means our net incomeplus depreciation and amortization, less our capital expenditures.

*AnnualBonuses – Discretionary*

Wehave historically established a cash bonus pool each year to fund discretionarybonus awards.  Historically, this bonuspool has been set in an amount equal to approximately ten percent (10%) of ourpre-tax, pre-bonus accrual net income, as adjusted by the CompensationCommittee, taking into account our performance during the then precedingcalendar year.  The CompensationCommittee determines discretionary bonus awards to our CEO.  Discretionary bonus awards for all otherexecutive officers are determined by the Compensation Committee based uponrecommendations by our CEO, taking into account our performance and the individualperformance of each of our executive officers. Our performance is measured by Available Cash that is deemed to beOperating Surplus (defined above), by the organic development of our existingmarkets,

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and by theachievement of accretive acquisitions that are “bolt-on” and/or “step-out” innature.  “Bolt-on” acquisitions expandour geographic reach into markets that are adjacent to our existing markets,and allow us to leverage our existing expertise and customer and supplierrelationships. “Step-out” transactions involve our acquisition of physicalassets and expansion into new markets. In addition to consideringthe nature and scope of the transactional work performed by our executiveofficers in 2006, review of their individual performance included considerationfor each executive officer’s role in (i) effecting the transitionalrequirements of a newly public company including, without limitation, achievingcompliance with applicable securities and corporate governance requirementssuch as Section 404 of the Sarbanes-OxleyAct of 2002, (ii) developing and deepening our investor relations, and (iii)advancing our growth strategies. The aggregate amount of the discretionary bonus payment awarded to Mr.Hollister for his performance in 2006 and the contractual bonus paid to him for2006 was equal to the discretionary bonus payments awarded to each of Messrs.Faneuil and Rudinsky for their performance in 2006.

*Potential Future Compensation –Global Partners LP Long-Term Incentive Plan*

We adopted aLong-Term Incentive Plan (the “LTIP”) immediately prior to our initial publicoffering.  No awards of any kind havebeen granted under the LTIP.  Managementhas engaged Wilson GroupTM to make recommendations to management and theCompensation Committee with respect to the development and implementation ofour LTIP as a performance based non-cash incentive for our named executiveofficers, senior officers, managers and independent directors in 2007.

***Relationshipof Compensation Elements to Compensation Objectives***

We use basesalaries to provide financial stability and to compensate our executiveofficers for fulfillment of their respective job duties.  We use annual bonuses to align a portion ofour executive officers’ compensation with annual business performance andsuccess, and to provide rewards and recognition for key annual business andfinancial outcomes such as achieving increased quarterly distributions,expanding our terminaling storage capacity and the geographic markets that weserve, and diversifying our product mix to enhance profitability andeffectively manage weather sensitivity in our business.  Annual bonuses also allow flexibility toreward performance and individual success consistent with such criteria as maybe established from time to time by our CEO and the Compensation Committee.  We offer a mix of traditional perquisites,such as automobile fringe benefits and country/golf club memberships, andadditional benefits, such as payment of professional financial planning and taxadvice fees that are tailored to address our executive officers’ individualneeds to facilitate the performance of their job duties and to be competitivewith the total compensation packages available to executive officers generally.

Inthe event that we elect to institute awards under the LTIP, the objective ofsuch a program would be to provide incentive and reward eligible participantsfor the achievement of long-term Partnership objectives, to facilitate theretention of key employees by investing them in our long-term performance, tocontinue to make our compensation mix more competitive, and to concretely alignthe interests of management with those of our unitholders.

***ContractualChange of Control Provisions***

Theemployment agreements between our general partner and each of Messrs. Slifkaand Hollister and the deferred compensation agreement between our generalpartner and Mr. Faneuil include severance or deferred compensation paymentprovisions that are triggered upon a change of control as defined in therespective agreements.  The change ofcontrol provisions in Mr. Slifka’s employment agreement become operative if Mr.Slifka terminates his employment in the three hundred sixty (360) day periodoccurring ninety (90) days after the occurrence of a change of control.  The change of control provisions in Mr. Hollister’semployment agreement become operative if Mr. Hollister terminates hisemployment at any time for any reason within the first six (6) months of achange of control.  Mr. Hollister’semployment agreement also provides for accelerated vesting on any and alloutstanding partnership options, restricted units, phantom units, unitappreciation rights and other similar rights held by Mr. Hollister on the dateof termination (i) by the general partner without 

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cause (as definedin the employment agreement), or (ii) by Mr. Hollister for constructivetermination (as defined in the employment agreement) at any time within three(3) months before and twelve (12) months following a change of control.  Messrs. Slifka’s and Hollister’s employmentagreements require a “double trigger” for payment of benefits upon theoccurrence of a change in control, meaning that there must be a defined changein control plus a termination of the executive officer’s employment, althoughin each case the termination of employment is at the executive officer’s solediscretion.   Mr. Faneuil’s deferredcompensation agreement provides for the payment of benefits in a lump sumwithin sixty (60) days of the effective date of a change in control.

For purposes ofMr. Hollister’s employment agreement and Mr. Faneuil’s deferred compensationagreement, a change of control is deemed to occur “on the date that any oneperson, entity or group (other than Alfred Slifka, Richard Slifka or EricSlifka, or their respective family members or entities they control,individually or in the aggregate, directly or indirectly) acquires ownership ofthe membership interests of our general partner that, together with themembership interests of our general partner already held by such person, entityor group, constitutes more than 50% of the total fair market value or totalvoting power of the membership interests of our general partner.”   Mr. Slifka’s employment agreement providesthat a change of control is deemed to occur when none of Alfred A. Slifka, RichardSlifka and Eric Slifka or their respective family members or entities theycontrol, individually or in the aggregate, directly or indirectly, owns amajority of the member interests in our general partner.  See “Potential Payments Upon Termination orChange of Control” below for a detailed discussion of the provisions in ourexecutive officers’ employment agreements and Mr. Faneuil’s deferredcompensation agreement related to termination, change of control and relatedpayment obligations.

**Compensation ofNamed Executive Officers**

Thefollowing table sets forth certain information with respect to compensation ofour Chief Executive Officer, our Chief Financial Officer and the two other mosthighly compensated executive officers during 2006.   The table also presents information withrespect to compensation of our former Chief Financial Officer, who served insaid capacity from our date of formation through June 30, 2006.

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**Summary Compensation Table for 2006**
|                                                                | ** ** | ** ** | ** ** | ** ** | ** ** | **Non-Equity**          | ** ** | ** **             | ** ** | ** **         | ** ** | ** ** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|-------------------------|------------|------------------------|------------|--------------------|------------|------------|------------|
| ** **                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive Plan** | ** ** | **Change in**     | ** ** | **All Other** | ** ** | ** ** | ** ** |
| **Name and Principal Position**                 | ** ** | **Salary** | ** ** | **Bonus**  | ** ** | **Compensation**        | ** ** | **Pension Value** | ** ** | **Compensation**   | ** ** | **Total**  | ** ** |
| ** **                                                     | ** ** | **$**      | ** ** | **$**      | ** ** | **$**                   | ** ** | **$**                  | ** ** | **$**              | ** ** | **$**      | ** ** |
|                                                           |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
| Eric Slifka                                                    |       | 1,000,000  |       | 1,000,000  |       | 500,000                 |       | (457                   | )          | 88,666             |       | 2,588,209  |       |
| President and CEO (1) (2) (6) (7)                              |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
|                                                           |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
| Thomas J. Hollister                                            |       | 275,000    |       | 94,466     |       | 65,534                  |       | —                 |       | 12,239             |       | 447,239    |       |
| EVP and CFO (1) (3) (4) (6) (8)                                |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
|                                                           |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
| Edward J. Faneuil                                              |       | 358,050    |       | 160,000    |       | —                  |       | 16,045                 |       | 21,871             |       | 555,966    |       |
| EVP, General Counsel and Secretary (1)  (6) (9)                |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
|                                                           |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
| Charles A. Rudinsky                                            |       | 260,000    |       | 160,000    |       | —                  |       | 49,593                 |       | 14,463             |       | 484,056    |       |
| EVP, Treasurer and Chief Accounting  Officer (1) (6) (10) (11) |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
|                                                           |       |       |       |       |       |                    |       |                   |       |               |       |       |       |
| Thomas A. McManmon, Jr.                                        |       | 447,334    |       | —     |       | —                  |       | 51,423                 |       | 27,533             |       | 551,503    |       |
| Former EVP and Former CFO (1) (5) (6)  (12)                    |       |       |       |       |       |                    |       |                   |       |               |       |       |       |

 

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(1)             The bonuses andnon-equity incentive plan compensation set forth in the preceding tablerepresent the amounts paid to the listed executives by our general partner in2007 as bonuses for service in 2006. Those portions of Messrs. Slifka’s and Hollister’s bonus payments thatwere earned pursuant to their respective employment agreements with our generalpartner are shown as non-equity incentive plan compensation.  The discretionary bonuses paid to our namedexecutive officers (shown under the column entitled “Bonuses” above) wereawarded by the Compensation Committee and, except for payments to Mr. Slifka,were paid from our 2006 bonus pool.  Weaccrued for the 2006 bonus pool expenses for payments to Messrs. Hollister,Faneuil, Rudinsky and McManmon on our financial statements. We separatelyaccrued for Mr. Slifka’s earned and discretionary bonus awards.

(2)             The aggregate amountof Mr. Slifka’s 2006 bonus includes a contractual bonus of **$**500,000in accordance with the provisions of his employment agreement with our generalpartner and a discretionary performance bonus awarded to him by the CompensationCommittee in the amount of $1,000,000.

(3)             Mr. Hollister wasnamed Executive Vice President and Chief Financial Officer of our generalpartner effective July 1, 2006.  He wasappointed Chief Operating Officer of our general partner effective February 1,2007.  Mr. Hollister was neither employedby nor an executive officer of our general partner in 2005.  Mr. Hollister’s 2006 salary is prorated forthe period from July 1 through December 31, 2006.

(4)             The aggregate amountof Mr. Hollister’s 2006 bonus includes a contractual bonus of **$**65,534 in accordance with the provisions of his employmentagreement with our general partner and a discretionary performance bonusawarded to him by the Compensation Committee in the amount of $94,466.

(5)             Mr. McManmon wasemployed as Executive Vice President and Chief Financial Officer of our generalpartner for the period commencing with our formation and continuing throughJune 30, 2006.  Total salary paid to Mr.McManmon in 2006 includes $225,750 (prorated for the period from January 1through June 30, 2006) plus $221,584 (aggregate monthly payments of $35,542each for the months of July and August 2006 and $37,625 each for the months ofSeptember

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through December 2006, inclusive, pursuant to hisemployment agreement with our general partner dated August 17, 2006.)

(6)             All of our executiveofficers are eligible to participate in our general partner’s health insurance,pension, 401(k) and other employee benefit plans in accordance with our generalpartner’s policies and on the same general basis as other employees of our generalpartner.  See “Other Benefits – PensionBenefits” for information with respect to eligibility standards andcalculations of estimated annual pension benefits payable upon retirement.  Our general partner’s 401(k) Savings andProfit Sharing Plan provides for discretionary matching contributions to theplan by our general partner.  See “401(k) Savingsand Profit Sharing Plan” for additional information with respect to eligibilityand permitted contributions to this plan.

(7)             With respect to Mr.Slifka, “All Other Compensation” for the year ended December 31, 2006 includesthe following perquisites in connection with his employment by our generalpartner:  Employer contributions paid byus under our 401(k) plan; the estimated personal value of automobiles providedby us for Mr. Slifka’s use; life insurance and long-term disability insurancepremiums paid by us; club memberships in the aggregate amount of $39,225annually; and professional financial planning and tax advice fees paid by us.

(8)             With respect to Mr.Hollister, “All Other Compensation” for the year ended December 31, 2006includes the following perquisites in connection with his employment by ourgeneral partner:  The estimated personalvalue of an automobile provided by us for Mr. Hollister’s use; and long-termdisability insurance premiums paid by us.

(9)             With respect to Mr.Faneuil, “All Other Compensation” for the year ended December 31, 2006 includesthe following perquisites in connection with his employment by our generalpartner:  Employer contributions paid byus under our 401(k) plan; the estimated personal value of an automobileprovided by us for Mr. Faneuil’s use; long-term disability insurance premiumspaid by us; and club membership fees paid by us.

(10)       With respect to Mr.Rudinsky, “All Other Compensation” for the year ended December 31, 2006includes the following perquisites in connection with his employment by ourgeneral partner:  Employer contributionspaid by us under our 401(k) plan; the estimated personal value of an automobileprovided by us for Mr. Rudinsky’s use; and long-term disability insurancepremiums paid by us.

(11)       Mr. Rudinsky was promotedto Executive Vice President and appointed Treasurer of our general partnereffective February 1, 2007.

(12)       With respect to Mr.McManmon, “All Other Compensation” for the year ended December 31, 2006includes the following perquisites in connection with his employment by ourgeneral partner:  Employer contributionspaid by us under our 401(k) plan; the estimated personal value of an automobileprovided by us for Mr. McManmon’s use; long-term disability insurance premiumspaid by us; club memberships paid by us; and professional financial planningand tax advice fees paid by us.

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Thefollowing table provides information regarding awards of non-equity plancompensation to certain of our named executive officers as set forth in theirrespective employment agreements with our general partner.  These awards, which were granted and paid in2007, are bonuses that our general partner became contractually obligated topay upon the achievement of specified targets by the Partnership during theyear ended December 31, 2006.

GRANTS OF PLAN-BASED AWARDS

|                         | ** ** | ** **          | ** ** | **Estimated Payments Under  Non-Equity Incentive Plan Awards** | ** ** |
|-------------------------|------------|---------------------|------------|-----------------------------------------------------------------------------------------|------------|
| **Name**                | ** ** | **Grant Date** | ** ** | **Threshold**                                                                           | ** ** | **Target** | ** ** | **Maximum** | ** ** |
|                    |       |                |       |                                                                                    |       |   |   |   |   |
| **Eric Slifka**         |       |                |       |                                                                                    |       |   |   |   |   |
| Bonus                   |       | 1/23/07             |       | (1                                                                                      | )          | $ 500,000 |   | $ 500,000 |   |
| ** **              |       |                |       |                                                                                    |       |   |   |   |   |
| **Thomas J. Hollister** |       |                |       |                                                                                    |       |   |   |   |   |
| Bonus                   |       | 1/23/07             |       | (2                                                                                      | )          | $   65,534 |   | $   65,534 |   |

 

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(1)                                  UnderMr. Slifka’s employment agreement with our general partner, Mr. Slifka wasentitled to receive a one-time cash payment for the year endedDecember 31, 2006 in an amount up to $500,000 to the extent, the aggregateamount of Available Cash deemed to be Operating Surplus, excluding anyadditional cash and cash equivalents resulting from working capital borrowings,for the four quarters ending December 31, 2006 exceeded $19,000,000.  Because the aggregate amount of AvailableCash deemed to be Operating Surplus at December 31, 2006 exceeded $19,000,000by more than $500,000, Mr. Slifka earned and received a one-time cash paymentin the amount of $500,000, payable as soon as practicable after payment of the minimumquarterly distribution for the quarter ending December 31, 2006 owed to ourgeneral partner and to each unitholder, but no later than March 31, 2007.  See “Compensation Discussion and Analysis—Elementsof Compensation – Annual Bonuses – Contractual” for definitions of “AvailableCash” and “Operating Surplus.”

(2)                                  UnderMr. Hollister’s employment agreement with our general partner, Mr. Hollisterwas entitled to receive a one-time cash payment in the amount of $130,000,prorated for Mr. Hollister’s tenure of employment with our general partnerduring 2006, in the event our annual distributable cash flow for the 2006calendar year exceeded $21,000,000.   See“Compensation Discussion and Analysis—Elements of Compensation – Annual Bonuses– Contractual” for the definition of “distributable cash flow.”

**Employmentand Related Agreements**

***Eric Slifka*** is employed as President and ChiefExecutive Officer pursuant to an employment agreement with our generalpartner.  The term of the agreementcommenced on October 4, 2005 and continues through December 31, 2008 unlessterminated earlier in accordance with the terms of the agreement.  The agreement provides for a base salary of$1,000,000 per year, subject to increase at the commencement of the yearscommencing January 1, 2007 and 2008 by the percentage increase, if any, in theconsumer price index.  In addition, Mr.Slifka is eligible to receive annual cash bonuses based on (a) our results ofoperations and financial condition for each of 2005 and 2006 and (b)discretionary bonus amounts to be determined by the Compensation Committee foryears after 2005.  Mr. Slifka is entitledto participate in the LTIP and in such other benefit plans and programs as ourgeneral partner may provide for its employees in general. The agreementincludes a confidentiality provision which, subject to typical exceptions forrequirement 

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of law and publicknowledge (other than as a result of unauthorized disclosure by Mr. Slifka),will continue for two years following Mr. Slifka’s termination ofemployment.  See “Potential Payments UponTermination or Change of Control” for a discussion of the provisions in Mr.Slifka’s employment agreement related to termination, change of control andrelated payment obligations.   Mr.Slifka also is subject to certain non-competition provisions included in theOmnibus Agreement, which non-competition obligations continue through December31, 2010 unless terminated earlier pursuant to the terms ofMr. Slifka’s employment agreement.

***Thomas J. Hollister*** is employed as Executive VicePresident and Chief Financial Officer pursuant to an employment agreement withour general partner.  Effective February1, 2007, Mr. Hollister was also named Chief Operating Officer. Mr. Hollister’semployment commenced effective July 1, 2006 and is on an “at will” basis,meaning that Mr. Hollister’s employment has no specific duration and that,subject to the provisions of the agreement, either Mr. Hollister or our generalpartner may terminate his employment at any time for any reason.  The agreement provides for a base salary of$550,000 for the initial 12-month period commencing July 1, 2006, andsubsequent review by the Compensation Committee no less frequently thanannually, at which time Mr. Hollister’s base salary may be increased in thediscretion of the Compensation Committee. In addition, Mr. Hollister is eligible to receive an annual cash bonus****amount of $130,000 for each 12-month period that he isemployed by our general partner (such amount to be prorated for the period fromJuly 1, 2006 through December 31, 2006), provided that thePartnership achieves a distributable cash flow target.  Mr. Hollister also shall be entitled toparticipate in the LTIP or, in the event we do not make awards under the LTIPon or before June 30, 2007, to receive a secondary bonus in the amount of$250,000, payable over four years; provided, however, that Mr. Hollister mustbe employed by our general partner as of the date of each scheduled payment ofthe secondary bonus in order to be eligible to receive it.  The agreement includes a confidentialityprovision which, subject to typical exceptions for requirement of law andpublic knowledge (other than as a result of unauthorized disclosure by Mr.Hollister), will continue for two years following Mr. Hollister’stermination of employment.  The agreementalso includes non-competition provisions which continue during the term of theagreement and for a period of two years thereafter. ** **Also see “PotentialPayments Upon Termination or Change of Control” for a discussion of theprovisions in Mr. Hollister’s employment agreement related to termination,change of control and related payment obligations.

***Edward J. Faneuil*** is employed as Executive VicePresident, General Counsel and Secretary pursuant to an employment agreementwith our general partner.  Mr. Faneuil’semployment agreement became effective as of July 1, 2006 and continues throughDecember 31, 2008 unless terminated earlier in accordance with the terms of theagreement.  The agreement provides for anannual base salary of $358,050 for the 12-month period commencing July 1,2006.  Thereafter, Mr. Faneuil’s basesalary will be reviewed by the Compensation Committee at least annually.  Mr. Faneuil also is entitled to receivediscretionary bonuses as authorized by the Compensation Committee to be paid nolater than March 15 of the calendar year immediately following the calendaryear in which such bonuses are earned. Mr. Faneuil is eligible to participatein our general partner’s health insurance, pension, 401(k) and other employeebenefit plans and will also receive additional fringe benefits consistent withbenefits previously provided to him under prior arrangements.  If and when our LTIP is implemented, Mr.Faneuil shall be eligible to participate in the LTIP on the same general basisas the other executive officers of our general partner.  The agreement includes a confidentialityprovision which, subject to typical exceptions for requirement of law andpublic knowledge (other than as a result of unauthorized disclosure by Mr.Faneuil), will continue for two years following Mr. Faneuil’s termination ofemployment.   The agreement also includesnon-competition and non-solicitation provisions which continue during the termof the agreement and for a period of two years thereafter**.** ** **Mr.Faneuil also has entered into a deferred compensation agreement with ourgeneral partner.  See “—DeferredCompensation Agreements” below for a description of this non-qualified deferredcompensation plan.  See “PotentialPayments Upon Termination or Change of Control” for a discussion of theprovisions in Mr. Faneuil’s employment agreement and deferred compensationagreement related to termination, change of control and related paymentobligations.

***Thomas A. McManmon, Jr.*** was employed as ExecutiveVice President and Chief Financial Officer from the date of our formationthrough June 30, 2006.  He currently isan employee of our general partner pursuant to an employment agreement datedAugust 17, 2006, which is effective as of July 1, 2006 through September 30,2010.  Pursuant to the agreement, Mr. McManmon 

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will performservices as an employee on an as-needed basis for up to 30 hours per week withsuch duties and responsibilities as may be reasonably assigned to him from timeto time by the President and CEO of our general partner.  Under theagreement, Mr. McManmon will be paid a monthly salary of $35,542 for the periodfrom July 1 through August 31, 2006, $37,625 for the period from September 1,2006 through August 31, 2008, and $2,083 for the period from September 1, 2008 throughSeptember 30, 2010.  In addition to the compensation provided in theagreement, Mr. McManmon will be entitled to participate in our annual incentiveor bonus plans at the discretion of our CEO for the year 2006 only. During his term of employment, Mr. McManmon will be entitled to participate inall employee benefit plans except as otherwise provided under the agreement orto the extent such plans are duplicative of benefits otherwise provided underhis employment agreement.  Mr. McManmon’s employment may be terminatedprior to the expiration of his term of employment under certain circumstancesas provided in the agreement. Mr. McManmon also has entered into adeferred compensation agreement with our general partner.  See “—Deferred Compensation Agreements” belowfor a description of this non-qualified deferred compensation plan.  See “Potential Payments Upon Termination orChange of Control” for a discussion of the provisions in Mr. McManmon’semployment agreement and deferred compensation agreement related totermination, change of control and related payment obligations.

***CharlesA. Rudinsky***, Executive Vice President, Treasurer andChief Accounting Officer, is an at will employee.

***Deferred Compensation Agreements***

On February 1, 2007 our general partner and Edward J. Faneuil entered into a deferred compensation agreement. Mr. Faneuil will be subject to the terms and conditions relating to confidential information, non-solicitation and non-competition as provided in the deferred compensation agreement.  See “Potential Payments Upon Termination or Change of Control” for a discussion of the provisions in Mr. Faneuil’s deferred compensation agreement related to termination, change of control and related payment obligations.

On August 17, 2006 our general partner and Thomas A. McManmon, Jr. entered into a deferred compensation agreement.   Mr. McManmon will be subject to the terms and conditions relating to confidential information, non-solicitation (until he attains age 75) and non-competition (until he attains age 72) as provided in the deferred compensation agreement.   See “Potential Payments Upon Termination or Change of Control” for a discussion of the provisions in Mr. McManmon’s deferred compensation agreement related to termination, change of control and related payment obligations.

