As filed with the Securities and Exchange Commission on May 24, 2002
                                            Registration Statement No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                ---------------
                                    Form S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                                ---------------
                                  INERGY, L.P.
             (Exact name of registrant as specified in its charter)

                                                           
           Delaware                           5984                         43-1918951
 (State or other jurisdiction     (Primary Standard Industrial          (I.R.S. Employer
      of incorporation or         Classification Code Number)          Identification No.)
         organization)

                          1101 Walnut St., Suite 1500
                          Kansas City, Missouri 64106
                                 (816) 842-8181
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)

                                ---------------
                                John J. Sherman
                          1101 Walnut St., Suite 1500
                          Kansas City, Missouri 64106
                                 (816) 842-8181
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                                ---------------
                                   Copies to:

                                                           
        David P. Oelman                Paul E. McLaughlin                Joshua Davidson
    Catherine S. Gallagher        Stinson Morrison Hecker LLP          Baker Botts L.L.P.
    Vinson & Elkins L.L.P.        1201 Walnut St., Suite 2800            One Shell Plaza
    1001 Fannin, Suite 2300       Kansas City, Missouri 64106             910 Louisiana
   Houston, Texas 77002-6760             (816) 842-8600               Houston, Texas 77002
        (713) 758-2222                                                   (713) 229-1234

                                ---------------

   Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
   If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
   If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
   If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

                                ---------------
                        CALCULATION OF REGISTRATION FEE

- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------

                                                   Proposed     Proposed
                                                   maximum      maximum
   Title of class of                               offering    aggregate    Amount of
   securities to be           Amount to be          price       offering   registration
      registered             registered(1)       per unit(2)  price(1)(2)      fee
- ---------------------------------------------------------------------------------------
                                                               
Common Units
 representing limited
 partner interests ...   1,610,000 common units     $33.25    $53,532,500     $4,925
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------

(1) Includes 210,000 common units which may be sold upon exercise of the
    underwriter's over-allotment option.
(2) Calculated in accordance with Rule 457(c) on the basis of the average of
    the high and low sales prices of the common units on May 21, 2002.
                                ---------------
   The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the Registration Statement filed with the     +
+Securities and Exchange Commission is effective. This Prospectus is not an    +
+offer to sell these securities, and we are not soliciting an offer to buy     +
+these securities in any state where the offer or sale is not permitted.       +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                   Subject to completion, dated May 24, 2002

PROSPECTUS
                             1,400,000 Common Units

                                 [INERGY LOGO]

                     Representing Limited Partner Interests

                                  -----------

  We are offering 1,054,741 common units, and the selling unitholders are
offering 345,259 common units. We will not receive any proceeds from the sale
of the common units by the selling unitholders. Our common units are traded on
the Nasdaq National Market under the symbol "NRGY." On May 22, 2002, the last
reported sale price of our common units on the Nasdaq was $33.00 per common
unit.

  Common units are entitled to receive minimum distributions of operating cash
of $0.60 per quarter, or $2.40 on an annualized basis, before any distributions
are paid on senior subordinated units or junior subordinated units, to the
extent we have sufficient cash from operations after establishment of cash
reserves and payment of fees and expenses, including payments to our general
partners. For the quarter ended March 31, 2002, we distributed $0.66 on each of
our outstanding common, senior subordinated and junior subordinated units.

                                  -----------

                 Investing in our common units involves risks.
                    See "Risk Factors" beginning on page 14.

                                  -----------

  These risks include the following:
  . We may not be able to generate sufficient cash from operations to allow us
    to pay the minimum quarterly distribution.
  . Since weather conditions may adversely affect the demand for propane, our
    financial condition and results of operations are vulnerable to, and will
    be adversely affected by, warm winters.
  . If we are unable to integrate our recent acquisitions or if we do not
    continue to make acquisitions on economically acceptable terms, our future
    financial performance will be limited.
  . Due to our lack of asset diversification, adverse developments in our
    propane business would reduce our ability to make distributions to
    unitholders.
  . Unitholders have less ability to elect or remove management than holders
    of common stock in a corporation.
  . Cost reimbursements due our managing general partner may be substantial
    and reduce our ability to pay the minimum quarterly distribution.
  . Our general partners have conflicts of interest and limited fiduciary
    responsibilities, which may permit our general partners to favor their own
    interests to the detriment of unitholders.
  . You may be required to pay taxes on income from us even if you do not
    receive any cash distributions.

                                  -----------

                           PRICE $   PER COMMON UNIT

                                  -----------

                                                                  Per
                                                              Common Unit Total
                                                              ----------- -----
                                                                    
Public offering price........................................     $       $
Underwriting discount........................................     $       $
Proceeds, before expenses, to Inergy, L.P....................     $       $
Proceeds, before expenses, to the selling unitholders........     $       $

  We have granted the underwriter a 30-day option to purchase up to an
additional 210,000 common units to cover over-allotments. The underwriter
expects to deliver the common units to purchasers on or about     , 2002.

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

                                  -----------

                           A.G. Edwards & Sons, Inc.

                          Prospectus dated     , 2002

               [map and photographs of Inergy, L.P.'s operations]

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                                                                         
GUIDE TO READING THIS PROSPECTUS..........................................   iv

PROSPECTUS SUMMARY........................................................    1
  Inergy, L.P.............................................................    1
  Summary of Conflicts of Interest and Fiduciary Responsibilities.........    6
  Partnership Structure and Management....................................    6
  Summary Pro Forma Financial and Operating Data..........................   11

RISK FACTORS..............................................................   14
  Risks Inherent in our Business..........................................   14
  Risks Inherent in an Investment in Inergy, L.P..........................   18
  Tax Risks To Common Unitholders.........................................   21

USE OF PROCEEDS...........................................................   24

CAPITALIZATION............................................................   25

PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS.............................   26

CASH DISTRIBUTION POLICY..................................................   27
  Distributions of Available Cash.........................................   27
  Operating Surplus and Capital Surplus...................................   27
  Subordination Period....................................................   28
  Distributions of Available Cash from Operating Surplus During the
   Subordination Period...................................................   30
  Distributions of Available Cash from Operating Surplus After the
   Subordination Period...................................................   30
  Incentive Distribution Rights...........................................   30
  Percentage Allocations of Available Cash from Operating Surplus.........   31
  Distributions from Capital Surplus......................................   31
  Adjustment to the Minimum Quarterly Distribution and Target Distribution
   Levels.................................................................   32
  Distributions of Cash Upon Liquidation..................................   32

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.....................   35

SELECTED HISTORICAL FINANCIAL AND OPERATING DATA..........................   45

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
 OPERATIONS...............................................................   49
  General.................................................................   49
  Inergy, L.P. and Inergy Partners, LLC...................................   51
  Independent Propane Company.............................................   55
  Hoosier Propane Group...................................................   56
  Liquidity and Capital Resources.........................................   59
  Description of Indebtedness.............................................   61
  Environmental Matters...................................................   63
  Recent Accounting Pronouncements........................................   64
  Critical Accounting Policies............................................   64
  Quantitative and Qualitative Disclosure About Market Risk...............   65
  Propane Price Risk......................................................   65

BUSINESS..................................................................   68
  General.................................................................   68
  Recent Acquisitions.....................................................   68
  Industry Background and Competition.....................................   69
  Competitive Strengths...................................................   71
  Retail Operations.......................................................   72
  Wholesale Supply, Marketing and Distribution Operations.................   74

                                       i

                                                                            Page
                                                                            ----
                                                                         
  Transportation Assets, Truck Fabrication and Maintenance.................  75
  Supply...................................................................  75
  Pricing Policy...........................................................  75
  Billing and Collection Procedures........................................  76
  Properties...............................................................  76
  Trademark and Tradenames.................................................  76
  Employees................................................................  77
  Government Regulation....................................................  77
  Litigation...............................................................  78

MANAGEMENT.................................................................  79
  Our Managing General Partner Manages Inergy, L.P.........................  79
  Directors and Executive Officers of Inergy GP, LLC.......................  79
  Reimbursement of Expenses of the Managing General Partner................  81
  Compensation of Directors................................................  81
  Executive Compensation...................................................  82
  Employment Agreements....................................................  84
  Long-Term Incentive Plan.................................................  85
  Unit Purchase Plan.......................................................  86

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............  87

SELLING UNITHOLDERS........................................................  90

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................  91
  Related Party Transactions...............................................  91

CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES.......................  94
  Conflicts of Interest....................................................  94

DESCRIPTION OF THE COMMON UNITS............................................  98
  The Units................................................................  98
  Transfer Agent and Registrar Duties......................................  98

DESCRIPTION OF THE SUBORDINATED UNITS...................................... 100
  Limited Voting Rights.................................................... 100
  Distributions Upon Liquidation........................................... 100

THE PARTNERSHIP AGREEMENT.................................................. 101
  Organization............................................................. 101
  Purpose.................................................................. 101
  Power of Attorney........................................................ 101
  Capital Contributions.................................................... 101
  Limited Liability........................................................ 102
  Issuance of Additional Securities........................................ 102
  Amendment of the Partnership Agreement................................... 103
  Action Relating to the Operating Company................................. 105
  Merger, Sale or Other Disposition of Assets.............................. 106
  Termination and Dissolution.............................................. 106
  Liquidation and Distribution of Proceeds................................. 106
  Withdrawal or Removal of the General Partners............................ 107
  Transfer of General Partner Interests.................................... 108
  Transfer of Incentive Distribution Rights................................ 108
  Transfer of Ownership Interests in General Partners...................... 109
  Change of Management Provisions.......................................... 109

                                       ii

                                                                            Page
                                                                            ----
                                                                         
  Limited Call Right....................................................... 109
  Meetings; Voting......................................................... 109
  Status as Limited Partner or Assignee.................................... 110
  Non-Citizen Assignees; Redemption........................................ 110
  Indemnification.......................................................... 111
  Books and Reports........................................................ 111
  Right to Inspect our Books and Records................................... 112
  Registration Rights...................................................... 112

UNITS ELIGIBLE FOR FUTURE SALE............................................. 113

TAX CONSIDERATIONS......................................................... 114
  Partnership Status....................................................... 114
  Limited Partner Status................................................... 116
  Tax Consequences of Unit Ownership....................................... 116
  Tax Treatment of Operations.............................................. 121
  Disposition of Common Units.............................................. 122
  Uniformity of Units...................................................... 123
  Tax-Exempt Organizations and Other Investors............................. 124
  Administrative Matters................................................... 125
  State, Local and Other Tax Considerations................................ 127

INVESTMENT IN INERGY, L.P. BY EMPLOYEE BENEFIT PLANS....................... 128

UNDERWRITING............................................................... 129

VALIDITY OF THE COMMON UNITS............................................... 131

EXPERTS.................................................................... 131

OTHER MATTERS.............................................................. 131

WHERE YOU CAN FIND MORE INFORMATION........................................ 132

FORWARD-LOOKING STATEMENTS................................................. 132

INDEX TO FINANCIAL STATEMENTS.............................................. F-1

Appendix A--Glossary of Terms.............................................. A-1

                                      iii

                       GUIDE TO READING THIS PROSPECTUS

   The following information should help you understand some of the
conventions used in this prospectus.

  . Throughout this prospectus,

   (1) when we use the terms "we," "us," or "Inergy, L.P.," we are referring
       either to Inergy, L.P., the registrant itself, or to Inergy, L.P. and
       its operating subsidiaries collectively, as the context requires, and

   (2) when we use the term "our predecessor," we are referring to Inergy
       Partners, LLC, the entity that conducted our business prior to our
       initial public offering, which closed on July 31, 2001. Inergy, L.P.
       was formed as a Delaware limited partnership on March 7, 2001 and did
       not have operations until the initial public offering. Our
       predecessor commenced operations in November 1996. The discussion of
       our business throughout this prospectus relates to the business
       operations of Inergy Partners, LLC prior to Inergy, L.P.'s initial
       public offering and Inergy, L.P. thereafter.

  . We have a managing general partner and a non-managing general partner.
    Our managing general partner is responsible for the management of our
    partnership and its operations are governed by a board of directors. Our
    managing general partner does not have rights to allocations or
    distributions from our partnership and does not receive a management fee,
    but it is reimbursed for expenses incurred on our behalf. Our non-
    managing general partner owns a 2% non-managing general partner interest
    in our partnership. Generally, we refer to each general partner as
    managing or non-managing, as the case may be. We collectively refer to
    our managing general partner and our non-managing general partner as our
    "general partners."

  . For ease of reference, a glossary of some terms used in this prospectus
    is included in this prospectus as Appendix A.

  . Unless otherwise specified, the information in this prospectus assumes
    that the underwriter's over-allotment option is not exercised.

                                      iv

                               PROSPECTUS SUMMARY

   This summary highlights selected information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including the
historical and pro forma financial statements and the notes to those financial
statements. You should read "Risk Factors" beginning on page 14 for more
information about important factors that you should consider before buying
common units.

                                  INERGY, L.P.

Our Business

   We own and operate a rapidly growing retail and wholesale propane marketing
and distribution business. Since our predecessor's inception in November 1996,
we have acquired thirteen propane companies for an aggregate purchase price of
approximately $230 million, including working capital, assumed liabilities and
acquisition costs. For the fiscal year ended September 30, 2001, on a pro forma
combined basis, we sold approximately 117 million gallons of propane to retail
customers and approximately 262 million gallons of propane to wholesale
customers.

   Our retail business includes the retail marketing, sale and distribution of
propane to residential, commercial, industrial and agricultural customers. We
market our propane products primarily under six regional brand names and serve
approximately 190,000 retail customers in Arkansas, Florida, Georgia, Illinois,
Indiana, Michigan, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee,
Texas, Virginia and Wisconsin from 99 customer service centers. In addition to
our retail business, we operate a wholesale supply, marketing and distribution
business providing propane procurement, transportation, supply and price risk
management services. We currently provide wholesale supply, marketing and
distribution services to approximately 350 customers in 24 states, primarily in
the Midwest and Southeast.

Recent Developments

 Recent Acquisitions

   Independent Propane Company Acquisition. In December 2001, we acquired the
assets of Independent Propane Company Holdings, which we refer to in this
prospectus as IPC, through an affiliate of our managing general partner for
approximately $96.8 million, including approximately $7.5 million paid for net
working capital.

   IPC's principal business is the retail sale of propane throughout its branch
network in Texas, Oklahoma, Arkansas, Tennessee, South Carolina, Georgia, and
Florida. For the twelve months ended September 30, 2001, IPC sold approximately
49.8 million retail gallons of propane to approximately 116,000 customers
through its 44 branches and 24 satellite locations. For the year ended
September 30, 2001, IPC sold 74% of its volumes to individual homeowners, 20%
to commercial accounts and 6% to agricultural customers.

   Pro Gas Acquisition. In November 2001, we acquired the operations of the Pro
Gas affiliated companies, which we refer to collectively in this prospectus as
Pro Gas. The acquisition included six retail operations and three satellite
bulk storage facilities in Michigan. For the twelve months ended September 30,
2001, Pro Gas delivered approximately 12.4 million gallons of propane to
approximately 12,000 customers.

   Secured Notes Offering. Our operating company, Inergy Propane, LLC, expects
to enter into a note purchase agreement with a group of institutional lenders
pursuant to which our operating company will issue $85.0 million of senior
secured notes with a weighted average interest rate of 9.07% and a weighted
average

                                       1

maturity of 5.9 years. We currently expect to enter into the note purchase
agreement in June 2002. The material covenants of the note purchase agreement
relating to the senior secured notes will be similar to the covenants contained
in our bank credit facility, including the obligation of Inergy Propane to
maintain certain financial ratios. We intend to use the net proceeds from the
senior secured notes offering to repay indebtedness under our bank credit
facility.

Summary of Risk Factors

   An investment in our common units involves risks associated with our
business, our partnership structure and the tax characteristics of our common
units. Please carefully read the risks relating to these matters described
under "Risk Factors."

 Risks Inherent in Our Business

  . We may not be able to generate sufficient cash from operations to allow
    us to pay the minimum quarterly distribution.

  . Since weather conditions may adversely affect the demand for propane, our
    financial condition and results of operations are vulnerable to, and will
    be adversely affected by, warm winters.

  . If we do not continue to make acquisitions on economically acceptable
    terms, our future financial performance will be limited.

  . We cannot assure you that we will be successful in integrating our recent
    acquisitions.

  . Sudden and sharp propane price increases that cannot be passed on to
    customers may adversely affect our profit margins.

  . Our indebtedness may limit our ability to borrow additional funds, make
    distributions to you or capitalize on acquisition or other business
    opportunities.

  . The highly competitive nature of the retail propane business could cause
    us to lose customers, thereby reducing our revenues.

  . If we are not able to purchase propane from our principal suppliers, our
    results of operations would be adversely affected.

  . Competition from alternative energy sources may cause us to lose
    customers, thereby reducing our revenues.

  . Terrorists attacks, such as the attacks that occurred on September 11,
    2001, have resulted in increased costs, and future war or risk of war may
    adversely impact our results of operations.

  . Our business would be adversely affected if service at our principal
    storage facilities or on the common carrier pipelines we use is
    interrupted.

  . We are subject to operating and litigation risks that could adversely
    affect our operating results to the extent not covered by insurance.

  . Our results of operations and financial condition may be adversely
    affected by governmental regulation and associated environmental and
    regulatory costs.

  . Energy efficiency and new technology may reduce the demand for propane.

  . Due to our lack of asset diversification, adverse developments in our
    propane business would reduce our ability to make distributions to
    unitholders.

                                       2

 Risks Inherent in an Investment in Inergy, L.P.

  . Unitholders have less ability to elect or remove management than holders
    of common stock in a corporation.

  . Our managing general partner has a limited call right that may require
    you to sell your common units at an undesirable time or price.

  . Cost reimbursements due our managing general partner may be substantial
    and reduce our ability to pay the minimum quarterly distribution.

  . We may issue additional common units without your approval, which would
    dilute your existing ownership interests.

  . You may not have limited liability if a court finds that unitholder
    actions constitute control of our business.

  .  Our general partners have conflicts of interest and limited fiduciary
     responsibilities, which may permit our general partners to favor their
     own interests to the detriment of unitholders.

 Tax Risks to Common Unitholders

  .  The IRS could treat us as a corporation for tax purposes, which would
     substantially reduce the cash available for distribution to you.

  .  A successful IRS contest of the federal income tax positions we take may
     adversely affect the market for common units.

  .  You may be required to pay taxes on your share of our income even if you
     do not receive any cash distributions from us.

Our Competitive Strengths

   We believe that we are well positioned to compete in the propane industry.
Our competitive strengths include:

  .  Proven Acquisition Expertise. Our executive officers and key employees,
     who average more than 15 years experience in the propane industry, have
     significant industry contacts that have enabled us to negotiate all
     thirteen of our acquisitions on an exclusive basis. This acquisition
     expertise should allow us to continue to grow through strategic and
     accretive acquisitions that complement our existing operations.

  .  Internal Growth. We consistently promote internal growth in our retail
     operations through a combination of marketing programs and employee
     incentives. We also provide various financial and other services,
     including level payment, fixed price and price cap programs, supply,
     repair and maintenance contracts, and 24-hour customer service, in order
     to attract new customers and retain existing customers.

  .  Operations in High Growth Markets. A majority of our operations are
     concentrated in higher-than-average population growth areas, where
     natural gas distribution is not cost effective. We intend to pursue
     acquisitions in similar high growth markets.

  .  Regional Branding. We believe that our success in generating internal
     growth at our customer service centers results from our established,
     locally recognized trade names. We attempt to capitalize on the
     reputation of the companies we acquire by retaining their local brand
     names and employees, thereby preserving the goodwill of the acquired
     business and fostering employee loyalty and customer retention.

                                       3

  .  High Percentage of Retail Sales to Residential Customers. Our retail
     propane operations concentrate on sales to residential customers who
     generate higher margins and are generally more stable purchasers than
     other customers. For the fiscal year ended September 30, 2001, sales to
     residential customers represented approximately 72% of our retail
     propane gallons sold and approximately 75% of our retail propane gross
     profits, on a pro forma combined basis.

  .  Strong Wholesale Supply, Marketing and Distribution Business. Our
     wholesale business provides us with growing revenues as well as valuable
     market intelligence and awareness of potential acquisition
     opportunities. In addition, these operations help us achieve a secure,
     efficient source of supply and product cost advantages for our customer
     service centers. Moreover, the presence of our trucks serving our
     wholesale customers across the Midwest and Southeast allows us to take
     advantage of various pricing and distribution inefficiencies that exist
     in the market from time to time.

  .  Flexible Financial Structure. We have a $75.0 million revolving credit
     facility for acquisitions and a $50.0 million revolving working capital
     facility. Upon completion of this offering and our senior secured notes
     offering, we expect to have available capacity of approximately $60.0
     million under our acquisition facility and approximately $49.0 million
     under our working capital facility. We believe our available capacity
     under these facilities combined with our ability to fund acquisitions
     through the issuance of additional partnership interests will provide us
     with a flexible financial structure that will facilitate our acquisition
     strategy.

   Our primary objective is to increase distributable cash flow for our
unitholders, while maintaining the highest level of commitment and service to
our customers. We intend to pursue this objective by capitalizing on our
competitive strengths.

Distribution History

   We have made distributions of available cash to all of our unitholders for
one partial quarter and two full quarters since our initial public offering on
July 31, 2001:

                                                 Distributions Paid Per Unit
                                               ---------------------------------
                                                          Senior       Junior
                                               Common  Subordinated Subordinated
                                               ------  ------------ ------------
                                                           
Fiscal Year 2002
  Quarter ended March 31, 2002................ $0.660     $0.660       $0.660
  Quarter ended December 31, 2001.............  0.625      0.625        0.625
Fiscal Year 2001
  Quarter ended September 30, 2001............  0.400*     0.400*       0.400*

- --------
* Represents a partial quarterly distribution for the period from July 31,
  2001, the date of our initial public offering, through September 30, 2001,
  the end of our fourth fiscal quarter.

   For the quarter ended March 31, 2002, we distributed $0.66 per unit,
representing $0.06 in excess of the minimum quarterly distribution on all of
our outstanding units. In accordance with the terms of our partnership
agreement, an affiliate of our general partners will receive increasing
percentages, up to 48%, of the cash we distribute in excess of $0.66 per unit.

Industry Background

   Propane, a by-product of natural gas processing and petroleum refining, is a
clean-burning energy source recognized for its transportability and ease of use
relative to alternative stand-alone energy sources. Our retail propane business
consists principally of transporting propane to our customer service centers
and other

                                       4

distribution areas and then to tanks located on our customers' premises. Retail
propane falls into three broad categories: residential, industrial and
commercial and agricultural. Residential customers use propane primarily for
space and water heating. Industrial customers use propane primarily as fuel for
forklifts and stationary engines, to fire furnaces, as a cutting gas, in mining
operations and in other process applications. Commercial customers, such as
restaurants, motels, laundries and commercial buildings, use propane in a
variety of applications, including cooking, heating and drying. In the
agricultural market, propane is primarily used for tobacco curing, crop drying,
poultry brooding and weed control.

   According to the American Petroleum Institute, the domestic retail market
for propane is approximately 12.1 billion gallons annually. This represents
approximately 5% of household energy consumption in the United States. The
propane distribution industry is characterized by a large number of relatively
small, independently owned and operated local distributors. Each year a
significant number of these local distributors have sought to sell their
businesses for reasons that include retirement and estate planning. In
addition, the propane industry faces increasing environmental regulations and
escalating capital requirements needed to acquire advanced, customer-oriented
technologies. Primarily as a result of these factors, the industry is
undergoing consolidation, and we, as well as other national and regional
distributors, have been active consolidators in the propane market. In recent
years, an active, competitive market has existed for the acquisition of propane
assets and businesses. We expect this acquisition market to continue for the
foreseeable future.

                                       5

        SUMMARY OF CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

   Inergy GP, LLC, our managing general partner, has a legal duty to manage us
in a manner beneficial to our unitholders. This legal duty originates in
statutes and judicial decisions and is commonly referred to as a "fiduciary"
duty. However, because our managing general partner is a subsidiary of Inergy
Holdings, LLC (generally referred to as Inergy Holdings in this prospectus),
its officers and directors also have fiduciary duties to manage our managing
general partner's business in a manner beneficial to the members of Inergy
Holdings. As a result of these relationships and others, conflicts of interest
may arise in the future between us and our unitholders, on the one hand, and
our general partners and their affiliates, on the other. For a more detailed
description of the conflicts of interest and fiduciary responsibilities of our
general partners, please read "Conflicts of Interest and Fiduciary
Responsibilities."

   Our partnership agreement limits the liability and reduces the fiduciary
duties owed by our general partners to the unitholders. Our partnership
agreement also restricts the remedies available to unitholders for actions that
might otherwise constitute breaches of our general partners' fiduciary duties.
By purchasing a common unit, you are treated as having consented to various
actions contemplated in the partnership agreement and conflicts of interest
that might otherwise be considered a breach of fiduciary or other duties under
applicable state law.

                      PARTNERSHIP STRUCTURE AND MANAGEMENT

   Our operations are conducted through, and our operating assets are owned by,
our subsidiaries. We own our interests in our subsidiaries through our
operating company, Inergy Propane, LLC.

  .  We own a 100% membership interest in Inergy Propane, LLC. Our membership
     interest in Inergy Propane, LLC carries economic and voting rights.

  .  Inergy GP, LLC, our managing general partner, has sole responsibility
     for conducting our business and managing our operations. Our managing
     general partner's only interest in us is its management rights. Inergy
     GP, LLC has no economic interest in our partnership and does not receive
     a management fee, but it is reimbursed for expenses incurred on our
     behalf.

  .  Inergy Partners, LLC, our non-managing general partner, owns a 2% non-
     managing general partner interest in us. The 2% general partner interest
     is entitled to its proportionate share of allocations and distributions
     in our partnership. Our non-managing general partner has no operational
     or managerial responsibilities under our partnership agreement. In this
     prospectus, we refer to the interest owned by the non-managing general
     partner as its 2% general partner interest.

  .  Inergy Holdings, LLC owns 100% of each of our managing general partner
     and our non-managing general partner. Inergy Holdings also owns all of
     the "incentive distribution rights," which entitle it to receive
     increasing percentages, up to 48%, of any cash we distribute in excess
     of $0.66 per unit in any quarter. Additionally, Inergy Holdings, LLC and
     its affiliates own 404,601 common units, representing an aggregate
     limited partner interest in us of approximately 5.2% after this
     offering.

  .  New Inergy Propane, LLC, a wholly-owned subsidiary of our non-managing
     general partner, owns 959,954 senior subordinated units and 507,063
     junior subordinated units, representing an aggregate limited partner
     interest in us of approximately 19.0% after this offering.

   Our principal executive offices are located at 1101 Walnut St., Suite 1500,
Kansas City, Missouri 64106, and our phone number is (816) 842-8181.

   The chart on the following page depicts our organization and ownership after
giving effect to this offering.

                                       6

                                           
                                              ----------------------------------------------------
                                                  Ownership of Inergy, L.P. after the offering:
                                                Common units...........................     47.6%
- --------------------------                      Senior subordinated units..............     43.0%
    Public Unitholders                          Junior subordinated units..............      7.4%
  3,268,012 Common Units                        General partner interest...............      2.0%
- --------------------------                                                                 ------
       |                                                                                    100.0%
       |                                                                                    ------
       |                                       ----------------------------------------------------
       |
       |       ---------------------------------------                             ---------------------------
       |                  Owners of Certain                                           Inergy Holdings, LLC
       |                 Acquired Businesses                                           and its affiliates
       |                 and Other Investors                                          404,601 Common Units
       |         2,353,413 Senior Subordinated Units                ____________      Incentive Distribution    ____________
       |           65,479 Junior Subordinated Units                |                         Rights                        |
       |       ----------------------------------------            |               ---------------------------             |
       |                 |                                         |                              |                        |
       |                 |                                         |                              |                        |
       |                 |                                         |                              |                        |
       |                 |                        100% membership interest                        |                        |
       |                 |                                    |                                   |                        |
       |                 |                                    |                        100% membership interest            |
       |                 |                                    |                                   |                        |
       |                 |                        ------------------------               --------------------              |
       |                 |                          Inergy Partners, LLC                    Inergy GP, LLC                 |
      42.4% limited      |             _________    (The Non-managing                       (The Managing                  |
     partner interest    |             |             General Partner)                       General Partner)               |
       |                 |             |          ------------------------                --------------------             |
       |                 |             |                       |                                  |                        |
       |                 |             |           100% membership interest                       |                        |
       |                 |             |                       |                                  |                        |
       |                 |             |                       |                                  |                        |
       |                 |             |            ---------------------------                   |                        |
       |                 |             |              New Inergy Propane, LLC                     |                        |
       |                 |     2% non-managing            959,954 Senior                          |                        |
       |                 |         general              Subordinated Units             management rights                   |
       |                 |      partner interest          507,063 Junior                   /                               |
       |                 |             |                Subordinated Units               /                                 |
       |                               |            ----------------------------       /                                   |
       |           31.4% limited       |                        |                    /                                     |
       |         partner interest      |          19.0% limited partner interest   /                                       |
       |                               |                        |                /                  5.2% limited           |
       |                 |             |                        |              /                  partner interest   _____ |
       |                 |             |                                     /                            |
       |                 |             |                                                                  |
       |                 |             |                ---------------                                   |
       |                 |             |______________                      ______________________________|
       |                 |                                Inergy, L.P.
       |                 |____________________________  (The Partnership)
       |______________________________________________
                                                        ---------------
                                                               |
                                                               |
                                                     100% membership interest
                                                               |
                                                     -------------------------
                                                        Inergy Propane, LLC
                                                           (The Operating
                                                              Company)
                                                     -------------------------

                                       7

                                  The Offering

Common units offered by
Inergy, L.P. .............
                              1,054,741 common units.

                              1,264,741 common units if the underwriter
                              exercises its over-allotment option in full.

Common units offered by
the selling unitholders
............................    345,259 common units. For information about
                              the selling unitholders, please read "Selling
                              Unitholders."

Units outstanding after
this offering ............
                              3,672,613 common units, representing a 47.6%
                              limited partner interest in Inergy, L.P.;
                              3,313,367 senior subordinated units,
                              representing a 43.0% limited partner interest
                              in Inergy, L.P.; and 572,542 junior
                              subordinated units, representing a 7.4%
                              limited partner interest in Inergy, L.P.

Cash distributions .......    Common units are entitled to receive
                              distributions of available cash of $0.60 per
                              quarter, or $2.40 on an annualized basis,
                              before any distributions are paid on our
                              subordinated units.

                              In general, we will pay any cash
                              distributions we make each quarter in the
                              following manner:

                              . first, 98% to the common units and 2% to the
                                non-managing general partner, until each common
                                unit has received a minimum quarterly
                                distribution of $0.60 plus any arrearages from
                                prior quarters;

                              . second, 98% to the senior subordinated units
                                and 2% to the non-managing general partner,
                                until each senior subordinated unit has
                                received a minimum quarterly distribution of
                                $0.60;

                              . third, 98% to the junior subordinated units and
                                2% to the non-managing general partner, until
                                each junior subordinated unit has received a
                                minimum quarterly distribution of $0.60; and

                              . fourth, 98% to all units, pro rata, and 2% to
                                the non-managing general partner, until each
                                unit has received a distribution of $0.66 per
                                quarter.

                              If cash distributions exceed $0.66 per unit
                              in any quarter, Inergy Holdings will receive
                              increasing percentages, up to 48%, of the
                              cash we distribute in excess of that amount.
                              We refer to Inergy Holdings' right to receive
                              these higher amounts of cash as "incentive
                              distribution rights."

                              We must distribute all of our cash on hand at
                              the end of each quarter, less reserves
                              established by our managing general partner.
                              We refer to this cash as "available cash,"
                              and we define its meaning in our partnership
                              agreement and in the glossary in

                                       8

                              Appendix A. The amount of available cash may
                              be greater than or less than the minimum
                              quarterly distribution.

Timing of distributions       We pay distributions approximately 45 days
............................    after March 31, June 30, September 30 and
                              December 31 to unitholders of record on the
                              applicable record date and to our non-
                              managing general partner.

Subordination period .....    The subordination period will end once we
                              meet the financial tests in the partnership
                              agreement, but it generally cannot end before
                              June 30, 2006 with respect to the senior
                              subordinated units and June 30, 2008 with
                              respect to the junior subordinated units.

                              When the applicable subordination period
                              ends, all remaining senior subordinated units
                              or junior subordinated units, as applicable,
                              will convert into common units on a one-for-
                              one basis. Once all subordinated units have
                              been converted into common units, the common
                              units will no longer be entitled to
                              arrearages.

Early conversion of
subordinated units .......
                              If we meet the applicable financial tests in
                              the partnership agreement for any quarter
                              ending on or after June 30, 2004, 25% of the
                              senior subordinated units will convert into
                              common units. If we meet these tests for any
                              quarter ending on or after June 30, 2005, an
                              additional 25% of the senior subordinated
                              units will convert into common units. The
                              early conversion of the second 25% of the
                              senior subordinated units may not occur until
                              at least one year after the early conversion
                              of the first 25% of the senior subordinated
                              units.

                              If we meet the applicable financial tests in
                              the partnership agreement for any quarter
                              ending on or after June 30, 2006, 25% of the
                              junior subordinated units will convert into
                              common units. If we meet these tests for any
                              quarter ending on or after June 30, 2007, an
                              additional 25% of the junior subordinated
                              units will convert into common units. The
                              early conversion of the second 25% of the
                              junior subordinated units may not occur until
                              at least one year after the early conversion
                              of the first 25% of the junior subordinated
                              units.

                              Notwithstanding the foregoing, all
                              outstanding junior subordinated units may
                              convert into common units on a one-for-one
                              basis on or after June 30, 2006, if we have
                              paid a distribution of at least $2.80 on each
                              outstanding unit for each of the three
                              preceding non-overlapping four-quarter
                              periods, all of the senior subordinated units
                              have been converted into common units, and we
                              have met other applicable financial tests in
                              the partnership agreement.

Issuance of additional        In general, while any senior subordinated
units ....................    units remain outstanding, we may not issue
                              more than 800,000 additional common units
                              without obtaining unitholder approval. We
                              may, however, issue an

                                       9

                              unlimited number of common units in
                              connection with acquisitions that increase
                              cash flow from operations per unit on a pro
                              forma basis. We refer to acquisitions which
                              increase cash flow from operations on a per
                              unit basis as "accretive."

Voting rights ............    Unlike the holders of common stock in a
                              corporation, you will have only limited
                              voting rights on matters affecting our
                              business. You will have no right to elect our
                              managing general partner or its directors on
                              an annual or other continuing basis. The
                              managing general partner may not be removed
                              except by the vote of the holders of at least
                              66 2/3% of the outstanding units, including
                              units owned by the general partners and their
                              affiliates.

Limited call right .......    If at any time not more than 20% of the
                              outstanding common units are held by persons
                              other than our general partners and their
                              affiliates, our managing general partner has
                              the right, but not the obligation, to
                              purchase all of the remaining common units at
                              a price not less than the then current market
                              price of the common units.

Estimated ratio of
taxable income to
distributions ............
                              We estimate that if you own the common units
                              you purchase in this offering through
                              December 31, 2004, you will be allocated, on
                              a cumulative basis, an amount of federal
                              taxable income for that period that will be
                              no more than 20% of the cash distributed to
                              you with respect to that period.

                              Please read "Tax Considerations--Tax
                              Treatment of Unitholders--Ratio of Taxable
                              Income to Distributions" for the basis of
                              this estimate.

Exchange listing .........    Our common units are traded on the Nasdaq
                              National Market under the symbol "NRGY."

                                       10

                 SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA

   The summary pro forma financial and operating data of Inergy, L.P. reflect
the consolidated historical operating results of Inergy, L.P., and our
predecessor, Inergy Partners, LLC., the Hoosier Propane Group, Pro Gas and IPC,
as adjusted for this offering, the senior secured notes offering, our initial
public offering and the related acquisition transactions. The summary pro forma
financial data are derived from the unaudited pro forma financial statements.
The pro forma balance sheet assumes that this offering and the senior secured
notes offering occurred on March 31, 2002. The pro forma statements of income
assume that the Hoosier Propane Group, Pro Gas and IPC acquisitions, our
initial public offering, this offering and the senior secured notes offering
occurred on October 1, 2000. For a description of all of the assumptions used
in preparing the summary pro forma and pro forma, as adjusted financial data,
you should read the notes to the pro forma financial statements for Inergy,
L.P. The pro forma financial and operating data should not be considered as
indicative of the historical results we would have had or future results.

   We define EBITDA as shown in the table on page 12 and elsewhere in this
prospectus as income before income taxes, plus interest expense and
depreciation and amortization expense, less interest income. EBITDA should not
be considered an alternative to net income, income before income taxes, cash
flows from operating activities, or any other measure of financial performance
calculated in accordance with generally accepted accounting principles as those
items are used to measure operating performance, liquidity or ability to
service debt obligations. We believe that EBITDA provides additional
information for evaluating our ability to make the minimum quarterly
distribution and is presented solely as a supplemental measure. EBITDA, as we
define it, may not be comparable to EBITDA or similarly titled measures used by
other corporations or partnerships.

   The following table should be read together with, and is qualified in its
entirety by reference to, the historical and pro forma financial statements and
the accompanying notes included in this prospectus. The table should also be
read together with "Selected Historical Financial and Operating Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

                                       11

                                  Year Ended              Six Months Ended
                              September 30, 2001           March 31, 2002
                          -------------------------- --------------------------
                                        Pro Forma As               Pro Forma As
                          Pro Forma (a) Adjusted (b) Pro Forma (a) Adjusted (b)
                          ------------- ------------ ------------- ------------
                                 (in thousands, except per unit amounts)
                                                       
Statement of Income
 Data:
Revenues................    $350,420      $350,420     $178,823      $178,823
Cost of product sold....     258,510       258,510      119,984       119,984
                            --------      --------     --------      --------
Gross profit............      91,910        91,910       58,839        58,839
Expenses:
 Operating and
  administrative........      52,118        52,118       28,048        28,048
 Depreciation and
  amortization..........      13,066        13,066        6,258         6,258
                            --------      --------     --------      --------
Operating income........      26,726        26,726       24,533        24,533
Other income (expense):
 Interest expense.......     (12,642)      (11,595)      (4,344)       (5,582)
 Interest income........         238           238            6             6
 Gain (loss) on sale of
  property, plant and
  equipment.............          46            46         (119)         (119)
 Finance charges........         302           302           85            85
 Other..................         246           246           39            39
                            --------      --------     --------      --------
Income before income
 taxes..................      14,916        15,963       20,200        18,962
Provision for income
 taxes..................          39            39           52            52
                            --------      --------     --------      --------
Net income..............    $ 14,877      $ 15,924     $ 20,148      $ 18,910
                            ========      ========     ========      ========
Non-managing general
 partner's interest in
 net income.............    $    298      $    318     $    403      $    378
                            ========      ========     ========      ========
Limited partners'
 interest in net
 income.................    $ 14,579      $ 15,606     $ 19,745      $ 18,532
                            ========      ========     ========      ========
Net income per limited
 partner unit:
 Basic..................    $   2.24      $   2.06     $   3.04      $   2.45
                            ========      ========     ========      ========
 Diluted................    $   2.22      $   2.05     $   2.99      $   2.42
                            ========      ========     ========      ========
Weighted average limited
 partners' units
 outstanding:
 Basic..................       6,504         7,559        6,504         7,559
                            ========      ========     ========      ========
 Diluted................       6,569         7,624        6,595         7,650
                            ========      ========     ========      ========
Balance Sheet Data (end
 of period):
Current assets..........                                             $ 53,049(c)
Total assets............                                              272,430(c)
Long-term debt,
 including current
 portion................                                              109,675(c)
Partners' capital.......                                              137,039(c)

Other Financial Data:
EBITDA..................    $ 40,386      $ 40,386     $ 30,796      $ 30,796
Maintenance capital
 expenditures (d).......       3,428         3,428          981           981
Reconciliation of Net
 Income to EBITDA:
Net income..............    $ 14,877      $ 15,924     $ 20,148      $ 18,910
Plus:
 Income taxes...........          39            39           52            52
 Interest expense.......      12,642        11,595        4,344         5,582
 Depreciation and
  amortization expense..      13,066        13,066        6,258         6,258
                            --------      --------     --------      --------
                              40,624        40,624       30,802        30,802
Less:
 Interest income........         238           238            6             6
                            --------      --------     --------      --------
EBITDA..................    $ 40,386      $ 40,386     $ 30,796      $ 30,796
                            ========      ========     ========      ========

Other Operating Data:
Retail propane gallons
 sold...................     117,476       117,476       64,392        64,392
Wholesale propane
 gallons sold...........     262,335       262,335      231,079       231,079

                                                   (footnotes on following page)

                                       12

- --------
(a) Reflects the acquisitions of the Hoosier Propane Group, Pro Gas and IPC,
    the financing in connection with these acquisitions, and the initial public
    offering and transactions whereby Inergy, L.P. became the successor to the
    business of our predecessor, as if all such transactions took place on
    October 1, 2000.
(b) In addition to the transactions described in footnote (a) above, reflects
    the proceeds from this offering and the senior secured notes offering,
    including interest expense adjustments resulting from the repayment of debt
    under our bank credit facility with the proceeds of this offering and the
    refinancing of $85.0 million of remaining debt under our bank credit
    facility as if this offering and the senior secured notes offering took
    place on October 1, 2000.
(c) Assumes that this offering and the senior secured notes offering took place
    on March 31, 2002.
(d) Capital expenditures fall generally into three categories: (1) growth
    capital expenditures, which include expenditures for the purchase of new
    propane tanks and other equipment to facilitate expansion of our retail
    customer base, (2) maintenance capital expenditures, which include
    expenditures for repair and replacement of property, plant and equipment,
    and (3) acquisition capital expenditures.

                                       13

                                 RISK FACTORS

   Limited partner interests are inherently different from capital stock of a
corporation, although many of the business risks to which we are subject are
similar to those that would be faced by a corporation engaged in a similar
business. You should carefully consider the following risk factors together
with all of the other information included in this prospectus in evaluating an
investment in the common units.

   If any of the following risks were actually to occur, our business,
financial condition or results of operations could be materially adversely
affected. In that case, the trading price of our common units could decline
and you could lose all or part of your investment.

Risks Inherent in our Business

 We may not be able to generate sufficient cash from operations to allow us to
 pay the minimum quarterly distribution.

   The amount of cash we can distribute on our common units depends upon the
amount of cash we generate from our operations. The amount of cash we generate
from our operations will fluctuate from quarter to quarter and will depend
upon, among other things, the temperatures in our operating areas, the cost to
us of the propane we buy for resale, the level of competition from other
propane companies and other energy providers and prevailing economic
conditions. In addition, the actual amount of cash available for distribution
will also depend on other factors, such as the level of capital expenditures
we make, debt service requirements, fluctuations in working capital needs, our
ability to borrow under our working capital facility to make distributions,
and the amount, if any, of cash reserves established by the managing general
partner in its discretion for the proper conduct of our business. Because of
all these factors, we may not have sufficient available cash each quarter to
be able to pay the minimum quarterly distribution.

   Furthermore, you should be aware that the amount of cash we have available
for distribution depends primarily upon our cash flow, including cash flow
from financial reserves and working capital borrowings, and is not solely a
function of profitability, which will be affected by non-cash items. As a
result, we may make cash distributions during periods when we record losses
and may not make cash distributions during periods when we record net income.

 Since weather conditions may adversely affect the demand for propane, our
 financial condition and results of operations are vulnerable to, and will be
 adversely affected by, warm winters.

