BUCKEYE PARTNERS L P, 10-K, 1996-03-28

BUCKEYE PARTNERS L P
10-K, 1996-03-28
PIPE LINES (NO NATURAL GAS)

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DRAFT: 2/26

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(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, 1995

[_] 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 1-9356

BUCKEYE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 23-2432497
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

3900 HAMILTON BOULEVARD
ALLENTOWN, PENNSYLVANIA 18103
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 770-4000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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<S> <C>
LP Units representing limited partnership interests................ New York Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

None
(TITLE OF CLASS)

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

At March 25, 1996, the aggregate market value of the registrant's LP Units
held by non-affiliates was $460 million. The calculation of such market value
should not be construed as an admission or conclusion by the registrant that
any person is in fact an affiliate of the registrant.

LP Units outstanding as of March 25, 1996: 12,047,230

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TABLE OF CONTENTS

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PAGE
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<S> <C> <C>
PART I
ITEM 1. BUSINESS.................................................................... 1
ITEM 2. PROPERTIES.................................................................. 10
ITEM 3. LEGAL PROCEEDINGS........................................................... 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................... 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S LP UNITS AND RELATED UNITHOLDER MATTERS......... 14
ITEM 6. SELECTED FINANCIAL DATA .................................................... 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................. 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................. 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE................................................................. 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................... 41
ITEM 11. EXECUTIVE COMPENSATION ..................................................... 43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............. 49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............ 53
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PART I

ITEM 1. BUSINESS

INTRODUCTION

Buckeye Partners, L.P. (the "Partnership"), the Registrant, is a limited
partnership organized in 1986 under the laws of the state of Delaware.

The Partnership conducts all its operations through subsidiary entities.
These operating subsidiaries are Buckeye Pipe Line Company, L.P. ("Buckeye"),
Laurel Pipe Line Company, L.P. ("Laurel"), Everglades Pipe Line Company, L.P.
("Everglades") and Buckeye Tank Terminals Company, L.P. ("BTT"), each of which
is 99 percent owned. (Each of Buckeye, Laurel, Everglades and BTT is referred
to as an "Operating Partnership" and collectively as the "Operating
Partnerships").

Buckeye is one of the largest independent pipeline common carriers of
refined petroleum products in the United States, with 3,119 miles of pipeline
serving 10 states. Laurel owns a 345-mile common carrier refined products
pipeline located principally in Pennsylvania. Everglades owns 37 miles of
refined products pipeline in Florida. Buckeye, Laurel and Everglades conduct
the Partnership's refined products pipeline business. BTT provides bulk
storage service through leased facilities with an aggregate capacity of
271,000 barrels of refined petroleum products.

The Partnership acquired its interests in the Operating Partnerships from
The Penn Central Corporation, now American Financial Group, Inc. ("American
Financial"), on December 23, 1986 (the "1986 Acquisition"). The Operating
Partnerships (other than Laurel) had been organized by American Financial for
purposes of the 1986 Acquisition and succeeded to the operations of
predecessor companies owned by American Financial, including Buckeye Pipe Line
Company (an Ohio corporation) and its subsidiaries ("Pipe Line"), in November
1986. Laurel was formed in October 1992 and succeeded to the operations of
Laurel Pipe Line Company ("Laurel Corp") (an Ohio corporation) which was a
majority owned corporate subsidiary of the Partnership until the minority
interest was acquired in December 1991.

Buckeye Management Company (the "General Partner"), a corporation organized
in 1986 under the laws of the state of Delaware, owns a 1 percent general
partnership interest in, and serves as sole general partner of, the
Partnership. A corporate subsidiary of the General Partner, Buckeye Pipe Line
Company (a Delaware corporation) (the "Manager"), owns a 1 percent general
partnership interest in, and serves as sole general partner and manager of,
each Operating Partnership.

On March 22, 1996, BMC Acquisition Company ("BAC"), a corporation organized
in 1996 under the laws of the state of Delaware, acquired all of the common
stock of the General Partner from a subsidiary of American Financial (the
"Acquisition"). BAC is owned by Glenmoor Partners, LLP ("Glenmoor"), an
investment group led by Alfred W. Martinelli, Chairman of the Board and Chief
Executive Officer of the General Partner and including as partners all of the
members of senior management of the General Partner, certain managers of the
Manager and by the BMC Acquisition Company Employee Stock Ownership Plan (the
"ESOP") formed for the benefit of employees of the General Partner, the
Manager and Glenmoor. Pursuant to a Management Agreement dated March 22, 1996,
among Glenmoor, the General Partner and the Manager (the "Glenmoor Management
Agreement"), Glenmoor will hire all of the executive officers of the General
Partner and the Manager and certain managers of the Manager and provide
certain management functions for the General Partner and the Manager following
the Acquisition. The executive officers will continue in their capacity as
executive officers of the General Partner and the Manager. See "Certain
Relationships and Related Transactions."

REFINED PRODUCTS BUSINESS

The Partnership receives petroleum products from refineries, connecting
pipelines and marine terminals, and transports those products to other
locations. In 1995, refined products accounted for substantially all of the
Partnership's consolidated revenues and consolidated operating income.

The Partnership transported an average of approximately 1,009,800 barrels
per day of refined products in 1995. The following table shows the volume and
percentage of refined products transported over the last three years.

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VOLUME AND PERCENTAGE OF REFINED PRODUCTS TRANSPORTED(1)
(VOLUME IN THOUSANDS OF BARRELS PER DAY)

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YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993
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VOLUME PERCENT VOLUME PERCENT VOLUME PERCENT
------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gasoline........................ 507.1 50% 526.0 51% 503.6 51%
Jet Fuels....................... 243.9 24 235.5 23 234.1 24
Middle Distillates (2).......... 235.2 24 246.1 24 223.0 23
Other Products.................. 23.6 2 21.2 2 20.4 2
------- --- ------- --- ----- ---
Total........................... 1,009.8 100% 1,028.8 100% 981.1 100%
======= === ======= === ===== ===
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(1) Excludes local product transfers.
(2) Includes diesel fuel, heating oil, kerosene and other middle distillates.

The Partnership provides service in the following states: Pennsylvania, New
York, New Jersey, Indiana, Ohio, Michigan, Illinois, Connecticut,
Massachusetts, Washington and Florida.

Pennsylvania--New York--New Jersey

Buckeye serves major population centers in the states of Pennsylvania, New
York and New Jersey through 1,002 miles of pipeline. Refined products are
received at Linden, New Jersey. Products are then transported through two
lines from Linden, New Jersey to Allentown, Pennsylvania. From Allentown, the
pipeline continues west, through a connection with Laurel, to Pittsburgh,
Pennsylvania (serving Reading, Harrisburg, Altoona/Johnstown and Pittsburgh)
and north through eastern Pennsylvania into New York State (serving
Scranton/Wilkes-Barre, Binghamton, Syracuse, Utica and Rochester and, via a
connecting carrier, Buffalo). Products received at Linden, New Jersey are also
transported through two lines to John F. Kennedy International and LaGuardia
Airports and to commercial bulk terminals at Long Island City and Inwood, New
York. The pipeline presently supplies Kennedy, LaGuardia and Newark
International airports with substantially all of each airport's jet fuel
requirements.

Laurel transports refined products through a 345-mile pipeline extending
westward from five refineries in the Philadelphia area to Pittsburgh,
Pennsylvania.

Indiana--Ohio--Michigan--Illinois

Buckeye transports refined products through 1,991 miles of pipeline (of
which 246 miles are jointly owned with other pipeline companies) in southern
Illinois, central Indiana, eastern Michigan, western and northern Ohio and
western Pennsylvania. A number of receiving lines and delivery lines connect
to a central corridor which runs from Lima, Ohio, through Toledo, Ohio to
Detroit, Michigan. Products are received at East Chicago, Indiana; Robinson,
Illinois and at the corridor connection points of Detroit, Toledo and Lima.
Major areas served include Huntington/Fort Wayne, Indiana; Bay City, Detroit
and Flint, Michigan; Cleveland, Columbus, Lima and Toledo, Ohio; and
Pittsburgh, Pennsylvania.

Other Refined Products Pipelines

Buckeye serves Connecticut and Massachusetts through 112 miles of pipeline
that carry refined products from New Haven, Connecticut to Hartford,
Connecticut and Springfield, Massachusetts.

Everglades carries primarily jet fuel on a 37-mile pipeline from Port
Everglades, Florida to Hollywood-Ft. Lauderdale International Airport and
Miami International Airport.

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Buckeye owns a 14-mile pipeline from Tacoma, Washington to McChord Air Force
Base which delivers military jet fuel.

OTHER BUSINESS ACTIVITIES

BTT provides bulk storage services through leased facilities located in
Pittsburgh, Pennsylvania which have the capacity to store up to an aggregate
of approximately 271,000 barrels of refined petroleum products. The facility,
which is served by Buckeye and Laurel, provides bulk storage and loading
facilities for shippers or other customers.

COMPETITION AND OTHER BUSINESS CONSIDERATIONS

The Operating Partnerships do business without the benefit of exclusive
franchises from government entities. In addition, the Operating Partnerships
generally operate as common carriers, providing transportation services at
posted tariffs and without long-term contracts. As providers of such service,
the Operating Partnerships do not own the products they transport. Demand for
such service arises, ultimately, from demand for petroleum products in the
regions served and the ability and willingness of refiners, marketers and end-
users to supply such demand by deliveries through the Partnership's pipelines.
Demand for refined petroleum products is primarily a function of price,
prevailing economic conditions and weather. The Operating Partnerships'
businesses are, therefore, subject to a variety of factors partially or
entirely beyond their control. Multiple sources of pipeline entry and multiple
points of delivery, however, have historically helped maintain stable total
volumes even when volumes at particular source or destination points have
changed.

The Partnership's business may in the future be affected by changing prices
or demand for oil and for other fuels. The Partnership may also be affected by
energy conservation, changing sources of supply, structural changes in the oil
industry and new energy technologies. The General Partner is unable to predict
the effect of such factors.

A substantial portion of the refined petroleum products transported by the
Partnership's pipelines are ultimately used as fuel for motor vehicles and
aircraft. Changes in transportation and travel patterns in the areas served by
the Partnership's pipelines could adversely affect the Partnership's results
of operations.

In 1995, the Operating Partnerships had approximately 105 customers, most of
which were either major integrated oil companies or smaller marketing
companies. The largest two customers accounted for 7.7 percent and 6.7
percent, respectively, of consolidated revenues, while the 20 largest
customers accounted for 77.6 percent of consolidated revenues.

Generally, pipelines are the lowest cost method for long-haul overland
movement of refined petroleum products. Therefore, the Operating Partnership's
most significant competitors for large volume shipments are other pipelines,
many of which are owned and operated by major integrated oil companies.
Although it is unlikely that a pipeline system comparable in size and scope to
the Operating Partnership's will be built in the foreseeable future, new
pipelines (including pipeline segments that connect with existing pipeline
systems) could be built to effectively compete with the Operating Partnerships
in particular locations.

In some areas, the Operating Partnerships compete with marine
transportation. Tankers and barges on the Great Lakes account for some of the
volume to certain Michigan, Ohio and upstate New York locations during the
approximately eight non-winter months of the year. Barges are presently a
competitive factor for deliveries to the New York City area, the Pittsburgh
area, Connecticut and Ohio.

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Trucks competitively deliver product in a number of areas served by the
Operating Partnerships. While their costs may not be competitive for longer
hauls or large volume shipments, trucks compete effectively with the Operating
Partnerships in many areas. The availability of truck transportation places a
significant competitive constraint on the ability of the Operating
Partnerships to increase their tariff rates.

Privately arranged exchanges of product between marketers in different
locations are an increasing but unquantified form of competition. Generally,
such exchanges reduce both parties' costs by eliminating or reducing
transportation charges.

Distribution of refined petroleum products depends to a large extent upon
the location and capacity of refineries. In past years, a significant quantity
of domestic refining capacity has been shut down. To date, the aggregate
impact of these shut-downs has affected the Operating Partnerships' volumes
favorably, as these shut-downs have resulted in the transportation of product
over longer distances to certain locations. Because the Operating
Partnerships' pipelines have numerous source points, the General Partner does
not believe that the shut-down of any particular refinery would have a
material adverse effect on the Partnership. However, the General Partner is
unable to determine whether additional shut-downs will occur or what their
effects might be.

The Operating Partnerships' mix of products transported tends to vary
seasonally. Declines in demand for heating oil during the summer months are,
to a certain extent, offset by increased demand for gasoline and jet fuels.
Overall, operations have been only moderately seasonal, with somewhat lower
than average volume being transported during March, April and May as compared
to the rest of the year.

Neither the Partnership nor any of the Operating Partnerships have any
employees. All of the operations of the Operating Partnerships are managed and
operated by employees of the Manager. At December 31, 1995, the Manager had
594 full-time employees, 168 of whom were represented by two labor unions. The
collective bargaining agreement with each of these unions is subject to
renewal in 1996. The Operating Partnerships (and their predecessors) have
never experienced any significant work stoppages or other significant labor
problems.

CAPITAL EXPENDITURES

The General Partner anticipates that the Partnership will continue to make
ongoing capital expenditures to maintain and enhance its assets and
properties, including improvements to meet customers' needs and those required
to satisfy new environmental and safety standards. In 1995, total capital
expenditures were $17.4 million. Projected capital expenditures for 1996
amount to $14.3 million. Planned capital expenditures in 1996 include, among
other things, renewal and replacement of several tank floors, roofs and seals,
installation of new metering systems and field instrumentation and various
facility improvements that facilitate increased pipeline volumes. Although
projected 1996 capital expenditures are expected to decline, capital
expenditures are expected to increase over time primarily in response to
increasingly rigorous governmental safety and environmental requirements as
well as industry standards. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

REGULATION

General

Buckeye is an interstate common carrier subject to the regulatory
jurisdiction of the Federal Energy Regulatory Commission ("FERC") under the
Interstate Commerce Act and the Department of Energy Organization Act. FERC
regulation requires that interstate oil pipeline rates be posted publicly and
that these rates be "just and reasonable" and non-discriminatory. FERC
regulation also

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enforces common carrier obligations and specifies a uniform system of
accounts. In addition, Buckeye, and the other Operating Partnerships, are
subject to the jurisdiction of certain other federal agencies with respect to
environmental and pipeline safety matters.

The Operating Partnerships are also subject to the jurisdiction of various
state and local agencies, including, in some states, public utility
commissions which have jurisdiction over, among other things, intrastate
tariffs, the issuance of debt and equity securities, transfers of assets and
pipeline safety.

Tariffs

FERC has jurisdiction over Buckeye's interstate tariffs. In July 1988, in
the midst of a rate proceeding involving Buckeye, FERC issued an order that
provided Buckeye with the opportunity to qualify for an unspecified
alternative form of "light-handed" rate regulation if Buckeye could establish
that it lacked significant market power. On December 31, 1990, after extensive
testimony and hearings, FERC issued an opinion which found that in most of its
relevant market areas, Buckeye operated in a competitive environment in which
it could not exercise significant market power and that Buckeye's tariff rates
in those markets were just and reasonable. Based on these findings, FERC
permitted Buckeye to implement a "light-handed" rate regulation program on an
experimental basis for three years beginning in March 1991. Under the program,
in markets where Buckeye does not have significant market power, individual
rate increases: (a) will not exceed a real (i.e., exclusive of inflation)
increase of 15 percent over any two-year period (the "rate cap"), and (b) will
be allowed to become effective without suspension or investigation if they do
not exceed a "trigger" equal to the change in the GDP implicit price deflator
since the date on which the individual rate was last increased, plus 2
percent. Individual rate decreases will be presumptively valid upon a showing
that the proposed rate exceeds marginal costs. In markets where Buckeye was
found to have significant market power and in certain markets where no market
power finding was made: (i) individual rate increases cannot exceed the volume
weighted average rate increase in markets where Buckeye does not have
significant market power since the date on which the individual rate was last
increased, and (ii) any volume weighted average rate decrease in markets where
Buckeye does not have significant market power must be accompanied by a
corresponding decrease in all of Buckeye's rates in markets where it does have
significant market power. Shippers retain the right to file complaints or
protests following notice of a rate increase, but are required to show that
the proposed rates violate or have not been adequately justified under the
experimental program, that the proposed rates are unduly discriminatory, or
that Buckeye has acquired significant market power in markets previously found
to be competitive.

In October 1992, the Energy Policy Act of 1992 (the "Policy Act") was
enacted. Title XVIII of the Policy Act, "Oil Pipeline Regulatory Reform,"
provided, among other things, that certain tariff rates that were in effect on
October 25, 1991 were deemed "just and reasonable, " and that FERC was
directed by October 24, 1993 to promulgate a rule establishing a simplified
and generally applicable ratemaking methodology for oil pipelines. FERC was
also directed to issue a rule streamlining certain procedural aspects of its
proceedings.

On October 22, 1993, FERC issued a final rule pursuant to the Policy Act
with respect to rate regulation of oil pipelines. The rule relies primarily on
an index methodology, whereby a pipeline would be allowed to change its rates
in accordance with an index that FERC believes reflects cost changes
appropriate for application to pipeline rates. In the alternative, a pipeline
is allowed to charge market-based rates if the pipeline establishes that it
does not possess significant market power in a particular market. In addition,
the rule provides for the rights of both pipelines and shippers to demonstrate
that the index should not apply to an individual pipeline's rates in light of
the pipeline's costs. The final rule became effective on January 1, 1995.

On October 26, 1994, Buckeye filed a motion that requested FERC to permit
Buckeye to continue its existing "experimental" rate program indefinitely, as
an exception to the generic oil pipeline rate

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regulations. On December 6, 1994, FERC issued an order granting that motion
and extended the operation of Buckeye's rate program indefinitely, commencing
January 1, 1995. The Buckeye rate program will be subject to reevaluation at
the same time FERC reviews the index selected in the generic oil pipeline
regulations, currently scheduled to occur five years after the effective date
of the generic rules. Independent of regulatory considerations, it is expected
that tariff rates will continue to be constrained by competition and other
market factors.

Environmental Matters

The Operating Partnerships are subject to federal and state laws and
regulations relating to the protection of the environment. Although the
General Partner believes that the operations of the Operating Partnerships
comply in all material respects with applicable environmental regulations,
risks of substantial liabilities are inherent in pipeline operations, and
there can be no assurance that material environmental liabilities will not be
incurred. Moreover, it is possible that other developments, such as
increasingly rigorous environmental laws, regulations and enforcement policies
thereunder, and claims for damages to property or persons resulting from the
operations of the Operating Partnerships, could result in substantial costs
and liabilities to the Partnership. See "Legal Proceedings" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources--Environmental Matters."

The Oil Pollution Act of 1990 ("OPA") amends certain provisions of the
federal Water Pollution Control Act of 1972, commonly referred to as the Clean
Water Act ("CWA"), and other statutes as they pertain to the prevention of and
response to oil spills into navigable waters. The OPA subjects owners of
facilities to strict joint and several liability for all containment and
clean-up costs and certain other damages arising from a spill. The CWA
provides penalties for any discharges of petroleum products in reportable
quantities and imposes substantial liability for the costs of removing a
spill. State laws for the control of water pollution also provide varying
civil and criminal penalties and liabilities in the case of releases of
petroleum or its derivatives into surface waters or into the ground.
Regulations are currently being developed under OPA and state laws which may
impose additional regulatory burdens on the Partnership.

Contamination resulting from spills or releases of refined petroleum
products are not unusual in the petroleum pipeline industry. The Partnership's
pipelines cross numerous navigable rivers and streams. Although the General
Partner believes that the Operating Partnerships comply in all material
respects with the spill prevention, control and countermeasure requirements of
federal laws, any spill or other release of petroleum products into navigable
waters may result in material costs and liabilities to the Partnership.

The Resource Conservation and Recovery Act ("RCRA"), as amended, establishes
a comprehensive program of regulation of "hazardous wastes." Hazardous waste
generators, transporters, and owners or operators of treatment, storage and
disposal facilities must comply with regulations designed to ensure detailed
tracking, handling and monitoring of these wastes. RCRA also regulates the
disposal of certain non-hazardous wastes. As a result of recently issued
regulations, many previously non-hazardous wastes generated by pipeline
operations have become "hazardous wastes" which are subject to more rigorous
and costly disposal requirements.

The Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), also known as "Superfund," governs the release or threat of
release of a "hazardous substance." Disposal of a hazardous substance, whether
on or off-site, may subject the generator of that substance to liability under
CERCLA for the costs of clean-up and other remedial action. Pipeline
maintenance and other activities in the ordinary course of business could
subject the Operating Partnerships to the requirements of these statutes. As a
result, to the extent hydrocarbons or other petroleum waste may have been
released or disposed of in the past, the Operating Partnerships may

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in the future be required to remedy contaminated property. Governmental
authorities such as the Environmental Protection Agency ("EPA"), and in some
instances third parties, are authorized under CERCLA to seek to recover
remediation and other costs from responsible persons, without regard to fault
or the legality of the original disposal. In addition to its potential
liability as a generator of a "hazardous substance," the property or right-of-
way of the Operating Partnerships may be adjacent to or in the immediate
vicinity of Superfund and other hazardous waste sites. Accordingly, the
Operating Partnerships may be responsible under CERCLA for all or part of the
costs required to cleanup such sites, which costs could be material.

The Clean Air Act, amended by the Clean Air Act Amendments of 1990 (the
"Amendments"), imposes controls on the emission of pollutants into the air.
The Operating Partnerships may be affected in several ways by the Amendments,
including required changes in operating procedures and increased capital
expenditures. The Amendments require states to develop permitting programs
over the next several years to comply with new federal programs. Existing
operating and air-emission permits like those held by the Operating
Partnerships will have to be reviewed to determine compliance with the new
programs. It is possible that new or more stringent controls will be imposed
upon the Operating Partnerships through this permit review. In addition, the
Amendments impose new requirements on the composition of fuels transported by
the Operating Partnerships. While the principal impact of these new
requirements will be on refiners and marketers of such fuels, the Operating
Partnerships may have to institute additional quality control procedures and
provide additional tankage in order to satisfy customer needs for segregated
storage of these reformulated fuels.

The Operating Partnerships are also subject to environmental laws and
regulations adopted by the various states in which they operate. In certain
instances, the regulatory standards adopted by the states are more stringent
than applicable federal laws.

In connection with the 1986 Acquisition, Pipe Line obtained an
Administrative Consent Order ("ACO") from the New Jersey Department of
Environmental Protection and Energy ("NJDEPE") under the New Jersey
Environmental Cleanup Responsibility Act of 1983 ("ECRA") for all six of Pipe
Line's facilities in New Jersey. The ACO permitted the 1986 Acquisition to be
completed prior to full compliance with ECRA, but required Pipe Line to
conduct in a timely manner a sampling plan for environmental contamination at
the New Jersey facilities and to implement any required clean-up plan.
Sampling continues in an effort to identify areas of contamination at the New
Jersey facilities, while clean-up operations have begun at certain of the
sites. The obligations of Pipe Line were not assumed by the Partnership, and
the costs of compliance have been and will continue to be paid by American
Financial. Through December 1995, Buckeye's costs of approximately $2,516,000
have been funded by American Financial.

Safety Matters

The Operating Partnerships are subject to regulation by the United States
Department of Transportation ("DOT") under the Hazardous Liquid Pipeline
Safety Act of 1979 ("HLPSA") relating to the design, installation, testing,
construction, operation, replacement and management of their pipeline
facilities. HLPSA covers petroleum and petroleum products and requires any
entity which owns or operates pipeline facilities to comply with applicable
safety standards, to establish and maintain a plan of inspection and
maintenance and to comply with such plans.

The Pipeline Safety Reauthorization Act of 1988 required increased
coordination of safety regulation between federal and state agencies, testing
and certification of pipeline personnel, and authorization of safety-related
feasibility studies. In 1990, the Manager initiated a random drug testing
program to comply with the regulations promulgated by the Office of Pipeline
Safety, DOT, and in January 1995, the Manager instituted a program to comply
with new DOT regulations that require alcohol testing of certain pipeline
personnel.

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HLPSA requires, among other things, that the Secretary of Transportation
consider the need for the protection of the environment in issuing federal
safety standards for the transportation of hazardous liquids by pipeline. The
legislation also requires the Secretary of Transportation to issue regulations
concerning, among other things, the identification by pipeline operators of
environmentally sensitive areas; the circumstances under which emergency flow
restricting devices should be required on pipelines; training and
qualification standards for personnel involved in maintenance and operation of
pipelines; and the periodic integrity testing of pipelines in environmentally
sensitive and high-density population areas by internal inspection devices or
by hydrostatic testing. Significant expenses would be incurred if, for
instance, additional valves were required, if leak detection standards were
amended to exceed the current control system capabilities of the Operating
Partnerships or additional integrity testing of pipeline facilities were to be
required. The General Partner believes that the Operating Partnerships'
operations comply in all material respects with HLPSA. However, the industry,
including the Partnership, could be required to incur substantial additional
capital expenditures and increased operating costs depending upon the
requirements of final regulations issued by DOT pursuant to HLPSA, as amended.

The Operating Partnerships are also subject to the requirements of the
Federal Occupational Safety and Health Act ("OSHA") and comparable state
statutes. The General Partner believes that the Operating Partnerships'
operations comply in all material respects with OSHA requirements, including
general industry standards, recordkeeping, hazard communication requirements
and monitoring of occupational exposure to benzene and other regulated
substances.

The General Partner cannot predict whether or in what form any new
legislation or regulatory requirements might be enacted or adopted or the
costs of compliance. In general, any such new regulations would increase
operating costs and impose additional capital expenditure requirements on the
Partnership, but the General Partner does not presently expect that such costs
or capital expenditure requirements would have a material adverse effect on
the Partnership.

TAX TREATMENT OF PUBLICLY TRADED PARTNERSHIPS UNDER THE INTERNAL REVENUE CODE

The Internal Revenue Code of 1986, as amended (the "Code"), imposes certain
limitations on the current deductibility of losses attributable to investments
in publicly traded partnerships and treats certain publicly traded
partnerships as corporations for federal income tax purposes. The following
discussion briefly describes certain aspects of the Code that apply to
individuals who are citizens or residents of the United States without
commenting on all of the federal income tax matters affecting the Partnership
or its unitholders (the "Unitholders"), and is qualified in its entirety by
reference to the Code. UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISOR
ABOUT THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE PARTNERSHIP.

Characterization of the Partnership for Tax Purposes

The Code treats a publicly traded partnership that existed on December 17,
1987, such as the Partnership, as a corporation for federal income tax
purposes beginning in the earlier of (i) 1998 or (ii) the year in which it
adds a substantial new line of business unless, for each taxable year of the
Partnership beginning in the earlier of such years, 90 percent or more of its
gross income consists of qualifying income. Qualifying income includes
interest, dividends, real property rents, gains from the sale or disposition
of real property, income and gains derived from the exploration, development,
mining or production, processing, refining, transportation (including
pipelines transporting gas, oil or products thereof), or the marketing of any
mineral or natural resource (including fertilizer, geothermal energy and
timber), and gain from the sale or disposition of capital assets that produced
such income.

8
<PAGE>

Because the Partnership is engaged primarily in the refined products
pipeline transportation business, the General Partner believes that 90 percent
or more of the Partnership's gross income has been qualifying income. If this
continues to be true and no subsequent legislation amends this provision, the
Partnership would continue to be classified as a partnership and not as a
corporation for federal income tax purposes.

In connection with the Acquisition, the existing demand notes in an
aggregate principal amount of $28,000,000 (the "Demand Notes") issued by a
subsidiary of American Financial and payable to the General Partner were
cancelled. In addition, promissory notes in the same amount (the "Inter-
company Notes") issued by the General Partner and payable to the Manager were
cancelled. At the Acquisition closing, BAC contributed approximately $5.8
million to the capital of the General Partner and the General Partner issued
to the Manager a $5 million demand note. In accordance with the Amended and
Restated Agreement of Limited Partnership, dated December 12, 1986, as amended
(the "Partnership Agreement"), the Partnership has received an opinion of
counsel that neither the cancellation of the Demand Notes or the Inter-company
Notes, nor the declaration or making of any dividend, distribution or other
payment in respect of the capital stock of the General Partner or the Manager
(a "Restricted Payment") after such cancellation would result in the
classification of the Partnership or any Operating Partnership as an
association taxable as a corporation for federal income tax purposes. The
opinion of counsel assumed, among other things, that after giving effect to
the cancellation of the Demand Notes and the Inter-company Notes, and the
payment of any Restricted Payment, the General Partner and the Manager will
have a net worth of at least $5,000,000 without regard to any investment in
the Partnership or the Operating Partnerships, which amount could be reached
by creditors. The form of the opinion of counsel was approved by a special
committee of disinterested directors of the General Partner consisting of
William C. Pierce (Chairman), A. Leon Fergenson and Edward F. Kosnik, acting
on behalf of the Partnership.

Passive Activity Loss Rules

The Code provides that an individual, estate, trust or personal service
corporation generally may not deduct losses from passive business activities,
to the extent they exceed income from all such passive activities, against
other income. Income which may not be offset by passive activity "losses"
includes not only salary and active business income, but also portfolio income
such as interest, dividends or royalties or gain from the sale of property
that produces portfolio income. Credits from passive activities are also
limited to the tax attributable to any income from passive activities. The
passive activity loss rules are applied after other applicable limitations on
deductions, such as the at-risk rules and the basis limitation. Certain
closely held corporations are subject to slightly different rules, which can
also limit their ability to offset passive losses against certain types of
income.

Under the Code, net income from publicly traded partnerships is not treated
as passive income for purposes of the passive loss rule, but is treated as
non-passive income. Net losses and credits attributable to an interest in a
publicly traded partnership are not allowed to offset a partner's other
income. Thus, a Unitholder's proportionate share of the Partnership's net
losses may be used to offset only Partnership net income from its trade or
business in succeeding taxable years or, upon a complete disposition of a
Unitholder's interest in the Partnership to an unrelated person in a fully
taxable transaction, may be used to (i) offset gain recognized upon the
disposition, and (ii) then against all other income of the Unitholder. In
effect, net losses are suspended and carried forward indefinitely until
utilized to offset net income of the Partnership from its trade or business or
allowed upon the complete disposition to an unrelated person in a fully
taxable transaction of a Unitholder's interest in the Partnership. A
Unitholder's share of Partnership net income may not be offset by passive
activity losses generated by other passive activities. In addition, a
Unitholder's proportionate share of the Partnership's portfolio income,
including portfolio income arising from the investment of the Partnership's
working capital, is not treated as income from a passive activity and may not
be offset by such Unitholder's share of net losses of the Partnership.