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**PotentialPayments upon a Change of Control or Termination**

Thefollowing table shows potential payments to our named executive officers underexisting contracts, agreements, plans or arrangements, whether written or unwritten,for various scenarios involving a change of control or termination ofemployment of each such executive officer assuming a December 31, 2006termination date.
|                                 | ** ** | ** **                                        | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                                        | ** ** | **Constructive**                                  | ** ** | ** **             | ** ** |
|---------------------------------|------------|---------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------|------------|------------------------|------------|
| ** **                      | ** ** | ** **                                        | ** ** | ** **                             | ** ** | ** **                             | ** ** | **Termination**                                   | ** ** | **termination/**                                  | ** ** | ** **             | ** ** |
| ** **                      | ** ** | ** **                                        | ** ** | ** **                             | ** ** | ** **                             | ** ** | **by general**                               | ** ** | **Breach by**                                | ** ** | ** **             | ** ** |
| ** **                      | ** ** | **Change of**                                | ** ** | ** **                             | ** ** | **Permanent**                          | ** ** | **partner**                                       | ** ** | **general**                                       | ** ** | ** **             | ** ** |
| **Name**                        | ** ** | **Control**                                       | ** ** | **Death**                              | ** ** | **Disability**                         | ** ** | **without cause**                            | ** ** | **partner**                                       | ** ** | **Nonrenewal**         | ** ** |
|                            |       |                                              |       |                                   |       |                                   |       |                                              |       |                                              |       |                   |       |
| **Eric  Slifka**(1)             | ** ** | ** **                                        | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                                        | ** ** | ** **                                        | ** ** | ** **             | ** ** |
| Base salary                     |       | —                                            |       | $  2,000,000                 |       | $  2,000,000                 |       | $  2,000,000                            |       | $  2,000,000                            |       | —                 |       |
| Bonus                           |       | —                                            |       | $     500,000 |       | $     500,000 |       | $  1,486,606                            |       | $  1,486,606                            |       | —                 |       |
| Severance                       |       | $  1,000,000                            |       | —                                 |       | $  1,869,977                 |       | $  1,869,977                            |       | $  1,869,977                            |       | $  1,869,977 |       |
| Fringe benefits                 |       | —                                            |       | $     177,332 |       | $     177,332 |       | $     177,332            |       | $     177,332            |       | —                 |       |
|                            |       |                                              |       |                                   |       |                                   |       |                                              |       |                                              |       |                   |       |
| **Thomas  J. Hollister**(2)     | ** ** | ** **                                        | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                                        | ** ** | ** **                                        | ** ** | ** **             | ** ** |
| Severance                       |       | $  1,100,000                            |       | —                                 |       | —                                 |       | $  1,100,000                            |       | $  1,100,000                            |       | —                 |       |
| Fringe benefits                 |       | $       24,478 |       | —                                 |       | —                                 |       | $       24,478 |       | $       24,478 |       | —                 |       |
|                            |       |                                              |       |                                   |       |                                   |       |                                              |       |                                              |       |                   |       |
| **Thomas  A. McManmon, Jr.**(3) | ** ** | ** **                                        | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                                        | ** ** | ** **                                        | ** ** | ** **             | ** ** |
| Severance                       |       | —                                            |       | $     752,550 |       | $     752,550 |       | —                                            |       | —                                            |       | —                 |       |
| Deferred Compensation           |       | $     857,625            |       | $     857,625 |       | $  1,275,000                 |       | $  1,275,000                            |       | $  1,275,000                            |       | —                 |       |
|                            |       |                                              |       |                                   |       |                                   |       |                                              |       |                                              |       |                   |       |
| **Edward  J. Faneuil**(4)       | ** ** | ** **                                        | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                                        | ** ** | ** **                                        | ** ** | ** **             | ** ** |
| Severance                       |       | —                                            |       | —                                 |       | —                                 |       | $     716,100            |       | $     716,100            |       | —                 |       |
| Deferred  Compensation          |       | $     755,388            |       | $     755,388 |       | $     755,388 |       | $  1,050,000                            |       | $  1,050,000                            |       | —                 |       |
| Fringe benefits                 |       | —                                            |       | —                                 |       | —                                 |       | $       21,231 |       | $       21,231 |       | —                 |       |

 

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(1)          ***EricSlifka***:

The employmentagreement between our general partner and Mr. Slifka provides that upon theoccurrence of a “change of control” (defined below), our general partnerwill pay Mr. Slifka an amount equal to his base salary as in effect on the dateof termination, payable in a lump sum within ten (10) days of the date oftermination.  Under this employment agreement, a “change of control” is deemed to haveoccurred when none of Alfred A. Slifka, Richard Slifka and Eric Slifkaor their respective family members or entities they control, individually or inthe aggregate, directly or indirectly, owns a majority of the member interestsin our general partner.

Mr. Slifka’s employmentagreement also provides, upon termination of employment for death or “permanentdisability” (defined below), that Mr. Slifka will receive allcompensation and all benefits pursuant to the terms of the agreement throughDecember 31, 2008.

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In the event of a permanent disability, assuming atermination date of December 31, 2006, Mr. Slifka would have been entitled toreceive a severance payment in the amount of $1,869,977 (75% times the sum of(i) the base salary in effect on the date of termination, and (ii) the averageof the bonuses earned by Mr. Slifka in the two calendar years immediatelypreceding the date of termination), payable in twenty-four (24) equal monthly installmentsbeginning no later than January 1, 2009. For purposes of Mr. Slifka’s employment agreement, “permanent disability”is defined as a physical or mental disability or impairment which renders Mr.Slifka unable, with or without reasonable accommodation, to perform theessential functions of his job for a period of at least ninety (90) consecutivedays, which disability or impairment is either expected to continue for atleast an additional ninety (90) consecutive days or to be of indefinite duration.

In the event of termination “for cause” (definedbelow), assuming a termination date of December 31, 2006, Mr. Slifka would havebeen entitled to receive all compensation and all benefits pursuant to theterms of the employment agreement until the date of termination, but Mr. Slifkawould not have been entitled to receive any bonus.  For purposes of this employment agreement, “cause”is defined as (a) engaging in gross negligence or willful misconduct in theperformance of duties, (b) committing an act of fraud, embezzlement or willfulbreach of a fiduciary duty to us including our general partner and any of oursubsidiaries (including the unauthorized disclosure of any of our materialsecret, confidential and/or proprietary information, knowledge or data), (c)being convicted of (or pleading no contest to) a crime involving fraud,dishonesty or moral turpitude or any felony, or (d) breaching any materialprovision of the employment agreement or of the Omnibus Agreement, whichagreement contains non-competition provisions applicable to Mr. Slifka.

In the event of termination without cause orconstructive termination (defined below), and assuming a termination date ofDecember 31, 2006,  Mr. Slifka would havebeen entitled to receive in a lump sum on the date of termination (i)$2,000,000 (his base salary as in effect on the date of termination for eachyear or portion of a year commencing on the date of termination and ending onDecember 31, 2008), plus (ii)  $1,500,000(the bonus earned in the calendar year immediately preceding the date oftermination and unpaid at the date of termination), plus (iii) **$**1,869,977 (a severance amount equal tothe product of 75% and the sum of (a) the base salary as in effect on the dateof termination, and (b) the average of bonuses earned in the two calendar yearsimmediately preceding the date of termination.) Additionally, Mr. Slifka would remain eligible through December 31, 2008to participate in our general partner’s health insurance, pension, 401(k) andother employee benefit plans in accordance with our general partner’s policiesand on the same general basis as other employees, and he would continue toreceive such additional fringe benefits as are consistent with benefitsprovided to him under prior arrangements and in accordance with past practice,including a matching contribution under our general****partner’s401(k) plan, supplemental life insurance, supplemental long-term disabilityinsurance, automobile fringe benefits, club membership fees and financialplanning and tax advice fees.** **In****theevent of termination without cause or constructive termination, Mr. Slifkamay elect early termination of the non-competition restrictions contained inSection 2.1 of the Omnibus Agreement. Assuming a December 31, 2006 termination date, upon such election thenon-competition provisions would remain applicable to Mr. Slifka only throughDecember 31, 2007 and Mr. Slifka would forfeit the entire severance amountof $1,869,977. For purposes of theemployment agreement between our general partner and Mr. Slifka, “constructivetermination” is termination of employment as a result of any substantialdiminution, without Mr. Slifka’s written consent, in his working conditionsconsisting of (a) a material reduction in his duties and responsibilities, (b)any change in the reporting structure so that he no longer reports solely toour Board of Directors or (c) a relocation of the place of work further thanforty (40) miles from Waltham, Massachusetts.

If, as of December 31, 2008, theemployment agreement between our general partner and Mr. Slifka has not beenotherwise terminated and our general partner and Mr. Slifka have not enteredinto an employment agreement pursuant to which Mr. Slifka will be employedas our President and Chief Executive Officer commencing on January 1, 2009, 

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Mr. Slifka will be entitled to receive a non-renewalpayment.   Assuming a December 31, 2006 termination date, such non-renewalpayment would have been in an amount equal to **$**1,869,977 (the product of 75% and thesum of (i) the base salary as in effect on the date of termination, and (ii)the average of bonuses earned in the two calendar years immediately precedingthe date of termination), payable in twenty-four (24) equal monthlyinstallments beginning January 1, 2009. Notwithstanding the foregoing, Mr. Slifka may elect to forfeit all or aportion of the non-renewal severance amount in exchange for early terminationof the non-competition restrictions contained in Section 2.1 of the OmnibusAgreement.  Assuming a December 31, 2006termination date, upon such election the non-competition provisions wouldremain applicable to Mr. Slifka only through December 31, 2007 and Mr.Slifka would forfeit the entire non-renewal severance amount of $1,869,977.

Our general partner is obligated to reimburse Mr.Slifka for the federal excise tax and any tax imposed upon such reimbursementamount including, but not limited to, any federal taxes, including Medicaretax, and state taxes, if any, which become due on compensation and severancepaid pursuant to the employment agreement between our general partner and Mr.Slifka.

(2)          ***Thomas J. Hollister:***

The employment agreementbetween our general partner and Mr. Hollister provides, upon termination of hisemployment for any reason, that Mr. Hollister will receive payment through thedate of termination of his employment of (i) any earned, but unpaid, basesalary as then in effect, (ii) all earned, but unpaid, bonuses, and (iii) allaccrued vacation, expense reimbursements and other benefits (other thanseverance benefits, except as provided below) due Mr. Hollister in accordancewith the established plans and policies of our general partner or applicablelaw.

In the event of a change in control (defined below),Mr. Hollister’s employment agreement provides for accelerated vesting on anyand all outstanding Partnership options, restricted units, phantom units, unitappreciation rights and other similar rights (under the LTIP or otherwise) heldby him as in effect on the date of termination. No such options, restricted units, phantom units, unit appreciationrights and other similar rights had been granted to Mr. Hollister as ofDecember 31, 2006.  Pursuant to the employment agreement betweenour general partner and Mr. Hollister, a “change in control” is deemed to have occurredon the date that any one person, entity or group (other than Alfred Slifka,Richard Slifka or Eric Slifka, or their respective family members or entitiesthey control, individually or in the aggregate, directly or indirectly)acquires ownership of the membership interests of our general partner that,together with the membership interests of our general partner already held bysuch person, entity or group, constitutes more than 50% of the total fair marketvalue or total voting power of the membership interests of our general partner.

In the event of termination of Mr. Hollister’semployment without cause, or in the event of constructive termination (definedbelow), and assuming a December 31, 2006 termination date, Mr. Hollister wouldhave been entitled to receive a severance payment of $1,100,000 (twice his basesalary), payable monthly in twenty-four (24) equal installments.  During such severance payment payout period,Mr. Hollister would remain eligible to participate in our general partner’shealth insurance, pension, 401(k) and other employee benefit plans inaccordance with our general partner’s policies and on the same general basis asother employees.  The employment agreement between our generalpartner and Mr. Hollister defines “constructive termination” as the terminationof employment by Mr. Hollister as a result of (i) an uncured breach by thegeneral partner of a material provision of the employment agreement, (ii) theuncured failure of any successor (whether direct or indirect, by purchase,merger or otherwise) to all or substantially all of our business and/or assetsto expressly assume and agree to perform the employment agreement, (iii) Mr.Hollister’s desire to terminate his employment at any time for any reasonwithin the first six (6) months of a change in control, provided that he givesnotice of termination within thirty (30) days after the expiration of such six(6) month period, or (iv) any material diminution in working conditionsconsisting of (A) a material reduction in duties and responsibilities, (B) anychange in the reporting structure so that Mr. Hollister no longer reports toour President and Chief Executive Officer, (C) a relocation of place of workfurther than forty (40) miles from Waltham, Massachusetts,

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or (D) a reduction in base salary.  Assuming a December 31, 2006 terminationdate, in the event Mr. Hollister elected to terminate his employment forconstructive termination at any time within three (3) months before a change incontrol and twelve (12) months after a change in control, then in addition tothe foregoing severance and benefits Mr. Hollister also would have beenentitled to the accelerated vesting provisions described in the precedingparagraph.

Our general partner is obligated to reimburse Mr.Hollister for any and all federal excise taxes and penalties (other thanpenalties imposed as a result of Mr. Hollister’s actions), and any taxesimposed upon such reimbursement amounts, including, but not limited to, anyfederal, state and local income taxes, employment taxes, and other taxes, ifany, which may become due pursuant to the application of Sections 4999 and/or409A of the Code on any payments to Mr. Hollister in connection with theemployment agreement.

(3)          ***Thomas A. McManmon, Jr.***

The employment agreementbetween our general partner and Mr. McManmon provides that, upon termination ofhis employment for death or disability (defined below), Mr. McManmon (or hisestate or conservator or guardian, as applicable) will receive theremaining unpaid portion of any unpaid payment for services for the remainingterm of the agreement.  Assuming atermination date of December 31, 2006, the payment for services for theremainder of the term would include monthly payments of $37,625 for the periodfrom January 1, 2007 through August 31, 2008 and $2,083 for the period fromSeptember 1, 2008 through August 31, 2010.  “Disability”is defined in the employment agreement to mean that Mr. McManmon isunable to engage in any substantial gainful activity by reason of any medicallydeterminable physical or mental impairment which can be expected to result indeath or can be expected to last for a continuous period of not less than 12months, or if he is determined to be totally disabled by the Social SecurityAdministration, or if he is determined to be disabled in accordance with thelong-term disability plan, if any, of our general partner in which heparticipates.

Our general partner and Thomas A. McManmon, Jr. entered into a deferred compensation agreement pursuant to which Mr. McManmon will be paid the sum of $85,000 per year (the “Deferred Compensation”) in equal monthly installments of $7,083.33 on the first business day of each month for 15 years (180 months) commencing on October 1, 2010.  The Deferred Compensation will be forfeited in its entirety in the event that our general partner terminates Mr. McManmon’s employment for cause or Mr. McManmon terminates his employment for any reason other than death or disability prior to September 1, 2010.  On and after the date on which Deferred Compensation payments commence, our general partner may terminate its obligations under the deferred compensation agreement only for cause.  In the event of Mr. McManmon’s death prior to his receiving the aggregate amount of the Deferred Compensation, our general partner will pay Mr. McManmon’s beneficiary a single lump sum payment in an amount equal to the present value of the remaining payments that would have been paid to Mr. McManmon.

(4)          ***Edward J. Faneuil***

The employment agreementbetween our general partner and Mr. Faneuil provides that, upon termination ofhis employment for any reason, Mr. Faneuil will receive payment through thedate of termination of his employment of (i) any earned, but unpaid, basesalary as then in effect, (ii) all earned, but unpaid, bonuses, and (iii) allaccrued vacation, expense reimbursements and other benefits (other thanseverance benefits, except as provided below) due Mr. Faneuil in accordancewith the established plans and policies of our general partner or applicablelaw.  In the event of terminationof Mr. Faneuil’s employment by the general partner without cause, or in theevent of constructive termination, and assuming a December 31, 2006 terminationdate, Mr. Faneuil would have been entitled to receive a severance payment of$716,100 (twice his base salary), payable monthly in twenty-four (24) equalinstallments.  In addition, the generalpartner would provide health care continuation coverage benefits to Mr. Faneuilpursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”)and would continue to pay the applicable percentage of the medical insurancepremium that it pays for active employees during the applicable COBRA coverageperiod.

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Our general partner and Edward J. Faneuil entered intoa deferred compensation agreement pursuant to which Mr. Faneuil will be paidthe sum of $70,000 per year (the “Deferred Compensation”) in equal monthlyinstallments of $5,833.33 on the first business day of each month for 15 years(180 months) commencing on the earlier of: (i) August 1, 2014, and (ii) the firstbusiness day of the month following the termination of Mr. Faneuil’s employmentwith our general partner for reasons other than cause, subject to earliertermination as provided in the agreement. In the event of an unforeseeable emergency as referenced in thedeferred compensation agreement, our general partner will pay Mr. Faneuilwithin 15 days of the occurrence of the unforeseeable emergency the maximumamount allowable in a lump sum promptly following the occurrence of suchunforeseeable emergency. The Deferred Compensation will be forfeited in itsentirety in the event that our general partner terminates Mr. Faneuil’semployment prior to August 1, 2014 for cause or Mr. Faneuil terminates hisemployment for any reason other than death, disability or constructivetermination as defined in Mr. Faneuil’s employment agreement.  On and after the date on which DeferredCompensation payments commence, our general partner may terminate itsobligations under the deferred compensation agreement for cause or if ourgeneral partner subsequently determines within 18 months of Mr. Faneuil’stermination that circumstances which would give rise to a for cause terminationof Mr. Faneuil otherwise existed at the time of his earlier termination.  In the event of Mr. Faneuil’s death prior tohis receiving the aggregate amount of the Deferred Compensation, our generalpartner will pay Mr. Faneuil’s beneficiary within 60 days of the date of hisdeath a single lump sum payment in an amount equal to the present value of theremaining payments that would have been paid to Mr. Faneuil.  If there is a change in control or Mr. Faneuilis determined to have a disability prior to his receiving the aggregate amountof the Deferred Compensation, our general partner will pay to Mr. Faneuilwithin 60 days of the effective date of the change in control or thedetermination of disability a single lump sum payment in an amount equal to thepresent value of the remaining payments that would have been paid to him hadthe change in control or disability not occurred.

Our general partner is obligated to reimburse Mr.Faneuil for any and all federal excise taxes and penalties (other thanpenalties imposed as a result of Mr. Faneuil’s actions), and any taxes imposedupon such reimbursement amounts, including, but not limited to, any federal,state and local income taxes, employment taxes, and other taxes, if any, whichmay become due pursuant to the application of Sections 4999 and/or 409A of theCode on any payments to Mr. Faneuil in connection with the employmentagreement.  Mr. Faneuil and our generalpartner have agreed to reform any provision of the deferred compensationagreement between them in a manner mutually agreeable to avoid imposition ofany additional tax under the provisions of Section 409A of the InternalRevenue Code and related regulations and Treasury pronouncements.

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**Other Benefits**

***Pension Benefits***

Thetable below sets forth information regarding the present value as of December31, 2006 of the accumulated benefits of our named executive officers under theGlobal Partners LP Pension Plan.

**Pension Benefits at December 31, 2006**

|                          | ** ** | ** **         | ** ** | **Number of Years** | ** ** | **Present Value of** | ** ** | **Payments During**       | ** ** |
|--------------------------|------------|--------------------|------------|-------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| **Name**                 | ** ** | **Plan Name** | ** ** | **Credited Service**     | ** ** | **Accumulated Benefit**   | ** ** | **Last Fiscal Year** | ** ** |
| ** **               | ** ** | ** **         | ** ** | **(#)**                       | ** ** | **($)**                        | ** ** | **($)**                        | ** ** |
| Eric Slifka              |       | (1)                |       | 20                            |       | 171,882                        |       | —                         |       |
| Thomas J.  Hollister (2) |       | (1)                |       | —                        |       | —                         |       | —                         |       |
| Thomas A.  McManmon, Jr. |       | (1)                |       | 28                            |       | 766,135                        |       | —                         |       |
| Edward J.  Faneuil       |       | (1)                |       | 16                            |       | 273,538                        |       | —                         |       |
| Charles A. Rudinsky (3)  |       | (1)                |       | 23                            |       | 498,026                        |       | —                         |       |

 

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(1)          Global Partners LP Pension Plan

(2)          Mr. Hollister, whose employment with our general partner began July 1,2006, will not be eligible to participate in the Global Partners LP PensionPlan until he has completed one year of service.

(3)          From 1984 through 1988, Mr. Rudinsky was employed by National PetroleumCorporation, Inc.  In 1988, a predecessorof the Partnership acquired all of the outstanding capital stock of NationalPetroleum Corporation, Inc. and Mr. Rudinsky became an employee of saidpredecessor of the Partnership.  Inconnection with this acquisition, and for purposes of the Global Partners LPPension Plan, Mr. Rudinsky was credited with 4 additional years of service forthe period from 1984 through 1988.

All employees who(1) are 21 years of age or older, (2) are not covered by acollective bargaining agreement, (3) have been employed by ourpredecessor, our general partner or one of our operating subsidiaries for oneyear prior to enrollment in the Pension Plan and (4) have worked for ourpredecessor, our general partner or one of our operating subsidiaries at least1,000 hours during the applicable plan year are eligible to participate inthe  Global partners LP Pension Plan (the“Pension Plan”).  An employee is fullyvested in benefits under the Pension Plan after completing five years ofservice or upon termination due to death, disability or retirement. When anemployee retires at age 65, the employee can elect to receive either a lump sumdistribution or monthly benefit payments under the Pension Plan equal to(1) 23% of the employee’s average monthly compensation for the fiveconsecutive calendar years during which the employee received the highest amountof pay (“Average Compensation”) plus (2) 19.5% of the employee’s AverageCompensation in excess of his monthly “covered compensation” for SocialSecurity purposes, as provided in the Pension Plan. However, if an employeecompletes less than 30 years of service on his termination at or afterreaching age 65, the monthly benefit will be reduced by 1/30th for each yearless than 30 years completed by the employee. If an employee is terminatedbefore age 65, his benefit beginning at age 65 would be based on his AverageCompensation multiplied by a fraction, the numerator of which is a number ofyears of service at termination (not to exceed 30) and the denominator ofwhich is the number of years such employee would have served (not to exceed 30) hadhe stayed until age 65. An employee who is terminated after completing at leastfive years of service will be eligible for an early retirement benefitdetermined as described in the preceding sentence.