   Weather conditions have a significant impact on the demand for propane
because our customers depend on propane principally for heating purposes. As a
result, warm weather conditions will adversely impact our operating results
and financial condition. On a pro forma basis for the fiscal year ended
September 30, 2001, approximately 75% of our retail propane volume and
approximately 73% of our gross profit was attributable to sales during the
peak heating season of October through March. Actual weather conditions can
substantially change from one year to the next. Furthermore, warmer than
normal temperatures in one or more regions in which we operate can
significantly decrease the total volume of propane we sell. Consequently, our
operating results may vary significantly due to actual changes in temperature.
During the fiscal years ended September 30, 1999 and 2000, temperatures were
significantly warmer than normal in our areas of operation. Similarly, the
first half of fiscal 2002 was significantly warmer than normal in our areas of
operations. We believe that our results of operations during these periods
were adversely affected primarily due to this abnormally warm weather.

 If we do not continue to make acquisitions on economically acceptable terms,
 our future financial performance will be limited.

   The propane industry is not a growth industry because of increased
competition from alternative energy sources. In addition, as a result of
longstanding customer relationships that are typical in the retail home

                                      14

propane industry, the inconvenience of switching tanks and suppliers and
propane's higher cost as compared to certain other energy sources, we may have
difficulty in increasing our retail customer base other than through
acquisitions. Therefore, while our business strategy includes internal growth,
our ability to grow will depend principally on acquisitions. Our future
financial performance depends on our ability to continue to make acquisitions
at attractive prices. We cannot assure you that we will be able to continue to
identify attractive acquisition candidates in the future or that we will be
able to acquire businesses on economically acceptable terms. In particular,
competition for acquisitions in the propane business has intensified and
become more costly. We may not be able to grow as rapidly as we expect through
acquiring additional businesses after this offering closes for various
reasons, including the following:

  .  We will use our cash from operations primarily for reinvestment in our
     business and distributions to unitholders. Consequently, the extent to
     which we are unable to use cash or access capital to pay for additional
     acquisitions may limit our growth and impair operating results. Further,
     we are subject to certain debt incurrence covenants in our revolving
     credit facility and senior secured notes that may restrict our ability
     to incur additional debt to finance acquisitions. In addition, any new
     debt we incur to finance acquisitions may adversely affect our ability
     to make distributions to our unitholders.

  .  Although we intend to use common units as an acquisition currency, some
     prospective sellers may not be willing to accept units as consideration
     and their issuance in some circumstances may be dilutive to our existing
     unitholders.

   Moreover, acquisitions involve potential risks, including:

  .  the inability to integrate the operations of recently acquired
     businesses,

  .  the diversion of management's attention from other business concerns,

  .  customer or key employee loss from the acquired businesses, and

  .  a significant increase in our indebtedness.

 We cannot assure you that we will be successful in integrating our recent
 acquisitions.

   We have recently completed the IPC and Pro Gas acquisitions, which
geographically expanded our operations into several new states, including
Arkansas, Florida, Georgia, Oklahoma, South Carolina and Texas. For the year
ended September 30, 2001, the IPC and Pro Gas operations constituted 49% of
our pro forma gross profits and 47% of our pro forma EBITDA. We cannot assure
you that we will successfully integrate these acquisitions into our
operations, or that we will achieve the desired profitability from these
acquisitions. Failure to successfully integrate these substantial acquisitions
could adversely affect our operations and cash flows available for
distribution to our unitholders.

 Sudden and sharp propane price increases that cannot be passed on to
 customers may adversely affect our profit margins.

   The propane industry is a "margin-based" business in which gross profits
depend on the excess of sales prices over supply costs. As a result, our
profitability will be sensitive to changes in wholesale prices of propane
caused by changes in supply or other market conditions. When there are sudden
and sharp increases in the wholesale cost of propane, we may not be able to
pass on these increases to our customers through retail or wholesale prices.
Propane is a commodity and the price we pay for it can fluctuate significantly
in response to supply or other market conditions. We have no control over
supply or market conditions. In addition, the timing of cost pass-throughs can
significantly affect margins. Sudden and extended wholesale price increases
could reduce our gross profits and could, if continued over an extended period
of time, reduce demand by encouraging our retail customers to conserve or
convert to alternative energy sources. Furthermore, on May 1, 2002, we entered
into a one-year contract to purchase all of Sunoco Inc. (R&M)'s propane
production at its Toledo, Ohio refinery, which is approximately 62 million
gallons per year. If we are unable to market all of this propane at
competitive prices, our gross profits and margins could be significantly
reduced.

                                      15

 Our indebtedness may limit our ability to borrow additional funds, make
 distributions to you or capitalize on acquisition or other business
 opportunities.

   Upon completion of this offering and the senior secured notes offering, we
expect our total outstanding long-term indebtedness to be approximately $104.0
million, including $85.0 million of senior secured notes, approximately $15.0
million under our acquisition facility and approximately $4.0 million of other
indebtedness. Our payment of principal and interest on the indebtedness will
reduce the cash available for distribution on our outstanding units. We will be
prohibited by our credit facility and the terms of our senior secured notes
from making cash distributions during an event of default under any of our
indebtedness. Furthermore, our leverage and various limitations in the credit
facility and the note purchase agreement relating to the senior secured notes
may reduce our ability to incur additional indebtedness, to engage in some
transactions and to capitalize on acquisition or other business opportunities.

   In addition, our credit facility contains provisions relating to change of
control of our managing general partner, our partnership and our operating
company. If these provisions are triggered, such outstanding indebtedness may
become due. In such event, there is no assurance that we would be able to pay
the indebtedness, in which case the lenders would have the right to foreclose
on our assets, which would have a material adverse effect on us. There is no
restriction on the ability of our general partners to enter into a transaction
which would trigger the change of control provisions.

   Please read "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Description of Indebtedness." Any subsequent refinancing
of our current indebtedness or any new indebtedness could have similar or
greater restrictions.

 The highly competitive nature of the retail propane business could cause us to
 lose customers, thereby reducing our revenues.

   We have competitors and potential competitors who are larger and have
substantially greater financial resources than we do, which may provide them
with some advantages. Also, because of relatively low barriers to entry into
the retail propane business, numerous small retail propane distributors, as
well as companies not engaged in retail propane distribution, may enter our
markets and compete with us. Competition in the past several years has
intensified, partly as a result of warmer-than-normal weather and general
economic conditions. Most of our propane retail branch locations compete with
several marketers or distributors. The principal factors influencing
competition with other retail marketers are:

  .  price,

  .  reliability and quality of service,

  .  responsiveness to customer needs,

  .  safety concerns,

  .  long-standing customer relationships,

  .  the inconvenience of switching tanks and suppliers, and

  .  the lack of growth in the industry.

   We can make no assurances that we will be able to compete successfully on
the basis of these factors. If a competitor attempts to increase market share
by reducing prices, we may lose customers, which would reduce our revenues.

                                       16

 If we are not able to purchase propane from our principal suppliers, our
 results of operations would be adversely affected.

   During the fiscal year ended September 30, 2001, BP Amoco p.l.c., Louis
Dreyfus and Exxon Mobil Corporation each accounted for approximately 11% of our
volume of propane purchases on a pro forma combined basis. Most of these
purchases were made under supply contracts that have a term of one year, are
subject to annual renewal and provide various pricing formulas. On May 1, 2002,
we entered into a one-year contract to purchase all of Sunoco Inc. (R&M)'s
propane production at its Toledo, Ohio refinery, which is approximately 62
million gallons per year. In the event that we are unable to purchase propane
from Sunoco or our other significant suppliers, our failure to obtain alternate
sources of supply at competitive prices and on a timely basis would hurt our
ability to satisfy customer demand, reduce our revenues and adversely affect
our results of operations.

 Competition from alternative energy sources may cause us to lose customers,
 thereby reducing our revenues.

   Competition from alternative energy sources, including natural gas and
electricity, has been increasing as a result of reduced regulation of many
utilities, including natural gas and electricity. Propane is generally not
competitive with natural gas in areas where natural gas pipelines already exist
because natural gas is a less expensive source of energy than propane. The
gradual expansion of natural gas distribution systems and availability of
natural gas in many areas that previously depended upon propane could cause us
to lose customers, thereby reducing our revenues.

 Terrorist attacks, such as the attacks that occurred on September 11, 2001,
 have resulted in increased costs, and future war or risk of war may adversely
 impact our results of operations.

   The impact that the terrorist attacks of September 11, 2001 may have on the
energy industry in general, and on us in particular, is not known at this time.
Uncertainty surrounding retaliatory military strikes or a sustained military
campaign may affect our operations in unpredictable ways, including disruptions
of fuel supplies and markets, particularly oil, and the possibility that
infrastructure facilities, including pipelines, production facilities,
processing plants and refineries, could be direct targets of, or indirect
casualties of, an act of terror. We may have to incur additional costs in the
future to safeguard certain of our assets and we may be required to incur
significant additional costs in the future.

   The terrorist attacks on September 11, 2001 and the changes in the insurance
markets attributable to the September 11 attacks may make certain types of
insurance more difficult for us to obtain. We may be unable to secure the
levels and types of insurance we would otherwise have secured prior to
September 11, 2001. There can be no assurance that insurance will be available
to us without significant additional costs. A lower level of economic activity
could also result in a decline in energy consumption which could adversely
affect our revenues or restrict our future growth. Instability in the financial
markets as a result of terrorism or war could also affect our ability to raise
capital.

 Our business would be adversely affected if service at our principal storage
 facilities or on the common carrier pipelines we use is interrupted.

   Historically, a substantial portion of the propane purchased to support our
operations has originated at Conway, Kansas, Hattiesburg, Mississippi and Mont
Belvieu, Texas and has been shipped to us through major common carrier
pipelines. Any significant interruption in the service at these storage
facilities or on the common carrier pipelines we use would adversely affect our
ability to obtain propane.

 We are subject to operating and litigation risks that could adversely affect
 our operating results to the extent not covered by insurance.

   Our operations are subject to all operating hazards and risks incident to
handling, storing, transporting and providing customers with combustible
liquids such as propane. As a result, we may be a defendant in various

                                       17

legal proceedings and litigation arising in the ordinary course of business.
Our insurance may not be adequate to protect us from all material expenses
related to potential future claims for personal and property damage. In
addition, the occurrence of a serious accident, whether or not we are
involved, may have an adverse effect on the public's desire to use our
products.

 Our results of operations and financial condition may be adversely affected
 by governmental regulation and associated environmental and regulatory costs.

   The propane business is subject to a wide range of federal and state laws
and regulations related to environmental and other regulated matters. We may
have higher costs in the future due to stricter pollution control requirements
or liabilities resulting from non-compliance with operating or other
regulatory permits. New environmental regulations might adversely impact our
operations, as well as the storage and transportation of propane.

 Energy efficiency and new technology may reduce the demand for propane.

   The national trend toward increased conservation and technological
advances, including installation of improved insulation and the development of
more efficient furnaces and other heating devices, has adversely affected the
demand for propane by retail customers. Future conservation measures or
technological advances in heating, conservation, energy generation or other
devices might reduce demand for propane.

 Due to our lack of asset diversification, adverse developments in our propane
 business would reduce our ability to make distributions to our unitholders.

   We rely exclusively on the revenues generated from our propane business.
Due to our lack of asset diversification, an adverse development in this
business would have a significantly greater impact on our financial condition
and results of operations than if we maintained more diverse assets.

Risks Inherent in an Investment in Inergy, L.P.

 Unitholders have less ability to elect or remove management than holders of
 common stock in a corporation.

   Unlike the holders of common stock in a corporation, unitholders have only
limited voting rights on matters affecting our business, and therefore limited
ability to influence management's decisions regarding our business.
Unitholders did not elect our managing general partner or its board of
directors and will have no right to elect our managing general partner or its
board of directors on an annual or other continuing basis. The board of
directors of our managing general partner is chosen by the sole member of our
managing general partner, Inergy Holdings. Although our managing general
partner has a fiduciary duty to manage our partnership in a manner beneficial
to Inergy, L.P. and the unitholders, the directors of the managing general
partner have a fiduciary duty to manage the managing general partner in a
manner beneficial to its member, Inergy Holdings.

   Furthermore, if the unitholders are dissatisfied with the performance of
our managing general partner, they will have little ability to remove our
managing general partner. First of all, the managing general partner generally
may not be removed except upon the vote of the holders of 66 2/3% of the
outstanding units voting together as a single class. Because the general
partners and their affiliates, including our executive officers and directors,
will control approximately 31% of all the units upon completion of this
offering, it will be difficult to remove the managing general partner without
the consent of the general partners and our affiliates. Furthermore, if the
managing general partner is removed without cause during the subordination
period and units held by the general partners and their affiliates are not
voted in favor of that removal, all remaining subordinated units will
automatically be converted into common units and any existing arrearages on
the common units will be extinguished. A removal under these circumstances
would adversely affect the common units by prematurely eliminating their
distribution and liquidation preference over the subordinated units which
would otherwise have continued until we had met certain distribution and
performance tests.

                                      18

   Cause is narrowly defined to mean that a court of competent jurisdiction
has entered a final, non-appealable judgment finding the managing general
partner liable for actual fraud, gross negligence, or willful or wanton
misconduct in its capacity as our managing general partner. Cause does not
include most cases of charges of poor management of the business, so the
removal of the managing general partner because of the unitholders'
dissatisfaction with the managing general partner's performance in managing
our partnership will most likely result in the termination of the
subordination period.

   Furthermore, unitholders' voting rights are further restricted by the
partnership agreement provision providing that any units held by a person that
owns 20% or more of any class of units then outstanding, other than the
general partners and their affiliates, cannot be voted on any matter.

 The control of our managing general partner may be transferred to a third
 party without unitholder consent.

   The managing general partner may transfer its general partner interest to a
third party in a merger or in a sale of all or substantially all of its assets
without the consent of the unitholders. Furthermore, there is no restriction
in the partnership agreement on the ability of the owner of the managing
general partner, Inergy Holdings, from transferring its ownership interest in
the managing general partner to a third party. The new owner of the managing
general partner would then be in a position to replace the board of directors
and officers of the managing general partner with its own choices and to
control the decisions taken by the board of directors and officers.

 Our managing general partner has a limited call right that may require you to
 sell your common units at an undesirable time or price.

   If at any time less than 20% of the outstanding units of any class are held
by persons other than our general partners and their affiliates, our managing
general partner has the right to acquire all, but not less than all, of those
units held by the unaffiliated persons. The price for these units will not be
less than the then-current market price of the units. As a consequence, you
may be required to sell your common units at an undesirable time or price. Our
managing general partner may assign this acquisition right to any of its
affiliates or to the partnership.

 Cost reimbursements due our managing general partner may be substantial and
 reduce our ability to pay the minimum quarterly distribution.

   Prior to making any distributions on the units, we will reimburse our
managing general partner for all expenses it has incurred on our behalf. In
addition, our general partners and their affiliates may provide us with
services for which we will be charged reasonable fees as determined by the
managing general partner. The reimbursement of these expenses and the payment
of these fees could adversely affect our ability to make distributions to you.
Our managing general partner has sole discretion to determine the amount of
these expenses and fees. From July 31, 2001 until March 31, 2002, our general
partners and their affiliates incurred $7.0 million of direct and indirect
expenses on our behalf, consisting primarily of salaries and employee
benefits. Effective January 1, 2002, all employees of our general partners
became employees of our operating company.

 We may issue additional common units without your approval, which would
 dilute your existing ownership interests.

   While any senior subordinated units remain outstanding, our managing
general partner may cause us to issue up to 800,000 additional common units
without your approval. Our managing general partner may also cause us to issue
an unlimited number of additional common units, without your approval, in a
number of circumstances, such as:

  .  the issuance of common units in connection with acquisitions that
     increase cash flow from operations per unit on a pro forma basis,

  .  the conversion of subordinated units into common units,

                                      19

  .  the conversion of the general partner interests and the incentive
     distribution rights into common units as a result of the withdrawal of
     our general partners, or

  .  issuances of common units under our employee benefit plans.

   The issuance of additional common units or other equity securities of equal
rank will have the following effects:

  .  your proportionate ownership interest in us will decrease,

  .  the amount of cash available for distribution on each common unit may
     decrease,

  .  since a lower percentage of total outstanding units will be subordinated
     units, the risk that a shortfall in the payment of the minimum quarterly
     distribution will be borne by the common unitholders will increase,

  .  the relative voting strength of each previously outstanding common unit
     may be diminished, and

  .  the market price of the common units may decline.

   Once no senior subordinated units remain outstanding, we may issue an
unlimited number of limited partner interests of any type without the approval
of the unitholders. Our partnership agreement does not give the unitholders
the right to approve our issuance of equity securities ranking junior to the
common units.

 You may not have limited liability if a court finds that unitholder actions
 constitute control of our business.

   Under Delaware law, you could be held liable for our obligations to the
same extent as a general partner if a court determined that the right of
unitholders to remove our managing general partner or to take other action
under the partnership agreement constituted participation in the "control" of
our business.

   Our general partners generally have unlimited liability for the obligations
of the partnership, such as its debts and environmental liabilities, except
for those contractual obligations of the partnership that are expressly made
without recourse to the general partners.

   In addition, Section 17-607 of the Delaware Revised Uniform Limited
Partnership Act provides that, under some circumstances, a unitholder may be
liable to us for the amount of a distribution for a period of three years from
the date of the distribution. Please read "The Partnership Agreement--Limited
Liability" for a discussion of the implications of the limitations on
liability to a unitholder.

 Our general partners have conflicts of interest and limited fiduciary
 responsibilities, which may permit our general partners to favor their own
 interests to the detriment of unitholders.

   Following this offering, Inergy Holdings and its affiliates will indirectly
own an aggregate limited partner interest of approximately 24% in us and the
incentive distribution rights, will own and control our managing general
partner and will own and control our non-managing general partner, which owns
the 2% general partner interest. Conflicts of interest could arise in the
future as a result of relationships between Inergy Holdings, our general
partners and their affiliates, on the one hand, and the partnership or any of
the limited partners, on the other hand. As a result of these conflicts our
general partners may favor their own interests and those of their affiliates
over the interests of the unitholders. The nature of these conflicts includes
the following considerations:

  .  Our general partners may limit their liability and reduce their
     fiduciary duties, while also restricting the remedies available to
     unitholders for actions that might, without the limitations, constitute
     breaches of fiduciary duty. Unitholders are deemed to have consented to
     some actions and conflicts of interest that might otherwise be deemed a
     breach of fiduciary or other duties under applicable state law.

                                      20

  .  Our general partners are allowed to take into account the interests of
     parties in addition to the partnership in resolving conflicts of
     interest, thereby limiting their fiduciary duties to the unitholders.

  .  Our general partners' affiliates are not prohibited from engaging in
     other business or activities, including those in direct competition with
     us.

  .  Our managing general partner determines the amount and timing of asset
     purchases and sales, capital expenditures, borrowings and reserves, each
     of which can affect the amount of cash that is distributed to
     unitholders.

  .  Our managing general partner determines whether to issue additional
     units or other equity securities of the partnership.

  .  Our managing general partner determines which costs are reimbursable by
     us.

  .  Our managing general partner controls the enforcement of obligations
     owed to us by it.

  .  Our managing general partner decides whether to retain separate counsel,
     accountants or others to perform services for us.

  .  Our managing general partner is not restricted from causing us to pay it
     or its affiliates for any services rendered on terms that are fair and
     reasonable to us or entering into additional contractual arrangements
     with any of these entities on our behalf.

  .  In some instances our managing general partner may borrow funds in order
     to permit the payment of distributions, even if the purpose or effect of
     the borrowing is to make a distribution on the subordinated units or to
     make incentive distributions or hasten the expiration of the
     subordination period.

Tax Risks To Common Unitholders

   You are urged to read "Tax Considerations" for a more complete discussion of
the following expected material federal income tax consequences of owning and
disposing of our common units.

 The IRS could treat us as a corporation for tax purposes, which would
 substantially reduce the cash available for distribution to you.

   The anticipated after-tax economic benefit of an investment in our units
depends largely on our being treated as a partnership for federal income tax
purposes. We have not requested, and do not plan to request, a ruling from the
IRS on this or any other matter affecting us.

   If we were treated as a corporation for federal income tax purposes, we
would pay federal income tax on our income at the corporate tax rate, which is
currently a maximum of 35% and we would likely pay state taxes as well.
Distributions to you would generally be taxed again to you as corporate
distributions, and none of our income, gains, losses or deductions would flow
through to you. Because a tax would be imposed upon us as a corporation, our
cash available for distribution to you would be substantially reduced.
Therefore, treatment of us as a corporation would result in a material
reduction in the after-tax return to the unitholders, likely causing a
substantial reduction in the value of our common units.

   A change in current law or a change in our business could cause us to be
treated as a corporation for federal income tax purposes or otherwise subject
us to entity-level taxation. The partnership agreement provides that, if a law
is enacted or existing law is modified or interpreted in a manner that causes
us to be treated as a corporation or otherwise subjects us to entity-level
taxation for federal, state or local income tax purposes, then the minimum
quarterly distribution and the target distribution levels will be adjusted to
reflect that impact on us.

                                       21

 A successful IRS contest of the federal income tax positions we take may
 adversely affect the market for common units and the costs of any contest will
 be borne by our unitholders and our general partners.

   We have not requested a ruling from the IRS with respect to any matter
affecting us. The IRS may adopt positions that differ from the conclusions of
our counsel expressed in this prospectus or from the positions we take. It may
be necessary to resort to administrative or court proceedings to sustain our
counsel's conclusions or the positions we take. A court may not concur with our
counsel's conclusions or the positions we take. Any contest with the IRS may
materially and adversely affect the market for our common units and the price
at which they trade. In addition, some or all of our unitholders and our
general partners will indirectly bear the costs of any contest with the IRS,
principally legal, accounting and related fees.

 You may be required to pay taxes on your share of our income even if you do
 not receive any cash distributions from us.

   You will be required to pay federal income taxes and, in some cases, state
and local income taxes on your share of our taxable income even if you do not
receive any cash distributions from us. You may not receive cash distributions
from us equal to your share of our taxable income or even equal to the actual
tax liability that results from the taxation of your share of our taxable
income.

 Tax gain or loss on disposition of common units could be different than
 expected.

   If you sell your common units, you will recognize gain or loss equal to the
difference between the amount realized and your tax basis in those common
units. Prior distributions to you in excess of the total net taxable income you
were allocated for a common unit which decreased your tax basis in that common
unit will, in effect, become taxable income to you if the common unit is sold
at a price greater than your tax basis in that common unit, even if the price
is less than your original cost. A substantial portion of the amount you
realize, whether or not representing gain, will likely be ordinary income to
you. Should the IRS successfully contest some positions we take, you could
recognize more gain on the sale of your common units than would be the case
under those positions, without the benefit of decreased income in prior years.
Also, if you sell your common units, you may incur a tax liability in excess of
the amount of cash you receive from the sale.

 Tax-exempt entities, regulated investment companies and foreign persons face
 unique tax issues from owning common units which may result in adverse tax
 consequences to them.

   Investment in common units by tax-exempt entities, including employee
benefit plans and individual retirement accounts (known as IRAs), regulated
investment companies (known as mutual funds) and non-U.S. persons raises issues
unique to them. For example, virtually all of our income allocated to
unitholders who are organizations exempt from federal income tax, may be
unrelated business taxable income and will be taxable to them. Very little of
our income will be qualifying income to a regulated investment company.
Distributions to non-U.S. persons will be reduced by withholding taxes, at the
highest effective tax rate applicable to individuals, and non-U.S. persons will
be required to file federal income tax returns and generally pay tax on their
share of our taxable income.

 We are registered as a tax shelter. This may increase the risk of an IRS audit
 of us or a unitholder.

   We are registered with the IRS as a "tax shelter." Our tax shelter
registration number is 01204000001. The tax laws require that some types of
entities, including some partnerships, register as "tax shelters" in response
to the perception that they claim tax benefits that may be unwarranted. As a
result, we may be audited by the IRS and tax adjustments could be made. Any
unitholder owning less than a 1% profits interest in us has very limited rights
to participate in the income tax audit process. Further, any adjustments in our
tax returns will lead to adjustments in your tax returns and may lead to audits
of your tax returns and adjustments of items unrelated to us. You will bear the
cost of any expense incurred in connection with an examination of your personal
tax return and indirectly bear a portion of the cost of an audit of us.

                                       22

 We will treat each purchaser of units as having the same tax benefits without
 regard to the units purchased. The IRS may challenge this treatment, which
 could adversely affect the value of the units.

   Because we cannot match transferors and transferees of common units, we will
adopt depreciation and amortization positions that do not conform with all
aspects of existing Treasury regulations. A successful IRS challenge to those
positions could adversely affect the amount of tax benefits available to you.
It also could affect the timing of these tax benefits or the amount of gain
from your sale of common units and could have a negative impact on the value of
the common units or result in audit adjustments to your tax returns. Please
read "Tax Considerations--Uniformity of Units" for a further discussion of the
effect of the depreciation and amortization positions we adopt.

 You will likely be subject to state and local taxes in states where you do not
 live as a result of an investment in the units.

   In addition to federal income taxes, you will likely be subject to other
taxes, including state and local taxes, unincorporated business taxes and
estate, inheritance or intangible taxes that are imposed by the various
jurisdictions in which we do business or own property now or in the future even
if you do not live in any of those jurisdictions. You will likely be required
to file state and local income tax returns and pay state and local income taxes
in some or all of the jurisdictions. Further, you may be subject to penalties
for failure to comply with those requirements. We presently anticipate that
substantially all of our income will be generated in the following states:
Arkansas, Florida, Georgia, Illinois, Indiana, Michigan, North Carolina, Ohio,
Oklahoma, South Carolina, Tennessee, Texas, Virginia and Wisconsin. Each of
these states, except Florida and Texas, imposes a personal income tax. If we
expand our operations into other states, you may have to file state and local
income tax returns in additional jurisdictions. If we conduct operations in
other states, you may be required to file state and local income tax returns in
additional jurisdictions. It is your responsibility to file all federal, state
and local tax returns. Our counsel has not rendered an opinion on the state or
local tax consequences of an investment in the common units.

                                       23

                                USE OF PROCEEDS

   We estimate that we will receive net proceeds of approximately $32.5
million from the sale of the 1,054,741 common units by us, together with a
capital contribution from our non-managing general partner of approximately
$0.7 million to maintain its 2% general partner interest in our partnership,
assuming an offering price of $33.00 per unit and after deducting underwriting
discounts and estimated offering expenses. We intend to use all of the net
proceeds of this offering to repay a portion of our borrowings incurred in
connection with the acquisition of IPC and Pro Gas under our bank credit
facility. We will use the net proceeds from any exercise of the overallotment
option to further repay borrowings under our bank credit facility.

   As of May 21, 2002, total borrowings under our credit facility were
approximately $133.1 million and had a weighted average interest rate of
4.19%. The credit facility has a maturity date of December 20, 2004. We
incurred all of our debt to fund acquisitions and for working capital
purposes.

   We will not receive any proceeds from the sale of the 345,259 common units
by the selling unitholders.

                                      24

                                 CAPITALIZATION

   The following table shows (1) our historical capitalization as of March 31,
2002 on an actual basis, and (2) our pro forma capitalization as of March 31,
2002, as adjusted to reflect the sale of 1,054,741 common units in this
offering at an assumed price of $33.00 per unit and the application of the net
proceeds we receive in the offering as described under "Use of Proceeds" as
well as the senior secured notes offering and the application of the proceeds
therefrom. We derived this table from, and it should be read in conjunction
with and is qualified in its entirety by reference to, the historical and pro
forma financial statements and the accompanying notes included elsewhere in
this prospectus.

                                               As of March 31, 2002
                                   --------------------------------------------
                                            Senior Secured Common Unit
                                            Note Offering   Offering      As
                                    Actual   Adjustments   Adjustments Adjusted
                                   -------- -------------- ----------- --------
                                                  (in thousands)
                                                           
Cash and cash equivalents......... $  2,475    $ (1,000)               $  1,475
                                   ========    ========                ========
Debt:
  Current portion of long-term
   debt........................... $  3,722    $    --      $    --    $  3,722
  Long-term bank debt, less
   current portion................  138,442     (85,000)     (32,489)    20,953
  Senior secured notes............      --       85,000                  85,000
                                   --------    --------     --------   --------
    Total debt....................  142,164         --       (32,489)   109,675
                                   --------    --------     --------   --------
Partners' capital:
  Common unitholders..............   49,514        (306)      31,779     80,987
  Senior subordinated
   unitholders....................   51,421        (276)                 51,145
  Junior subordinated
   unitholders....................    2,358         (48)                  2,310
  Non-managing general partner....    1,900         (13)         710      2,597
                                   --------    --------     --------   --------
  Total partners' capital.........  105,193        (643)      32,489    137,039
                                   --------    --------     --------   --------
    Total capitalization.......... $247,357    $   (643)    $    --    $246,714
                                   ========    ========     ========   ========

                                       25

                 PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS

   The common units are listed and traded on the Nasdaq National Market under
the symbol "NRGY." The common units began trading on July 26, 2001 at an
initial public offering price of $22.00 per common unit. The following table
shows the high and low closing sales prices per common unit, as reported by the
Nasdaq National Market, for the periods indicated. Distributions are shown in
the quarter for which they were paid. For each quarter, an identical cash
distribution was paid on all outstanding senior and junior subordinated units.

                                                              Cash Distributions
Period Ended                                     Low    High       Per Unit
- ------------                                    ------ ------ ------------------
                                                     
Fiscal 2002:
  June 30, 2002(a)............................. $29.95 $34.24
  March 31, 2002...............................  27.65  30.10       $0.660
  December 31, 2001............................  23.50  28.25        0.625
Fiscal 2001:
  September 30, 2001........................... $22.20 $27.45       $0.400(b)

- --------
(a) Through May 22, 2002.
(b) Reflects the pro rata portion of the $0.60 minimum quarterly distribution
    per unit, representing the period from the July 31, 2001 closing of the
    initial public offering through September 30, 2001.

   The last reported sale price of the common units on the Nasdaq on May 22,
2002 was $33.00. As of May 22, 2002, there were approximately 2,500 holders of
record of our common units.

                                       26

                            CASH DISTRIBUTION POLICY

Distributions of Available Cash

   General. Within approximately 45 days after the end of each quarter, we will
distribute all of our available cash to unitholders of record on the applicable
record date.

   Definition of Available Cash. We define available cash in the glossary, and
it generally means, for each fiscal quarter, all cash on hand at the end of the
quarter less the amount of cash that the managing general partner determines in
its reasonable discretion is necessary or appropriate to:

  .  provide for the proper conduct of our business,

  .  comply with applicable law, any of our debt instruments, or other
     agreements, or

  .  provide funds for distributions to unitholders (including units held by
     affiliates of Inergy Holdings) and to our non-managing general partner
     for any one or more of the next four quarters,

  plus all cash on hand on the date of determination of available cash for
  the quarter resulting from working capital borrowings made after the end of
  the quarter. Working capital borrowings are generally borrowings that are
  made under our working capital facility and in all cases are used solely
  for working capital purposes or to pay distributions to partners.

   Minimum Quarterly Distribution. Common units are entitled to receive
distributions from operating surplus of $0.60 per quarter, or $2.40 on an
annualized basis, before any distributions are paid on our subordinated units.
There is no guarantee that we will pay the minimum quarterly distribution on
the common units in any quarter, and we will be prohibited from making any
distributions to unitholders if it would cause an event of default under our
credit facility or the secured notes. As reflected below, our definition of
operating surplus contains an $8.5 million basket. This basket is a provision
that will enable us, if we choose, to distribute as operating surplus up to
$8.5 million of cash we receive in the future from non-operating sources, such
as asset sales, issuances of securities and long-term borrowings, that would
otherwise be distributed as capital surplus.

Operating Surplus and Capital Surplus

   General. All cash distributed to unitholders will be characterized either as
"operating surplus" or "capital surplus." We distribute available cash from
operating surplus differently than available cash from capital surplus.

   Definition of Operating Surplus. We define operating surplus in the
glossary, and for any period it generally means:

  .  our cash balance of $5.8 million at the closing of our initial public
     offering,

  .  plus $8.5 million (as described above),

  .  plus all of our cash receipts since the initial public offering,
     excluding cash from borrowings that are not working capital borrowings,
     sales of equity and debt securities and sales of assets outside the
     ordinary course of business,

  .  plus working capital borrowings made after the end of a quarter but
     before the date of determination of operating surplus for the quarter,

  .  less all of our operating expenditures since the initial public
     offering, including the repayment of working capital borrowings, but not
     the repayment of other borrowings, and including maintenance capital
     expenditures,

  .  less the amount of cash reserves that our managing general partner deems
     necessary or advisable to provide funds for future operating
     expenditures.

                                       27

   Definition of Capital Surplus. We also define capital surplus in the
glossary, and it will generally be generated only by:

  .  borrowings other than working capital borrowings,

  .  sales of debt and equity securities, and

  .  sales or other disposition of assets for cash, other than inventory,
     accounts receivable and other current assets sold in the ordinary course
     of business or as part of normal retirements or replacements of assets.

   Characterization of Cash Distributions. We will treat all available cash
distributed as coming from operating surplus until the sum of all available
cash distributed since we began operations equals the operating surplus as of
the most recent date of determination of available cash. We will treat any
amount distributed in excess of operating surplus, regardless of its source, as
capital surplus. We do not anticipate that we will make any distributions from
capital surplus.

Subordination Period

   General. During the subordination period, which we define below, the common
units have the right to receive distributions of available cash from operating
surplus in an amount equal to the minimum quarterly distribution of $0.60 per
quarter, plus any arrearages in the payment of the minimum quarterly
distribution on the common units from prior quarters, before any distributions
of available cash from operating surplus may be made on any junior or senior
subordinated units. The purpose of the subordinated units is to increase the
likelihood that during the subordination period there will be available cash to
be distributed on the common units. The majority of our senior subordinated
units are held by persons who received preferred equity in our predecessor when
we bought their propane business or when they made a preferred investment. Our
management owns the majority of our junior subordinated units and a portion of
our senior subordinated units.

   Definition of Subordination Period. We define the subordination period in
the glossary. The subordination period will extend until the first day of any
quarter beginning after June 30, 2006 for the senior subordinated units and
June 30, 2008 for the junior subordinated units that each of the following
tests are met:

  .  distributions of available cash from operating surplus on each of the
     outstanding common units and subordinated units equaled or exceeded the
     minimum quarterly distribution for each of the three consecutive, non-
     overlapping four-quarter periods immediately preceding that date,

  .  the adjusted operating surplus generated during each of the three
     immediately preceding non-overlapping four-quarter periods equaled or
     exceeded the sum of the minimum quarterly distributions on all of the
     outstanding common units and subordinated units during those periods on
     a fully diluted basis and the related distribution on the 2% general
     partner interest during those periods, and

  .  there are no arrearages in payment of the minimum quarterly distribution
     on the common units.

   Before the end of the subordination period, a portion of the senior
subordinated units may convert into common units on a one-for-one basis
immediately after the distribution of available cash to the partners in respect
of any quarter ending on or after:

  .  June 30, 2004 with respect to 25% of the senior subordinated units, and

  .  June 30, 2005 with respect to 25% of the senior subordinated units.

   Before the end of the subordination period, a portion of the junior
subordinated units may convert into common units on a one-for-one basis
immediately after the distribution of available cash to the partners in respect
of any quarter ending on or after:

  .  June 30, 2006 with respect to 25% of the junior subordinated units, and

  .  June 30, 2007 with respect to 25% of the junior subordinated units.

                                       28

   The early conversions will occur if at the end of the applicable quarter
each of the following occurs:

  .  distributions of available cash from operating surplus on the common
     units and the subordinated units equal or exceed the sum of the minimum
     quarterly distributions on all of the outstanding common units and
     subordinated units for each of the three non-overlapping four-quarter
     periods immediately preceding that date,

  .  the adjusted operating surplus generated during each of the three
     immediately preceding non-overlapping four-quarter periods equals or
     exceeds the sum of the minimum quarterly distributions on all of the
     outstanding common units and subordinated units during those periods on
     a fully diluted basis and the related distribution on the 2% general
     partner interest during those periods, and

  .  there are no arrearages in payment of the minimum quarterly distribution
     on the common units.

   However, the early conversion of the second 25% of the senior or junior
subordinated units, as applicable, may not occur until at least one year
following the early conversion of the first 25% of the senior or junior
subordinated units, as applicable.

   Notwithstanding the foregoing, all outstanding junior subordinated units may
convert into common units on a one-for-one basis immediately after the
distribution of available cash to the partners in respect of any quarter ending
on or after June 30, 2006, if each of the following tests is met:

  .  distributions of available cash from operating surplus on each of the
     outstanding common units and the subordinated units equaled or exceeded
     the sum of $2.80 for each of the three consecutive, non-overlapping
     four-quarter periods immediately preceding that date,

  .  the adjusted operating surplus generated during each of the three
     immediately preceding non-overlapping four-quarter periods equaled or
     exceeded the sum of $2.80 on all of the outstanding common units and
     senior and junior subordinated units during those periods on a fully
     diluted basis and the related distribution on the 2% general partner
     interest during those periods,

  .  all of the senior subordinated units have been converted into common
     units, and

  .  there are no arrearages in payment of the minimum quarterly distribution
     on the common units.

   Definition of Adjusted Operating Surplus. We define "adjusted operating
surplus" in the glossary and for any period as:

  .  operating surplus generated during that period,

  .  less any net increase in working capital borrowings during that period,

  .  less any net reduction in cash reserves for operating expenditures
     during that period not relating to an operating expenditure made during
     that period,

  .  plus any net decrease in working capital borrowings during that period,

  .  plus any net increase in cash reserves for operating expenditures during
     that period required by any debt instrument for the repayment of
     principal, interest or premium.

   Adjusted operating surplus is intended to reflect the cash generated from
operations during a particular period and therefore excludes net increases in
working capital borrowings and net drawdowns of reserves of cash generated in
prior periods.

   Effect of Expiration of the Subordination Period. Upon expiration of the
subordination period, each outstanding subordinated unit will convert into one
common unit and will then participate pro rata with the other common units in
distributions of available cash. In addition, if the unitholders remove our
managing general partner other than for cause, the subordination period will
end, any then-existing arrearages on the common units will terminate, and each
subordinated unit will immediately convert into one common unit.

                                       29

Distributions of Available Cash from Operating Surplus During the Subordination
Period

   Our partnership agreement requires us to make distributions of available
cash from operating surplus for any quarter during the subordination period in
the following manner:

  .  First, 98% to the common unitholders, pro rata, and 2% to the non-
     managing general partner until we distribute for each outstanding common
     unit an amount equal to the minimum quarterly distribution for that
     quarter,

  .  Second, 98% to the common unitholders, pro rata, and 2% to the non-
     managing general partner until we distribute for each outstanding common
     unit an amount equal to any arrearages in payment of the minimum
     quarterly distribution on the common units for any prior quarters during
     the subordination period,

  .  Third, 98% to the senior subordinated unitholders, pro rata, and 2% to
     the non-managing general partner until we distribute for each senior
     subordinated unit an amount equal to the minimum quarterly distribution
     for that quarter,

  .  Fourth, 98% to the junior subordinated unitholders, pro rata, and 2% to
     the non-managing general partner until we distribute for each junior
     subordinated unit an amount equal to the minimum quarterly distribution
     for that quarter, and

  .  Thereafter, in the manner described in "--Incentive Distribution Rights"
     below.

Distributions of Available Cash from Operating Surplus After the Subordination
Period

   Our partnership agreement requires us to make distributions of available
cash from operating surplus for any quarter following the subordination period
in the following manner:

  .  First, 98% to all unitholders, pro rata, and 2% to the non-managing
     general partner until we distribute for each outstanding unit an amount
     equal to the minimum quarterly distribution for that quarter, and

  .  Thereafter, in the manner described in "--Incentive Distribution Rights"
     below.

Incentive Distribution Rights

   Incentive distribution rights represent the right to receive an increasing
percentage of quarterly distributions of available cash from operating surplus
after the minimum quarterly distribution and the target distribution levels
have been achieved. Inergy Holdings, which owns our managing general partner
and substantially all of our non-managing general partner, currently holds the
incentive distribution rights, but may transfer these rights separately from
its general partner interest to an entity that controls or is controlled by the
managing general partner.

   If for any quarter:

  .  we have distributed available cash from operating surplus to the common
     and subordinated unitholders in an amount equal to the minimum quarterly
     distribution, and

  .  we have distributed available cash from operating surplus on outstanding
     common units in an amount necessary to eliminate any cumulative
     arrearages in payment of the minimum quarterly distribution,

then, we will distribute any additional available cash from operating surplus
for that quarter among the unitholders and the non-managing general partner in
the following manner:

  .  First, 98% to all unitholders, pro rata, and 2% to the non-managing
     general partner, until each unitholder receives a total of $0.66 per
     unit for that quarter (the "first target distribution"),

                                       30

  .  Second, 85% to all unitholders, pro rata, 2% to the non-managing general
     partner and 13% to Inergy Holdings, until each unitholder receives a
     total of $0.75 per unit for that quarter (the "second target
     distribution"),

  .  Third, 75% to all unitholders, pro rata, 2% to the non-managing general
     partner and 23% to Inergy Holdings, until each unitholder receives a
     total of $0.90 per unit for that quarter (the "third target
     distribution"), and

  .  Thereafter, 50% to all unitholders, pro rata, 2% to the non-managing
     general partner and 48% to Inergy Holdings.

   In each case, the amount of the target distribution set forth above is
exclusive of any distributions to common unitholders to eliminate any
cumulative arrearages in payment of the minimum quarterly distribution on the
common units.

Percentage Allocations of Available Cash from Operating Surplus

   The following table illustrates the percentage allocations of the additional
available cash from operating surplus among the unitholders, the non-managing
general partner and Inergy Holdings up to the various target distribution
levels. The amounts set forth under "Marginal Percentage Interest in
Distributions" are the percentage interests of the unitholders, non-managing
general partner and Inergy Holdings in any available cash from operating
surplus we distribute up to and including the corresponding amount in the
column "Total Quarterly Distribution Target Amount," until available cash we
distribute reaches the next target distribution level, if any. The percentage
interests shown for the unitholders and the non-managing general partner for
the minimum quarterly distribution are also applicable to quarterly
distribution amounts that are less than the minimum quarterly distribution.

                                                                 Marginal Percentage
                                                              Interest in Distributions
                                                      -----------------------------------------
                         Total Quarterly Distribution              Non-Managing      Inergy
                                Target Amount         Unitholders General Partner Holdings, LLC
                         ---------------------------- ----------- --------------- -------------
                                                                      
Minimum Quarterly
 Distribution...........            $0.60                 98%            2%            --
First Target
 Distribution...........         up to $0.66              98%            2%            --
Second Target
 Distribution...........   above $0.66 up to $0.75        85%            2%             13%
Third Target
 Distribution...........   above $0.75 up to $0.90        75%            2%             23%
Thereafter..............         above $0.90              50%            2%             48%

Distributions from Capital Surplus

   How Distributions from Capital Surplus Will Be Made. We will make
distributions of available cash from capital surplus in the following manner:

  .  First, 98% to all unitholders, pro rata, and 2% to the non-managing
     general partner, until we distribute for each common unit that was
     issued in the initial public offering, an amount of available cash from
     capital surplus equal to the initial public offering price,

  .  Second, 98% to the common unitholders, pro rata, and 2% to the non-
     managing general partner, until we distribute for each common unit, an
     amount of available cash from capital surplus equal to any unpaid
     arrearages in payment of the minimum quarterly distribution on the
     common units, and

  .  Thereafter, we will make all distributions of available cash from
     capital surplus as if they were from operating surplus.