9
<PAGE>

Deductibility of Interest Expense

The Code generally provides that investment interest expense is deductible
only to the extent of a non-corporate taxpayer's net investment income. In
general, net investment income for purposes of this limitation includes gross
income from property held for investment, gain attributable to the disposition
of property held for investment (except for net capital gains for which the
taxpayer has elected to be taxed at a maximum rate of 28 percent) and
portfolio income (determined pursuant to the passive loss rules) reduced by
certain expenses (other than interest) which are directly connected with the
production of such income. Property subject to the passive loss rules is not
treated as property held for investment. However, the IRS has issued a Notice
which provides that net income from a publicly traded partnership (not
otherwise treated as a corporation) may be included in net investment income
for purposes of the limitation on the deductibility of investment interest. A
Unitholder's investment income attributable to its interest in the Partnership
will include both its allocable share of the Partnership's portfolio income
and trade or business income. A Unitholder's investment interest expense will
include its allocable share of the Partnership's interest expense attributable
to portfolio investments.

Unrelated Business Taxable Income

Certain entities otherwise exempt from federal income taxes (such as
individual retirement accounts, pension plans and charitable organizations)
are nevertheless subject to federal income tax on net unrelated business
taxable income and each such entity must file a tax return for each year in
which it has more than $1,000 of gross income from unrelated business
activities. The General Partner believes that substantially all of the
Partnership's gross income will be treated as derived from an unrelated trade
or business and taxable to such entities. The tax-exempt entity's share of the
Partnership's deductions directly connected with carrying on such unrelated
trade or business are allowed in computing the entity's taxable unrelated
business income. ACCORDINGLY, INVESTMENT IN THE PARTNERSHIP BY TAX-EXEMPT
ENTITIES SUCH AS INDIVIDUAL RETIREMENT ACCOUNTS, PENSION PLANS AND CHARITABLE
TRUSTS MAY NOT BE ADVISABLE.

State Tax Treatment

The Partnership owns property or does business in the states of
Pennsylvania, New York, New Jersey, Indiana, Ohio, Michigan, Illinois,
Connecticut, Massachusetts, Washington and Florida. A Unitholder will likely
be required to file state income tax returns and to pay applicable state
income taxes in many of these states and may be subject to penalties for
failure to comply with such requirements. Some of the states have proposed
that the Partnership withhold a percentage of income attributable to
Partnership operations within the state for Unitholders who are non-residents
of the state. In the event that amounts are required to be withheld (which may
be greater or less than a particular Unitholder's income tax liability to the
state), such withholding would generally not relieve the non-resident
Unitholder from the obligation to file a state income tax return.

ITEM 2. PROPERTIES

As of December 31, 1995, the principal facilities of the Operating
Partnerships included 3,501 miles of 6-inch to 24-inch diameter pipeline, 37
pumping stations, 102 delivery points and various sized tanks having an
aggregate capacity of approximately 9.7 million barrels.

The Operating Partnerships own substantially all of their facilities
subject, in the case of Buckeye, to a mortgage and security interest granted
to secure payment of the outstanding balance of Buckeye's First Mortgage Notes
due serially through 2010. See Note 8 to Consolidated Financial Statements of
Buckeye Partners, L.P. In addition, certain portions of Buckeye's pipeline in
Connecticut and Massachusetts are subject to security interests in favor of
the owners of the right-of-way to secure future lease payments.

10
<PAGE>

In general, the Operating Partnerships' pipelines are located on land owned
by others pursuant to rights granted under easements, leases, licenses and
permits from railroads, utilities, governmental entities and private parties.
Like other pipelines, certain of the Operating Partnerships' rights are
revocable at the election of the grantor or are subject to renewal at various
intervals, and some require periodic payments. The Operating Partnerships have
not experienced any revocations or lapses of such rights which were material
to its business or operations, and the General Partner has no reason to expect
any such revocation or lapse in the foreseeable future. Most pumping stations
and terminal facilities are located on land owned by the Operating
Partnerships.

The General Partner believes that the Operating Partnerships have sufficient
title to their material assets and properties, possess all material
authorizations and franchises from state and local governmental and regulatory
authorities and have all other material rights necessary to conduct their
business substantially in accordance with past practice. Although in certain
cases the Operating Partnerships' title to assets and properties or their
other rights, including their rights to occupy the land of others under
easements, leases, licenses and permits, may be subject to encumbrances,
restrictions and other imperfections, none of such imperfections are expected
by the General Partner to interfere materially with the conduct of the
Operating Partnerships' businesses.

ITEM 3. LEGAL PROCEEDINGS

The Partnership, in the ordinary course of business, is involved in various
claims and legal proceedings, some of which are covered in whole or in part by
insurance. The General Partner is unable to predict the timing or outcome of
these claims and proceedings. Although it is possible that one or more of
these claims or proceedings, if adversely determined, could, depending on the
relative amounts involved, have a material effect on the Partnership's results
of operations for a future period, the General Partner does not believe that
their outcome will have a material effect on the Partnership's consolidated
financial condition.

FREEPORT LANDSLIDE

On March 30, 1990, a landslide near Freeport, Pennsylvania caused a rupture
to one of the Partnership's pipelines which resulted in the release of
approximately 58,000 gallons of petroleum products. Undetermined amounts of
petroleum products saturated the soils surrounding the landslide area and
flowed into Knapp Run and eventually into the Allegheny River. Buckeye
promptly conducted extensive emergency response and remediation efforts.

Following the release, various agencies and departments of both the federal
and state governments, including the United States Department of Justice, the
Pennsylvania Office of Attorney General, the Pennsylvania Department of
Environmental Resources ("DER") , the Pennsylvania Department of
Transportation, EPA, the National Transportation Safety Board, and DOT,
commenced investigations into the circumstances of the pipeline rupture. In
January 1995, the U.S. Attorney's office in Pittsburgh filed a complaint
against Buckeye alleging two misdemeanor violations of environmental laws. In
May 1995, Buckeye pleaded guilty and paid a fine of $125,000 in respect of the
alleged violation of the strict liability provisions of the Rivers and Harbors
Act and reimbursed the government $100,000 towards its costs of the
investigation of the incident. The government dismissed the charge alleging a
violation of the Clean Water Act. Also in January 1995, the DER filed a
complaint for civil penalties with the Commonwealth of Pennsylvania
Environmental Hearing Board based on alleged violations by Buckeye of various
state strict liability environmental laws. The DER, acting as trustee for
various Pennsylvania environmental agencies, also asserted natural resource
damage claims against Buckeye arising from the pipeline rupture. In August
1995, Buckeye reached a settlement agreement with the DER concerning the civil
penalty and natural resource damage claims. In return for a release and
dismissal of action for civil penalties, Buckeye agreed to pay the state
agencies $88,000 in civil penalties and $475,000 in natural resource damages.
In addition, Buckeye agreed to pay the Pennsylvania Fish and Boat Commission
$22,000 for response costs. Buckeye was

11
<PAGE>

reimbursed by its insurance carriers for the $475,000 payment for natural
resource damages and the $22,000 payment for response costs.

In addition to the above governmental proceedings, eight civil class actions
against the Partnership, Buckeye and certain affiliates were filed in four
Pennsylvania counties. Plaintiffs in these lawsuits seek both injunctive and
monetary relief, including punitive damages and attorneys' fees, based on a
number of legal theories. The parties have consolidated these actions in a
single class action in the Court of Common Pleas for Allegheny County,
Pennsylvania, but the proposed class has not yet been certified and there has
been no significant activity in the case. At this time, it is not possible to
predict the likely outcome of such case. The consolidated class action is the
only remaining proceeding arising from the pipeline rupture. Buckeye believes
that it has meritorious defense to the consolidated class action complaint but
its potential liability, if any, related to this matter cannot be estimated at
this time.

Buckeye maintains insurance in amounts believed by the General Partner to be
adequate covering certain liabilities and claims arising out of pipeline
accidents above a self-insured retention amount. The insurance is written
generally on an indemnity basis, which requires Buckeye to seek reimbursement
from its carriers for covered claims after paying such claims directly. The
insurance carriers are reimbursing Buckeye for covered claims arising from the
Freeport incident subject to the terms of the policy.

OTHER ENVIRONMENTAL PROCEEDINGS

With respect to other environmental litigation, certain Operating
Partnerships (or their predecessors) have been named as a defendant in several
lawsuits or have been notified by federal or state authorities that they are a
potentially responsible party ("PRP") under federal laws or a respondent under
state laws relating to the generation, disposal or release of hazardous
substances into the environment. Typically, an Operating Partnership is one of
many PRPs for a particular site and its contribution of total waste at the
site is minimal. However, because CERCLA and similar statutes impose liability
without regard to fault and on a joint and several basis, the liability of the
Operating Partnerships in connection with these proceedings could be material.
Potentially material proceedings affecting the Operating Partnerships are
described below.

In July 1986, Buckeye was named as one of several PRPs for the Whitmoyer
Laboratories site in Myerstown, Pennsylvania. Buckeye previously owned part of
the site and sold it to a purchaser now believed to be primarily responsible
for the reported substantial chemical contamination at the site. Without
knowledge of the contamination, Buckeye subsequently repurchased a small
portion of the site on which it constructed a pumping station. After
completion of a remedial investigation and feasibility study and consideration
of proposed remediation plans, EPA issued two Records of Decision in December
1990 proposing a clean-up estimated to cost approximately $125 million. In
1992, EPA entered into a Consent Decree with the two PRPs that were former
owners of Whitmoyer Laboratories. These PRPs agreed to assume the cost of
clean-up at the site, and to reimburse EPA for future response costs and a
portion of its past response costs. These two PRPs have instituted suit
against each other to determine their relative responsibility for the
Whitmoyer Laboratories site clean-up. One of the PRPs served a third-party
complaint against Buckeye for the stated purpose of tolling the statute of
limitations to preserve its rights, if any, against Buckeye. Buckeye
subsequently settled the third-party complaint that had been filed against it.
In consideration of mutual releases and the PRP's agreement to cleanup
Buckeye's portion of the site, Buckeye agreed to remove its booster pump
station, to reroute its pipeline around the site and to reimburse the PRP for
the cost of removing the original pipeline, if such removal is required by
EPA. Buckeye estimates at this time that the costs of complying with the terms
of the settlement agreement will be between $1 million and $2 million. Buckeye
has not entered into any agreements with the EPA or the other PRP involved at
the site, and Buckeye has not waived any rights to recover for any claim
arising out of the PRP's activities at the site or any claims brought by any
governmental agency or third party based upon environmental

12
<PAGE>

conditions at the site. In the event that claims were asserted by any party in
connection with the site, Buckeye believes that it would have meritorious
defenses, but its potential liability, if any, related to such claims, cannot
be estimated at this time.

In July 1987, the NJDEPE ordered Buckeye and 27 other parties to provide
site security and conduct a preliminary clean-up at the Borne Chemical site
located in Elizabeth, New Jersey. Twenty of the parties (including Buckeye)
agreed to provide security and to remove certain materials from the site.
Buckeye agreed to pay approximately $64,000 of the $4 million estimated cost
of this activity. This removal work has been completed. The NJDEPE is
requiring that all parties (including Buckeye) which are alleged to have
contributed hazardous substances to the site, conduct a remedial
investigation/feasibility study to determine the scope of additional
contamination, if any, that may exist at the site. Buckeye's involvement with
this site is based on allegations that a small amount of Buckeye's waste was
stored at this site pending its ultimate disposal elsewhere. Buckeye believes
that it has meritorious defenses, but its potential liability, if any, for
future costs cannot be estimated at this time.

In March 1989, the NJDEPE issued a directive to Buckeye and 113 other
parties demanding payment of approximately $9.2 million in remediation costs
incurred by NJDEPE at the Bridgeport Rental & Oil Services site in Logan
Township, New Jersey. This site is subject to a remediation being conducted by
EPA under CERCLA. In March 1992, an action was commenced by Rollins
Environmental Services (NJ), Inc., and others, against the United States of
America and certain additional private parties seeking reimbursement for
remediation expenses incurred by plaintiffs in connection with the site. In
June 1992, the United States of America brought an action against Rollins
Environmental Services (NJ), Inc., and additional private parties, seeking
reimbursement of approximately $29 million for response costs incurred by EPA
at the site. Buckeye has not been designated by EPA as a PRP with respect to
the site, and has not been named as a defendant in any litigation connected
with the site. Buckeye believes that it is, at most, a de minimis contributor
of waste to this site. Although EPA has estimated remediation costs at the
site to be over $100 million, Buckeye expects that its liability, if any, will
not be material.

In July 1994, Buckeye was named as a defendant in an action filed by the
Michigan Department of Natural Resources in Circuit Court, Oakland County,
Michigan. The complaint also names three individuals and three other
corporations as defendants. The complaint alleges that under the Michigan
Environmental Response Act, the Michigan Water Resource Commission Act and the
Leaking Underground Storage Tank Act, the defendants are liable to the state
of Michigan for remediation expenses in connection with alleged groundwater
contamination in the vicinity of Sable Road, Oakland County, Michigan. The
complaint asserts that contaminated groundwater has infiltrated drinking water
wells in the area. The complaint seeks past response costs in the amount of
approximately $1.2 million and a declaratory judgment that the defendants are
liable for future response costs and remedial activities at the site. Buckeye
believes that its pipeline in the vicinity of the contaminated groundwater has
not been a source of the contaminants and that Buckeye has no responsibility
with respect to past or future clean-up costs at the site. The litigation is
presently in the discovery phase. Although the cost of the ultimate
remediation cannot be determined at this time, Buckeye expects that its
liability, if any, will not be material.

Additional claims for the cost of cleaning up releases of hazardous
substances and for damage to the environment resulting from the activities of
the Operating Partnerships or their predecessors may be asserted in the future
under various federal and state laws, but the amount of such claims or the
potential liability, if any, cannot be estimated. See "Business--Regulation--
Environmental Matters."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the holders of LP Units during the
fourth quarter of the fiscal year ended December 31, 1995.

13
<PAGE>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S LP UNITS AND RELATED UNITHOLDER MATTERS

The LP Units of the Partnership are listed and traded principally on the New
York Stock Exchange. The high and low sales prices of the LP Units in 1995 and
1994, as reported on the New York Stock Exchange Composite Tape, were as
follows:

<TABLE>
<CAPTION>
1995 1994
------------- -------------
QUARTER HIGH LOW HIGH LOW
- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First............................................... 37 32 41 35 1/2
Second.............................................. 36 30 39 1/4 35 1/4
Third............................................... 36 1/4 33 7/8 37 3/4 35 1/2
Fourth.............................................. 36 3/4 33 5/8 37 1/2 30 7/8
</TABLE>

During the months of December 1995 and January 1996, the Partnership
gathered tax information from its known LP Unitholders and from
brokers/nominees. Based on the information collected, the Partnership
estimates its number of beneficial LP Unitholders to be approximately 18,000.

Cash distributions paid quarterly during 1994 and 1995 were as follows:

<TABLE>
<CAPTION>
RECORD DATE PAYMENT DATE AMOUNT PER UNIT
- ----------- ------------ ---------------
<S> <C> <C>
February 8, 1994............................. February 28, 1994 $0.70
May 6, 1994.................................. May 31, 1994 $0.70
August 8, 1994............................... August 31, 1994 $0.70
November 8, 1994............................. November 30, 1994 $0.70
February 10, 1995............................ February 28, 1995 $0.70
May 8, 1995.................................. May 31, 1995 $0.70
August 4, 1995............................... August 31, 1995 $0.70
November 10, 1995............................ November 30, 1995 $0.70
</TABLE>

In general, the Partnership makes quarterly cash distributions of
substantially all of its available cash less such retentions for working
capital, anticipated expenditures and contingencies as the General Partner
deems appropriate.

On February 9, 1996, the Partnership announced a quarterly distribution of
$0.75 per LP Unit payable on February 29, 1996.

14
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth, for the period and at the dates indicated,
the Partnership's income statement and balance sheet data for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991. The tables should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Report.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue......................... $183,462 $186,338 $175,495 $163,064 $151,828
Depreciation and amortization... 11,202 11,203 11,002 10,745 10,092
Operating income................ 71,504 72,481 66,851 63,236 58,452
Interest and debt expense....... 21,710 24,931 25,871 27,452 27,502
Income from continuing opera-
tions before extraordinary
charge and cumulative effect of
change in accounting princi-
ple............................ 49,840 48,086 41,654 34,546 30,465
Net income...................... 49,840 45,817 39,366 9,002 30,465
Income per Unit from continuing
operations before extraordinary
charge and cumulative effect of
change in accounting princi-
ple............................ 4.10 3.96 3.44 2.85 2.51
Net income per Unit............. 4.10 3.77 3.25 0.74 2.51
Distributions per Unit.......... 2.80 2.80 2.60 2.60 2.60
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets..................... $552,646 $534,765 $543,493 $533,143 $545,281
Long-term debt................... 214,000 214,000 224,000 225,000 242,500
General Partner's capital........ 2,622 2,460 2,338 2,259 2,521
Limited Partners' capital........ 259,563 243,516 231,357 223,585 249,533
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following is a discussion of the liquidity and capital resources and the
results of operations of the Partnership for the periods indicated below.
Amounts in the Management's Discussion and Analysis of Financial Condition and
Results of Operations relate to continuing operations unless otherwise
indicated. This discussion should be read in conjunction with the consolidated
financial statements and notes thereto, which are included elsewhere in this
Report.

RESULTS OF OPERATIONS

Through its Operating Partnerships, the Partnership is principally engaged
in the transportation of refined petroleum products including gasoline, jet
fuel, diesel fuel, heating oil and kerosene. The Partnership's revenues are
principally a function of the volumes of refined petroleum products
transported by the Partnership, which are in turn a function of the demand for
refined petroleum products in the regions served by the Partnership's
pipelines and the tariffs or transportation fees charged for such
transportation. Results of operations are affected by factors which include

15
<PAGE>

competitive conditions, demand for products transported, seasonality and
regulation. See "Business-- Competition and Other Business Considerations."

1995 Compared With 1994

Revenue for the year ended December 31, 1995 was $183.5 million, $2.8
million or 1.5 percent less than revenue of $186.3 million for 1994. Volume
delivered during 1995 averaged 1,009,800 barrels per day, 19,000 barrels per
day or 1.8 percent less than volume of 1,028,800 barrels per day delivered in
1994. The decline in 1995 revenue was related to decreases in gasoline and
distillate deliveries, offset somewhat by increases in turbine fuel deliveries
and the effect of tariff rate increases. See "Tariff Changes". Gasoline
volumes declined as several competitive pipeline systems marginally expanded
their capacity in 1995 resulting in some volume shifting to these systems. In
addition, a Midwest refinery shutdown contributed to the decline. These
declines in gasoline volume were somewhat offset by increased market share in
Pennsylvania through the addition of a significant new customer during 1995.
The distillate volume decline was primarily related to warmer weather
throughout the Northeast in the first quarter of 1995. Marketers also opted to
keep inventories at low levels, unlike the prior year when extensive summer
inventory building occurred. The Midwest refinery closure also contributed to
the decline in distillate volumes. Meanwhile, turbine fuel deliveries
increased as both airline passenger and cargo traffic improved in the
Partnership's market areas during 1995. Volume increases occurred at several
major airport locations.

Costs and expenses during 1995 were $112.0 million, $1.9 million or 1.7
percent less than costs and expenses of $113.9 million during 1994. Declines
in the use of outside services and power, along with declines in casualty loss
expense, were partially offset by increases in payroll and employee benefit
expenses.

Other income (expenses) consist of interest income, interest and debt
expense, and minority interests and other. The partial repayment and
refinancing of debt at lower interest rates in 1994 resulted in an interest
expense decline of $3.2 million in 1995.

1994 Compared With 1993

Revenue for the year ended December 31, 1994 was $186.3 million, $10.8
million or 6.2 percent greater than revenue of $175.5 million for 1993. Volume
delivered during 1994 averaged 1,028,800 barrels per day, 47,700 barrels per
day or 4.9 percent greater than volume of 981,100 barrels per day delivered in
1993. Greater revenue in 1994 was related to increased gasoline and distillate
deliveries and to the effect of tariff rate increases. See "Tariff Changes".
Gasoline volumes increased primarily due to higher end-use demand in response
to continued economic recovery and moderate growth in market share. Higher
distillate shipments were the result of increased demand due to colder weather
early in the year and the effect of carrying two distillate inventories, both
high and low sulfur product, as required by Clean Air Act regulations that
became effective in October 1993. Turbine fuel shipments increased slightly
due to market demand growth at major airports.

Costs and expenses during 1994 were $113.9 million, $5.3 million or 4.9
percent greater than costs and expenses of $108.6 million during 1993.
Categories of increased expenses included payroll and employee benefits,
maintenance services, power, supplies and casualty loss. A significant portion
of these increased expenses were directly related to the transportation of
additional volume. In addition, costs incurred in connection with
environmental remediation activities were $2.9 million greater than the prior
year. See "Environmental Matters."

Other income (expenses) consist of interest income, interest and debt
expense, and minority interests and other. Net reductions in debt, plus
refinancing of debt at lower interest rates, resulted in a decline in interest
expense of $0.9 million from 1993 levels.

16
<PAGE>

Tariff Changes

In each of the years 1995, 1994 and 1993, certain of the Operating
Partnerships filed increases in certain tariff rates. The increases, at the
time of filing, were projected to generate approximately $4.0 million, $0.4
million and $1.5 million in additional revenue per year, respectively. Tariff
increases filed in 1995 became effective on May 1 and June 1, 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's financial condition at December 31, 1995, 1994 and 1993 is
highlighted in the following comparative summary:

Liquidity and Capital Indicators

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current ratio...................................... 1.7 to 1 1.2 to 1 1.1 to 1
Ratio of cash and temporary investments and trade
receivables to current liabilities................ 1.3 to 1 1.0 to 1 1.0 to 1
Working capital (in thousands)..................... $ 16,814 $ 5,750 $ 5,709
Ratio of total debt to total capital............... .45 to 1 .46 to 1 .50 to 1
Book value (per Unit).............................. $ 21.58 $ 20.27 $ 19.28
</TABLE>

Cash Provided by Operations

During 1995, cash provided by operations of $61.8 million was derived
principally from $61.0 million of income from operations before depreciation.
Changes in current assets and current liabilities resulted in a net cash use
of $0.9 million. Increases in prepaid and other current assets and declines in
temporary investments and trade receivables account for the majority of the
change. Remaining cash sources, totaling $1.7 million, were primarily related
to increases in other non-current liabilities.

During 1994, cash provided by operations of $58.1 million was derived
principally from $59.3 million of income from continuing operations before an
extraordinary charge and before depreciation. Changes in current assets and
current liabilities resulted in a net cash use of $0.7 million. Increases in
accrued and other current liabilities, trade receivables, temporary
investments and prepaid and other current assets account for the majority of
the change. Remaining cash uses, totaling $0.5 million, were related to an
extraordinary charge on early extinguishment of debt of $2.3 million, changes
in minority interests and changes in other non-current liabilities.

During 1993, cash provided by operations of $52.9 million was derived
principally from $52.7 million of income from continuing operations before an
extraordinary charge and before depreciation. Changes in current assets and
current liabilities resulted in a net source of $3.7 million. Operating
working capital changes relate to a decrease in trade receivables and an
increase in accrued and other current liabilities. Remaining cash uses,
totaling $3.5 million, were related to an extraordinary charge on early
extinguishment of debt of $2.2 million and changes in minority interests and
other non-current liabilities.

Debt Obligation and Credit Facilities

The indenture pursuant to which the First Mortgage Notes were issued (the
"Mortgage Note Indenture") was amended in March 1994 by a Fourth Supplemental
Indenture to permit Buckeye to issue additional First Mortgage Notes from time
to time under certain circumstances so long as the aggregate principal amount
of First Mortgage Notes outstanding after any such issuance does not exceed
$275 million.

17
<PAGE>

At December 31, 1995, the Partnership had $214.0 million in outstanding
current and long-term debt. The debt represents the First Mortgage Notes of
Buckeye. This amount excludes $25.0 million of First Mortgage Notes scheduled
to mature after December 31, 1995 which had previously been retired by in-
substance defeasance. The First Mortgage Notes are collateralized by
substantially all of Buckeye's currently existing and after acquired property,
plant and equipment. During 1995, the Partnership did not make any payments of
principal on the First Mortgage Notes as no payments were required due to
prior in-substance defeasances.

At December 31, 1994, the Partnership had $214.0 million in outstanding
current and long-term debt represented by the First Mortgage Notes of Buckeye.
This amount does not include $45.0 million in First Mortgage Notes which have
been retired by in-substance defeasance. The First Mortgage Notes are
collateralized by substantially all of Buckeye's currently existing and after
acquired property, plant and equipment. Debt outstanding at December 31, 1994
includes $15 million of additional First Mortgage Notes, Series N, bearing
interest at a rate of 7.93 percent. The First Mortgage Notes, Series N, were
issued on April 11, 1994 and are due December 2010. Current and long-term debt
excludes $20 million of 9.72 percent First Mortgage Notes, Series I, due
December 1996, which were retired by an in-substance defeasance with the
proceeds of the Series N First Mortgage Notes and an additional defeasance of
$5 million in December 1994. Also excluded from long-term debt is $5 million
of 11.18 percent First Mortgage Notes, Series J, which were retired by an in-
substance defeasance in December 1994. Total debt due beyond 1994 that was
retired by an in-substance defeasance during 1994 amounted to $25 million with
total new debt issued during 1994 of $15.0 million. During 1994, the
Partnership also paid $16 million of principal on the First Mortgage Notes,
Series G, that became due in December 1994.

At December 31, 1993, the Partnership had $240.0 million in outstanding
current and long-term debt represented by the First Mortgage Notes of Buckeye
which does not include $20.0 million in First Mortgage Notes which had
previously been retired by in-substance defeasance. Debt outstanding at 1993
year-end included $35 million of additional First Mortgage Notes (Series K, L
and M) bearing interest rates from 7.11 percent to 7.19 percent which were
issued on January 7, 1994 in accordance with an agreement entered into on
December 31, 1993 and excluded $20 million of 9.50 percent First Mortgage
Notes, Series H, due December 1995 that were retired by an in-substance
defeasance with a portion of the proceeds from such additional First Mortgage
Notes. During 1993, the Partnership paid $17.5 million of principal on the
First Mortgage Notes, Series F, that became due in December 1993. In December
1993, Buckeye entered into an agreement with the purchaser of the $35 million
of additional First Mortgage Notes which permitted Buckeye, under certain
circumstances, to issue up to $40 million of additional First Mortgage Notes
to such purchaser. At December 31, 1995, Buckeye had the capacity to borrow up
to $25.0 million of additional First Mortgage Notes under this agreement. On
January 7, 1996, this facility to borrow additional First Mortgage Notes
expired.

The Partnership has a $15 million unsecured short-term revolving credit
facility with a commercial bank. This facility, which has options to extend
borrowings through September 1999, is available to the Partnership for general
purposes, including capital expenditures and working capital. In addition,
Buckeye has a $10 million short-term line of credit secured by accounts
receivable. Laurel has an unsecured $1 million line of credit. At December 31,
1995, there were no outstanding borrowings under these facilities.

The ratio of total debt to total capital was 45 percent, 46 percent, and 50
percent at December 31, 1995, 1994 and 1993, respectively. For purposes of the
calculation of this ratio, total capital consists of current and long-term
debt, minority interests and partners' capital.

Cash Distributions

Pursuant to the Mortgage Note Indenture, cash distributions by Buckeye to
the Partnership cannot exceed Net Cash Available to Partners (generally
defined to equal net income plus depreciation

18
<PAGE>

and amortization less (a) capital expenditures funded from operating cash
flows, (b) payments of principal of debt and (c) certain other amounts, all on
a cumulative basis since the formation of the Partnership). The maximum amount
available for distribution by Buckeye to the Partnership under the formula as
of December 31, 1995 amounted to $13.5 million. The Partnership is also
entitled to receive cash distributions from Everglades, BTT and Laurel.

Capital Expenditures

At December 31, 1995, property, plant and equipment was approximately 92
percent of total consolidated assets. This compares to 94 percent and 92
percent for the years ended December 31, 1994 and 1993, respectively. Capital
expenditures are generally for expansion of the Operating Partnerships'
service capabilities and sustaining the Operating Partnerships' existing
operations.

Capital expenditures by the Partnership were $17.4 million, $15.4 million
and $13.3 million for 1995, 1994 and 1993, respectively. Projected capital
expenditures for 1996 are $14.3 million. Planned capital expenditures include,
among other things, renewal and replacement of several tank floors, roofs and
seals, installation of new metering systems and field instrumentation and
various facility improvements that facilitate increased pipeline volumes.
Although projected 1996 capital expenditures are less than the two prior
years, capital expenditures are expected to increase primarily in response to
increasingly rigorous governmental safety and environmental requirements as
well as industry standards.

Environmental Matters

The Operating Partnerships are subject to federal and state laws and
regulations relating to the protection of the environment. These regulations,
as well as the Partnership's own standards relating to protection of the
environment, cause the Operating Partnerships to incur current and ongoing
operating and capital expenditures. During 1995, the Operating Partnerships
incurred operating expenses of $2.6 million and capital expenditures of $2.7
million for environmental matters. Capital expenditures of $6.7 million for
environmental related projects are included in the Partnership's plans for
1996. Expenditures, both capital and operating, relating to environmental
matters are expected to remain somewhat higher than in past years due to the
Partnership's commitment to maintain high environmental standards and to
increasingly rigorous environmental laws.