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:

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| **Highest Consecutive 5-Year** | ** ** | **Estimated Annual Pension  for Representative Years of Credited Service** | ** ** |
|------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|
| **Average Compensation  $**         | ** ** | **5 Years**                                                                                              | ** ** | **10 Years** | ** ** | **15 Years** | ** ** | **20 Years** | ** ** | **25 Years** | ** ** | **30 Years &  Over** | ** ** |
| ** **                               | ** ** | **$**                                                                                                         | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** |
| 125,000                                  |       | 7,027                                                                                                         |       | 14,053 |   | 21,080 |   | 28,107 |   | 35,133 |   | 42,160 |   |
| 150,000                                  |       | 8,797                                                                                                         |       | 17,595 |   | 26,392 |   | 35,190 |   | 43,987 |   | 52,785 |   |
| 175,000                                  |       | 10,568                                                                                                        |       | 21,137 |   | 31,705 |   | 42,273 |   | 52,841 |   | 63,410 |   |
| 200,000                                  |       | 12,339                                                                                                        |       | 24,678 |   | 37,017 |   | 49,357 |   | 61,696 |   | 74,035 |   |
| 225,000 and above                        |       | 14,110                                                                                                        |       | 28,220 |   | 42,330 |   | 56,440 |   | 70,550 |   | 84,660 |   |

 

Benefits under theformula are based upon the employee’s highest consecutive five-year averagecompensation and are not subject to offset for social security benefits.  Compensation for such purposes meanscompensation including overtime, but excluding bonuses, commissions, anyprogram of deferred compensation, employee benefits, moving expense, transportationallowances, salary continuation, and additional forms of remuneration.

***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 generalpartner will maintain the 401(k) Savings and Profit Sharing Plan.  The plan permits all eligible employees tomake voluntary pre-tax contributions to the plan, subject to applicable taxlimitations.  Our general partner maymake a discretionary matching contribution to the plan for each eligibleemployee equal to 50% of each employee’s contribution, up to a maximumcontribution of 3% of the employee’s pre-tax annual compensation, subject tocertain limitations under federal law. Eligible employees may elect to contribute up to 60% of theircompensation to the plan for each plan year. Employee contributions are subject to annual dollar limitations, whichare periodically adjusted by the cost of living index.  Participants in the plan are always fullyvested in any matching contributions under the plan; however, additionaldiscretionary contributions are subject to a vesting schedule ranging from twoto six years.  The plan is intended to betax-qualified under Section 401(a) of the Internal Revenue Code sothat contributions to the plan, and income earned on plan contributions, arenot taxable to employees until withdrawn from the plan, and so thatcontributions, if any, will be deductible when made.

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**Compensation of Directors**

The following table sets forth certain informationconcerning the compensation earned by our directors in 2006.

**Director Compensation for 2006**

 

| Name                  | ** ** | **Fees  Earned  or Paid  in Cash**                                                | ** ** | **Change in  Pension Value  and Non-Qualified  Deferred  Compensation  Earnings**                                      | ** ** | **Total**                                                                                   | ** ** |
|-----------------------|------------|---------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|
| Alfred Slifka         |       | $              38,000 |       | $                     — |       | $              38,000 |       |
| Richard Slifka        |       | 39,000                                                                                      |       | —                                                                                                                                |       | 39,000                                                                                      |       |
| Eric Slifka (1)       |       | —                                                                                      |       | (457                                                                                                                                  | )          | —                                                                                      |       |
| Robert J. McCool      |       | 54,000                                                                                      |       | —                                                                                                                                |       | 54,000                                                                                      |       |
| David McKown (2)      |       | 53,000                                                                                      |       | —                                                                                                                                |       | 53,000                                                                                      |       |
| Kenneth I. Watchmaker |       | 54,000                                                                                      |       | —                                                                                                                                |       | 54,000                                                                                      |       |

 

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(1)          Mr. Eric Slifka, as anexecutive officer of our general partner, is otherwise compensated for hisservices and therefore receives no separate compensation for his service as adirector.  He participates in the GlobalPartners LP Pension Plan pursuant to his employment agreement with our generalpartner, and not in his capacity as a director.

(2)          Mr. McKown also receivesa $20,000 per year advisory fee from Alliance Energy Corp., which is a relatedparty to the Partnership.

Officersor employees of our general partner or an affiliate thereof who also serve asdirectors do not receive additional compensation.   Directors who are not officers or employeesof our general partner or an affiliate thereof (1) receive:(a) $30,000 annual cash retainer; (b) $1,000 for each meeting of theboard of directors 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 LTIP. As of December 31, 2006, no awards had been grantedunder the LTIP.

Each director also isreimbursed for out-of-pocket expenses in connection with attending meetings ofthe board of directors or committees. Each director will be fully indemnified by us for actions associatedwith being a director to the extent permitted under Delaware law.

**Compensation Committee Interlocksand Insider Participation**

Sincethe formation of Global GP LLC and throughout the fiscal year ended December31, 2006, the Compensation Committee of Global GP LLC’s board of directors hascomprised Robert J. McCool, David McKown and Kenneth I. Watchmaker, none ofwhom are officers or employees of our general partner or any of itssubsidiaries.  Mr. Alfred Slifka servesas the Chairman of the board of directors and is an employee of Alliance EnergyCorp., which is a related party to (and customer of ) the Partnership.  Mr. Richard Slifka serves as Vice Chairman ofour general partner’s board of directors and is the Treasurer and an employeeof Alliance Energy Corp.  Mr. Eric Slifkaserves as a director of Alliance Energy Corp.

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**Compensation Committee Report**

The CompensationCommittee of Global GP LLC held five meetings during fiscal year 2006.  The Compensation Committee has reviewed anddiscussed the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K with management.  Basedupon such review, the related discussions and such other matters deemedrelevant and appropriate by the Compensation Committee, the CompensationCommittee has recommended to the board of directors that the CompensationDiscussion and Analysis be included in this Form 10-K.

David McKown (Chairman)Robert J. McCoolKenneth I. Watchmaker

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**Item12.**                   SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters.

Thefollowing table sets forth as of March 1, 2007 the beneficial ownership ofunits of Global Partners LP held by certain beneficial owners of more than 5%of the units, by each director and named executive officer of our generalpartner and by all directors and executive officers of our general partner as agroup:
| **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** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| Kayne Anderson  Capital Advisors L.P.(2)                         |       | 861,000                                |       | 15.3                                                       | %          | —                                       |       | —                                                           |       | 7.6                                                       | %          |
| Richard A.  Kayne(2)                                             |       | 861,000                                |       | 15.3                                                       | %          | —                                       |       | —                                                           |       | 7.6                                                       | %          |
| Global Petroleum  Corp.(3)                                       |       | 2,267                                  |       | *                                                          |       | 1,723,196                                    |       | 30.5                                                             | %          | 15.3                                                      | %          |
| Larea Holdings  LLC(4)                                           |       | 742                                    |       | *                                                          |       | 564,242                                      |       | 10.0                                                             | %          | 5.0                                                       | %          |
| Larea Holdings  II LLC(5)                                        |       | 371                                    |       | *                                                          |       | 282,121                                      |       | 5.0                                                              | %          | 2.5                                                       | %          |
| Montello Oil  Corporation(6)                                     |       | 3,086                                  |       | *                                                          |       | 2,344,992                                    |       | 41.6                                                             | %          | 20.8                                                      | %          |
| Sandwich  Terminal, L.L.C.(7)                                    |       | 11                                     |       | *                                                          |       | 8,464                                        |       | *                                                                |       | *                                                         |       |
| Chelsea Terminal  Limited Partnership(8)                         |       | 947                                    |       | *                                                          |       | 719,409                                      |       | 12.8                                                             | %          | 6.4                                                       | %          |
| Amy Cook(5)                                                      |       | 6,171                                  |       | *                                                          |       | 282,121                                      |       | 5.0                                                              | %          | 2.6                                                       | %          |
| Karen Dattilo(5)                                                 |       | 6,171                                  |       | *                                                          |       | 282,121                                      |       | 5.0                                                              | %          | 2.6                                                       | %          |
| Andrew Slifka(5)                                                 |       | 6,171                                  |       | *                                                          |       | 282,121                                      |       | 5.0                                                              | %          | 2.6                                                       | %          |
| Alfred A.  Slifka(3)(6)(7)(8)(9)                                 |       | 6,411                                  |       | *                                                          |       | 4,796,061                                    |       | 85.0                                                             | %          | 42.6                                                      | %          |
| Richard  Slifka(3)(6)(7)(8)(9)                                   |       | 6,311                                  |       | *                                                          |       | 4,796,061                                    |       | 85.0                                                             | %          | 42.6                                                      | %          |
| Eric Slifka(4)                                                   |       | 26,242                                 |       | *                                                          |       | 564,242                                      |       | 10.0                                                             | %          | 5.2                                                       | %          |
| Thomas J.  Hollister                                             |       | 5,000                                  |       | *                                                          |       | —                                       |       | —                                                           |       | *                                                         |       |
| Thomas A.  McManmon, Jr.(10)                                |       | 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)(11) |       | 59,853                                 |       | 1.1                                                        | %          | 5,360,303                                    |       | 95.0                                                             | %          | 48.0                                                      | %          |

 

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*                    Less than 1%

(1)             The address for each person or entity listed,other than Kayne Anderson Capital Advisors, L.P. and Richard A. Kayne, isP.O. Box 9161, 800 South Street, Suite 200, Waltham, Massachusetts02454-9161.

(2)             Accordingto a Schedule 13G filed on February 16, 2007, Kayne Anderson Capital Advisors,L.P. and Richard A. Kayne as of December 31, 2006 beneficially owned 861,000common units, or 15.26% of total common units outstanding, representing a 7.63%limited partner interest in Global Partners LP. The address for Kayne Anderson Capital Advisors, L.P. andRichard A. Kayne is 1800 Avenue of the Stars, Second Floor, Los Angeles,California 90067.

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

(4)             EricSlifka owns 100% of the ownership interests in Larea Holdings LLC and has solevoting and investment power with respect to units owned by LareaHoldings LLC.  Eric Slifka may, therefore,be deemed to beneficially own the units held by Larea Holdings LLC.  Eric Slifka is the son of Alfred A.Slifka.

(5)             Amy Cook, Karen Dattilo and Andrew Slifka eachhas a 33 1/3% ownership interest in Larea Holdings II LLC and shareproportionate voting and investment power with respect to units owned by LareaHoldings II LLC.  Each of Amy Cook, KarenDattilo and Andrew Slifka may, therefore, be deemed to beneficially own theunits held by Larea Holdings II LLC.  AmyCook, Karen Dattilo and Andrew Slifka are the children of Richard Slifka.

(6)             ASRS Montello General Partnership owns 72.8%of the ownership interests in Montello Oil Corporation.  Alfred A. Slifka and Richard Slifka are equalowners of ASRS Montello General Partnership. Alfred A. Slifka and Richard Slifka share voting and investment powerwith respect to and, therefore, may be deemed to beneficially own, the unitsowned by Montello Oil Corporation. Alfred Slifka Montello Irrevocable Trust (“AS Montello”) owns 13.6% ofMontello.  Alfred A. Slifka is thebeneficial owner of AS Montello.  RichardSlifka Montello Irrevocable Trust (“RS Montello”) owns 13.6% of Montello.  Richard Slifka is the beneficial owner of RSMontello.

(7)             Alfred A. Slifka and Richard Slifka are equalowners of Sandwich Terminal, L.L.C. and share voting and investment power withrespect to and, therefore, may be deemed to beneficially own, the units ownedby Sandwich Terminal, L.L.C.

(8)             Chelsea Terminal Corp. is the general partnerof Chelsea Terminal Limited Partnership. Alfred A. Slifka and Richard Slifka are equal owners of Chelsea TerminalCorp. and each owns a 50% limited partner interest in Chelsea Terminal LimitedPartnership.  Alfred A. Slifka andRichard Slifka share voting and investment power with respect to and,therefore, may be deemed to beneficially own, the units owned by ChelseaTerminal Limited Partnership.

(9)             Beneficially owned unit amounts for each ofAlfred A. Slifka and Richard Slifka consist of the units owned by GlobalPetroleum Corp., Montello Oil Corporation, Sandwich Terminal, L.L.C. andChelsea Terminal Limited Partnership. Alfred A. Slifka and Richard Slifka are brothers.

(10)       31,000 common units are owned directly by the reporting person, and1,500 common units are owned indirectly by the reporting person’s son.  The reporting person disclaims beneficialownership of the securities owned by his son.

(11)       Units held by Thomas A. McManmon, Jr. are not included in the units heldby “All directors and executive officers as a group (9 persons).”  Effective July 1, 2006, Thomas J. Hollistersucceeded Thomas A. McManmon Jr.as Chief Financial Officer of our general partner.

**Equity CompensationPlan Table**

Thefollowing table summarizes information about our equity compensation plans asof December 31, 2006:
| **Plan Category**                                         | ** ** | **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(1) |       | —                                                                                                                                                |       | —                                                                                                           |       | 564,242                                                                                                                                                                                                          |       |
| Total                                                          |       | —                                                                                                                                                |       | —                                                                                                           |       | 564,242                                                                                                                                                                                                          |       |

 

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(1)             Fora description of the material terms of the Long-Term Incentive Plan, please seeItem 11, “Executive Compensation—Long-Term Incentive Plan.”

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**Item13.**                   CertainRelationships and Related Transactions, and Director Independence.

Affiliates of our general partner, including directorsand executive officers of our general partner, own 60,224 common units and5,642,424 subordinated units representing a 49.5% limited partner interest inus.  In addition, our general partnerowns a 2% general partner interest in us.

**Distributions andPayments to Our General Partner and Its Affiliates**

The following table summarizes the distributions andpayments to be made by us to our general partner and its affiliates inconnection with the ongoing operation and liquidation of Global PartnersLP.  These distributions and paymentswere determined 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 60,224 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 $9.4 million on their common units and subordinated units.                                                                                                                                             |
| ** **                                                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Payments to our  general partner and its affiliates                        |   | Our general partner does not receive a management  fee or other compensation for its management of Global Partners LP. Our  general partner and its affiliates are reimbursed for expenses incurred on  our behalf. Our partnership agreement provides that our general partner  determines 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. |
|-------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Omnibus Agreement**

Uponthe closing of our initial public offering, we entered into an omnibusagreement with certain members of the Slifka family and our general partnerthat addresses the following matters:

·       the agreement of certainmembers of the Slifka family not to compete with us and to cause theiraffiliates not to compete with us under certain circumstances; and

·       the obligation of GlobalPetroleum Corp. and certain of its affiliates to indemnify us for certainliabilities.

Thisagreement is not the result of arm’s-length negotiations and may not have beeneffected on terms at least as favorable to the parties to this agreement ascould have been obtained from unaffiliated third parties.

***Noncompetition***

Eachof Alfred A. Slifka, Chairman of our general partner, and Richard Slifka, ViceChairman of our general partner, agreed, and caused their affiliates to agree,for so long as such individual, Eric Slifka, President, Chief Executive Officerand a director of our general partner, 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 (other than transportation by truck) of refinedpetroleum products in the United States, provided such activity generatesqualifying income (as defined in Section 7704 of the Internal RevenueCode); (2) the storage of refined petroleum products in connection withany of the activities described in (1); and (3) bunkering.  These restrictions will not apply to:

·       any assets not contributedto us in connection with our initial public offering, including anyreplacements and natural extensions thereof;

·       the ownership, individuallyor collectively, of up to 9.9% in a publicly traded entity that competes withus as long as none of Alfred A., Richard or Eric Slifka are on the board ofdirectors of the publicly traded entity;

·       any investment in oracquisition of any restricted business in an aggregate amount of 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.

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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 theclosing of our initial public offering against certain potential environmentalliabilities associated with the operation of the assets and occurring beforethe closing date of our initial public offering and indefinitely against claimsfor covered environmental liabilities made before the fifth anniversary of theclosing of our initial public offering and indefinitely against potentialliabilities resulting from the two lawsuits alleging MTBE contamination in thegroundwater in Massachusetts in which Global Companies LLC is a nameddefendant.  Please read Items 1 and 2, “Businessand Properties—Legal Proceedings—Environmental.”  The obligation of the Indemnitors will notexceed $7.5 million and they do not have any indemnification obligation inany 12-month period (starting with the closing date of our initial publicoffering) until our losses for that period exceed $400,000 in the aggregate andthen only to the extent such aggregate losses exceed $400,000.  Any unused amounts, including carried overunused amounts, will be carried over to the next 12-month period.  After the fifth anniversary of the closing ofour initial public offering, the annual deductible (not including carried overamounts) 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 for all losses attributable to thepost-closing operations of the assets contributed to us, to the extent notsubject to their indemnification obligations.

**Shared ServicesAgreements**

We are party to sharedservices agreements with Global Petroleum Corp. and with Alliance EnergyCorp.  We believe the terms of theseagreements are at least as favorable as could have been obtained fromunaffiliated third parties.  Under eachagreement, we provide Global Petroleum Corp. and Alliance Energy Corp. withcertain accounting, treasury, legal, information technology, human resourcesand financial operations support for which Global Petroleum Corp. and AllianceEnergy Corp., as applicable, pay us an amount based upon the cost associatedwith 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 suchservices.  We paid to Global PetroleumCorp. a net total of $78,000 and received from Alliance Energy Corp. a total of$757,000 for the year ended December 31, 2006.

**ThroughputAgreement with Global Petroleum Corp.**

We have an exclusivethroughput agreement with Global Petroleum Corp., one of our affiliates, withrespect to the Revere terminal in Revere, Massachusetts.  We believe the terms of this agreement are atleast as favorable as could have been obtained from unaffiliated thirdparties.  This agreement provides formore than two million barrels of storage capacity for our refined petroleumproducts.  We retain the title of allproducts stored at this terminal.  Pleasealso see Items 1 and 2, “Business and Properties—Storage—Bulk Terminals That WeOwn or Operate or at Which We Maintain Dedicated Storage—Revere Terminal(Revere, Massachusetts)” for more information. The term of this agreement ends December 31, 2013.  The agreement automatically renews annuallyunless it is terminated by either party by giving 90 days notice.  We pay a monthly fee to Global PetroleumCorp., which is adjusted according to the Consumer Price Index for the Northeastregion and for certain contractual costs. Including increases in certain contractual costs but excludingamortization of deferred rent, we paid to Global Petroleum Corp. a total of $8.0 millionfor the year ended December 31, 2006. Throughout the term of the Throughput Agreement with Global PetroleumCorp., we will have a right of first refusal through September 30, 2014 topurchase or lease the Revere terminal if Global Petroleum Corp. desires to sellor lease the Revere terminal to a third party.

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

Some members of ourmanagement team are also officers and/or directors of two of our affiliates,Global Petroleum Corp. and Alliance Energy Corp.  Global Petroleum Corp. is wholly owned byASRS Global General Partnership, an entity that is owned equally by Alfred A.and Richard Slifka. Messrs. Hollister, Faneuil and Rudinsky spend a portion of theirtime providing services to Global Petroleum Corp. under a shared services agreement.  Please read “—Shared Services Agreements.”

Alliance Energy Corp. is90% owned by members of the Slifka family. Alfred A. and Richard Slifka each own 15% of Alliance Energy Corp., andthey together control another 60% of this entity through voting trusts for thebenefit of their six children, each of whom owns 10% of Alliance EnergyCorp.  In addition, Mr. McManmonowns 5% of Alliance Energy Corp., and the remaining 5% ownership interest isheld by a former employee of Global Companies LLC, Willard Poires.  Under a shared services agreement,Messrs. Eric Slifka, Hollister, Faneuil and Rudinsky spend a portion oftheir time providing services to Alliance Energy Corp.  Please read “—Shared Services Agreements.”

**DirectorIndependence**

Please see Item 10, “Directors,Executive Officers and Corporate Governance” for information regarding directorindependence.

**Item14.**                   PrincipalAccountant Fees and Services.

The audit committee ofthe board of directors of Global GP LLC selected Ernst & Young LLP,Independent Registered Public Accounting Firm, to audit the books, records andaccounts of Global Partners LP for the 2006 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 the audit, audit-related, tax and all otherfees categories below were approved by the audit committee.

Fees paid toErnst & Young LLP were as follows (in thousands): 

|                    | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------|------------|----------|------------|----------|------------|
| Audit Fees(1)      |       | $        | 1,250      |     | $          | 1,422 |   |
| Audit Related Fees |       | 27       |       | 40       |       |
| Tax Fees(2)        |       | 495      |       | 329      |       |
| Total              |       | $        | 1,772      |     | $          | 1,791 |   |

 

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(1)   Represents feesfor professional services provided in connection with the audits of our annualfinancial statements and reviews of our quarterly financial statements.  Audit fees for 2006 also includedErnst & Young’s audit of the effectiveness of our internal controlover financial reporting at December 31, 2006, and fees for 2005 includedaudits performed as part of our registration statement filings.

(2)   Tax fees includedtax planning and tax return preparation.

** **

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**PART IV**

**Item15.**                   Exhibitsand Financial Statement Schedules
| (a)    | The following documents are included with the filing  of this report: |
|--------|-----------------------------------------------------------------------|
|   |                                                                  |   |
|   | 1.                                                                    | Financial statements |
|   |                                                                  |   |
|   |                                                                  | See “Index to Financial  Statements” on page F-1. |
|   |                                                                  |   |
|   | 2.                                                                    | Financial statement  schedules: |
|   |                                                                  |   |
|   |                                                                  | 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 |
|   |                                                                  |   |
|   |                                                                  | See “Exhibit Index” immediately following the  financial statement schedules in this Annual Report on Form 10-K for a  description of the documents that are filed as Exhibits to this report or  incorporated herein by reference. |
|   |                                                                  |   |
| (b)    | The following documents are filed as Exhibits to  this report:        |

 
|        | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|------------|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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 the Current Report on Form 8-K  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 the Current Report on Form 8-K 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) 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 the Current Report on Form 8-K  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 the  Current Report on Form 8-K 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 the Current Report  on Form 8-K 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 the Current Report on Form 8-K 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 the Current Report on Form 8-K 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 the Current Report on Form 8-K  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 the Current Report on Form 8-K filed on November 14,  2005).            |

 

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|            | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.10^     |       | —     |       | Employment Agreement dated April 19, 2006, by and  between Global GP LLC and Thomas J. Hollister (incorporated herein by  reference to Exhibit 99.1 to the Current Report on Form 8-K filed  on May 11, 2006).                                                                                                                                                                                                                                                                                  |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.11      |       | —     |       | Second Amendment to Credit Agreement, dated as of  August 2, 2006, among Global Operating LLC, Global Companies LLC, Global  Montello Group Corp., 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 10.1 to the Current  Report on Form 8-K filed on August 3, 2006). |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.12^     |       | —     |       | Agreement dated August 17, 2006, by and between  Global GP LLC and Thomas A. McManmon, Jr. (incorporated herein by reference  to Exhibit 10.1 to the Current Report on Form 8-K filed on August  21, 2006).                                                                                                                                                                                                                                                                                     |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.13^     |       | —     |       | Deferred Compensation Agreement dated August 17,  2006, by and between Global GP LLC and Thomas A. McManmon, Jr. (incorporated  herein by reference to Exhibit 10.2 to the Current Report on Form 8-K  filed on August 21, 2006).                                                                                                                                                                                                                                                               |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.14^     |       |       |       | Employment Agreement dated February 1, 2007, by and  between Global GP LLC and Edward J. Faneuil (incorporated herein by reference  to Exhibit 10.1 to the Current Report on Form 8-K filed on  February 7, 2007).                                                                                                                                                                                                                                                                         |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.15^     |       |       |       | Deferred Compensation Agreement dated February 1,  2007, by and between Global GP LLC and Edward J. Faneuil (incorporated herein  by reference to Exhibit 10.2 to the Current Report on Form 8-K  filed on February 7, 2007).                                                                                                                                                                                                                                                              |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 21.1*      |       | —     |       | List of Subsidiaries of Global Partners LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 23.1*      |       |       |       | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|       |       |       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 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.                                                                                                                                                                                                                                                                                                                                                                                 |

----

^                     Managementcontract or compensatory plan or arrangement.