   Effect of a Distribution from Capital Surplus. The partnership agreement
treats a distribution of capital surplus as the repayment of the initial unit
price from the initial public offering, which is a return of capital. The
initial public offering price less any distributions of capital surplus per
unit is referred to as the

                                       31

"unrecovered initial unit price." Each time a distribution of capital surplus
is made, the minimum quarterly distribution and the target distribution levels
will be reduced in the same proportion as the corresponding reduction in the
unrecovered initial unit price. Because distributions of capital surplus will
reduce the minimum quarterly distribution, after any of these distributions are
made, it may be easier for Inergy Holdings to receive incentive distributions
and for the subordinated units to convert into common units. However, any
distribution of capital surplus before the unrecovered initial unit price is
reduced to zero cannot be applied to the payment of the minimum quarterly
distribution or any arrearages.

   Once we distribute capital surplus on a unit in an amount equal to the
initial unit price, we will reduce the minimum quarterly distribution and the
target distribution levels to zero and we will make all future distributions
from operating surplus, with 50% being paid to the holders of units, 2% to our
non-managing general partner and 48% to Inergy Holdings.

Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

   In addition to adjusting the minimum quarterly distribution and target
distribution levels to reflect a distribution of capital surplus, we will
proportionately adjust the minimum quarterly distribution, target distribution
levels, unrecovered initial unit price, the number of common units issuable
during the subordination period without a unitholder vote and the number of
common units into which a subordinated unit is convertible if we combine our
units into fewer units or subdivide our units into a greater number of units.
In addition, if legislation is enacted or if existing law is modified or
interpreted in a manner that causes us to become taxable as a corporation or
otherwise subject to taxation as an entity for federal, state or local income
tax purposes, we will reduce the minimum quarterly distribution and the target
distribution levels by multiplying the same by one minus the sum of the highest
marginal federal corporate income tax rate that could apply and any increase in
the effective overall state and local income tax rates. For example, if we
became subject to a maximum marginal federal, and effective state and local
income tax rate of 38%, then the minimum quarterly distribution and the target
distributions levels would each be reduced to 62% of their previous levels.

Distributions of Cash Upon Liquidation

   If we dissolve in accordance with the partnership agreement, we will sell or
otherwise dispose of our assets in a process called liquidation. We will first
apply the proceeds of liquidation to the payment of our creditors. We will
distribute any remaining proceeds to the unitholders and our non-managing
general partner, in accordance with their capital account balances, as adjusted
to reflect any gain or loss upon the sale or other disposition of our assets in
liquidation.

   The allocations of gain and loss upon liquidation are intended, to the
extent possible, to entitle the holders of outstanding common units to a
preference over the holders of outstanding subordinated units upon the
liquidation of Inergy, to the extent required to permit common unitholders to
receive their unrecovered initial unit price plus the minimum quarterly
distribution for the quarter during which liquidation occurs plus any unpaid
arrearages in payment of the minimum quarterly distribution on the common
units. However, there may not be sufficient gain upon our liquidation to enable
the holders of common units to fully recover all of these amounts, even though
there may be cash available for distribution to the holders of subordinated
units. Any further net gain recognized upon liquidation will be allocated in a
manner that takes into account the incentive distribution rights of Inergy
Holdings.

   Manner of Adjustments for Gain. The manner of the adjustment is set forth in
the partnership agreement. If our liquidation occurs before the end of the
subordination period, we will allocate any gain to the partners in the
following manner:

  .  First, to the non-managing general partner and the holders of units who
     have negative balances in their capital accounts to the extent of and in
     proportion to those negative balances, which are not expected,

                                       32

  .  Second, 98% to the common unitholders, pro rata, and 2% to the non-
     managing general partner until the capital account for each common unit
     is equal to the sum of:

   (1) the unrecovered initial unit price for that common unit, plus

   (2) the amount of the minimum quarterly distribution for the quarter
       during which our liquidation occurs, plus

   (3) any unpaid arrearages in payment of the minimum quarterly
       distribution on that common unit,

  .  Third, 98% to the senior subordinated unitholders, pro rata, and 2% to
     the non-managing general partner until the capital account for each
     senior subordinated unit is equal to the sum of:

   (1) the unrecovered initial unit price on that senior subordinated unit,
       and

   (2) the amount of the minimum quarterly distribution for the quarter
       during which our liquidation occurs,

  .  Fourth, 98% to the junior subordinated unitholders, pro rata, and 2% to
     the non-managing general partner until the capital account for each
     junior subordinated unit is equal to the sum of:

   (1) the unrecovered initial unit price on that junior subordinated unit,
       and

   (2) the amount of the minimum quarterly distribution for the quarter
       during which our liquidation occurs,

  .  Fifth, 98% to all unitholders, pro rata, and 2% to the non-managing
     general partner, until we allocate under this paragraph an amount per
     unit equal to:

   (1) the sum of the excess of the first target distribution per unit over
       the minimum quarterly distribution per unit for each quarter of our
       existence, less

   (2) the cumulative amount per unit of any distributions of available cash
       from operating surplus in excess of the minimum quarterly
       distribution per unit that we distributed 98% to the unitholders, pro
       rata, and 2% to our non-managing general partner for each quarter of
       our existence,

  .  Sixth, 85% to all unitholders, pro rata, 2% to the non-managing general
     partner and 13% to Inergy Holdings, until we allocate under this
     paragraph an amount equal to:

   (1) the sum of the excess of the second target distribution per unit over
       the first target distribution per unit for each quarter of our
       existence, less

   (2) the cumulative amount per unit of any distributions of available cash
       from operating surplus in excess of the first target distribution per
       unit that we distributed 85% to the unitholders, pro rata, 2% to our
       non-managing general partner and 13% to Inergy Holdings for each
       quarter of our existence,

  .  Seventh, 75% to all unitholders, pro rata, 2% to the non-managing
     general partner and 23% to Inergy Holdings, until we allocate under this
     paragraph an amount per unit equal to:

   (1) the sum of the excess of the third target distribution per unit over
       the second target distribution per unit for each quarter of our
       existence, less

   (2) the cumulative amount per unit of any distributions of available cash
       from operating surplus in excess of the second target distribution
       per unit that we distributed 75% to the unitholders, pro rata, 2% to
       our managing general partner and 23% to Inergy Holdings for each
       quarter of our existence,

  .  Thereafter, 50% to all unitholders, pro rata, 2% to the non-managing
     general partner and 48% to Inergy Holdings.

   If the liquidation occurs after the end of the subordination period, the
distinction between common units, senior subordinated units and junior
subordinated units will disappear, so that clause (3) of the second priority
above and all of the third and fourth priorities above will no longer be
applicable.

                                       33

   Manner of Adjustments for Losses. Upon our liquidation, we will generally
allocate any loss to our non-managing general partner and the unitholders in
the following manner:

  .  First, 98% to holders of junior subordinated units in proportion to the
     positive balances in their capital accounts and 2% to our non-managing
     general partner until the capital accounts of the holders of the junior
     subordinated units have been reduced to zero,

  .  Second, 98% to the holders of senior subordinated units in proportion to
     the positive balances in their capital accounts and 2% to our non-
     managing general partner until the capital accounts of the holders of
     the senior subordinated units have been reduced to zero,

  .  Third, 98% to the holders of common units in proportion to the positive
     balances in their capital accounts and 2% to our non-managing general
     partner until the capital accounts of the common unitholders have been
     reduced to zero, and

  .  Thereafter, 100% to our non-managing general partner.

   If the liquidation occurs after the end of the subordination period, the
distinction between common units, senior subordinated units and junior
subordinated units will disappear, so that all of the first and second bullets
point above will no longer be applicable.

   Adjustments to Capital Accounts Upon the Issuance of Additional Units. We
will make adjustments to capital accounts upon the issuance of additional
units. In doing so, we will allocate any unrealized, and, for tax purposes,
unrecognized gain or loss resulting from the adjustments to the unitholders and
our managing general partner in the same manner as we allocate gain or loss
upon liquidation. In the event that we make positive interim adjustments to the
capital accounts, we will allocate any later negative adjustments to the
capital accounts resulting from the issuance of additional units or upon our
liquidation in a manner which results, to the extent possible, in the capital
account balances of our non-managing general partner equaling the amount which
would have been in its capital account balance if no earlier positive
adjustments to the capital accounts had been made.

                                       34

             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
  For the Year Ended September 30, 2001 and for the Six Months Ended March 31,
                                      2002

   The unaudited pro forma consolidated balance sheet of Inergy, L.P. as of
March 31, 2002, was prepared to reflect the effects of this offering and the
senior secured notes offering as if they had been completed as of March 31,
2002. The unaudited pro forma consolidated statements of income of Inergy, L.P.
for the year ended September 30, 2001 and for the six months ended March 31,
2002 were prepared to reflect the effects of the acquisitions of the Hoosier
Propane Group, Pro Gas and IPC, our initial public offering, this offering and
the senior secured notes offering, as if all such transactions took place on
October 1, 2000.

   The unaudited pro forma consolidated financial statements of Inergy, L.P.
have been derived from: the audited historical consolidated statements of
operations of Inergy Partners, LLC, Inergy, L.P. and IPC for the year ended
September 30, 2001; the audited historical combined statement of income of the
Hoosier Propane Group for the three months ended December 31, 2000; the
unaudited historical consolidated financial statements of Inergy, L.P. for the
six months ended March 31, 2002; the unaudited historical combined statements
of income of Pro Gas until the date of its acquisition; and the unaudited
historical consolidated statement of income of IPC from October 1, 2001 until
the date of its acquisition, in each case, after giving effect to the pro forma
adjustments discussed below. Therefore, the unaudited pro forma consolidated
statement of income for the six months ended March 31, 2002 reflects one month
of pre-acquisition operations of Pro Gas and approximately two and one-half
months of pre-acquisition operations of IPC, and the unaudited pro forma
consolidated statement of income for the year ended September 30, 2001 reflects
three months of pre-acquisition operations of the Hoosier Propane Group and
twelve months of pre-acquisition operations of Pro Gas and IPC.

   In preparing the unaudited pro forma consolidated financial statements of
Inergy, L.P., we have made four sets of adjustments to the historical financial
statements. The first set of adjustments is acquisition related and reflects:

  .  the acquisitions in purchase business combinations of the assets of the
     Hoosier Propane Group in January 2001, Pro Gas in November 2001 and IPC
     in December 2001, including the financing in connection with these
     acquisitions. The pre-acquisition historical results of operations for
     each acquired company are presented separately from acquisition
     adjustments. The consideration paid and purchase price allocation of
     each acquisition is as follows:

                                                          Hoosier
                                                          Propane
                                                           Group  Pro Gas  IPC
                                                          ------- ------- -----
                                                              (in millions)
                                                                 
       Cash..............................................  $56.0   $10.9  $74.6
       Assumed liabilities...............................    5.6     0.8    2.5
       9% redeemable preferred interests.................    7.4     --     --
       9% subordinated debentures........................    5.0     --     --
       5% seller note payable............................    --      0.8    --
       Common units......................................    --      --    19.7
                                                           -----   -----  -----
                                                           $74.0   $12.5  $96.8
                                                           =====   =====  =====
       Property, plant and equipment.....................  $34.9   $10.9  $45.9
       Goodwill..........................................   25.2     --    15.0
       Customer accounts.................................   10.5     --    27.4
       Covenant not to compete...........................    0.5     1.3    1.0
       Net current assets................................    2.9     0.3    7.5
                                                           -----   -----  -----
                                                           $74.0   $12.5  $96.8
                                                           =====   =====  =====

                                       35

             We determined the fair value of the property and equipment
             acquired by reference to replacement cost values readily
             available for the assets acquired (predominantly tanks). The
             values of customer accounts represent the discounted present
             values of future profits on customer accounts acquired and were
             determined through consultations with, and assistance received
             from, valuation and appraisal professionals. The values of
             covenants not to compete represent the discounted present value
             of future payments to contracted individuals. The book value of
             current assets acquired was generally considered fair value due
             to their rapid turnover.

  .   financing the Hoosier Propane Group acquisition through the issuance
      of: 9% redeemable preferred interests in our predecessor (all of which
      were converted into senior subordinated units at the initial public
      offering) to certain former owners of the Hoosier Propane Group ($7.4
      million) and other new and existing members ($16.1 million in cash);
      $5.0 million in subordinated indebtedness; and the incurrence of $78.3
      million of indebtedness under our bank credit facility, less a
      repayment of $36.1 million of indebtedness and accrued interest
      incurred in connection with previous acquisitions,

  .   financing the Pro Gas acquisition through the incurrence of $10.9
      million of indebtedness under our bank credit facility, and

  .   financing the IPC acquisition through: the incurrence of $132.0 million
      of indebtedness under our amended bank credit facility (including $70.0
      million under the IPC acquisition term loan and $62.0 million under our
      revolving acquisition facility), less a repayment of $57.4 million of
      indebtedness and accrued interest incurred in connection with the above
      acquisitions; and the issuance of $19.7 million of common units.

   The second set of adjustments reflects our initial public offering
completed on July 31, 2001, including:

  .  the initial public offering of 1,840,000 common units of Inergy, L.P. at
     an initial public offering price of $22.00 per common unit,

  .  the payment of approximately $6.2 million of underwriting fees and
     commissions and other fees and expenses associated with the initial
     public offering, and

  .  the application of the net proceeds of the offering to retire $5.0
     million of the subordinated debt and $29.3 million of bank loans assumed
     to be outstanding for the ten-month period immediately prior to the
     initial public offering.

   The third set of adjustments reflects this offering, including:

  .  the public offering of 1,054,741 common units of Inergy, L.P. at an
     assumed public offering price of $33.00 per common unit,

  .  the contribution by Inergy Partners, LLC to Inergy L.P. of $0.7 million
     to maintain its 2% general partner interest,

  .  the payment of approximately $3.0 million of underwriting fees and
     commissions and other fees and expenses associated with this offering,
     and

  .  the application of the net proceeds of this offering to repay $32.5
     million of indebtedness under the bank credit facility.

   The fourth set of adjustments reflects the senior secured notes offering,
including:

  .  the private placement of $85.0 million senior secured notes with a
     weighted average interest rate of 9.07% and a weighted average maturity
     of 5.9 years, as follows: $35.0 million principal amount of 8.85% senior
     secured notes with a 5-year maturity, $25.0 million principal amount of
     9.10% senior secured notes with a 6-year maturity, and $25.0 million
     principal amount of 9.34% senior secured notes with a 7-year maturity,

                                      36

  .  the payment of approximately $1.0 million of placement agent fees and
     other fees and expenses associated with the senior secured notes
     offering, capitalized as deferred financing costs and amortized over the
     weighted average life of the senior secured notes,

  .  the application of the proceeds of the note offering to repay $85.0
     million of indebtedness under the bank credit facility with an average
     interest rate of 4.60% for the six months ended March 31, 2002 and 7.60%
     for the year ended September 30, 2001, and

  .   the write off of the net deferred financing costs of $643,000
      associated with the retirement of the IPC acquisition term loan.

   The unaudited pro forma consolidated financial statements do not purport to
present the results of operations of Inergy, L.P. had the transactions
described above actually been completed as of the dates indicated. In addition,
the unaudited pro forma consolidated financial statements are not necessarily
indicative of the results of future operations of Inergy, L.P. and should be
read in conjunction with the audited historical financial statements and notes
thereto of Inergy Partners, LLC, Inergy, L.P., the Hoosier Propane Group and
IPC appearing elsewhere in this prospectus.

                                       37

                                  INERGY, L.P.

                 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                                 March 31, 2002
                                 (in thousands)

                                             Inergy, L.P. Adjustments  Pro Forma
                                             ------------ -----------  ---------
                                                              
                   ASSETS
Current assets:
 Cash.......................................   $  2,475    $ 35,516 A  $  1,475
                                                             (3,027)B
                                                            (32,489)C
                                                             85,000 D
                                                            (85,000)D
                                                             (1,000)D
 Accounts receivable, net...................     24,111                  24,111
 Inventories................................     16,591                  16,591
 Prepaid expenses and other current assets..      1,975                   1,975
 Assets from price risk management
  activities................................      8,897                   8,897
                                               --------    --------    --------
Total current assets........................     54,049      (1,000)     53,049
Property, plant and equipment, at cost......    134,853                 134,853
 Less accumulated depreciation..............     (9,378)                 (9,378)
                                               --------    --------    --------
Net property, plant and equipment...........    125,475                 125,475
Intangible assets:
 Covenants not to compete...................      6,124                   6,124
 Deferred financing costs...................      4,977       1,000 D     5,334
                                                               (643)E
 Customer accounts..........................     41,411                  41,411
 Goodwill...................................     47,053                  47,053
                                               --------    --------    --------
                                                 99,565         357      99,922
 Less accumulated amortization..............     (6,489)                 (6,489)
                                               --------    --------    --------
Net intangible assets.......................     93,076         357      93,433
Other.......................................        473                     473
                                               --------    --------    --------
Total assets................................   $273,073    $   (643)   $272,430
                                               ========    ========    ========
     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
 Accounts payable...........................   $  9,041                $  9,041
 Accrued expenses...........................      6,743                   6,743
 Customer deposits..........................      5,314                   5,314
 Liabilities from price risk management
  activities................................      4,618                   4,618
 Current portion of long-term debt..........      3,722                   3,722
                                               --------    --------    --------
Total current liabilities...................     29,438                  29,438
Long-term debt, less current portion........    138,442     (32,489)C   105,953
                                                             85,000 D
                                                            (85,000)D
Partners' capital:
 Common unitholders (2,617,872 units issued
  and outstanding, actual, and 3,672,613
  units, pro forma as adjusted).............     49,514      34,806 A    80,987
                                                             (3,027)B
                                                               (306)E
 Senior subordinated unitholders (3,313,367
  units issued and outstanding, actual and
  pro forma as adjusted)....................     51,421        (276)E    51,145
 Junior subordinated unitholders (572,542
  units issued and outstanding, actual and
  pro forma as adjusted)....................      2,358         (48)E     2,310
 Non-managing general partner (2% interest
  with dilutive effect equivalent to 132,730
  units issued and outstanding, actual, and
  154,256, pro forma as adjusted)...........      1,900         710 A     2,597
                                                                (13)E
                                               --------    --------    --------
Total partners' capital.....................    105,193      31,846     137,039
                                               --------    --------    --------
Total liabilities and partners' capital.....   $273,073    $   (643)   $272,430
                                               ========    ========    ========

                                       38

                                  INERGY, L.P.

              UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                    For the six months ended March 31, 2002
                      (in thousands, except per unit data)

                                                           Acquisition             Offering    Pro Forma
                          Inergy, L.P. Pro Gas(F) IPC(G)   Adjustments Pro Forma  Adjustments As Adjusted
                          ------------ ---------- -------  ----------- ---------  ----------- -----------
                                                                         
Revenues................    $164,060     $1,227   $13,536     $ --     $178,823     $   --     $178,823
Cost of product sold....     113,787        793     5,404       --      119,984         --      119,984
                            --------     ------   -------     -----    --------     -------    --------
Gross profit............      50,273        434     8,132       --       58,839         --       58,839
Expenses:
 Operating and
  administrative........      23,326        267     4,455       --       28,048         --       28,048
 Depreciation and
  amortization..........       5,145         53     1,649         4 H     6,258         --        6,258
                                                               (593)I
                            --------     ------   -------     -----    --------     -------    --------
Operating income........      21,802        114     2,028       589      24,533         --       24,533
Other income (expense):
 Interest expense.......      (3,236)        (1)     (842)     (143)J    (4,344)        (85)N    (5,582)
                                                               (122)K                   747 O
                                                                                     (1,900)P
 Interest income........         --           6       --        --            6         --            6
 Gain (loss) on sale of
  property, plant and
  equipment.............        (119)       --        --        --         (119)        --         (119)
 Finance charges........          85        --        --        --           85         --           85
 Other..................          36        --          3       --           39         --           39
                            --------     ------   -------     -----    --------     -------    --------
Income before income
 tax....................      18,568        119     1,189       324      20,200      (1,238)     18,962
Provision for income
 taxes..................          52        --        --        --           52         --           52
                            --------     ------   -------     -----    --------     -------    --------
Net income..............    $ 18,516     $  119   $ 1,189     $ 324    $ 20,148     $(1,238)   $ 18,910
                            ========     ======   =======     =====    ========     =======    ========
Partners' interest
 information:
 Non-managing general
  partner's interest in
  net income............    $    370                                   $    403                $    378
                            ========                                   ========                ========
Limited partners'
 interest in net income:
 Common unit interest...    $  6,702                                   $  7,948                $  9,004
 Senior subordinated
  unit interest.........       9,758                                     10,059                   8,124
 Junior subordinated
  unit interest.........       1,686                                      1,738                   1,404
                            --------                                   --------                --------
 Total limited partners'
  interest in net
  income................    $ 18,146                                   $ 19,745                $ 18,532
                            ========                                   ========                ========
Net income per limited
 partner unit:
 Basic..................    $   2.94                                   $   3.04                $   2.45
                            ========                                   ========                ========
 Diluted................    $   2.90                                   $   2.99                $   2.42
                            ========                                   ========                ========
Weighted average limited
 partners' units
 outstanding:
 Basic..................       6,162                            342 L     6,504       1,055 Q     7,559
                            ========                          =====    ========     =======    ========
 Diluted................       6,249                            346 M     6,595       1,055 Q     7,650
                            ========                          =====    ========     =======    ========

                                       39

                                  INERGY, L.P.

              UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                     For the year ended September 30, 2001
                      (in thousands, except per unit data)

                          Inergy, L.P. Hoosier                         IPO and                          Pro Forma
                              and      Propane                       Acquisition             Offering      As
                          Predecessor  Group(R)  Pro Gas(S)   IPC    Adjustments Pro Forma  Adjustments Adjusted
                          ------------ --------  ---------- -------  ----------- ---------  ----------- ---------
                                                                                
Revenues................    $223,139   $31,541    $19,320   $76,420    $   --    $350,420     $   --    $350,420
Cost of product sold....     182,582    25,172     12,995    37,761        --     258,510         --     258,510
                            --------   -------    -------   -------    -------   --------     -------   --------
Gross profit............      40,557     6,369      6,325    38,659        --      91,910         --      91,910
Expenses:
 Operating and
  administrative........      23,501     2,538      3,757    22,322        --      52,118         --      52,118
 Depreciation and
  amortization..........       6,532       373        639     7,019         33 H   13,066                 13,066
                                                                        (2,201)I
                                                                           671 T
                            --------   -------    -------   -------    -------   --------     -------   --------
 Operating income.......      10,524     3,458      1,929     9,318      1,497     26,726         --      26,726
Other income (expense):
 Interest expense.......      (6,670)     (246)       (32)   (6,297)      (652)J  (12,642)       (170)N  (11,595)
                                                                         1,255 K                2,468 O
                                                                                               (1,251)P
 Interest income........         --         57        181       --         --         238         --         238
 Gain (loss) on sale of
  property, plant and
  equipment.............          37        10         (1)      --         --          46         --          46
 Finance charges........         290        12        --        --         --         302         --         302
 Other..................         168        78        --        --         --         246         --         246
                            --------   -------    -------   -------    -------   --------     -------   --------
Income before income
 tax....................       4,349     3,369      2,077     3,021      2,100     14,916       1,047     15,963
Provision for income
 taxes..................         --        --          39       --         --          39         --          39
                            --------   -------    -------   -------    -------   --------     -------   --------
Net income..............    $  4,349   $ 3,369    $ 2,038   $ 3,021    $ 2,100   $ 14,877     $ 1,047   $ 15,924
                            ========   =======    =======   =======    =======   ========     =======   ========
Net income for the
 period from October 1,
 2000 to July 31, 2001
 attributable to Inergy,
 L.P. predecessor.......    $  6,664
                            ========
Net loss for the period
 from July 31, 2001
 through September 30,
 2001 attributable to
 Inergy, L.P. following
 initial public
 offering...............    $ (2,315)
                            ========
Partners' interest
 information for the
 period from July 31,
 2001 through September
 30, 2001, actual (the
 year ended September
 30, 2001, pro forma):
Non-managing general
 partner's interest in
 net income (loss):.....    $    (46)                                            $    298               $    318
                            ========                                             ========               ========
Limited partners'
 interest in net income
 (loss):
 Common unit interest:
 Allocation of net
  income (loss).........    $   (729)                                            $  5,869               $  7,583
 Less beneficial
  conversion value
  allocated to senior
  subordinated units....      (8,600)                                    8,600 U      --                     --
                            --------                                             --------               --------
 Net common unit
  interest..............      (9,329)                                               5,869                  7,583
 Senior subordinated
  interest:
 Allocation of net
  loss..................      (1,313)                                               7,427                  6,841
 Plus beneficial
  conversion value
  allocated to senior
  subordinated units....       8,600                                    (8,600)U      --                     --
                            --------                                             --------               --------
 Net senior subordinated
  unit interest.........       7,287                                                7,427                  6,841
 Junior subordinated
  unit interest.........        (227)                                               1,283                  1,182
                            --------                                             --------               --------
 Total limited partners'
  interest in net income
  (loss)................    $ (2,269)                                            $ 14,579               $ 15,606
                            ========                                             ========               ========
Net income (loss) per
 limited partner unit
 Basic..................    $  (0.40)                                            $   2.24               $   2.06
                            ========                                             ========               ========
 Diluted................    $  (0.40)                                            $   2.22               $   2.05
                            ========                                             ========               ========
Weighted average limited
 partners' units
 outstanding
 Basic..................       5,726                                       778 L    6,504       1,055 Q    7,559
                            ========                                   =======   ========     =======   ========
 Diluted................       5,726                                       843 M    6,569       1,055 Q    7,624
                            ========                                   =======   ========     =======   ========

                                       40

                                  INERGY, L.P.

                          NOTES TO UNAUDITED PRO FORMA
                       CONSOLIDATED FINANCIAL STATEMENTS

                      Six Months Ended March 31, 2002 and
                         Year Ended September 30, 2001

(A) Reflects the gross proceeds to Inergy, L.P. of $34.8 million from the
    issuance and sale of 1,054,741 common units at an assumed offering price of
    $33.00 per common unit, together with a capital contribution from the non-
    managing general partner of approximately $0.7 million to maintain its 2%
    general partner interest.

(B) Reflects the payment of the underwriter's discounts and commissions and
    offering expenses, estimated to be $3.0 million.

(C) Reflects the repayment of borrowings under our bank credit facility using
    the net proceeds from the sale of common units in this offering.

(D) Reflects the $85.0 million senior secured notes offering with net proceeds
    used to pay down indebtedness under our bank credit facility. In
    conjunction with the senior secured notes offering, a payment of $1.0
    million is estimated for placement agent fees and other fees and expenses.

(E) Reflects the allocation of the write-off of the net deferred financing
    costs of $643,000 associated with the retirement of the IPC acquisition
    term loan. The dollar amounts assigned are based on the pro rata number of
    units of each class issued and outstanding, pro forma as adjusted. This
    amount is not reflected in the accompanying pro forma statements of income
    but will be included in our financial statements upon the closing of the
    secured notes offering.

(F) Includes the historical combined operating results of Pro Gas for the
    period from October 1, 2001 to October 31, 2001 (immediately prior to the
    acquisition).

(G) Includes the historical consolidated operating results of IPC for the
    period from October 1, 2001 to December 19, 2001 (immediately prior to the
    acquisition).

(H) Reflects pro forma depreciation and amortization based on the portion of
    the purchase price of Pro Gas allocated to property, plant and equipment
    and intangible assets, as follows:

                                                      Depreciation and Amortization
                                                     -------------------------------
                                                      Year Ended
                                           Composite September 30, Six Months Ended
                                Amount      Life(a)      2001      March 31, 2002(b)
                            -------------- --------- ------------- -----------------
                                              (in
                            (in thousands)  years)           (in thousands)
                                                       
   Property, plant and
    equipment
    (excluding land).......     $9,521       19.87       $479             $41
   Covenants not to
    compete................      1,348        7.00        193              16
                                                         ----             ---
                                                          672              57
   Historical depreciation
    and amortization
    expense of Pro Gas.....                               639              53
                                                         ----             ---
   Pro forma adjustment to
    depreciation and
    amortization expense...                              $ 33             $ 4
                                                         ====             ===

  --------
  (a) The composite life is calculated by taking the weighted average lives
      of the assets. Propane tanks, which were allocated $7.3 million of the
      $9.5 million allocated to property, plant and equipment, are
      depreciated over 30 years; buildings are depreciated over 25 years; and
      office furniture and equipment, vehicles and other plant equipment are
      depreciated over four to eight years.
  (b)  Pro forma effect is only for the period from October 1, 2001 to
       October 31, 2001 (immediately prior to the acquisition).

                                       41

(I)  Reflects pro forma depreciation and amortization based on the portion of
     the purchase price of IPC allocated to property, plant and equipment and
     intangible assets, as follows:

                                                     Depreciation and Amortization
                                                     ------------------------------
                                                      Year Ended   Six Months Ended
                                           Composite September 30,    March 31,
                                Amount      Life(a)      2001          2002(b)
                            -------------- --------- ------------- ----------------
                                              (in
                            (in thousands)  years)           (in thousands)
                                                       
   Property, plant and
    equipment (excluding
    land)..................    $44,013       15.77      $ 2,791         $  612
   Covenants not to
    compete................      1,000        5.00          200             44
   Customer accounts.......     27,411       15.00        1,827            400
                                                        -------         ------
                                                          4,818          1,056
   Historical depreciation
    and amortization
    expense of IPC.........                               7,019          1,649
                                                        -------         ------
   Pro forma adjustment to
    depreciation and
    amortization expense...                             $(2,201)        $ (593)
                                                        =======         ======

  --------
  (a)  The composite life is calculated by taking the weighted average lives
       of the assets. Propane tanks, which were allocated $29.4 million of
       the $44.0 million allocated to property, plant and equipment, are
       depreciated over 30 years; buildings are depreciated over 25 years;
       and office furniture and equipment, vehicles and other plant equipment
       are depreciated over four to eight years. Goodwill recorded in
       connection with this acquisition is not amortized in accordance with
       SFAS No. 142.
  (b)  Pro forma effect is only for the period from October 1, 2001 to
       December 19, 2001 (immediately prior to the acquisition).

(J)  Reflects amortization of $2.0 million of debt issuance costs incurred in
     connection with the IPC acquisition over the three-year term of our bank
     credit facility.

(K)  Reflects the adjustment to interest expense resulting from the acquisition
     related transactions described on pages 35-37, and our initial public
     offering, reconciled as follows:

                                                 Year Ended   Six Months Ended
                                                September 30,    March 31,
                                                    2001            2002
                                                ------------- ----------------
                                                        (in thousands)
                                                        
   Inergy's historical interest expense
    attributable to debt refinanced in
    connection with the acquisition of IPC,
    interest based on LIBOR plus 2.0% to 3.5%..    $(6,246)       $(2,689)
   Interest expense related to the debt of the
    Hoosier Propane Group, Pro Gas and IPC.....     (6,575)          (843)
   Pro forma interest expense attributable to
    the financing of the IPC acquisition and
    the refinancing of existing indebtedness:
     Interest on bank credit facility at
      average LIBOR rates in effect during the
      year ended September 30, 2001 and the six
      months ended March 31, 2002 plus 2.50%
      spread, ranging from 6.20% to 8.24% for
      the year ended September 30, 2001 and
      4.58% to 4.85% for the six months ended
      March 31, 2002...........................     11,245          3,494
     Interest on assumed seller notes payable
      at an average of 8.12% per annum.........        321            160
                                                   -------        -------
                                                    11,566          3,654
                                                   -------        -------
   Pro forma adjustment to interest expense....    $(1,255)       $   122
                                                   =======        =======

                                       42

  The interest rates used in determining the amount of pro forma interest
  expense were based upon Inergy's weighted average borrowing rate under its
  bank credit facility. Assuming a change in the interest rate on Inergy,
  L.P.'s floating rate debt of 1/8%, interest expense would have been
  approximately $184,000 and $95,000 greater or lesser than the amounts shown
  above for the fiscal year ended September 30, 2001 and the six months ended
  March 31, 2002, respectively.

(L)  Reflects the issuance of: 394,601 common units to IPCH Acquisition Corp.
     in conjunction with the IPC acquisition, 365,019 common units to former
     IPC shareholders, and 18,252 common units to certain members of IPC
     management who continue as employees of Inergy, L.P. For the six months
     ended March 31, 2002, these units are weighted from October 1, 2001
     through December 19, 2001 prior to the acquisition.

(M)  Reflects the additional common units related to Inergy, L.P. options
     previously considered antidilutive in the historical financial statements
     and additional common units resulting from the issuance of options to
     certain members of IPC management who continue as employees of Inergy,
     L.P. For the six months ended March 31, 2002, the common units resulting
     from the issuance of options are weighted from October 1, 2001 through
     December 19, 2001 prior to the acquisition.

(N)  Reflects amortization of $1.0 million of debt issuance costs expected to
     be incurred in connection with the senior secured notes offering over 5.9
     years, the assumed weighted average life of the notes.

(O)  Reflects reduction of interest expense resulting from the repayment of a
     portion of our bank credit facility borrowings with an average interest
     rate of 7.60% for the year ended September 30, 2001 and 4.60% for the six
     months ended March 31, 2002 with the net proceeds from this offering.

(P)  Reflects increased interest expense resulting from refinancing $85.0
     million of the existing indebtedness under our bank credit facility with
     an average interest rate of 7.60% for the year ended September 30, 2001
     and 4.60% for the six months ended March 31, 2002 with proceeds from the
     senior secured notes offering with an average interest rate of 9.07%.

(Q)  Reflects the issuance of 1,054,741 common units offered by Inergy L.P. in
     this offering.

(R)  Includes the historical combined operating results of the Hoosier Propane
     Group for the period from October 1, 2000 to December 31, 2000
     (immediately prior to the acquisition).

                                       43

(S) Includes the historical combined operating results of Pro Gas for the
    period from October 1, 2000 to September 30, 2001.

(T) Reflects pro forma depreciation and amortization based on the portion of
    the purchase price of the Hoosier Propane Group allocated to property,
    plant and equipment and intangible assets (including goodwill because the
    acquisition was completed prior to July 1, 2001), as follows:

                                                               Depreciation and
                                                                 Amortization
                                                               ----------------
                                                                  Year Ended
                                                     Composite  September 30,
                                          Amount      Life(a)      2001(b)
                                      -------------- --------- ----------------
                                                        (in
                                      (in thousands)  years)    (in thousands)
                                                      
   Property, plant and equipment
    (excluding land).................    $33,423       19.67        $ 428
   Covenants not to compete..........        465        7.00           17
   Customer accounts.................     10,500       15.00          176
   Goodwill..........................     25,183       15.00          423
                                                                    -----
                                                                    1,044
   Historical depreciation and
    amortization expense of Hoosier
    for the period October 1, 2000 to
    December 31, 2000................                                 373
                                                                    -----
   Pro forma adjustment to
    depreciation and amortization
    expense..........................                               $ 671
                                                                    =====

  --------
  (a) The composite life is calculated by taking the weighted average lives
      of the assets. Propane tanks, which were allocated $25.3 million of the
      $33.4 million allocated to property, plant and equipment, are
      depreciated over 30 years; buildings are depreciated over 25 years; and
      office furniture and equipment, vehicles and other plant equipment are
      depreciated over four to eight years.
  (b) Pro forma effect is only for the period from October 1, 2000 to
      December 31, 2000 (immediately prior to the acquisition).

(U) Reflects an elimination in the beneficial conversion value of $8.6 million
    allocated to senior subordinated units with a corresponding decrease in
    common unit capital, and initially recognized upon completion of the
    initial public offering, assuming our initial public offering occurred
    immediately prior to October 1, 2000.

                                       44

                SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

   The following table sets forth selected financial data and other operating
data of Inergy, L.P., our predecessor, Inergy Partners, LLC, the Hoosier
Propane Group and IPC. The selected historical financial data of Inergy
Partners, LLC for the period from November 8, 1996 (date of formation) to
September 30, 1997, and the years ended September 30, 1998, 1999 and 2000 and
as of September 30, 1997, 1998, 1999 and 2000 are derived from the audited
financial statements of Inergy Partners, LLC. The selected historical financial
data of Inergy, L.P. as of and for the year ended September 30, 2001 are
derived from the audited financial statements of Inergy Partners, LLC and
Inergy, L.P. The selected historical financial data of Inergy Partners, LLC and
Inergy, L.P. for the six months ended March 31, 2001 and 2002 are derived from
the unaudited financial statements of Inergy Partners, LLC and Inergy, L.P. The
historical financial data of Inergy Partners, LLC and Inergy, L.P. include the
results of operations of the Hoosier Propane Group from January 1, 2001, the
effective date of the acquisition, which closed on January 12, 2001, the
results of operations of Pro Gas from November 1, 2001, the date of
acquisition, and the results of operations of IPC from December 20, 2001, the
effective date of the acquisition. The selected historical financial data for
the Hoosier Propane Group as of and for the years ended September 30, 1998,
1999 and 2000 and the three months ended December 31, 2000 are derived from the
audited financial statements of the Hoosier Propane Group. The selected
historical financial data of the Hoosier Propane Group for the three months
ended December 31, 1999 are derived from the unaudited financial statements of
the Hoosier Propane Group. The selected historical financial data for IPC as of
and for the years ended September 30, 1999, 2000 and 2001 are derived from the
audited financial statements of IPC.

   In the opinion of our management, each of the unaudited financial statements
include all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation of the financial position and results of operations for the
unaudited periods. Operating results for the six months ended March 31, 2002
are not necessarily indicative of the results that can be expected for the
entire year ending September 30, 2002.

   "EBITDA" shown in the table below is defined as income before income taxes,
plus interest expense and depreciation and amortization expense, less interest
income. EBITDA should not be considered an alternative to net income, income
before income taxes, cash flows from operating activities, or any other measure
of financial performance calculated in accordance with generally accepted
accounting principles as those items are used to measure operating performance,
liquidity or ability to service debt obligations. We believe that EBITDA
provides additional information for evaluating our ability to make the minimum
quarterly distribution and is presented solely as a supplemental measure.
EBITDA, as we define it, may not be comparable to EBITDA or similarly titled
measures used by other corporations or partnerships.

                                       45

   The data in the following tables should be read together with and are
qualified in their entirety by reference to, the historical financial
statements and the accompanying notes included in this prospectus. The tables
should be read together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

                                          Inergy Partners, LLC and Inergy, L.P.
                            --------------------------------------------------------------------------
                             November 8,                                            Six Months Ended
                               1996 to        Years ended September 30,                 March 31,
                            September 30, -------------------------------------     ------------------
                                1997       1998      1999      2000      2001         2001      2002
                            ------------- -------  --------  --------  --------     --------  --------
                                                                                       (unaudited)
                                                      (in thousands)
                                                                         
Statement of Operations
 Data:
Revenues..................     $ 6,966    $ 7,507  $ 19,211  $ 93,595  $223,139     $170,439  $164,060
Cost of product sold......       4,366      4,215    13,754    81,636   182,582      141,425   113,787
                               -------    -------  --------  --------  --------     --------  --------
Gross profit..............       2,600      3,292     5,457    11,959    40,557       29,014    50,273
Expenses:
 Operating and
  administrative(a).......       2,196      2,424     4,119     8,990    23,501       11,464    23,326
 Depreciation and
  amortization............         325        394       690     2,286     6,532        2,588     5,145
                               -------    -------  --------  --------  --------     --------  --------
Operating income..........          79        474       648       683    10,524       14,802    21,802
Other income (expense):
 Interest expense.........        (398)      (569)     (962)   (2,740)   (6,670)      (3,020)   (3,236)
 Gain (loss) on sale of
  property, plant and
  equipment...............         --         --        101       --         37          --       (119)
 Finance charges..........          44         59        79       176       290          158        85
 Other....................           1          1         5        59       168           87        36
                               -------    -------  --------  --------  --------     --------  --------
Income (loss) before
 income taxes.............        (274)       (35)     (129)   (1,822)    4,349       12,187    18,568
Provision for income
 taxes....................         --         --         56         7       --           --         52
                               -------    -------  --------  --------  --------     --------  --------
Net income (loss).........     $  (274)   $   (35) $   (185) $ (1,829) $  4,349     $ 12,187  $ 18,516
                               =======    =======  ========  ========  ========     ========  ========
Net income (loss) per
 limited partner unit:
 Basic....................                                             $  (0.40)(b)           $   2.94
                                                                       ========               ========
 Diluted..................                                             $  (0.40)(b)           $   2.90
                                                                       ========               ========
Weighted average limited
 partners' units
 outstanding:
 Basic....................                                                5,726 (b)              6,162
                                                                       ========               ========
 Diluted..................                                                5,726 (b)              6,249
                                                                       ========               ========
Balance Sheet Data (end of
 period):
Current assets............     $ 2,282    $ 2,119  $ 11,390  $ 22,199  $ 36,920     $ 31,306  $ 54,049
Total assets..............       8,457     10,230    38,896    68,924   155,653      150,373   273,073
Long-term debt, including
 current portion..........       5,382      5,694    22,337    34,927    54,132       84,398   142,164
Redeemable preferred
 members' interest........         --         --        --     10,896       --        34,313       --
Members' equity/partners'
 capital..................       1,209      2,611     5,269     2,972    72,754       14,453   105,193
Other Financial Data:
EBITDA (unaudited)........     $   449    $   928  $  1,523  $  3,204  $ 17,551     $ 17,795  $ 26,949
Net cash provided by (used
 in) operating
 activities...............         555        362      (774)     (222)    4,659        2,594    10,633
Net cash used in investing
 activities...............      (6,640)      (727)  (13,130)  (12,464)  (64,025)     (60,179)   88,966
Net cash provided by
 financing activities.....       6,114        336    14,056    13,907    60,164       59,740    78,637
Maintenance capital
 expenditures(c)
 (unaudited)..............         -- (d)      61       156       283     1,901          551       517
Other Operating Data
 (unaudited):
Retail propane gallons
 sold.....................       4,765      5,612     8,006    18,112    46,750       34,031    60,869
Wholesale propane gallons
 sold.....................         N/A        N/A    24,735   146,644   238,649      161,768   231,079
Reconciliation of Net
 Income (Loss) to EBITDA:
Net income (loss).........     $  (274)   $   (35) $   (185) $ (1,829) $  4,349     $ 12,187  $ 18,516
Plus:
 Income taxes.............         --         --         56         7       --           --         52
 Interest expense.........         398        569       962     2,740     6,670        2,588     3,236
 Depreciation and
  amortization expense....         325        394       690     2,286     6,532        3,020     5,145
                               -------    -------  --------  --------  --------     --------  --------
Less:                              449        928     1,523     3,204    17,551       17,795    26,949
 Interest income..........         --         --        --        --        --           --        --
                               -------    -------  --------  --------  --------     --------  --------
EBITDA....................     $   449    $   928  $  1,523  $  3,204  $ 17,551     $ 17,795  $ 26,949
                               =======    =======  ========  ========  ========     ========  ========

- --------
(a) The historical financial statements include non-cash charges related to
    amortization of deferred compensation of $78,000, $79,000 and $234,000 for
    the years ended September 30, 1999, 2000 and 2001, respectively, and
    $39,000 for the six month period ended March 31, 2001.
(b) Amounts relate to the net loss incurred by Inergy, L.P. and the weighted
    average limited partners' units outstanding for the period from July 31,
    2001 (the closing date of our initial public offering) through September
    30, 2001. See pages F-4 and F-5.
(c) Capital expenditures fall generally into three categories: (1) growth
    capital expenditures, which include expenditures for the purchase of new
    propane tanks and other equipment to facilitate expansion of our retail
    customer base, (2) maintenance capital expenditures, which include
    expenditures for repair and replacement of property, plant and equipment,
    and (3) acquisition capital expenditures.
(d) Maintenance capital expenditures are not available for this period.