Certain Operating Partnerships (or their predecessors) have been named as a
defendant in lawsuits or have been notified by federal or state authorities
that they are a PRP under federal laws or a respondent under state laws
relating to the generation, disposal, or release of hazardous substances into
the environment. These proceedings generally relate to potential liability for
clean-up costs. The total potential remediation costs to be borne by the
Operating Partnerships relating to these clean-up sites cannot be reasonably
estimated and could be material. With respect to each site, however, the
Operating Partnership involved is one of several or as many as several hundred
PRPs that would share in the total costs of clean-up under the principle of
joint and several liability. The General Partner believes that the generation,
handling and disposal of hazardous substances by the Operating Partnerships
and their predecessors have been in material compliance with applicable
environmental and regulatory requirements.

At the Whitmoyer Laboratories site in Myerstown, Pennsylvania, Buckeye is
one of several PRPs for a clean-up estimated to cost approximately $125
million. However, in 1992, EPA entered into an agreement with the estate of
one of the PRPs to recover a portion of EPA's past costs and a Consent Decree
with the two PRPs that were former owners of Whitmoyer Laboratories to assume
the cost of clean-up at the site and to reimburse EPA for future response
costs and a portion of its past response costs. These two PRPs have instituted
suit against each other to determine their relative

19
<PAGE>

responsibility for the Whitmoyer Laboratories site clean-up. One of the PRPs
served a third-party complaint against Buckeye for the stated purpose of
tolling the statute of limitations to preserve its rights, if any, against
Buckeye. Buckeye subsequently settled the third-party complaint that had been
filed against it. In consideration of mutual releases and the PRP's agreement
to cleanup Buckeye's portion of the site, Buckeye agreed to remove its booster
pump station, to reroute its pipeline around the site and to reimburse the PRP
for the cost of removing the original pipeline, if such removal is required by
EPA. Buckeye has not entered into any agreements with the EPA or the other PRP
involved at the site, and Buckeye has not waived any rights to recover for any
claim arising out of the PRP's activities at the site or any claims brought by
any governmental agency or third-party based upon environmental conditions at
the site. Although the exact costs of the settlement are not known, Buckeye
estimates at this time that the costs of complying with the terms of the
settlement agreement will be between $1 million and $2 million.

In March 1990, a landslide near Freeport, Pennsylvania caused a rupture to
one of Buckeye's pipelines which resulted in the release of approximately
58,000 gallons of petroleum products. During 1995, Buckeye paid claims and
other charges related to this incident in the amount of $1.0 million. Total
claims paid as a result of this incident have amounted to $14.1 million. Of
this amount, $11.9 million has been reimbursed by Buckeye's insurance
carriers. Buckeye is unable to estimate the total amount of future
environmental clean-up and other costs and liabilities that may be incurred in
connection with this incident. However, based on information currently
available to it, Buckeye believes that its net expense after insurance
recoveries will not be material to its financial condition or results of
operations. See "Legal Proceedings--Freeport Landslide."

Various claims for the cost of cleaning up releases of hazardous substances
and for damage to the environment resulting from the activities of the
Operating Partnerships or their predecessors have been asserted and may be
asserted in the future under various federal and state laws. Although the
Partnership has made a provision for certain legal expenses relating to these
matters, the General Partner is unable to determine the timing or outcome of
any pending proceedings or of any future claims and proceedings. See
"Business--Regulation--Environmental Matters" and "Legal Proceedings."

Discontinued Operations

In the fourth quarter of 1990, the Partnership recorded a non-cash charge to
earnings of $19.1 million, net of estimated earnings during phase-out,
relating to the Partnership's decision to discontinue its 16-inch crude oil
pipeline and a refined products terminal. The Partnership closed the sale of
the 16-inch crude oil pipeline, together with associated real and personal
property to Sun Pipe Line Company on February 1, 1993. Proceeds from the sale
amounted to $9.2 million. Remaining discontinued operations consisting of
petroleum facilities at a refined products terminal were dismantled and
removed during the first quarter 1993. Disposal of these discontinued
operations resulted in a loss of $127,000 in 1993.

ADOPTION OF EMPLOYEE STOCK OWNERSHIP PLAN

In connection with the Acquisition, the ESOP was formed for the benefit of
employees of the General Partner, the Manager and Glenmoor. The General
Partner borrowed $63 million pursuant to a 15-year term loan from a third-
party lender. The General Partner then loaned $63 million to the ESOP, which
used the loan proceeds to purchase $63 million of Senior A Convertible
Preferred Stock of BAC. Interest payments associated with the amortization of
the ESOP loan for the remainder of 1996 are estimated to be approximately $3.7
million. The General Partner has implemented an expense reduction plan
including, among other things, a freeze on salaried employee pay as well as
fringe benefit reductions and eliminations that will fully offset the expenses
associated with the amortization of the ESOP loan in 1996.

20
<PAGE>

ACCOUNTING STATEMENTS NOT YET ADOPTED

Impairment of Long-Lived Assets

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Also, in general, long-lived assets and
certain identifiable intangibles to be disposed of should be reported at the
lower of carrying amount or fair value less cost to sell. The Partnership
intends to adopt the new method of accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of during fiscal year 1996.
However, adoption of this new standard is not expected to have a material
effect on the Partnership's financial position or results of operations.

Stock-Based Compensation

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. This statement defines
a fair value based method of accounting for an employee stock option and
encourages all entities to adopt that method of accounting for their employee
stock compensation plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," which the Partnership currently
uses to measure stock-based compensation to its employees under its Unit
Option and Distribution Equivalent Plan. The Partnership intends to adopt the
provisions of this new standard during fiscal year 1996. However, adoption of
this new standard is not expected to have a material effect on the
Partnership's financial position or results of operations.

21
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BUCKEYE PARTNERS, L.P.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
Financial Statements and Independent Auditors' Report:
Independent Auditors' Report..................................... 23
Consolidated Statements of Income--For the years ended December
31, 1995, 1994 and 1993......................................... 24
Consolidated Balance Sheets--December 31, 1995 and 1994.......... 25
Consolidated Statements of Cash Flows--For the years ended Decem-
ber 31, 1995, 1994 and 1993..................................... 26
Notes to Consolidated Financial Statements....................... 27
Financial Statement Schedules and Independent Auditors' Report:
Independent Auditors' Report..................................... S-1
Schedule I--Registrant's Condensed Financial Statements.......... S-2
Schedule II--Valuation and Qualifying Accounts--For the years
ended December 31, 1995, 1994 and 1993.......................... S-3
</TABLE>

Schedules other than those listed above are omitted because they are either
not applicable or not required or the information required is included in the
consolidated financial statements or notes thereto.

22
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Buckeye Partners, L.P.:

We have audited the accompanying consolidated balance sheets of Buckeye
Partners, L.P. and its subsidiaries (the "Partnership") as of December 31,
1995 and 1994, and the related consolidated statements of income and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Partnership as of December 31, 1995 and 1994, and the results of its
operations and cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Philadelphia, Pennsylvania
January 26, 1996 (March 22, 1996 as to Note 3)

23
<PAGE>

BUCKEYE PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
NOTES 1995 1994 1993
----- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue................................... 2 $183,462 $186,338 $175,495
-------- -------- --------
Costs and expenses
Operating expenses...................... 4,14 89,156 92,097 87,029
Depreciation and amortization........... 2 11,202 11,203 11,002
General and administrative expenses..... 14 11,600 10,557 10,613
-------- -------- --------
Total costs and expenses.............. 111,958 113,857 108,644
-------- -------- --------
Operating income.......................... 71,504 72,481 66,851
-------- -------- --------
Other income (expenses)
Interest income......................... 1,037 1,465 919
Interest and debt expense............... (21,710) (24,931) (25,871)
Minority interests and other............ (991) (929) (245)
-------- -------- --------
Total other income (expenses)......... (21,664) (24,395) (25,197)
-------- -------- --------
Income from continuing operations before
extraordinary charge..................... 49,840 48,086 41,654
Loss from discontinued operations......... 6 -- -- (127)
Extraordinary charge on early
extinguishment of debt................... 12 -- (2,269) (2,161)
-------- -------- --------
Net income................................ $ 49,840 $ 45,817 $ 39,366
======== ======== ========
Net income allocated to General Partner... 15 $ 498 $ 458 $ 394
Net income allocated to Limited Partners.. 15 $ 49,342 $ 45,359 $ 38,972
Income allocated to General and Limited
Partners per Partnership Unit:
Income from continuing operations before
extraordinary charge................... $ 4.10 $ 3.96 $ 3.44
Loss from discontinued operations....... -- -- (.01)
Extraordinary charge on early
extinguishment of debt................. -- (.19) (.18)
-------- -------- --------
Net income................................ $ 4.10 $ 3.77 $ 3.25
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

24
<PAGE>

BUCKEYE PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
NOTES 1995 1994
------------ -------- --------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents.................... 2 $ 16,213 $ 6,071
Temporary investments........................ 2 895 1,400
Trade receivables............................ 2 16,295 17,057
Inventories.................................. 2 1,561 1,320
Prepaid and other current assets............. 7,272 5,474
-------- --------
Total current assets....................... 42,236 31,322
Property, plant and equipment, net............. 2,5 509,944 503,083
Other non-current assets....................... 466 360
-------- --------
Total assets............................... $552,646 $534,765
======== ========
Liabilities and partners' capital
Current liabilities
Accounts payable............................. $ 2,406 $ 2,325
Accrued and other current liabilities........ 4,7,10,11,14 23,016 23,247
-------- --------
Total current liabilities.................. 25,422 25,572
Long-term debt................................. 8,12 214,000 214,000
Minority interests............................. 2,781 2,616
Other non-current liabilities.................. 4,9,10,11,14 48,258 46,601
Commitments and contingent liabilities......... 4 -- --
-------- --------
Total liabilities.......................... 290,461 288,789
-------- --------
Partners' capital................................ 15
General Partner................................ 2,622 2,460
Limited Partners............................... 259,563 243,516
-------- --------
Total partners' capital.................... 262,185 245,976
-------- --------
Total liabilities and partners' capital.... $552,646 $534,765
======== ========
</TABLE>

See notes to consolidated financial statements.

25
<PAGE>

BUCKEYE PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
NOTES 1995 1994 1993
----- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations before
extraordinary charge..................... $ 49,840 $ 48,086 $ 41,654
-------- -------- --------
Adjustments to reconcile income to net
cash provided by operating activities:
Extraordinary charge on early
extinguishment of debt.................. -- (2,269) (2,161)
Depreciation and amortization............ 11,202 11,203 11,002
Minority interests....................... 510 469 145
Distributions to minority interests...... (345) (345) (532)
Change in assets and liabilities:
Temporary investments................... 505 (1,150) (250)
Trade receivables....................... 762 (1,716) 1,497
Inventories............................. (241) (146) (153)
Prepaid and other current assets........ (1,798) (1,029) (1,189)
Accounts payable........................ 81 (237) 1,378
Accrued and other current liabilities
(a).................................... (231) 3,560 2,394
Other non-current assets................ (106) 100 --
Other non-current liabilities (a)....... 1,657 1,544 (1,043)
-------- -------- --------
Total adjustments from continuing
operating activities.................. 11,996 9,984 11,088
-------- -------- --------
Net cash provided by continuing operating
activities.............................. 61,836 58,070 52,742
Net cash provided by discontinued
operations (b).......................... 6 -- -- 206
-------- -------- --------
Net cash provided by operating
activities............................ 61,836 58,070 52,948
-------- -------- --------
Cash flows from investing activities:
Capital expenditures...................... (17,407) (15,364) (13,328)
Proceeds from sale of net assets of
discontinued operations.................. 6 -- -- 9,200
Net (expenditures for) proceeds from
disposal of property, plant and
equipment................................ (656) 153 (1,810)
-------- -------- --------
Net cash used in investing activities.. (18,063) (15,211) (5,938)
-------- -------- --------
Cash flows from financing activities:
Capital contribution...................... 4 4 --
Proceeds from exercise of unit options.... 374 428 --
Proceeds from issuance of long-term debt.. 8 -- 15,000 35,000
Payment of long-term debt................. 8 -- (41,000) (37,500)
Distributions to Unitholders.............. 15,16 (34,009) (33,968) (31,515)
-------- -------- --------
Net cash used in financing activities.. (33,631) (59,536) (34,015)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................... 2 10,142 (16,677) 12,995
Cash and cash equivalents at beginning of
year...................................... 2 6,071 22,748 9,753
-------- -------- --------
Cash and cash equivalents at end of year... $ 16,213 $ 6,071 $ 22,748
======== ======== ========
Supplemental cash flow information:
Cash paid during the year for interest
(net of amount capitalized).............. $ 21,656 $ 24,947 $ 26,169
Non-cash changes in property, plant and
equipment................................ -- -- 602
(a) Non-cash changes in accrued and other
liabilities.............................. -- -- 3,173
(b) Non-cash changes in discontinued
operations............................... -- -- 3,259
</TABLE>

See notes to consolidated financial statements.

26
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994 AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1. ORGANIZATION

Buckeye Partners, L.P. (the "Partnership") is a limited partnership
organized in 1986 under the laws of the state of Delaware. The Partnership
owns 99 percent limited partnership interests in Buckeye Pipe Line Company,
L.P. ("Buckeye"), Laurel Pipe Line Company, L.P. ("Laurel"), Everglades Pipe
Line Company, L.P. ("Everglades") and Buckeye Tank Terminals Company, L.P.
("BTT"). The foregoing entities are hereinafter referred to as the "Operating
Partnerships." Laurel owns a 98.01 percent limited partnership interest in
Buckeye Pipe Line Company of Michigan, L.P. ("BPL Michigan") which
discontinued operations in 1993 (see Note 6).

During December 1986, the Partnership sold 12,000,000 limited partnership
units ("LP Units") in a public offering representing an aggregate 99 percent
limited partnership interest in the Partnership. Concurrently, the Partnership
sold 121,212 units representing a 1 percent general partnership interest in
the Partnership ("GP Units") to Buckeye Management Company (the "General
Partner"), a wholly owned subsidiary of American Financial Group, Inc.
("American Financial"), formerly American Premier Underwriters, Inc. The
Partnership used the proceeds from such sales to purchase from subsidiaries of
American Financial the 99 percent limited partnership interests in the then
existing Operating Partnerships and an 83 percent stock interest in Laurel
Pipe Line Company ("Laurel Corp"). In December 1991, the Partnership acquired
the minority interest in Laurel Corp. Laurel was formed in October 1992 and
succeeded to the operations of Laurel Corp. The Partnership has issued an
additional 29,730 limited partnership units and 300 general partnership units
under its Unit Option and Distribution Equivalent Plan. At December 31, 1995,
there were 12,029,730 limited partnership units and 121,512 general
partnership units outstanding (see Note 15 and Note 17).

A subsidiary of the General Partner, Buckeye Pipe Line Company (the
"Manager"), owns a 1 percent general partnership interest in, and serves as
sole general partner and manager of, each Operating Partnership. The Manager
also owns a 1 percent general partnership interest and a 0.99 percent limited
partnership interest in BPL Michigan.

The Partnership maintains its accounts in accordance with the Uniform System
of Accounts for Pipeline Companies, as prescribed by the Federal Energy
Regulatory Commission ("FERC"). Reports to FERC differ from the accompanying
consolidated financial statements, which have been prepared in accordance with
generally accepted accounting principles, generally in that such reports
calculate depreciation over estimated useful lives of the assets as prescribed
by FERC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements of the Partnership have been prepared
using the purchase method of accounting. An allocation of the purchase price
to the net assets acquired was made on their

27
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
relative fair market values as appraised. The financial statements include the
accounts of the Operating Partnerships on a consolidated basis. All
significant intercompany transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Partnership's consolidated financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions. These estimates and assumptions,
which may differ from actual results, will affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenue and expense during the reporting period.

Financial Instruments

The fair values of financial instruments are determined by reference to
various market data and other valuation techniques as appropriate. Unless
otherwise disclosed, the fair values of financial instruments approximate
their recorded values (see Note 8).

Cash and Cash Equivalents

All highly liquid debt instruments purchased with a maturity of three months
or less are classified as cash equivalents.

Temporary Investments

The Partnership's temporary investments that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities. Trading securities are recorded at fair value as current assets on
the balance sheet, with the change in fair value during the period included in
earnings.

Revenue Recognition

Substantially all revenue is derived from interstate and intrastate
transportation of petroleum products. Such revenue is recognized as products
are delivered to customers. Such customers are major integrated oil companies,
major refiners and large regional marketing companies. While the consolidated
Partnership's continuing customer base numbers approximately 105, no customer
during 1995 contributed more than 10 percent of total revenue. The Partnership
does not maintain an allowance for doubtful accounts.

Inventories

Inventories, consisting of materials and supplies, are carried at cost which
does not exceed realizable value.

Property, Plant and Equipment

Property, plant and equipment consist primarily of pipeline and related
transportation facilities and equipment. For financial reporting purposes,
depreciation is calculated primarily using the straight-line method over the
estimated useful life of 50 years. Additions and betterments are capitalized
and maintenance and repairs are charged to income as incurred. Generally, upon
normal retirement or replacement, the cost of property (less salvage) is
charged to the depreciation reserve, which has no effect on income.

28
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

For federal and state income tax purposes, the Partnership and Operating
Partnerships are not taxable entities. Accordingly, the taxable income or loss
of the Partnership and Operating Partnerships, which may vary substantially
from income or loss reported for financial reporting purposes, is generally
includable in the federal and state income tax returns of the individual
partners. As of December 31, 1995 and 1994, the Partnership's reported amount
of net assets for financial reporting purposes exceeded its tax basis by
approximately $211 million and $179 million, respectively.

Environmental Expenditures

Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and do not contribute to current
or future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or clean-ups are probable, and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with
the Partnership's commitment to a formal plan of action.

Pensions

The Manager maintains a defined contribution plan and a defined benefit plan
(see Note 10) which provide retirement benefits to substantially all of its
regular full-time employees. Certain hourly employees of the Manager are
covered by a defined contribution plan under a union agreement.

Postretirement Benefits Other Than Pensions

The Manager provides postretirement health care and life insurance benefits
for certain of its retirees (see Note 11). Certain other retired employees are
covered by a health and welfare plan under a union agreement.

Impairment of Long-Lived Assets

Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," is effective for fiscal years beginning after December 15, 1995.
This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Also, in general, long-lived assets and
certain identifiable intangibles to be disposed of should be reported at the
lower of carrying amount or fair value less cost to sell. The impact of this
new standard is not expected to have a material effect on the Partnership's
financial position or results of operations.

Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for
fiscal years beginning after December 15, 1995. This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This statement defines a fair value based method of
accounting for an employee stock option and encourages all entities to adopt
that method of accounting for their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", which the

29
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Partnership currently uses to measure stock-based compensation to its
employees under its Unit Option and Distribution Equivalent Plan. The impact
of this new standard is not expected to have a material effect on the
Partnership's financial position or results of operations.

3. SUBSEQUENT EVENT

On January 8, 1996, American Financial announced a definitive agreement to
sell all of the outstanding shares of stock of the General Partner for $63
million in cash to an investment group consisting of certain members of its
management and the BMC Acquisition Company Employee Stock Ownership Plan (the
"ESOP").

On March 22, 1996, BMC Acquisition Corp. ("BAC"), a corporation organized in
1996 under the laws of the state of Delaware, acquired all of the common stock
of the General Partner from a subsidiary of American Financial (the
"Acquisition"). BAC is owned by Glenmoor Partners, LLP ("Glenmoor"), an
investment group led by Alfred W. Martinelli, Chairman of the Board and Chief
Executive Officer of the General Partner and including as partners all of the
members of senior management of the General Partner, certain managers of the
Manager and by the ESOP. Comerica Bank-Illinois serves as trustee of the ESOP.

In connection with the Acquisition, the ESOP was formed for the benefit of
employees of the General Partner, the Manager and Glenmoor. The General
partner borrowed $63 million pursuant to a 15-year term loan from a third-
party lender. The General Partner then loaned $63 million to the ESOP, which
used the loan proceeds to purchase $63 million of Senior A Convertible
Preferred Stock of BAC. BAC used the $63 million proceeds of the sale of the
Senior A Convertible Preferred Stock to the ESOP plus $6 million of proceeds
from the sale of common stock to Glenmoor to pay the Acquisition purchase
price, Acquisition-related expenses and to make a capital contribution to the
General Partner to maintain its net worth at not less than $5,000,000.

On March 22, 1996, the General Partner amended the Partnership Agreement to
(a) extend the period under which the General Partner would agree to act as
general partner of the Partnership until the later of (i) December 23, 2011 or
(ii) the date the ESOP loan is paid in full, (b) clarify that fair market
value of the GP Units includes the value of the right to receive incentive
compensation for purposes of determining the amount required to be paid to the
General Partner by any successor general partner of the Partnership, and (c)
reduce the threshold for payment of Restricted Payments by the General Partner
or the Manager from $23,000,000 to $5,000,000. The Partnership received an
opinion of counsel that the execution of the amendment to the Partnership
Agreement would not (a) result in the loss of limited liability of any Limited
Partner or (b) result in the Partnership or any Operating Partnership being
treated as an association taxable as a corporation for federal income tax
purposes. The amendment to the Partnership Agreement and related opinion of
counsel were approved on behalf of the Partnership by a special committee of
disinterested directors of the Partnership.

Also on March 22, 1996, the General Partner amended and restated the
Incentive Compensation Agreement to (a) delete American Financial as a party
to the agreement, (b) eliminate certain provisions relating to distribution
support obligations which expired in 1991, and (c) clarify that the Incentive
Compensation Agreement terminates if the General Partner is removed as general
partner of the Partnership. The Incentive Compensation Agreement was approved
on behalf of the Partnership by a special committee of disinterested directors
of the Partnership.

30
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. CONTINGENCIES

The Partnership and the Operating Partnerships in the ordinary course of
business, are involved in various claims and legal proceedings, some of which
are covered in whole or in part by insurance. The General Partner is unable to
predict the timing or outcome of these claims and proceedings. Although it is
possible that one or more of these claims or proceedings, if adversely
determined, could, depending on the relative amounts involved, have a material
effect on the Partnership's results of operations for a future period, the
General Partner does not believe that their outcome will have a material
effect on the Partnership's consolidated financial condition or annual results
of operations.

Environmental

In accordance with its accounting policy on environmental expenditures, the
Partnership recorded expenses of $2.6 million, $5.9 million and $3.0 million
for 1995, 1994 and 1993, respectively, which were related to the environment.
Expenditures, both capital and operating, relating to environmental matters
are expected to remain somewhat higher than in past years due to the
Partnership's commitment to maintain high environmental standards and to
increasingly strict environmental laws and government enforcement policies.

Certain Operating Partnerships (or their predecessors) have been named as a
defendant in lawsuits or have been notified by federal or state authorities
that they are a potentially responsible party ("PRP") under federal laws or a
respondent under state laws relating to the generation, disposal, or release
of hazardous substances into the environment. These proceedings generally
relate to potential liability for clean-up costs. The total potential
remediation costs relating to these clean-up sites cannot be reasonably
estimated. With respect to each site, however, the Operating Partnership
involved is one of several or as many as several hundred PRPs that would share
in the total costs of clean-up under the principle of joint and several
liability. The General Partner believes that the generation, handling and
disposal of hazardous substances by the Operating Partnerships and their
predecessors have been in material compliance with applicable environmental
and regulatory requirements. Additional claims for the cost of cleaning up
releases of hazardous substances and for damage to the environment resulting
from the activities of the Operating Partnerships or their predecessors may be
asserted in the future under various federal and state laws. Although the
Partnership has made a provision for certain legal expenses relating to these
matters, the General Partner is unable to determine the timing or outcome of
any pending proceedings or of any future claims and proceedings.

Guaranteed Investment Contract

The Buckeye Pipe Line Company Retirement and Savings Plan (the "Plan") held
a guaranteed investment contract ("GIC") issued by Executive Life Insurance
Company ("Executive Life"), which entered conservatorship proceedings in the
state of California in April 1991. The GIC was purchased in July 1989, with an
initial principal investment of $7.4 million earning interest at an effective
rate per annum of 8.98 percent through June 30, 1992. Pursuant to the
Executive Life Plan of Rehabilitation, the Plan has received an interest only
contract from Aurora National Life Assurance
Company in substitution for its Executive Life GIC. The contract provides for
semi-annual interest payments at a rate of 5.61 percent per annum through
September 1998, the maturity date of the contract. In addition, the Plan is to
receive certain additional cash payments through the maturity date of the
contract pursuant to the Plan of Rehabilitation. The timing and amount of
these additional cash payments cannot be estimated accurately at this time. In
May 1991, the General Partner, in order to safeguard the basic retirement and
savings benefits of its employees, announced its intention to enter an
arrangement with the Plan that would guarantee that the Plan would receive at
least its initial

31
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
principal investment of $7.4 million plus interest at an effective rate per
annum of 5 percent from July 1, 1989. The General Partner's present intention
is to effectuate its commitment no later than September 1998. The costs and
expenses of the General Partner's employee benefit plans are reimbursable by
the Partnership under the applicable limited partnership and management
agreements. The General Partner believes that an adequate provision has been
made for costs which may be incurred by the Partnership in connection with the
guarantee.

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land...................................................... $ 10,186 $ 10,189
Buildings and leasehold improvements...................... 26,211 23,887
Machinery, equipment and office furnishings............... 519,548 514,287
Construction in progress.................................. 2,335 8,576
-------- --------
558,280 556,939
Less accumulated depreciation........................... 48,336 53,856
-------- --------
Total................................................... $509,944 $503,083
======== ========
</TABLE>

Depreciation expense was $11,202,000, $11,203,000 and $11,002,000 for the
years 1995, 1994 and 1993, respectively.

6. DISCONTINUED OPERATIONS

In the fourth quarter of 1990, the Partnership recorded a non-cash charge to
earnings of $19.1 million, net of estimated earnings during phase-out,
relating to the Partnership's decision to discontinue its 16-inch crude oil
pipeline and a refined products terminal. The Partnership closed the sale of
the 16-inch crude oil pipeline, together with associated real and personal
property to Sun Pipe Line Company on February 1, 1993. Proceeds from the sale
amounted to $9.2 million. Remaining discontinued operations consisting of
petroleum facilities at the refined products terminal were dismantled and
removed during the first quarter 1993. Disposal of these discontinued
operations resulted in a loss of $127,000 in 1993.

7. ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Taxes--other than income.................................... $ 8,258 $ 7,557
Accrued charges due Manager................................. 6,436 6,011
Accrued outside services.................................... 660 2,377
Environmental liabilities................................... 2,409 2,530
Interest.................................................... 1,023 969
Other....................................................... 4,230 3,803
------- -------
Total..................................................... $23,016 $23,247
======= =======
</TABLE>

32
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. LONG-TERM DEBT AND CREDIT FACILITIES

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Notes
11.18% Series J due December 15, 2006
(subject to $16.9 million annual
sinking fund requirement commencing
December 15, 1997)..................................... $164,000 $164,000
7.11% Series K due December 15, 2007.................... 11,000 11,000
7.15% Series L due December 15, 2008.................... 11,000 11,000
7.19% Series M due December 15, 2009.................... 13,000 13,000
7.93% Series N due December 15, 2010.................... 15,000 15,000
-------- --------
Total................................................. $214,000 $214,000
======== ========
</TABLE>

Maturities of debt outstanding at December 31, 1995 are as follows: None in
1996; $11,900,000 in 1997; $16,900,000 in 1998; $16,900,000 in 1999;
$16,900,000 in 2000 and a total of $151,400,000 in the period 2001 through
2010.

The fair value of the Partnership's debt is estimated to be $250 million and
$221 million as of December 31, 1995 and 1994, respectively. These values were
calculated using interest rates currently available to the Partnership for
issuance of debt with similar terms and remaining maturities.

The First Mortgage Notes are collateralized by a mortgage on and a security
interest in substantially all of the currently existing and after-acquired
property, plant and equipment (the "Mortgaged Property") of Buckeye.

The indenture pursuant to which the First Mortgage Notes were issued (the
"Mortgage Note Indenture"), as amended by Supplemental Indentures, contains
covenants which generally (a) limit the outstanding indebtedness of Buckeye
under the Mortgage Note Indenture at any time to $275 million plus up to $15
million of short-term borrowings for working capital purposes, (b) prohibit
Buckeye from creating or incurring additional liens on its property, (c)
prohibit Buckeye from disposing of substantially all of its property or
business to another party and (d) prohibit Buckeye from disposing of any part
of the Mortgaged Property unless the proceeds in excess of $1 million in a
fiscal year are available for reinvestment in assets subject to the lien of
the Mortgage Note Indenture.

In December 1993, Buckeye entered into an agreement to issue $35 million of
additional First Mortgage Notes in accordance with provisions under a Third
Supplemental Indenture and as permitted under the Mortgage Note Indenture.
These additional First Mortgage Notes, which were issued on January 7, 1994,
mature from 2007 to 2009 and bear interest at rates ranging from 7.11 percent
to 7.19 percent. A portion of the proceeds of these notes was used to complete
an in-substance defeasance of principal and interest with respect to Buckeye's
$20 million, 9.50 percent First Mortgage Notes (Series H) due December 1995
(see Note 12). Remaining proceeds of the additional notes were used for
working capital purposes. In addition, Buckeye entered into an agreement with
the purchaser of the $35 million of additional First Mortgage Notes which
permitted Buckeye, under certain circumstances, to issue up to $40 million of
additional First Mortgage Notes to such purchaser (the "Mortgage Note
Facility").

33
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During March 1994, Buckeye entered into an agreement with such purchaser to
issue $15 million of additional First Mortgage Notes under the Mortgage Note
Facility and in accordance with provisions under a Fourth and Fifth
Supplemental Indenture and the Mortgage Note Indenture. These additional First
Mortgage Notes mature in 2010 and bear interest at 7.93 percent. The proceeds
of these notes, plus additional cash of $1.6 million, were used to complete an
in-substance defeasance of principal and interest with respect to $15 million
of 9.72 percent First Mortgage Notes (Series I) due December 1996. In
addition, in December 1994, Buckeye completed an in-substance defeasance of $5
million of Buckeye's 9.72 percent Series I First Mortgage Notes and $5 million
of Buckeye's 11.18 percent Series J First Mortgage Notes (see Note 12). As of
December 1995, Buckeye had the capacity to borrow up to $25 million of
additional First Mortgage Notes under the Mortgage Note Facility. On January
7, 1996, the Mortgage Note Facility expired.