*                    Filed herewith.

†                     Notdeemed “filed” for purposes of Section 18 of the Securities Exchange Actof 1934 or otherwise subject to the liability of that section.

87

----

**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.
|                            | **GLOBAL PARTNERS LP** |
|----------------------------|------------------------|
|                       | By:                    | Global GP LLC, |
|                       |                   | its general partner |
|                       |                   |   |
|                       |                   |   |
| Dated: March 16, 2007 |                   | By: | /s/ ERIC  SLIFKA |   |
|                       |                   |   | Eric Slifka |
|                       |                   |   | President and Chief Executive Officer |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities indicated on March 16, 2007. 
| Signature                  | ** ** | **Title**                                          |
|----------------------------|------------|----------------------------------------------------|
|                       |       |                                               |
| /s/ ERIC SLIFKA            |       | President, Chief  Executive Officer and Director   |
| Eric Slifka                |       | (Principal  Executive Officer)                     |
|                       |       |                                               |
|                       |       | Executive Vice  President, Chief Operating Officer |
| /s/ THOMAS J.  HOLLISTER   |       | and Chief  Financial Officer                       |
| Thomas J.  Hollister       |       | (Principal  Financial Officer)                     |
|                       |       |                                               |
|                       |       | Executive Vice  President, Treasurer               |
| /s/ CHARLES A.  RUDINSKY   |       | 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     |       |                                               |

 

88

----

**INDEXTO FINANCIAL STATEMENTS**
| **GLOBAL PARTNERS LP FINANCIAL STATEMENTS**                                                                                                                                                                                                                        |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| ** **                                                                                                                                                                                                                                                         |   |   |
| Report  of Independent Registered Public Accounting Firm                                                                                                                                                                                                           |   |   |
|                                                                                                                                                                                                                                                               |   |   |
| Consolidated  Balance Sheets as of December 31, 2006 and 2005                                                                                                                                                                                                 |   |   |
|                                                                                                                                                                                                                                                               |   |   |
| Consolidated/Combined  Statements of Income for the year ended December 31, 2006, the periods from  October 4, 2005 through December 31, 2005 and from January 1,  2005 through October 3, 2005 and the Year Ended December 31, 2004      |   |   |
|                                                                                                                                                                                                                                                               |   |   |
| Consolidated/Combined  Statements of Cash Flows for the year ended December 31, 2006, the periods  from October 4, 2005 through December 31, 2005 and from  January 1, 2005 through October 3, 2005 and the Year Ended  December 31, 2004 |   |   |
|                                                                                                                                                                                                                                                               |   |   |
| Consolidated/Combined  Statements of Partners’/Members’ Equity for the Years Ended December 31,  2006, 2005 and 2004                                                                                                                                |   |   |
|                                                                                                                                                                                                                                                               |   |   |
| Notes to Financial Statements                                                                                                                                                                                                                                      |   |   |

 

F-1

----

**Report ofIndependent Registered Public Accounting Firm**

The Board of Directors of Global GPLLC and Unitholders of Global Partners LP

We have audited the accompanying consolidated balancesheets of Global Partners LP (“the Partnership”), as of December 31, 2006 and2005, and the related consolidated statements of income, partners’ equity andcash flows for the year ended December 31, 2006 (successor) and for the periodfrom October 4, 2005 through December 31, 2005 (successor) and the combinedstatements of income, members’ equity, and cash flows for the period fromJanuary 1, 2005 through October 3, 2005 (predecessor), and the year endedDecember 31, 2004 (predecessor). Our audits also included the financialstatement schedule listed in the Index at Item 15 (c).  These financial statements and schedule arethe responsibility of the Partnership’s management.  Our responsibility is to express an opinionon these financial statements and schedule based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion.  

In our opinion, the financial statements referred toabove present fairly, in all material respects, the financial position ofGlobal Partners LP at December 31, 2006 and 2005, and the results of itsoperations and its cash flows for the year ended December 31, 2006 (successor)and for the period from October 4, 2005 through December 31, 2005 (successor),the period from January 1, 2005 through October 3, 2005 (predecessor), and theyear ended December 31, 2004 (predecessor), in conformity with U.S. generallyaccepted accounting principles. Also, in our opinion, the related financialstatement schedule, when considered in relation to the basic financialstatements taken as a whole, presents fairly in all material respects theinformation set forth therein.

As discussed in Note 3 to the accompanying financialstatements, the Partnership has restated its balance sheet for the year endedDecember 31, 2005.

We also haveaudited, in accordance with the standards of the Public Company AccountingOversight Board (United States), the effectiveness of Global Partners LP’sinternal control over financial reporting as of December 31, 2006, based oncriteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our reportdated March 16, 2007 expressed an unqualified opinion thereon.
|                       | /s/ Ernst & Young LLP |
|-----------------------|--------------------------------|
| Boston, Massachusetts |                           |
| March 16, 2007        |                           |

F-2

----

**GLOBALPARTNERS LPCONSOLIDATED BALANCE SHEETS**(In thousands, except unit data)
| ** **                                                                                                            | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **Assets**                                                                                                            | ** ** | ** **                  | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                       |       |                        |       |                        |       |
| Cash and cash  equivalents                                                                                            |       | $                           | 3,861      |                        | $          | 1,769 |   |
| Accounts  receivable, less allowance of $2,756 and $2,084 as of December 31, 2006  and 2005, respectively        |       | 202,580                     |       | 237,861                     |       |
| Accounts  receivable—affiliates                                                                                  |       | 1,988                       |       | 2,005                       |       |
| Inventories                                                                                                           |       | 288,067                     |       | 260,714                     |       |
| Available for  sale securities                                                                                        |       | 13,913                      |       | —                      |       |
| Brokerage margin  deposits                                                                                            |       | 625                         |       | 9,210                       |       |
| Fair value of  forward fixed contracts                                                                                |       | 66,115                      |       | —                      |       |
| Prepaid expenses  and other current assets                                                                            |       | 18,924                      |       | 7,781                       |       |
| Total current  assets                                                                                                 |       | 596,073                     |       | 519,340                     |       |
|                                                                                                                  |       |                        |       |                        |       |
| Property and equipment,  net                                                                                          |       | 31,657                      |       | 21,975                      |       |
| Intangible assets, net                                                                                                |       | 9,076                       |       | 10,603                      |       |
| Other assets                                                                                                          |       | 2,081                       |       | 2,838                       |       |
| Total assets                                                                                                          |       | $                           | 638,887    |                        | $          | 554,756 |   |
|                                                                                                                  |       |                        |       |                        |       |
| **Liabilities and partners’  equity**                                                                            | ** ** | ** **                  | ** ** | ** **                  | ** ** |
| Current liabilities:                                                                                                  |       |                        |       |                        |       |
| Accounts payable                                                                                                      |       | $                           | 222,034    |                        | $          | 259,463 |   |
| Revolving line  of credit – current portion                                                                      |       | 188,700                     |       | 95,800                      |       |
| Notes payable,  other—current portion                                                                            |       | 319                         |       | 297                         |       |
| Accrued expenses  and other current liabilities                                                                       |       | 35,573                      |       | 28,615                      |       |
| Income taxes  payable                                                                                                 |       | 1,164                       |       | 1,200                       |       |
| Obligations on  forward fixed contracts and other derivatives                                                         |       | —                      |       | 1,038                       |       |
| Total current  liabilities                                                                                            |       | 447,790                     |       | 386,413                     |       |
|                                                                                                                  |       |                        |       |                        |       |
| Revolving line of  credit – less current portion                                                                 |       | 82,000                      |       | 85,800                      |       |
| Notes payable,  other—less current portion                                                                       |       | 1,239                       |       | 1,559                       |       |
| Accrued pension benefit  cost                                                                                         |       | 3,170                       |       | 3,187                       |       |
| Deferred compensation                                                                                                 |       | 1,429                       |       | 1,236                       |       |
| Other long-term  liabilities                                                                                          |       | 20                          |       | 253                         |       |
| Total  liabilities                                                                                                    |       | 535,648                     |       | 478,448                     |       |
| Commitments and  contingencies (See Note 12)                                                                          |       | —                      |       | —                      |       |
|                                                                                                                  |       |                        |       |                        |       |
| **Partners’ equity**                                                                                             | ** ** | ** **                  | ** ** | ** **                  | ** ** |
| Common  unitholders (5,642,424 units issued and outstanding at  December 31, 2006 and 2005)                      |       | 104,212                     |       | 97,512                      |       |
| Subordinated  unitholders (5,642,424 units issued and outstanding at  December 31, 2006 and 2005)                |       | (13,672                     | )          | (20,372                     | )          |
| General partner  interest (2% interest with 230,303 equivalent units outstanding at  December 31, 2006 and 2005) |       | (560                        | )          | (832                        | )          |
| Accumulated  other comprehensive income                                                                               |       | 13,259                      |       | —                      |       |
| Total partners’  equity                                                                                          |       | 103,239                     |       | 76,308                      |       |
| Total liabilities and  partners’ equity                                                                          |       | $                           | 638,887    |                        | $          | 554,756 |   |

 

The accompanying notesare an integral part of these financial statements.

F-3

----

**GLOBAL PARTNERS LPCONSOLIDATED/COMBINED STATEMENTS OF INCOME**(In thousands, except per unit data)
| ** **                                                                        | ** ** | **Successor**                          | ** ** | ** **                                     | ** ** | **Predecessor** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------|------------|-----------------|------------|
| ** **                                                                        | ** ** | **Year Ended  December 31,** | ** ** | **October 4  through  December 31,** | ** ** | ** **      | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                                                                        | ** ** | **2006**                               | ** ** | **2005**                                       | ** ** | ** **      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                        | ** ** | **Consolidated**                       | ** ** | **Consolidated**                               | ** ** | ** **      | ** ** | **Combined** | ** ** | **Combined** | ** ** |
| Sales                                                                             |       | $                                      | 4,472,418  |                                           | $          | 1,248,899       |       |   |   | $ | 2,796,959 |   | $ | 3,187,569 |   |
| Cost of sales                                                                     |       | 4,359,192                              |       | 1,219,991                                      |       |            |       | 2,734,150 |   | 3,111,697 |   |
| Gross profit                                                                      |       | 113,226                                |       | 28,908                                         |       |            |       | 62,809 |   | 75,872 |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Costs and operating  expenses:                                                    |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Selling, general  and administrative                                              |       | 43,027                                 |       | 10,515                                         |       |            |       | 29,932 |   | 33,439 |   |
| Operating  expenses                                                               |       | 22,158                                 |       | 4,924                                          |       |            |       | 14,775 |   | 19,608 |   |
| Amortization  expenses                                                            |       | 1,528                                  |       | 389                                            |       |            |       | 1,234 |   | 825 |   |
| Total costs and  operating expenses                                               |       | 66,713                                 |       | 15,828                                         |       |            |       | 45,941 |   | 53,872 |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Operating income                                                                  |       | 46,513                                 |       | 13,080                                         |       |            |       | 16,868 |   | 22,000 |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Interest expense                                                                  |       | (11,901                                | )          | (2,686                                         | )          |            |       | (7,275 | ) | (4,700 | ) |
| Other income (expense)                                                            |       | 515                                    |       | —                                         |       |            |       | (900 | ) | 9 |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Income before income  tax expense                                                 |       | 35,127                                 |       | 10,394                                         |       |            |       | 8,693 |   | 17,309 |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Income tax expense                                                                |       | (1,666                                 | )          | (986                                           | )          |            |       | — |   | — |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Net income                                                                        |       | $                                      | 33,461     |                                           | $          | 9,408           |       |   |   | $ | 8,693 |   | $ | 17,309 |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Less:                                                                             |       |                                   |       |                                           |       |            |       |   |   |   |   |
| General  partners’ interest in net income                                    |       | (669                                   | )          | (188                                           | )          |            |       |   |   |   |   |
| Limited  partners’ interest in net income                                    |       | $                                      | 32,792     |                                           | $          | 9,220           |       |   |   |   |   |   |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Net income per limited  partner unit— basic and diluted(1)                   |       | $                                      | 2.46       |                                           | $          | 0.70            |       |   |   |   |   |   |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Weighted average  limited partners’ units outstanding—basic and diluted |       | 11,285                                 |       | 11,285                                         |       |            |       |   |   |   |   |
|                                                                              |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Distributions per limited partner unit                                            |       | $                                      | 1.72       |                                           |       |            |       |   |   |   |   |   |

 

----

(1)    See Note 2 of Notes toFinancial Statements for net income per limited partner unit calculation.

The accompanying notesare an integral part of these financial statements.

F-4

----

**GLOBAL PARTNERS LPCONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS**(In thousands)
| ** **                                                                                                                                       | ** ** | **Successor**         | ** ** | ** **            | ** ** | **Predecessor** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------|------------|
| ** **                                                                                                                                       | ** ** | ** **            | ** ** | **October 4**    | ** ** | ** **      | ** ** | **January 1** | ** ** | ** ** | ** ** |
| ** **                                                                                                                                       | ** ** | **Year Ended**   | ** ** | **through**           | ** ** | ** **      | ** ** | **through** | ** ** | **Year Ended** | ** ** |
| ** **                                                                                                                                       | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | ** **      | ** ** | **October 3,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                                                       | ** ** | **2006**              | ** ** | **2005**              | ** ** | ** **      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                                                                                       | ** ** | **Consolidated**      | ** ** | **Consolidated**      | ** ** | ** **      | ** ** | **Combined** | ** ** | **Combined** | ** ** |
| **Cash flows from operating  activities**                                                                                                        | ** ** | ** **            | ** ** | ** **            | ** ** |            |       | ** ** | ** ** | ** ** | ** ** |
| Net income                                                                                                                                       |       | $                     | 33,461     |                  | $          | 9,408           |       |   |   | $ | 8,693 |   | $ | 17,309 |   |
| Adjustments to  reconcile net income to net cash (used in) provided by operating activities:                                                     |       |                  |       |                  |       |            |       |   |   |   |   |
| Depreciation and  amortization                                                                                                                   |       | 4,110                 |       | 953                   |       |            |       | 2,922 |   | 3,232 |   |
| Write-offs and  amortization of deferred financing fees                                                                                          |       | 403                   |       | 392                   |       |            |       | 220 |   | 381 |   |
| Loss on  surrender of split dollar insurance policy                                                                                              |       | —                |       | —                |       |            |       | 1,050 |   | — |   |
| Loss (gain) on  disposition of property and equipment and other                                                                                  |       | 177                   |       | (3                    | )          |            |       | 34 |   | (299 | ) |
| Changes in  operating assets and liabilities, net of acquisitions:                                                                               |       |                  |       |                  |       |            |       |   |   |   |   |
| Accounts  receivable                                                                                                                             |       | 35,281                |       | (62,122               | )          |            |       | (17,304 | ) | (40,523 | ) |
| Accounts  receivable—affiliate                                                                                                              |       | 17                    |       | 4,341                 |       |            |       | (168 | ) | (3,864 | ) |
| Inventories                                                                                                                                      |       | (27,353               | )          | 14,339                |       |            |       | (109,467 | ) | (17,887 | ) |
| Prepaid  expenses, all other current assets and other assets                                                                                     |       | (3,282                | )          | 14,581                |       |            |       | (14,446 | ) | (6,185 | ) |
| Accounts payable                                                                                                                                 |       | (37,429               | )          | 61,478                |       |            |       | 57,500 |   | (20,828 | ) |
| Income taxes  payable                                                                                                                            |       | (35                   | )          | 1,200                 |       |            |       |   |   |   |   |
| Accrued expenses  and all other current liabilities                                                                                              |       | 7,323                 |       | 7,100                 |       |            |       | (3,641 | ) | 6,148 |   |
| Change in fair  value of forward fixed contracts                                                                                                 |       | (67,152               | )          | (85,977               | )          |            |       | 80,527 |   | (19,959 | ) |
| Other long-term  liabilities                                                                                                                     |       | —                |       | 248                   |       |            |       | (210 | ) | 522 |   |
| Net cash (used in)  provided by operating activities                                                                                             |       | (54,479               | )          | (34,062               | )          |            |       | 5,710 |   | (81,953 | ) |
| **Cash flows from investment  activities**                                                                                                       | ** ** | ** **            | ** ** | ** **            | ** ** |            |       | ** ** | ** ** | ** ** | ** ** |
| Terminal  acquisitions                                                                                                                           |       | (6,551                | )          | —                |       |            |       | — |   | (724 | ) |
| Maintenance  capital expenditures                                                                                                                |       | (1,971                | )          | (760                  | )          |            |       | (1,024 | ) | (1,301 | ) |
| Capital  improvement expenditures                                                                                                                |       | (3,944                | )          | —                |       |            |       | — |   | — |   |
| Proceeds from  the sale of property and equipment                                                                                                |       | 24                    |       | 12                    |       |            |       | 144 |   | 859 |   |
| Net cash used in  investment activities                                                                                                          |       | (12,442               | )          | (748                  | )          |            |       | (880 | ) | (1,166 | ) |
| **Cash flows from financing activities**                                                                                                         | ** ** | ** **            | ** ** | ** **            | ** ** |            |       | ** ** | ** ** | ** ** | ** ** |
| Proceeds from revolving  line of credit, net                                                                                                     |       | 89,100                |       | 181,600               |       |            |       | — |   | — |   |
| Payments on note  payable, other                                                                                                                 |       | (298                  | )          | (71                   | )          |            |       | (206 | ) | (259 | ) |
| Distributions to  partners                                                                                                                       |       | (19,789               | )          | —                |       |            |       | — |   | — |   |
| Issuance of  common units, net of underwriter discount                                                                                           |       | —                |       | 115,289               |       |            |       | — |   | — |   |
| Offering costs                                                                                                                                   |       | —                |       | (4,002                | )          |            |       | — |   | — |   |
| Redemptions of  common units from the predecessor members as a result of over-allotment  option exercise concurrent with initial public offering |       | —                |       | (15,098               | )          |            |       | — |   | — |   |
| Distributions to  the predecessor members concurrent with IPO                                                                                    |       | —                |       | (45,250               | )          |            |       | — |   | — |   |
| Payments of  deferred financing fees                                                                                                             |       | —                |       | (1,024                | )          |            |       | — |   | — |   |
| (Payments on)  proceeds from revolving line of credit under Former Credit Facility, net                                                          |       | —                |       | (149,000              | )          |            |       | 9,100 |   | 97,500 |   |
| (Payment on)  proceeds from term loan                                                                                                            |       | —                |       | (51,000               | )          |            |       | — |   | 51,000 |   |
| Payments to  RYTTSA                                                                                                                              |       | —                |       | —                |       |            |       | — |   | (43,230 | ) |
| Payments on note  payable to bank                                                                                                                |       | —                |       | —                |       |            |       | — |   | (6,000 | ) |
| Distributions to  members                                                                                                                        |       | —                |       | —                |       |            |       | (11,895 | ) | (16,041 | ) |
| Net cash provided by  (used in) financing activities                                                                                             |       | 69,013                |       | 31,444                |       |            |       | (3,001 | ) | 82,970 |   |
| **Cash and cash equivalents**                                                                                                                    | ** ** | ** **            | ** ** | ** **            | ** ** |            |       | ** ** | ** ** | ** ** | ** ** |
| Increase  (decrease) in cash and cash equivalents                                                                                                |       | 2,092                 |       | (3,366                | )          |            |       | 1,829 |   | (149 | ) |
| Cash and cash  equivalents at beginning of period                                                                                                |       | 1,769                 |       | 5,135                 |       |            |       | 3,306 |   | 3,455 |   |
| Cash and cash  equivalents at end of period                                                                                                      |       | $                     | 3,861      |                  | $          | 1,769           |       |   |   | $ | 5,135 |   | $ | 3,306 |   |
| **Supplemental information**                                                                                                                     | ** ** | ** **            | ** ** | ** **            | ** ** |            |       | ** ** | ** ** | ** ** | ** ** |
| Cash paid during the  year for interest                                                                                                          |       | $                     | 11,780     |                  | $          | 2,609           |       |   |   | $ | 7,969 |   | $ | 4,119 |   |

 

The accompanying notesare an integral part of these financial statements.

F-5

----

**GLOBAL PARTNERS LPCONSOLIDATED/COMBINED STATEMENTS OF PARTNERS’/MEMBERS’ EQUITY**(In thousands)
| ** **                                                                                                                                  | ** ** | **Predecessor**  | ** ** | ** ** | ** ** | **Successor**   | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------|------------|-----------------|------------|
| ** **                                                                                                                                  | ** ** | **Global**       | ** ** | ** ** | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                                                                                                                  | ** ** | **Companies**    | ** ** | ** ** | ** ** | ** **      | ** ** | ** ** | ** ** | **General** | ** ** | **Other** | ** ** | **Total** | ** ** |
| ** **                                                                                                                                  | ** ** | **LLC and** | ** ** | ** ** | ** ** | **Common**      | ** ** | **Subordinated** | ** ** | **Partner** | ** ** | **Comprehensive** | ** ** | **Partners’** | ** ** |
| ** **                                                                                                                                  | ** ** | **Affiliates**   | ** ** | ** ** | ** ** | **Unitholders** | ** ** | **Unitholders** | ** ** | **Interest** | ** ** | **Income** | ** ** | **Equity** | ** ** |
| ** **                                                                                                                                  | ** ** | ** **       | ** ** |       |       | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Predecessor:**                                                                                                                            | ** ** | ** **       | ** ** |       |       | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Balance December 31, 2003**                                                                                                          |       | $                | 42,565     |       |       |            | $          | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 42,565 |   |
| Net income and total  comprehensive income                                                                                                  |       | 17,309           |       |       |       | —          |       | — |   | — |   | — |   | 17,309 |   |
| Distribution to members                                                                                                                     |       | (16,041          | )          |       |       | —          |       | — |   | — |   | — |   | (16,041 | ) |
| Effect of RYTTSA  transaction                                                                                                               |       | (20,670          | )          |       |       | —          |       | — |   | — |   | — |   | (20,670 | ) |
| **Balance December 31, 2004**                                                                                                          |       | 23,163           |       |       |       | —          |       | — |   | — |   | — |   | 23,163 |   |
| Distribution to members                                                                                                                     |       | (11,895          | )          |       |       | —          |       | — |   | — |   | — |   | (11,895 | ) |
| Net income and total  comprehensive income through October 3, 2005                                                                     |       | 8,693            |       |       |       | —          |       | — |   | — |   | — |   | 8,693 |   |
| **Balance October 3, 2005**                                                                                                            |       | 19,961           |       |       |       | —          |       | — |   | — |   | — |   | 19,961 |   |
| **Successor:**                                                                                                                              | ** ** | ** **       | ** ** |       |       | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Consolidated*                                                                                                                              | * *   | * *         | * *   | * *   | * *   | * *        | * *   | * * | * * | * * | * * | * * | * * | * * | * * |
| Allocation of net  predecessor investment to unitholders                                                                                    |       | (19,961          | )          |       |       | 2,240           |       | 17,026 |   | 695 |   | — |   | — |   |
| Proceeds from initial  public offering, net of underwriter discount                                                                         |       | —           |       |       |       | 115,289         |       | — |   | — |   | — |   | 115,289 |   |
| Offering costs                                                                                                                              |       | —           |       |       |       | (4,002          | )          | — |   | — |   | — |   | (4,002 | ) |
| Distributions to the  predecessor members concurrent with initial public offering                                                           |       | —           |       |       |       | (5,078          | )          | (38,596 | ) | (1,576 | ) | — |   | (45,250 | ) |
| Redemption of common  units from predecessor members as a result of over-allotment option exercise  concurrent with initial public offering |       | —           |       |       |       | (15,098         | )          | — |   | — |   | — |   | (15,098 | ) |
| Elimination of  intercompany balance concurrent with initial public offering                                                                |       | —           |       |       |       | (449            | )          | (3,412 | ) | (139 | ) | — |   | (4,000 | ) |
| Net income and total  comprehensive income from October 4, 2005 through December 31, 2005                                         |       | —           |       |       |       | 4,610           |       | 4,610 |   | 188 |   | — |   | 9,408 |   |
| **Balance December 31, 2005**                                                                                                          |       | —           |       |       |       | 97,512          |       | (20,3722 | ) | (832 | ) | — |   | $ | 76,308 |   |
| Comprehensive income:                                                                                                                       |       |             |       |       |       |            |       |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                  |       | —           |       |       |       | 16,396          |       | 16,396 |   | 669 |   | — |   | 33,461 |   |
| Other  comprehensive income:                                                                                                                |       |             |       |       |       |            |       |   |   |   |   |   |   |   |   |
| Unrealized gain  on NYMEX shares                                                                                                            |       | —           |       |       |       | —          |       | — |   | — |   | 12,837 |   | 12,837 |   |
| Total  comprehensive income                                                                                                                 |       | —           |       |       |       | 16,396          |       | 16,396 |   | 669 |   | 12,837 |   | 46,298 |   |
| Adjustment to initially  apply SFAS No. 158                                                                                                 |       | —           |       |       |       | —          |       | — |   | — |   | 422 |   | 422 |   |
| Distributions to  partners                                                                                                                  |       |             |       |       |       | (9,696          | )          | (9,696 | ) | (397 | ) | — |   | (19,789 | ) |
| **Balance December 31, 2006**                                                                                                          |       | $                | —     |       |       |            | $          | 104,212 |   | $ | (13,6722 | ) | $ | (560 | ) | $ | 13,259 |   | $ | 103,239 |   |

 

The accompanying notesare an integral part of these financial statements.