                                       46

                                                    Independent Propane
                                                      Company Holdings
                                                 ----------------------------
                                                 Years ended September 30,
                                                 ----------------------------
                                                   1999      2000      2001
                                                 --------  --------  --------
                                                       (in thousands)
                                                            
Statement of Income Data:
Sales........................................... $ 44,990  $ 58,973  $ 76,420
Cost of sales...................................   16,037    28,329    37,761
                                                 --------  --------  --------
Gross profit....................................   28,953    30,644    38,659
Operating expenses:
 Selling, general and administrative............   21,305    21,923    22,322
 Depreciation and amortization..................    5,544     6,883     7,019
                                                 --------  --------  --------
Operating profit................................    2,104     1,838     9,318
 Interest expense, net..........................    5,095     7,394     6,297
                                                 --------  --------  --------
Net income (loss)............................... $ (2,991) $ (5,556) $  3,021
                                                 ========  ========  ========
Balance Sheet Data (end of period):
Current assets.................................. $  7,692  4 10,639  $ 10,688
Total assets....................................   71,966    75,408    71,078
Long-term debt, including current portion.......   53,412    61,408    54,966
Stockholders' deficit...........................  (21,495)  (31,997)  (34,653)
Other Financial Data:
EBITDA (unaudited).............................. $  7,648  $  8,721  $ 16,337
Net cash provided by operating activities.......    2,927       784    10,099
Net cash used in investing activities...........  (21,834)   (8,054)   (2,997)
Net cash provided by (used in) financing
 activities.....................................   18,763     7,378    (6,908)
Maintenance capital expenditures (a)
 (unaudited)....................................    1,710       287     1,013
Other Operating Data (unaudited):
Retail propane gallons sold.....................   43,591    45,141    49,763
Reconciliation of Net Income (Loss) to EBITDA:
Net income (loss)............................... $ (2,991) $ (5,556) $  3,021
Plus:
 Interest expense, net..........................    5,095     7,394     6,297
 Depreciation and amortization expense..........    5,544     6,883     7,019
                                                 --------  --------  --------
                                                    7,648     8,721    16,337
Less:
 Interest income................................      --        --        --
                                                 --------  --------  --------
EBITDA.......................................... $  7,648  $  8,721  $ 16,337
                                                 ========  ========  ========

- --------
(a) Capital expenditures fall generally into three categories: (1) growth
    capital expenditures, which include expenditures for the purchase of new
    propane tanks and other equipment to facilitate expansion of our retail
    customer base, (2) maintenance capital expenditures, which include
    expenditures for repair and replacement of property, plant and equipment,
    and (3) acquisition capital expenditures.

                                       47

                                            Hoosier Propane Group
                                   -------------------------------------------
                                                               Three Months
                                    Years ended September          Ended
                                             30,               December 31,
                                   -------------------------  ----------------
                                    1998     1999     2000     1999     2000
                                   -------  -------  -------  -------  -------
                                                                (unaudited)
                                               (in thousands)
                                                        
Statement of Income Data:
Revenues.......................... $55,740  $43,678  $65,595  $20,780  $31,541
Costs of product sold.............  42,823   28,889   49,049   15,604   25,172
                                   -------  -------  -------  -------  -------
Gross profit......................  12,917   14,789   16,546    5,176    6,369
Expenses:
 Operating and administrative.....   7,617    8,274    9,375    2,493    2,538
 Depreciation and amortization....   1,529    1,690    1,623      389      373
                                   -------  -------  -------  -------  -------
Operating income..................   3,771    4,825    5,548    2,294    3,458
Other income (expense):
 Interest expense.................    (594)    (941)  (1,029)    (287)    (246)
 Interest income..................     239      205      230       32       57
 Gain (loss) on sales of property,
  plant and equipment.............     (43)     (63)      51       17       10
 Other............................     158      130      184       81       90
                                   -------  -------  -------  -------  -------
Net income........................ $ 3,531  $ 4,156  $ 4,984  $ 2,137  $ 3,369
                                   =======  =======  =======  =======  =======
Balance Sheet Data (end of
 period):
Current assets.................... $11,680  $11,431  $ 8,377  $12,408  $18,677
Total assets......................  32,237   36,079   33,117   37,707   43,298
Long-term debt, including current
 portion..........................   7,711    9,543    7,559    9,868    6,268
Stockholders' equity..............  13,910   15,700   16,506   17,479   18,798
Other Financial Data:
EBITDA (unaudited)................ $ 5,415  $ 6,582  $ 7,406  $ 2,781  $ 3,931
Net cash provided by (used in)
 operating activities.............   8,845    1,152    9,274    3,734     (321)
Net cash used in investing
 activities.......................  (4,648)  (4,893)  (1,527)    (615)    (239)
Net cash provided by (used in)
 financing activities.............  (2,640)   2,540   (7,822)  (1,007)   1,569
Maintenance capital expenditures
 (a) (unaudited)..................     968      795      764      198      117
Other Operating Data (unaudited):
Retail propane gallons sold.......  17,440   22,780   22,911    7,228    8,581
Wholesale propane gallons sold....  89,706   63,804   68,801   29,202   23,686
Reconciliation of Net Income to
 EBITDA:
Net income........................ $ 3,531  $ 4,156  $ 4,984  $ 2,137  $ 3,369
Plus:
 Interest expense.................     594      941    1,029      287      246
 Depreciation and amortization
  expense.........................   1,529    1,690    1,623      389      373
                                   -------  -------  -------  -------  -------
                                     5,654    6,787    7,636    2,813    3,988
Less:
 Interest income..................     239      205      230       32       57
                                   -------  -------  -------  -------  -------
EBITDA............................ $ 5,415  $ 6,582  $ 7,406  $ 2,781  $ 3,931
                                   =======  =======  =======  =======  =======

- --------
(a) Capital expenditures fall generally into three categories: (1) growth
    capital expenditures, which include expenditures for the purchase of new
    propane tanks and other equipment to facilitate expansion of our retail
    customer base, (2) maintenance capital expenditures, which include
    expenditures for repair and replacement of property, plant and equipment,
    and (3) acquisition capital expenditures.

                                       48

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS

   You should read the following discussion of our financial condition and
results of operations in conjunction with the historical financial statements
included in this prospectus. For more detailed information regarding the basis
of presentation for the following information, you should read the notes to the
historical and pro forma financial statements included in this prospectus.

General

   We are a Delaware limited partnership recently formed to own and operate a
rapidly growing retail and wholesale propane marketing and distribution
business. For the fiscal year ended September 30, 2001, on a pro forma combined
basis we sold approximately 117 million gallons of propane to retail customers
and approximately 262 million gallons of propane to wholesale customers. Our
retail business includes the retail marketing, sale and distribution of
propane, including the sale and lease of propane supplies and equipment, to
residential, commercial, industrial and agricultural customers. In addition to
our retail business, we operate a wholesale supply, marketing and distribution
business, providing propane procurement, transportation, supply and price risk
management services to our customer service centers, as well as to independent
dealers and multistate marketers and, to a lesser extent, selling propane as
standby fuel to industrial end-users.

   The results of operations discussed below are those of Inergy, L.P. on and
after July 31, 2001, the date of the initial public offering, and our
predecessor, Inergy Partners, LLC prior to July 31, 2001. Audited financial
statements for Inergy, L.P. and Inergy Partners, LLC, its predecessor, are
included elsewhere in this prospectus.

   Since the inception of our predecessor, Inergy Partners, LLC, in November
1996, we have acquired 13 propane companies for an aggregate purchase price of
approximately $230 million, including working capital, assumed liabilities and
acquisition costs. For a more detailed description of our predecessor, please
read "Guide to Reading this Prospectus." These acquisitions have significantly
increased the size of our operations over the periods discussed below and,
accordingly, impact the comparability of the financial results presented. Our
most recent acquisitions include:

  . The acquisition of IPC on December 19, 2001. At the time of the
    acquisition, IPC had annual sales of approximately 49.8 million retail
    gallons.

  . The acquisition of Pro Gas on November 1, 2001. At the time of the
    acquisition, Pro Gas had annual sales of approximately 12.4 million
    retail gallons.

  . The acquisition of the Hoosier Propane Group on January 12, 2001,
    effective January 1, 2001. At the time of the acquisition, the Hoosier
    Propane Group had annual sales of approximately 22.9 million retail
    gallons and 68.8 million wholesale gallons.

  . The acquisition of Country Gas Company, Inc. on June 1, 2000. At the time
    of the acquisition, Country Gas had annual sales of approximately 9.9
    million retail gallons.

   On a pro forma basis in the fiscal year ended September 30, 2001, we sold
approximately 72% of our retail gallons to residential customers, 20% to
industrial and commercial customers and 8% to agricultural customers. Sales to
residential customers during that period accounted for approximately 75% of our
pro forma retail gross profit on propane sales, reflecting the higher
profitability of this segment of the business.

   The retail distribution business is largely seasonal due to propane's
primary use as a heating source in residential and commercial buildings. As a
result, cash flows from operations are highest from November through April when
customers pay for propane purchased during the six-month peak heating season of
October through March. On a pro forma basis in the fiscal year ended September
30, 2001, approximately 75% of our retail propane volume and approximately 73%
of our gross profit was attributable to sales during this six-month period. We
generally experience losses in the six-month, off season of April through
September.

                                       49

   Because a substantial portion of our propane is used in the weather-
sensitive residential markets, the temperatures realized in our areas of
operations, particularly during the six-month peak heating season, have a
significant effect on our financial performance. In any given area, warmer-
than-normal temperatures will tend to result in reduced propane use, while
sustained colder-than-normal temperatures will tend to result in greater
propane use. Therefore, we use information on normal temperatures in
understanding how historical results of operations are affected by temperatures
that are colder or warmer than normal and in preparing forecasts of future
operations, which are based on the assumption that normal weather will prevail
in each of our regions. "Heating degree days" are a general indicator of
weather impacting propane usage and are calculated by taking the difference
between 65 degrees and the average temperature of the day (if less than 65
degrees).

   In determining actual and normal weather for a given period of time, we
compare the actual number of heating degree days for such period to the average
number of heating degree days for a longer time period assumed to more
accurately reflect the average normal weather, in each case as such information
is published by the National Oceanic and Atmospheric Administration, for each
measuring point in each of our regions. When we discuss "normal" weather in our
results of operations presented below we are referring to a 30 year average
consisting of the years 1961 through 1990. We then calculate weighted averages,
based on retail volumes attributable to each measuring point, of actual and
normal heating degree days within each region. Based on this information, we
calculate a ratio of actual heating degree days to normal heating degree days,
first on a regional basis and then on a partnership-wide basis.

   Although we believe that comparing temperature information for a given
period of time to "normal" temperatures is helpful for an understanding of our
results of operations, when comparing variations in weather to changes in total
revenues or operating profit, we draw your attention to the fact that a portion
of our total revenues is not weather-sensitive and other factors such as price,
competition, product supply costs and customer mix also affect the results of
operations. For example, our sales to industrial customers are generally not
sensitive to fluctuations in the weather. Sales to residential customers
ordinarily generate higher margins than sales to other customer groups, such as
commercial or agricultural customers.

   The propane business is a "margin-based" business where the level of
profitability is largely dependent on the difference between sales prices and
product cost. The unit cost of propane is subject to volatile changes as a
result of product supply or other market conditions. Propane unit cost changes
can occur rapidly over a short period of time and can impact margins. There is
no assurance that we will be able to fully pass on product cost increases,
particularly when product costs increase rapidly. We have generally been
successful in passing on higher propane costs to our customers and have
historically maintained or increased our gross margin per gallon in periods of
rising costs. In periods of increasing costs, we have experienced a decline in
our gross profit as a percentage of revenues. In periods of decreasing costs,
we have experienced an increase in our gross profit as a percentage of
revenues. Retail sales generate significantly higher margins than wholesale
sales and sales to residential customers generally generate higher margins than
sales to our other retail customers.

   We believe our wholesale supply, marketing and distribution business
complements our retail distribution business. For the fiscal year ended
September 30, 2001, on a pro forma combined basis, we sold approximately 262
million gallons of propane on a wholesale basis. Although sales to wholesale
customers would have accounted for approximately 69% of our total volumes on a
pro forma basis, such sales would have accounted for only 7% of our pro forma
gross profit from propane sales, reflecting the lower margins our wholesale
business generates. Through our wholesale operations, we also offer price risk
management services to propane retailers and other related businesses through a
variety of financial and other instruments, including:

  . forward contracts involving the physical delivery of propane;

  . swap agreements which require payments to (or receipt of payments from)
    counterparties based on the differential between a fixed and variable
    price for propane; and

  . options, futures contracts on the New York Mercantile Exchange and other
    contractual arrangements.

                                       50

   We purchase a portion of our propane (approximately 55% of a given typical
year's projected propane needs) pursuant to agreements with terms of one year
that contain various pricing formulas. The balance of our propane needs are
satisfied in the spot market. On a pro forma basis, during the fiscal year
ended September 30, 2001, three suppliers each provided approximately 11% of
our propane supplies, and no other single supplier provided more than ten
percent of our total propane supply for the year ended September 30, 2001. On
May 1, 2002, we entered into a one-year contract with Sunoco Inc. (R&M) to
purchase all of its propane production at its Toledo, Ohio refinery. Current
annual production at this refinery is 62 million gallons.

   We engage in hedging transactions to reduce the effect of price volatility
on our product costs and to help ensure the availability of propane during
periods of short supply. We attempt to balance our contractual portfolio by
purchasing volumes only when we have a matching purchase commitment from our
wholesale customers. However, we may experience net unbalanced positions from
time to time which we believe to be immaterial in amount. In addition to our
ongoing policy to maintain a balanced position, for accounting purposes we are
required, on an ongoing basis, to track and report the market value of our
purchase obligations and our sales commitments.

   In addition to the revenues we generate from our retail and wholesale
propane operations, we generate additional revenues from truck fabrication and
maintenance as well as from sales of propane appliance and propane service
operations.

Inergy, L.P. and Inergy Partners, LLC

   The results of operations discussed below are those of Inergy, L.P. on and
after July 31, 2001, the date of the initial public offering, and our
predecessor, Inergy Partners, LLC prior to July 31, 2001. Audited and unaudited
financial statements for Inergy, L.P. and Inergy Partners, LLC are included
elsewhere in this prospectus. The results discussed below include the results
of operations of Country Gas beginning on June 1, 2000, the date of its
acquisition, the results of operations of the Hoosier Propane Group beginning
on January 1, 2001, the effective date of its acquisition, the results of
operations of Pro Gas beginning on November 1, 2001, the effective date of its
acquisition, and the results of operations of IPC beginning on December 20,
2001, the effective date of its acquisition. For a more detailed description of
our predecessor, please read "Guide to Reading this Prospectus."

 Six Months Ended March 31, 2002 Compared to Six Months Ended March 31, 2001

   Volume. During the six months ended March 31, 2002, we sold 60.9 million
retail gallons of propane, an increase of 26.9 million gallons, or 79%, from
the 34.0 million retail gallons sold during the six months ended March 31,
2001. The increase in retail sales volume was principally due to the January
2001 acquisition of Hoosier, the November 2001 acquisition of Pro Gas and the
December 2001 acquisition of IPC (in the aggregate, 33.3 million gallons). The
increases associated with these acquisitions were partially offset by weather
that was approximately 18% warmer in the six months ended March 31, 2002 as
compared to the same period in 2001 in our retail areas of operations.

   Wholesale gallon sales increased 69.3 million gallons, or 43%, to 231.1
million gallons in the six months ended March 31, 2002 from 161.8 million
gallons in the six months ended March 31, 2001. This increase was attributable
to the Hoosier acquisition, partially offset by a decrease due to weather that
was approximately 20% warmer in the six months ended March 31, 2002 as compared
to the same period in 2001 in our wholesale areas of operations.

   Revenues. Revenues in the six months ended March 31, 2002 were $164.1
million, a decrease of $6.3 million, or 4%, from $170.4 million of revenues for
the six months ended March 31, 2001. Revenues from retail propane sales were
$66.5 million in the six months ended March 31, 2002, an increase of $18.3
million, or 38%, from $48.2 million for the same six-month period in 2001. This
increase was primarily attributable to

                                       51

acquisition related volume (approximately $33.4 million), partially offset by
lower selling prices of propane (approximately $11.0 million) and volume
decreases (approximately $4.1 million) primarily due to warmer weather in the
six months ended March 31, 2002. Other retail revenues increased approximately
$2.5 million, or 46%, from $5.2 million in the six months ended March 31, 2001
to $7.6 million in the six months ended March 31, 2002 due to acquisitions.
These revenues consist of transportation revenues, tank rentals, heating oil
sales, appliance sales and service. Revenues from wholesale propane sales were
$89.8 million (after elimination of sales to our retail operations) in the six
months ended March 31, 2002, a decrease of $27.2 million, or 23%, from $117.0
million for the six months ended March 31, 2001. This decrease was attributable
to decreased selling prices as a result of the lower cost of propane.

   Cost of Product Sold. Cost of product sold in the six months ended March 31,
2002 was $113.8 million, a decrease of $27.6 million, or 20%, from cost of
product sold of $141.4 million in the same six-month period in 2001. This
decrease was attributable to an approximate 46% decrease in the average cost of
propane, partially offset by an increase in both wholesale and retail propane
volumes as discussed above.

   Gross Profit. Retail gross profit was $46.9 million in the six months ended
March 31, 2002 compared to $24.3 million in the six months ended March 31,
2001, an increase of $22.6 million, or 93%. This increase was primarily
attributable to an increase in retail gallons sold (approximately $18.0
million) and an increase in margin per gallon (approximately $1.7 million).
Wholesale gross profit was $3.4 million (after elimination of gross profit
attributable to our retail operations) in the six months ended March 31, 2002
compared to $4.8 million in the same six-month period in 2001, a decrease of
$1.4 million. This decrease was attributable to a decrease in margin per gallon
partially offset by an increase in wholesale volumes.

   Operating and Administrative Expenses. Operating and administrative expenses
increased $11.8 million, or 103%, to $23.3 million for the six months ended
March 31, 2002 as compared to $11.5 million in the same period in 2001. This
increase resulted from the acquisitions discussed above and, to a lesser
extent, an increase in insurance costs as a result of higher premiums and self
insured retention amounts, and an increase in personnel costs associated with
our growth and the completion of the initial public offering in July 2001.

   Depreciation and Amortization. Depreciation and amortization increased $2.5
million, or 99%, to $5.1 million in the six months ended March 31, 2002 from
$2.6 million in the same six-month period in 2001 primarily as a result of the
Hoosier, Pro Gas and IPC acquisitions.

   Interest Expense. Interest expense increased $0.4 million, or 13%, to $3.2
million in the six months ended March 31, 2002 as compared to $3.0 million for
the six months ended March 31, 2001. This increase is the result of additional
debt outstanding during 2002 as compared to 2001, partially offset by lower
interest rates in 2002.

   Net Income. Net income increased $6.3 million, or 52%, to $18.5 million in
the six months ended March 31, 2002 from $12.2 million in the same six-month
period in 2001. This increase in net income was attributable to the increase in
gross profit partially offset by an increase in operating and administrative
expenses, depreciation and amortization expenses.

   EBITDA. In the six months ended March 31, 2002, EBITDA increased $9.1
million, or 51%, to $26.9 million from $17.8 million in the same period of
fiscal 2001. The increase was primarily attributable to increased sales volumes
partially offset by an increase in operating and administrative expenses.

 Fiscal Year Ended September 30, 2001 Compared to Fiscal Year Ended September
 30, 2000

   Volume. During fiscal 2001, we sold 46.8 million retail gallons of propane,
an increase of 28.7 million gallons, or 158%, from the 18.1 million retail
gallons sold in fiscal 2000. The increase in retail sales volume was
principally due to the acquisitions of Country Gas (7.6 million gallons) and
the Hoosier Propane Group

                                       52

(16.3 million gallons). The remaining 4.8 million gallon increase was
attributable to internal growth and the fact that the year ended September 30,
2001 was approximately 15.8% colder than the year ended September 30, 2000 and
approximately 1.4% colder than normal in our retail areas of operation.

   Wholesale gallon sales increased 92.0 million gallons, or 63%, to 238.6
million gallons in fiscal 2001 from 146.6 million gallons in fiscal 2000. This
increase was attributable to the continued growth of our wholesale sales
operations, which were initiated after the fiscal 1999 winter season, and the
acquisition of the Hoosier Propane Group. In addition, fiscal 2001 was
approximately 8% colder than fiscal 2000 and slightly warmer than normal in our
wholesale areas of operations.

   Revenues. Revenues in fiscal 2001 were $223.1 million, an increase of $129.5
million, or 138%, over $93.6 million of revenues in fiscal 2000. Revenues from
retail propane sales increased $41.7 million, or 221%, from $18.9 million in
fiscal 2000 to $60.6 million in fiscal 2001. This increase was attributable to
the acquisitions of Country Gas ($10.5 million) and the Hoosier Propane Group
($19.9 million) and higher sales prices ($4.6 million), with the remaining
increase ($6.7 million) due to volume increases due to growth and colder
weather in our retail areas of operations. Revenues from wholesale propane
sales increased $81.7 million, or 116%, from $70.1 million in fiscal 2000 to
$151.8 million (after elimination of sales to our retail operations) in fiscal
2001. Approximately $23.1 million resulted from increased selling prices and
the remaining $58.6 million was attributed to our growth and colder weather
described above. Other retail revenues increased approximately $6.1 million, or
133%, from $4.6 million in fiscal 2000 to $10.7 million in fiscal 2001. This
increase was primarily due to transportation revenues of $6.0 million
attributable to the acquisition of the Hoosier Propane Group. Other retail
revenues also consist of tank rentals, heating oil sales, appliance sales and
service.

   Cost of Product Sold. Cost of product sold in fiscal 2001 was $182.6
million, an increase of $101.0 million, or 124%, over fiscal 2000 cost of sales
of $81.6 million. The increase was principally attributable to the significant
increases in wholesale and retail volumes (approximately $75.9 million) and an
approximate 28% increase in the average cost of propane (approximately $21.7
million). In addition, we recorded a charge to cost of product sold in fiscal
2001 of approximately $0.6 million associated with a third party who was
involuntarily petitioned into bankruptcy in December 2001.

   Gross Profit. Retail gross profit was $34.6 million in fiscal 2001 compared
to $10.7 million in fiscal 2000, an increase of $23.9 million, or 223%. This
increase was primarily attributable to higher retail gallons (approximately
$17.4 million) and an increase in margin per gallon (approximately $3.7
million). Wholesale gross profit was $5.9 million (after elimination of gross
profit attributable to our retail operations) in fiscal 2001 compared to $1.3
million in fiscal 2000, an increase of $4.6 million, or 353%. This increase was
attributable to higher wholesale gallon sales in fiscal 2001, including the
acquisition of the wholesale operations within the Hoosier Propane Group
(approximately $2.3 million), and an increase in gross profit per gallon
(approximately $2.3 million).

   Operating and Administrative Expenses. Operating and administrative expenses
were $23.5 million in fiscal 2001 as compared to $9.0 million in fiscal 2000,
an increase of $14.5 million, or 161%. This increase primarily resulted from
acquisitions and personnel costs, including performance incentives accrued as a
result of the increased profitability, with the remaining increase primarily
attributable to higher vehicle fuel and maintenance costs as a result of the
increased retail volumes.

   Depreciation and Amortization. Depreciation and amortization increased $4.2
million, or 186%, to $6.5 million in fiscal 2001 from $2.3 million in fiscal
2000. This increase was primarily a result of the Country Gas and the Hoosier
Propane Group acquisitions, which included property, plant and equipment and
intangible assets of approximately $88.6 million.

                                       53

   Interest Expense. Interest expense increased $4.0 million, or 143%, to $6.7
million in fiscal 2001 from $2.7 million in fiscal 2000. This increase was
primarily a result of the higher average outstanding borrowings in fiscal 2001
over fiscal 2000 associated with the debt incurred in the Country Gas and the
Hoosier Propane Group acquisitions. In addition, included in interest expense
in fiscal 2001 is a charge of $0.5 million associated with the early
termination of an interest rate swap agreement that was terminated by Inergy
Partners, LLC immediately prior to the initial public offering.

   Net Income (Loss). Net income increased $6.1 million to $4.3 million in
fiscal 2001 from a net loss of $1.8 million in fiscal 2000. This increase in
net income was attributable to the increase in gross profit in an amount
greater than the increases in operating and administrative expenses and
depreciation and amortization expense partially offset by an increase in
interest expense as a result of higher average outstanding borrowings
associated with the acquisitions.

   EBITDA. EBITDA increased $14.3 million, or 448%, to $17.5 million in fiscal
2001 from $3.2 million in fiscal 2000. The increase in EBITDA was attributable
to increased retail and wholesale volumes and margin per gallon associated with
our retail and wholesale sales partially offset by increased operating and
administrative expenses.

 Fiscal Year Ended September 30, 2000 Compared to Fiscal Year Ended September
 30, 1999

   Volume. During fiscal 2000, Inergy Partners, LLC sold 18.1 million retail
gallons of propane, an increase of 10.1 million gallons, or 126%, from the 8.0
million retail gallons sold in fiscal 1999. This increase was primarily
attributable to the acquisition of six retail propane distributors during
fiscal 1999 and two retail propane distributors in fiscal 2000 (8.6 million
gallons). The balance of the increase (1.5 million gallons) was attributable to
a winter that was slightly colder in fiscal 2000 than in fiscal 1999 as well as
internal growth. Fiscal 2000 was 17% warmer than normal in our retail areas of
operation.

   Wholesale gallon sales increased 121.9 million gallons, or 493%, to 146.6
million gallons in fiscal 2000 from 24.7 million gallons in fiscal 1999. This
increase was attributable to the growth of our wholesale sales operations,
which were initiated after the fiscal 1999 winter season. Fiscal 2000 was
approximately 11% warmer than normal in our wholesale areas of operations.

   Revenues. Revenues in fiscal 2000 were $93.6 million, an increase of $74.4
million, or 387%, over $19.2 million of revenues in fiscal 1999. Revenues from
retail propane sales increased $12.1 million, or 178%, from $6.8 million in
fiscal 1999 to $18.9 million in fiscal 2000. This increase is attributable to
our retail acquisitions (approximately $7.8 million), higher selling prices
(approximately $3.0 million) and slightly colder weather and internal growth.
Other retail revenues increased approximately $1.6 million, or 53%, to $4.6
million in fiscal 2000 from $3.0 million in fiscal 1999. These revenues consist
of tank rentals, heating oil sales, appliance sales and service and were
attributable to our retail acquisitions in fiscal 1999 and 2000. Revenues from
wholesale propane sales increased $60.7 million, or 650%, from $9.4 million in
fiscal 1999 to $70.1 million (after elimination of sales to our retail
operations) in fiscal 2000. This increase was a result of the growth of our
wholesale operations.

   Cost of Product Sold. Cost of product sold in fiscal 2000 was $81.6 million,
an increase of $67.8 million, or 494%, over fiscal 1999 cost of sales of $13.8
million. The increase was attributable to the significant increases in
wholesale and retail volumes and an approximate 29% increase in the average
cost of propane.

   Gross Profit. Retail gross profit was $10.7 million in fiscal 2000 compared
to $4.9 million in fiscal 1999, an increase of $5.8 million, or 120%. This
increase was attributable to higher retail gallons and a slight increase in
margin per gallon. Wholesale gross profit was $1.3 million (after elimination
of gross profit attributable to

                                       54

our retail operations) in fiscal 2000 compared to $0.5 million in fiscal 1999,
an increase of $0.8 million, or 148%. This increase was attributable to higher
wholesale gallon sales in fiscal 2000 partially offset by a decrease in gross
profit per gallon.

   Operating and Administrative Expenses. Operating and administrative expenses
were $9.0 million in fiscal 2000 as compared to $4.1 million in fiscal 1999, an
increase of $4.9 million, or 118%. This increase primarily resulted from
acquisitions.

   Depreciation and Amortization. Depreciation and amortization increased $1.6
million, or 231%, to $2.3 million in fiscal 2000 from $0.7 million in fiscal
1999. This increase was attributable to depreciation and amortization of
acquired assets, including intangible assets and, to a lesser extent, the
amortization of acquisition financing costs.

   Net Loss. Net loss increased $1.6 million to $1.8 million in fiscal 2000
from $0.2 million in fiscal 1999. This increase in net loss was primarily
attributable to an increase in interest expense of $1.8 million, most of which
was incurred in connection with acquisitions.

   EBITDA. EBITDA increased $1.7 million, or 110%, to $3.2 million in fiscal
2000 from $1.5 million in fiscal 1999. The increase in EBITDA was attributable
to increased retail and wholesale volumes, largely offset by higher operating
and administrative expenses.

Independent Propane Company

   Our acquisition of IPC was completed effective December 20, 2001. The
audited financial statements of IPC are included in this prospectus.

 Fiscal Year Ended September 30, 2001 Compared to Fiscal Year Ended September
 30, 2000

   Volume. During fiscal 2001, IPC sold 49.8 million retail gallons of propane,
an increase of 4.7 million gallons, or 10%, from the 45.1 million retail
gallons sold in fiscal 2000. During fiscal year 2000, IPC made 9 acquisitions
of small retail propane dealers that accounted for 0.9 million gallons of the
4.7 million gallon increase. The remaining increase in retail sales volume was
principally due to colder than normal weather in IPC's retail areas of
operations and internal growth.

   Sales. Sales in fiscal 2001 were $76.4 million, an increase of $17.4
million, or 30%, over $59.0 million of sales in fiscal 2000. This increase was
attributable to higher sales prices and volume increases due to colder weather
in IPC's retail areas of operations and internal growth.

   Cost of Sales. Cost of sales in fiscal 2001 was $37.8 million, an increase
of $9.5 million, or 33%, over fiscal 2000 cost of sales of $28.3 million. The
increase was attributable to the increases in retail volumes and an increase in
the average cost of propane.

   Gross Profit. Gross profit was $38.7 million in fiscal 2001 compared to
$30.6 million in fiscal 2000, an increase of $8.1 million, or 26%. This
increase was primarily attributable to the increase in retail gallons and an
increase in average propane margin per gallon.

   Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $22.3 million in fiscal 2001 as compared to $21.9
million in fiscal 2000, an increase of $0.4 million, or 2%. This increase
reflects incremental operating costs primarily resulting from increased labor
costs and vehicle expenses associated with increased gallon volume.

   Depreciation and Amortization. Depreciation and amortization increased $0.1
million to $7.0 million in fiscal 2001 from $6.9 million in fiscal 2000.

                                       55

   Net Income (Loss). Net income increased $8.6 million to $3.0 million in
fiscal 2001 from a net loss of $5.6 million in fiscal 2000. This increase in
net income was attributable to the increase in operating income, and lower
interest cost resulting from lower interest rate and average outstanding
borrowings, offset by slightly increased operating costs.

 Fiscal Year Ended September 30, 2000 Compared to Fiscal Year Ended September
 30, 1999

   Volume. During fiscal 2000, IPC sold 45.1 million retail gallons of propane,
an increase of 1.5 million gallons, or 4%, from the 43.6 million retail gallons
sold in fiscal 1999. This increase was the result of acquisitions, partially
offset by warmer than normal temperatures in IPC's retail areas of operation.
During fiscal year 2000 and fiscal year 1999, IPC made 9 and 21 acquisitions of
small retail propane dealers, respectively.

   Sales. Sales in fiscal 2000 were $59.0 million, an increase of $14.0
million, or 31%, over $45.0 million of sales in fiscal 1999. This increase is
primarily attributable to higher selling prices and acquisitions.

   Cost of Sales. Cost of sales in fiscal 2000 was $28.3 million, an increase
of $12.3 million, or 77%, over fiscal 1999 cost of sales of $16.0 million. The
increase was attributable to the approximate 78% increase in the average cost
of propane.

   Gross Profit. Gross profit was $30.6 million in fiscal 2000 compared to
$29.0 million in fiscal 1999, an increase of $1.6 million, or 6%. This increase
was primarily attributable to an increase in retail gallons sold.

   Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $21.9 million in fiscal 2000 as compared to $21.3
million in fiscal 1999, an increase of $0.6 million, or 3%. This increase is
primarily the result of incremental operating costs primarily resulting from
increased labor costs and vehicle expenses associated with increased gallon
volume.

   Depreciation and Amortization. Depreciation and amortization increased $1.4
million, or 24%, to $6.9 million in fiscal 2000 from $5.5 million in fiscal
1999. This increase was attributable to the depreciation and amortization of
the assets acquired in acquisitions.

   Net Loss. Net loss increased $2.6 million to $5.6 million in fiscal 2000
from $3.0 million in fiscal 1999. This increase in net loss was primarily
attributable to an increase in interest expense of $2.3 million, most of which
was incurred in connection with acquisitions and an increase in depreciation
and amortization of $1.4 million, partially offset by an increase in operating
income.

Hoosier Propane Group

   Our acquisition of the Hoosier Propane Group was completed effective January
1, 2001. The audited and unaudited financial statements of the Hoosier Propane
Group are included elsewhere in this prospectus.

 Three Months Ended December 31, 2000 Compared to Three Months Ended December
 31, 1999

   Volume. During the three months ended December 31, 2000, the Hoosier Propane
Group sold 8.6 million retail gallons of propane, an increase of 1.4 million
gallons, or 19%, from the 7.2 million retail gallons sold in the same period in
fiscal 1999. This increase was attributable to colder weather and internal
growth.

   The Hoosier Propane Group sold 23.7 million wholesale gallons of propane in
the three months ended December 31, 2000, a decrease of 5.5 million gallons, or
19%, from the 29.2 million wholesale gallons sold in the same period in fiscal
1999. This decrease was attributable to less competitive pricing in the 2000
period due to higher product costs.

                                       56

   Revenues. Revenues in the three months ended December 31, 2000 were $31.5
million, an increase of $10.7 million, or 52%, over $20.8 million of revenues
in the same period of fiscal 1999. This increase was attributable to increased
propane and freight revenues.

   Revenues from propane sales increased $10.1 million, or 53%, to $29.2
million in the three months ended December 31, 2000 from $19.1 million in the
same period in fiscal 1999. This increase was primarily attributable to higher
prices and increased retail volumes, and was partially offset by decreased
wholesale volumes.

   Freight revenues increased $0.6 million, or 49%, to $2.0 million in the
three months ended December 31, 2000 from $1.4 million in the same period in
fiscal 1999. The colder weather in the 2000 period resulted in more deliveries
of propane to independent propane distributors and other contract customers.

   Cost of Product Sold. Cost of product sold in the three months ended
December 31, 2000 was $25.2 million, an increase of $9.6 million, or 61%, over
the 1999 period of $15.6 million. This increase was attributable to a
significant increase in the average cost of propane and increased retail
volumes, partially offset by a decrease in wholesale volumes.

   Gross Profit. Gross profit was $6.4 million in the three months ended
December 31, 2000 compared to $5.2 million in the fiscal 1999 period, an
increase of $1.2 million, or 23%. This increase was attributable to an increase
in retail volumes and margins, partially offset by decreases in wholesale
volumes and margins. The increase in retail gross margin per gallon was
attributable to favorable propane purchases during a period of increasing
retail prices and colder weather in our areas of operation.

   Operating and Administrative Expenses. Operating and administrative expenses
remained constant at $2.5 million, in the three month periods ended December
31, 2000 and 1999.

   Depreciation and Amortization. Depreciation and amortization remained
constant at $0.4 million in the three month periods ended December 31, 2000 and
1999, primarily as a result of maintaining existing assets in 2000 as opposed
to the replacement of these assets.

   Net Income. Net income increased $1.3 million, or 58%, to $3.4 million in
the three months ended December 31, 2000 from $2.1 million in the fiscal 1999
period. This increase was attributable to an increase in operating income while
interest expense and other income remained relatively constant in the fiscal
2000 period as compared to the fiscal 1999 period.

 Fiscal Year Ended September 30, 2000 Compared to Fiscal Year Ended September
 30, 1999

   Volume. During fiscal 2000, the Hoosier Propane Group sold 22.9 million
retail gallons of propane, an increase of 0.1 million gallons from the 22.8
million retail gallons sold in fiscal 1999. This increase was attributable to
fiscal 2000 being 3% colder than fiscal 1999 in the Hoosier Propane Group's
areas of operation and internal growth, partially offset by decreases in
agricultural and commercial volumes resulting from an increased focus on higher
margin sales. Fiscal 2000 was 10% warmer than normal in our area of operations.

   The Hoosier Propane Group sold 68.8 million wholesale gallons of propane in
fiscal 2000, an increase of 5.0 million gallons, or 8%, over the 63.8 million
wholesale gallons sold in fiscal 1999. This increase was attributable to the
favorable sales opportunities and the slightly colder weather in the Hoosier
Propane Group's areas of operation in fiscal 2000 as compared to fiscal 1999.
Wholesale marketing efforts were primarily concentrated in the Southeast and
Midwest where fiscal 2000 temperatures were approximately 10% warmer than
normal.

   Revenues. Revenues in fiscal 2000 were $65.6 million, an increase of $21.9
million, or 50%, over $43.7 million of revenues in fiscal 1999. Increased
propane revenues accounted for approximately $19.9 million of

                                       57

this increase with freight and other revenues increasing approximately $2.0
million from fiscal 1999 to fiscal 2000.

   Revenues from propane sales increased $19.9 million, or 51%, from $38.8
million in fiscal 1999 to $58.7 million in fiscal 2000. This increase was
primarily attributable to higher sales prices and an increase in wholesale
volumes.

   Freight revenues increased $1.2 million, or 25%, to $5.7 million fiscal 2000
from $4.5 million in fiscal 1999 as a result of growth in market share.

   Other revenues increased $0.8 million, or 241%, to $1.2 million in fiscal
2000 from $0.4 million in fiscal 1999 due to increased vehicle service
revenues.

   Cost of Product Sold. Cost of product sold in fiscal 2000 was $49.0 million,
an increase of $20.1 million, or 70%, over the fiscal 1999 cost of product sold
of $28.9 million. This increase was attributable to a significant increase in
the average cost of propane in fiscal 2000 compared to fiscal 1999 and to
increased wholesale volumes in fiscal 2000.

   Gross Profit. Gross profit was $16.5 million in fiscal 2000 compared to
$14.8 million in fiscal 1999, an increase of $1.7 million, or 12%. This
increase was attributable to an increase in retail margins and wholesale
volumes. The increase in retail gross margin per gallon was attributable to an
increased focus on higher margin gallon sales.

   Operating and Administrative Expenses. Operating and administrative expenses
were $9.4 million in fiscal 2000 as compared to $8.3 million in fiscal 1999, an
increase of $1.1 million, or 13%. This increase primarily resulted from
increased labor costs and vehicle expenses associated with higher retail and
wholesale volumes together with growth in freight revenues. In addition, the
increased cost per gallon of vehicle fuel in fiscal 2000 over fiscal 1999
contributed to the increase in vehicle costs.

   Depreciation and Amortization. Depreciation and amortization decreased $0.1
million to $1.6 million in fiscal 2000 from $1.7 million in fiscal 1999.

   Net Income. Net income increased $0.8 million, or 20%, to $5.0 million in
fiscal 2000 from $4.2 million in fiscal 1999. This increase in net income was
attributable to the increase in operating income.

 Fiscal Year Ended September 30, 1999 Compared to Fiscal Year Ended September
 30, 1998

   Volume. During fiscal 1999, the Hoosier Propane Group sold 22.8 million
retail gallons of propane, an increase of 5.4 million gallons, or 31%, from the
17.4 million retail gallons sold in fiscal 1998. At the end of fiscal 1998 and
the beginning of fiscal 1999, the Hoosier Propane Group acquired three retail
propane distributors that accounted for 5.1 million gallons of the 5.4 million
gallon increase in retail propane volume. The remaining 0.3 million gallon
increase in retail volume resulted from internal growth and, to a lesser
extent, slightly colder weather in fiscal 1999 as compared to fiscal 1998.

   During fiscal 1999, the Hoosier Propane Group sold 63.8 million wholesale
gallons, a decrease of 25.9 million gallons, or 29%, from the 89.7 million
wholesale gallons sold in fiscal 1998. The decrease in wholesale volumes is due
in part to the loss of the business of a multi-state retail propane marketer.

   Revenues. Revenues in fiscal 1999 were $43.7 million, a decrease of $12.0
million, or 22%, from $55.7 million in fiscal 1998. Revenues from propane sales
decreased $11.8 million, or 23%, from $50.6 million in fiscal 1998 to $38.8
million in fiscal 1999 primarily due to a decrease in prices. Freight revenues
decreased $0.3 million, or 6%, from $4.8 million in fiscal 1998 to $4.5 million
in fiscal 1999 due to the loss of the business of a multi-state marketer, while
other revenues increased $0.1 million, or 24%, to $0.4 million in fiscal 1999
from $0.3 million in fiscal 1998.

                                       58

   Cost of Product Sold. Cost of product sold in fiscal 1999 was $28.9 million,
a decrease of $13.9 million, or 33%, from fiscal 1998 cost of product sold of
$42.8 million. The decrease in cost of product sold was primarily attributable
to a decrease in the cost of propane per gallon in fiscal 1999 as compared to
fiscal 1998 and, to a lesser extent, decreased wholesale volumes, partially
offset by an increase in retail volumes.

   Gross Profit. Gross profit was $14.8 million in fiscal 1999 compared to
$12.9 million in fiscal 1998, an increase of $1.9 million, or 14%. This
increase was attributable to an increase in retail volumes and margins,
partially offset by a decrease in wholesale volume. The increase in our retail
gross margin per gallon resulted from our focus on higher margin gallon sales.

   Operating and Administrative Expenses. Operating and administrative expenses
were $8.3 million in fiscal 1999 as compared to $7.6 million in fiscal 1998, an
increase of $0.7 million, or 9%. This increase was attributable to increased
personnel costs resulting from acquisitions.

   Depreciation and Amortization. Depreciation and amortization increased $0.2
million, or 11%, to $1.7 million in fiscal 1999 from $1.5 million in fiscal
1998. This increase was primarily attributable to the depreciation of the
assets acquired in acquisitions.

   Net Income. Net income increased $0.7 million, or 18%, to $4.2 million in
fiscal 1999 from $3.5 million in fiscal 1998. This increase in net income was
attributable to the increase in operating income offset by a $0.3 million
increase in acquisition related interest expense.

Liquidity and Capital Resources

 Cash Flows

   Cash flows provided by (used in) operating activities of $4.7 million in
fiscal 2001 consisted primarily of: net income of $4.3 million; net non-cash
charges of $8.1 million, principally related to depreciation and amortization
of $6.5 million associated with our recent acquisitions; and uses of cash of
$7.8 million associated with the changes in operating assets and liabilities,
including net liabilities from price risk management activities. The use of
cash associated with the changes in operating assets and liabilities is
primarily due to the timing effects of the acquisition of the Hoosier Propane
Group which closed in January 2001 and the use of working capital to finance
business growth. Cash used in operating activities was $0.2 million in fiscal
2000 and $0.8 million in fiscal 1999. The uses of cash from operating
activities for these periods are principally due to the net losses incurred of
$1.8 million in fiscal 2000 and $0.2 million in fiscal 1999. These net losses
resulted from the development of management and infrastructure sufficient to
accommodate planned future growth. Depreciation and amortization increased to
$2.3 million in fiscal 2000 from $0.7 million in fiscal 1999 due to the effects
of acquisitions completed in these two years. Net increases in operating assets
and liabilities, including net liabilities from price risk management
activities, required a use of cash amounting to $1.0 million in fiscal 2000 and
$1.4 million in fiscal 1999.