The Partnership Agreement contains certain restrictions which limit the
incurrence of any debt by the Partnership or any Operating Partnership to the
First Mortgage Notes, any additional debt of Buckeye permitted by the Mortgage
Note Indenture and other debt not in excess of an aggregate consolidated
principal amount of $25 million plus the aggregate proceeds from the sale of
additional partnership interests.

The Partnership maintains a $15 million unsecured revolving credit facility
with a commercial bank which is available to the Partnership for general
purposes, including capital expenditures and working capital. Interest on any
borrowings under this facility is calculated on the bank's Alternate Base Rate
("ABR") or LIBOR plus one percent. ABR is defined as the highest of the bank's
prime rate, the three month secondary CD rate plus one percent, and the
Federal Funds Rate plus one-half of one percent. At December 31, 1995, there
was no amount outstanding under this facility.

Buckeye has a line of credit from two commercial banks (the "Working Capital
Facility") which permits short-term borrowings of up to $10 million
outstanding at any time. Borrowings under the Working Capital Facility bear
interest at each bank's prime rate and are secured by the accounts receivable
of Buckeye. The Mortgage Note Indenture contains covenants requiring that, for
a period of 45 consecutive days during any year, no indebtedness be
outstanding under the Working Capital Facility. In addition, Laurel has an
unsecured line of credit from a commercial bank which permits short-term
borrowings of up to $1 million outstanding at any time. Borrowings bear
interest at the bank's prime rate. Laurel's unsecured line of credit contains
covenants requiring that, for a period of 30 consecutive days during any year,
no indebtedness be outstanding under this facility. At December 31, 1995,
there were no amounts outstanding under either of these facilities.

9. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued employee benefit liabilities........................ $35,699 $34,121
Accrued charges due Manager................................. 2,607 2,607
Other....................................................... 9,952 9,873
------- -------
Total..................................................... $48,258 $46,601
======= =======
</TABLE>

34
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. PENSION PLANS

The Manager provides retirement benefits, primarily through noncontributory
pension plans, for substantially all of its regular full-time employees,
except those covered by certain labor contracts, under which the Manager
contributes 5 percent of each covered employee's salary, and a retirement
income guarantee plan (a defined benefit plan) which generally guarantees
employees hired before January 1, 1986, a retirement benefit at least equal to
the benefit they would have received under a previously terminated defined
benefit plan. The Manager's policy is to fund amounts as are necessary to at
least meet the minimum funding requirements of ERISA. All of these plans were
assumed by the Manager.

Net pension expense for 1995, 1994 and 1993 for the defined benefit plans
included the following components:

<TABLE>
<CAPTION>
1995 1994 1993
------- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost........................................ $ 452 $ 448 $ 431
Interest cost on projected benefit obligation....... 933 785 784
Actual return on assets............................. (1,653) (31) (1,142)
Net amortization and deferral....................... 838 (854) 229
------- ----- -------
Net pension expense............................... $ 570 $ 348 $ 302
======= ===== =======
</TABLE>

The pension expense for the defined contribution plan included in the
consolidated statements of income approximated $1,493,000, $1,471,000 and
$1,403,000 for 1995, 1994 and 1993, respectively.

The following table sets forth the funded status of the Manager's defined
benefit plans and amounts recognized in the Partnership's consolidated balance
sheets at December 31, 1995 and 1994 related to those plans:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligations............................ $ (5,338) $ (3,386)
======== ========
Accumulated benefit obligations....................... $ (6,721) $ (4,312)
======== ========
Projected benefit obligation.......................... $(14,311) $(11,712)
Plan assets at fair value............................... 8,521 7,891
-------- --------
Projected benefit obligation in excess of plan assets... (5,790) (3,821)
Unrecognized net loss (gain) ........................... 476 (763)
Unrecognized net asset.................................. (1,262) (1,422)
-------- --------
Pension liability recognized in the balance sheet....... $ (6,576) $ (6,006)
======== ========
</TABLE>

As of December 31, 1995, approximately 42.6 percent of plan assets were
invested in debt securities, 55.3 percent in equity securities and 2.1 percent
in cash equivalents.

The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.25 percent and 8.50 percent at
December 31, 1995 and 1994,

35
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
respectively. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
was 5.0 percent and 6.0 percent at December 31, 1995 and 1994, respectively.
The expected long-term rate of return on assets was 8.5 percent as of
January 1, 1995 and 1994.

The Manager also participates in a multi-employer retirement income plan
which provides benefits to employees covered by certain labor contracts.
Pension expense for the plan was $145,000, $152,000 and $156,000 for 1995,
1994 and 1993, respectively.

11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Manager provides postretirement health care and life insurance benefits
to certain of its retirees. To be eligible for these benefits an employee had
to be hired prior to January 1, 1991 and has to meet certain service
requirements. The Manager does not pre-fund this postretirement benefit
obligation.

Net postretirement benefit costs for 1995, 1994 and 1993 included the
following components:

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost....................................... $ 520 $ 583 $ 442
Interest cost on accumulated postretirement benefit
obligation........................................ 1,895 1,712 1,673
Net amortization and deferral...................... (577) (576) (580)
------ ------ ------
Net postretirement expense......................... $1,838 $1,719 $1,535
====== ====== ======
</TABLE>

The following table sets forth the amounts related to postretirement benefit
obligations recognized in the Partnership's consolidated balance sheets as of
December 31, 1995 and 1994:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefits
Retirees and dependents............................. $(11,886) $(11,666)
Employees eligible to retire...................... (4,368) (3,828)
Employees ineligible to retire.................... (8,431) (7,363)
-------- --------
Accumulated postretirement benefit obligation..... (24,685) (22,857)
Unamortized gain due to plan amendment................ (4,637) (5,217)
Unrecognized net loss (gain) ......................... 199 (41)
-------- --------
Postretirement liability recognized in the balance
sheet................................................ $(29,123) $(28,115)
======== ========
</TABLE>

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation ("APBO") was 7.25 percent and 8.50 percent
at December 31, 1995 and 1994, respectively. The assumed rate for plan cost
increases in 1995 was 11.6 percent and 10.2 percent for non-Medicare eligible
and Medicare eligible retirees, respectively. The assumed annual rates of cost
increase decline each year through 2005 to a rate of 4.5 percent, and remain
at 4.5 percent thereafter for both non-Medicare eligible and Medicare eligible
retirees. The effect of a 1 percent increase in the health care cost trend
rate for each future year would have increased the aggregate of service and
interest cost

36
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
components by $512,500 in 1995 and the APBO would have increased by $4,232,600
as of December 31, 1995.

The Manager also contributes to a multi-employer postretirement benefit plan
which provides health care and life insurance benefits to employees covered by
certain labor contracts. The cost of providing these benefits was
approximately $137,000, $130,000 and $123,000 for 1995, 1994 and 1993,
respectively.

12. EARLY EXTINGUISHMENT OF DEBT

In March 1994, Buckeye entered into an agreement to issue $15 million of
additional First Mortgage Notes (Series N) bearing interest at 7.93 percent
(see Note 8). The proceeds from the issuance of these First Mortgage Notes,
plus additional amounts approximating $1.6 million, were used to purchase U.S.
Government securities. These securities were deposited into an irrevocable
trust to complete an in-substance defeasance of $15 million of Buckeye's 9.72
percent, Series I, First Mortgage Notes. In addition, during December 1994,
Buckeye purchased approximately $10.7 million of U.S. Government securities.
These securities were deposited into an irrevocable trust to complete an in-
substance defeasance of $5 million of Buckeye's 9.72 percent, Series I, First
Mortgage Notes and $5 million of Buckeye's 11.18 percent, Series J, First
Mortgage Notes. The funds placed in trust in 1994 will be used solely to
satisfy the interest due and principal amounts of $20 million Series I Notes
due December 1996 and $5 million Series J Notes due serially through December
2006. Accordingly, these U.S. Government securities, the Series I First
Mortgage Notes and $5 million of the Series J First Mortgage Notes have been
excluded from the balance sheets. This debt extinguishment resulted in an
extraordinary charge of $2,269,000 in 1994.

In December 1993, Buckeye entered into an agreement to issue $35 million of
additional First Mortgage Notes (Series K, L and M) bearing interest at rates
ranging from 7.11 percent to 7.19 percent (see Note 8). A portion of the
proceeds from the issuance of these First Mortgage Notes were used to purchase
approximately $22.2 million of U.S. Government securities. These securities
were deposited into an irrevocable trust to complete an in-substance
defeasance of Buckeye's 9.50 percent, Series H, First Mortgage Notes. The
funds in the trust were used solely to satisfy the interest due and principal
amount of $20 million due at maturity in December 1995. Accordingly, these
U.S. Government securities and the Series H First Mortgage Notes have been
excluded from the balance sheets. This debt extinguishment resulted in an
extraordinary charge of $2,161,000 in 1993.

13. LEASES

The Operating Partnerships lease certain land and rights-of-way. Minimum
future lease payments for these leases as of December 31, 1995 are
approximately $2.6 million for each of the next five years. Substantially all
of these lease payments can be cancelled at any time should they not be
required for operations.

The Manager leases space in an office building and certain copying equipment
and Buckeye leases certain computing equipment and automobiles. The rent on
such leases is charged to the Operating Partnerships. Future minimum lease
payments under these noncancellable operating leases at December 31, 1995 were
as follows: $964,000 for 1996, $850,000 for 1997, $724,000 for 1998, $353,000
for 1999, $362,000 for 2000 and $2,020,000 thereafter.

Rent expense for all operating leases was $5,161,000, $4,834,000 and
$4,890,000 for 1995, 1994 and 1993, respectively.

37
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

14. RELATED PARTY TRANSACTIONS

The Partnership and the Operating Partnerships are managed and controlled by
the General Partner and the Manager. Under certain partnership agreements and
management agreements, the General Partner, the Manager, and certain related
parties are entitled to reimbursement of all direct and indirect costs related
to the business activities of the Partnership and the Operating Partnerships.
These costs, which totaled $55.4 million, $52.5 million and $52.7 million in
1995, 1994 and 1993, respectively, include insurance fees, consulting fees,
general and administrative costs, compensation and benefits payable to
officers and employees of the General Partner and Manager, tax information and
reporting costs, legal and audit fees and an allocable portion of overhead
expenses.

In 1986, Buckeye's predecessor (then owned by a subsidiary of American
Financial) obtained an Administrative Consent Order ("ACO") from the New
Jersey Department of Environmental Protection and Energy under the New Jersey
Environmental Cleanup Responsibility Act of 1983 ("ECRA") for all six of its
facilities in New Jersey. The ACO required Pipe Line to conduct in a timely
manner a sampling plan for environmental contamination at the New Jersey
facilities and to implement any required clean-up plan. Sampling continues in
an effort to identify areas of contamination at the New Jersey facilities,
while clean-up operations have begun at certain of the sites. The obligations
of Pipe Line were not assumed by the Partnership and the costs of compliance
have been and will continue to be paid by American Financial. Through December
1995, Buckeye's costs of approximately $2,516,000 have been funded by American
Financial.

On July 18, 1995, the General Partner amended the Partnership Agreement to
reflect its agreement to continue to act as general partner of the Partnership
until December 23, 2006, a ten-year extension of its current term. In
connection therewith, the General Partner, the Partnership and American
Financial amended the Distribution Support Incentive Compensation and APU
Redemption Agreement dated December 23, 1986, which provides for incentive
compensation payable to the General Partner in the event quarterly or special
distributions to Unitholders exceed specified targets. Both amendments were
approved on behalf of the Partnership by a special committee of disinterested
directors of the General Partner.

38
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

15. PARTNERS' CAPITAL

Changes in partners' capital for the years ended December 31, 1993, 1994,
and 1995 were as follows:

<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------------------- -----------
(IN THOUSANDS, EXCEPT FOR UNITS)
<S> <C> <C> <C>
Partners' capital at January 1, 1993.... $ 2,259 $ 223,585 $ 225,844
Net income.............................. 394 38,972 39,366
Distributions........................... (315) (31,200) (31,515)
-------- ----------- -----------
Partners' capital at December 31, 1993.. 2,338 231,357 233,695
Net income.............................. 458 45,359 45,817
Distributions........................... (340) (33,628) (33,968)
Proceeds from Exercise of unit options
and capital contributions.............. 4 428 432
-------- ----------- -----------
Partners' capital at December 31, 1994.. 2,460 243,516 245,976
Net income.............................. 498 49,342 49,840
Distributions........................... (340) (33,669) (34,009)
Proceeds from Exercise of unit options
and capital contributions.............. 4 374 378
-------- ----------- -----------
Partners' capital at December 31, 1995.. $ 2,622 $ 259,563 $ 262,185
======== =========== ===========
Units outstanding at January 1 and
December 31, 1993...................... 121,212 12,000,000 12,121,212
Units issued pursuant to the unit option
and distribution equivalent plan and
capital contributions.................. 162 16,060 16,222
-------- ----------- -----------
Units outstanding at December 31, 1994.. 121,374 12,016,060 12,137,434
Units issued pursuant to the unit option
and distribution equivalent plan and
capital contributions.................. 138 13,670 13,808
-------- ----------- -----------
Units outstanding at December 31, 1995.. 121,512 12,029,730 12,151,242
======== =========== ===========
</TABLE>

The net income per unit for 1995, 1994 and 1993 was calculated using the
weighted average outstanding units of 12,146,124, 12,131,640 and 12,121,212,
respectively.

The Partnership Agreement provides that without prior approval of limited
partners of the Partnership holding an aggregate of at least two-thirds of the
outstanding LP Units, the Partnership cannot issue more than 4,800,000
additional LP Units, or issue any additional LP Units of a class or series
having preferences or other special or senior rights over the LP Units. At
December 31, 1995, the Partnership has the ability to issue up to 4,770,270
additional LP Units without prior approval of the Limited Partners of the
Partnership.

16. CASH DISTRIBUTIONS

The Mortgage Note Indenture covenants permit cash distributions by Buckeye
to the Partnership so long as no default exists under the Mortgage Note
Indenture and provided that such distributions do not exceed Net Cash
Available to Partners (generally defined to equal net income plus depreciation
and amortization less (a) capital expenditures, funded from operating cash
flows (b) payments of principal of debt and (c) certain other amounts, all on
a cumulative basis since the formation of the Partnership). The maximum amount
available for distribution by Buckeye to the Partnership under the formula as
of December 31, 1995 amounted to $13.5 million. The Partnership is also
entitled to receive cash distributions from Everglades, BTT and Laurel.

39
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Partnership makes quarterly cash distributions to Unitholders of
substantially all of its available cash, generally defined as consolidated
cash receipts less consolidated cash expenditures and such retentions for
working capital, anticipated cash expenditures and contingencies as the
General Partner deems appropriate or as are required by the terms of the
Mortgage Note Indenture. In 1995 and 1994, quarterly distributions of $0.70
per GP and LP Unit were paid in February, May, August and November. In 1993,
quarterly distributions of $0.65 per GP and LP Unit were paid in February,
May, August and November. All such distributions were paid on the then
outstanding GP and LP Units. Cash distributions aggregated $34,009,000 in
1995, $33,968,000 in 1994 and $31,515,000 in 1993.

On February 9, 1996, the General Partner announced a quarterly distribution
of $0.75 per GP and LP Unit payable on February 29, 1996.

17. UNIT OPTION AND DISTRIBUTION EQUIVALENT PLAN

The Partnership has a Unit Option and Distribution Equivalent Plan (the
"Option Plan"), which was approved by the Board of Directors of the General
Partner on April 25, 1991 and by holders of the LP Units on October 22, 1991.
The Option Plan authorizes the granting of options (the "Options") to acquire
LP Units to selected key employees (the "Optionees") of the General Partner or
any subsidiary, not to exceed 360,000 LP Units in the aggregate. The price at
which each LP Unit may be purchased pursuant to an Option granted under the
Option Plan is generally equal to the market value on the date of the grant.
Options may be granted with a feature that allows Optionees to apply accrued
credit balances (the "Distribution Equivalents") as an adjustment to the
aggregate purchase price of such Options. The Distribution Equivalents shall
be an amount equal to (i) the Partnership's per LP Unit regular quarterly
distribution, multiplied by (ii) the number of LP Units subject to such
Options that have not vested. Vesting in the Options is determined by the
number of anniversaries the Optionee has remained in the employ of the General
Partner or a subsidiary following the date of the grant of the Option. Options
become vested in varying amounts beginning generally three years after the
date of grant and remain exercisable for a period of five years. The aggregate
number of Options granted during 1995, 1994 and 1993 were 30,250 units, 26,750
units and 23,500 units, respectively, with a purchase price of $34.438,
$39.438 and $32.750, respectively. All such Options were granted with
Distribution Equivalents. During 1995, a total of 13,670 Options were
exercised at an exercise price ranging from $15.225 to $19.638 per unit.
During 1994, a total of 16,060 Options were exercised at an exercise price
ranging from $18.025 to $29.450 per unit. At December 31, 1995, there were
93,120 Options outstanding and 3,500 of the outstanding Options were
exercisable. At December 31, 1994, there were 76,540 Options outstanding and
none of the outstanding Options were exercisable.

18. QUARTERLY FINANCIAL DATA (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)

Summarized quarterly financial data for 1995 and 1994 are set forth below.
Quarterly results were influenced by seasonal factors inherent in the
Partnership's business.

<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
--------------- --------------- --------------- --------------- -----------------
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $44,234 $45,619 $46,011 $46,114 $46,195 $46,574 $47,022 $48,031 $183,462 $186,338
Operating income........ 16,844 18,201 17,887 18,054 17,852 18,766 18,921 17,460 71,504 72,481
Income from operations
before extraordinary
charge................. 11,405 11,784 12,535 12,013 12,393 12,706 13,507 11,583 49,840 48,086
Net income.............. 11,405 10,215 12,535 12,013 12,393 12,706 13,507 10,883 49,840 45,817
Income per Unit before
extraordinary charge... 0.94 0.97 1.03 0.99 1.02 1.05 1.11 0.95 4.10 3.96
Net income per Unit..... 0.94 0.84 1.03 0.99 1.02 1.05 1.11 0.89 4.10 3.77
</TABLE>

40
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Partnership does not have directors or officers. The directors and
officers of the General Partner and the Manager perform all management
functions. Prior to the Acquisition, directors and officers of the General
Partner and the Manager were selected by American Financial. Directors and
officers of the General Partner and the Manager will now be selected by BAC.
See "Certain Relationships and Related Transactions".

DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER

Set forth below is certain information concerning the directors and
executive officers of the General Partner. All of such persons were elected to
their present positions with the General Partner in October 1986, except as
noted below.

<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH GENERAL BUSINESS EXPERIENCE DURING
PARTNER PAST FIVE YEARS
--------------------- ---------------------------
<S> <C>
Alfred W. Martinelli, 68 Mr. Martinelli has been Chairman of the Board and
Chairman of the Board, Chief Executive Officer of the General Partner for
Chief Executive Offi- more than five years. He served as President of the
cer and Director* General Partner from February 1991 to February 1992.
Mr. Martinelli has been Chairman and Chief Executive
Officer of Penn Central Energy Management Company
("PCEM") for more than five years. He was also Vice
Chairman and a director of American Financial and a
director of American Annuity Group, Inc. until his
resignation in March 1996.

C. Richard Wilson, 51 Mr. Wilson was elected as a director of the General
President and Director* Partner in February 1995. He was elected President
of the General Partner in March 1996. Mr. Wilson was
elected Chairman of the Board of the Manager in Feb-
ruary 1995. He has been President and Chief Operat-
ing Officer of the Manager since February 1991.

Ernest R. Varalli, 65 Mr. Varalli was elected to his present position in
Executive Vice Presi- July 1987. He served as Executive Vice President,
dent, Chief Chief Financial Officer and Treasurer of PCEM until
Financial Officer, his resignation in March 1996. Mr. Varalli had been
Treasurer a consultant to American Financial for more than
and Director* five years.

Brian F. Billings, 57 Mr. Billings served as President of the General
Director* Partner from October 1986 to December 1990. He
served as Chairman of the Manager to February 1995.
Mr. Billings was President of the Manager from July
1987 to December 1990. He was President of PCEM from
December 1986 to 1995.
</TABLE>

41
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH GENERAL BUSINESS EXPERIENCE DURING
PARTNER PAST FIVE YEARS
- --------------------- ---------------------------
<S> <C>
A. Leon Fergenson, 83 Mr. Fergenson has been a director of the General
Director Partner since December 1986. He is also a director
of American Annuity Group, Inc., Sequa Corporation
and National Benefit Life Insurance Company.

Edward F. Kosnik, 51 Mr. Kosnik has been Executive Vice President and
Director Chief Financial Officer of Alexander & Alexander
Services, Inc. since August 1994 and is also a di-
rector. He was Chairman of the Board, President and
Chief Executive Officer of JWP, Inc. from May 1993
through April 1994. Mr. Kosnik was Executive Vice
President and Chief Financial Officer of JWP, Inc.
from December 1992 to April 1993. He was President
of Sprague Technologies, Inc. from May 1992 to June
1992 and President and Chief Executive Officer of
Sprague Technologies, Inc. from July 1987 to May
1992.

William C. Pierce, 55 Mr. Pierce has been a director of the General Part-
Director ner since February 1987. He was Executive Vice Pres-
ident and Group Executive of Chemical Bank and Chem-
ical Banking Corporation from November 1992 until
his retirement in July 1994. Mr. Pierce served as
Executive Vice President and Chief Risk Policy Offi-
cer of Chemical Bank and Chemical Banking Corpora-
tion from December 1991 to November 1992. He was
Chief Credit Officer of Chemical Bank and Chemical
Banking Corporation from January 1988 to December
1991.

Robert H. Young, 74 Mr. Young has been a director of the General Partner
Director since July 1987. He was Secretary of the General
Partner from July 1987 through October 1991. Since
October 1991, Mr. Young has been Counsel to the law firm
of Morgan, Lewis & Bockius. Prior to October 1991, he was
a Senior Partner with that firm for more than five years.
Mr. Young is also Chairman of the Board of Directors of
Independence Blue Cross.
</TABLE>
- --------
* Also a director of the Manager.

Mr. Neil M. Hahl, the President of the General Partner since February 1992,
a director of the General Partner since February 1989 and Senior Vice
President of American Financial, resigned as President and director of the
General Partner upon the closing of the Acquisition.

The General Partner has an Audit Committee, which currently consists of
three directors: A. Leon Fergenson, William C. Pierce and Robert H. Young.
Messrs. Fergenson, Pierce and Young are neither officers nor employees of the
General Partner or any of its affiliates.

The General Partner also has a Compensation Committee, which currently
consists of four directors: Alfred W. Martinelli, Brian F. Billings, Ernest R.
Varalli and Robert H. Young. The Compensation Committee is concerned primarily
with establishing executive compensation policies for

42
<PAGE>

officers of the Manager and administering of the Partnership's Option Plan.
See "Executive Compensation--Compensation Committee Interlocks and Insider
Participation in Compensation Decisions."

DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGER

Set forth below is certain information concerning the directors and executive
officers of the Manager. Messrs. Billings and Martinelli were elected as
directors of the Manager in March 1987, and Mr. Varalli was elected as a
director of the Manager in July 1987.

<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH THE BUSINESS EXPERIENCE DURING
MANAGER PAST FIVE YEARS
--------------------- --------------------------
<S> <C>
C. Richard Wilson, 51 Mr. Wilson was elected Chairman of the Board of the
Chairman of the Board, Manager in February 1995. He was named President and
President, Chief Oper- Chief Operating Officer in February 1991. Mr. Wilson
ating Officer was Executive Vice President and Chief Operating Of-
and Director ficer from July 1987 to February 1991. He has been a
director of the Manager since October 1986. Mr.
Wilson was elected as a Director of the General
Partner in February 1995 and as President of the
General Partner in March 1996.

Michael P. Epperly, 52 Mr. Epperly was named Senior Vice President--Opera-
Senior Vice President-- tions in March 1990. He was Vice President--Opera-
Operations tions from October 1986 to February 1990.

Stephen C. Muther, 46 Mr. Muther was named Senior Vice President--Adminis-
Senior Vice President-- tration, General Counsel and Secretary in February
Administration, General 1995. He served as General Counsel, Vice President--
Counsel Administration and Secretary from May 1990 to Febru-
and Secretary* ary 1995.

Steven C. Ramsey, 41 Mr. Ramsey was named Vice President--Finance and
Vice President--Finance Treasurer in February 1995. He served as Vice Presi-
and Treasurer dent and Treasurer from February 1991 to February
1995. Mr. Ramsey was elected Treasurer in June 1989.
Prior to June 1989, he served in various positions
in the marketing and engineering departments of the
Manager.
</TABLE>
- --------
* Also Secretary of the General Partner since February 1992.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the total compensation earned by the Chief
Executive Officer of the General Partner and the four most highly compensated
executive officers of the General Partner and the Manager for services
rendered to the Partnership, the General Partner or the Manager for the fiscal
year ended December 31, 1995, as well as the total compensation earned by such
individuals for the two previous fiscal years. Alfred W. Martinelli, Chairman
of the Board, Chief Executive Officer and Director of the General Partner, did
not receive any cash compensation for serving as an officer of the General
Partner in 1995, but received fees for serving as a Director of the General
Partner. See "Director Compensation". Executive officers of the Manager,
including Messrs. Wilson, Epperly, Muther and Ramsey, are compensated by the
Manager and, pursuant to management agreements with each of the Operating
Partnerships, such compensation is reimbursed by the Operating Partnerships in
accordance with an allocation formula based upon the results of the prior
year's operations.

43
<PAGE>

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------- ---------- ----------
OTHER SECURITIES
ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND BONUS(1) COMPEN- OPTIONS(2) PAYOUTS(3) COMPEN-
PRINCIPAL POSITION YEAR SALARY ($) ($) SATION($) (#) ($) SATION ($)
------------------ ---- ---------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred W. Martinelli.... 1995 0 0 0 0 0 30,000(6)
Chairman of the Board 1994 0 0 11,033(4) 0 0 24,500(6)
and Chief Executive 1993 0 0 5,539(4) 0 0 22,500(6)
Officer of the General
Partner
C. Richard Wilson....... 1995 247,500 135,000 (5) 10,000 0 40,425(7)
Chairman of the Board, 1994 225,000 120,000 (5) 9,000 13,050 33,938(7)
President and Chief 1993 206,667 105,000 (5) 7,500 37,050 20,977(7)
Operating Officer of
the Manager
Michael P. Epperly...... 1995 167,500 67,500 (5) 4,500 0 25,850(7)
Senior Vice President-- 1994 155,000 67,500 (5) 4,550 10,875 23,650(7)
Operations of the 1993 143,333 60,000 (5) 3,750 30,729 19,901(7)
Manager
Stephen C. Muther....... 1995 170,500 75,000 (5) 5,500 0 23,050(7)
Senior Vice President-- 1994 155,000 60,000 (5) 4,000 0 20,000(7)
Administration, General 1993 144,167 45,000 (5) 3,000 20,000 17,550(7)
Counsel and Secretary
of the Manager
Steven C. Ramsey........ 1995 145,800 67,500 (5) 4,500 0 20,580(7)
Vice President--Finance 1994 135,000 60,000 (5) 4,000 7,250 18,000(7)
and Treasurer of the 1993 126,667 45,000 (5) 2,500 20,377 15,800(7)
Manager
</TABLE>
- --------
(1) Represents amounts awarded by the Compensation Committee as cash bonuses
earned under the Manager's Annual Incentive Compensation Plan ("AIC Plan").
Under the AIC Plan, individual awards are granted to participants based
upon satisfaction of such participant's target award opportunities and such
awards are paid to participants as soon as practicable after they are
granted.
(2) Represents options granted under the Partnership's Unit Option and
Distribution Equivalent Plan (the "Option Plan"). See "Long Term
Compensation--Option Plan". Certain officers of the Manager are also
eligible to participate in the American Financial Stock Option Plan (the
"American Financial Option Plan"). No cost or expense relating to the
American Financial Option Plan is borne by the Partnership. No options were
awarded in 1993, 1994 or 1995 under the American Financial Option Plan to
the Chief Executive Officer of the General Partner or the four most highly
compensated executive officers of the General Partner and the Manager.
(3) Represents payments received during the applicable year under the Manager's
Long-Term Incentive Compensation Plans (the "LTIC Plans"). See "Long-Term
Compensation--Long-Term Incentive Plans".

44
<PAGE>

(4) Represents lease payments made by the Partnership for an automobile used
by Mr. Martinelli.
(5) During the year indicated, no perquisites or non-cash compensation
exceeded the lesser of $50,000 or an amount equal to 10 percent of such
person's salary and bonus.
(6) Represents director fees which commenced in July 1992. See "Director
Compensation".
(7) Represents the amount contributed by the Manager to the Manager's defined
contribution retirement plan and the Manager's matching contributions
under the Manager's savings plan and, for Messrs. Wilson, Epperly, Muther
and Ramsey an additional $23,925, $9,350, $8,050 and $5,580, respectively,
under the Manager's Benefit Equalization Plan for 1995. Messrs. Wilson,
Epperly, Muther and Ramsey received an additional $18,313, $7,150, $5,000
and $3,000, respectively in 1994 and Mr. Wilson and Mr. Epperly received
an additional $733 and $379, respectively, in 1993 under the Manager's
Benefit Equalization Plan. In addition to participation in the Manager's
defined contribution plan, Messrs. Wilson, Epperly and Ramsey are
guaranteed certain defined benefits upon retirement under the Manager's
retirement income guarantee plan. See "Retirement and Savings Plans".