F-6

----

**GLOBALPARTNERS LPNOTES TO FINANCIAL STATEMENTS**

**Note1.**                      Organization and Nature of Business

Global Partners LP (the “Partnership”) is a publiclytraded master limited partnership that engages in the wholesale and commercialdistribution of refined petroleum products and small amounts of natural gas andprovides ancillary services to companies domestically and, on a limited basis,internationally.  The Partnershipcommenced operations on October 4, 2005 upon the completion of its initialpublic offering of common units (the “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 (other than Glen Hes Corp.) arewholly owned by Global Operating LLC, a wholly owned subsidiary of thePartnership.

The Partnership’s 2% general partner interest is heldby Global GP LLC (the “General Partner”). The General Partner, which is owned by affiliates of the Slifka family,manages the Partnership’s operations and activities and employs its officersand substantially all of its personnel. Affiliates of the General Partner, including its directors and executiveofficers, own 60,224 common units and 5,642,424 subordinated units,representing a combined 49.5% limited partner 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 yearended December 31, 2004 refer to the business of Global Companies LLC andits affiliates, Glen Hes Corp., Global Montello Group LLC and Chelsea SandwichLLC (collectively, the “Predecessor”).

Immediately after becoming a publicly traded masterlimited partnership, the Partnership converted Global Montello Group LLC (thepredecessor 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 with respect to the period fromJanuary 1, 2005 through October 3, 2005 and the year endedDecember 31, 2004 and, in the consolidated financial statements and notes,Global Montello Group Corp. as of and for the year ended December 31, 2006 andas of and with respect to the period from October 4, 2005 throughDecember 31, 2005.

***The Partnership’s IPO***

On October 4, 2005, the Partnership completed itsIPO of 5,635,000 common units at a price of $22.00 per common unit, whichincluded a 735,000 common unit over-allotment option that was exercised by theunderwriters.  Proceeds from the sale ofthe common units were approximately $111.3 million, net of offering costsand underwriting discounts.  The netproceeds from the exercise of the underwriters’ over-allotment option of $15.1million were used to redeem common units from affiliates of the GeneralPartner.  The IPO represented the sale ofa 48.9% interest in the Partnership.

In connection with the Partnership’s IPO, the ownersof the Companies conveyed their respective interests in the Companies to thePartnership 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 the above-describedtransactions, the Companies became wholly-owned subsidiaries of GlobalOperating LLC.  The transfer of ownershipof assets from the Predecessor to the Partnership was recorded at historicalcosts in accordance with Emerging Issues Task Force (“EITF”) Issue No. 87-21,“Change in Accounting Basis in Master Limited Partnership Transactions.”

F-7

----

The following table presents the net assets of thePredecessor immediately prior to contributing such assets and liabilities tothe Partnership (in thousands):

|                                                                     | ** ** | **October 3,** | ** ** |
|---------------------------------------------------------------------|------------|---------------------|------------|
| ** **                                                          | ** ** | **2005**            | ** ** |
| Cash and cash  equivalents                                          |       | $                   | 5,135      |   |
| Accounts  receivable—trade                                     |       | 179,865             |       |
| Accounts  receivable—affiliates                                |       | 6,346               |       |
| Inventories                                                         |       | 275,053             |       |
| Broker margin  deposits                                             |       | 13,861              |       |
| Prepaid expenses  and other current assets                          |       | 14,700              |       |
| Property and  equipment, net                                        |       | 21,784              |       |
| Intangible  assets, net                                             |       | 10,996              |       |
| Other assets                                                        |       | 5,217               |       |
| Total assets                                                        |       | $                   | 532,957    |   |
| Revolving line  of credit                                           |       | $                   | 149,000    |   |
| Accounts payable                                                    |       | 198,112             |       |
| Notes payable,  other—current portion                          |       | 51,277              |       |
| Accrued expenses  and other current liabilities                     |       | 21,514              |       |
| Obligations on  forward fixed price contracts and other derivatives |       | 87,015              |       |
| Notes payable,  other—less current portion                     |       | 1,650               |       |
| Other long term  liabilities                                        |       | 4,428               |       |
| Total liabilities                                                   |       | $                   | 512,996    |   |
| Net assets                                                          |       | $                   | 19,961     |   |

 

***The Predecessor***

Immediately prior to the IPO, the Predecessorconducted the business 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 Holdings LLC and Larea Holdings II LLC(the “Transaction”).  Upon completion ofthe Transaction on July 2, 2004, RYTTSA no longer had an ownershipinterest in the Companies.

F-8

----

The aggregatepurchase price of RYTTSA’s interest, $43,230,000 was allocated to the assetsand liabilities based on their relative fair values at the time of acquisitionas determined by an independent appraisal firm. The following table presentsthe allocation of purchase price reflected in the accompanying combinedfinancial statements on a Push Down Accounting basis (in thousands):
| Original carrying value of  net assets acquired |   | $      | 20,670 |   |
|-------------------------------------------------|--------|--------|--------|--------|
| Fair Market  Value Adjustments:                 |   |   |   |
| Property and equipment                          |   | 8,842  |   |
| Intangible assets                               |   | 12,777 |   |
| Other assets                                    |   | 941    |   |
| Total                                           |   | $      | 22,560 |   |
|                                            |   |   |   |
| Total purchase price                            |   | $      | 43,230 |   |

 

**Note2.**                      Summary of Significant Accounting Policies

***Basis of Consolidation and Presentation***

The accompanying consolidated financial statements asof December 31, 2006 and 2005 and for the year ended December 31, 2006 and forthe period October 4, 2005 through December 31, 2005 reflect theaccounts of the Partnership.  Allintercompany balances and transactions have been eliminated.

The accompanying combined financial statements andnotes for the period January 1, 2005 through October 3, 2005 and forthe year ended December 31, 2004 reflect the accounts of the Predecessor.  All intercompany balances and transactionshave been eliminated.

***Reclassification***

Certain prior year amounts in the consolidated/combinedfinancial statements have been reclassified to conform to the current yearpresentation.

***Use of Estimates***

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and the disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period.  Actual results may differ from thoseestimates under different assumptions or conditions.

F-9

----

***Cash and Cash Equivalents***

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

The Partnership considers highly liquid investmentswith original maturities of three months or less at the time of purchase to becash equivalents.  The carrying value ofcash and cash equivalents approximates fair value.

***Inventories***

The Partnershiphedges substantially all of its inventory purchases through futures and swapagreements.  Changes in the fair value ofthese contracts, as well as the offsetting gain or loss on the hedged inventoryitem, are recognized currently in earnings, resulting in inventoryapproximating lower of cost or market on a first-in, first-out method.  Inventories consisted of the following atDecember 31 (in thousands):
|                                               | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|
|                                          |       |     |       |     |       |
| Distillates:  light oil, diesel, and kerosene |       | $        | 235,266    |     | $          | 195,171 |   |
| Residual oil                                  |       | 35,226   |       | 39,450   |       |
| Gasoline                                      |       | 9,870    |       | 19,311   |       |
| Blend stock                                   |       | 7,705    |       | 6,782    |       |
| Total                                         |       | $        | 288,067    |     | $          | 260,714 |   |

 

In addition to its own inventory, the Partnership hasexchange agreements with unrelated third-party suppliers, whereby it may drawinventory from these other suppliers (see *Revenue Recognition*)and suppliers may draw inventory from the Partnership.  Positive exchange balances are accounted foras accounts receivable.  Negativeexchange balances are accounted for as accounts payable.  Exchange transactions are valued usingcurrent quoted market prices.  The impactof exchange agreements was not material to the Partnership’s financialstatements at December 31, 2006 and 2005.

***Property and Equipment***

Property andequipment are stated at cost. Expenditures for routine maintenance, repairs and renewals are chargedto expense as incurred, and major improvements are capitalized.  Depreciation is charged to cost of sales andselling, general and administrative expenses over the estimated useful lives ofthe applicable assets, using principally straight-line methods.  The estimated useful lives are as follows:
| Buildings, docks, terminal facilities  and improvements |   | 15-39 years |   |
|---------------------------------------------------------|--------|-------------|--------|
| Fixtures, equipment and  automobiles                    |   | 3-7 years   |   |

 

***Long-Lived Assets***

Statement of Financial Accounting Standards (“SFAS”)No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”addresses financial accounting and reporting for the impairment or disposal oflong-lived assets other than goodwill or indefinite lived intangibleassets.  Accordingly, the Partnershipevaluates for impairment whenever indicators of impairment are identified.  The impairment evaluation is based on theprojected cash flows of the particular asset. No such indicators of impairment were identified during 2006 and 2005.

F-10

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***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 are estimated based upon ananalysis of potential results, assuming a combination of litigation andsettlement strategies and outcomes.

The Partnership provides for losses associated withenvironmental remediation obligations when such losses are probable andreasonably estimable.  Estimated lossesfrom environmental remediation obligations generally are recognized no laterthan completion of the remedial feasibility study.  Loss accruals are adjusted as furtherinformation becomes available or circumstances change.  Costs of future expenditures forenvironmental remediation obligations are not discounted to their presentvalue.

Recoveries of environmental remediation costs fromother parties are recognized as assets when their receipt is deemed probable.

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 andcontract and employment claims. Environmental and other legal proceedings may also include matters withrespect to businesses previously owned. Further, due to the lack of adequate information and the potentialimpact of present regulations and any future regulations, there are certaincircumstances in which no range of potential exposure may be reasonablyestimated.

There were no accruals recorded for environmental andother contingencies as of December 31, 2006 and 2005.

***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 the provisions of SFAS No. 13, “Accountingfor Leases,” as amended, which requires that leases be evaluated and classifiedas operating or capital leases for 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.

***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 cashdiscounts are recorded as a reduction of sales at the time of sale based on theestimated future outcome.  ThePartnership also provides for shipping costs at the time of sale, which areincluded in cost of sales.  The amountsrecorded for bad debts are generally based upon historically derivedpercentages while also factoring in any new business conditions that mightimpact the historical analysis, such as market conditions and bankruptcies ofparticular customers.  Bad debtprovisions are included in selling, general and administrative expenses.

Revenue is not recognized on exchange agreements,which are entered into primarily to acquire various refined petroleum productsof a desired quality or to reduce transportation costs by taking delivery ofproducts closer to the Partnership’s end markets.  In accordance with EITF No. 04-13, “Accountingfor Purchases and Sales of Inventory with the Same Counterparty,” any netdifferential for exchange agreements is recorded as an adjustment of inventorycosts in the purchases component of cost of sales in the statement of income.

F-11

----

***Income Taxes***

Section 7704 of the Internal Revenue Codeprovides that publicly-traded partnerships are, as a general rule, taxed ascorporations.  However, an exception,referred to as the “Qualifying Income Exception,” exists under Section 7704(c)with respect to publicly-traded partnerships of which 90% or more of the grossincome for every taxable year consists of “qualifying income.”  Qualifying income includes income and gainsderived from the transportation, storage and marketing of crude oil, naturalgas and products thereof.  Other types ofqualifying income include interest (other than from a financial business),dividends, gains from the sale of real property and gains from the sale orother disposition of capital assets held for the production of income thatotherwise constitutes qualifying income.

Substantially all of the Partnership’s income is “qualifyingincome” for federal and state income tax purposes and, therefore, is notsubject to federal and state income taxes at the partnership level.  Accordingly, no provision has been made forincome taxes on the qualifying income in the Partnership’s financialstatements.  Net income for financialstatement purposes may differ significantly from taxable income reportable tounitholders as a result of differences between the tax bases and financialreporting bases of assets and liabilities and the taxable income allocationrequirements under the First Amended and Restated Agreement of LimitedPartnership of Global Partners LP, as amended. 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 the unitholder’s tax position, differs fromthe accounting followed in the Partnership’s consolidated financialstatements.  Accordingly, the aggregatedifference in the basis of the Partnership’s net assets for financial and taxreporting purposes cannot be readily determined because information regardingeach unitholder’s tax attributes in the Partnership is not available to thePartnership.

Effective as of October 5, 2005, Global MontelloGroup Corp. (the successor by conversion to Global Montello Group LLC) is ataxable entity for federal and state income tax purposes.  Current and deferred income taxes arerecognized on the separate earnings of Global Montello Group Corp. for the yearended December 31, 2006 and for the period October 5, 2005 throughDecember 31, 2005.  The after-taxearnings of Global Montello Group Corp. are included in the earnings of thePartnership.  Deferred income taxesreflect the net tax effects of temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and theamounts used for income tax purposes for Global Montello Group Corp.  See Note 5.

***Concentration of Risk***

Financial instruments that potentially subject thePartnership to concentration of credit risk consist primarily of cash, cashequivalents, accounts receivable, firm commitments and, under certaincircumstances, futures contracts, options and swap agreements.  The Partnership invests excess cash primarilyin investment-grade securities and, by policy, limits the amount of creditexposure to any one financial institution. The Partnership provides credit, in the normal course of business,primarily to other wholesale and retail petroleum companies and generally doesnot require collateral.  The Partnershipperforms ongoing credit evaluations of its customers and provides for creditlosses based on specific information and historical trends.  Credit risk on trade receivables is minimizedas a result of the Partnership’s large customer base.  Losses have historically been within management’sexpectations.  See Note 4 for adiscussion regarding risk of credit loss related to futures contracts, optionsand swap agreements.

As demand for some of our refined petroleum products,specifically home heating oil and residual oil for space heating purposes, isgenerally greater during the winter months, sales are generally better duringthe first and fourth quarters of the calendar year which may result insignificant fluctuations in our quarterly operating results.

F-12

----

No single customer accounted for 10% or more of salesfor the years ended December 31, 2006, 2005 and 2004 or 10% or more of accountsreceivable as of December 31, 2006 and 2005.

***Derivative Financial Instruments***

SFAS No. 133, “Accounting for DerivativeInstruments and Hedging Activities,” as amended (“SFAS No. 133”),establishes accounting and reporting standards for derivative instruments andhedging activities and requires that an entity recognize derivatives as eitherassets or liabilities on the balance sheet and measure the instruments at fairvalue.  Changes in the fair value of thederivative are to be recognized currently in earnings, unless specific hedgeaccounting criteria are met.

The fair value of the Partnership’s derivatives isdetermined through the use of independent markets and is based upon theprevailing market prices of such instruments at the date of valuation.  The Partnership enters into futures contractsfor the receipt or delivery of refined petroleum products in futureperiods.  The contracts are entered intoin the normal course of business to reduce risk of loss of inventory on hand,which could result through fluctuations in market prices.  Changes in the fair value of these contracts,as well as the offsetting gain or loss on the hedged inventory item, arerecognized currently in earnings.

The Partnership also uses futures contracts and swapsto hedge exposure under forward purchase and sale commitments.  These agreements are intended to hedge thecost component of virtually all of the Partnership’s forward commitments.  Changes in the fair value of these contracts,as well as offsetting gains or losses on the forward fixed purchase and salecommitments, are recognized currently in earnings.  Gains and losses on net product margin fromforward fixed purchase and sale contracts are reflected in earnings as thesecontracts mature.

The Partnership also markets and sells naturalgas.  The Partnership generally conductsbusiness by entering into forward purchase commitments for natural gas onlywhen it simultaneously enters into arrangements for the sale of product forphysical delivery to third-party users. The Partnership generally takes delivery under its purchase commitmentsat the same location as it delivers to third-party users.  Through these transactions, which establishan immediate margin, the Partnership seeks to maintain a position that issubstantially balanced between firm forward purchase and salescommitments.  Natural gas is generallypurchased and sold at fixed prices and quantities.  Current price quotes from actively tradedmarkets are used in all cases to determine the contracts’ fair value.  Changes in the fair value of these contractsare recognized currently in earnings as an increase or decrease in cost ofsales.

***Financial Instruments***

The fair value of the Partnership’s financialinstruments approximated carrying value as of December 31, 2006 and 2005,in each case due to the short-term and the variable interest rate nature of thefinancial instruments.

F-13

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***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 unitsoutstanding during the year.  Basic anddiluted net income per limited partner unit are determined by dividing netincome after deducting the amount allocated to the general partner interest(including its incentive distribution in excess of its 2% interest) by theweighted average number of outstanding limited partner units during the periodin accordance with EITF 03-06, “Participating Securities and theTwo-Class Method under FASB Statement No. 128’’ (“EITF 03-06”).  EITF 03-06 addresses thecomputation of earnings per share (in the Partnership’s case, net income perlimited partner unit) by an entity that has issued securities other than commonstock (in the Partnership’s case, limited partner units) that contractuallyentitle the holder to participate in dividends and earnings of the entity when,and if, it declares dividends on its common stock (in the Partnership’s case,distributions on its limited partner units). Essentially, EITF 03-06 provides that in any accounting periodwhere the Partnership’s aggregate net income exceeds its aggregate distributionfor such period, the Partnership is required to present net income per limitedpartner unit as if all of the earnings for the periods were distributed,regardless of whether those earnings would actually be distributed during aparticular period from an economic or practical perspective.  EITF 03-06 does not impact the Partnership’soverall net income or other financial results; however, for periods in whichthe Partnership’s aggregate net income exceeds its aggregate distributions forsuch period, it will have the impact of reducing the earnings per limitedpartner unit.  This result occurs as alarger portion of the Partnership’s aggregate earnings is allocated to theincentive distribution rights held by the General Partner, as if distributed,even though the Partnership makes cash distributions on the basis of cashavailable for distributions, not earnings, in any given accounting period.  In accounting periods where aggregate netincome does not exceed aggregate distributions for such period, EITF 03-06does not have any impact on the Partnership’s net income per limited partnerunit calculation.

The following sets forth the net income allocation andper unit data using this method (in thousands, except per unit data):
|                                                            | ** ** | ** **                      | ** ** | **October 4, 2005**   | ** ** |
|------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                 | ** ** | **Year Ended**                  | ** ** | **through**                     | ** ** |
| ** **                                                 | ** ** | **December 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|                                                       |       |                            |       |                            |       |
| Net income                                                 |       | $                               | 33,461     |                            | $          | 9,408 |   |
| Less:                                                      |       |                            |       |                            |       |
| General Partner’s 2% interest                         |       | (669                            | )          | (188                            | )          |
| Net income available to limited partners                   |       | 32,792                          |       | 9,220                           |       |
| Dilutive impact of theoretical distribution of  earnings   |       | (5,085                          | )          | (1,298                          | )          |
| Net income available to limited partners under EITF  03-06 |       | $                               | 27,707     |                            | $          | 7,922 |   |
|                                                       |       |                            |       |                            |       |
| Per unit data:                                             |       |                            |       |                            |       |
| Net income available to limited partners                   |       | $                               | 2.91       |                            | $          | 0.82 |   |
| Dilutive impact of theoretical distribution of  earnings   |       | (0.45                           | )          | (0.12                           | )          |
| Net income available to limited partners under EITF  03-06 |       | $                               | 2.46       |                            | $          | 0.70 |   |
|                                                       |       |                            |       |                            |       |
| Weighted average  limited partner units outstanding        |       | 11,285                          |       | 11,285                          |       |

 

F-14

----

The Partnership did not and was not required todeclare cash distributions for the year ended December 31, 2006 or for theperiod October 4, 2005 through December 31, 2005 that would result inan incentive distribution to the General Partner as indicated above.

***Recent Accounting Pronouncements***

In December 2004,the Financial 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 modifiedprospective recognition of compensation expense or modified retrospectiverecognition.  The Partnership adoptedSFAS 123 (revised) on January 1, 2006, and the adoption of this standard didnot have a material effect on its consolidated financial statements as thereare currently no awards outstanding.

In September 2005, the EITF issued Issue No. 04-13,“Accounting for Purchases and Sales of Inventory with the Same Counterparty” (“EITF04-13”).  The EITF concluded thatinventory purchases and sales transactions with the same counterparty should becombined for accounting purposes if entered into in contemplation of eachother.  The EITF provided indicators tobe considered for purposes of determining whether such transactions are enteredinto in contemplation of each other. Guidance was also provided on the circumstances under which nonmonetaryexchanges of inventory within the same line of business should be recognized atfair value.  The Partnership adopted EITF04-13 on April 1, 2006, and the adoption of this standard did not have amaterial impact on its consolidated financial statements.

In June 2006, the FASB ratified EITF 06-03,“How Taxes Collected from Customers and Remitted to Governmental AuthoritiesShould Be Presented in the Income Statement (That Is, Gross versus NetPresentation)” (“EITF 06-03”).  Thescope of EITF 06-03 includes any tax assessed by a governmental authoritythat is imposed on and concurrent with a revenue-producing transaction betweena seller and a customer.  EITF 06-03states that a company may adopt a policy of presenting taxes either grosswithin revenue or net.  If these taxesare significant, a company is required to disclose its accounting policy andthe amount of taxes that are recognized on a gross basis, if applicable.  The Partnership adopted EITF 06-03 asof December 31, 2006.  The Partnershipcollects trustee taxes, which consist of various pass through taxes collectedfrom customers on behalf of taxing authorities, and remits such taxes directlyto those taxing authorities.  As such, itis the Partnership’s policy to exclude trustee taxes from revenues and cost ofsales and account for them as liabilities. Trustee taxes are included in accrued expenses and other currentliabilities in the accompanying balance sheets. The adoption of EITF 06-03 did not have an impact on thePartnership’s consolidated financial statements.