   Cash provided by operating activities was $10.6 million in the six months
ended March 31, 2002 compared to $2.6 million in the six months ended March 31,
2001. The increase in cash provided by operating activities is primarily
attributable to higher net income and depreciation and amortization charges in
the six months ended March 31, 2002 as compared to the six months ended March
31, 2001. Net income increased to $18.5 million for the six months ended March
31, 2002 from $12.2 million for the six months ended March 31, 2001 due to the
effects of the acquisitions completed in fiscal 2002 and the effects of higher
margins per gallon, partially offset by the warmer weather in the 2002 period.
Depreciation and amortization increased to $5.1 million in the six months ended
March 31, 2002 from $2.6 million in the same fiscal 2001 period due to the
effects of acquisitions. The change in operating assets and liabilities,
including net liabilities from price risk management activities, required a use
of cash amounting to $14.4 million in the six months ended March 31, 2002 and
$13.2 million in the same fiscal 2001 period to accommodate increased business
volume.

   Cash used in investing activities was $64.0 million in fiscal 2001, $12.4
million in fiscal 2000 and $13.1 million in fiscal 1999. These amounts were
primarily comprised of: $56.3 million for the acquisition of the

                                       59

Hoosier Propane Group and Bear Man Propane and $3.1 million of costs incurred
in the financing of that acquisition in fiscal 2001; $9.6 million for
acquisitions in fiscal 2000; and $11.4 million for acquisitions in fiscal 1999.
Additionally, we expended $4.8 million in fiscal 2001, $2.3 million in fiscal
2000 and $1.4 million in fiscal 1999, for additions of property and equipment
to accommodate our growing operations.

   Cash used in investing activities was $88.9 million in the six months ended
March 31, 2002 compared to $60.2 million in the six months ended March 31,
2001. The six months ended March 31, 2002 included $84.5 million of cash used
for the IPC and Pro Gas acquisitions and $2.5 million used for capital
expenditures. In addition, the six months ended March 31, 2002 included a use
of $2.0 million for payment of deferred financing costs associated with the
credit facilities used to finance the IPC and Pro Gas acquisitions. The six
months ended March 31, 2001 included $56.3 million used for acquisitions.

   Cash provided by financing activities was $60.2 million in fiscal 2001,
$13.9 million in fiscal 2000 and $14.1 million in fiscal 1999. Cash provided by
financing activities in fiscal 2001, fiscal 2000 and fiscal 1999 included net
borrowings of $14.2 million, $12.6 million and $14.2 million, respectively,
under debt agreements, including borrowings and repayments in conjunction with
the January 2001 and July 2001 refinancings of our credit facilities and
borrowings and repayments of our revolving working capital facility. In
addition, the net proceeds were received from the initial public offering of
$34.3 million in fiscal 2001 and proceeds from the issuance of redeemable
preferred stock amounted to $16.1 million in fiscal 2001 and $1.9 million in
fiscal 2000. Offsetting these cash sources were $2.6 million, $0.5 million and
$0.2 million of distributions paid to holders of Inergy Partners Class A
Preferred Interests in fiscal 2001, fiscal 2000 and fiscal 1999, respectively,
and $1.8 million of cash retained by Inergy Partners at the time of the
conveyance of assets in conjunction with the initial public offering in fiscal
2001.

   Cash provided by financing activities was $78.6 million in the six months
ended March 31, 2002 and $59.7 million in the six months ended March 31, 2001.
The 2002 period included net proceeds from long term debt of $84.4 million
associated with working capital needs and borrowings and repayments related to
amended credit facilities negotiated in connection with acquisitions in that
period. In addition, we received cash of approximately $0.7 million in capital
contributions and paid $6.5 million in distributions to unitholders in the 2002
period. The 2001 period included net proceeds from issuance of long-term debt
of $44.5 million and redeemable preferred members' interest of $16.0 million.

   At March 31, 2002, we had goodwill of $47.1 million, representing
approximately 17% of total assets. This goodwill is attributable to our
acquisitions. We expect recovery of the goodwill through future cash flows
associated with these acquisitions.

 Distributions

   On November 14, 2001, we paid a $.040 per limited partner unit distribution
to unitholders, which totaled $2.3 million. This represented a partial
quarterly distribution for the period from July 31, 2001, the date of our
initial public offering, through September 30, 2001. On February 15, 2001, we
paid a $0.625 per limited partner unit distribution to unitholders, which
totaled $4.1 million. On May 15, 2002, we paid a $0.66 per limited partner
distribution to unitholders, which totaled $4.4 million.

                                       60

 Total Contractual Cash and Other Obligations

   The following table summarizes our long-term debt and operating lease
obligations (in thousands) as of March 31, 2002:

                                           Less than   1-3               After
                                   Total    1 year    Years   4-5 Years 5 years
                                  -------- --------- -------- --------- -------
                                                         
Aggregate amount of principal to
 be paid on the outstanding
 long-term debt.................  $142,164  $3,722   $137,559   $ 437    $446
Future minimum lease payments
 under noncancelable operating
 leases.........................     5,196   1,611      2,425   1,044     116
Standby letters of credit.......     2,000   2,000         --      --      --

   As of September 30, 2001, total propane contracts had an outstanding net
fair value of $4.6 million, as compared to total propane contracts outstanding
with a net fair value at March 31, 2002 of $4.3 million. The net change of $0.3
million includes a net decrease in fair value of $1.0 million from contracts
settled during the six-month period, partially offset by a net $0.7 million
increase from other changes in fair value. Of the outstanding fair value as of
March 31, 2002, contracts with a maturity of less than one year totaled $3.9
million, and contracts maturing between one and two years totaled $0.4 million.

 Liquidity Needs

   Our primary short-term liquidity needs are to fund general working capital
requirements while our long-term liquidity needs are primarily associated with
capital expenditures for the growth and maintenance of our existing businesses
together with funding for strategic business acquisitions. Growth capital
expenditures are primarily for the purchase of customer storage tanks while
maintenance capital expenditures are primarily related to repair and
replacement of propane delivery vehicles and maintenance associated with
existing customer installations. Our primary sources of funds for our short-
term liquidity needs will be cash flows from operations and borrowings under a
short-term working capital facility while our long-term sources of funds will
be from long-term bank borrowings and equity or debt financings.

   We believe that anticipated cash from operations and borrowings under our
amended and restated credit facility described below will be sufficient to meet
our liquidity needs for the foreseeable future. If our plans or assumptions
change or are inaccurate, or we make any additional acquisitions, we may need
to raise additional capital. We may not be able to raise additional funds or
may not be able to raise such funds on favorable terms.

Description of Indebtedness

   Upon completion of this offering and the senior secured notes offering, we
expect our total outstanding long-term indebtedness to be approximately $104.0
million, including approximately $85.0 million of senior secured notes,
approximately $15.0 million under our acquisition facility and approximately
$4.0 million of other indebtedness.

   Bank Credit Facility. In conjunction with the acquisition of IPC, on
December 19, 2001, Inergy Propane entered into a $195 million amended and
restated senior secured credit facility with First Union National Bank and
other lenders. The revolving portion of the credit facility has a term of three
years and is guaranteed by us and each subsidiary of Inergy Propane. The IPC
acquisition term loan portion of the credit facility matures April 1, 2003 and
is also guaranteed by us and each subsidiary of Inergy Propane. We currently
have approximately $133.0 million outstanding under the credit facility,
comprised of approximately $62.0 million outstanding under the revolving
acquisition facility, approximately $70.0 million outstanding under the IPC
acquisition term loan and approximately $1.0 million under the working capital
facility.

   The following is a summary of the material terms of the credit facility.

   The credit facility consists of a working capital facility in the aggregate
principal amount of up to $50 million, a revolving acquisition facility in the
aggregate principal amount of up to $75 million and an IPC

                                       61

acquisition term loan in the amount of $70 million. The aggregate amount of
borrowings under the working capital facility, including outstanding letters of
credit, are subject to a borrowing base requirement relating to accounts
receivable and inventory. During the period from July 1 through December 31,
Inergy Propane may borrow up to an additional $12 million not subject to the
borrowing base, however, total borrowings under the working capital facility
cannot exceed $50 million. Up to $10 million of the working capital facility
may be used for the issuance of letters of credit. Each of the working capital
facility, the revolving acquisition facility and the IPC acquisition term loan
may be prepaid and the commitments may be reduced at any time without penalty.
Amounts borrowed and repaid under either the working capital facility or the
revolving acquisition facility may be reborrowed. Any amounts repaid under the
IPC acquisition term loan, however, cannot be reborrowed and must be repaid by
April 1, 2003.

   During each fiscal year beginning October 1, 2001, the outstanding balance
of the working capital facility must be reduced to $4 million or less for a
minimum of 30 consecutive days during the period commencing March 1 and ending
September 30 of each calendar year.

   The obligations under the credit facility will be secured by first priority
liens on all assets of Inergy Propane and its subsidiaries, the pledge of all
of Inergy Propane's equity interests in its subsidiaries and by a pledge of our
membership interest in Inergy Propane. The credit facility permits Inergy
Propane to generally secure up to $100 million in privately placed indebtedness
with the same collateral on a pari passu basis. Any such indebtedness may not
be secured by any other collateral, must be incurred within the next 12 months
and may not require or permit any principal payments to be made prior to the
maturity of the credit facility. Inergy Propane is required to use 100% of the
net cash proceeds of any such indebtedness to reduce borrowings under the
credit facility.

   Indebtedness under the credit facility will bear interest at the option of
Inergy Propane at either a base rate or LIBOR (preadjusted for reserves), plus
in each case, an applicable margin. The applicable margin varies quarterly
based on Inergy Propane's leverage ratio. The applicable margin will increase
by 50 basis points on the six-month anniversary of the credit agreement and
again on the nine-month anniversary of the credit agreement if the advances
outstanding under the IPC acquisition term loan exceed $25 million on each of
such dates. Inergy Propane will incur a fee based on the average daily unused
commitments under the credit facility.

   Inergy Propane is required to use 100% of the net cash proceeds (that are
not applied to purchase replacement assets) from asset dispositions (other than
the sale of inventory and motor vehicles in the ordinary course of business) to
reduce borrowings under the credit facility during any fiscal year in which
unapplied net cash proceeds are in excess of $1 million. Any such mandatory
prepayments are applied first to reduce borrowings under the acquisition
facility and then under the working capital facility.

   In addition, the credit facility contains various covenants limiting the
ability of Inergy Propane and its subsidiaries to, among other things:

  .  incur other indebtedness (other than permitted debt, including $100
     million of privately placed debt secured on a pari passu basis);

  .  grant or incur liens;

  .  pay dividends or make distributions if a default or event of default has
     occurred and is continuing;

  .  permit operating lease obligations to exceed $5 million;

  .  enter into any debt which contains covenants more restrictive than those
     of the credit facility;

  .  make investments, loans and acquisitions;

  .  enter into a merger, consolidation or sale of assets;

  .  engage in any sale and leaseback transaction or another type of business
     or create any subsidiary;

  .  engage in transactions with affiliates;

                                       62

  .  in the case of subsidiaries, to issue any capital stock;

  .  modify in any material respects the rights of holders of capital stock;
     and

  .  modify material contracts.

   In addition, Inergy, L.P. is prohibited from incurring indebtedness except
its guarantee of the credit facility.

   Furthermore, the credit facility contains the following financial covenants:

  .  the ratio of consolidated EBITDA (as defined in the credit facility) to
     consolidated interest expense (as defined in the credit facility) must
     be at least 2.25 to 1.0 during the four quarters ending December 31,
     2001 and 2.5 to 1.0 for any fiscal quarter thereafter; and

  .  the ratio of total funded debt (as defined in the credit facility) to
     consolidated EBITDA may not exceed 4.5 to 1.

   Each of the following is an event of default under the credit facility:

  .  nonpayment of principal, interest, fees or other amounts;

  .  violation of covenants;

  .  inaccuracy of representations and warranties;

  .  a default under other loan documents for the credit facility;

  .  a default under other material agreements and indebtedness of Inergy
     Propane, its subsidiaries or Inergy, L.P.;

  .  bankruptcy and other insolvency events of Inergy Propane, its
     subsidiaries or Inergy, L.P.;

  .  judgments exceeding $500,000 against Inergy Propane, its subsidiaries or
     Inergy, L.P. are undischarged or unstayed for 30 days;

  .  the actual or asserted invalidity of any loan documentation or security
     interest;

  .  a change of control of Inergy, L.P.;

  .  Inergy, L.P. ceases to own 100% of Inergy Propane; and

  .  a condition or event occurs that could have a material adverse effect in
     the reasonable judgment of 2/3 of the lenders.

   Secured Notes Offering. Our operating company, Inergy Propane, LLC, expects
to enter into a note purchase agreement in June 2002 with a group of
institutional lenders pursuant to which our operating company will issue $85.0
million aggregate principal amount of senior secured notes with a weighted
average interest rate of 9.07% and a weighted average maturity of 5.9 years. We
are not required to make principal payments on the senior secured notes prior
to their maturity. The senior secured notes consist of: $35.0 million principal
amount of 8.85% senior secured notes with a 5-year maturity, $25.0 million
principal amount of 9.10% senior secured notes with a 6-year maturity, and
$25.0 million principal amount of 9.34% senior secured notes with a 7-year
maturity. The material covenants of the note purchase agreement relating to the
senior secured notes will be similar to the covenants contained in our bank
credit facility, including the obligation of Inergy Propane to maintain certain
financial ratios. We intend to use the net proceeds from the senior secured
notes offering to repay indebtedness under our bank credit facility.

Environmental Matters

   Environmental liabilities have not materially impacted our financial
condition, results of operations or liquidity since our inception.

                                       63

Recent Accounting Pronouncements

   In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supercedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of, and the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for a disposal of a segment of
a business. SFAS No. 144 is effective for fiscal years beginning after December
15, 2001, with earlier application encouraged. Management has not determined
the method, timing, or impact of adopting SFAS No. 144.

   In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 supercedes APB
Opinion No. 16, Business Combinations, and FASB Statement No. 28, Accounting
for Preacquisition Contingencies of Purchased Enterprises. This statement
requires accounting for all business combination using the purchase method, and
changes the criteria for recognizing intangible assets apart from goodwill.
This statement is effective for all business combinations initiated after June
30, 2001. SFAS No. 142 supercedes APB Opinion No. 17, Intangible Assets, and
addresses how purchased intangibles should be accounted for upon acquisition.
The statement also addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements. All intangibles will be subject to periodic impairment testing and
will be adjusted to fair value. The adoption of SFAS No. 142 eliminates
goodwill amortization that would have totaled approximately $2.1 million in
fiscal 2002, based on the balances as of September 30, 2001 and totaled
approximately $1.7 million in fiscal 2001. Application of the nonamortization
and impairment provisions of the statement has not significantly impacted our
financial position or results of operations.

Critical Accounting Policies

 Accounting for Price Risk Management

   Through our wholesale operations, we offer price risk management services to
our customers and, in addition, trades for our own account. Financial
instruments utilized in connection with trading activities are accounted for
using the mark-to-market method in accordance with Emerging Issues Task Force
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities." Under the mark-to-market method of accounting,
forwards, swaps, options and storage contracts are reflected at fair value,
inclusive of reserves, and are shown in the consolidated balance sheets as
assets and liabilities from price risk management activities. In addition,
inventories for wholesale operations, which consist mainly of liquid propane
commodities, are also stated at market. Unrealized gains and losses from newly
originated contracts, contract restructuring and the impact of price movements
on these financial instruments and wholesale propane inventories are recognized
in cost of products sold. Changes in the assets and liabilities from trading
and price risk management activities result primarily from changes in the
market prices, newly originated transactions and the timing of settlement
relative to the receipt of cash for certain contracts. The market prices used
to value these transactions reflect management's best estimate considering
various factors including closing exchange and over-the-counter quotations,
time value and volatility factors underlying the commitments. The values are
adjusted to reflect the potential impact of liquidating our position in an
orderly manner over a reasonable period of time under present market
conditions. The cash flow impact of financial instruments is reflected as cash
flows from operating activities in the consolidated statements of cash flows.

 Revenue Recognition

   Sales of propane are recognized at the time product is shipped or delivered
to the customer. Revenue from the sale of propane appliances and equipment is
recognized at the time of sale or installation. Revenue from repairs and
maintenance is recognized upon completion of the service.

                                       64

 Impairment of Long-Lived Assets

   We review our long-lived assets, other than goodwill, in accordance with
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of," for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If such events or changes
in circumstances are present, a loss is recognized if the carrying value of the
asset is in excess of the sum of the undiscounted cash flows expected to result
from the use of the asset and its eventual disposition. An impairment loss is
measured as the amount by which the carrying amount of the asset exceeds the
fair value of the asset. For assets identified to be disposed of in the future,
the carrying value of these assets is compared to the estimated fair value less
the cost to sell to determine if impairment is required. Until the assets are
disposed of, an estimate of the fair value is recalculated when related events
or circumstances change.

   We review goodwill, in accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets," for impairment on at least an annual basis by applying a
fair-value-based test. If the fair value of the goodwill is less than the
carrying value, a loss is recognized for the excess of the carrying value over
the fair value of the goodwill.

   In connection with the transitional goodwill impairment evaluation,
Statement No. 142 requires us to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this we identify our reporting units and determine the carrying value of each
reporting unit by assigning the assets and liabilities, including the existing
goodwill and intangible assets, to those reporting units as of the date of
adoption. To the extent a reporting unit's carrying value exceeds its fair
value, an indication exists that the reporting unit's goodwill may be impaired
and we must perform the second step of the transitional impairment test. In the
second step, we must compare the implied fair value of the goodwill, determined
by allocating the fair value to all of its assets (recognized and unrecognized)
and liabilities in a manner similar to a purchase price allocation in
accordance with SFAS No. 141, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption.

Quantitative and Qualitative Disclosure About Market Risk

   We have long-term debt and a revolving line of credit subject to the risk of
loss associated with movements in interest rates.

   At March 31, 2002, we had floating rate obligations totaling approximately
$138.2 million for amounts borrowed under our revolving line of credit and
long-term debt. The floating rate obligations expose us to the risk of
increased interest expense in the event of increases in short-term interest
rates. If the floating interest rate were to increase by 100 basis points from
March 31, 2002 levels, our combined interest expense would increase by a total
of approximately $0.1 million per month.

Propane Price Risk

   The propane industry is a "margin-based" business in which gross profits
depend on the excess of sales prices over supply costs. As a result, our
profitability will be sensitive to changes in wholesale prices of propane
caused by changes in supply or other market conditions. When there are sudden
and sharp increases in the wholesale cost of propane, we may not be able to
pass on these increases to our customers through retail or wholesale prices.
Propane is a commodity and the price we pay for it can fluctuate significantly
in response to supply or other market conditions. We have no control over
supply or market conditions. In addition, the timing of cost pass-throughs can
significantly affect margins. Sudden and extended wholesale price increases
could reduce our gross profits and could, if continued over an extended period
of time, reduce demand by encouraging our retail customers to conserve or
convert to alternative energy sources.

                                       65

   We engage in hedging transactions to reduce the effect of price volatility
on our product costs and to help ensure the availability of propane during
periods of short supply. We attempt to balance our contractual portfolio by
purchasing volumes only when we have a matching purchase commitment from our
wholesale customers. However, we may experience net unbalanced positions from
time to time which we believe to be immaterial in amount. In addition to our
ongoing policy to maintain a balanced position, for accounting purposes we are
required, on an ongoing basis, to track and report the market value of our
purchase obligations and our sales commitments.

 Trading Activities

   Through our wholesale operations, we offer price risk management services to
energy related businesses through a variety of financial and other instruments,
including forward contracts involving physical delivery of propane. In
addition, we manage our own trading portfolio using forward, physical and
futures contracts. We attempt to balance our contractual portfolio in terms of
notional amounts and timing of performance and delivery obligations. However,
net unbalanced positions can exist or are established based on assessment of
anticipated short-term needs or market conditions.

   The price risk management services are offered to propane retailers and
other related businesses through a variety of financial and other instruments
including forward contracts involving physical delivery of propane, swap
agreements, which require payments to (or receipt of payments from)
counterparties based on the differential between a fixed and variable price for
propane, options and other contractual arrangements.

   We have recorded our trading activities at fair value in accordance with
EITF No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities." EITF No. 98-10 requires energy trading contracts to be
recorded at fair value on the balance sheet, with the changes in fair value
included in earnings.

   We have no negative Enron exposure.

 Notional Amounts and Terms

   The notional amounts and terms of these financial instruments at March 31,
2002 include fixed price payor for 3.6 million and fixed price receiver for 4.2
million barrels.

   Notional amounts reflect the volume of the transactions, but do not
represent the amounts exchanged by the parties to the financial instruments.
Accordingly, notional amounts do not accurately measure our exposure to market
or credit risks.

 Fair Value

   The fair value of the financial instruments related to price risk management
activities as of March 31, 2002 was assets of $8.9 million and liabilities of
$4.6 million related to propane. All intercompany transactions have been
appropriately eliminated. The market prices used to value these transactions
reflect management's best estimate considering various factors including
closing exchange and over-the-counter quotations, time value and volatility
factors underlying the commitments. The values are adjusted to reflect the
potential impact of liquidating our position in an orderly manner over a
reasonable period of time under present market conditions.

 Market and Credit Risk

   Inherent in the resulting contractual portfolio are certain business risks,
including market risk and credit risk. Market risk is the risk that the value
of the portfolio will change, either favorably or unfavorably, in response to
changing market conditions. Credit risk is the risk of loss from nonperformance
by suppliers,

                                       66

customers or financial counterparties to a contract. We take an active role in
managing and controlling market and credit risk and has established control
procedures, which are reviewed on an ongoing basis. We monitor market risk
through a variety of techniques, including daily reporting of the portfolio's
value to senior management. We attempt to minimize credit risk exposure through
credit policies, periodic monitoring procedures and obtaining customer deposits
on sales contracts. The counterparties associated with assets from price risk
management activities as of March 31, 2002 were energy marketers.

                                       67

                                    BUSINESS

General

   We own and operate a rapidly growing retail and wholesale propane marketing
and distribution business. Since our predecessor's inception in November 1996,
we have acquired 13 propane companies for an aggregate purchase price of
approximately $230 million, including working capital, assumed liabilities and
acquisition costs. For a more detailed description of our predecessor, please
read "Guide to Reading this Prospectus." For the fiscal year ended September
30, 2001, on a pro forma combined basis we sold approximately 117 million
gallons of propane to retail customers and approximately 262 million gallons of
propane to wholesale customers.

   Our retail business includes the retail marketing, sale and distribution of
propane, including the sale and lease of propane supplies and equipment, to
residential, commercial, industrial and agricultural customers. We market our
propane products under six regional brand names: Bradley Propane, Country Gas,
Hoosier Propane, McCracken, Pro Gas and IPC. We serve approximately 190,000
retail customers in Arkansas, Florida, Georgia, Illinois, Indiana, Michigan,
North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Virginia and
Wisconsin from 99 customer service centers which have an aggregate of
approximately 6.2 million gallons of above-ground propane storage capacity. In
addition to our retail business, we operate a wholesale supply, marketing and
distribution business, providing propane procurement, transportation and supply
and price risk management services to our customer service centers, as well as
to independent dealers and multistate marketers and, to a lesser extent,
selling propane as a standby fuel to industrial end users. We currently provide
wholesale supply and distribution services to approximately 350 customers in 24
states, primarily in the Midwest and Southeast.

   We have grown primarily through acquisitions of propane operations and, to a
lesser extent, through internal growth. Since our initial acquisition of
McCracken Oil & Propane Company in 1996, we have completed twelve additional
acquisitions in North Carolina, Tennessee, Illinois, Indiana, Michigan and
Texas. The following chart sets forth information about each company we have
acquired:

 Acquisition
    Date                       Company(1)                       Location
 -----------                   ----------                       --------
                                                     
November 1996  McCracken Oil & Propane Company, LLC        Wake Forest, NC
December 1998  Wilson Oil Company of Johnston County, Inc. Wilson's Mills, NC
December 1998  Ernie Lee Oil & LP Gas, LLC                 Raleigh, NC
May 1999       Langston Gas & Oil Co., Inc.                Four Oaks, NC
July 1999      Castleberry's, Inc.                         Smithfield, NC
August 1999    Rolesville Gas & Oil Company, Inc.          Raleigh, NC
October 1999   Bradley Propane, Inc.                       Chattanooga, TN
November 1999  Butane-Propane Gas Company of Tenn., Inc.   Marion, TN
June 2000      Country Gas Company, Inc.                   Crystal Lake, IL
November 2000  Bear-Man Propane                            Hixson, TN
January 2001   Hoosier Propane Group                       Kendallville, IN
November 2001  Pro Gas Companies                           Muskegon, MI
December 2001  Independent Propane Company Holdings        Irving, TX

- --------
(1) Name of acquired company as of acquisition date.

Recent Acquisitions

 Independent Propane Company Acquisition and Related Transactions

   In December 2001, we acquired the assets of IPC through an affiliate of our
managing general partner for approximately $96.8 million, including
approximately $7.5 million paid for net working capital.

                                       68

   IPC's principal business is the retail sale of propane, propane appliances
and merchandise and parts and labor throughout its branch network in Texas,
Oklahoma, Arkansas, Tennessee, South Carolina, Georgia, and Florida. For the
twelve months ended September 30, 2001, IPC sold approximately 49.8 million
retail gallons of propane to approximately 116,000 customers through its 44
branches and 24 satellite locations. For the twelve months ended September 30,
2001, IPC sold 74% of its volumes to individual homeowners, 20% to commercial
accounts and 6% to agricultural customers.

   In order to consummate the IPC acquisition, we and several of our affiliates
entered into various transactions. IPCH Acquisition Corp., an affiliate of our
managing general partner, borrowed approximately $27 million under a bridge
facility financed by one of our lenders. $9.6 million of these loan proceeds
was used to acquire 365,019 common units from us. IPCH Acquisition Corp.
utilized these common units to provide a portion of the consideration paid to
some of the former stockholders of IPC's parent corporation, including the
selling unitholders in this offering. The balance of the loan proceeds of
approximately $17.4 million was applied to the purchase price. Immediately
thereafter, IPCH Acquisition Corp. sold, assigned and transferred its interest
in IPC and certain rights under the IPC acquisition agreement and related
escrow agreement to our operating company. In consideration for this sale,
assignment and transfer, we issued to IPCH Acquisition Corp. 394,601 common
units and paid $82.2 million in cash (including $9.6 million of cash received
from the sale of 365,019 common units to IPCH Acquisition Corp.) and our
operating company assumed $2.5 million of notes payable. We also issued 18,252
common units to members of IPC's management, who are current employees of our
operating company, for approximately $0.5 million in cash.

 Pro Gas Acquisition

   In November 2001, we acquired the operations of Pro Gas for approximately
$12.5 million, including working capital. The acquisition included six retail
operations and three satellite bulk storage facilities in Michigan. For the
twelve months ended September 30, 2001, Pro Gas delivered approximately 12.4
million gallons of propane to approximately 12,000 customers.

Industry Background and Competition

   Propane, a by-product of natural gas processing and petroleum refining, is a
clean-burning energy source recognized for its transportability and ease of use
relative to alternative stand-alone energy sources. Our retail propane business
consists principally of transporting propane to our customer service centers
and other distribution areas and then to tanks located on our customers'
premises. Retail propane falls into three broad categories: residential,
industrial and commercial and agricultural. Residential customers use propane
primarily for space and water heating. Industrial customers use propane
primarily as fuel for forklifts and stationary engines, to fire furnaces, as a
cutting gas, in mining operations and in other process applications. Commercial
customers, such as restaurants, motels, laundries and commercial buildings, use
propane in a variety of applications, including cooking, heating and drying. In
the agricultural market, propane is primarily used for tobacco curing, crop
drying, poultry brooding and weed control.

   Propane is extracted from natural gas or oil wellhead gas at processing
plants or separated from crude oil during the refining process. Propane is
normally transported and stored in a liquid state under moderate pressure or
refrigeration for ease of handling in shipping and distribution. When the
pressure is released or the temperature is increased, it is usable as a
flammable gas. Propane is colorless and odorless; an odorant is added to allow
its detection. Propane is clean-burning, producing negligible amounts of
pollutants when consumed.

   The retail market for propane is seasonal because it is used primarily for
heating in residential and commercial buildings. Approximately 75% of our
retail propane volume is sold during the peak heating season from October
through March. Consequently, sales and operating profits are generated mostly
in the first and fourth calendar quarters of each year.

   According to the American Petroleum Institute, the domestic retail market
for propane is approximately 12.1 billion gallons annually. This represents
approximately 5% of household energy consumption in the

                                       69

United States. Propane competes primarily with natural gas, electricity and
fuel oil as an energy source, principally on the basis of price, availability
and portability. Propane is more expensive than natural gas on an equivalent
BTU basis in locations served by natural gas, but serves as an alternative to
natural gas in rural and suburban areas where natural gas is unavailable or
portability of product is required. Historically, the expansion of natural gas
into traditional propane markets has been inhibited by the capital costs
required to expand pipeline and retail distribution systems. Although the
extension of natural gas pipelines tends to displace propane distribution in
areas affected, we believe that new opportunities for propane sales arise as
more geographically remote neighborhoods are developed. Propane is generally
less expensive to use than electricity for space heating, water heating,
clothes drying and cooking. Although propane is similar to fuel oil in certain
applications and market demand, propane and fuel oil compete to a lesser extent
than propane and natural gas, primarily because of the cost of converting to
fuel oil. The costs associated with switching from appliances that use fuel oil
to appliances that use propane are a significant barrier to switching. By
contrast, natural gas can generally be substituted for propane in appliances
designed to use propane as a principal fuel source.

   In addition to competing with alternative energy sources, we compete with
other companies engaged in the retail propane distribution business.
Competition in the propane industry is highly fragmented and generally occurs
on a local basis with other large full-service multi-state propane marketers,
smaller local independent marketers and farm cooperatives. Based on industry
publications, we believe that the ten largest retailers account for less than
36% of the total retail sales of propane in the United States, and that no
single marketer has a greater than 10% share of the total retail market in the
United States. Most of our customer service centers compete with several
marketers or distributors. Each customer service center operates in its own
competitive environment because retail marketers tend to locate in close
proximity to customers. Our typical customer service center generally has an
effective marketing radius of approximately 25 miles, although in certain rural
areas the marketing radius may be extended by a satellite location.

   The ability to compete effectively further depends on the reliability of
service, responsiveness to customers and the ability to maintain competitive
prices. We believe that our safety programs, policies and procedures are more
comprehensive than many of our smaller, independent competitors and give us a
competitive advantage over such retailers. We also believe that our service
capabilities and customer responsiveness differentiate us from many of these
smaller competitors. Our employees are on call 24-hours and seven-days-a-week
for emergency repairs and deliveries.

   The wholesale propane business is highly competitive. Our competitors in the
wholesale business include producers and independent regional wholesalers. We
believe that our wholesale supply and distribution business provides us with a
stronger regional presence and a reasonably secure, efficient supply base, and
positions us well for expansion through acquisitions or start-up operations in
new markets.

   Retail propane distributors typically price retail usage based on a per
gallon margin over wholesale costs. As a result, distributors generally seek to
maintain their operating margins by passing costs through to customers, thus
insulating themselves from volatility in wholesale propane prices. During
periods of sudden price increases in propane at the wholesale level costs,
distributors may be unable or unwilling to pass entire cost increases through
to customers. In these cases, significant decreases in per gallon margins may
result.

   The propane distribution industry is characterized by a large number of
relatively small, independently owned and operated local distributors. Each
year a significant number of these local distributors have sought to sell their
business for reasons that include retirement and estate planning. In addition,
the propane industry faces increasing environmental regulations and escalating
capital requirements needed to acquire advanced, customer-oriented
technologies. Primarily as a result of these factors, the industry is
undergoing consolidation, and we, as well as other national and regional
distributors, have been active consolidators in the propane market. In recent
years, an active, competitive market has existed for the acquisition of propane
assets and businesses. We expect this acquisition market to continue for the
foreseeable future.

                                       70

Competitive Strengths

   We believe that we are well-positioned to compete in the propane industry.
Our competitive strengths include:

 Proven Acquisition Expertise

   Since our predecessor's inception, we have acquired and successfully
integrated 13 propane companies with an aggregate purchase price of
approximately $230 million, including seven propane distributors since
September 1999. Our executive officers and key employees, who average more than
15 years experience in the propane industry, have developed business
relationships with retail propane owners and businesses throughout the United
States. These significant industry contacts have enabled us to negotiate all of
our acquisitions on an exclusive basis. This acquisition expertise should allow
us to continue to grow through strategic and accretive acquisitions. Our
acquisition program will continue to seek:

  .  businesses in geographical areas experiencing higher-than-average
     population growth,

  .  established names with local reputations for customer service and
     reliability,

  .  high concentration of propane sales to residential customers, and

  .  the retention of key employees in acquired businesses.

 Internal Growth

   We consistently promote internal growth in our retail operations through a
combination of marketing programs and employee incentives. We enjoy strong
relationships with builders, mortgage companies and real estate agents which
enable us to access customers as new residences are built. We also provide
various financial incentives for customers who sign up for our automatic
delivery program, including level payment, fixed price and price cap programs.
We provide all customers with supply, repair and maintenance contracts and 24-
hour customer service. Finally, we have instituted an employee bonus program
and other incentives that foster an entrepreneurial environment by rewarding
employees who expand revenues by attracting new customers while controlling
costs. We intend to continue to aggressively seek new customers and promote
internal growth through local marketing and service programs in our residential
propane business.

 Operations in High Growth Markets

   A majority of our operations are concentrated in higher-than-average
population growth areas, where natural gas distribution is not cost effective.
These markets have experienced strong economic growth which has spurred the
development of sizable, low density and relatively affluent residential
communities which are significant consumers of propane. We intend to pursue
acquisitions in similar high growth markets.

 Regional Branding

   We believe that our success in generating internal growth at our customer
service centers results from our operation under established, locally
recognized trade names. We attempt to capitalize on the reputation of the
companies we acquire by retaining their local brand names and employees,
thereby preserving the goodwill of the acquired business and fostering employee
loyalty and customer retention. Employees at our local branches will continue
to manage our marketing programs, new business development, customer service
and customer billing and collections. Our employee incentive programs encourage
efficiency and allow us to control costs at the corporate and field levels.

 High Percentage of Retail Sales to Residential Customers

   Our retail propane operations concentrate on sales to residential customers.
Residential customers tend to generate higher margins and are generally more
stable purchasers than other customers. For the fiscal year ended September 30,
2001, sales to residential customers represented approximately 72% of our
retail propane

                                       71

gallons sold and approximately 75% of our retail gross profits, on a pro forma
combined basis. Although overall demand for propane is affected by weather and
other factors, we believe that residential propane consumption is not
materially affected by general economic conditions because most residential
customers consider home space heating to be an essential purchase. In addition,
we own approximately 65% of the propane tanks located at our customers' homes.
In many states, fire safety regulations restrict the refilling of a leased tank
solely to the propane supplier that owns the tank. These regulations, which
require customers to switch propane tanks when they switch suppliers, help
enhance the stability of our customer base because of the inconvenience and
costs involved with switching tanks and suppliers.

 Strong Wholesale Supply, Marketing and Distribution Business

   One of our distinguishing strengths is our procurement and distribution
expertise and capabilities. For the fiscal year ended September 30, 2001, on a
pro forma combined basis we sold approximately 262 million gallons of propane
on a wholesale basis to independent dealers and multistate marketers. These
operations are significantly larger on a relative basis than the wholesale
operations of most publicly traded propane businesses. We also provide
transportation services to these distributors through our fleet of transport
vehicles and price risk management services to our customers through a variety
of financial and other instruments. Our wholesale business provides us with
growing revenues as well as valuable market intelligence and awareness of
potential acquisition opportunities. Because we sell on a wholesale basis to
many residential and commercial retailers, we have an ongoing relationship with
a large number of businesses that may be attractive acquisition opportunities
for us. In addition, because of the scale of our wholesale purchases, we
believe that we will have an adequate supply of propane to support our growing
retail operations at prices which are generally available only to large
wholesale purchasers. This purchasing scale and resulting expertise also helps
us avoid shortages during periods of tight supply to an extent not generally
available to other retail propane distributors. Moreover, the presence of our
trucks serving our wholesale customers across the Midwest and Southeast allows
us to take advantage of various pricing and distribution inefficiencies that
exist in the market from time to time.

 Flexible Financial Structure

   Flexible Financial Structure. We have a $75.0 million revolving credit
facility for acquisitions and a $50.0 million revolving working capital
facility. Upon completion of this offering and our senior secured notes
offering, we expect to have available capacity of approximately $60.0 million
under our acquisition facility and approximately $49.0 million under our
working capital facility. We believe our available capacity under these
facilities combined with our ability to fund acquisitions through the issuance
of additional partnership interests will provide us with a flexible financial
structure that will facilitate our acquisition strategy.

   Our primary objective is to increase distributable cash flow for our
unitholders, while maintaining the highest level of commitment and service to
our customers. We intend to pursue this objective by capitalizing on our
competitive strengths.

Retail Operations

   We currently distribute propane to approximately 190,000 retail customers in
14 states from 99 customer service centers. We market propane primarily in
rural areas, but also have a significant number of customers in suburban areas
where energy alternatives to propane such as natural gas are generally not
available.

                                       72

   We market our propane primarily in the Southeast and Midwest regions of the
United States and in Texas through our customer service centers using six
regional brand names. The following table shows our customer service centers by
state:

                                                                    Number of
                                                                    Customer
     State                                                       Service Centers
     -----                                                       ---------------
                                                              
     Arkansas...................................................         1
     Florida....................................................         2
     Georgia....................................................         4
     Illinois...................................................         2
     Indiana....................................................        10
     Michigan...................................................        10
     North Carolina.............................................         9
     Ohio.......................................................         2
     Oklahoma...................................................         6
     South Carolina.............................................         1
     Tennessee..................................................         4
     Texas......................................................        48
                                                                       ---
       Total....................................................        99
                                                                       ===

   From our customer service centers, we also sell, install and service
equipment related to our propane distribution business, including heating and
cooking appliances. Typical customer service centers consist of an office and
service facilities, with one or more 12,000 to 30,000 gallon bulk storage
tanks. Some of our customer service centers also have an appliance showroom. We
have several satellite facilities that typically contain only large capacity
storage tanks. We have approximately 6.2 million gallons of above-ground
propane storage capacity at our customer service centers and satellite
locations.

   Retail deliveries of propane are usually made to customers by means of our
fleet of bobtail and rack trucks. At May 1, 2002, we operated 385 bobtail and
rack trucks. Propane is pumped from the bobtail truck, which generally holds
2,500 to 3,000 gallons, into a stationary storage tank at the customer's
premises. The capacity of these tanks ranges from approximately 100 gallons to
approximately 1,200 gallons, with a typical tank having a capacity of 100 to
300 gallons in milder climates and 500 to 1,000 gallons in colder climates. We
also deliver propane to retail customers in portable cylinders, which typically
have a capacity of five to 35 gallons. These cylinders are picked up and
replenished at our distribution locations, then returned to the retail
customer. To a limited extent, we also deliver propane to certain customers in
larger trucks known as transports, which have an average capacity of
approximately 10,000 gallons. At May 1, 2002, we operated 113 transports. These
customers include industrial customers, large-scale heating accounts and large
agricultural accounts.

   During the fiscal year ended September 30, 2001, on a pro forma basis,
approximately 31% and 69% of our propane sales by volume of gallons sold were
to retail and wholesale customers, respectively. Our retail sales were
comprised of approximately:

  .  72% to residential customers;

  .  20% to industrial and commercial customers; and

  .  8% to agricultural customers.

   Sales to residential customers during the fiscal year ended September 30,
2001, accounted for approximately 75% of our gross profit on retail propane
sales, reflecting the higher-margin nature of this segment of the market. No
single retail customer accounted for more than 1% of our pro forma revenue
during the fiscal year ended September 30, 2001. No single wholesale customer
accounted for more than 5% of our pro forma revenue for the same period.

                                       73

   Nearly half of our residential customers receive their propane supply under
an automatic delivery program. Under the automatic delivery program, we deliver
propane to our heating customers approximately six times during the year. We
determine the amount of propane delivered based on weather conditions and
historical consumption patterns. Our automatic delivery program eliminates the
customer's need to make an affirmative purchase decision, promotes customer
retention by ensuring an uninterrupted supply and enables us to efficiently
route deliveries on a regular basis. We promote this program by offering level
payment billing, discounts, fixed price options and price caps. In addition, we
provide emergency service 24 hours a day, seven days a week, 52 weeks a year.
Approximately 65% of our retail propane customers lease their tanks from us. In
most states, due to fire safety regulations, a leased tank may only be refilled
by the propane distributor that owns that tank. The inconvenience and costs
associated with switching tanks and suppliers greatly reduces a customer's
tendency to change distributors. Our tank lease programs are very valuable to
us from the standpoint of retaining customers and maintaining profitability.

   The propane business is very seasonal with weather conditions significantly
affecting demand for propane. We believe that the geographic diversity of our
areas of operations helps to minimize our exposure to regional weather.
Although overall demand for propane is affected by climate, changes in price
and other factors, we believe our residential and commercial business to be
relatively stable due to the following characteristics: (i) residential and
commercial demand for propane has been relatively unaffected by general
economic conditions due to the largely non-discretionary nature of most propane
purchases by our customers, (ii) loss of customers to competing energy sources
has been low, (iii) the tendency of our customers to remain with us due to the
product being delivered pursuant to a regular delivery schedule and to our
ownership of approximately 65% of the storage tanks utilized by our customers
and (iv) our ability to offset customer losses through internal growth of our
customer base in existing markets. Since home heating usage is the most
sensitive to temperature, residential customers account for the greatest usage
variation due to weather. Variations in the weather in one or more regions in
which we operate, however, can significantly affect the total volumes of
propane we sell and the margins we realize and, consequently, our results of
operations. We believe that sales to the commercial and industrial markets,
while affected by economic patterns, are not as sensitive to variations in
weather conditions as sales to residential and agricultural markets.

Wholesale Supply, Marketing and Distribution Operations

   In addition to our core retail operations, we are also engaged in the
wholesale marketing of propane to independent dealers, multi-state marketers
and, to a lesser extent, local gas utilities that use propane as supplemental
fuel to meet peak demand requirements. We currently provide wholesale supply,
marketing and distribution services to 350 customers in 24 states, primarily in
the Midwest and Southeast. On a pro forma basis, our wholesale supply,
marketing and distribution operations accounted for approximately 61% of total
volumes and 7% of our pro forma gross profit during the fiscal year ended
September 30, 2001.

   One of our distinguishing strengths is our procurement and distribution
expertise and capabilities. For the fiscal year ended September 30, 2001, on a
pro forma combined basis we sold approximately 262 million gallons of propane
on a wholesale basis to independent dealers and multistate marketers. Because
of the size of our wholesale operations, we have developed significant
procurement and distribution expertise. This is partly the result of the unique
background of our management team, which has significant experience in the
procurement aspects of the propane business. We also offer transportation
services to these distributors through our fleet of transport trucks and price
risk management services to our customers through a variety of financial and
other instruments. Our wholesale supply, marketing and distribution business
provides us with a relatively stable and growing income stream as well as
extensive market intelligence and acquisition opportunities. In addition, these
operations provide us with more secure supplies and better pricing for our
customer service centers. Moreover, the presence of our trucks across the
Midwest and Southeast allows us to take advantage of various pricing and
distribution inefficiencies that exist in the market from time to time.