LONG-TERM COMPENSATION

Option Plan

The following table sets forth additional information regarding options
granted under the Option Plan to the Chief Executive Officer of the General
Partner and the four most highly compensated executive officers of the General
Partner and Manager during 1995.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF LP UNIT
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------ --------------------------
PERCENT OF
TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED (1) IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/UNIT) DATE 5% ($) (2) 10% ($) (2)
---- ----------- ---------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alfred W. Martinelli.... 0 -- -- -- -- --
C. Richard Wilson....... 10,000 33.1% 34.438 2/01/2005 216,600 548,900
Michael P. Epperly...... 4,500 14.9% 34.438 2/01/2005 97,500 247,000
Stephen C. Muther....... 5,500 18.2% 34.438 2/01/2005 119,100 301,900
Steven C. Ramsey........ 4,500 14.9% 34.438 2/01/2005 97,500 247,000
</TABLE>

- --------
(1) Represents LP Unit options granted under the Option Plan. Options shown in
the table were granted with a feature that allows optionees to apply
accrued credit balances (the "Distribution Equivalents") as a reduction to
the aggregate purchase price of such options. The Distribution Equivalents
are equal to (i) the Partnership's per LP Unit regular quarterly
distribution as declared from time to time by the Board of Directors of
the General Partner, multiplied by (ii) the number of LP Units subject to
options that have not vested. Vesting in the options is determined by the
number of anniversaries the optionee has remained in the employ of the
General Partner or a subsidiary following the date of the grant of the
option. Vesting shall be at the rate of 0 percent if the number of
anniversaries are less than three, 60 percent if the number of
anniversaries are three but less than four, 80 percent if the number of
anniversaries are four but

45
<PAGE>

less than five and 100 percent if the number of anniversaries are five or
more. In addition, the optionee may become fully vested upon death,
retirement, disability or a determination by the Board of Directors of the
General Partner or the Compensation Committee that acceleration of the
vesting in the option would be desirable for the Partnership. Up to 95
percent of the LP Unit purchase price and up to 100 percent of any taxes
required to be withheld in connection with the purchase of the LP Units
pursuant to such options may be financed through a loan program established
by the General Partner.

(2)The dollar amounts under these columns are the values of options (not
including accrual of any Distribution Equivalents) at the 5 percent and 10
percent rates set by the Securities and Exchange Commission and therefore are
not intended to forecast possible future appreciation, if any, of the price
of LP Units. No alternative formula for a grant date valuation was used, as
the General Partner is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors.

The following table sets forth information regarding options exercised in
1995 and values of unexercised options as of December 31, 1995 for the Chief
Executive Officer of the General Partner and the four most highly compensated
executive officers of the General Partner and the Manager.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
1995 (#) 1995 ($)(1)
LP UNITS ------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Alfred W. Martinelli...... 0 -- 0/0 --
C. Richard Wilson......... 5,670 93,600 0/30,670 0/39,300
Michael P. Epperly........ 3,000 47,000 0/15,000 0/21,000
Stephen C. Muther......... 2,400 38,400 0/14,300 0/16,800
Steven C. Ramsey.......... 0 -- 2,000/12,500 13,800/14,000
</TABLE>
- --------
(1) The values of the unexercised options do not include any accrual for
Distribution Equivalents.

In 1995, Messrs. Wilson, Epperly and Muther exercised options to purchase
2,620 shares, 1,091 shares and 545 shares of American Financial, respectively,
with a net value realized of $19,752, $3,446 and $6,570, respectively. In
1994, Mr. Muther exercised options to purchase 546 shares of American
Financial with a net value realized of $3,784. In 1993, Messrs. Wilson,
Epperly and Muther exercised options to purchase 11,294 shares, 1,636 shares
and 1,090 shares of American Financial, respectively, with a net value
realized of $63,559, $22,141 and $8,916, respectively. All shares were
acquired pursuant to the American Financial Option Plan. No cost or expense
relating to the exercise of these options was incurred by the Partnership.

Long-Term Incentive Plans

Prior to 1991 when the Option Plan went into effect, the Manager created a
LTIC Plan each year which permitted the Board of Directors of the General
Partner or the Compensation Committee to grant cash awards to certain
employees of the Manager for performance during three-year periods. Although
cash award payments continued under these LTIC Plans through 1994, no new LTIC
plans were established after 1990. In addition to the LTIC Plans, the Manager
created a transition plan which grants to each participant an additional cash
award in an amount equal to the difference

46
<PAGE>

between the target amount under the 1990-1992 LTIC Plan and the sum of (i)
amounts received pursuant to LTIC Plans and (ii) the value of Distribution
Equivalents vested under the Option Plan for each year from 1992 through 1995.

Awards under LTIC Plans were based on achievement of certain long-term
financial performance goals for the Partnership and could not exceed 150
percent of the target award opportunity established by the Board of Directors
of the General Partner or the Compensation Committee at the beginning of such
period (or as soon as practicable thereafter) for such period. A participant's
target award opportunity under the LTIC Plans could not exceed 25 percent of
such participant's aggregate base salary earned during the three-year period.
If the Partnership met or exceeded the interim financial performance goals
under the LTIC Plans, cash payments up to the full amount of the target award
were made in the following installments: 10 percent in the second year of the
award period, 30 percent in the third year of the award period and 60 percent
in the first year following the award period. Any cash award in excess of the
target award was paid in the second year following the award period with 10
percent simple interest.

RETIREMENT AND SAVINGS PLANS

Effective December 31, 1985, Pipe Line terminated its defined benefit
retirement plan (the "Retirement Plan") and adopted a new defined contribution
plan (the "New Retirement Program"). Those employees hired prior to January 1,
1986 are covered by a retirement income guarantee plan (the "RIGP"). These
plans were assumed by the Manager.

The Operating Partnerships reimburse the Manager for cash costs incurred in
connection with the New Retirement Program, the RIGP, the Equalization Plan
(described below) and the Savings Plan (described below).

Under the New Retirement Program, the Manager makes contributions equal to 5
percent of an employee's covered compensation, which includes base salary plus
overtime, annual cash bonuses and any periodic salary continuance payments but
does not include extraordinary cash bonuses, deferred awards, other forms of
deferred compensation, lump-sum severance pay, fees or any other kind of
special or extra compensation. Employees may elect to have the Manager's
contributions invested in any of five investment funds.

The RIGP generally provides for an additional retirement benefit equal to
the amount, if any, by which the aggregate of the annuity equivalent of the
employee's accrued benefit under the former Retirement Plan at December 31,
1985 plus the annuity equivalent of the vested portion of employer
contributions under the New Retirement Program for the account of such
employee (plus or minus aggregate investment gains or losses thereon) is less
than the retirement benefit that the employee would have received if the
former Retirement Plan had continued. The vesting formula for the New
Retirement Program and the RIGP provides for 100 percent vesting after 5 years
of service. Service under the former Retirement Plan is carried over to the
new plans. The minimum retirement benefit guaranteed under the RIGP is based
on the highest average compensation during any five consecutive calendar years
of employment within the last ten years of employment preceding retirement
("Highest Average Compensation"). For purposes of the RIGP, compensation is
defined to include the same components as under the New Retirement Program,
except that periodic salary continuance payments are not included. The former
Retirement Plan benefit, which the RIGP was established to guarantee, provides
for a retirement benefit equal to 1.75 percent per year of service (maximum of
60 percent) of the Highest Average Compensation, reduced by 1.46 percent for
each year of service (with a maximum offset of 50 percent) of the estimated
primary insurance amount that an employee is entitled to receive upon
retirement, other termination of employment or, if earlier, attainment of age
65 under the Social Security Act.

47
<PAGE>

The Manager also assumed Pipe Line's Benefit Equalization Plan (the
"Equalization Plan"), which generally makes up the reductions caused by
Internal Revenue Code limitations in the annual retirement benefit determined
pursuant to the RIGP and in the Manager's contributions on behalf of an
employee pursuant to the New Retirement Program and the Savings Plan. Those
amounts not payable under the RIGP (or under affiliated company retirement
plans and employee transfer policies), the New Retirement Program or the
Savings Plan are payable under the Equalization Plan.

Estimated annual benefits under the RIGP and the Equalization Plan,
calculated under the single life annuity option form of pension, payable to
participants at the normal retirement age of 65, are illustrated in the
following table.

<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFIT
AVERAGE OF 5 --------------------------------------------
HIGHEST ANNUAL YEARS OF SERVICE
COMPENSATION --------------------------------------------
LEVELS 15 20 25 30 35
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000....................... $ 22,970 $ 30,627 $ 38,384 $ 45,941 $ 52,510
150,000....................... 36,095 48,127 60,159 72,191 82,514
200,000....................... 49,220 65,627 82,034 98,441 112,518
250,000....................... 62,345 83,127 103,909 124,691 142,521
300,000....................... 75,470 100,627 125,784 150,941 172,525
350,000....................... 88,595 118,127 147,659 177,191 202,529
400,000....................... 101,720 135,627 169,534 203,441 232,533
450,000....................... 114,845 153,127 191,409 229,691 262,536
500,000....................... 127,970 170,627 213,284 255,941 292,540
</TABLE>

The amounts shown in the above table have been reduced by the percentage
equal to 1.46 percent for each year of service of the estimated maximum annual
benefits payable under the Social Security Act in respect of each category.
The amounts shown in the table would be further reduced, as described above,
by the accrued benefit under the former Retirement Plan as of December 31,
1985, as well as by the aggregate amount of vested employer contributions
under the New Retirement Program (plus or minus aggregate investment gains or
losses thereon).

Messrs. Wilson, Epperly and Ramsey have 21, 30 and 14 full credited years of
service with the Manager and its affiliates, respectively, under the New
Retirement Program, the RIGP and the Equalization Plan. Each of them is 100
percent vested under such plans. Mr. Muther has five full years of credited
service with the Manager. He is not covered under the RIGP and is currently
vested under the New Retirement Program.

Officers of the Manager are also eligible to participate on a voluntary
basis in the Manager's Savings Plan (the "Savings Plan"). An employee may
elect to contribute to the Savings Plan annually a specified percentage of his
pay, subject to certain limitations. The Manager will contribute to the
Savings Plan, out of its current or accumulated profits, for the benefit of
each participating employee, an amount equal to his contributions up to a
maximum of 5 percent of his pay (6 percent of pay if the employee has
completed 20 or more years of service). Employees may elect to have the
Manager's contributions invested in any of four investment funds. The
Manager's contributions vest immediately for the first 2 percent of the
employee's pay and at the rate of 20 percent per year of service (excluding
the first year of service) for the remainder, with 100 percent vesting upon
death, disability, retirement or attainment of age 65. Benefits are payable,
at the election of the employee, in a lump-sum cash distribution after
termination of employment or as an annuity upon retirement or a combination of
the two.

DIRECTOR COMPENSATION

The fee schedule for directors of the General Partner other than Messrs.
Martinelli and Wilson is as follows: annual fee, $15,000; attendance fee for
each Board of Directors meeting, $1,000; and

48
<PAGE>

attendance fee for each committee meeting, $750. Directors' fees paid by the
General Partner in 1995 to such directors amounted to $169,500.

Mr. Martinelli, Chairman of the Board, Chief Executive Officer and Director
of the General Partner is entitled to receive the following fees as Chairman
of the Board of Directors: annual fee $20,000; attendance fee for each Board
of Directors meeting, $1,500; and attendance fee for each committee meeting,
$1,000. Director's fees paid by the General Partner in 1995 to Mr. Martinelli
amounted to $30,000.

Mr. Wilson, Chairman of the Board, President and Chief Operating Officer of
the Manager and President and Director of the General Partner, is compensated
by the Partnership for his services to the Manager (see "Summary Compensation
Table") and does not receive any additional compensation or other benefits
with respect to his services as a director of the General Partner.

Members of the Board of Directors of the Manager were not compensated for
their services as directors, and it is not currently anticipated that any such
compensation will be paid in the future to directors of the Manager who are
full-time employees of the Manager or any of its affiliates.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

The Compensation Committee consists of Messrs. Martinelli, Varalli, Billings
and Young. Messrs. Martinelli and Varalli are executive officers of the
General Partner and Mr. Billings is a former executive officer of the General
Partner. Mr. Martinelli is also Chairman of BAC. Mr. Young is counsel to the
law firm of Morgan, Lewis and Bockius, which supplies legal services to the
Partnership.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

No person or group is known to be the beneficial owner of more than 5
percent of the LP Units as of February 1, 1996.

49
<PAGE>

The following table sets forth certain information, as of February 1, 1996,
concerning the beneficial ownership of LP Units by each director of the
General Partner, the Chief Executive Officer of the General Partner, the four
most highly compensated officers of the General Partner and the Manager and by
all directors and executive officers of the General Partner and the Manager as
a group. Such information is based on data furnished by the persons named.
Based on information furnished to the General Partner by such persons, no
director or executive officer of the General Partner or the Manager owned
beneficially, as of February 1, 1996, more than 1 percent of any class of
equity securities of the Partnership or any of its subsidiaries outstanding at
that date.

<TABLE>
<CAPTION>
NAME NUMBER OF LP UNITS (1)
---- ----------------------
<S> <C>
Brian F. Billings....................................... 7,500
Michael P. Epperly...................................... 25(2)
A. Leon Fergenson....................................... 200
Neil M. Hahl............................................ 2,500
Edward F. Kosnik........................................ 5,000
Alfred W. Martinelli.................................... 4,500
William C. Pierce....................................... 800(2)
Steven C. Ramsey........................................ 300(2)
Ernest R. Varalli....................................... 6,500
C. Richard Wilson....................................... 2,500
Robert H. Young......................................... 2,500
All directors and executive officers as a group
(consisting of 12 persons, including those named
above)................................................. 32,325(2)
</TABLE>
- --------
(1) Unless otherwise indicated, the persons named above have sole voting and
investment power over the LP Units reported.
(2) The LP Units owned by Messrs. Epperly, Pierce and Ramsey have shared
voting and investment power with their respective spouses.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Partnership and the Operating Partnerships are managed and controlled by
the General Partner and the Manager, respectively, pursuant to the Partnership
Agreement, the several Amended and Restated Agreements of Limited Partnership
of the Operating Partnerships (the "Operating Partnership Agreements") and the
several Management Agreements between the Manager and the Operating
Partnerships (the "Management Agreements").

On March 22, 1996, BAC acquired all of the common stock of the General
Partner from a subsidiary of American Financial for $63 million. The common
stock of BAC is owned by Glenmoor and certain managers of the Manager.
Glenmoor is a limited liability partnership whose partners consist primarily
of members of senior management of the General Partner and the Manager,
including Alfred W. Martinelli, Chairman of the Board, Chief Executive
Officer, Director of the General Partner, and a Director of the Manager;
Ernest R. Varalli, Executive Vice President, Chief Financial Officer,

50
<PAGE>

Treasurer, Director of the General Partner and a Director of the Manager; C.
Richard Wilson, Chairman of the Board, President, Chief Operating Officer,
Director of the Manager and President and a Director of the General Partner;
Stephen C. Muther, Senior Vice President--Administration, General Counsel and
Secretary of the Manager and Secretary of the General Partner; Steven C.
Ramsey, Vice President--Finance and Treasurer of the Manager; and Michael P.
Epperly, Senior Vice President--Operations of the Manager. All of the
outstanding Senior A Convertible Preferred Stock of BAC is owned by the ESOP.
Comerica Bank-Illinois serves as trustee of the ESOP.

In connection with the Acquisition, the General Partner borrowed $63 million
pursuant to a 15-year term loan from a third-party lender. The General Partner
then loaned $63 million to the ESOP, which used the proceeds to purchase the
Senior A Convertible Preferred Stock from BAC. BAC used the $63 million
proceeds of the sale of the Senior A Convertible Preferred Stock to the ESOP
plus $6 million of proceeds from the sale of BAC common stock to Glenmoor to
pay the Acquisition purchase price, Acquisition-related expenses and to make a
capital contribution to the General Partner to maintain its net worth at not
less than $5,000,000.

Also on March 22, 1996, the General Partner amended and restated the
Incentive Compensation Agreement to (a) delete American Financial as a party
to the agreement, (b) eliminate certain provisions relating to distribution
support obligations which expired in 1991, and (c) clarify that the Incentive
Compensation Agreement terminates if the General Partner is removed as general
partner of the Partnership. The amended and restated agreement was approved on
behalf of the Partnership by a special committee of disinterested directors of
the Partnership comprised of William C. Pierce, A. Leon Fergenson and Edward
F. Kosnik.

Under the Partnership Agreement and the Operating Partnership Agreements, as
well as the Management Agreements, the General Partner, the Manager and
certain related parties are entitled to reimbursement of all direct and
indirect costs and expenses related to the business activities of the
Partnership and the Operating Partnerships. These costs and expenses include
insurance fees, consulting fees, general and administrative costs,
compensation and benefits payable to officers and other employees of the
General Partner and Manager, tax information and reporting costs, legal and
audit fees and an allocable portion of overhead expenses. Such reimbursed
amounts constitute a substantial portion of the revenues of the General
Partner and the Manager. These costs and expenses reimbursed by the
Partnership totaled $55.3 million in 1995.

The Partnership received management consulting services from PCEM through
June 1995. The cost of this management consulting service allocated to the
Partnership in 1995 totaled $60,000. On July 18, 1995, a special committee of
disinterested directors of the General Partner, acting on behalf of the
Partnership, agreed to replace the management consulting service allocation
from PCEM with a

51
<PAGE>

Senior Management Charge from American Financial equalling $1,400,000 per
annum, and an Overhead Allocation estimated to be 3% of overall American
Financial non-executive administrative overhead or $450,000 per annum. This
allocation was intended to cover the services of Messrs. Martinelli, Varalli,
Hahl and other senior American Financial officers who from time to time
provide advice regarding Partnership matters, as well as treasury, pension,
human resources, risk management, claims and litigation services which the
Partnership receives from time to time from American Financial personnel.
Amounts paid in 1995 to American Financial for allocated expenses equaled
$925,000. See "Executive Compensation--Summary Compensation and Compensation
Committee Interlocks and Insider Participation in Compensation Decisions."

On March 22, 1996, the General Partner entered into the Glenmoor Management
Agreement pursuant to which Glenmoor agreed to provide certain management
functions to the General Partner and the Manager. Glenmoor shall receive an
annual management fee, which shall be approved each year by the disinterested
directors of the General Partner. The management fee includes a Senior
Administrative Charge of not less than $975,000, reimbursement for certain
compensation costs and expenses and participation of Glenmoor employees in the
Manager's employee benefit plans, including the ESOP. The aggregate management
fee to Glenmoor is expected to be less than the amounts paid by the General
Partner and the Manager to American Financial and senior management for
similar services. The Glenmoor Management Agreement was approved by a special
committee of disinterested directors of the General Partner comprised of
William C. Pierce, A. Leon Fergenson and Edward F. Kosnik.

The Incentive Compensation Agreement, as amended, provides that, subject to
certain limitations and adjustments, if a quarterly cash distribution exceeds
a target of $0.65 per LP Unit, the Partnership will pay the General Partner,
in respect of each outstanding LP Unit, incentive compensation equal to (i) 25
percent of that portion of the distribution per LP Unit which exceeds the
target quarterly amount of $0.65 but is not more than $0.70 plus (ii) 30
percent of the amount, if any, by which the quarterly distribution per LP Unit
exceeds $0.70 but is not more than $0.80 plus (iii) 40 percent of the amount,
if any, by which the quarterly distribution per LP Unit exceeds $0.80 but is
not more than $0.90 plus (iv) 50 percent of the amount, if any, by which the
quarterly distribution per LP Unit exceeds $0.90. The General Partner is also
entitled to incentive compensation, under a comparable formula, in respect of
special cash distributions exceeding a target special distribution amount per
LP Unit. The target special distribution amount generally means the amount
which, together with all amounts distributed per LP Unit prior to the special
distribution compounded quarterly at 13 percent per annum, would equal $20.00
(the initial public offering price of the LP Units) compounded quarterly at 13
percent per annum from the date of the closing of the initial public offering.
Incentive compensation paid by the Partnership to the General Partner totaled
$481,000 in 1995.

On February 9, 1996, the General Partner announced a quarterly distribution
of $0.75 per GP and LP Unit payable on February 29, 1996. As such distribution
exceeds a target of $0.65 per LP Unit, the Partnership will pay the General
Partner incentive compensation aggregating $331,000 as a result of this
distribution.

52
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this Report:

(1) and (2) Financial Statements and Financial Statement Schedules--see
Index to Financial Statements and Financial Statement Schedules appearing
on page 22.

(3) Exhibits, including those incorporated by reference. The following is
a list of exhibits filed as part of this Annual Report on Form 10-K. Where
so indicated by footnote, exhibits which were previously filed are
incorporated by reference. For exhibits incorporated by reference, the
location of the exhibit in the previous filing is indicated in parentheses.

<TABLE>
<CAPTION>
EXHIBIT NUMBER
(REFERENCED TO
ITEM 601 OF
REGULATION S-K)
---------------
<C> <S>
*2.1 --Share Purchase Agreement dated as of January 5, 1996 between
BMC Acquisition Company and Pennsylvania Company.
*2.2 --Amendment to Share Purchase Agreement dated as of March 22,
1996 between BMC Acquisition Company and Pennsylvania Compa-
ny.
3.1 --Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of December 23, 1986.(1) (Exhibit 3.1)
3.2 --Amendment No. 1 to the Amended and Restated Agreement of
Limited Partnership of the Partnership dated July 18,
1995.(10) (Exhibit 3.1)
*3.3 --Amendment No. 2 to the Amended and Restated Agreement of
Limited Partnership of the Partnership dated March 22, 1996.
3.4 --Amended and Restated Certificate of Limited Partnership of
the Partnership, dated as of November 18, 1986.(1) (Exhibit
3.1)
4.1 --Indenture of Mortgage and Deed of Trust and Security Agree-
ment, dated as of December 15, 1986, by Buckeye to Pittsburgh
National Bank and J. G. Routh, as Trustees.(1) (Exhibit 4.1)
4.2 --Note Purchase Agreement, dated as of December 15, 1986,
among Buckeye and the several purchasers named therein relat-
ing to $300,000,000 of First Mortgage Notes.(1) (Exhibit 4.2)
4.3 --First Supplemental Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of December 1, 1987, by
Buckeye Pipe Line Company, L.P., to Pittsburgh National Bank
and J. G. Routh, as Trustees.(2) (Exhibit 4.4)
4.4 --Second Supplemental Indenture and Deed of Trust and Security
Agreement, dated as of November 30, 1992 by Buckeye Pipe Line
Company, L.P. to Pittsburgh National Bank and J. G. Routh, as
Trustees.(3) (Exhibit 4.5)
4.5 --Third Supplemental Indenture and Deed of Trust and Security
Agreement, dated as of December 31, 1993, by Buckeye Pipe
Line Company, L.P. to Pittsburgh National Bank and J. G.
Routh, as Trustees.(8) (Exhibit 4.5)
4.6 --Note Purchase and Private Shelf Agreement, dated as of De-
cember 31, 1993 between Buckeye Pipe Line Company, L.P. and
The Prudential Insurance Company of America.(8) (Exhibit 4.6)
4.7 --Fourth Supplemental Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of March 15, 1994, by Buck-
eye Pipe Line Company, L.P., to PNC Bank, National Associa-
tion and J.G. Routh, as Trustees.(9) (Exhibit 4.8)
</TABLE>

53
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NUMBER
(REFERENCED TO
ITEM 601 OF
REGULATION S-K)
---------------
<C> <S>
4.8 --Fifth Supplemental Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of March 30, 1994, by Buck-
eye Pipe Line Company, L.P., to PNC Bank, National Associa-
tion and J.G. Routh, as Trustees.(9) (Exhibit 4.9)
4.9 --Certain instruments with respect to long-term debt of the
Operating Partnerships which relate to debt that does not ex-
ceed 10 percent of the total assets of the Partnership and
its consolidated subsidiaries are omitted pursuant to Item
601(b) (4) (iii) (A) of Regulation S-K, 17 C.F.R. (S)229.601.
The Partnership hereby agrees to furnish supplementally to
the Securities and Exchange Commission a copy of each such
instrument upon request.
10.1 --Amended and Restated Agreement of Limited Partnership of
Buckeye, dated as of December 23, 1986.(1)(4) (Exhibit 10.1)
*10.2 --Management Agreement, dated March 22, 1996 between the Gen-
eral Partner and Glenmoor.
10.3 --Management Agreement, dated November 18, 1986, between the
Manager and Buckeye.(1)(5) (Exhibit 10.4)
*10.4 --Amended and Restated Incentive Compensation Agreement, dated
as of March 22, 1996, between the General Partner and the
Partnership.
10.5 --Annual Incentive Compensation Plan for key employees of the
Manager.(1)(6) (Exhibit 10.8)
10.6 --Form of Long-Term Incentive Compensation Plan for key em-
ployees of the Manager.(1)(6) (Exhibit 10.9)
10.7 --Unit Option and Distribution Equivalent Plan of Buckeye
Partners, L.P.(6)(7) (Exhibit 10.10)
10.8 --Buckeye Management Company Unit Option Loan Program.(6)(7)
(Exhibit 10.11)
10.9 --Buckeye Pipe Line Company Benefit Equalization Plan.(3)(6)
(Exhibit 10.10)
*11.1 --Computation of earnings per Unit.
*21.1 --List of subsidiaries of the Partnership.
*27 --Financial Data Schedule
</TABLE>

- --------
(1) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the
year 1986.

(2) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for
the quarter ended March 31, 1988.

(3) Previously filed with the Securities and Exchange Commission as the
Exhibit to Buckeye Partners, L.P. Annual Report on Form 10-K for the year
1992.

(4) The Amended and Restated Agreements of Limited Partnership of the other
Operating Partnerships are not filed because they are identical to
Exhibit 10.1 except for the identity of the partnership.

(5) The Management Agreements of the other Operating Partnerships are not
filed because they are identical to Exhibit 10.4 except for the identity
of the partnership.

(6) Represents management contract or compensatory plan or arrangement.

54
<PAGE>

(7) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for
the quarter ended September 30, 1991.

(8) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the
year 1993.

(9) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994.

(10) Previously filed with the Securities and Exchange Commission as the
Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.

* Filed herewith

(b) Reports on Form 8-K filed during the quarter ended December 31, 1995:

None

55
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

Buckeye Partners, L.P.
(Registrant)

By: Buckeye Management Company,
as General Partner

/s/ Alfred W. Martinelli
Dated: March 26, 1996 By: _________________________________
Alfred W. Martinelli
Chairman of the Board

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

/s/ Brian F. Billings
Dated: March 26, 1996 By: _________________________________
Brian F. Billings
Director

/s/ A. Leon Fergenson
Dated: March 26, 1996 By: _________________________________
A. Leon Fergenson
Director

/s/ Edward F. Kosnik
Dated: March 26, 1996 By: _________________________________
Edward F. Kosnik
Director

/s/ Alfred W. Martinelli
Dated: March 26, 1996 By: _________________________________
Alfred W. Martinelli
Chairman of the Board and
Director
(Principal Executive Officer)

/s/ William C. Pierce
Dated: March 26, 1996 By: _________________________________
William C. Pierce
Director

/s/ Ernest R. Varalli
Dated: March 26, 1996 By: _________________________________
Ernest R. Varalli
Executive Vice President,
Chief Financial Officer,
Treasurer and Director
(Principal Accounting and
Financial Officer)

/s/ C. Richard Wilson
Dated: March 26, 1996 By: _________________________________
C. Richard Wilson
President and Director

/s/ Robert H. Young
Dated: March 26, 1996 By: _________________________________
Robert H. Young
Director

56
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Buckeye Partners, L.P.:

We have audited the consolidated financial statements of Buckeye Partners,
L.P. and its subsidiaries as of December 31, 1995 and 1994, and for each of
the three years in the period ended December 31, 1995, and have issued our
report thereon dated January 26, 1996 (March 22, 1996 as to Note 3); such
report is included elsewhere in this Form 10-K. Our audits also included the
consolidated financial statement schedules of Buckeye Partners, L.P. and
subsidiaries referred to in Item 14. These consolidated financial statement
schedules are the responsibility of the Partnership's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth therein.

Deloitte & Touche LLP

Philadelphia, Pennsylvania
January 26, 1996 (March 22, 1996
as to Note 3)

S-1
<PAGE>

SCHEDULE I

BUCKEYE PARTNERS, L.P.
REGISTRANT'S CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)

BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents................................. $ 4,209 $ 41
Temporary investments.................................. 895 2,255
Other current assets...................................... 44 30
-------- --------
Total current assets.................................... 5,148 2,326
Investments in and advances to subsidiaries (at equity)..... 262,030 245,689
-------- --------
Total assets............................................ $267,178 $248,015
-------- --------
-------- --------
Liabilities and partners' capital
Current liabilities......................................... $ 4,993 $ 2,039
-------- --------
Partners' capital
General Partner........................................... 2,622 2,460
Limited Partners.......................................... 259,563 243,516
-------- --------
Total partners' capital................................. 262,185 245,976
-------- --------
Total liabilities and partners' capital................. $267,178 $248,015
-------- --------
-------- --------
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Equity in income of subsidiaries................. $ 50,388 $ 46,250 $ 39,462
Operating expenses............................... (29) (16) (10)
Interest income.................................. 20 -- --
Interest and debt expense........................ (58) (57) (86)
Incentive compensation to General Partner........ (481) (360) --
-------- -------- --------
Net income................................. $ 49,840 $ 45,817 $ 39,366
-------- -------- --------
-------- -------- --------
STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 49,840 $ 45,817 $ 39,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries....... (16,341) (11,982) (7,858)
Change in assets and liabilities:
Temporary investments...................... 1,360 (2,005) (250)
Other current assets....................... (14) (12) 342
Current liabilities........................ 2,954 347 1,287
-------- -------- --------
Net cash provided by operating activities.. 37,799 32,165 32,887
Cash flows from financing activities:
Capital contributions.......................... 4 4 --
Proceeds from exercise of unit options......... 374 428 --
Distributions to Unitholders................... (34,009) (33,968) (31,515)
-------- -------- --------
Net increase (decrease) in cash and cash equiv-
alents........................................ 4,168 (1,371) 1,372
Cash and cash equivalents at beginning of peri-
od............................................ 41 1,412 40
-------- -------- --------
Cash and cash equivalents at end of period..... $ 4,209 $ 41 $ 1,412
======== ======== ========
</TABLE>

See footnotes to consolidated financial statements of Buckeye Partners, L.P.

S-2
<PAGE>

SCHEDULE II

BUCKEYE PARTNERS, L.P.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES, NET ACCOUNTS DEDUCTIONS OF PERIOD
- ----------- ---------- ------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1995
Reserve for discontinued
operations............. $ -- $-- $-- $ -- $--
======= ==== ==== ======= ====
Year ended December 31,
1994
Reserve for discontinued
operations............. $ -- $-- $-- $ -- $--
======= ==== ==== ======= ====
Year ended December 31,
1993
Reserve for discontinued
operations............. $21,768 $127 $-- $21,895(a) $--
======= ==== ==== ======= ====
</TABLE>
- --------
(a) Represents disposition of discontinued operations upon sale of net assets
of discontinued operations during 1993.