In July 2006, the FASB issued Interpretation No. 48, “Accountingfor Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN48”).  FIN 48 clarifies the accountingfor uncertainty in income taxes recognized in an enterprise’s financialstatements in accordance with SFAS No. 109, “Accounting for Income Taxes.”  It also prescribes a recognition thresholdand measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return,and it provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods, disclosure and transition.  The Partnership will adopt FIN 48beginning January 1, 2007 and does not believe FIN 48 will have a materialimpact on its consolidated financial statements.

F-15

----

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No.157”).  This statement defines fairvalue, establishes guidelines for measuring fair value and requires additionaldisclosures regarding fair value measurements. SFAS No. 157 applies only to fair value measurements currently requiredor permitted by other accounting standards and is expected to increase theconsistency of those measurements.  SFASNo. 157 is effective for fiscal years beginning after November 15, 2007.  The Partnership will adopt this statement onJanuary 1, 2008 and is in the process of evaluating the impact of SFAS No. 157on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans – anamendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”).  This statement requires the recognition ofthe overfunded or underfunded status of a defined benefit plan in the statementof financial position with the offset recognized through comprehensive income,changes the measurement date for defined benefit plan assets and obligations tothe entity’s fiscal year-end and requires additional disclosures.  The Partnership adopted the recognition anddisclosure requirements under SFAS No. 158 as of December 31, 2006 (seeNote 11) and will adopt the new measurement date requirements for the year endingDecember 31, 2008.

**Note3.**                      Restatement of Balance Sheet

Following a review of the Partnership’s classificationof its revolving line of credit, the Partnership restated its previously issuedbalance sheet as of December 31, 2005 consistent with the presentation as of December31, 2006.  Historically, the Partnershipclassified its working capital revolving credit facility as a long-termliability as this facility has a contractual maturity of October 2, 2009 and nopayments are required prior to that date. However, the Partnership repays amounts outstanding and reborrows fundsbased upon the Partnership’s working capital requirements.  As such, only the minimum amount expected tobe outstanding within twelve months after the balance sheet date should beexcluded from current liabilities.  ThePartnership has restated its balance sheet as of December 31, 2005 to properlyreflect this classification.

The restatement did not have any impact on thePartnership’s previously reported income, cash flow or partners’ equity or compliancewith any covenant under the Credit Agreement or any other debt instrument.

The following is asummary of the impact of the restatement on the Partnership’s consolidatedbalance sheet at December 31, 2005 (in thousands):
| ** **                                   | ** ** | **As  Previously  Reported** | ** ** | **Adjustments** | ** ** | **Restated** | ** ** |
|----------------------------------------------|------------|------------------------------|------------|-----------------|------------|--------------|------------|
| Current portion  of revolving line of credit |       | $                            | —     |            | $          | 95,800       |       | $ | 95,800 |   |
| Total current  liabilities                   |       | $                            | 290,613    |            | $          | 95,800       |       | $ | 386,413 |   |
| Revolving line of  credit                    |       | $                            | 181,600    |            | $          | (95,800      | )          | $ | 85,800 |   |

** **

**Note4.**                      Derivative Financial Instruments

The composition and fair value of derivativeinstruments relating to forward fixed contracts on the Partnership’s balancesheet consisted of the following at December 31 (in thousands):
|                                | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
|                           |       |     |       |     |       |
| Futures  contracts             |       | $        | 57,571     |     | $          | 4,587 |   |
| Swaps, options  and other, net |       | 8,544    |       | (5,625   | )          |
| Total                          |       | $        | 66,115     |     | $          | (1,038 | ) |

 

The Partnership formally documents all relationshipsbetween hedging instruments and hedged items, after its risk managementobjectives and strategy for undertaking the hedge are determined.  The Partnership calculates hedgeeffectiveness on a quarterly basis. Ineffectiveness related to these hedging activities was immaterial as ofDecember 31, 2006 and 2005.

F-16

----

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 at the inception of the hedge and on anongoing basis, the Partnership assesses whether the derivatives that are usedin hedging transactions are highly effective in offsetting changes in fairvalue of hedged items.  The derivativeinstruments that 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 futurescontracts.  The required brokerage marginbalance was $0.6 million and $9.2 million at December 31, 2006and 2005, respectively.

The Partnership is exposed to credit loss in the eventof nonperformance by counterparties of forward contracts, options and swapagreements, but the Partnership has no current reason to expect any materialnonperformance by any of these counterparties. Futures contracts, the primary derivative instrument utilized by thePartnership, are traded on regulated exchanges, greatly reducing potentialcredit risks.  Exposure on swap andcertain option agreements is limited to the amount of the recorded fair valueas of the balance sheet dates.  ThePartnership utilizes primarily one broker, a major financial institution, forall derivative transactions and the right of offset exists.  Accordingly, the fair value of all derivativeinstruments is displayed on a net basis on the balance sheets.

**Note5.**                      Income Taxes

The following table presents a reconciliation of thedifference between the statutory federal income tax rate and the effectiveincome tax rate for the year ended December 31, 2006 and for the periodOctober 4, 2005 to December 31, 2005:
|                                                    | ** ** | ** **            | ** ** | **October 4, 2005** | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|-------------------------------|------------|
| ** **                                         | ** ** | **Year Ended**        | ** ** | **through**                   | ** ** |
| ** **                                         | ** ** | **December 31,** | ** ** | **December 31,**         | ** ** |
| ** **                                         | ** ** | **2006**              | ** ** | **2005**                      | ** ** |
| ** **                                         | ** ** | ** **            | ** ** | ** **                    | ** ** |
| Federal  statutory income tax rate                 |       | 34.0                  | %          | 34.0                          | %          |
| State income tax  rate, net of federal tax benefit |       | 6.3                   | %          | 6.3                           | %          |
| Partnership  income not subject to tax             |       | (35.5                 | )%         | (30.8                         | )%         |
| Effective income tax  rate                         |       | 4.8                   | %          | 9.5                           | %          |

 

F-17

----

The followingtable presents the components of the provision for income taxes for the yearended December 31, 2006 and for the period October 4, 2005 to December 31,2005 (in thousands):

|                | ** ** | ** **            | ** ** | **October 4, 2005** | ** ** |
|----------------|------------|-----------------------|------------|-------------------------------|------------|
| ** **     | ** ** | **Year Ended**        | ** ** | **through**                   | ** ** |
| ** **     | ** ** | **December 31,** | ** ** | **December 31,**         | ** ** |
| ** **     | ** ** | **2006**              | ** ** | **2005**                      | ** ** |
| Current:       |       |                  |       |                          |       |
| Federal        |       | $                     | 1,195      |                          | $          | 918 |   |
| State          |       | 221                   |       | 282                           |       |
| Total current  |       | 1,416                 |       | 1,200                         |       |
|           |       |                  |       |                          |       |
| Deferred:      |       |                  |       |                          |       |
| Federal        |       | 226                   |       | (163                          | )          |
| State          |       | 24                    |       | (51                           | )          |
| Total deferred |       | 250                   |       | (214                          | )          |
| Total          |       | $                     | 1,666      |                          | $          | 986 |   |

 

At December 31, 2006 and 2005, the****Partnership’sdeferred tax (liabilities) assets, which primarily represent the differencebetween tax and book amortization, were approximately ($36,000) and $214,000,respectively.

The following presents a reconciliation of thedifferences between income before income tax expense and income subject toincome tax expense for the year ended December 31, 2006 and for the periodOctober 4, 2005 through December 31, 2005 (in thousands):
|                                       | ** ** | ** **            | ** ** | **October 4, 2005** | ** ** |
|---------------------------------------|------------|-----------------------|------------|-------------------------------|------------|
| ** **                            | ** ** | **Year Ended**        | ** ** | **through**                   | ** ** |
| ** **                            | ** ** | **December 31,** | ** ** | **December 31,**         | ** ** |
| ** **                            | ** ** | **2006**              | ** ** | **2005**                      | ** ** |
| ** **                            | ** ** | ** **            | ** ** | ** **                    | ** ** |
| Income before  income tax expense     |       | $                     | 35,127     |                          | $          | 10,394 |   |
| Non-taxable  income                   |       | (31,856               | )          | (7,954                        | )          |
| Income subject to  income tax expense |       | $                     | 3,271      |                          | $          | 2,440 |   |

 

The Partnership made approximately $1.4 million inincome tax payments during 2006 and no income tax payments during 2005.

F-18

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**Note6.**                      Property and Equipment

Property andequipment consisted of the following at December 31 (in thousands):
|                                                       | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                  |       |     |       |     |       |
| Building, dock,  terminal facilities and improvements |       | $        | 27,598     |     | $          | 18,698 |   |
| Land                                                  |       | 5,418    |       | 4,373    |       |
| Fixtures,  equipment and automobiles                  |       | 3,508    |       | 1,688    |       |
|                                                  |       | 36,524   |       | 24,759   |       |
| Less accumulated  depreciation                        |       | (4,867   | )          | (2,784   | )          |
| Total                                                 |       | $        | 31,657     |     | $          | 21,975 |   |

 

In May 2006, the Partnership acquired a terminal inBridgeport, Connecticut for approximately $2.2 million and incurredapproximately $0.2 million of buyer-related costs for an aggregate purchase priceof approximately $2.4 million.

In September 2006, the Partnership acquired a terminalin Macungie, Pennsylvania for approximately $3.9 million and incurredapproximately $0.2 million of buyer-related costs for an aggregate purchaseprice of approximately $4.1 million.

Depreciation expense allocated to cost of sales wasapproximately $1.9 million, $1.3 million, $0.4 million and$1.4 million for the year ended December 31, 2006, for the periodJanuary 1, 2005 through October 3, 2005, for the period October 4,2005 through December 31, 2005 and for the year ended December 31,2004.

Depreciation expense allocated to selling, general andadministrative expenses was approximately $0.7 million, $0.4 million,$0.2 million and $1.0 million for the year ended December 31, 2006,for the period January 1, 2005 through October 3, 2005, for theperiod October 4, 2005 through December 31, 2005 and for the yearended December 31, 2004, respectively.

The Partnership wrote off fully depreciated assetsthat were no longer in service in the amounts of approximately $0.4 million,$0.6 million and $0.8 million for the year ended December 31, 2006,for the period January 1, 2005 through October 3, 2005 and for the year endedDecember 31, 2004, respectively.  ThePartnership did not write off any such assets for the period October 4, 2005through December 31, 2005.

F-19

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**Note7.**                      Intangible Assets

Intangible assets consist principally of customerrelationships and are amortized on a straight-line basis over a weightedaverage estimated useful life of approximately nine years.  In addition, intangible assets include brandnames of approximately $0.2 million which have an indefinite life and,therefore, are not amortized.  Acquiredintangible assets subject to amortization consisted of the following atDecember 31 (in thousands): 
| ** **                                 | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net Intangible  Assets** | ** ** | **Remaining Useful  Lives** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|-------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| **December 31,  2006:**               |       |                            |       |                          |       |                            |       |                             |       |
| Intangible assets subject to amortization: |       |                            |       |                          |       |                            |       |                             |       |
| Customer relationships                     |       | $                               | 11,462     |                          | $          | (3,225                          | )          | $                                | 8,237      |   | 8-12 years |   |
| Customer contracts                         |       | 307                             |       | (307                          | )          | —                          |       | 2 years                          |       |
| Software                                   |       | 1,139                           |       | (569                          | )          | 570                             |       | 5 years                          |       |
| Total                                      |       | 12,908                          |       | (4,101                        | )          | 8,807                           |       |                             |       |
| Brand names, not subject to amortization   |       | 269                             |       | —                        |       | 269                             |       | Indefinite                       |       |
| Total intangible assets                    |       | $                               | 13,177     |                          | $          | (4,101                          | )          | $                                | 9,076      |   |   |   |
|                                       |       |                            |       |                          |       |                            |       |                             |       |
| **December 31,  2005:**               | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **                      | ** ** | ** **                       | ** ** |
| Intangible assets subject to amortization  |       |                            |       |                          |       |                            |       |                             |       |
| Customer relationships                     |       | $                               | 11,462     |                          | $          | (2,002                          | )          | $                                | 9,460      |   | 8-12 years |   |
| Customer contracts                         |       | 307                             |       | (230                          | )          | 77                              |       | 2 years                          |       |
| Software                                   |       | 1,139                           |       | (342                          | )          | 797                             |       | 5 years                          |       |
| Total                                      |       | 12,908                          |       | (2,574                        | )          | 10,334                          |       |                             |       |
| Brand names, not subject to amortization   |       | 269                             |       | —                        |       | 269                             |       | Indefinite                       |       |
| Total intangible  assets                   |       | $                               | 13,177     |                          | $          | (2,574                          | )          | $                                | 10,603     |   |   |   |

 

The aggregate amortization expense, which is includedin amortization expenses, was approximately $1.5 million,$1.2 million, $0.4 million and $0.8 million for the year endedDecember 31, 2006, for the period from January 1, 2005 throughOctober 3, 2005, for the period from October 4, 2005 through December 31,2005 and for the year ended December 31, 2004, respectively.

The estimated annual intangible asset amortizationexpense for future years ending December 31 is as follows (in thousands):

| 2007       |   | $     | 1,432  |   |
|------------|--------|-------|--------|--------|
| 2008       |   | 1,432 |   |
| 2009       |   | 1,317 |   |
| 2010       |   | 1,203 |   |
| 2011       |   | 1,203 |   |
| Thereafter |   | 2,220 |   |
| Total      |   | $     | 8,807  |   |

 

F-20

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**Note8.**                      Investment in Equity Securities

The Partnership holds an investment in NYMEX Holdings,Inc. which is accounted for under the provisions of SFAS No. 115, “Accountingfor Certain Investments in Debt and Equity Securities.” At December 31, 2006,the Partnership recorded the investment at a fair value of $13.9 million, basedon its quoted market price, and classified the security as available for salein the accompanying balance sheet.  ThePartnership’s unrealized gain of $12.8 million was recorded in othercomprehensive income.  Additionally, thePartnership recorded related dividend income of $515,000, $150,000 and $9,000in the accompanying statements of income for the year ended December 31, 2006,for the period January 1, 2005 through October 3, 2005 and for theyear ended December 31, 2004, respectively.

**Note9.**                      Debt

Debt consisted of the following at December 31 (inthousands):
|                                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                       |       |     |       |     |       |
| Revolving line  of credit – including current portion |       | $        | 270,700    |     | $          | 181,600 |   |
| Notes payable,  other – including current portion     |       | 1,558    |       | 1,856    |       |
| Total debt                                                 |       | 272,258  |       | 183,456  |       |
| Less revolving  line of credit – current portion      |       | (188,700 | )          | (95,800  | )          |
| Less notes  payable, other – current portion          |       | (319     | )          | (297     | )          |
| Total long-term  debt                                      |       | $        | 83,239     |     | $          | 87,359 |   |

 

***Credit Facility***

In connection with the closing of its initial publicoffering, the Partnership entered into a four-year senior secured creditagreement (the “Credit Agreement”).  InAugust 2006, the Credit Agreement was amended to increase the permanent workingcapital revolving credit facility commitment by $100.0 million for totalavailable commitments of $600.0 million. The Partnership recorded approximately $0.2 million in fees associatedwith the amendment.

The credit facilities are available to fund workingcapital, make acquisitions and provide payment for general partnershippurposes.  There are three facilitiesunder the Credit Agreement:

·                  a workingcapital revolving credit facility to be used for working capital purposes andletters of credit in the principal amount equal to the lesser of thePartnership’s borrowing base and $550.0 million, of which two $50.0 millionseasonal overline facilities are available each year only during the periodbetween September 1st and June 30th;

·                  a $35.0 millionacquisition facility to be used for funding acquisitions similar to thePartnership’s business line that have a purchase price of $25.0 million or lessor $35.0 million or less in the aggregate in any 12-month period; and

·                  a $15.0 millionrevolving credit facility to be used for general purposes, including payment ofdistributions to the Partnership’s unitholders.

** **

F-21

----

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, plus 1%,13⁄4% and 11⁄2%, respectively, (2) the cost of funds rate, plus 1%, 13⁄4% and 11⁄2%,respectively, or (3) the bank’s base rate. The Partnership incurs a letter of credit fee of 1% per annum for eachletter of credit issued.  In addition,the Partnership incurs a commitment fee on the unused portion of the threefacilities under the Credit Agreement (including the unused portion of eitherof the seasonal overline facilities exercised by the Partnership) at a rate of25 basis points per annum, a facility fee of 10 basis points per annum on anyunexercised seasonal overline facility during the period between September 1st and June 30th and a seasonal overline fee of $30,000 eachtime the Partnership elects to exercise either of the seasonal overlinefacilities.

The Credit Agreement will mature in October 2009. Historically,the Partnership classified its revolving line of credit as a long-termliability because the Partnership has a multi-year, long-term commitment fromits bank group.  However, since thePartnership repays amounts outstanding and reborrows funds based on its workingcapital requirements, the Partnership classified as a current liabilityapproximately $188.7 million and $95.8 million on the accompanyingbalance sheets at December 31, 2006 and 2005, respectively.  The current portion of the revolving line ofcredit is the amount the Partnership expects to pay down during the course ofthe year.  The long-term portion of therevolver was $82.0 million and $85.8 million at December 31, 2006 and2005, respectively, representing the amounts expected to be outstanding duringthe entire year.

At December 31, 2006, availability under the CreditAgreement was reduced by the outstanding balance under the working capitalrevolving credit facility of approximately $270.7 million and by letters ofcredit totaling approximately $71.9 million. The total remaining availability for borrowings and letters of credit atDecember 31, 2006 was $157.4 million, which included the $35.0 millionacquisition facility and the $15.0 million revolving credit facility andexcludes the two $50.0 million seasonal overline facilities the Partnership didnot exercise as of December 31, 2006. The average interest rate for the year ended December 31, 2006 was 6%.

The Credit Agreement is secured by substantially allof the assets of the Partnership and each of the Companies and is guaranteed bythe General Partner.  The CreditAgreement imposes certain requirements including, for example, a prohibitionagainst distributions if any potential default or event of default as definedin the Credit Agreement, as amended, would occur, and limitations on thePartnership’s ability to grant liens, make certain loans or investments, incuradditional indebtedness or guarantee other indebtedness, make any materialchange to the nature of the Partnership’s business or undergo a fundamentalchange, make any material dispositions, acquire another company, enter into amerger, consolidation, sale leaseback transaction or purchase of assets, ormake capital expenditures in excess of specified levels.

The Credit Agreement also imposes covenants thatrequire the Partnership to maintain certain minimum working capital amounts, aminimum earnings before interest, taxes, depreciation and amortization, orEBITDA, ratio, a minimum interest coverage ratio and a maximum leverageratio.  The Partnership was in compliancewith these covenants at December 31, 2006.

The Credit Agreement limits distributions by the Partnershipto its unitholders to the amount of the Partnership’s available cash andpermits borrowings to fund such distributions only under the revolving creditfacility.  The revolving credit facilityis subject to an annual “clean-down” period, requiring the Partnership toreduce the amount outstanding under the revolving credit facility to $0 for 30consecutive calendar days in each calendar year.

***Term Note – Notes Payable***

In 2001, the Partnership purchased the Fore RiverTerminal in South Portland, Maine.  Thepurchase price was approximately $3.4 million and included issuance by thePartnership of a promissory note for $3.0 million with a 7% interest rate.  The note is secured by the propertyacquired.  The note amortizationcommenced in June 2001 and extends through May 2008.  Monthly payments of principal and interestare approximately $34,800.

F-22

----

The following presentsthe aggregate annual maturities of debt at December 31, 2006, excludingapproximately $270.7 million due on the Partnership’s total revolving creditfacility (in thousands):

 
| 2007  |   | $     | 319    |   |
|-------|--------|-------|--------|--------|
| 2008  |   | 1,239 |   |
| Total |   | $     | 1,558  |   |

 

**Note10.**               Accrued Expenses and Other CurrentLiabilities

Accrued expensesand other current liabilities consisted of the following at December 31 (in thousands):
|                                                                    | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                               |       |     |       |     |       |
| Barging  transportation, product storage and other ancillary costs |       | $        | 11,703     |     | $          | 12,825 |   |
| Swaps and other  derivatives                                       |       | 8,816    |       | —   |       |
| Trustee taxes  (taxes other than income tax)                       |       | 6,806    |       | 8,994    |       |
| Employee  compensation                                             |       | 7,142    |       | 4,849    |       |
| Other                                                              |       | 1,106    |       | 1,947    |       |
| Total                                                              |       | $        | 35,573     |     | $          | 28,615 |   |

Trustee taxes consistedof various pass-through taxes collected from customers on behalf of taxingauthorities.  Employee compensationconsisted of bonuses, vacation and other salary accruals.  Ancillary costs consisted of cost accrualsrelated to product expediting and storage.

**Note11.**               Employee Benefit Plans with Related Party

The General Partner has a qualified401(k) Savings and Profit Sharing Plan that covers eligibleemployees.  Contributions under the planare determined annually, at the sole discretion of the General Partner’s boardof directors.  The General Partner’sdiscretionary matching contributions to the 401(k) Savings and ProfitSharing Plan have been equal to 50% of each employee’s contribution, up to amaximum contribution of 3% of the employee’s compensation.  Matching contributions greater than thislevel are allowed under the plan.  TheGeneral Partner’s matching contributions on behalf of higher-paid employees aresubject to certain limitations under federal law.  Employees may elect to contribute up to 60%of their compensation to the 401(k) Savings and Profit Sharing Plan foreach plan year.  Employee contributionsare subject to annual dollar limitations, which are periodically adjusted bythe cost of living index.  This plan hadexpenses of approximately $311,000, $214,000, $86,000 and $286,000 for the yearended December 31, 2006, for the period from January 1, 2005 throughOctober 3, 2005, for the period from October 4, 2005 throughDecember 31, 2005 and for the year ended December 31, 2004, respectively.which are included in selling, general and administrative expenses in theaccompanying statements of income.

F-23

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In addition, the GeneralPartner has a qualified pension plan (the “Plan”) that covers all eligibleemployees.  Effective December 31, 2006,the Partnership adopted SFAS No. 158 which amends SFAS No. 87, “Employers’Accounting for Pensions” (“SFAS 87”). Under SFAS No. 158, the Partnership is required to recognize theoverfunded or underfunded status of its defined benefit pension plan as anasset or liability in its consolidated balance sheets and to recognize changesin that funded status through comprehensive income in the year in which suchchanges occur.  The funded status ismeasured as the difference between the fair value of plan assets and the Plan’sbenefit obligation, with the benefit obligation including all actuarial gainsand losses, prior service cost and any remaining transition amounts.  SFAS No. 158 does not change thecomponents of net periodic benefit cost. All items currently deferred when applying SFAS No. 87 are to berecognized as a component of other comprehensive income, net of taxes, if any.