                                       74

Transportation Assets, Truck Fabrication and Maintenance

   Our transportation assets are owned and operated by L&L Transportation, LLC,
a wholly-owned subsidiary of our operating company. The transportation of
propane requires specialized equipment. Propane trucks carry specialized steel
tanks that maintain the propane in a liquefied state. As of May 1, 2002, we
owned a fleet of 32 tractors, 82 transports, 351 bobtail and rack trucks and
249 other service and pick-up trucks. The average age of our trucks is between
six and seven years. In addition to supporting our retail and wholesale propane
operations, our trucks are used to deliver butane and ammonia for third parties
and to distribute natural gas for various processors and refiners.

   We own truck fabrication and maintenance facilities located in Waterloo,
Indiana and additional maintenance facilities in Zephyrhills, Florida. We
believe that our ability to build and maintain the trucks we use in our propane
operations significantly reduces the costs we would otherwise incur in
purchasing and maintaining our fleet of trucks. We also sell a limited number
of trucks to third parties.

Supply

   We obtain propane from over 50 vendors at approximately 85 locations. During
the fiscal year ended September 30, 2001 on a pro forma basis, BP Amoco p.l.c.,
Louis Dreyfus Energy Services, L.P. and Exxon Mobil Corporation each accounted
for approximately 11% of our volume of propane purchases. Most of these
purchases were made under supply contracts that have a term of one year, are
subject to annual renewal and provide various pricing formulas. No other single
supplier accounted for more than 10% of our pro forma volume propane purchases
for the fiscal year ended September 30, 2001. On May 1, 2002, we entered into a
one-year contract with Sunoco, Inc. (R&M) to purchase all of its propane
production at its Toledo, Ohio refinery, which is currently 62 million gallons.
We believe that our diversification of suppliers will enable us to purchase all
of our supply needs at market prices if supplies are interrupted from any of
the sources without a material disruption of our operations.

   We purchased approximately 90% of our propane supplies from domestic
suppliers during the fiscal year ended September 30, 2001 on a pro forma basis.
Our remaining purchases were from suppliers in Canada. During the fiscal year
ended September 30, 2001 on a pro forma basis, we purchased approximately 55%
of our propane supplies pursuant to contracts that have a term of one year; the
balance of our purchases were made on the spot market. The percentage of our
contract purchases varies from year to year. Supply contracts generally provide
for pricing in accordance with posted prices at the time of delivery or the
current prices established at major storage points, and some contracts include
a pricing formula that typically is based on such market prices. Some of these
agreements provide maximum and minimum seasonal purchase guidelines.

   Propane is generally transported from refineries, pipeline terminals,
storage facilities and marine terminals to our 175 storage facilities. We
accomplish this by using our transports and contracting with common carriers,
owner-operators and railroad tank cars. Our customer service centers and
satellite locations typically have one or more 12,000 to 30,000 gallon storage
tanks, generally adequate to meet customer usage requirements for seven days
during normal winter demand. Additionally, we lease underground storage
facilities from third parties under annual lease agreements.

   We engage in risk management activities in order to reduce the effect of
price volatility on our product costs and to help insure the availability of
propane during periods of short supply. We are currently a party to propane
futures transactions on the New York Mercantile Exchange and to forward and
option contracts with various third parties to purchase and sell propane at
fixed prices in the future. We monitor these activities through enforcement of
our risk management policy.

Pricing Policy

   Our pricing policy is an essential element in our successful marketing of
propane. We base our pricing decisions on, among other things, prevailing
supply costs, local market conditions and local management input.

                                       75

We rely on our regional management to set prices based on these factors. Our
local managers are advised regularly of any changes in the posted prices of our
propane suppliers. We believe our propane pricing methods allow us to respond
to changes in supply costs in a manner that protects our customer base and
gross margins. In some cases, however, our ability to respond quickly to cost
increases could occasionally cause our retail prices to rise more rapidly than
those of our competitors, possibly resulting in a loss of customers.

Billing and Collection Procedures

   We retain our customer billing and account collection responsibilities at
the local level. We believe that this decentralized approach is beneficial for
a number of reasons:

  .  customers are billed on a timely basis;

  .  customers are more apt to pay a local business;

  .  cash payments are received faster; and

  .  local personnel have current account information available to them at
     all times in order to answer customer inquiries.

Properties

   We own 56 of our 99 customer service centers and lease the balance. Our
headquarters in Kansas City, Missouri are leased. We operate bulk storage
facilities at 175 locations and own 118 of the storage locations. We lease
underground storage facilities with an aggregate capacity of approximately 23
million gallons of propane at eight locations under annual lease agreements. We
also lease capacity in seven pipelines pursuant to annual lease agreements.

   Tank ownership and control at customer locations are important components to
our operations and customer retention. As of May 1, 2002, we owned the
following:

  .  286 bulk storage tanks with typical capacities of 12,000 to 30,000
     gallons,

  .  approximately 119,000 stationary customer storage tanks with typical
     capacities of 100 to 1,200 gallons, and

  .  approximately 34,000 portable propane cylinders with typical capacities
     of up to 35 gallons.

   We believe that we have satisfactory title or valid rights to use all of our
material properties. Although some of these properties are subject to
liabilities and leases, liens for taxes not yet due and payable, encumbrances
securing payment obligations under non-competition agreements entered in
connection with acquisitions and immaterial encumbrances, easements and
restrictions, we do not believe that any of these burdens will materially
interfere with our continued use of these properties in our business, taken as
a whole. Our obligations under our borrowings are secured by liens and
mortgages on all of our real and personal property.

   In addition, we believe that we have, or are in the process of obtaining,
all required material approvals, authorizations, orders, licenses, permits,
franchises and consents of, and have obtained or made all required material
registrations, qualifications and filings with, the various state and local
governmental and regulatory authorities which relate to ownership of our
properties or the operations of our business.

Trademark and Tradenames

   We use a variety of trademarks and tradenames which we own, including
"Inergy" and "Inergy Services." We believe that our strategy of retaining the
names of the companies we acquire has maintained the local identification of
such companies and has been important to the continued success of these
businesses. Our most significant trade names are "Bradley Propane," "Country
Gas," "Hoosier Propane," "McCracken,"

                                       76

"Pro Gas" and "IPC." We regard our trademarks, tradenames and other proprietary
rights as valuable assets and believe that they have significant value in the
marketing of our products.

Employees

   As of May 1, 2002, we had 654 full-time employees of which 87 were general
and administrative and 567 were operational employees. We employed 28 part-time
employees, all of whom were operational employees. None of our employees is a
member of a labor union. We believe that our relations with our employees are
satisfactory.

Government Regulation

   We are subject to various federal, state and local environmental, health and
safety laws and regulations related to our propane business as well as those
related to our ammonia and butane transportation operations. Generally, these
laws impose limitations on the discharge of pollutants and establish standards
for the handling of solid and hazardous wastes. These laws generally include
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Clean Air Act, the
Occupational Safety and Health Act, the Emergency Planning and Community Right
to Know Act, the Clean Water Act and comparable state or local statutes.
CERCLA, also known as the "Superfund" law, imposes joint and several liability
without regard to fault or the legality of the original conduct on certain
classes of persons that are considered to have contributed to the release or
threatened release of a hazardous substance into the environment. While propane
is not a hazardous substance within the meaning of CERCLA, other chemicals used
in our operations may be classified as hazardous. These laws and regulations
could result in civil or criminal penalties in cases of non-compliance or
impose liability for remediation costs. To date, we have not received any
notices in which we are alleged to have violated or otherwise incurred
liability under any of the above laws and regulations.

   For acquisitions that involve the purchase of real estate, we conduct a due
diligence investigation to attempt to determine whether any substance has been
sold from, or stored on, or released or spilled from any of that real estate
prior to its purchase. This due diligence includes questioning the seller,
obtaining representations and warranties concerning the seller's compliance
with environmental laws and performing site assessments. During this due
diligence our employees, and, in certain cases, independent environmental
consulting firms, review historical records and databases and conduct physical
investigations of the property to look for evidence of hazardous substance
contamination, compliance violations and the existence of underground storage
tanks.

   National Fire Protection Association Pamphlets No. 54 and No. 58, which
establish rules and procedures governing the safe handling of propane, or
comparable regulations, have been adopted as the industry standard in all of
the states in which we operate. In some states these laws are administered by
state agencies, and in others they are administered on a municipal level.
Regarding the transportation of propane, ammonia and butane by truck, we are
subject to regulations promulgated under the Federal Motor Carrier Safety Act.
These regulations cover the transportation of hazardous materials and are
administered by the United States Department of Transportation. We conduct
ongoing training programs to help ensure that our operations are in compliance
with applicable regulations. We maintain various permits that are necessary to
operate some of our facilities, some of which may be material to our
operations. Management believes that the procedures currently in effect at all
of our facilities for the handling, storage and distribution of propane and the
transportation of ammonia and butane are consistent with industry standards and
are in compliance in all material respects with applicable laws and
regulations.

   On August 18, 1997, the U.S. Department of Transportation published its
Final Rule for Continued Operation of the Present Propane Trucks. This final
rule is intended to address perceived risks during the transfer of propane and
required certain immediate changes in industry operating procedures, including
retrofitting all propane delivery trucks. We, as well as the National Propane
Gas Association and the propane

                                       77

industry in general, believe that the Final Rule for Continued Operation of the
Present Propane Trucks cannot practicably be complied with in its current form.
On October 15, 1997, five of the principal multi-state propane marketers, all
of whom were unrelated to us, filed an action against the U.S. Department of
Transportation in the United States District Court for the Western District of
Missouri seeking to enjoin enforcement of the Final Rule for Continued
Operation of the Present Propane Trucks. On February 13, 1998, the Court issued
a preliminary injunction prohibiting the enforcement of this final rule pending
further action by the Court. This suit is still pending. In addition, Congress
passed, and on October 21, 1998, the President of the United States signed, the
FY 1999 Transportation Appropriations Act, which included a provision
restricting the authority of the U.S. Department of Transportation from
enforcing specific provisions of the Final Rule for Continued Operation of the
Present Propane Trucks. At this time, Inergy cannot determine the likely
outcome of the litigation or the proposed legislation or what the ultimate
long-term cost of compliance with the Final Rule for Continued Operation of the
Present Propane Trucks will be to Inergy and the propane industry in general.

   Future developments, such as stricter environmental, health or safety laws
and regulations could affect our operations. It is not anticipated that our
compliance with or liabilities under environmental, health and safety laws and
regulations, including CERCLA, will have a material adverse effect on us. To
the extent that we do not know of any environmental liabilities, or
environmental, health or safety laws, or regulations are made more stringent,
there can be no assurance that our results of operations will not be materially
and adversely affected.

Litigation

   Our operations are subject to all operating hazards and risks normally
incidental to handling, storing, transporting and otherwise providing for use
by consumers of combustible liquids such as propane. As a result, at any given
time we are a defendant in various legal proceedings and litigation arising in
the ordinary course of business. We maintain insurance policies with insurers
in amounts and with coverages and deductibles as the managing general partner
believes are reasonable and prudent. However, we cannot assure that this
insurance will be adequate to protect us from all material expenses related to
potential future claims for personal and property damage or that these levels
of insurance will be available in the future at economical prices. In addition,
the occurrence of an explosion may have an adverse effect on the public's
desire to use our products.

                                       78

                                   MANAGEMENT

Our Managing General Partner Manages Inergy, L.P.

   Our managing general partner manages our operations and activities. Our
managing general partner is not elected by our unitholders and will not be
subject to re-election on a regular basis in the future. Our managing general
partner may be removed by our unitholders under the circumstances described
under "The Partnership Agreement." Unitholders do not directly or indirectly
participate in our management or operation. Please see "The Partnership
Agreement--Limited Liability" for a discussion of actions that might be deemed
to constitute participation in the control of our business. Our managing
general partner owes a fiduciary duty to the unitholders. Our managing general
partner is liable, as a general partner, for all of our debts (to the extent
not paid from our assets), except for specific non recourse indebtedness or
other obligations. Whenever possible, our managing general partner intends to
incur indebtedness or other obligations that are non-recourse.

   Our managing general partner may appoint two independent directors to serve
on a conflicts committee to review specific matters which the board of
directors believes may involve conflicts of interest. A conflicts committee
will determine if the resolution of any conflict of interest submitted to it is
fair and reasonable to us. The members of the conflicts committee must meet the
independence standards to serve on an audit committee of a board of directors
established by the Nasdaq Stock Market and certain other requirements. Any
matters approved by the conflicts committee will be conclusively deemed to be
fair and reasonable to us, approved by all of our partners, and not a breach by
our managing general partner of any duties it may owe us or our unitholders.
For more information relating to conflicts of interest that may arise, please
read "Conflicts of Interest and Fiduciary Responsibilities." Two members of the
board of directors also serve on a compensation committee, which oversees
compensation decisions for the officers of Inergy GP, LLC as well as the
compensation plans described below. The members of the compensation committee
are Richard C. Green, Jr. and David J. Schulte. In addition, three members of
the board of directors serve on an audit committee which reviews our external
financial reporting, recommends engagement of our independent auditors and
reviews procedures for internal auditing and the adequacy of our internal
accounting controls. The members of the audit committee must meet the
independence standards established by the Nasdaq Stock Market. The members of
the audit committee are Warren H. Gfeller, Richard C. Green, Jr. and David J.
Schulte.

   As is commonly the case with publicly-traded limited partnerships, we are
managed and operated by the officers and are subject to the oversight of the
directors of our managing general partner. Effective January 1, 2002 all
employees of our general partners became employees of our operating company.

   The board of directors of the managing general partner is presently composed
of five directors.

Directors and Executive Officers of Inergy GP, LLC

   The following table sets forth certain information with respect to the
executive officers and members of the board of directors of our managing
general partner. Executive officers and directors will serve until their
successors are duly appointed or elected.

Executive Officers and
Directors                 Age    Position with the Managing General Partner
- ----------------------    ---    ------------------------------------------
                        
John J. Sherman.........   47 President, Chief Executive Officer and Director
Phillip L. Elbert.......   44 Executive Vice President--Operations and Director
R. Brooks Sherman Jr. ..   36 Vice President and Chief Financial Officer
Carl A. Hughes..........   48 Vice President--Business Development
Michael D. Fox..........   45 Vice President--Wholesale Marketing
William C. Gautreaux....   39 Vice President--Supply
Richard C. Green, Jr. ..   47 Director
Warren H. Gfeller.......   49 Director
David J. Schulte........   41 Director

                                       79

 Executive Officers and Directors

   John J. Sherman. Mr. Sherman has been the President, Chief Executive Officer
and a director of our managing general partner since March, 2001, and of our
predecessor from 1997 until July, 2001. Prior to joining our predecessor, he
was a vice president with Dynegy, Inc. from 1996 through 1997. He was
responsible for all downstream propane marketing operations, which at the time
were the country's largest. From 1991 through 1996, Mr. Sherman was the
president of LPG Services Group, Inc., a company he co-founded and grew to
become one of the nation's largest wholesale marketers of propane before Dynegy
acquired LPG Services in 1996. From 1984 through 1991, Mr. Sherman was a vice
president and member of the management committee of Ferrellgas, which is one of
the country's largest retail propane marketers.

   Phillip L. Elbert. Mr. Elbert has served as the Executive Vice President--
Operations of our managing general partner since March 2001. He joined our
predecessor as Executive Vice President--Operations in connection with our
acquisition of the Hoosier Propane Group in January 2001. Mr. Elbert joined the
Hoosier Propane Group in 1992 and was responsible for overall operations,
including Hoosier's retail, wholesale, and transportation divisions. From 1987
through 1992, he was employed by Ferrellgas, serving in a number of management
positions relating to retail, transportation and supply. Prior to joining
Ferrellgas, he was employed by Buckeye Gas Products, a large propane marketer,
from 1981 to 1987.

   R. Brooks Sherman Jr. Mr. Brooks Sherman (no relation to Mr. John Sherman)
has served as the Vice President and Chief Financial Officer of our managing
general partner since March 2001. He joined our predecessor in December 2000 as
Vice President and Chief Financial Officer. From 1999 until joining our
predecessor, he served as chief financial officer of MCM Capital Group. From
1996 through 1999, Mr. Sherman was employed by National Propane Partners, a
publicly traded master limited partnership, first as its controller and chief
accounting officer and subsequently as its chief financial officer. From 1995
to 1996, Mr. Sherman served as chief financial officer for Berthel Fisher & Co.
Leasing Inc. and prior to 1995, Mr. Sherman was in public accounting with Ernst
& Young and KPMG Peat Marwick.

   Carl A. Hughes. Mr. Hughes has served as the Vice President of Business
Development of our managing general partner since March 2001. He joined our
predecessor as Vice President of Business Development in 1998. From 1996
through 1998, he served as a regional manager for Dynegy, Inc., responsible for
propane activities in 17 midwest and northeastern states. From 1993 through
1996, Mr. Hughes served as a regional marketing manager for LPG Services Group.
From 1985 through 1992, Mr. Hughes was employed by Ferrellgas where he served
in a variety of management positions.

   Michael D. Fox. Mr. Fox has served as the Vice President of Wholesale
Marketing Operations of our managing general partner since March 2001. He
joined our predecessor in 1998 as Vice President of Wholesale Marketing
Operations. From 1996 through 1998, he served as a regional manager with
Dynegy, Inc., responsible for wholesale propane marketing activities in nine
southeastern states. From 1992 through 1996, he served as regional marketing
manager for LPG Services Group, Inc. From 1985 through 1991, Mr. Fox was
employed by Ferrellgas where he served in a variety of sales and marketing
positions.

   William C. Gautreaux. Mr. Gautreaux has served as the Vice President of
Supply of our managing general partner since March 2001. He joined our
predecessor in 1998 as Vice President of Supply. From 1996 through 1998, he
served as a managing director for Dynegy, Inc., responsible for bulk natural
gas liquids marketing and risk management. Mr. Gautreaux was a co-founder of
LPG Services Group, Inc. and served as its vice president of supply from 1991
through 1996. From 1985 through 1991, Mr. Gautreaux was employed by Ferrellgas
where he served as a regional manager in the company's wholesale supply
logistics division.

   Richard C. Green, Jr. Mr. Green has been a member of our managing general
partner's board of directors since March 2001. He was a member of our
predecessor's board of directors since January 2001 until July 2001. He
currently serves as chairman and chief executive officer of Aquila, Inc., a
Fortune 100 global energy services company. Mr. Green is currently a special
limited partner of Kansas City Equity Partners and

                                       80

has previously served as its president and chairman of its advisory board. He
also serves as a director of Aquila, Inc., BHA Group, Inc. and Yellow Corp.

   Warren H. Gfeller. Mr. Gfeller has been a member of our managing general
partner's board of directors since March 2001. He was a member of our
predecessor's board of directors since January 2001 until July 2001. He has
engaged in private investments since 1991. From 1985 to 1991, Mr. Gfeller
served as president and chief executive officer of Ferrellgas, Inc., a retail
and wholesale marketer of propane and other natural gas liquids. Mr. Gfeller
began his career with Ferrellgas in 1983 as an executive vice president and
financial officer. He also serves as a director of Zapata Corporation.

   David J. Schulte. Mr. Schulte has been a member of our managing general
partner's board of directors since March 2001. He was a member of our
predecessor's board of directors since January 2001 until July 2001. He has
been a managing director of private equity firm Kansas City Equity Partners
since 1994, focusing on industries undergoing consolidation. Prior to joining
Kansas City Equity Partners, Mr. Schulte was an investment banker with
Fahnestock & Co. from 1988 to 1994. He is a member of the AICPA and the
Missouri Bar Association. He also serves as a director of Elecsys Corp.

Reimbursement of Expenses of the Managing General Partner

   The managing general partner does not receive any management fee or other
compensation for its management of Inergy, L.P. The managing general partner
and its affiliates are reimbursed for expenses incurred on our behalf. These
expenses include the costs of employee, officer and director compensation and
benefits properly allocable to Inergy, L.P. and all other expenses necessary or
appropriate to the conduct of the business of, and allocable to, Inergy, L.P.
The partnership agreement provides that the managing general partner will
determine the expenses that are allocable to Inergy, L.P. in any reasonable
manner determined by the managing general partner in its sole discretion.

Compensation of Directors

   Officers or employees of the managing general partner who also serve as
directors will not receive additional compensation. In connection with our
initial public offering, each non-employee director received an option under
our long term incentive plan for 22,200 common units at an exercise price equal
to the initial public offering price. In addition, each director receives cash
compensation of $18,000 per year for attending our regularly scheduled
quarterly board meetings. Each non-employee director receives $1,000 for each
special meeting of the board of directors attended. Non-employee directors
receive $500 per compensation or audit committee meeting attended and $1,000
per conflicts committee meeting attended. Each non-employee director is
reimbursed for out-of-pocket expenses in connection with attending meetings of
the board of directors or committees. Each director is fully indemnified for
actions associated with being a director to the extent permitted under Delaware
law.

                                       81

Executive Compensation

   The following table sets forth for the periods indicated, the compensation
paid or accrued by Inergy, L.P., its predecessor and our managing general
partner to the chief executive officer of our managing general partner and five
other executive officers (collectively, the "named executive officers") for
services rendered to Inergy, L.P. and its subsidiaries.

                                                                     Long Term
                                                                    Compensation
                                     Annual Compensation               Awards
                          ----------------------------------------- ------------
                                                                     Securities
Name and Principal        Fiscal                     Other Annual    Underlying     All Other
Position                   Year  Salary(1)  Bonus   Compensation(2)   Options    Compensation(3)
- ------------------        ------ --------- -------- --------------- ------------ ---------------
                                                               
John. J. Sherman........   2001  $175,000  $200,000     $5,161            --         $   --
 President and Chief       2000  $150,000  $    --      $6,614            --         $   --
 Executive Officer         1999  $150,000  $    --      $  590            --         $   --

Phillip L. Elbert.......   2001  $115,160  $112,500     $7,464         55,500        $   --
 Executive Vice
  President                2000  $    --   $    --      $  --             --         $   --
 Operations                1999  $    --   $    --      $  --             --         $   --

R. Brooks Sherman, Jr...   2001  $ 98,958  $158,333     $  730         27,750        $63,275
 Vice President and        2000  $    --   $    --      $  --             --         $   --
 Chief Financial Officer   1999  $    --   $    --      $  --             --         $   --

Carl A. Hughes..........   2001  $ 97,917  $228,320     $9,212         38,850        $   --
 Vice President--          2000  $ 75,000  $111,159     $9,864            --         $   --
 Business Development      1999  $ 75,000  $    --      $  590            --         $   --

William C. Gautreaux....   2001  $108,542  $244,000     $9,093         27,750        $   --
 Vice President--          2000  $ 80,000  $ 76,411     $7,425            --         $   --
 Supply                    1999  $ 42,000  $    --      $  --             --         $   --

Michael D. Fox..........   2001  $ 97,917  $130,000     $7,719         27,750        $   --
 Vice President--          2000  $ 75,000  $ 37,847     $8,437            --         $   --
 Wholesale Marketing       1999  $ 53,125  $ 24,011     $  --             --         $   --
 Operations

- --------
(1) Salaries for Mr. Phil Elbert and Mr. Brooks Sherman in fiscal 2001
    represent the pro rata portion of their annual salaries from the dates of
    the beginning of their employment with Inergy on January 12, 2001 and
    December 3, 2000, respectively.
(2) Excludes perquisites and other benefits, unless the aggregate amount of
    such compensation is equal to the lesser of either $50,000 or 10% of the
    total of annual salary and bonus reported for the named executive officer.
(3) "All Other Compensation" for Mr. Brooks Sherman in fiscal 2001 represents
    reimbursement of relocation expenses.

                                       82

 Option Grants in Last Fiscal Year

   The following table sets forth information concerning grants of unit options
to the named executive officers for the year ended September 30, 2001:

                                         Individual Grants
                          ------------------------------------------------
                                                                                Potential
                                                                               Realizable
                                                                            Value at Assumed
                                     Percent of                              Annual Rates of
                                       Total                                      Unit
                          Number of   Options                              Price Appreciation
                          Securities Granted to                                    for
                          Underlying Employees  Exercise or                  Option Term (2)
                           Options   in Fiscal   Base Price   Expiration   -------------------
                          Granted(3)    Year    ($/Share)(1)     Date         5%       10%
                          ---------- ---------- ------------ ------------- -------- ----------
                                                                  
John J. Sherman.........       --       --            --               --       --         --
Phillip L. Elbert.......    55,500       18%       $22.00    July 31, 2011 $767,880 $1,945,960
R. Brooks Sherman, Jr...    27,750        9%       $22.00    July 31, 2011 $383,940 $  972,980
Carl. A. Hughes.........    38,850       13%       $22.00    July 31, 2011 $537,516 $1,362,172
William C. Gautreaux....    27,750        9%       $22.00    July 31, 2011 $383,940 $  972,980
Michael D. Fox..........    27,750        9%       $22.00    July 31, 2011 $383,940 $  972,980

- --------
(1) All grants were made at 100% of the fair market value as of the grant date.
(2) The dollar amounts under these columns are the result of calculations at
    the 5% and 10% assumed annual growth rates mandated by the SEC and,
    therefore, are not intended to forecast possible future appreciation, if
    any, in the unit price. The calculations were based on the exercise prices
    and the 10-year term of the options. No gain to the optionees is possible
    without an increase in unit price which will benefit all unitholders
    proportionately.
(3) These options generally vest in proportion to the conversion of senior
    subordinated units into common units and are subject to forfeiture in
    certain cases if the executive officer retires or is terminated for cause
    prior to the expiration of five years from the date of the grant.

 Aggregated Option/SAR Exercises in last Fiscal Year and September 30, 2001
 Option Values

   The following table sets forth information concerning the number and value
of exercisable and unexercisable unit options held by the named executive
officers as of September 30, 2001.

                                                   Number of Securities
                                                        Underlying           Value of Unexercised
                                                  Unexercised Options at    In-the-Money Options at
                                                    September 30, 2001       September 30, 2001(1)
                                                 ------------------------- -------------------------
                         Units Acquired  Value
          Name            on Exercise   Realized Exercisable Unexercisable Exercisable Unexercisable
          ----           -------------- -------- ----------- ------------- ----------- -------------
                                                                     
John J. Sherman.........      --          --         --            --          --             --
Phillip L. Elbert.......      --          --         --         55,500         --        $219,225
R. Brooks Sherman,
 Jr. ...................      --          --         --         27,750         --        $109,613
Carl A. Hughes..........      --          --         --         38,850         --        $153,458
William C. Gautreaux....      --          --         --         27,750         --        $109,613
Michael D. Fox..........      --          --         --         27,750         --        $109,613

- --------
(1) Based on the $25.95 per unit fair market value of our common units on
    September 28, 2001, the last trading day of fiscal 2001, less the option
    exercise price.

                                       83

Employment Agreements

   The following executive officers have entered into employment agreements
with the managing general partner:

  . John J. Sherman, President and Chief Executive Officer;

  . Phillip L. Elbert, Executive Vice President--Retail Operations;

  . R. Brooks Sherman, Jr., Vice President--Chief Financial Officer;

  . Carl A. Hughes, Vice President--Business Development;

  . Michael D. Fox, Vice President--Wholesale Marketing; and

  . William C. Gautreaux, Vice President--Supply Logistics and Risk
    Management.

   The following is a summary of the material provisions of these employment
agreements, copies of which have been filed as exhibits to the registration
statement relating to this prospectus.

   All of these employment agreements are substantially similar, with certain
exceptions as set forth below. Except for Mr. Brooks Sherman, whose employment
agreement is for a term of three years, the employment agreements are for terms
of five years. The annual salaries for these individuals are as follows:

                                                                    
     . John J. Sherman................................................ $250,000
     . Phillip L. Elbert.............................................. $200,000
     . R. Brooks Sherman Jr........................................... $150,000
     . Carl A. Hughes................................................. $125,000
     . Michael D. Fox................................................. $125,000
     . William C. Gautreaux........................................... $135,000

   These employees will be reimbursed for all expenses in accordance with the
managing general partner's policies. They are also eligible for fringe benefits
normally provided to other members of executive management and any other
benefits agreed to by the managing general partner. Each of these employees is
eligible to participate in the Inergy Long Term Incentive Plan.

   Each of these individuals (other than Mr. John Sherman) will be entitled to
performance bonuses ranging from approximately $18,750 to $200,000 upon our
attaining certain levels of distributable cash flow on an annual basis for each
year during the term of his employment.

   The employment agreements provide for additional bonuses conditioned upon
the conversion of subordinated units into common units. Messrs. Fox, Gautreaux
and Hughes will be entitled to bonuses in the amounts of $300,000, $300,000 and
$400,000, respectively, at the end of the subordination period for the junior
subordinated units. Messrs. Brooks Sherman and Elbert will be entitled to
bonuses in the amounts of $200,000 and $500,000, respectively, payable upon,
and in the same proportion as the conversion of senior and junior subordinated
units into common units. Finally, Mr. John Sherman may receive performance
bonuses at the discretion of the board of directors and will be entitled to a
bonus in the amount of $625,000 at the end of the subordination period for the
junior subordinated units.

   Unless waived by the managing general partner, in order for any of these
individuals to receive any benefits under (i) the Inergy Long Term Incentive
Plan, (ii) the performance bonus based on target distributable cash flow, or
(iii) the bonus tied to the expiration of the subordination period for the
junior subordinated units, the individual must have been continuously employed
by the managing general partner or one of our affiliates from the date of his
employment agreement up to the date for determining eligibility to receive such
amounts.

                                       84

   Each employment agreement contains confidentiality and noncompetition
provisions. Also, each employment agreement contains a disclosure and
assignment of inventions clause that requires the employee to disclose the
existence of any invention and assign such employee's right in such invention
to the managing general partner.

   With respect to Mr. John Sherman, Mr. Elbert, Mr. Brooks Sherman, Mr.
Hughes, Mr. Fox and Mr. Gautreaux, in the event that the managing general
partner terminates such person's employment without cause, the managing general
partner will be required to continue making payments to such person for the
remainder of the term of such person's employment agreement.

   In addition to his employment agreement, Mr. Elbert has entered into an
option contract with Inergy Holdings whereby Inergy Holdings has granted Mr.
Elbert the right and option to invest in Inergy Holdings an aggregate of
$2,292,000, subject to adjustment, for a percentage interest in Inergy Holdings
equal to 7.1%, subject to adjustment.

   Pursuant to the partnership agreement, we will reimburse the managing
general partner for all expenses of the employment of these individuals related
to our activities.

Long-Term Incentive Plan

   An affiliate of our managing general partner has adopted the Inergy Long-
Term Incentive Plan for employees, consultants and directors of the managing
general partner and employees and consultants of its affiliates who perform
services for us. The summary of the long-term incentive plan contained herein
does not purport to be complete but outlines its material provisions. The long-
term incentive plan currently permits the grant of awards covering an aggregate
of 589,000 common units which are granted in the form of unit options and/or
restricted units; however not more than 192,000 restricted units may be granted
under the plan. The plan is administered by the compensation committee of the
managing general partner's board of directors.

   Restricted Units. A restricted unit is a "phantom" unit that entitles the
grantee to receive a common unit upon the vesting of the restricted unit, or in
the discretion of the compensation committee, cash equivalent to the value of a
common unit. The compensation committee may make grants under the plan to
employees and directors containing such terms as the compensation committee
shall determine under the plan. In general, restricted units granted to
employees will vest three years from the date of grant; provided, however, that
restricted units will not vest before the conversion of any senior subordinated
units and will only vest upon, and in the same proportion as, the conversion of
senior subordinated units into common units. In addition, the restricted units
will vest upon a change of control of the managing general partner or us.

   If a grantee's employment or membership on the board of directors terminates
for any reason, the grantee's restricted units will be automatically forfeited
unless, and to the extent, the compensation committee provides otherwise.
Common units to be delivered upon the vesting of restricted units may be common
units acquired by the managing general partner in the open market, common units
already owned by the managing general partner, common units acquired by the
managing general partner directly from us or any other person or any
combination of the foregoing. The managing general partner will be entitled to
reimbursement by us for the cost incurred in acquiring common units. If we
issue new common units upon vesting of the restricted units, the total number
of common units outstanding will increase. Following the subordination period,
the compensation committee, in its discretion, may grant tandem distribution
equivalent rights with respect to restricted units. Distribution equivalent
rights entitle the holder to receive "distributions" with respect to the
restricted unit in the same amount as if the holder owned a common unit.

   We intend the issuance of the common units pursuant to the restricted unit
plan to serve as a means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity appreciation of the
common units. Therefore, plan participants will not pay any consideration for
the common units they receive, and we will receive no remuneration for the
units.

                                       85

   Unit Options. The long-term incentive plan currently permits the grant of
options covering common units. The compensation committee may, in the future,
determine to make grants under the plan to employees and directors containing
such terms as the committee shall determine. Unit options will have an exercise
price equal to the fair market value of the units on the date of grant. In
general, unit options granted will become exercisable over a period determined
by the compensation committee; provided, however, that with the exception of
approximately 28,000 unit options granted under the plan to non-executive
officers in exchange for option grants in our predecessor, unit options will
not vest before the conversion of any senior subordinated units and will only
vest upon, and in the same proportion as, the conversion of senior subordinated
units into common units. In addition, the unit options will become exercisable
upon a change of control of the managing general partner or us. Generally, unit
options will expire after 10 years.

   Upon exercise of a unit option, the managing general partner will acquire
common units in the open market, or directly from us or any other person, or
use common units already owned by the managing general partner, or any
combination of the foregoing. The managing general partner will be entitled to
reimbursement by us for the difference between the cost incurred by the
managing general partner in acquiring these common units and the proceeds
received by the managing general partner from an optionee at the time of
exercise. Thus, the cost of the unit options will be borne by us. If we issue
new common units upon exercise of the unit options, the total number of common
units outstanding will increase, and the managing general partner will pay us
the proceeds it received from the optionee upon exercise of the unit options.
The unit option plan has been designed to furnish additional compensation to
employees and directors and to align their economic interests with those of
common unitholders.

   Termination and Amendment. The managing general partner's board of directors
in its discretion may terminate the long-term incentive plan at any time with
respect to any common units for which a grant has not yet been made. The
managing general partner's board of directors also has the right to alter or
amend the long-term incentive plan or any part of the plan from time to time,
including increasing the number of common units with respect to which awards
may be granted subject to unitholder approval as required by the exchange upon
which the common units are listed at that time. However, no change in any
outstanding grant may be made that would materially impair the rights of the
participant without the consent of the participant.

Unit Purchase Plan

   Our managing general partner has adopted a unit purchase plan for employees
of the managing general partner and its affiliates. The unit purchase plan
permits participants to purchase common units in market transactions, from us,
our general partners or any other person. We currently expect such purchases to
occur primarily in market transactions, although our plan allows us to issue
additional units. We have reserved 50,000 units for purchase under the unit
purchase plan. Pursuant to the unit purchase plan, the managing general partner
has agreed to pay the brokerage commissions, transfer taxes and other
transaction fees associated with a participant's purchase of common units in
market transactions and will reimburse to each participant an amount up to 10%
of the costs of such units. The maximum amount that a participant may be
reimbursed with respect to unit purchases in any calendar year may not exceed
10% of his or her base salary or wages for the year. Further, if any
participant sells or otherwise disposes of units for which he or she has been
reimbursed under this plan, the participant will thereafter be precluded from
participating in the unit purchase plan. The unit purchase plan is intended to
serve as a means for encouraging participants to invest in our common units.

                                       86

                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                AND MANAGEMENT

   The following table shows the beneficial ownership of units of Inergy, L.P.
as of May 23, 2002 held by:

  . each person who beneficially owns more than 5% of any of such units then
    outstanding,

  . each of the named executive officers of our managing general partner,

  . all of the directors of our managing general partner, and

  . all of the directors and executive officers of our managing general
    partner as a group.

                                                                  Percentage of              Percentage of
                                                        Senior       Senior        Junior       Junior
                                       Percentage of Subordinated Subordinated  Subordinated Subordinated  Percentage of
                          Common Units Common Units     Units         Units        Units         Units      Total Units
Name of Beneficial        Beneficially Beneficially  Beneficially Beneficially  Beneficially Beneficially  Beneficially
Owner(1)                     Owned         Owned        Owned         Owned        Owned         Owned         Owned
- ------------------        ------------ ------------- ------------ ------------- ------------ ------------- -------------
                                                                                      
Inergy Holdings, LLC
 (2)....................    404,601        15.5%        959,954       29.0%       507,063        88.6%         28.8%

Country Partners, Inc.
 (3)....................        --          --          409,091       12.3%           --          --            6.3%
 4010 Highway 14
 Crystal Lake, IL
  60014.................

KCEP Ventures II, L.P.
 (4)....................        --          --          395,454       11.9%           --          --            6.1%
 253 West 47th Street
 Kansas City, MO 64112

Hoosier Propane Group
 (5)....................        --          --          336,456       10.2%           --          --            5.2%
 P.O. Box 9
 Kendallville, IN 46755

J.P. Morgan Partners
 (SBIC) LLC ............    314,671        12.0%            --         --             --          --            4.8%
 1221 Avenue of the
 Americas, 39th Floor
 New York, NY 10020

Rocky Mountain Mezzanine
 Fund (6)...............        --          --          241,818        7.3%           --          --            3.7%
 1125 17th Street Suite
  2260
 Denver, CO 80202

John J. Sherman (7).....    404,601        15.5%        959,954       29.0%       507,063        88.6%         28.8%

Phillip L. Elbert (5)...      9,000           *             --         --             --          --              *

R. Brooks Sherman Jr....      1,000           *             --         --             --          --              *

Carl A. Hughes .........        --          --              --         --             --          --            --

Michael D. Fox .........        --          --              --         --             --          --            --

William C. Gautreaux ...     12,200           *             --         --             --          --              *

Richard C. Green, Jr.
 (8)....................        --          --           31,818        1.0%           --          --              *

Warren H. Gfeller (9)...        --          --            6,364          *            --          --              *

David J. Schulte (4)....        875           *         395,454       11.9%           --          --            6.1%

All directors and
 executive officers as a
 group (9 persons)......    427,676        16.3%      1,393,590       42.1%       507,063        88.6%         35.8%

- --------
  * less than 1%

                                      87

 (1) Unless otherwise indicated, the address of each person listed above is:
     1101 Walnut, Suite 1500, Kansas City, Missouri 64106. All persons listed
     have sole voting power and investment power with respect to their units
     unless otherwise indicated.
 (2) The senior and junior subordinated units indicated as beneficially owned
     by Inergy Holdings are held by New Inergy Propane, LLC, a wholly-owned
     subsidiary of Inergy Partners, LLC and an indirect subsidiary of Inergy
     Holdings. The common units indicated as beneficially owned by Inergy
     Holdings are held by Inergy Partners, LLC (10,000 units) and IPCH
     Acquisition Corp. (394,601 units), a wholly-owned subsidiary of Inergy
     Holdings.
 (3) Country Partners, Inc. (formerly Country Gas Company, Inc.) is controlled
     by Arlene Peterson and the the estate of Leonard Peterson.
 (4) KCEP Ventures II, LP ("KCEP II") owns 395,454 senior subordinated units.
     KCEP II is a Missouri limited partnership. Mr. Schulte in his capacity as
     a managing director of KCEP II may be deemed to beneficially own these
     units. Mr. Green is a special limited partner in KCEP II. Both Mr. Schulte
     and Mr. Green disclaim beneficial ownership of these units.
 (5) The Hoosier Propane Group consisted of Domex, Inc., Investors, Inc. and
     L&L Leasing, Inc., each of which was merged into DIL, Inc. (collectively,
     the "Hoosier Entities"). Each of Jerry Boman, Glen Cook and Wayne Cook own
     31.8% of the Hoosier Entities. Mr. Elbert, one of our executive officers,
     holds the remaining ownership interest in the Hoosier Entities. He
     disclaims beneficial ownership of the units held by the Hoosier Entities.
 (6) Edward C. Brown in his capacity as managing partner of Rocky Mountain
     Capital Partners, LLP, the general partner of Rocky Mountain Mezzanine
     Fund, may be deemed to beneficially own these units.
 (7) Mr. Sherman holds an ownership interest in and has voting control of
     Inergy Holdings, as indicated in the following table.
 (8) Mr. Green in his capacity as a general partner of RNG Investments, LP, a
     Delaware limited partnership ("RNG Investments"), may be deemed to
     beneficially own 31,818 senior subordinated units held by RNG Investments.
 (9) Mr. Gfeller in his capacity as managing member of Clayton-Hamilton, LLC
     may be deemed to beneficially own 6,364 units held by Clayton-Hamilton.

                                       88

   The following table shows the beneficial ownership as of May 23, 2002 of
Inergy Holdings, LLC of the directors and executive officers of the managing
general partner. As reflected above, Inergy Holdings owns our managing general
partner, non-managing general partner, the incentive distribution rights and,
through a subsidiary, approximately 24% of our outstanding units.

                                                          Inergy Holdings, LLC
     Name of Beneficial Owner (1)                         Percent of Class (2)
     ----------------------------                         --------------------
                                                       
     John J. Sherman.....................................         66.7%
     Phillip L. Elbert(3)................................          --
     R. Brooks Sherman Jr................................          --
     Carl A. Hughes......................................          8.3
     Michael D. Fox......................................          8.3
     William C. Gautreaux................................          8.3
     Richard C. Green, Jr. ..............................          --
     Warren H. Gfeller...................................          --
     David J. Schulte....................................          --
     All directors and executive officers as a group (9
      persons) (3).......................................         91.6%

- --------
(1) The address of each person listed above is 1101 Walnut, Suite 1500, Kansas
    City, Missouri 64106.
(2) The ownership of Inergy Holdings has not been certificated. As of the date
    of this prospectus, voting rights attach only to Mr. John Sherman's
    ownership interest. In the event Mr. John Sherman's ownership fails to
    exceed 50%, the remaining owners of Inergy Holdings will acquire voting
    rights in proportion to the ownership interest.
(3) Mr. Elbert holds an option to acquire 7.7% of Inergy Holdings, which option
    is subject to the terms of the Inergy Holdings, LLC Employee Option Plan.
    The option vests fully at the end of five years and upon a sale of control
    as defined in the plan. The option vests 20% each year in the event Mr.
    Elbert's employment terminates as a result of his death, disability or
    termination without cause (as defined in Mr. Elbert's employment
    agreement). Mr. Elbert's option expires on January 12, 2011. In the event
    Mr. Elbert exercises his option, the respective ownership interests of the
    persons listed above will be reduced on a pro rata basis.

                                       89

                              SELLING UNITHOLDERS

   The following table shows the beneficial ownership of common units held by
the selling unitholders as of May 23, 2002 and to be held following the
offering. Each of the selling unitholders acquired its common units in
connection with the IPC acquisition. Please read "Business--Recent
Acquisitions."