S-3

<PAGE>

EXHIBIT 2.1

SHARE PURCHASE AGREEMENT

RELATING TO THE ACQUISITION OF

BUCKEYE MANAGEMENT COMPANY

BMC ACQUISITION COMPANY

DATED: JANUARY 5, 1996

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Article 1 Sale and Purchase of Shares.................................... 1
1.1 Sale and Purchase of the Shares................................ 1
1.2 The Purchase Price............................................. 1
Article 2 The Closing.................................................... 1
2.1 Closing Date................................................... 1
2.2 Deliveries..................................................... 2
Article 3 Representations and Warranties of the Shareholder.............. 2
3.1 Organization and Standing...................................... 2
3.2 Capitalization and Share Ownership............................. 2
3.3 Authority and Binding Effect................................... 2
3.4 Validity of Contemplated Transactions.......................... 3
3.5 Subsidiaries................................................... 3
3.6 Taxes.......................................................... 3
3.7 No Material Undisclosed Facts.................................. 3
Article 4 Representations and Warranties of the Buyer.................... 3
4.1 Organization and Standing...................................... 3
4.2 Authority and Binding Effect................................... 4
4.3 Validity of Contemplated Transactions.......................... 4
4.4 Purchase for Investment........................................ 4
4.5 Available Financing............................................ 4
4.6 Financial Projections.......................................... 4
4.7 Investigation and Evaluation................................... 5
4.8 Securities Law Matters......................................... 5
Article 5 Certain Covenants.............................................. 5
5.1 Conduct of Business Pending Closing............................ 5
5.2 Approvals...................................................... 6
5.3 Confidential Information....................................... 6
5.4 Public Announcements........................................... 7
5.5 Tax Matters.................................................... 7
5.6 Audit Adjustments.............................................. 8
5.7 Certain Employee Benefit Arrangements.......................... 9
5.8 Insurance Arrangements......................................... 9
5.9 NJ Environmental Liabilities................................... 10
5.10 Prudential Financing and Special Committee Approval............ 12
5.11 No Solicitation of Transactions................................ 12
Article 6 Conditions Precedent to Obligations of the Buyer............... 12
6.1 Representations and Warranties................................. 12
6.2 Performance by the Shareholder................................. 12
6.3 Certificates................................................... 12
6.4 Intentionally Omitted.......................................... 12
6.5 Litigation Affecting Closing................................... 12
6.6 Regulatory Compliance and Approvals............................ 12
6.7 Consents....................................................... 12
6.8 Financing...................................................... 12
6.9 Special Committee.............................................. 13
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Article 7 Conditions Precedent to Obligations of the Shareholder......... 13
7.1 Buyer Representations True at Closing.......................... 13
7.2 Performance by the Buyer....................................... 13
7.3 Officer's Certificate.......................................... 13
7.4 Demand Notes................................................... 13
7.5 Incumbency Certificate......................................... 13
7.6 Opinion of Counsel............................................. 13
7.7 Litigation Affecting Closing................................... 13
7.8 Regulatory Compliance and Approval............................. 13
7.9 Special Committee.............................................. 14
Article 8 Miscellaneous.................................................. 14
8.1 No Survival of Representation and Warranties................... 14
8.2 Payment of Expenses............................................ 14
8.3 Termination.................................................... 14
8.4 Brokers' and Finders' Fees..................................... 14
8.5 Assignment and Binding Effect.................................. 15
8.6 Waiver......................................................... 15
8.7 Notices........................................................ 15
8.8 Pennsylvania Law to Govern..................................... 15
8.9 Remedies Not Exclusive......................................... 15
8.10 No Benefit to Others........................................... 16
8.11 Contents of Agreement.......................................... 16
8.12 Section Headings and Gender.................................... 16
8.13 Cooperation.................................................... 16
8.14 Severability................................................... 16
8.15 Counterparts................................................... 16
Annex I Certain Defined Terms............................................. 17
Schedule 4.1 List of Common Stock Subscribers............................. 20
</TABLE>

ii
<PAGE>

SHARE PURCHASE AGREEMENT

This Share Purchase Agreement is dated as of January 5, 1996. The parties
are Pennsylvania Company, a Delaware corporation (the "Shareholder"), being
the owner of all of the issued and outstanding shares of capital stock of
Buckeye Management Company, a Delaware corporation (the "Company"), and BMC
Acquisition Company, a Delaware corporation (the "Buyer").

PREAMBLE

The Shareholder owns 1,000 shares of Common Stock, par value $1.00 per share
(the "Common Stock"), of the Company which constitutes all of the issued and
outstanding shares of capital stock of the Company (the "Shares"). The Buyer
desires to purchase from the Shareholder, and the Shareholder desires to sell
to the Buyer, all of the Shares in exchange for the Purchase Price in
accordance with the terms and conditions set forth in this Agreement. The
parties hereto have determined to make an election under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended and in effect on the date hereof
(the "Code"), to have the purchase and sale of the Shares hereunder treated
for Federal income tax purposes as a purchase of assets by the Buyer from the
Shareholder.

For convenience and brevity, certain terms used in various parts of this
Agreement are listed in alphabetical order and defined or referred to on Annex
I hereto (such terms to be equally applicable to both singular and plural
forms of the terms defined).

Now, Therefore, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:

ARTICLE 1

Sale and Purchase of Shares

1.1 Sale and Purchase of the Shares. On the Closing Date and subject to the
terms and conditions hereinafter set forth and on the basis of and in reliance
upon the representations, warranties, obligations and agreements set forth
herein, the Shareholder shall sell to the Buyer and the Buyer shall purchase
from the Shareholder all of the Shares in exchange for the payment to the
Shareholder of the Purchase Price.

1.2 The Purchase Price. On the Closing Date and subject to the terms and
conditions hereinafter set forth and on the basis of and in reliance upon the
representations, warranties, obligations and agreements set forth herein, the
Buyer shall pay to the Shareholder $63,000,000 (the "Purchase Price"), payable
by wire transfer of immediately available funds to such account as the
Shareholder shall designate.

ARTICLE 2

The Closing

2.1 Closing Date. The Closing (the "Closing") of the sale and purchase of
the Shares shall take place at the offices of Morgan, Lewis & Bockius LLP,
2000 One Logan Square, Philadelphia, Pennsylvania at 10:00 A.M. local time, on
the later of (i) March 8, 1996, (ii) the fifth business day following the
satisfaction or waiver of all of the conditions set forth in Articles 6 and 7
hereof, or (iii) at
<PAGE>

such other time or place or on such other date as the Buyer and the
Shareholder may agree to in writing. The date of the Closing is hereinafter
sometimes referred to as the "Closing Date." The Closing shall be deemed to
have occurred as of the close of business on the Closing Date.

2.2 Deliveries. At the Closing, subject to the provisions of this Agreement,
the Shareholder shall deliver to the Buyer, free and clear of all Liens, the
certificates for the Shares to be sold by such Shareholder, duly endorsed in
blank, or with separate stock transfer powers attached thereto and signed in
blank, and the Buyer shall deliver to the Shareholder the Purchase Price by
wire transfer of immediately available funds. At the Closing, the Shareholder
shall also deliver to the Buyer, and the Buyer shall deliver to the
Shareholder, the certificates, opinions and other instruments and documents
referred to in Articles 6 and 7. The Buyer and the Shareholder shall deliver
executed copies of IRS Form 8023 making the joint election under Section
338(h)(10) of the Code, and in the case of the Buyer the election under
Section 338(g) of the Code to allow the election under Section 338(h)(10) of
the Code to be made. The parties shall cooperate with each other to reach
agreement upon a schedule of the allocation of the Purchase Price to be
attached to the IRS Form 8023 by each of the Buyer and the Shareholder.

ARTICLE 3

Representations and Warranties of the Shareholder

The Shareholder hereby represents and warrants to the Buyer that:

3.1 Organization and Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
having full corporate power and authority to carry on its business as it is
now being conducted and to own, lease and operate its assets. The Company is
duly qualified to do business and is in good standing in every jurisdiction in
which its business or the character of its assets requires such qualification
and in which the failure to be so qualified would have a Company Material
Adverse Effect.

3.2 Capitalization and Share Ownership. The Company's authorized capital
stock consists of 1,000 shares of Common Stock, par value $1.00 per share, of
which 1,000 shares are presently outstanding (previously defined as the
"Shares"), which Shares are owned by the Shareholder free and clear of any
Liens. All of the Shares have been duly authorized and validly issued, are
fully paid and nonassessable, were not issued in violation of the terms of any
Contract binding upon the Company, and were issued in compliance with all
applicable charter documents of the Company. No equity securities of the
Company, other than the Shares, are issued or outstanding. There are, and have
been, no preemptive rights with respect to the issuance of the Shares. There
are no existing Contracts, subscriptions, options, warrants, calls,
commitments or rights of any character to purchase or otherwise acquire any
capital stock or other securities of the Company, whether or not presently
issued or outstanding, from the Shareholder or the Company, at any time, or
upon the happening of any stated event.

3.3 Authority and Binding Effect. The Shareholder has the full corporate
power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by the
Shareholder has been duly authorized by all necessary corporate and
shareholder action. This Agreement has been, and the other agreements,
documents and instruments required to be delivered by the Shareholder in
accordance with the provisions hereof (the "Shareholder Documents") will be,
duly executed and delivered on behalf of the Shareholder by duly authorized
officers of the Shareholder, and this Agreement constitutes, and the
Shareholder Documents will constitute, the legal, valid and binding
obligations of the Shareholder, enforceable against the Shareholder in
accordance with their respective terms, except as may be limited by bankruptcy
or insolvency laws and other similar laws or equitable principles affecting
rights of creditors generally.

2
<PAGE>

3.4 Validity of Contemplated Transactions. Neither the execution and
delivery of this Agreement by the Shareholder nor the consummation of the
transactions contemplated hereby will contravene or violate the charter
documents or by-laws of the Shareholder or the Company or any Regulation or
Court Order which is applicable to the Company or the Shareholder, or will
result in a Default under, or require the consent or approval of any party to,
any material Contract relating to its business or its assets or to or by which
the Company or the Shareholder is a party or otherwise bound or affected, or,
to the Shareholder's knowledge based upon oral opinions of counsel, require
the Company or the Shareholder to notify or obtain any License from any
federal, state, local or other court or governmental agency or body or from
any other regulatory authority, except for public utility commission or
environmental approvals required to be obtained by the Company.

3.5 Subsidiaries. Except for interests in Buckeye Pipe Line Company, a
Delaware corporation (the "Management Subsidiary"), and the Master
Partnership, and the interests of the Management Subsidiary in each of the
Operating Partnerships, neither the Company nor the Management Subsidiary has
any subsidiaries or stock or other equity or ownership interest (whether
controlling or not) in any corporation, association, partnership, limited
liability company, joint venture or other entity. The Company owns of record
and beneficially (i) all of the issued and outstanding capital stock of the
Management Subsidiary free and clear of any Liens, and (ii) a 1% general
partnership interest in the Master Partnership in accordance with the Master
Partnership Agreement. The Company is the general partner of the Master
Partnership. The Management Subsidiary owns of record and beneficially a 1%
general partnership interest in each of the Operating Partnerships in
accordance with the Operating Partnership Agreements related thereto and a
.99% limited partnership interest in Buckeye Pipe Line Company of Michigan,
L.P. pursuant to its Operating Partnership Agreement. The Management
Subsidiary is the sole general partner of the Operating Partnerships. There
are: (a) no existing Contracts, subscriptions, options, warrants, calls,
commitments or rights of any character to purchase or otherwise acquire from
the Company or the Management Subsidiary at any time, or upon the happening of
any stated event, any capital shares or other securities of the Company, the
Management Subsidiary, the Master Partnership, or the Operating Partnerships,
whether or not presently issued or outstanding; (b) no outstanding securities
of the Management Subsidiary that are convertible into or exchangeable for
capital shares or other securities of the Management Subsidiary; and (c) no
Contracts, subscriptions, options, warrants, calls, commitments or rights to
purchase or otherwise acquire from the Company or the Management Subsidiary
any such convertible or exchangeable securities.

3.6 Taxes. All United States Federal income tax returns and all other
material tax returns which are required to be filed with respect to the
Company and the Management Subsidiary have been filed (except in instances in
which there is an effective extension of the time in which to file a tax
return) and all taxes due with respect thereto or pursuant to any assessment
with respect to the Company or the Management Subsidiary have been paid,
except for assessments the validity of which is being contested in good faith
by appropriate proceedings.

3.7 No Material Undisclosed Facts. The Shareholder has not omitted to
disclose to the Buyer any material fact with respect to the Company or the
Management Subsidiary, actually known by the Shareholder which is not known to
the Company or the Management Subsidiary.

ARTICLE 4

Representations and Warranties of the Buyer

The Buyer hereby represents and warrants to the Company and the Shareholder
as follows:

4.1 Organization and Standing. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, having all
requisite corporate power and authority to

3
<PAGE>

perform its obligations under this Agreement. As of the date hereof, the Buyer
has received legally binding subscriptions from the persons listed on Schedule
4.1 to contribute not less than $5 million to the Company on or before the
Closing Date in return for common stock of the Buyer. (In the case of Alfred
W. Martinelli, his subscription is subject to financing to be provided by the
Shareholder or its affiliates in the event that the Closing Date occurs prior
to March 13, 1996.) The Buyer has no assets or liabilities except for its
rights and obligations under this Agreement, the subscriptions and Prudential
Commitment Letter.

4.2 Authority and Binding Effect. The Buyer has the corporate power and
authority to execute, deliver and perform this Agreement and the other
agreements, documents and instruments required to be delivered by the Buyer in
accordance with the provisions hereof (the "Buyer Documents"), and has taken
all actions necessary to secure all approvals required in connection
therewith. The execution, delivery and performance of this Agreement and the
Buyer Documents by the Buyer has been duly authorized by all necessary
corporate and shareholder action. This Agreement has been, and the Buyer
Documents will be, duly executed and delivered on behalf of the Buyer by duly
authorized officers of the Buyer, and this Agreement constitutes, and the
Buyer Documents will constitute, the legal, valid and binding obligation of
the Buyer, enforceable against it in accordance with their respective terms,
except as may be limited by bankruptcy or insolvency and other similar laws or
equitable principles affecting rights of creditors generally.

4.3 Validity of Contemplated Transactions. Neither the execution and
delivery of this Agreement by the Buyer nor the consummation of the
transactions contemplated hereby by the Buyer will contravene or violate any
Regulation or Court Order which is applicable to the Buyer, or the charter
documents or By-Laws of the Buyer, or will result in a Default under any
Contract to which the Buyer is a party or by which it is otherwise bound, or
require the Buyer to notify or obtain any License from any federal, state,
local or other court or governmental agency or body or from any other
regulatory authority.

4.4 Purchase for Investment. The Buyer is acquiring the Shares solely for
its own account for investment and not with a view to or for the sale or
distribution thereof. The Buyer acknowledges that the Shares are not
registered under the Securities Act of 1933, as amended, and that such Shares
may not be transferred or sold except pursuant to the registration provisions
of the Securities Act or pursuant to an applicable exemption therefrom.

4.5 Available Financing. The Buyer has delivered to the Shareholder a
commitment letter (the "Prudential Commitment Letter") from Prudential Capital
Group to lend the Buyer up to $63,000,000 to purchase the Shares. The Buyer
has no reason to believe that Prudential Capital Group and the Buyer will not
be able to reach agreement on the form and substance of a definitive agreement
reflecting the terms of the Prudential Commitment Letter or that all
conditions precedent to the obligations of Prudential Capital Group contained
therein or in the Prudential Commitment Letter will not be satisfied.

4.6 Financial Projections. The Buyer has provided to the Shareholder
financial projections for the Buyer, the Company, and the Management
Subsidiary, supported by a cost reduction proposal, which reflects the
financial impact of the Company's results of operations, reimbursements from
the Master Partnership and Operating Partnerships, sources of expense savings,
repayment of the financing described in the Prudential Commitment Letter, and
the payment by the Buyer, the Company and the Management Subsidiary of their
obligations as they become due (the "Financial Information"). The Buyer
represents that (i) such Financial Information was prepared in good faith,
(ii) the Buyer reasonably believes the assumptions upon which the projections
contained in the Financial Information are based are reasonable and (iii) the
Buyer currently intends to operate the Company and the Management Subsidiary
in a manner consistent in all material respects with the assumptions contained
in the Financial Information.

4
<PAGE>

4.7 Investigation and Evaluation. The Buyer acknowledges that (a) the Buyer
is experienced in the operation of the type of business conducted by the
Company, the Management Subsidiary, the Master Partnership and the Operating
Partnerships, (b) the Buyer and its directors, officers, attorneys,
accountants and advisors have been given the opportunity to examine to the
full extent deemed necessary by the Buyer all books, records and other
information with respect to the Company, the Management Subsidiary, the Master
Partnership and the Operating Partnerships, (c) the Buyer has taken full
responsibility for determining the scope of its investigations of the Company,
the Management Subsidiary, the Master Partnership and the Operating
Partnerships, and for the manner in which such investigations have been
conducted, and has examined the Company, the Management Subsidiary, the Master
Partnership and the Operating Partnerships to the Buyer's full satisfaction,
(d) the Buyer is fully capable of evaluating the adequacy and accuracy of the
information and material obtained by the Buyer in the course of such
investigations, (e) the Buyer has not relied on the Shareholder with respect
to any matter in connection with the Buyer's evaluation of the Company, the
Management Subsidiary, the Master Partnership and the Operating Partnerships,
other than the representations and warranties specifically set forth in
Article 3, and (f) the Shareholder is making no representations or warranties,
express or implied, of any nature whatever with respect to the Company, the
Management Subsidiary, the Master Partnership and the Operating Partnerships,
other than the representations and warranties of the Shareholder specifically
set forth in Article 3. The Buyer acknowledges that (a) the Buyer has taken
full responsibility for evaluating the adequacy, completeness and accuracy of
various forecasts, projections, opinions and similar material heretofore
furnished by the Shareholder, its affiliates or their representatives to the
Buyer in connection with the Buyer's investigations of the Company, the
Management Subsidiary, the Master Partnership, and the Operating Partnerships
and their respective businesses, assets and liabilities; (b) there are
uncertainties inherent in attempting to make projections and forecasts and
render opinions, the Buyer is familiar with such uncertainties, and the Buyer
is not relying on any projections, forecasts or opinions furnished to it by
the Shareholder, or any affiliate thereof or any of their representatives; and
(c) neither the Shareholder nor any affiliate of the Shareholder makes any
representations or warranties concerning any such forecasts or projections.

4.8 Securities Law Matters. To the knowledge of the Buyer, neither this
Agreement, nor any other agreement, document, certificate or written statement
furnished to the Buyer by or on behalf of the Shareholder in connection with
the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. The Buyer, for itself,
its employees, shareholders and affiliates, irrevocably acknowledges and
confirms that the Shareholder has complied in all respects with its
obligations to the Buyer, if any, under Rule 10b-5 under the Securities
Exchange Act of 1934, as amended, and under all other federal and state
securities laws in connection with the transactions contemplated hereby.

ARTICLE 5

Certain Covenants

5.1 Conduct of Business Pending Closing. Until the Closing Date, except as
may be approved by the Buyer in writing or as otherwise provided in this
Agreement, the Shareholder shall use its reasonable efforts (subject to the
fiduciary duty of the Company and the Management Subsidiary to the Master
Partnership and the Operating Partnerships) to cause the Company and the
Management Subsidiary to:

(A) operate the business of the Company, the Management Subsidiary, the
Master Partnership and the Operating Partnerships solely in the ordinary
course and in substantially the same manner as such business has been
operated in the past;

5
<PAGE>

(B) not issue, repurchase or redeem or commit to issue, repurchase or
redeem, or permit the Master Partnership to issue, repurchase or redeem,
any shares of capital stock or partnership units, any options or other
rights to acquire such stock or units or any securities convertible into or
exchangeable for such stock or units except pursuant to the Buckeye
Partners, L.P. Unit Option and Distribution Equivalent Plan;

(D) not declare, pay or make any other distribution with respect to, the
partnership units of the Master Partnership, except for periodic
distributions by the Master Partnership with respect to such units in
amounts and at times which are consistent with past practice;

(E) not (1) incur a material amount of long or short-term debt for money
borrowed, (2) guarantee or agree to guarantee the obligations of others,
(3) indemnify or agree to indemnify others, or (4) incur any other material
Liabilities, in each case other than those incurred in the ordinary course
of business consistent with past practice;

(F) use its reasonable efforts to retain the employees of the Management
Subsidiary and maintain the respective businesses of the Company and the
Management Subsidiary so that employees will remain available to the
Management Subsidiary on and after the Closing Date and to maintain
existing relationships with suppliers, customers and others having business
dealings with the Company or the Management Subsidiary;

(G) not amend its Certificate of Incorporation or By-Laws or the Master
Partnership Agreement or the Operating Partnership Agreements;

(H) not merge with or into any other corporation or, except in the
ordinary course of business, sell, assign, transfer, pledge or encumber any
part of the assets of the Company or the Management Subsidiary or agree to
do any of the foregoing;

(I) except in the ordinary course of business, not enter into any
Contract on their own behalf, rather than as agent for or a partner of the
Master Partnership or any of the Operating Partnerships, that is material,
or permit any amendment or termination of any such material Contract to
which the Company or the Management Subsidiary is a party;

(J) except in the ordinary course of business, not waive any rights of
material value that would otherwise accrue to the Company after the Closing
Date;

(K) except in the ordinary course of business (or as disclosed in the
Disclosure Letter), not increase the salaries or benefits of, or make any
bonus or similar payments to or establish or modify any Employee Benefit
Plans for, any of the Company's directors, officers or employees or enter
into or modify any employment, consulting or similar Contracts with any
such persons or agree to do any of the foregoing;

(L) use its reasonable efforts to obtain any consents or approvals
required under any material Contracts that are necessary to complete the
Acquisition or to avoid a Default under any such Contracts; and

(M) not make any capital expenditures on its own behalf, rather than as
agent for or a partner of the Master Partnership or any of the Operating
Partnerships, in excess of $1,000,000.

5.2 Approvals. The Buyer and the Shareholder shall use their reasonable
efforts to obtain promptly all Licenses from all Regulatory Bodies and all
consents required under the terms of any Contracts which are required in
connection with the consummation of the Acquisition.

5.3 Confidential Information. Promptly, but in no event later than 5
business days, following the later of (a) the approval by the Special
Committee of the matters described in Section 7.9 and (b) the delivery by the
Buyer to the Shareholder of written confirmation from Prudential Capital Group

6
<PAGE>

that the Finance Committee of the Board of Directors of The Prudential
Insurance Company of America has authorized Prudential Capital Group to
purchase a note or notes in accordance with the Prudential Commitment Letter,
the Shareholder shall cause Furman Selz LLC to require all parties to any
confidentiality agreement between Furman Selz LLC on behalf of the Shareholder
and any other party with respect to a sale of the Company to return or destroy
all confidential information of the Company, the Management Subsidiary, the
Master Partnership and the Operating Partnerships in accordance with the terms
of such confidentiality agreements. At the Closing, the Shareholder will, to
the extent legally assignable, assign all of its rights under such
confidentiality agreements to the Company.

5.4 Public Announcements. The Buyer and the Shareholder shall not make any
public announcement of the transactions contemplated hereby without the prior
written consent of the other party. Nothing contained herein shall prevent
either party at any time from furnishing any information to any governmental
agency or pursuant to any Court Order or which is required by any Regulation
or any rule of the New York Stock Exchange.

5.5 Tax Matters.

(A) Section 338(h)(10) Election. The Shareholder and the Buyer shall make a
timely joint election under Section 338(h)(10) of the Code and pursuant to the
applicable provisions of the Temporary Treasury Regulations in order that the
transaction contemplated by this Agreement will be treated for Federal income
tax purposes as a purchase of assets by the Buyer from the Company. Any
liability for taxes resulting from the election by the Buyer and the
Shareholder under Section 338(h)(10) of the Code will be paid by the
Shareholder.

(B) Taxes Prior to and After the Closing Date. The Shareholder shall include
the Company in the applicable consolidated federal income tax return for the
period prior to and including the Closing Date. Taxes as a result of the joint
election under Section 338(h)(10) will be borne by the Shareholder. Any
adjustments in taxes of the Company for the period to and including the
Closing Date shall be borne by the Shareholder. The liability for any taxes of
the Company for the periods beginning after the Closing Date shall be borne by
the Company and the Buyer. The Buyer shall make an election under Section
338(g) of the Code to the extent necessary to allow the Section 338(h)(10)
election to be made. The Buyer will indemnify and hold harmless the
Shareholder and the Company against any and all liability (including, without
limitation, interest, additions to tax and penalties) for or with respect to
federal, state or local income taxes of the Company claimed or assessed for
all taxable periods beginning after the Closing Date. The Shareholder will
indemnify and hold harmless the Buyer and the Company against any and all
liability (including, without limitation, interest, additions to tax and
penalties) for or with respect to federal, state or local income taxes of the
Company claimed or assessed for all taxable periods including periods to and
including the Closing Date.

(C) Indemnification With Respect to Taxes. Without limiting the
indemnification obligations of any party contained elsewhere herein: After the
Closing, the Shareholder will indemnify and hold harmless the Buyer and the
Company against any and all liability (including, without limitation,
interest, additions to tax and penalties) for or with respect to federal
income taxes (and state or local income taxes in states in which tangible
personal property or real property of the Company is located) of the Company
claimed or assessed for all taxable periods ending on or prior to the Closing
Date attributable to gain realized by the Company as a result of the purchase
and sale of the Shares pursuant hereto and the making of the joint election by
the Shareholder and the Buyer under Section 338(h)(10) of the Code (and by the
Buyer under Section 338(g) of the Code but only to the extent it is required
for the election under Section 338(h)(10) of the Code)), net of any tax
benefit resulting from such payment. If the parties are unable to agree with
respect to the amount of any payment due under the preceding sentence, the
matter shall be submitted to an independent accounting firm selected by both
parties. The decision of such independent accounting firm shall be binding
upon both parties and the expense of such independent accounting firm shall be
borne equally by the parties.

7
<PAGE>

(D) Prior Period Adjustments. The Shareholder shall have the right to
contest any adjustment that increases the liability of the Company or the
Shareholder for taxes which arose during the period or periods ending on or
prior to the Closing Date (including federal income taxes (and state or local
income taxes in states which tangible personal property or real property of
the Company is located) attributable to gain realized by the Company as a
result of the purchase and sale of the Shares pursuant hereto and the making
of the joint election by the Shareholder and Buyer under Section 338(h)(10) of
the Code (and by the Buyer under Section 338(g) of the Code but only to the
extent it is required for the election under Section 338(h)(10) of the Code)).
The Buyer agrees to cooperate or cause the Company to cooperate in the
negotiation, settlement or litigation of any such adjustment. All decisions
with respect to the negotiation, settlement or litigation of any such
adjustment shall be made by the Shareholder and shall be binding upon the
Buyer. All expenses to contest such adjustment on behalf of the Company shall
be borne by the Shareholder. Any indemnity payable by the Shareholder to the
Buyer or the Company pursuant to this Section 5.5(D) shall be payable within
10 days of the Buyer's and/or the Company's request therefor, which request
shall be no sooner than within 20 days of the required remittance to the tax
authority. The parties agree that any payment made pursuant to this Section
5.5(D) shall be deemed an adjustment to the Purchase Price hereunder.

(E) Cooperation. After the Closing Date, the Buyer, the Shareholder and the
Company shall cooperate fully with each other and shall make available to the
other, as reasonably requested, and to any taxing authority, all information,
records or documents relating to tax liabilities or potential tax liabilities
of the Company for all periods prior to or ending on the Closing Date and
shall preserve all such information, records and documents until the
expiration of any applicable statutes of limitation or extensions thereof. The
Buyer, the Shareholder and the Company shall also make available to each
other, as reasonably requested, personnel responsible for preparing or
maintaining information, records and documents in connection with tax matters.

(F) Audits. So long as taxable periods of the Company ending on or before
the Closing Date remain open, the Buyer and the Shareholder shall promptly
notify the other in writing within 10 days from receipt by the Buyer or the
Shareholder of notice of (i) any pending or threatened federal, state or local
income tax audits or assessments of the Company, and (ii) any pending or
threatened federal, state or local income tax audits or assessments of the
Buyer which may affect the tax liabilities of the Company for taxable periods
ending on or before the Closing Date. The Shareholder shall have the right to
represent the interests of the Company in any tax audit or administrative or
court proceeding relating to fiscal periods ending on or before the Closing
and to employ counsel of its choice at its expense. The Buyer agrees that it
will, at the Shareholder's expense, cooperate fully with the Shareholder and
its counsel in the defense against or compromise of any claim in any said
proceeding.

5.6 Audit Adjustments.

(A) If, as a result of the examination of the consolidated federal, state or
local income tax return of the Shareholder or the Company (or any predecessor)
for a taxable year ending on or before or including the Closing Date, there
shall be any adjustment which decreases deductions, losses or credits against
taxes ("Tax Benefits") or which increases income, gains or recaptures of
credits against taxes ("Tax Detriments") for any such taxable year and which
will permit the Buyer or the Company (or any corporation in an affiliated
group of which the Buyer or the Company is a member) to increase the Tax
Benefits or decrease the Tax Detriments to which they would otherwise have
been entitled for any taxable year beginning on or after the Closing Date, the
Shareholder will notify the Buyer of such adjustment and provide the Buyer
with such information as may be necessary for the Buyer to take account of
such increases or decreases through the filing of a claim for refund or
otherwise. The Buyer shall take such action as is necessary to secure the
benefit of such increases or decreases and shall pay the Shareholder the
amount of such benefit (together with interest, if any, received), such amount
to be paid when and as such benefit is realized, less the amount, if any, of
the Buyer's reasonable expenses incurred in securing such benefit for the
Shareholder.