 

The following presents reconciliations of thebeginning and ending balances of the benefit obligation, fair value of planassets, funded status and the accumulated benefit obligation at December 31 (inthousands):
| ** **                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|
| **Change  in benefit obligation:**                 |       |     |       |     |       |
| Projected benefit  obligation at beginning of year |       | $        | 10,035     |     | $          | 8,763 |   |
| Service cost                                       |       | 765      |       | 687      |       |
| Interest cost                                      |       | 597      |       | 548      |       |
| Benefits paid                                      |       | (376     | )          | (49      | )          |
| Actuarial (gain) loss                              |       | (11      | )          | 86       |       |
| Projected benefit obligation at end of year        |       | 11,010   |       | 10,035   |       |
| ** **                                         |       |     |       |     |       |
| **Change  in plan assets:**                        |       |     |       |     |       |
| Fair value of plan assets at beginning of year     |       | 7,197    |       | 6,585    |       |
| Actual return on plan assets                       |       | 641      |       | 406      |       |
| Employer contributions                             |       | 378      |       | 255      |       |
| Benefits paid                                      |       | (376     | )          | (49      | )          |
| Fair value of plan assets at end of year           |       | 7,840    |       | 7,197    |       |
| ** **                                         |       |     |       |     |       |
| **Funded  status at end of year**                  |       | $        | (3,170     | )        | $          | (2,838 | ) |
| Unrecognized net  actuarial gain                   |       | (422     | )          | (349     | )          |
| Net amount  recognized                             |       | $        | (3,592     | )        | $          | (3,187 | ) |
|                                               |       |     |       |     |       |
| **Accumulated benefit obligation**                 |       | $        | 8,370      |     | $          | 7,481 |   |

 

Thefollowing presents amounts recognized in the consolidated balance sheets atDecember 31 (in thousands):
| ** **                              | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------|------------|----------|------------|----------|------------|
| Accrued pension  benefit cost           |       | $        | 3,170      |     | $          | 3,187 |   |
| Accumulated  other comprehensive income |       | 422      |       | —   |       |
| Net amount recognized                   |       | $        | 3,592      |     | $          | 3,187 |   |

 

F-24

----

All of the Partnership’sprior service costs and transition amounts have been fully amortized atDecember 31, 2006 and 2005.  Unrecognizednet actuarial gain of $0.4 million is shown as accumulated other comprehensiveincome as of December 31, 2006.

 

The following table provides the incremental effect ofrecognizing the funded status of the Partnership’s plan in accordance with SFASNo. 158 at December 31, 2006 (in thousands):
| ** **                              | ** ** | **Before  Application of  SFAS No. 158** | ** ** | **Adjustments** | ** ** | **After  Application of  SFAS No. 158** | ** ** |
|-----------------------------------------|------------|---------------------------------------------------------|------------|-----------------|------------|--------------------------------------------------------|------------|
|                                    |       |                                                    |       |            |       |                                                   |       |
| Total assets                            |       | $                                                       | 638,887    |            | $          | —                                                 |       | $ | 638,887 |   |
|                                    |       |                                                    |       |            |       |                                                   |       |
| Accrued pension  benefit cost           |       | 3,592                                                   |       | (422            | )          | 3,170                                                  |       |
| Total  liabilities                      |       | 536,070                                                 |       | (422            | )          | 535,648                                                |       |
|                                    |       |                                                    |       |            |       |                                                   |       |
| Accumulated  other comprehensive income |       | 12,837                                                  |       | 422             |       | 13,259                                                 |       |
| Total partners’ equity             |       | 102,817                                                 |       | 422             |       | 103,239                                                |       |
|                                         |            |                                                         |            |                 |            |                                                        |            |  |  |  |

 

The followingpresents the components of the net periodic benefit cost for the Plan (inthousands):
| ** **                             | ** ** | **Successor**                          | ** ** | ** **                                     | ** ** | **Predecessor** | ** ** |
|----------------------------------------|------------|----------------------------------------|------------|------------------------------------------------|------------|-----------------|------------|
| ** **                             | ** ** | **Year Ended  December 31,** | ** ** | **October 4  through  December 31,** | ** ** | ** **      | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                             | ** ** | **2006**                               | ** ** | **2005**                                       | ** ** | ** **      | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                   |       |                                   |       |                                           |       |            |       |   |   |   |   |
| Service cost                           |       | $                                      | 765        |                                           | $          | 173             |       |   |   | $ | 514 |   | $ | 599 |   |
| Interest cost                          |       | 597                                    |       | 143                                            |       |            |       | 405 |   | 503 |   |
| Expected return  on plan assets        |       | (578                                   | )          | (141                                           | )          |            |       | (413 | ) | (501 | ) |
| Amortization of  transition obligation |       | —                                 |       | —                                         |       |            |       | — |   | 12 |   |
| Amortization of  prior service cost    |       | —                                 |       | —                                         |       |            |       | — |   | (15 | ) |
| Net periodic benefit  cost             |       | $                                      | 784        |                                           | $          | 175             |       |   |   | $ | 506 |   | $ | 598 |   |

 

The followingpresents the weighted-average actuarial assumptions used in determining thePlan’s annual pension expense:
| ** **                      | ** ** | **Successor**                          | ** ** | ** **                                     | ** ** | **Predecessor** | ** ** |
|---------------------------------|------------|----------------------------------------|------------|------------------------------------------------|------------|-----------------|------------|
| ** **                      | ** ** | **Year Ended  December 31,** | ** ** | **October 4  through  December 31,** | ** ** | ** **      | ** ** | **January 1  through  October 3,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                      | ** ** | **2006**                               | ** ** | **2005**                                       | ** ** | ** **      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                      | ** ** | ** **                             | ** ** | ** **                                     | ** ** |            |       | ** ** | ** ** | ** ** | ** ** |
| Discount rate                   |       | 6.0%                                   |       | 6.0%                                           |       |            |       | 6.0% |   | 6.0 | % |
| 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-25

----

The following presents the benefits as of December 31,2006 expected to be paid in each of the next five fiscal years and in theaggregate for the next five fiscal years (in thousands):
| 2007      |   | $     | 204    |   |
|-----------|--------|-------|--------|--------|
| 2008      |   | 269   |   |
| 2009      |   | 339   |   |
| 2010      |   | 355   |   |
| 2011      |   | 406   |   |
| 2012-2016 |   | 3,821 |   |
| Total     |   | $     | 5,394  |   |

The General Partnerexpects to contribute, and the Partnership expects to reimburse the GeneralPartner for, approximately $580,000 to the Plan for the fiscal year endingDecember 31, 2007.

***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 Plansponsor.  At a minimum, the rate ofreturn should equal or exceed the discount rate assumed by the Plan’s actuariesin projecting the funding cost of the Plan under applicable Employee RetirementIncome Security Act, or ERISA, standards. To do so, the General Partner’s Pension Committee (the “Committee”) mayappoint one or more investment managers to invest all or portions of the assetsof the Plan in accordance with specific investment guidelines, objectives,standards and benchmarks.

Because the Committee expects the Plan’s investmentincome, when combined with anticipated contributions by the General Partner, toexceed the sum of benefit payments and expenses over the next several years,the Committee intends that the Plan be managed to achieve long-term returns,with only a small percentage of the Plan invested in cash.

The General Partner’s Plan asset allocation, all ofwhich is with unrelated parties, at December 31, was as follows:
|                            | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|
|                       |       |     |       |     |       |     |       |
| Cash and cash  equivalents |       | 0.9      | %          | 2.5      | %          | 3.0      | %          |
| Fixed income  securities   |       | 40.1     | %          | 39.5     | %          | 39.9     | %          |
| Equity  securities         |       | 59.0     | %          | 58.0     | %          | 57.1     | %          |
|                       |       | 100.0    | %          | 100.0    | %          | 100.0    | %          |

 

F-26

----

***Expected Long-term Rate of Return on Plan Assets***

 

The expected long-term rate of return on assetsassumption is based on historical experience and consultation with the GeneralPartner’s actuarial consultants.  Thecurrent 8.0% assumption compares to the historical weighted average compoundreturn of 6.9% actually achieved by the Plan assets in the Companies’ eightyears of existence.  Because the Plan hasonly been in existence since December 1999, the time period over which the6.9% return was calculated does not accurately reflect the long-term investmentreturn which the Plan sponsor expects to be achieved.  The Plan was created in December 1999with a transfer of assets from the pension plan of GPC and certain of itsaffiliates as a result of the RYTTSA’s acquisition of 51% of theCompanies.  Considering the investmentreturn of the Plan from 1995 through December 1998, the calculation of theaverage investment return would increase the 6.9% investment return to 12.0%over a 12-year period.

***Non-qualified Pension and Deferred Compensation Plans***

The Partnership has a non-qualified pension plan for aformer employee, which commenced fixed payments in November of 2003.  The plan calls for payments over afifteen-year period from the commencement date. Total remaining future fixed payments under this plan consist of$0.1 million per year for the period from 2007 through 2011 and anaggregate amount of $0.9 million thereafter.  The Partnership had a discounted obligationof approximately $1.1 million and $1.2 million recorded in long termliabilities at December 31, 2006 and 2005, respectively.

The General Partner also has two non-qualifieddeferred compensation arrangements for two executive officers.  One arrangement calls for annual payments inthe aggregate amount of $70,000 for fifteen consecutive years from thecommencement date and one arrangement that calls for annual payments in theaggregate amount of $85,000 for fifteen consecutive years from the commencementdate.  The Partnership****had a total discounted obligation of approximately$0.3 million and $0.1 million recorded in long-term liabilities atDecember 31, 2006 and 2005, respectively. In accordance with the provisions of the Partnership’s partnershipagreement**,** the General Partner will bereimbursed by the Partnership for payments to the executive officers underthese non-qualified deferred compensation arrangements.

***Long Term Incentive Plan***

In October 2005, the General Partner adopted aLong-Term Incentive Plan for employees, consultants and directors of theGeneral Partner and employees and consultants of affiliates of the Partnershipwho perform services for the Partnership. The Long-Term Incentive Plan allows for the award of unit options, unitappreciation rights, restricted units, phantom units and distributionequivalent rights.  As ofDecember 31, 2006, no units had been purchased by the General Partner forgrants under the Long-Term Incentive Plan, and no awards of any kind had beengranted under the General Partner’s Long-Term Incentive Plan.

The Partnership is subject to contingencies, includinglegal proceedings and claims arising out of the normal course of business thatcover a wide range of matters, including, among others, environmental mattersand contract and employment claims.

F-27

----

**Note 12.     Commitments and Contingencies**

 

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

The Partnership also has future commitments,principally for office space and computer equipment, under the terms ofoperating lease arrangements.  Thefollowing provides total future minimum payments under leases withnon-cancelable terms of one year or more at December 31, 2006 (in thousands):
| 2007  |   | $     | 1,282  |   |   |
|-------|--------|-------|--------|--------|--------|
| 2008  |   | 1,230 |   |   |
| 2009  |   | 42    |   |   |
| 2010  |   | 42    |   |   |
| 2011  |   | 28    |   |   |
| Total |   | $     | 2,624  |   |   |

Total expenses underthese lease arrangements amounted to approximately $1.6 million, $1.0 million,$0.4 million and $1.3 million for the year ended December 31, 2006, forthe period January 1, 2005 through October 3, 2005, for the periodOctober 4, 2005 through December 31, 2005, and for the year endedDecember 31, 2004.  The Partnershipalso has lease income from office space leased at one of its owned terminalsfor $0.2 million per year through April of 2009.

***Terminal and Throughput Leases***

The Partnership entered into terminal and throughputlease arrangements with various unrelated oil terminals.  Certain arrangements have minimum usagerequirements.  The following providesfuture minimum lease, sublease and throughput commitments under thesearrangements with non-cancelable terms of one year or more at December 31 (inthousands):
|            | ** ** | **Lease and  Throughput  Commitments** | ** ** | **Sublease  Commitments** | ** ** | **Total** | ** ** |
|------------|------------|---------------------------------------------|------------|---------------------------|------------|-----------|------------|
|       |       |                                        |       |                      |       |      |       |
| 2007       |       | $                                           | 7,001      |                      | $          | (1,076    | )          | $ | 5,925 |   |
| 2008       |       | 3,117                                       |       | (570                      | )          | 2,547     |       |
| 2009       |       | 324                                         |       | (24                       | )          | 300       |       |
| 2010       |       | 314                                         |       | (24                       | )          | 290       |       |
| 2011       |       | 318                                         |       | (16                       | )          | 302       |       |
| Thereafter |       | 948                                         |       | —                    |       | 948       |       |
| Total      |       | $                                           | 12,022     |                      | $          | (1,710    | )          | $ | 10,312 |   |

*** ***

***Purchase Commitments***

The minimum volume purchase requirements for 2007 and2008 under the Partnership’s existing supply agreements are 408 million gallonsand 22 million gallons, respectively. All existing purchase commitments expire in 2008.  The Partnership purchased approximately1.2 billion, 1.3 billion and 844 million gallons of productunder the Partnership’s existing supply agreements for $2.0 billion, $1.9 billionand $786.7 million in 2006, 2005 and 2004, respectively, whichincluded fulfillment of the minimum purchase obligation under thesecommitments.

***LegalProceedings***

Please see Note 17 for discussion of Legal Proceedings.

F-28

----

**Note13.**               Partners’ Equity, Allocations and CashDistributions

***Issuance of Units***

On October 4, 2005, the Partnership completed aninitial public offering of 5,635,000 common units.  Upon the closing of the Partnership’s IPO(and taking into account the underwriters’ exercise of their over-allotmentoption), GPC and certain affiliates of the Slifka family received an aggregateof 5,642,424 subordinated units, which constituted 49% ownership of thePartnership at that time, a 2% general partner interest, and 7,424 commonunits.

***Units Outstanding***

Partners’ equity at December 31, 2006 consistedof 5,642,424 common units outstanding (including 60,224 common units held byaffiliates of the General Partner, including directors and executive officers),5,642,424 subordinated units held by affiliates of the Slifka family,collectively representing a 98% effective ownership interest in thePartnership, and 230,303 general partner units representing a 2% generalpartner interest in the Partnership.

***Common Units***

During the subordination period, as defined in thePartnership’s partnership agreement, the common units will have the right toreceive distributions of available cash from operating surplus in an amountequal to the minimum quarterly distribution of $0.4125 per quarter, plus anyarrearages in the payment of the minimum quarterly distribution on the commonunits from prior quarters, before any distributions of available cash fromoperating surplus may be 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 period will extend untilthe first day of any quarter beginning after September 30, 2010 that eachof the following tests are met:  (1)distributions of available cash from operating surplus on each of theoutstanding common units and subordinated units and general partner unitsequaled or exceeded the minimum quarterly distribution for each of the threeconsecutive, non-overlapping four-quarter periods immediately preceding thatdate; (2) the “adjusted operating surplus” (as defined in the Partnership’spartnership agreement) generated during each of the three consecutivenon-overlapping four-quarter periods immediately preceding that date equaled orexceeded the sum of the minimum quarterly distributions on all of theoutstanding common units and subordinated units during those periods on a fullydiluted basis and the related distribution on the 2% general partner unitsduring those periods; and (3) there are no arrearages in payment of the minimumquarterly distribution on the common units. If the unitholders remove the General Partner without cause, thesubordination period may end before September 30, 2010.

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

Pursuant to the Partnership’s partnership agreement,if at any time the General Partner and its affiliates own more than 80% of thecommon units outstanding, the General Partner has the right, but not theobligation, to “call” or acquire all, but not less than all, of the commonunits held by unaffiliated persons at a price not less than their then-currentmarket value.  The General Partner mayassign this call right to any of its affiliates or to the Partnership.

** **

F-29

----

***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 arrearages will be paid to subordinatedunits.

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 partnership agreement alsosets forth the calculation to be used to determine the amount and priority ofcash distributions that the common unitholders, subordinated unitholders andGeneral Partner will receive.

The subordinated units have limited voting rights asset forth in the Partnership’s partnership agreement.

***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 havethe right to receive incentive distributions of cash in excess of the minimumquarterly distributions as discussed further below under CashDistributions.  The Partnership’spartnership agreement sets forth the calculation to be used to determine theamount and priority of cash distributions that the common unitholders,subordinated unitholders and general partner will receive.

The general partner units have the management rightsas set forth in the Partnership’s partnership agreement.

***Allocations of Net Income***

Net income is allocated between the General Partnerand the common and subordinated unitholders in accordance with the provisionsof the Partnership’s partnership agreement. Net income is generally allocated first to the General Partner and thecommon and subordinated unitholders in an amount equal to the net lossesallocated to the General Partner and the common and subordinated unitholders inthe current and prior tax years under the partnership agreement.  The remaining net income is allocated to theGeneral Partner and the common and subordinated unitholders in accordance withtheir respective percentage interests of the general partner units, commonunits 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 cash flows, capital requirements, financial condition and otherfactors.  The Credit Agreement prohibitsthe Partnership from making cash distributions if any potential default orevent of default, as defined in the Credit Agreement, occurs or would resultfrom the cash distribution.

F-30

----

 

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 recorddate.  The amount of available cash isall cash on hand at the end of the quarter; plus all cash on hand on the dateof determination of available cash for the quarter resulting from workingcapital borrowings made after the end of the quarter; less the amount of cashreserves established by the General Partner to provide for the proper conductof the Partnership’s business, to comply with applicable law, any of thePartnership’s debt instruments, or other agreements or to provide funds fordistributions to unitholders and to the General Partner for any one or more ofthe next four quarters.  Working capitalborrowings are generally borrowings that are made under the Credit Agreementand in all cases are used solely for working capital purposes or to pay distributionsto partners.

The Partnership will make distributions of availablecash from operating surplus for any quarter during the subordination period asdefined in the Partnership’s partnership agreement in the followingmanner:  firstly, 98% to the commonunitholders, pro rata, and 2% to the General Partner, until the Partnershipdistributes for each outstanding common unit an amount equal to the minimumquarterly distribution for that quarter; secondly, 98% to the commonunitholders, pro rata, and 2% to the General Partner, until the Partnershipdistributes for each outstanding common unit an amount equal to any arrearagesin payment of the minimum quarterly distribution on the common units for anyprior quarters during the subordination period; thirdly, 98% to thesubordinated unitholders, pro rata, and 2% to the General Partner, until thePartnership distributes for each subordinated unit an amount equal to theminimum quarterly distribution for that quarter; and thereafter, cash in excessof the minimum quarterly distributions is distributed to the unitholders andthe General Partner based on the percentages below.

The GeneralPartner 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 | % |

 

The Partnership paid the following cash distributionsduring 2006 (in thousands, except per unit data):
| Cash  Distribution  Payment Date | ** ** | **Per Unit  Cash  Distribution** | ** ** | **Common  Units** | ** ** | **Subordinated  Units** | ** ** | **General  Partner** | ** ** | **Total Cash  Distribution** | ** ** |
|---------------------------------------|------------|---------------------------------------|------------|-------------------|------------|-------------------------|------------|----------------------|------------|-----------------------------------|------------|
| ** **                            | ** ** | ** **                            | ** ** | ** **        | ** ** | ** **              | ** ** | ** **           | ** ** | ** **                        | ** ** |
| 02/14/06                              | ** ** | $                                     | 0.4111     | ** **        | $          | 2,319                   | ** ** | $                    | 2,319      | ** **                        | $          | 95 | ** ** | $ | 4,733 | ** ** |
| 05/15/06                              | ** ** | 0.4250                                | ** ** | 2,398             | ** ** | 2,398                   | ** ** | 98                   | ** ** | 4,894                             | ** ** |
| 08/14/06                              | ** ** | 0.4375                                | ** ** | 2,469             | ** ** | 2,469                   | ** ** | 100                  | ** ** | 5,038                             | ** ** |
| 11/14/06                              | ** ** | 0.4450                                | ** ** | 2,511             | ** ** | 2,511                   | ** ** | 102                  | ** ** | 5,124                             | ** ** |
|                                       |            |                                       |            |                   |            |                         |            |                      |            |                                   |            |  |  |  |  |  |

 

F-31

----

** **

In addition, on January 24, 2007, the board ofdirectorsof the General Partner declared a distribution of $0.4550 for the period fromOctober 1,2006 through December 31, 2006 ($1.82 per unit on an annualized basis) to thePartnership’s common and subordinated unitholders of record as of the close ofbusiness on February 5, 2007.  OnFebruary 14, 2007, the Partnership paid the total cash distribution ofapproximately $5.2 million.

**Note14.**               Related-Party Transactions

In connection with the Partnership’s IPO, thePartnership entered into a Second Amended and Restated Terminal Storage Rentaland Throughput Agreement which, among other things, extended the term of thethen current non-cancelable terminal facility agreement with GPC throughDecember 2013.  The agreement isaccounted for as an operating lease.  Thefollowing provides future minimum payments at December 31, 2006, whichhave an annual consumer price index adjustment (in thousands):
| 2007       |   | $      | 7,262  |   |
|------------|--------|--------|--------|--------|
| 2008       |   | 7,262  |   |
| 2009       |   | 7,262  |   |
| 2010       |   | 7,262  |   |
| 2011       |   | 7,262  |   |
| Thereafter |   | 14,524 |   |
| Total      |   | $      | 50,834 |   |

 

The expense under this agreement (or the applicablepredecessor agreement with GPC, as the case may be) was $8.1 million, $5.9million, $1.9 million and $7.6 million for the year ended December 31, 2006,for the period January 1, 2005 through October 3, 2005, for theperiod October 4, 2005 through December 31, 2005 and for the year endedDecember 31, 2004, respectively.  Theseexpenses include annual consumer price index adjustments of approximately$752,000, $276,000, $141,000 and $254,000 for the year ended December 31, 2006,for the period January 1, 2005 through October 3, 2005, for theperiod October 4, 2005 through December 31, 2005 and for the yearended December 31, 2004, respectively. Deferred rent expense was approximately $121,000, $92,000 and $29,000for the year ended December 31, 2006, for the period January 1, 2005 throughOctober 3, 2005 and for the period October 4, 2005 throughDecember 31, 2005, respectively, as calculated underSFAS 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 these services wasapproximately $78,000, $50,000, $17,000 and $67,000 for the year ended December31, 2006, for the period from January 1, 2005 through October 3,2005, for the period from October 4, 2005 through December 31, 2005and for the year ended December 31, 2004, respectively.  These affiliate charges were recorded inselling, general and administrative expenses in the accompanying statements ofincome.  In connection with the IPO, thePartnership entered into an Amended and Restated Services Agreement with GPCwhich, among other things, extended the term of the agreement throughDecember 31, 2007.

F-32

----

**[[**

The Partnership also provides certain administrative, accountingand information processing services, and the use of certain facilities, toAlliance Energy Corp. (“Alliance”), an affiliate of the Partnership that is 90%owned by members of the Slifka family. The income from these services was approximately $757,000, $240,000$80,000 and $320,000 for the year ended December 31, 2006, for the period fromJanuary 1, 2005 through October 3, 2005, for the period fromOctober 4, 2005 through December 31, 2005 and for the year endedDecember 31, 2004, respectively.  Theseintercompany fees were recorded as an offset to selling, general andadministrative expenses in the accompanying statements of income.  In connection with the Partnership’s IPO, thePartnership entered into an Amended and Restated Services Agreement withAlliance which, among other things, extended the term of the agreement throughDecember 31, 2007.