                                       Common Units               Common Units
                                    Beneficially Owned            Beneficially
                                      Prior to this     Units    Owned Following
                                         Offering      Offered    this Offering
                                    ------------------    in    -----------------
                                            Percentage   this          Percentage
Name of Selling Unitholder          Number    Owned    Offering Number   Owned
- --------------------------          ------- ---------- -------- ------ ----------
                                                        
JP Morgan Partners (SBIC), LLC....  314,671   12.0%    314,671     --     0.0%
 1221 Avenue of the Americas
 39th Floor
 New York, NY 10020

Heller Financial, Inc. ...........   12,587     *       12,587     --     0.0%
 500 West Monroe Street
 17th Floor
 Chicago, IL 60661

Triad Ventures Limited II, L.P. ..   12,587     *       12,587     --     0.0%
 4600 Post Oak Place
 No. 100
 Houston, TX 77027

Summit Capital, Inc. .............   10,069     *        4,825  5,244      *
 600 Travis
 Suite 6110
 Houston, TX 77002

Stephen Boane.....................      378     *          378     --     0.0%
 9333 Memorial Drive
 Suite 116
 Houston, TX 77024

Summit Capital Group, LLC.........      315     *          151    164      *
 600 Travis
 Suite 6110
 Houston, TX 77002

John L. Long, Jr. ................      126     *           60     66      *
 2600 Via Fortuna
 Suite 150
 Austin, TX 78746
                                    -------   -----    -------  -----     ----
  Total...........................  350,733   13.4%    345,259  5,474      *
                                    =======   =====    =======  =====     ====

- --------
* less than 1%

                                       90

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions

   1999 KCEP Investment. On December 31, 1999, KCEP Ventures II, L.P. ("KCEP
II") acquired a preferred interest in a predecessor entity of Inergy, L.P., for
$2.0 million in cash ("KCEP II 1999 Investment"). David Schulte, one of our
directors, holds voting power in KCEP II. Richard Green, one of our directors,
is a limited partner of KCEP II. Under the terms of its investment in us, KCEP
II's preferred interest automatically converted into 204,545 senior
subordinated units concurrently with the closing of our initial public
offering. As a result of favorable conversion terms, there was a beneficial
conversion feature associated with the KCEP II 1999 Investment. Further,
pursuant to the terms of the KCEP II 1999 Investment, KCEP II has the right to
elect one member of the board of directors of our managing general partner
until certain events related to subordination occur. David Schulte is currently
serving as KCEP II's board designee. The terms of this investment also provide
for certain limited registration rights which are described below.

   Country Gas Acquisition. On June 1, 2000, a predecessor entity of Inergy,
L.P. acquired all of the propane assets of Country Gas Company, Inc. for a
purchase price of approximately $18.6 million. The consideration paid in
respect of the purchase price consisted of approximately $9.6 million in cash
and assumed liabilities and a $9.0 million preferred interest in a predecessor
entity. Under the terms of its preferred interest, Country Gas exchanged its
preferred interest for 409,091 senior subordinated units concurrently with the
closing of our initial public offering.

   As a result of the Country Gas acquisition, we lease three properties from
Country Enterprises, an Illinois general partnership ("Country Enterprises").
Country Enterprises is controlled by Arlene Peterson and the estate of Leonard
Peterson, the controlling shareholders of Country Partners (formerly Country
Gas). The leases provide for aggregate monthly payments of $16,000 through June
30, 2002 and $14,000 thereafter, which are subject to adjustment based on the
consumer price index. During the fiscal year ended September 30, 2001, we paid
Country Enterprises an aggregate of $186,000 in respect of these leases. In
addition, we pay for all utilities, taxes, insurance and normal maintenance on
these properties. Each lease has an initial term of five years expiring on May
31, 2005. We have the right to extend each lease for one successive term of
five years.

   2001 Investor Group. On January 12, 2001, a predecessor entity of Inergy,
L.P. sold preferred interests to various investors (the "2001 Investor Group"),
including KCEP II, RNG Investments, L.P. and Clayton-Hamilton, LLC for $15
million in cash. KCEP II invested, as part of the 2001 Investor Group, $3.0
million in our predecessor. Mr. Schulte, one of our directors, is a managing
director of KCEP II. Mr. Green, one of our directors, is a limited partner of
KCEP II and is the managing general partner of RNG Investments. Clayton-
Hamilton is an affiliate of Mr. Gfeller, one of our directors. KCEP II, RNG
Investments and Clayton-Hamilton acquired their preferred interests, for $3.0
million, $500,000 and $100,000, respectively. Concurrently with the closing of
our initial public offering, the preferred interests held by these investors
automatically converted into 190,909, 31,818 and 6,364 senior subordinated
units, respectively. As a result of favorable conversion terms, there was a
beneficial conversion feature associated with the investment of the 2001
Investor Group. As a group, all members of the 2001 Investor Group have the
right to elect one director to the board of directors of our managing general
partner until certain events related to subordination occur. Mr. Green is
currently the board designee of these investors. These investors are also
entitled to registration rights, which are described below.

   On January 12, 2001, our predecessor entered into an Investors Rights
Agreement with the 2001 Investor Group. That agreement provides the members of
the 2001 Investor Group with the following registration rights:

  .  The 2001 Investor Group may demand registration once following each date
     senior subordinated units are converted to common units. This demand, if
     made, must be made with respect to 50% or more of the common units then
     held by the 2001 Investor Group.

                                       91

  .  If we meet the eligibility requirements of Form S-3, then members of the
     2001 Investor Group representing 33 1/3% or more of the common units
     held by the 2001 Investor Group can demand that we file a registration
     statement on Form S-3 to register their common units.

  .  We are not required to effect more than one registration in any twelve-
     month period.

  .  If we file a registration statement (other than one relating to employee
     benefit plans or exchange offers), the members of the 2001 Investor
     Group have piggy-back registration rights subject to limitations
     specified in the Investors Rights Agreement.

  .  The right of the 2001 Investor Group to demand registration of their
     common units expires on the third anniversary of the final subordination
     release date and their right to piggy-back registration rights expires
     on the fifth anniversary of the final subordination release date.

  .  We will bear all costs of any registration exclusive of any underwriting
     discounts or commissions.

   Hoosier Propane Group Acquisition. On January 12, 2001, a predecessor entity
of Inergy, L.P., acquired all of the propane assets of Investors 300, Inc.,
Domex, Inc. and L&L Leasing, Inc. (collectively, the "Hoosier Propane Group"),
for a purchase price of approximately $74.0 million. Mr. Elbert, one of our
executive officers, is a stockholder of the companies comprising the Hoosier
Propane Group. The consideration paid in respect of the purchase price
consisted of approximately $61.6 million in cash and assumed liabilities, a
subordinated promissory note of $5.0 million and a preferred interest in our
predecessor entity of $7.4 million. The subordinated promissory note will be
repaid at the closing of this offering. The preferred interest held by the
Hoosier Propane Group was exchanged for 336,456 senior subordinated units
concurrently with our initial public offering.

   IPC Acquisition. In order to consummate the IPC acquisition, we and several
of our affiliates entered into various transactions. IPCH Acquisition Corp., an
affiliate of our managing general partner, borrowed approximately $27 million
under a bridge facility financed by one of our lenders. $9.6 million of these
loan proceeds was used to acquire 365,019 common units from us. IPCH
Acquisition Corp. utilized these common units to provide a portion of the
consideration paid to some of the former stockholders of IPC's parent
corporation, including the selling unitholders in this offering. The balance of
the loan proceeds of approximately $17.4 million was applied to the purchase
price. Immediately thereafter, IPCH Acquisition Corp. sold, assigned and
transferred its interest in IPC and certain rights under the IPC acquisition
agreement and related escrow agreement to our operating company. In
consideration for this sale, assignment and transfer, we issued to IPCH
Acquisition Corp. 394,601 common units, which were valued at $10.4 million, and
paid $82.2 million in cash (including $9.6 million of cash received from the
sale of 365,019 common units to IPCH Acquisition Corp.) and our operating
company assumed $2.5 million of notes payable. We also issued 18,252 common
units to members of IPC's management, who are current employees of our
operating company, for approximately $0.5 million in cash. Each common unit
issued in connection with the IPC transaction was valued at $26.30, the 30-day
average trading price of the common units on Nasdaq immediately prior to
December 19, 2001.

   In connection with the IPC transaction, we entered into a registration
rights agreement with J.P. Morgan Partners (SBIC), LLC, Summit Capital, Inc.,
Heller Financial, Inc. and Triad Ventures Limited, L.P. (the "IPC Investors"),
which provides the IPC Investors with the following registration rights:

  .  We shall use our best efforts to file a shelf registration statement and
     to register the common units issued to former IPC shareholders,
     including the IPC Investors, subject to various conditions and
     limitations specified in the registration rights agreement.

  .  If we file a registration statement, the IPC Investors have piggy-back
     registration rights subject to various conditions and limitations
     specified in the registration rights agreement.

                                       92

  .  The right of the IPC Investors to demand registration of their common
     units expires upon the registration of all common units held by the IPC
     Investors.

  .  We will bear all costs of any registration exclusive of any underwriting
     discounts or commissions.

   On December 19, 2001, Inergy, L.P. entered into a registration rights
agreement with IPCH Acquisition Corp., which provides IPCH Acquisition Corp.
with the following registration rights:

  .  If Inergy, L.P. proposes to register any of its common units or other
     units under applicable securities laws, IPCH Acquisition Corp. will have
     piggy-back registration rights subject to various conditions and
     limitations specified in the registration rights agreement.

  .  The right of IPCH Acquisition Corp. to demand piggy-back registration
     rights of its common units expires upon the registration of all common
     units held by IPCH Acquisition Corp.

  .  We will bear all costs of any registration exclusive of any underwriting
     discounts or commissions.

                                       93

              CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

Conflicts of Interest

   Conflicts of interest exist and may arise in the future as a result of the
relationships between the general partners and their affiliates (including
Inergy Holdings), on the one hand, and Inergy, L.P. and its limited partners,
on the other hand. The directors and officers of our managing general partner
and the non-managing general partner have fiduciary duties to manage each
general partner in a manner beneficial to its owners. At the same time, the
general partners have a fiduciary duty to manage Inergy, L.P. in a manner
beneficial to Inergy, L.P. and the unitholders.

   The partnership agreement contains provisions that allow our managing
general partner to take into account the interests of parties in addition to
ours in resolving conflicts of interest. In effect, these provisions limit the
general partners' fiduciary duties to the unitholders. The partnership
agreement also restricts the remedies available to unitholders for actions
taken that might, without those limitations, constitute breaches of fiduciary
duty. Whenever a conflict arises between a general partner or its affiliates,
on the one hand, and Inergy, L.P. or any other partner, on the other, the
managing general partner will resolve that conflict. Our managing general
partner may appoint a conflicts committee of at least two independent directors
to review specific matters which the board of directors believes may involve
conflicts of interest. Our managing general partner will not be in breach of
its obligations under the partnership agreement or its duties to us or the
unitholders if the resolution of the conflict is considered to be fair and
reasonable to us. Any resolution is considered to be fair and reasonable to us
if that resolution is:

  .  approved by the conflicts committee, although no party is obligated to
     seek approval of the conflicts committee and the managing general
     partner may adopt a resolution or course of action that has not received
     approval,

  .  on terms no less favorable to us than those generally being provided to
     or available from unrelated third parties, or

  .  fair to us, taking into account the totality of the relationships
     between the parties involved, including other transactions that may be
     particularly favorable or advantageous to us.

   In resolving a conflict, our managing general partner may, unless the
resolution is specifically provided for in the partnership agreement, consider:

  .  the relative interests of the parties involved in the conflict or
     affected by the action,

  .  any customary or accepted industry practices or historical dealings with
     a particular person or entity, and

  .  generally accepted accounting practices or principles and other factors
     it considers relevant, if applicable.

   Conflicts of interest could arise in the situations described below, among
others:

 Actions taken by our managing general partner may affect the amount of cash
 available for distribution to unitholders or accelerate the right to convert
 subordinated units.

   The amount of cash that is available for distribution to unitholders is
affected by decisions of our managing general partner regarding matters,
including:

  .  amount and timing of asset purchases and sales,

  .  cash expenditures,

  .  borrowings,

                                       94

  .  issuance of additional units, and

  .  the creation, reduction or increase of reserves in any quarter.

   In addition, borrowings by Inergy, L.P. and its affiliates do not
constitute a breach of any duty owed by the managing general partner to the
unitholders, including borrowings that have the purpose or effect of:

  .  enabling an affiliate of our managing general partner to receive
     distributions on any subordinated units held by it or the incentive
     distribution rights; or

  .  hastening the expiration of the subordination period.

   The partnership agreement provides that Inergy and our subsidiaries may
borrow funds from our managing general partner and its affiliates. Our
managing general partner and its affiliates may not borrow funds from us, our
operating company or its subsidiaries.

 We reimburse the managing general partner and its affiliates for expenses.

   We reimburse the managing general partner and its affiliates for costs
incurred in managing and operating Inergy, L.P., including costs incurred in
rendering corporate staff and support services to Inergy, L.P. The partnership
agreement provides that the managing general partner will determine the
expenses that are allocable to Inergy, L.P. in any reasonable manner
determined by the managing general partner in its sole discretion.

 The managing general partner intends to limit the liability of the general
 partners regarding Inergy, L.P.'s obligations.

   The managing general partner intends to limit the liability of the general
partners under contractual arrangements so that the other party has recourse
only to Inergy, L.P.'s assets and not against the general partners or their
assets. The partnership agreement provides that any action taken by the
managing general partner to limit its liability or the liability of the non-
managing general partner is not a breach of the managing general partner's
fiduciary duties, even if we could have obtained more favorable terms without
the limitation on liability.

 Common unitholders have no right to enforce obligations of the managing
 general partner and its affiliates under agreements with us.

   Any agreements between Inergy, L.P. on the one hand, and the managing
general partner and its affiliates, on the other, will not grant to the
unitholders, separate and apart from Inergy, L.P., the right to enforce the
obligations of the managing general partner and its affiliates in our favor.

 Contracts between us, on the one hand, and the managing general partner and
 its affiliates, on the other, will not be the result of arm's-length
 negotiations.

   The partnership agreement allows the managing general partner to pay itself
or its affiliates for any services rendered, provided these services are
rendered on terms that are fair and reasonable to us. The managing general
partner may also enter into additional contractual arrangements with any of
its affiliates on our behalf. Neither the partnership agreement nor any of the
other agreements, contracts and arrangements between us and the managing
general partner and its affiliates are or will be the result of arm's-length
negotiations. All of these transactions are to be on terms that are fair and
reasonable to Inergy, L.P., however.

   The managing general partner and its affiliates have no obligation to
permit us to use any facilities or assets of the managing general partner and
its affiliates, except as may be provided in contracts entered into
specifically dealing with that use. There is no obligation of the managing
general partner and its affiliates to enter into any contracts of this kind.

                                      95

 Common units are subject to the managing general partner's limited call right.

   The managing general partner may exercise its limited right to call and
purchase common units as provided in the partnership agreement or assign this
right to one of its affiliates or to us. The managing general partner may use
its own discretion, free of fiduciary duty restrictions, in determining whether
to exercise this right. As a result, a common unitholder may have his common
units purchased from him at an undesirable time or price. Please read "The
Partnership Agreement--Limited Call Right."

 We may not choose to retain separate counsel for ourselves or for the holders
 of common units.

   The attorneys, independent accountants and others who perform services for
us have been retained by the managing general partner. Attorneys, independent
accountants and others who perform services for us are selected by the managing
general partner or the conflicts committee and also may perform services for
the managing general partner and its affiliates. We may retain separate counsel
for ourselves or the holders of common units in the event of a conflict of
interest between the managing general partner and its affiliates, on the one
hand, and us or the holders of common units, on the other, depending on the
nature of the conflict. We do not intend to do so in most cases.

 The general partners' affiliates may compete with us.

   The partnership agreement provides that the managing general partner is
restricted from engaging in any business activities other than those incidental
to its ownership of interests in us. Affiliates of the general partners are not
prohibited from engaging in other businesses or activities, including those
that might be in direct competition with us.

 Fiduciary duties owed to unitholders by the general partners are prescribed by
 law and the partnership agreement

   The general partners are accountable to us and our unitholders as
fiduciaries. The Delaware Act provides that Delaware limited partnerships may,
in their partnership agreements, restrict or expand the fiduciary duties owed
by the managing general partner to limited partners and the partnership.

   Our partnership agreement contains various provisions restricting the
fiduciary duties that might otherwise be owed by the managing general partner.
The following is a summary of the material restrictions of the fiduciary duties
owed by our managing general partner to the limited partners:

State-law fiduciary duty       Fiduciary duties are generally considered to
standards..................    include an obligation to act with due care and
                               loyalty. The duty of care, in the absence of a
                               provision in a partnership agreement providing
                               otherwise, would generally require a general
                               partner to act for the partnership in the same
                               manner as a prudent person would act on his own
                               behalf. The duty of loyalty, in the absence of
                               a provision in a partnership agreement
                               providing otherwise, would generally prohibit a
                               general partner of a Delaware limited
                               partnership from taking any action or engaging
                               in any transaction where a conflict of interest
                               is present.

                               The Delaware Act generally provides that a
                               limited partner may institute legal action on
                               behalf of the partnership to recover damages
                               from a third party where a general partner has
                               refused to institute the action or where an
                               effort to cause a general partner to do so is
                               not likely to succeed. In addition, the
                               statutory or case law of some jurisdictions may
                               permit a limited partner to institute legal
                               action on behalf of himself and all other
                               similarly situated limited

                                       96

                               partners to recover damages from a general
                               partner for violations of its fiduciary duties
                               to the limited partners.

Partnership agreement
modified standards.........
                               Our partnership agreement contains provisions
                               that waive or consent to conduct by our general
                               partners and their affiliates that might
                               otherwise raise issues as to compliance with
                               fiduciary duties or applicable law. For
                               example, our partnership agreement permits our
                               managing general partner to make a number of
                               decisions in its "sole discretion." This
                               entitles the managing general partner to
                               consider only the interests and factors that it
                               desires and it has no duty or obligation to
                               give any consideration to any interest of, or
                               factors affecting, us, our affiliates or any
                               limited partner. Other provisions of the
                               partnership agreement provide that the managing
                               general partner's actions must be made in its
                               reasonable discretion.

                               Our partnership agreement generally provides
                               that affiliated transactions and resolutions of
                               conflicts of interest not involving a required
                               vote of unitholders must be "fair and
                               reasonable" to us under the factors previously
                               set forth. In determining whether a transaction
                               or resolution is "fair and reasonable" our
                               managing general partner may consider interests
                               of all parties involved, including its own.
                               Unless our managing general partner has acted
                               in bad faith, the action taken by our managing
                               general partner shall not constitute a breach
                               of its fiduciary duty. These standards reduce
                               the obligations to which our managing general
                               partner would otherwise be held.

                               In addition to the other more specific
                               provisions limiting the obligations of the
                               general partners, our partnership agreement
                               further provides that the general partners and
                               their officers and directors will not be liable
                               for monetary damages to us, the limited
                               partners or assignees for errors of judgment or
                               for any acts or omissions if the general
                               partners and those other persons acted in good
                               faith.

   In order to become one of our limited partners, a common unitholder is
required to agree to be bound by the provisions in the partnership agreement,
including the provisions discussed above. This is in accordance with the policy
of the Delaware Act favoring the principle of freedom of contract and the
enforceability of partnership agreements. The failure of a limited partner or
assignee to sign a partnership agreement does not render the partnership
agreement unenforceable against that person.

   We must indemnify our general partners and their respective officers,
directors, employees, affiliates, partners, members, agents and trustees, to
the fullest extent permitted by law, against liabilities, costs and expenses
incurred by the general partners or these other persons. We must provide this
indemnification if our general partners or these persons acted in good faith
and in a manner they reasonably believed to be in, or (in the case of a person
other than the general partners) not opposed to, our best interests. We also
must provide this indemnification for criminal proceedings if our general
partners or these other persons had no reasonable cause to believe their
conduct was unlawful. Thus, our general partners and their respective
affiliates could be indemnified for their negligent acts if they meet these
requirements concerning good faith and our best interests. Please read "The
Partnership Agreement--Indemnification."

                                       97

                        DESCRIPTION OF THE COMMON UNITS

The Units

   The common units and the subordinated units represent limited partner
interests in us. The holders of units are entitled to participate in
partnership distributions and exercise the rights or privileges available to
limited partners under our partnership agreement. For a description of the
relative rights and preferences of holders of common units and subordinated
units in and to partnership distributions, please read "Cash Distribution
Policy" and "Description of Subordinated Units." For a description of the
rights and privileges of limited partners under our partnership agreement,
including voting rights, please read "The Partnership Agreement."

Transfer Agent and Registrar Duties

 Duties

   American Stock Transfer & Trust Company serves as registrar and transfer
agent for the common units. We pay all fees charged by the transfer agent for
transfers of common units, except the following that must be paid by
unitholders:

  .  surety bond premiums to replace lost or stolen certificates, taxes and
     other governmental charges,

  .  special charges for services requested by a holder of a common unit, and

  .  other similar fees or charges.

   There is no charge to unitholders for disbursements of our cash
distributions. We will indemnify the transfer agent, its agents and each of
their stockholders, directors, officers and employees against all claims and
losses that may arise out of acts performed or omitted for its activities in
that capacity, except for any liability due to any gross negligence or
intentional misconduct of the indemnified person or entity.

 Resignation or Removal

   The transfer agent may resign, by notice to us, or be removed by us. The
resignation or removal of the transfer agent will become effective upon our
appointment of a successor transfer agent and registrar and its acceptance of
the appointment. If no successor has been appointed and accepted the
appointment within 30 days after notice of the resignation or removal, the
managing general partner may act as the transfer agent and registrar until a
successor is appointed.

 Transfer of Common Units

   The transfer of the common units to persons that purchase directly from the
underwriters will be accomplished through the completion, execution and
delivery of a transfer application by the investor. Any later transfers of a
common unit will not be recorded by the transfer agent or recognized by us
unless the transferee executes and delivers a transfer application. By
executing and delivering a transfer application, the transferee of common
units:

  .  becomes the record holder of the common units and is an assignee until
     admitted into our partnership as a substituted limited partner,

  .  automatically requests admission as a substituted limited partner in our
     partnership,

  .  agrees to be bound by the terms and conditions of, and executes, our
     partnership agreement,

  .  represents that the transferee has the capacity, power and authority to
     enter into the partnership agreement,

                                       98

  .  grants powers of attorney to officers of our managing general partner
     and any liquidator of us as specified in the partnership agreement, and

  .  makes the consents and waivers contained in the partnership agreement.

   An assignee will become a substituted limited partner of our partnership
for the transferred common units upon the consent of our managing general
partner and the recording of the name of the assignee on our books and
records. The managing general partner may withhold its consent in its sole
discretion.

   A transferee's broker, agent or nominee may complete, execute and deliver a
transfer application. We are entitled to treat the nominee holder of a common
unit as the absolute owner. In that case, the beneficial holder's rights are
limited solely to those that it has against the nominee holder as a result of
any agreement between the beneficial owner and the nominee holder.

   Common units are securities and are transferable according to the laws
governing transfer of securities. In addition to other rights acquired upon
transfer, the transferor gives the transferee the right to request admission
as a substituted limited partner in our partnership for the transferred common
units. A purchaser or transferee of common units who does not execute and
deliver a transfer application obtains only:

  .  the right to assign the common unit to a purchaser or other transferee,
     and

  .  the right to transfer the right to seek admission as a substituted
     limited partner in our partnership for the transferred common units.

   Thus, a purchaser or transferee of common units who does not execute and
deliver a transfer application:

  .  will not receive cash distributions or federal income tax allocations,
     unless the common units are held in a nominee or "street name" account
     and the nominee or broker has executed and delivered a transfer
     application, and

  .  may not receive some federal income tax information or reports furnished
     to record holders of common units.

   The transferor of common units has a duty to provide the transferee with
all information that may be necessary to transfer the common units. The
transferor does not have a duty to insure the execution of the transfer
application by the transferee and has no liability or responsibility if the
transferee neglects or chooses not to execute and forward the transfer
application to the transfer agent. Please read "The Partnership Agreement--
Status as Limited Partner or Assignee."

   Until a common unit has been transferred on our books, we and the transfer
agent, may treat the record holder of the unit as the absolute owner for all
purposes, except as otherwise required by law or stock exchange regulations.

                                      99

                     DESCRIPTION OF THE SUBORDINATED UNITS

   The senior subordinated units and junior subordinated units are separate
classes of limited partner interests in our partnership, and the rights of
holders to participate in distributions to partners differ from, and are
subordinated to, the rights of the holders of common units. For any given
quarter, any available cash will first be distributed to the non-managing
general partner and to the holders of common units, until the holders of common
units have received the minimum quarterly distribution plus any arrearages, and
then will be distributed to the holders of subordinated units. The
subordination period will end once we meet the financial tests in the
partnership agreement, but it generally cannot end before June 30, 2006 with
respect to the senior subordinated units and June 30, 2008 with respect to the
junior subordinated units. Please read "Cash Distribution Policy."

Limited Voting Rights

   Holders of subordinated units sometimes vote as a single class together with
the common units and sometimes vote as a class separate from the holders of
common units. Holders of senior subordinated units and junior subordinated
units sometimes vote together as a class and sometimes vote as separate
classes. Holders of subordinated units, like holders of common units, have very
limited voting rights. During the subordination period, common units and
subordinated units each vote separately as a class on the following matters:

  . a sale or exchange of all or substantially all of our assets,

  . the election of a successor managing general partner in connection with
    the removal of the managing general partner,

  . dissolution or reconstitution of Inergy, L.P.,

  . a merger,

  . issuance of limited partner interests in some circumstances, and

  . some amendments to the partnership agreement, including any amendment
    that would cause us to be treated as an association taxable as a
    corporation.

   The subordinated units are not entitled to vote on approval of the
withdrawal of the managing general partner or the transfer by the managing
general partner of its general partner interest. Removal of the managing
general partner requires:

   .a 66 2/3% vote of all outstanding units voting as a single class, and

  . the election of a successor general partner by the holders of a majority
    of the outstanding common units and subordinated units, voting as
    separate classes.

   Under the partnership agreement, the managing general partner generally will
be permitted to effect amendments to the partnership agreement that do not
materially adversely affect unitholders without the approval of any
unitholders. Please read "The Partnership Agreement--Opinion of Counsel and
Unitholder Approval."

Distributions Upon Liquidation

   If we liquidate during the subordination period, in some circumstances
holders of outstanding common units will be entitled to receive more per unit
in liquidating distributions than holders of outstanding subordinated units.
The per unit difference will be dependent upon the amount of gain or loss that
we recognize in liquidating our assets. Following conversion of the
subordinated units into common units, all units will be treated the same upon
liquidation.

                                      100

                           THE PARTNERSHIP AGREEMENT

   The following is a summary of the material provisions of our partnership
agreement. Our partnership agreement and the limited liability company
agreement governing our operating company are included as exhibits to the
registration statement of which this prospectus constitutes a part. We will
provide prospective investors with a copy of these agreements upon request at
no charge.

   We summarize the following provisions of the partnership agreement elsewhere
in this prospectus:

  . With regard to the transfer of common units, please read "Description of
    the Common Units--Transfer of Common Units."

  . With regard to distributions of available cash, please read "Cash
    Distribution Policy."

  . With regard to allocations of taxable income and taxable loss, please
    read "Tax Considerations."

Organization

   We were organized on March 7, 2001 and will have a perpetual existence.

Purpose

   Our purpose under the partnership agreement is limited to serving as a
member of the operating company and engaging in any business activities that
may be engaged in by the operating company or that are approved by the managing
general partner. All of our operations are conducted through our operating
company, Inergy Propane, LLC, and its subsidiaries. We own 100% of the
outstanding membership interest of the operating company. The limited liability
company agreement of the operating company provides that the operating company
may, directly or indirectly, engage in:

     (1) its operations as conducted immediately before our initial public
  offering,

     (2) any other activity approved by the managing general partner but only
  to the extent that the managing general partner reasonably determines that,
  as of the date of the acquisition or commencement of the activity, the
  activity generates "qualifying income" as this term is defined in Section
  7704 of the Internal Revenue Code, or

     (3) any activity that enhances the operations of an activity that is
  described in (1) or (2) above.

   Although the managing general partner has the ability to cause Inergy, L.P.,
the operating company or its subsidiaries to engage in activities other than
the wholesale and retail marketing and transportation of propane, the managing
general partner has no current plans to do so. The managing general partner is
authorized in general to perform all acts deemed necessary to carry out our
purposes and to conduct our business.

Power of Attorney

   Each limited partner, and each person who acquires a unit from a unitholder
and executes and delivers a transfer application, grants to the managing
general partner and, if appointed, a liquidator, a power of attorney to, among
other things, execute and file documents required for our qualification,
continuance or dissolution. The power of attorney also grants the managing
general partner the authority to amend, and to make consents and waivers under,
the partnership agreement.

Capital Contributions

   Unitholders are not obligated to make additional capital contributions,
except as described below under "--Limited Liability."

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Limited Liability

   Assuming that a limited partner does not participate in the control of our
business within the meaning of the Delaware Act and that he otherwise acts in
conformity with the provisions of the partnership agreement, his liability
under the Delaware Act will be limited, subject to possible exceptions, to the
amount of capital he is obligated to contribute to us for his common units plus
his share of any undistributed profits and assets. If it were determined,
however, that the right, or exercise of the right, by the limited partners as a
group:

  . to remove or replace the managing general partner,

  . to approve some amendments to the partnership agreement, or

  . to take other action under the partnership agreement,

constituted "participation in the control" of our business for the purposes of
the Delaware Act, then the limited partners could be held personally liable for
our obligations under the laws of Delaware, to the same extent as the managing
general partner. This liability would extend to persons who transact business
with us who reasonably believe that the limited partner is a general partner.
Neither the partnership agreement nor the Delaware Act specifically provides
for legal recourse against the general partners if a limited partner were to
lose limited liability through any fault of the general partners. While this
does not mean that a limited partner could not seek legal recourse, we know of
no precedent for this type of a claim in Delaware case law.

   Under the Delaware Act, a limited partnership may not make a distribution to
a partner if, after the distribution, all liabilities of the limited
partnership, other than liabilities to partners on account of their partnership
interests and liabilities for which the recourse of creditors is limited to
specific property of the partnership, would exceed the fair value of the assets
of the limited partnership. For the purpose of determining the fair value of
the assets of a limited partnership, the Delaware Act provides that the fair
value of property subject to liability for which recourse of creditors is
limited shall be included in the assets of the limited partnership only to the
extent that the fair value of that property exceeds the nonrecourse liability.
The Delaware Act provides that a limited partner who receives a distribution
and knew at the time of the distribution that the distribution was in violation
of the Delaware Act shall be liable to the limited partnership for the amount
of the distribution for three years. Under the Delaware Act, an assignee who
becomes a substituted limited partner of a limited partnership is liable for
the obligations of his assignor to make contributions to the partnership,
except the assignee is not obligated for liabilities unknown to him at the time
he became a limited partner and that could not be ascertained from the
partnership agreement.

   Our subsidiaries conduct business in 14 states. Maintenance of our limited
liability as a member of the operating company, may require compliance with
legal requirements in the jurisdictions in which the operating company conducts
business, including qualifying our subsidiaries to do business there.
Limitations on the liability of members for the obligations of a limited
liability company have not been clearly established in many jurisdictions. If
it were determined that we were, by virtue of our membership interest in the
operating company or otherwise, conducting business in any state without
compliance with the applicable limited partnership or limited liability company
statute, or that the right or exercise of the right by the limited partners as
a group to remove or replace the managing general partner, to approve some
amendments to the partnership agreement, or to take other action under the
partnership agreement constituted "participation in the control" of our
business for purposes of the statutes of any relevant jurisdiction, then the
limited partners could be held personally liable for our obligations under the
law of that jurisdiction to the same extent as the managing general partner
under the circumstances. We will operate in a manner that the managing general
partner considers reasonable and necessary or appropriate to preserve the
limited liability of the limited partners.

Issuance of Additional Securities

   The partnership agreement authorizes us to issue an unlimited number of
additional limited partner interests and other equity securities for the
consideration and on the terms and conditions established by the

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managing general partner in its sole discretion without the approval of any
limited partners. While any senior subordinated units remain outstanding,
however, except as we discuss in the following paragraph, we may not issue
equity securities ranking senior to the common units or an aggregate of more
than 800,000 additional common units or units on a parity with the common
units, in each case, without the approval of the holders of a majority of the
outstanding common units and subordinated units, voting as separate classes.

   During or after the subordination period, we may issue an unlimited number
of common units as follows:

  . upon exercise of the underwriters' over-allotment option,

  . upon conversion of the subordinated units,

  . under employee benefit plans,

  . upon conversion of the general partner interests and incentive
    distribution rights as a result of a withdrawal of a general partner,

  . in the event of a combination or subdivision of common units, or

  . in connection with an acquisition or a capital improvement that would
    have resulted, on a pro forma basis, in an increase in adjusted operating
    surplus on a per unit basis for the preceding four-quarter period.

   It is possible that we will fund acquisitions through the issuance of
additional common units or other equity securities. Holders of any additional
common units we issue will be entitled to share equally with the then-existing
holders of common units in our distributions of available cash. In addition,
the issuance of additional partnership interests may dilute the value of the
interests of the then-existing holders of common units in our net assets.

   In accordance with Delaware law and the provisions of our partnership
agreement, we may also issue additional partnership interests that, in the
sole discretion of the managing general partner, have special voting rights to
which the common units are not entitled.

   Upon issuance of additional partnership interests, the non-managing general
partner will be required to make additional capital contributions to the
extent necessary to maintain its 2% general partner interest in us and the
operating company. Moreover, the non-managing general partner will have the
right, which it may from time to time assign in whole or in part to any of its
affiliates, to purchase common units, subordinated units or other equity
securities whenever, and on the same terms that, we issue those securities to
persons other than the non-managing general partner and its affiliates, to the
extent necessary to maintain its percentage interest, including its interest
represented by common units and subordinated units, that existed immediately
prior to each issuance. The holders of common units will not have preemptive
rights to acquire additional common units or other partnership interests.

Amendment of the Partnership Agreement

 General

   Amendments to the partnership agreement may be proposed only by or with the
consent of the managing general partner, which consent may be given or
withheld in its sole discretion. In order to adopt a proposed amendment, other
than the amendments discussed below, the managing general partner must seek
written approval of the holders of the number of units required to approve the
amendment or call a meeting of the limited partners to consider and vote upon
the proposed amendment. Except as we describe below, an amendment must be
approved:

  . during the subordination period, by a majority of the common units,
    excluding those common units held by our general partners and their
    affiliates, voting as a class, and a majority of the senior subordinated
    units and the junior subordinated units, voting together as a class, and

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  . after the subordination period, by a majority of the common units.

   We refer to the voting provisions described above as a "unit majority."

 Prohibited Amendments

   No amendment may be made that would:

     (1) enlarge the obligations of any limited partner without its consent,
  unless approved by at least a majority of the type or class of limited
  partner interests so affected,

     (2) enlarge the obligations of, restrict in any way any action by or
  rights of, or reduce in any way the amounts distributable, reimbursable or
  otherwise payable by us to the general partners or any of their affiliates
  without the consent of the managing general partner, which may be given or
  withheld in its sole discretion,

     (3) change the term of our partnership,

     (4) provide that our partnership is not dissolved upon an election to
  dissolve our partnership by the managing general partner that is approved
  by the holders of a majority of the outstanding common units and
  subordinated units, voting as separate classes, or

     (5) give any person the right to dissolve our partnership other than the
  managing general partner's right to dissolve our partnership with the
  approval of the holders of a majority of the outstanding common units and
  subordinated units, voting as separate classes.

   The provision of the partnership agreement preventing the amendments having
the effects described in clauses (1) through (5) above can be amended upon the
approval of the holders of at least 90% of the outstanding units voting as a
single class.

 No Unitholder Approval

   The managing general partner may generally make amendments to the
partnership agreement without the approval of any limited partner or assignee
to reflect:

     (1) a change in our name, the location of our principal place of
  business, our registered agent or our registered office,

     (2) the admission, substitution, withdrawal or removal of partners in
  accordance with the partnership agreement,

     (3) a change that, in the sole discretion of the managing general
  partner, is necessary or advisable for us to qualify or to continue our
  qualification as a limited partnership or a partnership in which the
  limited partners have limited liability under the laws of any state or to
  ensure that neither we, the operating company nor its subsidiaries will be
  treated as an association taxable as a corporation or otherwise taxed as an
  entity for federal income tax purposes,

     (4) an amendment that is necessary, in the opinion of our counsel, to
  prevent us or our managing general partner or its directors, officers,
  agents or trustees, from in any manner being subjected to the provisions of
  the Investment Company Act of 1940, the Investment Advisors Act of 1940, or
  "plan asset" regulations adopted under the Employee Retirement Income
  Security Act of 1974, whether or not substantially similar to plan asset
  regulations currently applied or proposed,

     (5) subject to the limitations on the issuance of additional common
  units or other limited or general partner interests described above, an
  amendment that in the discretion of the managing general partner is
  necessary or advisable for the authorization of additional limited or
  general partner interests,

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     (6) any amendment expressly permitted in the partnership agreement to be
  made by the managing general partner acting alone,

     (7) an amendment effected, necessitated or contemplated by a merger
  agreement that has been approved under the terms of the partnership
  agreement,

     (8) any amendment that, in the discretion of the managing general
  partner, is necessary or advisable for the formation by us of, or our
  investment in, any corporation, partnership or other entity, as otherwise
  permitted by the partnership agreement,

     (9) a change in our fiscal year or taxable year and related changes, and

     (10) any other amendments substantially similar to any of the matters
  described in (1) through (9) above.

   In addition, the managing general partner may make amendments to the
partnership agreement without the approval of any limited partner or assignee
if those amendments, in the discretion of the managing general partner:

     (1) do not adversely affect the limited partners (or any particular
  class of limited partners) in any material respect,

     (2) are necessary or advisable to satisfy any requirements, conditions
  or guidelines contained in any opinion, directive, order, ruling or
  regulation of any federal or state agency or judicial authority or
  contained in any federal or state statute,

     (3) are necessary or advisable to facilitate the trading of limited
  partner interests or to comply with any rule, regulation, guideline or
  requirement of any securities exchange on which the limited partner
  interests are or will be listed for trading, compliance with any of which
  the managing general partner deems to be in our best interest and the best
  interest of limited partners,

     (4) are necessary or advisable for any action taken by the managing
  general partner relating to splits or combinations of units under the
  provisions of the partnership agreement, or

     (5) are required to effect the intent expressed in this prospectus or
  the intent of the provisions of the partnership agreement or are otherwise
  contemplated by the partnership agreement.

 Opinion of Counsel and Unitholder Approval

   Our managing general partner will not be required to obtain an opinion of
counsel that an amendment will not result in a loss of limited liability to the
limited partners or result in our being treated as an entity for federal income
tax purposes if one of the amendments described above under "--No Unitholder
Approval" should occur. No other amendments to the partnership agreement will
become effective without the approval of holders of at least 90% of the units
unless we obtain an opinion of counsel to the effect that the amendment will
not affect the limited liability under applicable law of any of our limited
partners or cause us, the operating company or its subsidiaries to be taxable
as a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously taxed as such).

   Any amendment that would have a material adverse effect on the rights or
preferences of any type or class of outstanding units in relation to other
classes of units will require the approval of at least a majority of the type
or class of units so affected. Any amendment that reduces the voting percentage
required to take any action must be approved by the affirmative vote of limited
partners constituting not less than the voting requirement sought to be
reduced.

Action Relating to the Operating Company

   Without the approval of the holders of units representing a unit majority,
our managing general partner is prohibited from consenting on our behalf, as
the sole member of the operating company, to any amendment to

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the limited liability company agreement of the operating company or taking any
action on our behalf permitted to be taken by a member of the operating
company, in each case that would adversely affect our limited partners (or any
particular class of limited partners) in any material respect.

Merger, Sale or Other Disposition of Assets

   The partnership agreement generally prohibits the managing general partner,
without the prior approval of the holders of units representing a unit
majority, from causing us to, among other things, sell, exchange or otherwise
dispose of all or substantially all of our assets in a single transaction or a
series of related transactions, including by way of merger, consolidation or
other combination, or approving on our behalf the sale, exchange or other
disposition of all or substantially all of the assets of our subsidiaries. The
managing general partner may, however, mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of our assets without that
approval. The managing general partner may also sell all or substantially all
of our assets under a foreclosure or other realization upon those encumbrances
without that approval.

   If conditions specified in the partnership agreement are satisfied, the
managing general partner may merge us or any of our subsidiaries into, or
convey some or all of our assets to, a newly formed entity if the sole purpose
of that merger or conveyance is to effect a mere change in our legal form into
another limited liability entity. The unitholders are not entitled to
dissenters' rights of appraisal under the partnership agreement or applicable
Delaware law in the event of a merger or consolidation, a sale of substantially
all of our assets or any other transaction or event.

Termination and Dissolution

   We will continue as a limited partnership until terminated under the
partnership agreement. We will dissolve upon:

     (1) the election of the managing general partner to dissolve us, if
  approved by the holders of units representing a unit majority,

     (2) the sale, exchange or other disposition of all or substantially all
  of our assets and properties and those of our subsidiaries,

     (3) the entry of a decree of judicial dissolution of Inergy, L.P., or

     (4) the withdrawal or removal of our managing general partner or any
  other event that results in its ceasing to be the managing general partner
  other than by reason of a transfer of its general partner interest in
  accordance with the partnership agreement or withdrawal or removal of the
  managing general partner following approval and admission of a successor.

   Upon a dissolution under clause (4), the holders of a majority of the
outstanding common units and subordinated units, voting as separate classes,
may also elect, within specific time limitations, to reconstitute us and
continue our business on the same terms and conditions described in the
partnership agreement by forming a new limited partnership on terms identical
to those in the partnership agreement and having as managing general partner an
entity approved by the holders of a majority of the outstanding common units
and subordinated units, voting as separate classes, subject to our receipt of
an opinion of counsel to the effect that:

     (1) the action would not result in the loss of limited liability of any
  limited partner, and

     (2) neither us, the reconstituted limited partnership nor the operating
  company would be treated as an association taxable as a corporation or
  otherwise be taxable as an entity for federal income tax purposes upon the
  exercise of that right to continue.

Liquidation and Distribution of Proceeds

   Upon our dissolution, unless we are reconstituted and continued as a new
limited partnership, the liquidator authorized to wind up our affairs will,
acting with all of the powers of the managing general partner

                                      106

that the liquidator deems necessary or desirable in its judgment, liquidate our
assets and apply the proceeds of the liquidation as provided in "Cash
Distribution Policy--Distributions of Cash upon Liquidation." The liquidator
may defer liquidation of our assets for a reasonable period of time or
distribute assets to partners in kind if it determines that a sale would be
impractical or would cause undue loss to the partners.

Withdrawal or Removal of the General Partners

   Except as described below, our managing general partner has agreed not to
withdraw voluntarily as a general partner prior to June 30, 2011 without
obtaining the approval of the holders of at least a majority of the outstanding
common units, excluding common units held by the general partners and their
affiliates, and furnishing an opinion of counsel regarding limited liability
and tax matters. On or after June 30, 2011 our managing general partner may
withdraw as managing general partner without first obtaining approval of any
unitholder by giving 90 days' written notice, and that withdrawal will not
constitute a violation of the partnership agreement. Notwithstanding the
information above, our managing general partner may withdraw without unitholder
approval upon 90 days' notice to the limited partners if at least 50% of the
outstanding common units are held or controlled by one person and its
affiliates other than the general partners and their affiliates. Our non-
managing general partner must withdraw as a general partner at any time after a
transfer of its general partner interest upon obtaining the consent of the
managing general partner. If our non-managing general partner is removed or
withdraws and no successor is appointed, the managing general partner will
continue the business of Inergy, L.P.

   Upon the withdrawal of the managing general partner under any circumstances,
other than as a result of a transfer by the managing general partner of all or
a part of its general partner interest in us, the holders of a majority of the
outstanding common units and subordinated units, voting as separate classes,
may select a successor to that withdrawing managing general partner. If a
successor is not elected, or is elected but an opinion of counsel regarding
limited liability and tax matters cannot be obtained, we will be dissolved,
wound up and liquidated, unless within 180 days after that withdrawal, the
holders of a majority of the outstanding common units and subordinated units,
voting as separate classes, agree in writing to continue our business and to
appoint a successor general partner. Please read "--Termination and
Dissolution."