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(B) If, as a result of the examination of the consolidated or separate
federal, state or local income tax return of any group of corporations of
which the Buyer or the Company (or any successor) is a member for a taxable
year beginning on or after the Closing Date, there shall be any adjustment
which decreases Tax Benefits or increases Tax Detriments for any such taxable
year and which will permit the Shareholder or any member of the Shareholder's
consolidated group to increase Tax Benefits or decrease Tax Detriments to
which the Shareholder would otherwise have been entitled for any taxable year
ending on or before and including the Closing Date, the Buyer will notify the
Shareholder of such adjustment and provide the Shareholder with such
information as may be necessary for the Shareholder to take account of such
increase or decrease through the filing of a claim for refund or otherwise.
The Shareholder shall take such action as is necessary to secure the benefit
of such increases or decreases and shall pay to the Buyer the amount of such
benefit (together with interest, if any, received), such amount to be paid
when and as such benefit is realized, less the amount, if any, of the
Shareholder's reasonable expenses incurred in securing such benefit for the
Buyer.

5.7 Certain Employee Benefit Arrangements. From and after the Closing:

(A) The Buckeye Pipe Line Company Retirement Income Guarantee Plan. The
Buckeye Pipe Line Company Retirement Income Guarantee Plan (the "RIGP") is
funded through a master defined benefit trust (the "Master DB Trust").
After the Closing Date, Buckeye Pipe Line Company will continue to be the
"Plan Sponsor", as defined in ERISA, for such RIGP (and will continue to be
responsible for any contributions required or due with respect to the
RIGP). Within 45 days after the Closing Date, the Buyer shall identify a
successor trust to hold the assets of the RIGP, and promptly after
identification of such successor trust, the trustee of the Master DB Trust
shall transfer the pro rata share of the assets of the Master DB Trust
allocable to the RIGP to the trustee of such successor trust.

(B) The Buckeye Pipe Line Company Retirement and Savings Plan. After the
Closing Date, Buckeye Pipe Line Company will continue to be the "Plan
Sponsor", as defined in ERISA, with respect to the Buckeye Pipe Line
Company Retirement and Savings Plan (the "RASP") (and will continue to be
responsible for any contributions required or due with respect to the
RASP). The Buyer agrees to retain, through the end of 1996, the provision
in the RASP allowing participants in the RASP to transfer their account
balances from the RASP to the American Premier Retirement and Savings Plan.
A portion of the assets of the RASP are invested in a trust which holds
fixed income assets on behalf of the RASP and other qualified retirement
plans (the "Fixed Income Trust"). Within 45 days after the Closing Date,
the Buyer shall identify a successor trust to hold the assets of the RASP
invested in the Fixed Income Trust and, promptly after identification of
such successor trust, the trustee of the Fixed Income Trust shall transfer
a pro rata share of the assets in the Fixed Income Trust allocable to the
RASP to the trustee of such successor trust.

5.8 Insurance Arrangements. From and after the Closing:

(a) The Company and the Management Subsidiary shall cease to be covered
with respect to any occurrence after the Closing under the insurance
policies and agreements obtained and maintained by the Shareholder and its
affiliates covering the Company and the Management Subsidiary, (the
"Policies"). All such occurrences prior to the Closing which are insured
under the Policies shall continue to be so insured, and the Company and
Management Subsidiary shall be entitled to the benefits thereof, subject to
applicable Retention Levels. The Buyer shall cause the Company and the
Management Subsidiary to pay to the Shareholder and its affiliates any
retrospective premium adjustments and premium audit adjustments payable to
insurance carriers and all retention payments in respect of insurance
covering the Company and the Management Subsidiary for periods prior to the
Closing Date. The Shareholder shall, or shall cause its affiliates to, pay
to the Company any rebate received with respect to any premiums paid prior
to the Closing Date in respect of Policies covering the Company and the
Management Subsidiary for

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periods subsequent to the Closing Date as a result of the removal of the
Company and the Management Subsidiary from coverage under such Policies.

(b) Provided the Buyer is not in breach of its obligations under
subsection (c) hereof, the Shareholder shall indemnify and hold the Company
and the Management Subsidiary to the extent they are named insured under
the applicable Policy or Policies harmless from and against any and all
Insured Losses to the extent such Insured Losses exceed the applicable
Retention Level of the Company or the Management Subsidiary but do not
exceed the Retention Level applicable to the Shareholder and its affiliates
with respect thereto. Neither the Shareholder nor its affiliates shall have
any liability to the Company or the Management Subsidiary for any Insured
Losses to the extent such Insured Losses (a) are within the applicable
Retention Level for the particular company or (b) exceed the applicable
Retention Level for the Shareholder and its affiliates. In addition, the
Shareholder and its affiliates shall have no liability to the Buyer, the
Company or the Management Subsidiary for any Loss which would not be
covered by the insuring terms and conditions of the applicable Policy,
assuming a Retention Level for the Shareholder and its affiliates of zero.

(c) The Company and the Management Subsidiary shall be liable and
responsible for all the Insured Losses that are within the Retention Levels
applicable to them. Accordingly, provided the Shareholder and its
affiliates are not in breach of their obligations under section (b) hereof,
the Buyer will cause the Company and the Management Subsidiary to either,
as the Shareholder shall direct, (a) reimburse the Shareholder and its
affiliates for such payments as the Shareholder and its affiliates may make
in the normal course of their claims management program to the applicable
insurer or claims administrator of Insured Losses that are within the
Retention Levels of the Company and the Management Subsidiary, such
reimbursement to be made promptly and in any event within 15 days of
presentation of the Shareholder's written invoices therefor or (b) pay such
Insured Losses directly to the applicable insurer or claims administrator.
The Buyer will, and will cause the Company and the Management Subsidiary
to, negotiate in good faith to settle all claims under the Policies within
the applicable Retention Levels of the Company and the Management
Subsidiary and promptly notify and consult with the Shareholder regarding
any such claim that may exceed the applicable Retention Levels of the
Company and the Management Subsidiary. The Shareholder shall have the right
to control and direct the defense of any such claim that is likely to
exceed the Retention Levels of the Company and the Management Subsidiary.

(d) The parties hereto shall give, and shall cause the Company and the
Management Subsidiary to give, to each other prompt notice of the assertion
by any person of any claim against the Shareholder or any of its
affiliates, or the Company and the Management Subsidiary, as the case may
be, which might be subject to the insurance coverage or related obligations
described in this Section 5.8. The parties hereto shall cooperate, and
shall cause the Company and the Management Subsidiary to cooperate, with
the Shareholder and its affiliates, or the Company and the Management
Subsidiary, as the case may be, and any applicable insurance carrier or
claims administrator in any investigation by the Shareholder and its
affiliates, or by the Company and the Management Subsidiary, as the case
may be, or any applicable insurance carrier or claims administrator, of any
such claim, including without limitation any currently pending claim which
relates to a pre-Closing occurrence; and the Buyer shall give, and shall
cause the Company and the Management Subsidiary to give, to the Shareholder
and its affiliates, and any applicable insurance carrier or claims
administrator, reasonable access to the books, records and personnel of the
Company and the Management Subsidiary to the extent reasonably necessary to
enable the Shareholder or any of its affiliates, and any applicable
insurance carrier or claims administrator, to investigate such claim.

5.9 NJ Environmental Liabilities. From and after the Closing, the
Shareholder or an affiliate of the Shareholder (the Shareholder and each of
its affiliates, the "Shareholder Group") shall continue

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to retain the liabilities described that certain Administrative Consent Order,
dated November 17, 1986, issued by the New Jersey Department of Environmental
Protection (such liabilities, the "NJ Environmental Liabilities"). In
connection with the NJ Environmental Liabilities, the parties agree as
follows:

(a) The Buyer shall cooperate, and cause the employees and officers of
the Company and the Management Subsidiary to cooperate, with the
Shareholder Group in connection with all matters related to the NJ
Environmental Liabilities and shall provide, at no charge, such
administrative assistance with respect thereto as the Shareholder may
reasonably request (which may include, without limitation, review of
documents and attendance at meetings and teleconferences regarding the NJ
Environmental Liabilities).

(b) The Buyer shall, and shall cause the Company and the Management
Subsidiary to, provide to the Shareholder Group such services, labor and
materials, to the extent reasonably available, as the Shareholder may
request in connection with the NJ Environmental Liabilities. The
Shareholder shall reimburse the Buyer, the Company or the Management
Subsidiary, as appropriate, for such entity's direct, out-of-pocket cost
(i) of all hourly labor furnished by such entity at the request of the
Shareholder, (ii) of all services provided by non-employees of the Buyer,
the Company or the Management Subsidiary at the request of the Shareholder,
and (iii) of all materials provided by such entity at the request of the
Shareholder. The Shareholder Group shall have the right to use, without
cost, the water filtration system/waste recovery system and plant located
at the Linden, New Jersey premises of the Operating Partnerships (the
"Waste Recovery System") in connection with the activities of the
Shareholder Group related to the NJ Environmental Liabilities, subject to
reimbursement by the Shareholder Group of any costs incurred for activated
carbon attributed solely to the Shareholder Group's utilization of the
Waste Recovery System.

(c) Without the prior consent of the Shareholder, the Buyer shall not
take any action which it knows is reasonably likely to increase the amount
of the NJ Environmental Liabilities. In addition, the Buyer shall, and
shall cause the Company and the Management Subsidiary to, take all
commercially reasonable actions to mitigate the expense and liability of
the Shareholder Group with respect to the NJ Environmental Liabilities.

(d) In connection with the NJ Environmental Liabilities, the Shareholder
Group agrees to use commercially reasonable efforts to obtain a Declaration
of Environmental Restriction ("DER"). Buyer hereby consents to the issuance
of a DER, and agrees that it shall execute, and shall cause the Company,
the Management Subsidiary, the Master Partnership and the Operating
Partnership, to execute all commercially reasonable documents necessary to
obtain a DER.

(e) Upon request of the Shareholder the Buyer will use reasonable efforts
to support and facilitate any reasonable proposal from the Shareholder
Group that the Master Partnership, in consideration for a payment by the
Shareholder Group, assume the remaining costs anticipated to be associated
with the NJ Environmental Liabilities.

(f) The Buyer acknowledges on its own behalf and on behalf of The Company
and the Management Subsidiary that there are no unpaid charges for
services, labor, materials or facilities provided by the Company or the
Management Subsidiary in connection with the NJ Environmental Liabilities.

(g) The Buyer acknowledges that the Shareholder Group will not be liable
for any environmental liability or expense related to, or arising out of
the business of, the Company, the Management Subsidiary, the Master
Partnership, or any of the Operating Partnerships, other than the NJ
Environmental Liabilities.

(h) The Buyer shall indemnify the Shareholder Group against any failure
by the Company, the Management Subsidiary, the Master Partnership and the
Operating Partnerships to comply with the provisions of this Section 5.9.

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<PAGE>

5.10 Prudential Financing and Special Committee Approval. The Buyer shall
use its best efforts to diligently and as promptly as practicable (i) obtain
the approval of the Special Committee of the matters described in Section 6.9
hereof and provide such information in connection therewith as the Special
Committee may request; and (ii) negotiate, execute and deliver, and consummate
a definitive agreement with Prudential Capital Group providing for the
financing described in the Prudential Commitment Letter. Upon the
Shareholder's request from time to time, the Buyer shall report to the
Shareholder concerning the status of such matters.

5.11 No Solicitation of Transactions. Prior to the termination of this
Agreement pursuant to Section 8.3, none of the Shareholder or any of its
affiliates or any of their respective directors, officers, employees,
representatives, investment bankers or agents shall, directly or indirectly,
solicit or initiate inquiries or proposals form, or provide confidential
information to or participate in any discussions or negotiations with, any
corporation, partnership, person, trust or other entity or group (other than
the Buyer and its affiliates and representatives) concerning the sale of stock
of the Company or the Management Subsidiary or any of their respective assets
or any merger, consolidation, recapitalization, liquidation or similar
transaction involving the Company or the Management Subsidiary. This Section
5.11 shall not be considered to limit any rights or remedies the Buyer may
have a result of a breach of this Agreement by the Shareholder.

ARTICLE 6

Conditions Precedent to Obligations of the Buyer

Subject to waiver as set forth in Section 8.6, the obligations of the Buyer
under this Agreement are subject to the fulfillment prior to or at the Closing
of each of the following conditions:

6.1 Representations and Warranties. The representations and warranties of
the Shareholder set forth in Article 3 shall be true and correct in all
material respects on the Closing Date with the same effect as if made at that
time.

6.2 Performance by the Shareholder. The Shareholder shall have performed and
satisfied in all material respects all agreements and conditions which it is
required by this Agreement to perform or satisfy prior to or on the Closing
Date.

6.3 Certificates. The Buyer shall have received certificates from the
Shareholder dated the Closing Date certifying in such detail as the Buyer may
reasonably request that each of the conditions described in Sections 6.1 and
6.2 has been fulfilled.

6.4 Intentionally Omitted.

6.5 Litigation Affecting Closing. No Court Order shall have been issued or
entered which prohibits the completion of the Acquisition.

6.6 Regulatory Compliance and Approvals. All approvals required under any
Regulations to carry out the Acquisition shall have been obtained and the
Company and the Shareholder shall have complied in all material respects with
all Regulations applicable to the Acquisition.

6.7 Consents. The Shareholder or the Company shall have delivered to the
Buyer all consents required to be obtained in connection with the Acquisition
in order to avoid a Default under any material Contract to or by which the
Company is a party or may be bound.

6.8 Financing. The Buyer and Prudential Capital Group shall have entered
into a definitive agreement reflecting the terms of the Prudential Commitment
Letter and the Prudential Capital

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<PAGE>

Group shall be prepared to fund the loan provided for thereby in the amount of
$63,000,000 contemporaneously with the Closing.

6.9 Special Committee. A committee of independent directors of the Company
which will exclude all directors who are employees of the Shareholder, the
Company or their affiliates (the "Special Committee") shall have approved on
behalf of the Master Partnership (i) the form of opinion of Morgan, Lewis &
Bockius LLP relating to the satisfaction by the Buyer of the Company's capital
requirement in compliance with Sections 17.6 and 19.1 of the Master
Partnership Agreement after giving effect to the cancellation of the Demand
Notes and (ii) the Buyer's employee stock ownership plan as a fringe benefit,
the cost of which may be reasonably allocated to the Partnership pursuant to
Section 7.4 of the Master Partnership Agreement.

ARTICLE 7

Conditions Precedent to Obligations of the Shareholder

Subject to waiver as set forth in Section 8.6, the obligations of the
Shareholder under this Agreement are subject to the fulfillment prior to or at
the Closing of each of the following conditions:

7.1 Buyer Representations True at Closing. The representations and
warranties of the Buyer set forth in Article 4 shall be true and correct in
all material respects on the Closing Date with the same effect as if made at
that time.

7.2 Performance by the Buyer. The Buyer shall have performed and satisfied
all agreements and conditions which it is required by this Agreement to
perform or satisfy prior to or on the Closing Date.

7.3 Officer's Certificate. The Shareholder shall have received a certificate
from an appropriate officer of the Buyer dated the Closing Date certifying in
such detail as the Shareholder may reasonably request that each of the
conditions described in Sections 7.1 and 7.2 has been fulfilled.

7.4 Demand Notes. The Shareholder shall have been released from its
obligations under the Demand Notes, and the Buyer shall have provided for
capitalization of the Company in the amount of at least $6 million.

7.5 Incumbency Certificate. The Shareholder shall have received a
certificate of the Secretary or an Assistant Secretary of the Buyer dated the
Closing Date certifying to the incumbency of the officers of the Buyer signing
for it and as to the authenticity of their signatures.

7.6 Opinion of Counsel. The Shareholder shall have received the written
opinion dated the Closing Date of Morgan, Lewis & Bockius LLP, counsel for the
Buyer, in form and substance reasonably satisfactory to the Shareholder.

7.7 Litigation Affecting Closing. No Court Order shall have been issued or
entered which would be prohibits the completion of the Acquisition. No person
who or which is not a party to this Agreement shall have commenced or
threatened to commence any Litigation seeking to restrain or prohibit, or to
obtain substantial damages in connection with, this Agreement or the
transactions contemplated by this Agreement.

7.8 Regulatory Compliance and Approval. All approvals required under any
Regulations to carry out the Acquisition shall have been obtained and that the
Buyer shall have complied in all material respects with all Regulations
applicable to the Acquisition.

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<PAGE>

7.9 Special Committee. The Special Committee shall have approved on behalf
of the Master Partnership (i) the form of opinion of Morgan, Lewis & Bockius
LLP relating to the satisfaction by the Buyer of the Company's capital
requirement in compliance with Sections 17.6 and 19.1 of the Master
Partnership Agreement after giving effect to the cancellation of the Demand
Notes, (ii) cancellation of the Demand Notes effective at the Closing and
(iii) the Buyer's employee stock ownership plan as a fringe benefit, the cost
of which may be reasonably allocated to the Partnership pursuant to Section
7.4 of the Master Partnership Agreement.

ARTICLE 8

Miscellaneous

8.1 No Survival of Representation and Warranties. None of the
representations, warranties, covenants and agreements made by each party in
this Agreement or in any attachment, Exhibit, certificate, document or list
delivered by any such party pursuant hereto or in connection with the
Acquisition shall survive the Closing.

8.2 Payment of Expenses. The Buyer shall pay all legal, accounting and other
fees and expenses which it incurs in connection with this Agreement and the
transactions contemplated hereby, and all legal, accounting and other fees and
expenses incurred by the Shareholder in connection with this Agreement shall
be paid by the Shareholder (other than expenses and costs incurred for, by or
on account of employees of the Company or the Company's auditors and other
than expenses and costs, including without limitation reasonable attorney's
fees, related to the securing of all requisite Regulatory Approvals, all of
which shall be paid by the Company).

8.3 Termination. This Agreement may be terminated before the Closing occurs
only as follows:

(a) By written consent of the Shareholder and the Buyer;

(b) By written notice by the Shareholder to the Buyer at any time after
February 22, 1996, unless on or prior thereto the Buyer shall have provided
the Shareholder with satisfactory evidence that the Special Committee has
approved the matters described in Section 7.9 hereof;

(c) By written notice by the Shareholder to the Buyer at any time after
February 22, 1996, unless on or prior thereto the Buyer shall have
delivered to the Shareholder written confirmation from Prudential Capital
Group that the Finance Committee of the Board of Directors of The
Prudential Insurance Company of America has authorized Prudential Capital
Group to purchase a note or notes in accordance with the Prudential
Commitment Letter;

(d) By written notice by the Shareholder to the Buyer, at any time after
April 15, 1995, except that no such notice may be given under this clause
(d) if as of the date of such notice the only condition specified in
Article 7 that is not satisfied or able to be satisfied is the condition
specified in Section 7.8; or

(e) By written notice by the Shareholder or the Buyer to the other at any
time after June 30, 1995.

8.4 Brokers' and Finders' Fees. The Shareholder and the Buyer each to the
other represents and warrants that all negotiations relative to this Agreement
have been carried on by them directly without the intervention of any person,
firm, corporation or other entity who or which may be entitled to any
brokerage fee or other commission in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby except
for (i) Furman Selz LLC, whose fees shall be paid by the Shareholder and (ii)
Houlihan, Lokey, Howard & Zukin, Inc., whose fees shall be paid by the Buyer,
and each of them shall indemnify and hold the other or any affiliate of them
harmless against any and all claims, losses, liabilities or expenses which may
be asserted against any

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<PAGE>

of them as a result of any dealings, arrangements or agreements by the
indemnifying party with any such person, firm, corporation or other entity.

8.5 Assignment and Binding Effect. This Agreement may not be assigned prior
to the Closing by any party hereto without the prior written consent of the
other parties. Subject to the foregoing, all of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of the Shareholder and by the
successors and assigns of the Buyer.

8.6 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument
executed by such party.

8.7 Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in writing and
shall be deemed given only if delivered personally to the address set forth
below (to the attention of the person identified below) or sent by facsimile
message, Federal Express (or other reputable overnight delivery service) or by
registered or certified mail, postage prepaid, as follows:

If to the Buyer, to:

BMC Acquisition Company
5 Radnor Corporate Center
100 Matson Ford Road
Radnor, PA 19087

Attention: A. W. Martinelli

With required copies to:

Buckeye Management Company

If by Federal Express:
If by mail:

3900 Hamilton Boulevard
P.O. Box 368 Allentown, PA 18103
Emmaus, PA 18049

Attention: Stephen C. Muther, Esquire

If to the Shareholder, to:

American Financial Group, Inc.
One East Fourth Street
Cincinnati, OH 45202

Attention: Neil M. Hahl

With a required copy to the Corporate Secretary of the Shareholder at the
same address.

or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have given as of
the date so delivered or sent by facsimile message, the day after the date
sent when sent by Federal Express (or other reputable overnight delivery
service), or, if mailed, three business days after the date so mailed.

8.8 Pennsylvania Law to Govern. This Agreement shall be governed by and
interpreted and enforced in accordance with the substantive laws of the
Commonwealth of Pennsylvania applicable to contracts made and to be performed
in that Commonwealth.

8.9 Remedies Not Exclusive. Nothing in this Agreement shall be deemed to
limit or restrict in any manner other rights or remedies that any party may
have against any other party at law, in equity or otherwise.

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<PAGE>

8.10 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and the Company and their successors and assigns, and they shall not be
construed as conferring and are not intended to confer any rights on any other
persons.

8.11 Contents of Agreement. This Agreement sets forth the entire agreement
of the parties hereto with respect to the transactions contemplated hereby.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto, and no claimed amendment, modification, termination or
waiver shall be binding unless in writing and signed by the party against whom
or which such claimed amendment, modification, termination or waiver is sought
to be enforced. The Shareholder agrees that upon request of the Buyer, it will
amend this Agreement and take such other action as may be necessary to modify
the structure of the transaction contemplated hereby from a stock purchase to
a partial stock purchase and partial stock redemption, except that the
Shareholder shall be so obligated only if such modification will not have an
adverse effect on the Shareholder or its affiliates.

8.12 Section Headings and Gender. All section headings and the use of a
particular gender are for convenience only and shall in no way modify or
restrict any of the terms or provisions hereof. Any reference in this
Agreement to a Section, Annex or Exhibit shall be deemed to be a reference to
a Section, Annex or Exhibit of this Agreement unless the context otherwise
expressly requires.

8.13 Cooperation. Subject to the provisions hereof, the parties hereto shall
use their reasonable efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things
necessary, proper or advisable under the provisions of this Agreement and
under applicable law to consummate and make effective the transactions
contemplated by this Agreement.

8.14 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.

8.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which is an original and all of which together shall be
deemed to be one and the same instrument. This Agreement shall become binding
when one or more counterparts taken together shall have been executed and
delivered by all of the parties. It shall not be necessary in making proof of
this Agreement or any counterpart hereof to produce or account for any of the
other counterparts.

In Witness Whereof, the parties hereto have duly executed this Agreement as
of the date first written above.

Pennsylvania Company

/s/ Neil M. Hahl
By: _________________________________
Title: Senior Vice President

BMC Acquisition Company

/s/ A.W. Martinelli
By: _________________________________
Title: Chairman

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ANNEX I

CERTAIN DEFINED TERMS

"Acquisition" means the acquisition of all of the Shares by the Buyer and
all related transactions provided for in or contemplated by this Agreement.

"Agreement" means this Share Purchase Agreement.

"Buyer" means BMC, a Delaware corporation.

"Company Material Adverse Effect" shall mean a material adverse change in,
or material adverse effect on, the results of operations, financial condition
or business of the Company and the Management Subsidiary, taken as a whole;
but in any case after application of the proceeds of any insurance or
indemnity under any contract or agreement with any third party.

"Contract" means any written or oral contract, agreement, lease, instrument
or other commitment that is binding on any person or its property under
applicable law.

"Court Order" means any judgment, decree, injunction, order or ruling of any
federal, state or local court or governmental or regulatory body or authority
that is binding on any person or its property under applicable law.

"Default" means (1) a material breach of or material default under any
Contract, (2) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a material breach of or material
default under any Contract, or (3) the occurrence of an event that with or
without the passage of time or the giving of notice or both would give rise to
a right of termination, renegotiation or acceleration under any Contract.

"Demand Notes" mean that certain Demand Promissory Note, dated November 18,
1986, in the aggregate principal amount of $24,000,000, by the Shareholder to
the Company, and that certain Demand Promissory Note, dated December 23, 1986,
in the aggregate principal amount of $4,000,000, by the Shareholder to the
Company.

"Employee Benefit Plans" means "employee benefit plans" as defined in
section 3(3) of ERISA and any other plan, policy, program, practice or
arrangement providing benefits to any officer or employee of the Company, the
Management Subsidiary, or any dependent or beneficiary thereof, which are now
maintained by the Company or the Management Subsidiary, or under which the
Company or the Management Subsidiary has any obligation or liability,
including, without limitation, all incentive, bonus, deferred compensation,
medical, disability, share purchase, unit purchase, retirement or other
similar plans, policies, programs, practices or arrangements; provided,
however, that such term shall not include (i) any employment agreements
entered into by the Company or the Management Subsidiary with their respective
employees, or (ii) any regular payroll practices of the Company or the
Management Subsidiary.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"Insured Losses" shall mean Losses under the Policies and any related loss
adjustment expense, including attorney fees and claims administration and
handling costs.

"IRS" means the Internal Revenue Service.

"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of or by any
person (other than endorsements of notes, bills and checks presented to banks
for collection or deposit in the ordinary course of business).

17
<PAGE>

"Licenses" means licenses, franchises, permits, easements, rights and other
authorizations.

"Lien" means any mortgage, lien, security interest, pledge, encumbrance,
restriction on transferability, defect of title, charge or claim of any nature
whatsoever on any property or property interest.

"Litigation" means any lawsuit, action, arbitration, administrative or other
proceeding, criminal prosecution or governmental investigation or inquiry
involving the Company, the Management Subsidiary, their respective businesses
or assets, or any Contracts to which the Company or the Management Subsidiary
is a party or by which it or any of their respective businesses or assets may
be bound.

"Loss" or "Losses" shall mean: liabilities, damages, costs, judgments, costs
of investigating claims, amounts paid in settlement, interest, penalties,
assessments and out-of-pocket expenses (including reasonable attorneys' and
auditors' and actuaries' fees) actually incurred.

"Master Partnership" means Buckeye Partners, L.P., a Delaware limited
partnership.

"Master Partnership Agreement" means that certain Amended and Restated
Agreement of Limited Partnership of the Master Partnership, dated as of
December 23, 1986.

"Operating Partnerships" means Buckeye Pipe Line Company, L.P., a Delaware
limited partnership, Buckeye Pipe Line Company of Michigan, L.P., a Delaware
limited partnership, Buckeye Tank Terminals Company, L.P., a Delaware limited
partnership, Everglades Pipe Line Company, L.P., a Delaware limited
partnership, and Laurel Pipe Line Company, L.P., a Delaware limited
partnership.

"Regulation" means any statute, law, ordinance, regulation, order or rule of
any federal, state, local or other governmental agency or body or of any other
type of regulatory body, including, without limitation, those covering
environmental, energy, safety, health, transportation, bribery, recordkeeping,
zoning, antidiscrimination, antitrust, wage and hour, and price and wage
control matters.

"Retention Levels" shall mean the retention levels specified in the Policies
for the respective companies, time periods and types of insurance coverage
specified thereon.

18
<PAGE>

INDEX OF DEFINED TERMS

<TABLE>
<S> <C>
Acquisition................................................................. 26
Agreement................................................................... 26
Buyer....................................................................... 1
Buyer Documents............................................................. 5
Closing..................................................................... 2
Closing Date................................................................ 2
Code........................................................................ 1
Common Stock................................................................ 1
Company..................................................................... 1
Company Material Adverse Effect............................................. 26
Contract.................................................................... 26
Court Order................................................................. 26
Default..................................................................... 26
Demand Notes................................................................ 26
Employee Benefit Plans...................................................... 26
ERISA....................................................................... 27
Financial Information....................................................... 6
Fixed Income Trust.......................................................... 14
Insured Losses.............................................................. 27
IRS......................................................................... 27
Liability................................................................... 27
Licenses.................................................................... 27
Lien........................................................................ 27
Litigation.................................................................. 27
Loss or Losses.............................................................. 27
Management Subsidiary....................................................... 4
Master DB Trust............................................................. 13
Master Partnership.......................................................... 27
Master Partnership Agreement................................................ 27
Operating Partnerships...................................................... 28
Plan Sponsor................................................................ 13
Policies.................................................................... 14
Prudential Commitment Letter................................................ 6
Purchase Price.............................................................. 2
RASP........................................................................ 13
Regulation.................................................................. 28
Retention Levels............................................................ 28
RIGP........................................................................ 13
Shareholder................................................................. 1
Shareholder Documents....................................................... 3
Shares...................................................................... 1
Special Committee........................................................... 19
Tax Benefits................................................................ 12
Tax Detriments.............................................................. 12
</TABLE>

19
<PAGE>

SCHEDULE 4.1

(Names of subscribers for common stock)

Alfred W. Martinelli
C. Richard Wilson
Stephen C. Muther
Steven C. Ramsey
Michael P. Epperly

<PAGE>

EXHIBIT 2.2

AMENDMENT TO SHARE PURCHASE AGREEMENT

This Amendment is made as of this 22nd day of March, 1996 by Pennsylvania
Company, a Delaware corporation (the "Shareholder") and BMC Acquisition
Company, a Delaware corporation (the "Buyer").

Whereas, the Shareholder and the Buyer have entered into a Share Purchase
Agreement (the "Agreement") dated as of January 5, 1996 providing for the
acquisition of all of the issued and outstanding shares of capital stock of
Buckeye Management Company, a Delaware corporation ("Company") by the Buyer
from the Shareholder; and

Whereas, the Shareholder and the Buyer desire to amend the Agreement as set
forth in this Amendment.

Now, Therefore, intending to be legally bound, the parties hereto agree as
follows:

1. The Shareholder and the Buyer hereby agree that, prior to the Closing,
the Buyer may terminate the existing subscription agreements from the
persons listed on the form of Schedule 4.1 originally attached to the
Agreement and simultaneously enter into a new subscription agreement with
Glenmoor Partners, LLP, a Pennsylvania limited liability partnership, to
acquire not less than $5,000,000 of common stock of the Buyer on or before
the Closing Date.