The Partnership sells refined petroleum products toAlliance and previously sold refined petroleum products to RYTTSA at arm’slength and at prevailing market prices at the time of delivery.  Sales to Alliance were $18.9 million,$14.8 million, $3.8 million and $18.1 million for the year endedDecember 31, 2006, for the period from January 1, 2005 throughOctober 3, 2005, for the period from October 4, 2005 throughDecember 31, 2005 and for the year ended December 31, 2004,respectively.  Sales to RYTTSA wereapproximately $19.6 million for the year ended December 31, 2004.

Effective October 4, 2005, the General Partner employssubstantially all of the Partnership’s employees and charges the Partnershipfor their services.  The amounts expensedfor the year ended December 31, 2006 and for the period from October 4,2005 through December 31, 2005, including payroll, payroll taxes and bonusaccruals, were $24.4 million and $6.1 million, respectively.  The Partnership also reimburses the GeneralPartner for its contributions under the General Partner’s 401(k) Savings andProfit Sharing Plan and the General Partner’s qualified and non-qualifiedpension plans.  See Note 11, EmployeeBenefit Plans with Related Party.

The table below presents trade receivables withAlliance, receivables incurred in connection with the services agreements (orthe applicable predecessor agreements, as the case may be) between Alliance andGPC and the Partnership, as the case may be, and receivables from the GeneralPartner at December 31 (in thousands):
|                                          | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|
|                                     |       |     |       |     |       |
| Receivables from Alliance                |       | $        | 1,793      |     | $          | 1,748 |   |
| Receivables from GPC                     |       | 81       |       | 56       |       |
| Receivables from the General Partner (1) |       | 114      |       | 201      |       |
| Total                                    |       | $        | 1,988      |     | $          | 2,005 |   |

 

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(1)             Receivables from the General Partner reflectthe Partnership’s prepayment of payroll taxes and payroll accruals to theGeneral Partner.

F-33

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**Note15.**               Capital Expenditures

The Partnership’s terminalling operations requireinvestments to expand, upgrade or enhance existing operations and to meetenvironmental and operations regulations. The Partnership’s capital requirements primarily consist of maintenancecapital expenditures and capital improvement expenditures.  Maintenance capital expenditures representcapital expenditures to replace partially or fully depreciated assets tomaintain the operating capacity of, or sales generated by, existing assets andextend their useful lives such as expenditures required to maintain equipmentreliability, tankage and pipeline integrity and safety, and to addressenvironmental regulations.  ThePartnership had approximately $2.0 million, $1.0 million,$0.8 million and $1.3 million in maintenance capital expenditures forthe year ended December 31, 2006, for the period January 1, 2005 throughOctober 3, 2005, for the period October 4, 2005 throughDecember 31, 2005 and for the year ended December 31, 2004, respectively.

Capital improvement expenditures include expendituresto acquire assets to grow the Partnership’s business and to expand existingfacilities, such as projects that increase operating capacity by increasingtankage or adding terminals.  ThePartnership had approximately $10.4 million in capital improvement expendituresfor the year ended December 31, 2006 to increase its operating capacity andcapabilities.  The Partnership did notincur capital improvement expenditures in the years ended December 31, 2005 and2004.  Repair and maintenance expensesassociated with existing assets that are minor in nature and do not extend theuseful life of existing assets are charged to operating expenses as incurred.

**Note16.**               Segment Reporting

The Partnership is a wholesale and commercialdistributor of gasoline, distillates, and residual oil whose business is organized within two operatingsegments, Wholesale and Commercial, based on the way the chief operatingdecision maker (CEO) manages the business and on the similarity of customersand expected long-term financial performance of each segment.  The accounting policies of the segments arethe same as those described in Note 2, “Summary of Significant AccountingPolicies.”

In the Wholesale segment, the Partnership sellsgasoline, home heating oil, diesel, kerosene, and residual oil to unbrandedretail gasoline stations and other resellers of transportation fuels, homeheating oil retailers and wholesale distributors, respectively.  Generally, customers use their own vehiclesor contract carriers to take delivery of the product at bulk terminals andinland storage facilities that the Partnership owns or controls or with whichit has throughput arrangements.

The Commercial segment includes (i) sales anddeliveries of unbranded gasoline, home heating oil, diesel, kerosene, residualoil and small amounts of natural gas to customers in the public sector and tolarge commercial and industrial customers, either through a competitive biddingprocess or through contracts of various terms, and (ii) sales of custom blendeddistillates and residual oil delivered by barges or from a terminal dock.  Commercial segment customers include federaland state agencies, municipalities, large industrial companies, many autonomousauthorities such as transportation authorities and water resource authorities,colleges and universities and a limited group of small utilities.  Unlike the Wholesale segment, in theCommercial segment, the Partnership generally arranges the delivery of theproduct to the customer’s designated location, typically hiring third-partycommon carriers to deliver the product.

F-34

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** **

The Partnership evaluates segment performance based onnet product margins before allocations of corporate and indirect operatingcosts, depreciation, amortization (including non-cash charges) andinterest.  Based on the way the CEOmanages the business, it is not reasonably possible for the Partnership toallocate the components of operating costs and expenses between the reportablesegments.  Additionally, due to thecommingled nature and uses of the Partnership’s assets, it is not reasonablypossible for the Partnership to allocate assets between the two segments.  There were no intersegment sales for any ofthe years or periods presented below.

Summarized financial information for the Partnership’sreportable segments is presented in the table below (in thousands):
| ** **                                 | ** ** | **Successor**                                | ** ** | ** **                                           | ** ** | **Predecessor** | ** ** |
|--------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------|------------|-----------------|------------|
| ** **                                 | ** ** | **Year Ended  December 31,  2006** | ** ** | **October 4  through  December 31,  2005** | ** ** | ** **      | ** ** | **January 1  through  October 3,  2005** | ** ** | **Year Ended  December 31,  2004** | ** ** |
| **Wholesale Segment:**                     |       |                                         |       |                                                 |       |            |       |   |   |   |   |
| Sales                                      |       | $                                            | 4,071,608  |                                                 | $          | 1,115,251       |       |   |   | $ | 2,507,622 |   | $ | 2,863,173 |   |
| Net product margin(1)                      |       |                                         |       |                                                 |       |            |       |   |   |   |   |
| Distillates                                |       | $                                            | 58,285     |                                                 | $          | 16,484          |       |   |   | $ | 25,461 |   | $ | 36,237 |   |
| Gasoline                                   |       | 22,812                                       |       | 2,372                                                |       |            |       | 11,602 |   | 9,609 |   |
| Residual oil                               |       | 20,896                                       |       | 7,096                                                |       |            |       | 15,794 |   | 16,378 |   |
| Total                                      |       | $                                            | 101,993    |                                                 | $          | 25,952          |       |   |   | $ | 52,857 |   | $ | 62,224 |   |
|                                       |       |                                         |       |                                                 |       |            |       |   |   |   |   |
| **Commercial Segment:**                    |       |                                         |       |                                                 |       |            |       |   |   |   |   |
| Sales                                      |       | $                                            | 400,810    |                                                 | $          | 133,648         |       |   |   | $ | 289,337 |   | $ | 324,396 |   |
| Net product margin(1)                      |       | 13,151                                       |       | 3,368                                                |       |            |       | 11,202 |   | 15,094 |   |
|                                       |       |                                         |       |                                                 |       |            |       |   |   |   |   |
| **Combined sales and net product margin:** |       |                                         |       |                                                 |       |            |       |   |   |   |   |
| Sales                                      |       | $                                            | 4,472,418  |                                                 | $          | 1,248,899       |       |   |   | $ | 2,796,959 |   | $ | 3,187,569 |   |
| Net product margin(1)                      |       | $                                            | 115,144    |                                                 | $          | 29,320          |       |   |   | $ | 64,059 |   | $ | 77,318 |   |
| Depreciation allocated to cost of sales    |       | 1,918                                        |       | 412                                                  |       |            |       | 1,250 |   | 1,446 |   |
| **Combined  gross profit:**                |       | $                                            | 113,226    |                                                 | $          | 28,908          |       |   |   | $ | 62,809 |   | $ | 75,872 |   |

 

----

(1)             Net product margin is a non-GAAP financialmeasure used by management and external users of the Partnership’s financialstatements to assess product costs associated with the Partnership’s business.  The table above reconciles net product marginon a combined basis to gross profit, a directly comparable GAAP measure.

F-35

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**[[[[**

A reconciliation of the totals reported for thereportable segments to the applicable line items in the consolidated/combinedfinancial statements is as follows (in thousands):
| ** **                                                             | ** ** | **Successor**                                | ** ** | ** **                                           | ** ** | **Predecessor** | ** ** |
|------------------------------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------|------------|-----------------|------------|
| ** **                                                             | ** ** | **Year Ended  December 31,  2006** | ** ** | **October 4  through  December 31,  2005** | ** ** | ** **      | ** ** | **January 1  through  October 3,  2005** | ** ** | **Year Ended  December 31,  2004** | ** ** |
| **Combined gross profit**                                              |       | $                                            | 113,226    |                                                 | $          | 28,908          |       |   |   | $ | 62,809 |   | $ | 75,872 |   |
| **Operating costs and expenses not allocated to  reportable segments** |       |                                         |       |                                                 |       |            |       |   |   |   |   |
| Selling, general and administrative expenses                           |       | 43,027                                       |       | $                                                    | 10,515     |            |       |   | $ | 29,932 |   | $ | 33,439 |   |
| Operating expenses                                                     |       | 22,158                                       |       | 4,924                                                |       |            |       | 14,775 |   | 19,608 |   |
| Amortization expense                                                   |       | 1,528                                        |       | 389                                                  |       |            |       | 1,234 |   | 825 |   |
| **Total operating costs and Expenses**                                 |       | 66,713                                       |       | 15,828                                               |       |            |       | 45,941 |   | 53,872 |   |
| Operating income                                                       |       | 46,513                                       |       | 13,080                                               |       |            |       | 16,868 |   | 22,000 |   |
| Interest expense                                                       |       | (11,901                                      | )          | (2,686                                               | )          |            |       | (7,275 | ) | (4,700 | ) |
| Other income (expense), net                                            |       | 515                                          |       | —                                               |       |            |       | (900 | ) | 9 |   |
| Income tax expense                                                     |       | (1,666                                       | )          | (986                                                 | )          |            |       | — |   | — |   |
| **Net  income**                                                        |       | $                                            | 33,461     |                                                 | $          | 9,408           |       |   |   | $ | 8,693 |   | 17,309 |   |

 

There were no foreign sales for the years endedDecember 31, 2006, 2005 and 2004. The Partnership has no foreign assets.

**Note17.**               LegalProceedings

***General***

Although the Partnership may, from time to time, beinvolved in litigation and claims arising out of its operations in the normalcourse of business, the Partnership does not believe that it is a party to anylitigation that will have a material adverse impact on its financial conditionor results of operations.  Except asdescribed below, the Partnership is not aware of any significant legal orgovernmental proceedings against it, or contemplated to be brought against it.  The Partnership maintains insurance policieswith insurers in amounts and with coverage and deductibles as its generalpartner believes are reasonable and prudent. However, the Partnership can provide no assurance that this insurancewill be adequate to protect it from all material expenses related to potentialfuture claims for personal and property damage or that these levels ofinsurance will be available in the future at economical prices.

F-36

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**[**

***Environmental***

Global Companies LLC, in addition to several affiliates,has been named as one of over 50 defendants in two lawsuits alleging methyltertiary-butyl ether (“MTBE”) contamination of groundwater inMassachusetts.  MTBE is an oxygenate thathas been used extensively to reduce motor 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.  The plaintiffs in these cases generally claimto be public water providers or municipal or other government authorities.  These cases have been consolidated inmulti-district litigation with over 60 other MTBE cases in federal court in theSouthern District of New York.  ThePartnership intends to vigorously defend these cases.  The Partnership does not believe that thesecases will have a material impact on its operations although it can provide noassurances in this regard.

On November 29, 2004, a consent decree was lodgedby the U.S. Department of Justice in the federal District Court forMassachusetts whereby Global Companies LLC and Global Petroleum Corp. settledalleged violations of Clean Air Act regulations related to fuel qualityspecifications.  This consent decree wasentered by the court on January 21, 2005. As part of this settlement, Global Companies LLC has paid a $500,000civil penalty and instituted a compliance program for three years to ensurecompliance with Clean Air Act fuel quality specifications.  The alleged violations stemmed from theimportation of finished conventional gasoline, which was not a substantial partof our operations at the time of the alleged violations.  The Partnership does not believe that compliancewith the terms of the consent decree will result in material costs.

In November 2006, the U.S. Environmental ProtectionAgency, Region III (“EPA”) notified Global Companies, LLC, as the operator of apetroleum marketing and bulk storage terminal in Macungie, Pennsylvania of EPA’sintention to negotiate an Administrative Order on Consent (“AOC”) with GlobalCompanies, LLC and the previous owner and owners of an adjacent terminal, toinvestigate and remediate petroleum in the soil and groundwater at the twosites.  The Partnership is continuing towork with the other companies, including the previous owner of the Partnership’sterminal, to negotiate an AOC with EPA. While the Partnership cannot predict the outcome of these negotiationsand any subsequent environmental investigation of these sites, it does notexpect that this outcome will have a material adverse effect on thePartnership.

***Other***

On September 15, 2005, the Office of the AttorneyGeneral of the Commonwealth of Massachusetts issued a Civil InvestigativeDemand to the Partnership in connection with an investigation of gasolinedistributors and retailers in Massachusetts in the wake of HurricaneKatrina.  The Partnership believes thatthe Attorney General’s office has issued similar demands to other distributorsand retailers.  The Partnership has takensteps to comply with the demand.  Whilethe Partnership cannot predict the outcome of the investigation, it does notexpect that the outcome will have a material adverse effect on the Partnership.

F-37

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**Note18.**               Quarterly Financial Data (Unaudited)

Unaudited quarterlyfinancial data is as follows (in thousands, except per unit amounts):
| ** **                                                     | ** ** | **Successor** | ** ** |
|----------------------------------------------------------------|------------|---------------|------------|
| ** **                                                     | ** ** | **First**     | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** | **Total** | ** ** |
| **Year ended December 31, 2006**                          |       |          |       |   |   |   |   |   |   |   |   |
| Sales                                                          |       | $             | 1,351,023  |   | $ | 1,031,353 |   | $ | 995,834 |   | $ | 1,094,208 |   | $ | 4,472,418 |   |
| Gross Profit                                                   |       | $             | 32,217     |   | $ | 20,644 |   | $ | 25,721 |   | $ | 34,644 |   | $ | 113,226 |   |
| Net Income                                                     |       | $             | 12,688     |   | $ | 3,480 |   | $ | 6,234 |   | $ | 11,059 |   | $ | 33,461 |   |
| Limited partners’ interest in net income                  |       | $             | 12,434     |   | $ | 3,410 |   | $ | 6,109 |   | $ | 10,839 |   | $ | 32,792 |   |
| Net income per limited partner unit—basic and  diluted(1) |       | $             | 0.85       |   | $ | 0.30 |   | $ | 0.53 |   | $ | 0.78 |   | $ | 2.46 |   |
| Cash  distributions per limited partner unit(2)                |       | $             | 0.4111     |   | $ | 0.4250 |   | $ | 0.4375 |   | $ | 0.4450 |   | $ | 1.72 |   |

 
| ** **                                                        | ** ** | **Predecessor** | ** ** | ** ** | ** ** | **Successor** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------|------------|-----------------|------------|------------|------------|---------------|------------|------------|------------|
| ** **                                                        | ** ** | **First**       | ** ** | **Second** | ** ** | **Third**     | ** ** | ** ** | ** ** | **Fourth(3)** | ** ** | **Total** | ** ** |
| **Year ended December 31, 2005**                             |       |            |       |       |       |          |       |       |       |   |   |   |   |
| Sales                                                             |       | $               | 1,152,079  |       | $          | 763,197       |       | $          | 854,853    |   |   |   | $ | 1,275,729 |   | $ | 4,045,858 |   |
| Gross Profit                                                      |       | $               | 28,388     |       | $          | 14,491        |       | $          | 18,950     |   |   |   | $ | 29,888 |   | $ | 91,717 |   |
| Net Income (loss)                                                 |       | $               | 11,300     |       | $          | (903          | )          | $          | (2,048     | ) |   |   | $ | 9,752 |   | $ | 18,101 |   |
| Limited partners’ interest in net income                     |       | $               | —     |       | $          | —        |       | $          | —     |   |   |   | $ | 9,220 |   | $ | 9,220 |   |
| Net income per  limited partner unit—basic and diluted(1)(4) |       | $               | —     |       | $          | —        |       | $          | —     |   |   |   | $ | 0.70 |   | $ | 0.70 |   |

 

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(1)             See Note 2 for net income per limited partnerunit calculation.

(2)             Cash distributions declared in one calendarquarter are paid in the following calendar quarter.

(3)             Includes Predecessor’s results for the periodfrom October 1, 2005 through October 3, 2005.

(4)             Calculated for the period beginning with thePartnership’s initial public offering on October 4, 2005.  See Note 2.

**Note19.**               Subsequent Events

On February 8, 2007, the Partnership and certain ofits subsidiaries filed a universal shelf registration statement on Form S-3with the SEC to register the issuance and sale, from time to time and in suchamounts as determined by market conditions and the Partnership’s needs, of upto $400.0 million of the common units and debt securities of both thePartnership and certain of its subsidiaries. The Partnership will use the net proceeds from the sale of thesecurities covered by the shelf registration for general partnership purposes,which may include debt repayment, future acquisitions, capital expenditures andadditions to working capital.  As ofMarch 16, 2007, the registration statement on Form S-3 had not beendeclared effective by the SEC.

On February 14, 2007, the Partnership paid a cash distribution ofapproximately $5.2 million to its common and subordinated unitholders ofrecord as of the close of business on February 5, 2007.

On March 6,2007 and in private transactions, the Partnership sold its investment in NYMEXHoldings, Inc. along with its NYMEX seats for approximately $15.3 million andrealized a gain of approximately $14.1 million in the statement of incomeduring the quarter ended March 31, 2007.

 

F-38

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**Item 15(c)**

**SCHEDULEII—VALUATION AND QUALIFYING ACCOUNTSGLOBAL PARTNERS LPFOR THE YEAR ENDED DECEMBER 31, 2006, FOR THE PERIOD JANUARY 1, 2005 THROUGHOCTOBER 3, 2005, FOR THE PERIOD OCTOBER 4, 2005 THROUGH DECEMBER 31, 2005 ANDFOR THE YEAR ENDED DECMEBER 31, 2004In thousands**
| **Description**                                                  | ** ** | **Balance at  Beginning  of Period** | ** ** | **Charged to  Costs and  Expenses** | ** ** | **Recoveries** | ** ** | **Write Offs** | ** ** | **Balance at  End  of Period** | ** ** |
|------------------------------------------------------------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|----------------|------------|---------------------|------------|------------------------------------------|------------|
| ** **                                                       | ** ** | ** **                                     | ** ** | ** **                                    | ** ** | ** **     | ** ** | ** **          | ** ** | ** **                               | ** ** |
| **Year ended December 31, 2006 *(Successor)***                   |       |                                           |       |                                          |       |           |       |                |       |                                     |       |
| Allowance for doubtful accounts— accounts receivable        |       | $                                              | 2,084      |                                          | $          | 690            |       | $                   | 42         |                                     | $          | (60 | ) | $ | 2,756 |   |
| ** **                                                       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |
| **October 4, 2005 to December 31, 2005 *(Successor)*** |       |                                           |       |                                          |       |           |       |                |       |                                     |       |
| Allowance for doubtful accounts— accounts receivable        |       | $                                              | 2,006      |                                          | $          | 128            |       | $                   | 7          |                                     | $          | (57 | ) | $ | 2,084 |   |
| ** **                                                       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |
| **January 1, 2005 to October 3, 2005 *(Predecessor)*** |       |                                           |       |                                          |       |           |       |                |       |                                     |       |
| Allowance for doubtful accounts— accounts receivable        |       | $                                              | 1,862      |                                          | $          | 207            |       | $                   | 35         |                                     | $          | (98 | ) | $ | 2,006 |   |
| ** **                                                       |       |                                           |       |                                          |       |           |       |                |       |                                     |       |
| **Year ended December 31, 2004 *(Predecessor)***                 |       |                                           |       |                                          |       |           |       |                |       |                                     |       |
| Allowance for  doubtful accounts— accounts receivable       |       | $                                              | 2,001      |                                          | $          | 320            |       | $                   | 9          |                                     | $          | (468 | ) | $ | 1,862 |   |

ps

F-39

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**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 the Current Report on Form 8-K  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 the Current Report on Form 8-K 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) 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 the Current Report on Form 8-K  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 the  Current Report on Form 8-K 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 the Current Report  on Form 8-K 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 the Current Report on Form 8-K 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 the Current Report on Form 8-K 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 the Current Report on Form 8-K  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 the Current Report on Form 8-K filed on November 14,  2005). |

 

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| Exhibit  Number | ** ** | ** ** | ** ** | **Description** |
|-----------------|------------|------------|------------|-----------------|
| 10.10           | ^          |       | —     |            | Employment Agreement dated April 19, 2006, by and  between Global GP LLC and Thomas J. Hollister (incorporated herein by  reference to Exhibit 99.1 to the Current Report on Form 8-K filed  on May 11, 2006). |
|            |       |       |       |            |   |
| 10.11           |       |       | —     |            | Second Amendment to Credit Agreement, dated as of  August 2, 2006, among Global Operating LLC, Global Companies LLC, Global  Montello Group Corp., 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 10.1 to the Current  Report on Form 8-K filed on August 3, 2006). |
|            |       |       |       |            |   |
| 10.12           | ^          |       | —     |            | Agreement dated August 17, 2006, by and between  Global GP LLC and Thomas A. McManmon, Jr. (incorporated herein by reference  to Exhibit 10.1 to the Current Report on Form 8-K filed on August  21, 2006). |
|            |       |       |       |            |   |
| 10.13           | ^          |       | —     |            | Deferred Compensation Agreement dated August 17,  2006, by and between Global GP LLC and Thomas A. McManmon, Jr. (incorporated  herein by reference to Exhibit 10.2 to the Current Report on Form 8-K  filed on August 21, 2006). |
|            |       |       |       |            |   |
| 10.14           | ^          |       |       |            | Employment Agreement dated February 1, 2007, by and  between Global GP LLC and Edward J. Faneuil (incorporated herein by reference  to Exhibit 10.1 to the Current Report on Form 8-K filed on  February 7, 2007). |
|            |       |       |       |            |   |
| 10.15           | ^          |       |       |            | Deferred Compensation Agreement dated February 1,  2007, by and between Global GP LLC and Edward J. Faneuil (incorporated herein  by reference to Exhibit 10.2 to the Current Report on Form 8-K  filed on February 7, 2007). |
|            |       |       |       |            |   |
| 21.1            | *          |       | —     |            | List of Subsidiaries of Global Partners LP. |
|            |       |       |       |            |   |
| 23.1            | *          |       |       |            | Consent of Ernst & Young LLP |
|            |       |       |       |            |   |
| 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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^                     Managementcontract or compensatory plan or arrangement.

*                    Filed herewith.

†                     Notdeemed “filed” for purposes of Section 18 of the Securities Exchange Actof 1934 or otherwise subject to the liability of that section.

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