2. The Shareholder and the Buyer hereby agree that the date "April 15,
1995" in Section 8.3(d) and the date "June 30, 1995" in Section 8.3(e) were
intended to be and are hereby amended to be "April 15, 1996" and "June 30,
1996" respectively.

3. The Shareholder and the Buyer hereby agree that Section 8.1 of the
Agreement shall be amended to insert the phrase "Except as otherwise
specifically set forth in this Agreement in the case of covenants and
agreements," at the beginning of such section.

4. Buyer shall use commercially reasonable efforts to obtain as soon as
practicable following the Closing Date, but in no event later than August
14, 1996, the release of Shareholder and its affiliates from all surety
bonds for which Shareholder or any of its affiliates is a guarantor or an
account party, but which relate to the operations of the Company, the
Master Partnership and the Operating Partnerships. Shareholder agrees to
keep any such surety bonds in place until August 14, 1996, after which time
Shareholder or its affiliates may give notice of cancellation with respect
to their guaranty. Buyer agrees to indemnify and hold harmless Seller and
its affiliates from any loss arising out of such surety bonds.

5. All capitalized terms used in this Amendment but not defined herein
shall have the same meaning as such term has in the Agreement.

6. Any provision of this Amendment that is inconsistent with the
provisions of the Agreement shall be deemed amended to effectuate the
intention of the parties as expressed herein. Every other provision of the
Agreement shall remain unchanged and shall remain in full force and effect.

7. This Amendment may be executed in two or more counterparts, each of
which is an original, and all of which together shall be deemed to be one
and the same instrument. This Amendment shall become binding when one or
more counterparts taken together shall have been executed and delivered by
both of the parties. It shall not be necessary in making proof of this
Amendment or any counterpart hereof to produce or account for any of the
other counterparts.
<PAGE>

In Witness Whereof, the parties hereto have duly executed this Amendment as
of the date first written above.

Pennsylvania Company

/s/ Neil M. Hahl
By: _________________________________
Name: Neil M. Hahl
Title: Senior Vice President

BMC Acquisition Company

/s/ C. Richard Wilson
By: _________________________________
Name: C. Richard Wilson
Title: President

<PAGE>

EXHIBIT 3.3

AMENDMENT NO. 2 TO AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF BUCKEYE PARTNERS, L.P.

This Amendment is made as of this 22nd day of March, 1996 by Buckeye
Management Company, a Delaware corporation ("BMC" or the "General Partner").

Whereas, BMC is the general partner of Buckeye Partners, L.P., a Delaware
limited partnership (the "Partnership");

Whereas, the Partnership is governed under an Amended and Restated Agreement
of Limited Partnership dated as of December 23, 1986, as amended as of July
18, 1995 (the "Partnership Agreement");

Whereas, Pennsylvania Company, the owner of all of the outstanding shares of
capital stock of the General Partner (the "Shares") has agreed to sell the
Shares to BMC Acquisition Company, a company owned by certain investors
including management of the General Partner and an employee stock ownership
plan (the "ESOP") to be formed for the benefit of the employees of the General
Partner and its subsidiary;

Whereas, the Board of Directors of BMC has determined, and a special
committee of disinterested directors of the Board of Directors of BMC, on
behalf of the Partnership (the "Special Committee"), has agreed (i) in order
to facilitate a loan to the ESOP (the "ESOP Loan"), to amend Section 13.1 of
the Partnership Agreement to extend the period of time in which BMC has agreed
to act as general partner of the Partnership, (ii) to amend Section 13.2 of
the Partnership Agreement to conform with the Amended and Restated Incentive
Compensation Agreement of even date herewith, which amended and restated the
Distribution Support, Incentive Compensation and APU Redemption Agreement,
dated as of December 15, 1986 and amended as of July 18, 1995 (the
"Distribution Support Agreement") and (iii) to amend Section 17.6 of the
Partnership Agreement to reduce the required net worth of the General Partner
and the Manager, after giving effect to any Restricted Payment, from
$23,000,000 to $5,000,000;

Whereas, Section 15.1 of the Partnership Agreement provides that the General
Partner may amend any provision of the Partnership Agreement without the
consent of the limited partners of the Partnership to reflect any change that
in the good faith opinion of the General Partner does not adversely affect
such limited partners in any material respect; and

Whereas, the General Partner has determined that this Amendment does not
adversely affect the limited partners of the Partnership in any material
respect.

Now Therefore, intending to be legally bound, the Partnership Agreement is
hereby amended as follows:

1. The first sentence of Section 13.1(a) of the Partnership Agreement is
hereby amended in its entirety as follows:

BMC agrees to continue to act as General Partner of the Partnership
until the later of (i) the date which is twenty-five years after the
Time of Delivery or (ii) the date the ESOP Loan is paid in full,
subject to BMC's right to transfer all of its GP Units pursuant to
Section 11.1.

2. A new sentence is hereby added following the first sentence of Section
13.2 of the Partnership Agreement as follows:

The fair market value of the GP Units shall include the value of the
right to receive incentive compensation pursuant to the Distribution
Support Agreement or any other agreement between the Partnership and
the General Partner in effect on the date the successor General Partner
is so admitted.
<PAGE>

3. All references to the amount $23,000,000 in Section 17.6 are hereby
amended to be $5,000,000.

4. All terms used herein but not otherwise defined herein shall have the
meaning set forth for such terms in the Partnership Agreement.

5. Any provision of the Partnership Agreement which is inconsistent with
the provisions of this Amendment shall be deemed amended to effectuate the
intention expressed herein. Every other provision of the Partnership
Agreement shall remain unchanged and in full force and effect.

6. This Amendment shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.

In Witness Whereof, this Amendment has been executed as of the day and year
first above written.

Buckeye Management Company,
as General Partner

/s/ C. Richard Wilson
By: _________________________________
Name: C. Richard Wilson
Title: President

<PAGE>

EXHIBIT 10.2

MANAGEMENT AGREEMENT

DATED AS OF MARCH 22, 1996

AMONG

BUCKEYE MANAGEMENT COMPANY,

BUCKEYE PIPE LINE COMPANY

AND

GLENMOOR PARTNERS LLP

A PENNSYLVANIA LIMITED LIABILITY PARTNERSHIP

<PAGE>

MANAGEMENT AGREEMENT

This Management Agreement (the "Agreement"), dated as of March 22, 1996, is
entered into among Buckeye Management Company, a Delaware corporation (the
"General Partner"), Buckeye Pipe Line Company, a Delaware corporation ("BPLC")
and Glenmoor Partners LLP ("Glenmoor"), a Pennsylvania limited liability
partnership.

Witnesseth:

Whereas, the General Partner owns a 1% general partnership interest in, and
serves as sole general partner of, Buckeye Partners, L.P., a publicly traded
Delaware limited partnership (the "Partnership"); and

Whereas, BPLC owns a 1% general partnership interest in, and serves as sole
general partner of, Buckeye Pipe Line Company, L.P., Buckeye Tank Terminals
Company, L.P., Everglades Pipe Line Company, L.P. and Laurel Pipe Line
Company, L.P., each a Delaware limited partnership (together, the "Operating
Partnerships"), and the Partnership owns a 99% limited partnership interest in
each such entity; and

Whereas, the officers of the General Partner and BPLC, under the supervision
of the board of directors of the General Partner and BPLC, respectively,
currently manage the Partnership and its Operating Partnerships; and

Whereas, on the date hereof, Pennsylvania Company ("Pennco"), a wholly owned
subsidiary of American Financial Group, Inc. ("AFG"), has sold all of the
issued and outstanding capital stock of the General Partner to BMC Acquisition
Company, a newly formed Delaware corporation ("BAC"); and

Whereas, the preferred stock of BAC is held by an employee stock ownership
plan, whose participants consist of the employees of Glenmoor, the General
Partner and BPLC, and the common stock of BAC is held by Glenmoor and certain
managers of BPLC; and

Whereas, Glenmoor intends to employ all of the executive officers and
director-level managers of the General Partner and BPLC; and

Whereas, the General Partner and BPLC desire to engage and appoint Glenmoor
to provide senior management services to the General Partner and BPLC in
accordance with the terms set forth below.

Now, Therefore, in consideration of the mutual promises hereinafter set
forth and intending to be legally bound, the General Partner, BPLC and
Glenmoor hereby agree as follows:

ARTICLE I

Appointment of Glenmoor

The General Partner and BPLC hereby appoint Glenmoor as managing agent, and
Glenmoor accepts its appointment by the General Partner and BPLC, to manage
the business and affairs of the General Partner and BPLC in the manner which
Glenmoor deems appropriate and to perform all management functions currently
performed by the officers of the General Partner and BPLC. Management
functions to be performed by Glenmoor shall include, among other things,
supervision of day-to-day activities, ESOP plan administration, insurance
management, risk management, strategic planning and advice regarding corporate
and partnership governance issues. Glenmoor agrees to perform such services
under the supervision and control of the boards of directors of the General

2
<PAGE>

Partner and BPLC. Employees of Glenmoor shall also serve as officers of the
General Partner and BPLC, as they may be duly elected from time to time by the
boards of directors of the General Partner and BPLC, respectively.

ARTICLE II

Compensation

In consideration for the services to be performed hereunder, the General
Partner shall pay Glenmoor an annual management fee, the amount of which shall
be approved each year by the disinterested directors of the General Partner.
In connection with such annual approval, Glenmoor shall submit to the board of
directors of the General Partner an itemized report on the components of the
management fee in reasonable detail, consistent with the past practice of AFG.
The management fee shall be based on the reimbursement of all costs and
expenses (direct or indirect) incurred by Glenmoor which are directly or
indirectly related to the capitalization, business or activities of the
Partnership and the Operating Partnerships, including the salaries, bonuses
and benefits (including without limitation participation in all retirement,
savings, welfare, workers' compensation and other benefit plans maintained by
the General Partner and BPLC for its employees) of employees of Glenmoor
(whether or not such individuals are also partners of Glenmoor) reasonably
allocated to the General Partner and BPLC based upon time spent on behalf of
the Partnership and the Operating Partnerships. The management fee shall
include a "Senior Administrative Charge" of not less than $975,000 to
compensate Glenmoor for certain senior management functions (including the
services of A.W. Martinelli and E. Varalli) set forth in Article I hereof
which were previously provided to the General Partner by AFG and its
affiliates. This Senior Administrative Charge component of the management fee
shall be specifically approved by the disinterested directors of the General
Partner in connection with its annual approval of the management fee. The
General Partner and BPLC shall also make contributions to the BMC Acquisition
Company Employee Stock Ownership Plan ("ESOP") on behalf of Glenmoor employees
who are also officers of the General Partner or BPLC in a manner consistent
with contributions to the ESOP on behalf of BPLC employees. The executive
officers of BPLC and the General Partner who are employed by Glenmoor will be
directly compensated by Glenmoor and, except for the ESOP contributions noted
above, will not be separately compensated by the General Partner or BPLC for
serving in their officer capacity. In addition to the management fee, the
General Partner shall reimburse Glenmoor for any costs arising out of any
common and competitive severance agreements between Glenmoor and its employees
which have been approved by the appropriate committee of the board of
directors of the General Partner and which are triggered by the termination of
a Glenmoor employee as an officer of the General Partner or BPLC or the
termination of this Agreement by the General Partner.

ARTICLE III

Outside Activities

Glenmoor shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the business of the
General Partner, BPLC, the Partnership or any Operating Partnership for its
own account and for the account of others, without having or incurring any
obligation to offer any interest in such businesses or activities to the
General Partner, BPLC, the Partnership or any Operating Partnership; provided,
however, that Glenmoor shall not engage in any businesses or activities that
are in direct competition with the General Partner, BPLC, the Partnership or
any Operating Partnership unless Glenmoor has received prior written consent
of the disinterested directors of the General Partner to engage in such
competitive activities. Neither the General Partner, BPLC, the Partnership,
any Operating Partnership, nor any limited partner of the Partnership, shall
have any rights by virtue of this Agreement, or the relationship created
hereby, in any such business interests of Glenmoor.

3
<PAGE>

ARTICLE IV

Liability of Glenmoor; Indemnification

4.01 Liability of Glenmoor. Notwithstanding anything to the contrary in this
Agreement, and except to the extent required by applicable law, neither
Glenmoor, any person who is or was a partner, employee or agent of Glenmoor,
or any person who is or was serving at the request of Glenmoor as a director,
officer, partner, trustee, employee or agent of another person (collectively,
the "Indemnitees") shall be liable to the General Partner or BPLC for any
action taken or omitted to be taken by such Indemnitee, provided that such
action was taken in good faith and such action or omission does not involve
the gross negligence or willful misconduct of such Indemnitee. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere, or its equivalent, shall not, of itself,
create a presumption that an Indemnitee did not act in good faith or that an
action or omission involves gross negligence or willful misconduct.

4.02 Indemnification. (a) The General Partner and BPLC shall, to the fullest
extent permitted by applicable law, jointly and severally indemnify each
Indemnitee against expenses (including legal fees and expenses), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by such
Indemnitee, in connection with any threatened, pending or completed action,
suit or proceeding to which such Indemnitee was or is a party or is threatened
to be made a party by reason of the Indemnitee's status as (i) a general
partner of Glenmoor; (ii) an employee or agent of Glenmoor; or (iii) a person
serving at the request of Glenmoor in another entity in similar capacity, and
which relates to this Agreement or the property, business, affairs or
management of the General Partner or BPLC, provided that the Indemnitee acted
in good faith, and the act or omission which is the basis of such demand,
claim, action, suit or proceeding does not involve the gross negligence or
willful misconduct of such Indemnitee.

(b) Expenses (including legal fees and expenses) incurred in defending any
proceeding subject to Section 4.02(a) hereof shall be paid by the General
Partner or BPLC in advance of the final disposition of such proceeding upon
receipt of an undertaking (which need not be secured) by or on behalf of the
Indemnitee to repay such amount if it shall ultimately be determined, by a
court of competent jurisdiction, that the Indemnitee is not entitled to be
indemnified by the General Partner or BPLC as authorized hereunder.

(c) The indemnification provided by Section 4.02(a) hereof shall be in
addition to any other rights to which the Indemnitees may be entitled and
shall continue as to an Indemnitee who has ceased to serve in a capacity for
which the Indemnitee is entitled to indemnification, and shall inure to the
benefit of the heirs, successors, assigns, administrators and personal
representatives of the Indemnitee.

(d) To the extent commercially reasonable, the General Partner shall
purchase and maintain insurance on behalf of the Indemnitees against any
liability which may be asserted against, or expense which may be incurred by,
such Indemnitees in connection with the General Partner's and BPLC's
activities, whether or not the General Partner or BPLC would have the power to
indemnify such Indemnitees against such liability under the provisions of this
Agreement.

(e) An Indemnitee shall not be denied indemnification in whole or in part
under Section 4.02(a) hereof because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement and the
Partnership's Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement").

(f) The provisions of this Article IV are for the benefit of the Indemnitees
and their heirs, successors, assigns, administrators and personal
representatives, and shall not be deemed to create any rights for the benefit
of any other persons.

4
<PAGE>

ARTICLE V

No Interest Conveyed to Glenmoor

This Agreement is a management agreement only and does not convey to
Glenmoor any right, title or interest in or to any assets of the General
Partner or BPLC, except that Glenmoor shall have and is hereby granted a
license to enter upon and use such assets for the purpose of performing its
duties and obligations hereunder.

ARTICLE VI

Term

The term of this Agreement shall commence as of the date hereof and shall
continue until the earlier of (i) the dissolution and liquidation of the
Partnership, (ii) the dissolution and liquidation of Glenmoor or (iii) the
removal of the General Partner as general partner of the Partnership.
Notwithstanding the foregoing, the General Partner may terminate this
Agreement on not less than 180 days' prior written notice upon a determination
by the disinterested directors of the General Partner that continuation of
this Agreement is not in the best interests of the Partnership; provided,
however, that if the General Partner terminates this Agreement pursuant to the
foregoing clause for reasons other than the bad faith, gross negligence or
willful misconduct of Glenmoor or its partners or employees in connection with
a matter material to the Partnership, the General Partner shall pay Glenmoor
promptly following the effective date of Glenmoor's termination a termination
fee equal to (i) the previous year's Senior Administrative Charge multiplied
by three, plus (ii) any amount outstanding pursuant to Article II hereof,
including reimbursement of severance obligations arising out of the
termination of this Agreement by the General Partner which have been approved
by the appropriate committee of the board of directors of the General Partner.

ARTICLE VII

Reports, Records and Access

Glenmoor shall prepare, maintain and furnish all reports, records and
information required by the Partnership Agreement.

ARTICLE VIII

General Provisions

8.01 Address and Notices. Any notice under this Agreement shall be deemed
given if received in writing by the General Partner and BPLC at BPLC's
principal offices located at 3900 Hamilton Blvd., Allentown, Pennsylvania
18103, or by Glenmoor at its principal offices located at 5 Radnor Corporate
Center, 100 Matsonford Road, Radnor, Pennsylvania 19087.

8.02 Headings. All article or section headings in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any of the provisions hereof.

8.03 Assignment; Binding Effect. This Agreement may not be assigned by
Glenmoor without the prior written consent of the disinterested directors of
the General Partner. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns.

5
<PAGE>

8.04 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with regard to management services to be provided by
Glenmoor to the General Partner and BPLC and supersedes all prior agreements
or understandings between the General Partner, BPLC and Glenmoor or their
agents with regard to such services.

8.05 Modification; Waiver. No modification or waiver of any provision of
this Agreement shall be valid unless it is in writing and signed by the party
against whom it is sought to be enforced. No failure by any party to insist
upon the strict performance of any covenant, duty, agreement or condition of
this Agreement, or to exercise any right or remedy consequent upon a breach
thereof, shall constitute a waiver of any such breach or of any other
covenant, duty, agreement or condition. No waiver at any time of any provision
of this Agreement shall be deemed a waiver of any other provision of this
Agreement at that time or a waiver of that or any other provision at any other
time.

8.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.

8.07 Accounting Principles. All financial reports requested to be rendered
under this Agreement shall be prepared in accordance with generally accepted
accounting principles.

8.08 Severability. If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions hereof, or of such provision in
other respects, shall not be affected thereby.

8.09 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to any conflict of laws provisions.

In Witness Whereof, this Agreement has been duly executed by the parties
hereto as of the date first above written.

Buckeye Management Company

/s/ Ernest R. Varalli
By: _________________________________

Buckeye Pipe Line Company

/s/ Stephen C. Muther
By: _________________________________

Glenmoor Partners LLP, a
Pennsylvania Limited Liability
Partnership

/s/ C. Richard Wilson
By: _________________________________

<PAGE>

EXHIBIT 10.4

AMENDED AND RESTATED INCENTIVE COMPENSATION AGREEMENT

This Amended and Restated Incentive Compensation Agreement, dated as of
March 22, 1996 (this "Agreement"), is entered into between Buckeye Management
Company, a Delaware corporation (the "General Partner"), and Buckeye Partners,
L.P., a Delaware limited partnership (the "Partnership").

Whereas, the General Partner, the Partnership and American Financial Group,
Inc., previously known as The Penn Central Corporation ("AFG") have entered
into a Distribution Support, Incentive Compensation and APU Redemption
Agreement, dated as of December 15, 1986, as amended as of July 18, 1995 (the
"Agreement");

Whereas, Pennsylvania Company, a wholly owned subsidiary of AFG and the
owner of all of the outstanding shares of capital stock of the General Partner
(the "Shares"), has agreed to sell the Shares to BMC Acquisition Company, a
company to be owned by certain investors including management of the General
Partner and an employee stock ownership plan (the "ESOP") for the benefit of
the employees of the General Partner and its subsidiary;

Whereas, Section 5.8 of the Agreement provides that the Agreement may be
amended only after complying with Section 17.4(a) of the Amended and Restated
Agreement of Limited Partnership dated as of December 15, 1986, as amended
(the "Partnership Agreement"), which provides that, without the prior approval
of a two-thirds interest of the limited partners of the Partnership, the
General Partner shall not amend the Agreement, unless such amendment does not,
in the good faith opinion of the General Partner, adversely affect the limited
partners of the Partnership (the "Limited Partners") in any material respect;

Whereas, the Board of Directors of the General Partner, on behalf of the
General Partner, and a special committee of disinterested directors of the
Board of Directors of the General Partner (the "Special Committee"), on behalf
of the Partnership, have approved the amendment and restatement of the
Agreement in accordance with the terms and conditions set forth below; and

Whereas, the Special Committee has further determined that this amended and
restated Agreement does not adversely affect the Limited Partners in any
material respect.

The parties hereto hereby agree as follows:

ARTICLE I

Definitions

Set forth below are definitions of certain capitalized terms used in this
Agreement. These definitions are intended to restate the definitions for such
terms in the Partnership's Prospectus, dated December 16, 1986 (the
"Prospectus"), relating to the initial offering and sale of 12,000,000 LP
Units representing limited partnership interests. All capitalized terms used
herein and not otherwise defined herein shall have the meanings provided
therefor in the Partnership Agreement.

1.1 "Aggregate Target Quarterly Amount" means the Target Quarterly Amount
per LP Unit times the number of Units outstanding.

1.2 "Aggregate Target Special Distribution Amount" means the Target Special
Distribution Amount times the number of Units outstanding.
<PAGE>

1.3 "Available Cash" for any quarter means the Partnership's consolidated
cash receipts during such quarter (including, for this purpose, amounts
retained as described in clause (b) below during prior quarters and determined
by the General Partner, in its sole discretion, to no longer be required to be
so retained) less (a) its consolidated cash expenditures during such quarter
(other than distributions of Available Cash for the prior quarter and
expenditures of amounts received in prior quarters) and (b) such retentions
(i) for working capital, anticipated cash expenditures (including capital
expenditures and debt service) and contingencies as the General Partner, in
its sole discretion, deems appropriate or (ii) as are required by the terms of
the Mortgage Note Indenture.

1.4 "IPO Price" is $20.00 per LP Unit.

1.5 "Manager" means Buckeye Pipe Line Company, a wholly-owned subsidiary of
the General Partner.

1.6 "Pipe Line Partnership" means the limited partnership subsidiaries of
the Partnership, collectively.

1.7 "Quarterly Cash To Be Distributed" for any quarter means the Available
Cash for such quarter (excluding cash to be distributed in a Special
Distribution) less retentions of Available Cash necessary to pay the General
Partner incentive compensation pursuant to this Agreement.

1.8 "Special Cash To Be Distributed" means the cash or fair market value of
securities to be distributed in a Special Distribution.

1.9 "Special Distribution" means any special cash distribution to
Unitholders in excess of $10 million from the proceeds of a financing, sale of
assets or disposition (or a series of related financings, sales of assets or
dispositions) or a special distribution of marketable securities with a fair
market value in excess of $10 million.

1.10 "Target Quarterly Amount" is $.65 per quarter.

1.11 "Target Special Distribution Amount" means the amount which, together
with all amounts distributed per LP Unit prior to the Special Distribution
compounded quarterly from the respective dates of distribution to the date of
such Special Distribution at the Target Rate, would equal the IPO Price
compounded quarterly at the Target Rate from December 23, 1986 to the date of
such Special Distribution.

1.12 "Target Rate" is 13% per annum.

ARTICLE II

Incentive Compensation Agreement

2.1 Quarterly Incentive Compensation. If Quarterly Cash To Be Distributed
for any calendar quarter exceeds the Aggregate Target Quarterly Amount, the
Partnership shall, subject to Section 2.3, pay the General Partner incentive
compensation equal to the sum of (a) 25% of the portion of the Quarterly Cash
To Be Distributed which (i) exceeds $.65 per LP Unit and (ii) is not more than
$.70 per LP Unit; (b) 30% of the portion of the Quarterly Cash To Be
Distributed which (i) exceeds $.70 per LP Unit and (ii) does not exceed $.80
per LP Unit; (c) 40% of the portion of the Quarterly Cash To Be Distributed
which (i) exceeds $.80 per LP Unit per quarter and (ii) does not exceed $.90
per LP Unit; and (d) 50% of the portion of the Quarterly Cash To Be
Distributed which exceeds $.90 per LP Unit per quarter.

2
<PAGE>

2.2 Special Distribution Incentive Compensation. If the Special Cash To Be
Distributed in a Special Distribution exceeds the Aggregate Target Special
Distribution Amount for such Special Distribution, the Partnership shall,
subject to Section 2.3, pay the General Partner, out of Special Cash To Be
Distributed, incentive compensation equal to (a) 15% of the portion of the
Special Cash To Be Distributed which (i) exceeds 100% of the Aggregate Target
Special Distribution Amount and (ii) is not more than 115% of the Aggregate
Target Special Distribution Amount, plus (b) 25% of the amount (if any) by
which the Special Cash To Be Distributed exceeds 115% of the Aggregate Target
Special Distribution Amount.

2.3 Limitation on Incentive Compensation. The General Partner shall not be
entitled to incentive compensation at any time pursuant to Section 2.1 and 2.2
to the extent that the aggregate incentive compensation payments and
distributions made by the Partnership or the Pipeline Partnership to the
General Partner or the Manager after the closing of the offering made by the
Prospectus would exceed 10% of the sum of (a) the total distributions made by
the Partnership or the Pipeline Partnership to Unitholders and to the Manager
as general partner of the Operating Partnership and (b) the total incentive
compensation payments made to the General Partner pursuant to Sections 2.1 and
2.2.

2.4 Termination Upon Removal of General Partner. The agreement contained in
this Article II shall terminate if the General Partner is removed as general
partner of the Partnership pursuant to the Partnership Agreement, effective
upon the date of such removal. However, the value of the right to receive
incentive compensation as provided in this Article II shall be included in
determining the fair market value of the GP Units pursuant to Section 13.2 of
the Partnership Agreement.

ARTICLE III

Miscellaneous

3.1 Headings. All article or section headings in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any of the provisions hereof.

3.2 Binding Effect; Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

3.3 Integration. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.

3.4 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.

3.5 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.

3.6 Amendment. This Agreement may be amended only after complying with
Section 17.4(a) of the Partnership Agreement.

3
<PAGE>

In Witness Whereof, this Amended and Restated Incentive Compensation
Agreement has been duly executed by the parties hereto as of the date first
above written.

Buckeye Management Company

/s/ C. Richard Wilson
By: _________________________________

Buckeye Partners, L.P.

By: Buckeye Management Company, as
General Partner

/s/ Ernest R. Varalli
By: _________________________________

<PAGE>

EXHIBIT 11.1
BUCKEYE PARTNERS, L.P.
COMPUTATION OF EARNINGS PER UNIT
(IN THOUSANDS, EXCEPT FOR UNITS AND PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Income from continuing operations before
extraordinary charge....................... $ 49,840 $48,086 $41,654
Loss from disposal of discontinued
operations................................. -- -- (127)
Extraordinary charge on early extinguishment
of debt.................................... -- (2,269) (2,161)
---------- ---------- ----------
Net income.................................. $ 49,840 $45,817 $39,366
========== ========== ==========
Primary earnings per Unit:
Income from continuing operations before
extraordinary charge..................... $ 4.10 $ 3.96 $ 3.43
Loss from disposal of discontinued
operations............................... -- -- (0.01)
Extraordinary charge on early
extinguishment of debt................... -- (0.19) (0.18)
---------- ---------- ----------
Net income................................ $ 4.10 $ 3.77 $ 3.24
========== ========== ==========
Fully-diluted earnings per Unit:
Income from continuing operations before
extraordinary charge..................... $ 4.10 $ 3.96 $ 3.43
Loss from disposal of discontinued
operations............................... -- -- (0.01)
Extraordinary charge on early
extinguishment of debt................... -- (0.19) (0.18)
---------- ---------- ----------
Net income................................ $ 4.10 $ 3.77 $ 3.24
========== ========== ==========
Average number of Units outstanding:
Units outstanding at December 31,......... 12,146,124 12,131,640 12,121,212
Exercise of Options reduced by the number
of Units purchased with proceeds (Prima-
ry)...................................... 17,387 20,376 18,945
---------- ---------- ----------
Total Units outstanding--Primary.......... 12,163,511 12,152,016 12,140,157
========== ========== ==========
Units outstanding at December 31,......... 12,146,124 12,131,640 12,121,212
Exercise of Options reduced by the number
of Units purchased with proceeds (Fully-
diluted)................................. 20,563 20,268 25,589
---------- ---------- ----------
Total Units outstanding--Fully-diluted.... 12,166,687 12,151,908 12,146,801
========== ========== ==========
</TABLE>
- --------
Although not required to be presented in the income statement under provisions
of APB Opinion No. 15, this calculation is submitted in accordance with
Regulations S-K item 601(b)(11).

<PAGE>

EXHIBIT 21.1
BUCKEYE PARTNERS, L.P.
SUBSIDIARIES OF THE REGISTRANT

The following table lists each significant subsidiary of Buckeye Partners,
L.P. and its jurisdiction of organization.

<TABLE>
<CAPTION>
JURISDICTION
OF
SUBSIDIARY ORGANIZATION
---------- ------------
<S> <C>
Buckeye Pipe Line Company, L.P. (99% owned)..................... Delaware
Buckeye Tank Terminals Company, L.P. (99% owned)................ Delaware
Everglades Pipe Line Company, L.P. (99% owned).................. Delaware
Laurel Pipe Line Company, L.P. (99% owned)...................... Delaware
</TABLE>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,213
<SECURITIES> 895
<RECEIVABLES> 16,295
<ALLOWANCES> 0
<INVENTORY> 1,561
<CURRENT-ASSETS> 42,236
<PP&E> 558,280
<DEPRECIATION> 48,336
<TOTAL-ASSETS> 552,646
<CURRENT-LIABILITIES> 25,422
<BONDS> 214,000
0
0
<COMMON> 0
<OTHER-SE> 262,185
<TOTAL-LIABILITY-AND-EQUITY> 552,646
<SALES> 0
<TOTAL-REVENUES> 183,462
<CGS> 0
<TOTAL-COSTS> 111,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,710
<INCOME-PRETAX> 49,840
<INCOME-TAX> 0
<INCOME-CONTINUING> 49,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,840
<EPS-PRIMARY> 4.10
<EPS-DILUTED> 4.10

</TABLE>