   The managing general partner may not be removed unless that removal is
approved by the vote of the holders of not less than 66 2/3% of the outstanding
units, including units held by the general partners and their affiliates, and
we receive an opinion of counsel regarding limited liability and tax matters.
Any removal of the managing general partner is also subject to the approval of
a successor managing general partner by the vote of the holders of a majority
of the outstanding common units and subordinated units, voting as separate
classes. The ownership of more than 33 1/3% of the outstanding units by the
general partners and their affiliates give the managing general partner the
practical ability to prevent its removal. At the closing of this offering, our
general partners and their affiliates, including our executive officers and
directors, will control approximately 31% of the outstanding units.

   The partnership agreement also provides that if Inergy GP, LLC is removed as
our managing general partner under circumstances where cause does not exist and
units held by the managing general partner and its affiliates are not voted in
favor of that removal:

     (1) the subordination period will end and all outstanding subordinated
  units will immediately convert into common units on a one-for-one basis,

     (2) any existing arrearages in payment of the minimum quarterly
  distribution on the common units will be extinguished, and

     (3) the non-managing general partner will have the right to convert its
  general partner interest and Inergy Holdings will have the right to convert
  its incentive distribution rights into common units or to receive cash in
  exchange for those interests.

   In the event of removal of the managing general partner under circumstances
where cause exists or withdrawal of the managing general partner where that
withdrawal violates the partnership agreement, a

                                      107

successor general partner will have the option to purchase the general partner
interest of the departing general partner for a cash payment equal to the fair
market value of those interests. Under all other circumstances where a general
partner withdraws or is removed by the limited partners, the departing general
partner will have the option to require the successor general partner to
purchase the general partner interests of the departing general partner and,
in the case of the withdrawal or removal of the managing general partner,
Inergy Holdings will have the option to require the successor managing general
partner to purchase the incentive distribution rights and the general partner
interest held by the nonmanaging general partners for fair market value. In
each case, this fair market value will be determined by agreement between the
departing general partner, and the successor general partner and, in the case
of a purchase of incentive distribution rights and the non-managing partner's
general partner interest, Inergy Holdings. If no agreement is reached, an
independent investment banking firm or other independent expert selected by
the departing general partner, Inergy Holdings and the successor general
partner will determine the fair market value. Or, if the departing general
partner, Inergy Holdings and the successor general partner cannot agree upon
an expert, then an expert chosen by agreement of the experts selected by each
of them will determine the fair market value.

   If the option described above is not exercised by either the departing
managing general partner or the successor managing general partner, the
departing managing general partner's general partner interest and Inergy
Holdings' incentive distribution rights and the non-managing partner's general
partner interest will automatically convert into common units equal to the
fair market value of those interests as determined by an investment banking
firm or other independent expert selected in the manner described in the
preceding paragraph.

   In addition, we will be required to reimburse the departing general partner
for all amounts due the departing general partner, including, without
limitation, all employee-related liabilities, including severance liabilities,
incurred for the termination of any employees employed by the departing
general partner or its affiliates for our benefit.

Transfer of General Partner Interests

   Except for a transfer by either general partner of all, but not less than
all, of its general partner interest to:

     (1) an affiliate of the general partner (other than an individual), or

     (2) another entity as part of the merger or consolidation of the general
  partner with or into another entity or the transfer by the general partner
  of all or substantially all of its assets to another entity,

the managing general partner may not transfer all or any part of its general
partner interest to another person prior to June 30, 2011 without the approval
of the holders of at least a majority of the outstanding common units,
excluding common units held by the general partners and their affiliates. As a
condition of this transfer, the transferee must, among other things, assume
the rights and duties of the managing general partner, agree to be bound by
the provisions of the partnership agreement and furnish an opinion of counsel
regarding limited liability and tax matters.

   The general partners and their affiliates may at any time transfer units to
one or more persons, without unitholder approval, except that they may not
transfer subordinated units to us.

Transfer of Incentive Distribution Rights

   Inergy Holdings or a later holder of the incentive distribution rights may
transfer its incentive distribution rights to an affiliate of the holder
(other than an individual) without the approval of the unitholders, provided,
in each case, the transferee agrees to be bound by the provisions of the
partnership agreement. Prior to June 30, 2011, other transfers of the
incentive distribution rights will require the affirmative vote of holders of
a majority of the outstanding common units, excluding common units held by the
general partners and their affiliates. On or after June 30, 2011 the incentive
distribution rights will be freely transferable.

                                      108

Transfer of Ownership Interests in General Partners

   At any time, the members of either general partner may sell or transfer all
or part of their membership interests in the managing general partner or the
non-managing general partner without the approval of the unitholders.

Change of Management Provisions

   The partnership agreement contains specific provisions that are intended to
discourage a person or group from attempting to remove Inergy GP, LLC as our
managing general partner or otherwise change management.

   If any person or group other than the general partners and their affiliates
acquires beneficial ownership of 20% or more of any class of units, that person
or group loses voting rights on all of its units. This loss of voting rights
does not apply to any person or group that acquires the units concurrently with
this offering from our general partners or their affiliates and any transferees
of that person or group approved by our managing general partner.

   The partnership agreement also provides that if the managing general partner
is removed under circumstances where cause does not exist and units held by the
general partners and their affiliates are not voted in favor of that removal:

     (1) the subordination period will end and all outstanding subordinated
  units will immediately convert into common units on a one-for-one basis,

     (2) any existing arrearages in payment of the minimum quarterly
  distribution on the common units will be extinguished, and

     (3) the non-managing general partner will have the right to convert its
  general partner interest and Inergy Holdings will have the right to convert
  its incentive distribution rights into common units or to receive cash in
  exchange for those interests.

Limited Call Right

   If at any time not more than 20% of the then-issued and outstanding limited
partner interests of any class are held by persons other than the general
partners and their affiliates, the managing general partner will have the
right, which it may assign in whole or in part to any of its affiliates or to
us, to acquire all, but not less than all, of the remaining limited partner
interests of the class held by unaffiliated persons as of a record date to be
selected by the managing general partner, on at least ten but not more than 60
days' notice. The purchase price in the event of this purchase is the greater
of:

     (1) the highest cash price paid by either of the general partners or any
  of their affiliates for any limited partner interests of the class
  purchased within the 90 days preceding the date on which the managing
  general partner first mails notice of its election to purchase those
  limited partner interests, and

     (2) the current market price as of the date three days before the date
  the notice is mailed.

   As a result of the managing general partner's right to purchase outstanding
limited partner interests, a holder of limited partner interests may have his
limited partner interests purchased at an undesirable time or price. The tax
consequences to a unitholder of the exercise of this call right are the same as
a sale by that unitholder of his common units in the market. Please read "Tax
Considerations--Disposition of Common Units."

Meetings; Voting

   Except as described below regarding a person or group owning 20% or more of
any class of units then outstanding, unitholders or assignees who are record
holders of units on the record date will be entitled to

                                      109

notice of, and to vote at, meetings of our limited partners and to act upon
matters for which approvals may be solicited. Common units that are owned by an
assignee who is a record holder, but who has not yet been admitted as a limited
partner, will be voted by the managing general partner at the written direction
of the record holder. Absent direction of this kind, the common units will not
be voted, except that, in the case of common units held by the managing general
partner on behalf of non-citizen assignees, the managing general partner will
distribute the votes on those common units in the same ratios as the votes of
limited partners on other units are cast.

   The managing general partner does not anticipate that any meeting of
unitholders will be called in the foreseeable future. Any action that is
required or permitted to be taken by the unitholders may be taken either at a
meeting of the unitholders or without a meeting if consents in writing
describing the action so taken are signed by holders of the number of units as
would be necessary to authorize or take that action at a meeting. Meetings of
the unitholders may be called by the managing general partner or by unitholders
owning at least 20% of the outstanding partnership securities of the class for
which a meeting is proposed. Unitholders may vote either in person or by proxy
at meetings. The holders of a majority of the outstanding partnership
securities of the class or classes for which a meeting has been called,
represented in person or by proxy, will constitute a quorum unless any action
by the unitholders requires approval by holders of a greater percentage, in
which case the quorum will be the greater percentage.

   Each record holder of a unit has a vote according to his percentage interest
in us, although additional limited partner interests having special voting
rights could be issued. Please read "--Issuance of Additional Securities."
However, if at any time any person or group, other than the managing general
partner and its affiliates, or a direct or subsequently approved transferee of
the managing general partner or its affiliates, acquires, in the aggregate,
beneficial ownership of 20% or more of any class of units then outstanding,
that person or group will lose voting rights on all of its units and the units
may not be voted on any matter and will not be considered to be outstanding
when sending notices of a meeting of unitholders, calculating required votes,
determining the presence of a quorum or for other similar purposes. Common
units held in nominee or street name account will be voted by the broker or
other nominee in accordance with the instruction of the beneficial owner unless
the arrangement between the beneficial owner and his nominee provides
otherwise. Except as the partnership agreement otherwise provides, subordinated
units will vote together with common units as a single class.

   Any notice, demand, request, report or proxy material required or permitted
to be given or made to record holders of common units under the partnership
agreement will be delivered to the record holder by us or by the transfer
agent.

Status as Limited Partner or Assignee

   Except as described above under "--Limited Liability," the common units will
be fully paid, and unitholders will not be required to make additional
contributions.

   An assignee of a common unit, after executing and delivering a transfer
application, but pending its admission as a substituted limited partner, is
entitled to an interest equivalent to that of a limited partner for the right
to share in allocations and distributions from us, including liquidating
distributions. The managing general partner will vote and exercise other powers
attributable to common units owned by an assignee that has not become a
substitute limited partner at the written direction of the assignee. See "--
Meetings; Voting." Transferees that do not execute and deliver a transfer
application will be treated neither as assignees nor as record holders of
common units, and will not receive cash distributions, federal income tax
allocations or reports furnished to holders of common units. Please read
"Description of the Common Units--Transfer of Common Units."

Non-Citizen Assignees; Redemption

   If we are or become subject to federal, state or local laws or regulations
that, in the reasonable determination of the managing general partner, create a
substantial risk of cancellation or forfeiture of any

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property that we have an interest in because of the nationality, citizenship or
other related status of any limited partner or assignee, we may redeem the
units held by the limited partner or assignee at their current market price. In
order to avoid any cancellation or forfeiture, the managing general partner may
require each limited partner or assignee to furnish information about his
nationality, citizenship or related status. If a limited partner or assignee
fails to furnish information about this nationality, citizenship or other
related status within 30 days after a request for the information or the
managing general partner determines after receipt of the information that the
limited partner or assignee is not an eligible citizen, the limited partner or
assignee may be treated as a non-citizen assignee. In addition to other
limitations on the rights of an assignee that is not a substituted limited
partner, a non-citizen assignee does not have the right to direct the voting of
his units and may not receive distributions in kind upon our liquidation.

Indemnification

   Under the partnership agreement, in most circumstances, we will indemnify
the following persons, to the fullest extent permitted by law, from and against
all losses, claims, damages or similar events:

  . the general partners,

  . any departing general partner,

  . any person who is or was an affiliate of a general partner or any
    departing general partner,

  . any person who is or was a member, partner, officer, director, employee,
    agent or trustee of the managing general partner or any departing general
    partner or any affiliate of a managing general partner or any departing
    general partner, or

  . any person who is or was serving at the request of a managing general
    partner or any departing general partner or any affiliate of a managing
    general partner or any departing general partner as an officer, director,
    employee, member, partner, agent or trustee of another person.

   Any indemnification under these provisions will only be out of our assets.
The general partners and their affiliates will not be personally liable for, or
have any obligation to contribute or loan funds or assets to us to enable us to
effectuate, indemnification. We may purchase insurance against liabilities
asserted against and expenses incurred by persons for our activities,
regardless of whether we would have the power to indemnify the person against
liabilities under the partnership agreement.

Books and Reports

   The managing general partner is required to keep appropriate books of our
business at our principal offices. The books will be maintained for both tax
and financial reporting purposes on an accrual basis. For fiscal reporting
purposes, our fiscal year ends September 30 of each calendar year. For tax
reporting purposes, our tax year ends December 31 each year.

   We will furnish or make available to record holders of common units, within
120 days after the close of each fiscal year, an annual report containing
audited financial statements and a report on those financial statements by our
independent public accountants. Except for our fourth quarter, we will also
furnish or make available summary financial information within 90 days after
the close of each quarter.

   We will furnish each record holder of a unit with information reasonably
required for tax reporting purposes within 90 days after the close of each
calendar year. This information is expected to be furnished in summary form so
that some complex calculations normally required of partners can be avoided.
Our ability to furnish this summary information to unitholders will depend on
the cooperation of unitholders in supplying us with specific information. Every
unitholder will receive information to assist him in determining his federal
and state tax liability and filing his federal and state income tax returns,
regardless of whether he supplies us with information.

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Right to Inspect our Books and Records

   The partnership agreement provides that a limited partner can, for a purpose
reasonably related to his interest as a limited partner, upon reasonable demand
and at his own expense, have furnished to him:

  . a current list of the name and last known address of each partner,

  . a copy of our tax returns,

  . information as to the amount of cash, and a description and statement of
    the agreed value of any other property or services, contributed or to be
    contributed by each partner and the date on which each became a partner,

  . copies of the partnership agreement, the certificate of limited
    partnership of the partnership, related amendments and powers of attorney
    under which they have been executed,

  . information regarding the status of our business and financial condition,
    and

  . any other information regarding our affairs as is just and reasonable.

   The managing general partner may, and intends to, keep confidential from the
limited partners trade secrets or other information the disclosure of which the
managing general partner believes in good faith is not in our best interests or
which we are required by law or by agreements with third parties to keep
confidential.

Registration Rights

   Under the partnership agreement, we have agreed to register for resale under
the Securities Act of 1933 and applicable state securities laws any common
units, senior or junior subordinated units or other partnership securities
proposed to be sold by the general partners or any of their affiliates or their
assignees if an exemption from the registration requirements is not otherwise
available. These registration rights continue for two years following any
withdrawal or removal of Inergy GP, LLC as our managing general partner. We are
obligated to pay all expenses incidental to the registration, excluding
underwriting discounts and commissions. Please read "Units Eligible for Future
Sale." We have granted registration rights to certain investors. For a summary
description of these registration rights, please read "Certain Relations and
Related Transactions."

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                         UNITS ELIGIBLE FOR FUTURE SALE

   After the sale of the common units offered by this prospectus, affiliates of
the managing general partner, former owners of propane businesses we have
acquired and some of our original investors will hold 404,601 common units,
3,313,367 senior subordinated units and 572,542 junior subordinated units. All
of the subordinated units will convert into common units at the end of the
subordination period and some may convert earlier. The sale of any of these
units could have an adverse impact on the price of the common units or on any
trading market that may develop. These common units, and upon conversion, these
subordinated units will be entitled to registration rights as described under
"Certain Relationships and Related Transactions" or will be freely transferable
without restriction or further registration under the Securities Act of 1933,
subject to the affiliate restrictions described below.

   The common units sold in the offering will generally be freely transferable
without restriction or further registration under the Securities Act of 1933,
except that any resale of common units purchased by an "affiliate" of Inergy,
L.P. will be subject to the volume limitations contained in Rule 144 of the
Securities Act.

   While any senior subordinated units remain outstanding, we may not issue
equity securities of the partnership ranking prior or senior to the common
units or an aggregate of more than 800,000 additional common units or an
equivalent amount of securities ranking on a parity with the common units,
without the approval of the holders of a majority of the outstanding common
units and subordinated units, voting as separate classes, subject to certain
exceptions described under "The Partnership Agreement--Issuance of Additional
Securities."

   The partnership agreement provides that, once no senior subordinated units
remain outstanding, we may issue an unlimited number of limited partner
interests of any type without a vote of the unitholders. The partnership
agreement does not restrict our ability to issue equity securities ranking
junior to the common units at any time. Any issuance of additional common units
or other equity securities would result in a corresponding decrease in the
proportionate ownership interest in us represented by, and could adversely
affect the cash distributions to and market price of, common units then
outstanding. Please read "The Partnership Agreement--Issuance of Additional
Securities."

   Under the partnership agreement, the general partners and their affiliates
have the right to cause us to register under the Securities Act of 1933 and
state laws the offer and sale of any units that they hold.

   Subject to the terms and conditions of the partnership agreement, these
registration rights allow the general partners and their affiliates or their
assignees holding any units to require registration of any of these units and
to include any of these units in a registration by us of other units, including
units offered by us or by any unitholder. Each general partner will continue to
have these registration rights for two years following its withdrawal or
removal as a general partner. In connection with any registration of this kind,
we will indemnify each unitholder participating in the registration and its
officers, directors and controlling persons from and against any liabilities
under the Securities Act of 1933 or any state securities laws arising from the
registration statement or prospectus. We will bear all costs and expenses
incidental to any registration, excluding any underwriting discounts and
commissions. Except as described below, the general partners and their
affiliates may sell their units in private transactions at any time, subject to
compliance with applicable laws.

   Inergy, L.P., New Inergy Propane, LLC, the general partners and certain of
their affiliates have agreed not to sell any common units they beneficially own
for a period of 90 days from the date of this prospectus. Please read
"Underwriting" for a description of these lock-up provisions.

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                               TAX CONSIDERATIONS

   This section addresses all of the material tax considerations that may be
relevant to prospective unitholders who are individual citizens or residents of
the United States and, unless otherwise noted in the following discussion, is
the opinion of Vinson & Elkins L.L.P., special counsel to the general partners
and us, insofar as it relates to legal conclusions with respect to United
States federal income tax law. This section is based upon current provisions of
the Internal Revenue Code, existing and proposed regulations and current
administrative rulings and court decisions, all of which are subject to change.
Later changes in these authorities may cause the tax consequences to vary
substantially from the consequences described below. Unless the context
otherwise requires, references in this section to "us" or "we" are references
to Inergy, L.P. and the operating company.

   No attempt has been made in the following discussion to comment on all
federal income tax matters affecting us or the unitholders. Moreover, the
discussion focuses on unitholders who are individual citizens or residents of
the United States and has only limited application to corporations, estates,
trusts, nonresident aliens or other unitholders subject to specialized tax
treatment, such as tax-exempt institutions, non-U.S. persons, individual
retirement accounts (IRAs) , real estate investment trusts (REITs) or mutual
funds. Accordingly, each prospective unitholder is urged to consult with, and
is urged to depend on, his own tax advisor in analyzing the federal, state,
local and foreign tax consequences particular to him of the ownership or
disposition of common units.

   All statements as to matters of law and legal conclusions, but not as to
factual matters, contained in this section, unless otherwise noted, are the
opinion of Vinson & Elkins L.L.P., unless otherwise noted, and are based on the
accuracy of the representations made by us.

   No ruling has been or will be requested from the IRS regarding any matter
affecting us or prospective unitholders. Instead, we will rely on opinions and
advice of Vinson & Elkins L.L.P. Unlike a ruling, an opinion of counsel
represents only that counsel's best legal judgment and does not bind the IRS or
the courts. Accordingly, the opinions and statements made here may not be
sustained by a court if contested by the IRS. Any contest of this sort with the
IRS may materially and adversely impact the market value of the common units.
In addition, the costs of any contest with the IRS will be borne indirectly by
the unitholders and our general partners. Furthermore, the tax treatment of
Inergy, L.P., or of an investment in Inergy, L.P., may be significantly
modified by future legislative or administrative changes or court decisions.
Any modifications may or may not be retroactively applied.

   For the reasons described below, Vinson & Elkins L.L.P. has not rendered an
opinion with respect to the following specific federal income tax issues:

     (l) the treatment of a unitholder whose common units are loaned to a
  short seller to cover a short sale of common units (please read "--Tax
  Consequences of Unit Ownership--Treatment of Short Sales"),

     (2) whether our monthly convention for allocating taxable income and
  losses is permitted by existing Treasury regulations (please read "--
  Disposition of Common Units--Allocations Between Transferors and
  Transferees"), and

     (3) whether our method for depreciating Section 743 adjustments is
  sustainable (please read "--Tax Consequences of Unit Ownership--Section 754
  Election").

Partnership Status

   A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner of a partnership is required to take into
account his share of items of income, gain, loss and deduction of the
partnership in computing his federal income tax liability, regardless of
whether cash distributions are made to him by the partnership. Distributions by
a partnership to a partner are generally not taxable unless the amount of cash
distributed is in excess of his adjusted basis in his partnership interest.

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   Section 7704 of the Internal Revenue Code provides that publicly-traded
partnerships will, as a general rule, be taxed as corporations. However, an
exception, referred to as the "Qualifying Income Exception," exists with
respect to publicly-traded partnerships whose gross income for every taxable
year consists of at least 90% "qualifying income." Qualifying income includes
income and gains derived from the wholesale and retail marketing and
transportation of propane. Other types of qualifying income include interest
other than from a financial business, dividends, gains from the sale of real
property and gains from the sale or other disposition of assets held for the
production of income that otherwise constitutes qualifying income. We estimate
that less than 7% of our current income is not qualifying income; however, this
estimate could change from time to time. Based upon and subject to this
estimate, the factual representations made by us and the managing general
partner and a review of the applicable legal authorities, counsel is of the
opinion that at least 90% of our current gross income constitutes qualifying
income.

   No ruling has been or will be sought from the IRS and the IRS has made no
determination as to our status as a partnership for federal income tax
purposes, the status of the operating company for federal income tax purposes
or whether our operations generate "qualifying income" under Section 7704 of
the Code. Instead, we will rely on the opinion of Vinson & Elkins L.L.P. that,
based upon the Internal Revenue Code, its regulations, published revenue
rulings and court decisions and the representations described below, Inergy,
L.P. has been and will be treated as a partnership for federal income tax
purposes and the operating company has been and will be disregarded as an
entity separate from us for federal income tax purposes.

   In rendering its opinion, Vinson & Elkins L.L.P. has relied on factual
representations made by us and the managing general partner. The
representations made by us and our managing general partner upon which counsel
has relied are:

     (a) Neither Inergy, L.P. nor the operating company has elected or will
  elect to be treated as a corporation, and

     (b) For each taxable year, more than 90% of our gross income has been
  and will be income from sources that Vinson & Elkins, L.L.P. has opined, or
  will opine, is "qualifying income" within the meaning of Section 7704(d) of
  the Internal Revenue Code.

   If we fail to meet the Qualifying Income Exception, other than a failure
which is determined by the IRS to be inadvertent and which is cured within a
reasonable time after discovery, we will be treated as if we had transferred
all of our assets, subject to liabilities, to a newly formed corporation, on
the first day of the year in which we fail to meet the Qualifying Income
Exception, in return for stock in that corporation, and then distributed that
stock to the unitholders in liquidation of their interests in us. This
contribution and liquidation should be tax-free to unitholders and Inergy, L.P.
so long as we, at that time, do not have liabilities in excess of the tax basis
of our assets. Thereafter, we would be treated as a corporation for federal
income tax purposes.

   If we were treated as a corporation in any taxable year, either as a result
of a failure to meet the Qualifying Income Exception or otherwise, our items of
income, gain, loss and deduction would be reflected only on our tax return
rather than being passed through to the unitholders, and our net income would
be taxed to us at corporate rates. In addition, any distribution made to a
unitholder would be treated as either taxable dividend income, to the extent of
our current or accumulated earnings and profits, or, in the absence of earnings
and profits, a nontaxable return of capital, to the extent of a unitholder's
tax basis in his common units, or taxable capital gain, after the unitholder's
tax basis in his common units is reduced to zero. Accordingly, treatment as a
corporation would materially reduce a unitholder's cash flow and after-tax
return and thus would reduce the value of the units.

   The remainder of this section is based on Vinson & Elkins L.L.P.'s opinion
that we will be treated as a partnership for federal income tax purposes.

                                      115

Limited Partner Status

   Unitholders who have become limited partners of Inergy, L.P. will be treated
as partners of Inergy, L.P. for federal income tax purposes. Also:

     (a) assignees who have executed and delivered transfer applications, and
  are awaiting admission as limited partners, and

     (b) unitholders whose common units are held in street name or by a
  nominee and who have the right to direct the nominee in the exercise of all
  substantive rights attendant to the ownership of their common units,

will be treated as partners of Inergy, L.P. for federal income tax purposes.

   As there is no direct authority addressing assignees of common units who are
entitled to execute and deliver transfer applications and thereby become
entitled to direct the exercise of attendant rights, but who fail to execute
and deliver transfer applications, the opinion of Vinson & Elkins L.L.P. does
not extend to these persons. Furthermore, a purchaser or other transferee of
common units who does not execute and deliver a transfer application may not
receive some federal income tax information or reports furnished to record
holders of common units unless the common units are held in a nominee or street
name account and the nominee or broker has executed and delivered a transfer
application for those common units.

   A beneficial owner of common units whose units have been transferred to a
short seller to complete a short sale would appear to lose his status as a
partner with respect to those units for federal income tax purposes. Please
read "--Tax Consequences of Unit Ownership--Treatment of Short Sales."

   Income, gain, deductions or losses would not appear to be reportable by a
unitholder who is not a partner for federal income tax purposes, and any cash
distributions received by a unitholder who is not a partner for federal income
tax purposes would therefore be fully taxable as ordinary income. These holders
are urged to consult their own tax advisors with respect to their status as
partners in Inergy, L.P. for federal income tax purposes.

Tax Consequences of Unit Ownership

   Flow-through of Taxable Income. We will not pay any federal income tax.
Instead, each unitholder will be required to report on his income tax return
his share of our income, gains, losses and deductions without regard to whether
we make cash distributions to him. Consequently, we may allocate income to a
unitholder even if he has not received a cash distribution from us. Each
unitholder will be required to include in income his allocable share of our
income, gains, losses and deductions for our taxable year ending with or within
his taxable year.

   Treatment of Distributions. Except as described below with respect to
certain non-pro rata distributions, our distributions to a unitholder will not
be taxable to the unitholder for federal income tax purposes to the extent of
his tax basis in his common units immediately before the distribution. Our cash
distributions in excess of a unitholder's tax basis will be considered to be
gain from the sale or exchange of the common units, taxable in accordance with
the rules described under "--Disposition of Common Units" below. To the extent
our distributions cause a unitholder's "at risk" amount to be less than zero at
the end of any taxable year, he must recapture any losses deducted in previous
years. Please read "--Limitations on Deductibility of Losses."

   Any reduction in a unitholder's share of our liabilities for which no
partner, including our general partners, bears the economic risk of loss, known
as "nonrecourse liabilities," will be treated as a distribution of cash to that
unitholder. We do not currently have any nonrecourse liabilities. A decrease in
a unitholder's percentage interest in us because of our issuance of additional
common units will decrease his share of our nonrecourse liabilities, and thus
will result in a corresponding deemed distribution of cash. A non-pro rata
distribution of cash may result in ordinary income to a unitholder, regardless
of his tax basis in his common units, if the distribution reduces his share of
our "unrealized receivables," including depreciation recapture, and/or
substantially appreciated "inventory items," both as defined in the Internal
Revenue Code, and collectively, "Section 751 Assets."

                                      116

   To that extent, he will be treated as having received his proportionate
share of our Section 751 Assets and having exchanged those assets with us in
return for the non-pro rata portion of the distribution made to him. This
latter deemed exchange will generally result in the unitholder's realization of
ordinary income. That income will equal the excess of (1) the non-pro rata
portion of that distribution over (2) the unitholder's tax basis for the share
of Section 751 Assets deemed relinquished in the exchange.

   Ratio of Taxable Income to Distributions. We estimate that a purchaser of
common units in this offering who owns those common units from the date of
closing of this offering through December 31, 2004, will be allocated an amount
of federal taxable income for that period that will be no more than 20% of the
cash distributed with respect to that period. These estimates are based upon
the assumption that gross income from operations will approximate the amount
required to make the minimum quarterly distribution on all units and other
assumptions with respect to capital expenditures, cash flow and anticipated
cash distributions. These estimates and assumptions are subject to, among other
things, numerous business, economic, regulatory, competitive and political
uncertainties beyond our control. Further, the estimates are based on current
tax law and tax reporting positions that we will adopt and with which the IRS
could disagree. Accordingly, these estimates may prove to be incorrect. The
actual percentage that will constitute taxable income could be higher or lower,
and any differences could be material and could materially affect the value of
the common units.

   Basis of Common Units. A unitholder's initial tax basis for his common units
will be the amount he paid for the common units plus his share of our
nonrecourse liabilities. That basis will be increased by his share of our
income and by any increases in his share of our nonrecourse liabilities. That
basis will be decreased, but not below zero, by our distributions to him, by
his share of our losses, by any decreases in his share of our nonrecourse
liabilities and by his share of our expenditures that are not deductible in
computing taxable income and are not required to be capitalized. A unitholder
will have no share of our debt which is recourse to either general partner, but
will have a share of our nonrecourse liabilities, generally based on his share
of profits. Please read "--Disposition of Common Units--Recognition of Gain or
Loss."

   Limitations on Deductibility of Losses. The deduction by a unitholder of his
share of our losses will be limited to the tax basis in his units and, in the
case of an individual unitholder or a corporate unitholder, if more than 50% of
the value of the corporate unitholder's stock is owned directly or indirectly
by five or fewer individuals or some tax-exempt organizations, to the amount
for which the unitholder is considered to be "at risk" with respect to our
activities, if that is less than his tax basis. A unitholder must recapture
losses deducted in previous years to the extent that distributions cause his at
risk amount to be less than zero at the end of any taxable year. Losses
disallowed to a unitholder or recaptured as a result of these limitations will
carry forward and will be allowable to the extent that his tax basis or at risk
amount, whichever is the limiting factor, is subsequently increased. Upon the
taxable disposition of a unit, any gain recognized by a unitholder can be
offset by losses that were previously suspended by the at risk limitation but
may not be offset by losses suspended by the basis limitation. Any excess loss
above that gain previously suspended by the at risk or basis limitations is no
longer utilizable.

   In general, a unitholder will be at risk to the extent of the tax basis of
his units, excluding any portion of that basis attributable to his share of our
nonrecourse liabilities, reduced by any amount of money he borrows to acquire
or hold his units, if the lender of those borrowed funds owns an interest in
us, is related to the unitholder or can look only to the units for repayment. A
unitholder's at risk amount will increase or decrease as the tax basis of the
unitholder's units increases or decreases, other than tax basis increases or
decreases attributable to increases or decreases in his share of our
nonrecourse liabilities.

   The passive loss limitations generally provide that individuals, estates,
trusts and some closely-held corporations and personal service corporations can
deduct losses from passive activities, which are generally partnership or
corporate activities in which the taxpayer does not materially participate,
only to the extent of the taxpayer's income from those passive activities. The
passive loss limitations are applied separately with

                                      117

respect to each publicly-traded partnership. Consequently, any passive losses
we generate will only be available to offset our passive income generated in
the future and will not be available to offset income from other passive
activities or investments, including any dividend income we derive or from our
investments or investments in other publicly-traded partnerships, or salary or
active business income. Passive losses that are not deductible because they
exceed a unitholder's share of our income may be deducted in full when he
disposes of his entire investment in us in a fully taxable transaction with an
unrelated party. The passive activity loss rules are applied after other
applicable limitations on deductions, including the at risk rules and the basis
limitation.

   A unitholder's share of our net income may be offset by any suspended
passive losses, but it may not be offset by any other current or carryover
losses from other passive activities, including those attributable to other
publicly-traded partnerships.

   Limitations on Interest Deductions. The deductibility of a non-corporate
taxpayer's "investment interest expense" is generally limited to the amount of
that taxpayer's "net investment income." Investment interest expense includes:

  .  interest on indebtedness properly allocable to property held for
     investment;

  .  our interest expense attributed to portfolio income; and

  .  the portion of interest expense incurred to purchase or carry an
     interest in a passive activity to the extent attributable to portfolio
     income.

   The computation of a unitholder's investment interest expense will take into
account interest on any margin account borrowing or other loan incurred to
purchase or carry a unit.

   Net investment income includes gross income from property held for
investment and amounts treated as portfolio income under the passive loss
rules, less deductible expenses, other than interest, directly connected with
the production of investment income, but generally does not include gains
attributable to the disposition of property held for investment.

   The IRS has indicated that the net passive income earned by a publicly
traded partnership will be treated as investment income to its unitholders. In
addition, a unitholder's share of our portfolio income will be treated as
investment income.

   Entity-Level Collections. If we are required or elect under applicable law
to pay any federal, state, foreign or local income tax on behalf of any
unitholder or the non-managing general partner or any former unitholder, we are
authorized to pay those taxes from our funds. That payment, if made, will be
treated as a distribution of cash to the unitholder on whose behalf the payment
was made. If the payment is made on behalf of a person whose identity cannot be
determined, we are authorized to treat the payment as a distribution to all
current unitholders. We are authorized to amend the partnership agreement in
the manner necessary to maintain uniformity of intrinsic tax characteristics of
units and to adjust later distributions, so that after giving effect to these
distributions, the priority and characterization of distributions otherwise
applicable under the partnership agreement is maintained as nearly as is
practicable. Payments by us as described above could give rise to an
overpayment of tax on behalf of an individual unitholder in which event the
unitholder would be required to file a claim in order to obtain a credit or
refund.

   Allocation of Income, Gain, Loss and Deduction. In general, if we have a net
profit, our items of income, gain, loss and deduction will be allocated among
the non-managing general partner and the unitholders in accordance with their
percentage interests in us. At any time that distributions are made to the
common units in excess of distributions to the senior subordinated units or
junior subordinated units, or incentive distributions are made to Inergy
Holdings, gross income will be allocated to the recipients to the extent of
these distributions. If we have a net loss for the entire year, that loss will
be allocated first to the non-managing general partner and the unitholders in
accordance with their percentage interests in us to the extent of their
positive capital accounts and, second, to the non-managing general partner.

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   Specified items of our income, gain, loss and deduction will be allocated to
account for the difference between the tax basis and fair market value of
property contributed to us by the non-managing general partner and its
affiliates, referred to in this discussion as "Contributed Property." The
effect of these allocations to a unitholder purchasing common units will be
essentially the same as if the tax basis of our assets were equal to their fair
market value at the time of contribution. In addition, recapture income will be
allocated to the extent possible to the unitholder who was allocated the
deduction giving rise to the treatment of that gain as recapture income in
order to minimize the recognition of ordinary income by other unitholders.
Finally, although we do not expect that our operations will result in the
creation of negative capital accounts, if negative capital accounts
nevertheless result, our income and gain will be allocated in an amount and
manner to eliminate the negative balance as quickly as possible.

   An allocation of our income, gain, loss or deduction, other than an
allocation required by the Internal Revenue Code to eliminate the difference
between a partner's "book" capital account, credited with the fair market value
of Contributed Property, and "tax" capital account, credited with the tax basis
of Contributed Property, referred to in this discussion as the "Book-Tax
Disparity," will generally be given effect for federal income tax purposes in
determining a unitholder's share of an item of income, gain, loss or deduction
only if the allocation has substantial economic effect. In any other case, a
unitholder's share of an item will be determined on the basis of his interest
in us, which will be determined by taking into account all the facts and
circumstances, including his relative contributions to us, the interests of all
the unitholders in profits and losses, the interest of all the unitholders in
cash flow and other nonliquidating distributions and the rights of all the
unitholders to distributions of capital upon liquidation.

   Vinson & Elkins L.L.P. is of the opinion that, with the exception of the
issues described in "--Tax Consequences of Unit Ownership--Section 754
Election" and "--Disposition of Common Units--Allocations Between Transferors
and Transferees," allocations under our partnership agreement will be given
effect for federal income tax purposes in determining a unitholder's share of
our income, gain, loss or deduction.

   Treatment of Short Sales. A unitholder whose units are loaned to a "short
seller" to cover a short sale of units may be considered as having disposed of
those units. If so, he would no longer be a partner for tax purposes with
respect to those units during the period of the loan and may recognize gain or
loss from the disposition. As a result, during this period:

  .  any of our income, gain, loss or deduction with respect to those units
     would not be reportable by the unitholder,

  .  any cash distributions received by the unitholder as to those units
     would be fully taxable, and

  .  all of these distributions would appear to be ordinary income.

   Vinson & Elkins L.L.P. has not rendered an opinion regarding the treatment
of a unitholder whose common units are loaned to a short seller. Therefore,
unitholders desiring to assure their status as partners and avoid the risk of
gain recognition should modify any applicable brokerage account agreements to
prohibit their brokers from loaning their units. The IRS has announced that it
is studying issues relating to the tax treatment of short sales of partnership
interests. Please also read "--Disposition of Common Units--Recognition of Gain
or Loss."

   Alternative Minimum Tax. Each unitholder will be required to take into
account his share of any items of our income, gain, loss or deduction for
purposes of the alternative minimum tax. The current minimum tax rate for
noncorporate taxpayers is 26% on the first $175,000 of alternative minimum
taxable income in excess of the exemption amount and 28% on any additional
alternative minimum taxable income. Prospective unitholders are urged to
consult with their tax advisors as to the impact of an investment in units on
their liability for the alternative minimum tax.

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   Tax Rates. In general the highest effective United States federal income tax
rate for individuals for 2002 is 38.6% and the maximum United States federal
income tax rate for net capital gains of an individual for 2002 is 20% if the
asset disposed of was held for more than 12 months at the time of disposition.

   Section 754 Election. We have made the election permitted by Section 754 of
the Internal Revenue Code. That election is irrevocable without the consent of
the IRS. The election will generally permit us to adjust a common unit
purchaser's tax basis in our assets ("inside basis") under Section 743(b) of
the Internal Revenue Code to reflect his purchase price. The Section 743(b)
adjustment belongs to the purchaser and not to other unitholders. For purposes
of this discussion, a unitholder's inside basis in our assets will be
considered to have two components: (1) his share of our tax basis in our assets
("common basis") and (2) his Section 743(b) adjustment to that basis.

   Treasury regulations under Section 743 of the Internal Revenue Code require,
if the remedial allocation method is adopted (which we have adopted), a portion
of the Section 743(b) adjustment attributable to recovery property to be
depreciated over the remaining cost recovery period for the Section 704(c)
built-in gain. Under Treasury Regulation Section l.167(c)-l(a)(6), a Section
743(b) adjustment attributable to property subject to depreciation under
Section 167 of the Internal Revenue Code rather than cost recovery deductions
under Section 168 is generally required to be depreciated using either the
straight-line method or the 150% declining balance method. Under our
partnership agreement, the managing general partner is authorized to take a
position to preserve the uniformity of units even if that position is not
consistent with these Treasury Regulations. Please read "--Tax Treatment of
Operations--Uniformity of Units."

   Although Vinson & Elkins L.L.P. is unable to opine as to the validity of
this approach because there is no clear authority on this issue, we intend to
depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of Contributed Property, to the extent of
any unamortized Book-Tax Disparity, using a rate of depreciation or
amortization derived from the depreciation or amortization method and useful
life applied to the common basis of the property, or treat that portion as non-
amortizable to the extent attributable to property the common basis of which is
not amortizable. This method is consistent with the regulations under Section
743 but is arguably inconsistent with Treasury Regulation Section l.167(c)-
l(a)(6) which is not expected to directly apply to a material portion of our
assets. To the extent a Section 743(b) adjustment is attributable to
appreciation in value in excess of the unamortized Book-Tax Disparity, we will
apply the rules described in the Treasury Regulations and legislative history.
If we determine that this position cannot reasonably be taken, we may take a
depreciation or amortization position under which all purchasers acquiring
units in the same month would receive depreciation or amortization, whether
attributable to common basis or a Section 743(b) adjustment, based upon the
same applicable rate as if they had purchased a direct interest in our assets.
This kind of aggregate approach may result in lower annual depreciation or
amortization deductions than would otherwise be allowable to some unitholders.
Please read "--Tax Treatment of Operations--Uniformity of Units."

   A Section 754 election is advantageous if the transferee's tax basis in his
units is higher than the units' share of the aggregate tax basis of our assets
immediately prior to the transfer. In that case, as a result of the election,
the transferee would have, among other items, a greater amount of depreciation
and depletion deductions and his share of any gain or loss on a sale of our
assets would be less. Conversely, a Section 754 election is disadvantageous if
the transferee's tax basis in his units is lower than those units' share of the
aggregate tax basis of our assets immediately prior to the transfer. Thus, the
fair market value of the units may be affected either favorably or unfavorably
by the election.

   The calculations involved in the Section 754 election are complex and will
be made on the basis of assumptions as to the value of our assets and other
matters. For example, the allocation of the Section 743(b) adjustment among our
assets must be made in accordance with the Internal Revenue Code. The IRS could
seek to reallocate some or all of any Section 743(b) adjustment allocated by us
to our tangible assets to goodwill instead. Goodwill, as an intangible asset,
is generally amortizable over a longer period of time or under a less

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accelerated method than tangible assets. We cannot assure you that the
determinations we make will not be successfully challenged by the IRS and that
the deductions resulting from them may not be reduced or disallowed altogether.
Should the IRS require a different basis adjustment to be made, and should, in
our opinion, the expense of compliance exceed the benefit of the election, we
may seek permission from the IRS to revoke our Section 754 election. If
permission is granted, a subsequent purchaser of units may be allocated more
income than he would have been allocated had the election not been revoked.

Tax Treatment of Operations

   Accounting Method and Taxable Year. We use the year ending December 31 as
our taxable year and the accrual method of accounting for federal income tax
purposes. Each unitholder will be required to include in income his share of
our income, gain, loss and deduction for our taxable year ending within or with
his taxable year. In addition, a unitholder who has a taxable year ending on a
date other than December 31 and who disposes of all of his units following the
close of our taxable year but before the close of his taxable year must include
his share of our income, gain, loss and deduction in income for his taxable
year, with the result that he will be required to include in income for his
taxable year his share of more than one year of our income, gain, loss and
deduction. Please read "--Disposition of Common Units--Allocations Between
Transferors and Transferees."

   Initial Tax Basis, Depreciation and Amortization. The tax basis of our
assets is used for purposes of computing depreciation and cost recovery
deductions and, ultimately, gain or loss on the disposition of these assets.
The federal income tax burden associated with the difference between the fair
market value of our assets and their tax basis immediately prior to this
offering will be borne by the non-managing general partner, its affiliates and
the owners of units immediately prior to this offering. Please read "--
Allocation of Income, Gain, Loss and Deduction."

   To the extent allowable, we may elect to use the depreciation and cost
recovery methods that will result in the largest deductions being taken in the
early years after assets are placed in service. We will not take any
amortization deductions with respect to any goodwill conveyed to us on
formation. Property we subsequently acquire or construct may be depreciated
using accelerated methods permitted by the Internal Revenue Code.

   If we dispose of depreciable property by sale, foreclosure, or otherwise,
all or a portion of any gain, determined by reference to the amount of
depreciation previously deducted and the nature of the property, may be subject
to the recapture rules and taxed as ordinary income rather than capital gain.
Similarly, a unitholder who has taken cost recovery or depreciation deductions
with respect to property we own will likely be required to recapture some or
all of those deductions as ordinary income upon a sale of his interest in us.
Please read "--Tax Consequences of Unit Ownership--Allocation of Income, Gain,
Loss and Deduction" and "--Disposition of Common Units--Recognition of Gain or
Loss."

   The costs incurred in selling our units (called "syndication expenses") must
be capitalized and cannot be deducted currently, ratably or upon termination of
Inergy, L.P. There are uncertainties regarding the classification of costs as
organization expenses, which may be amortized by us, and as syndication
expenses, which may not be amortized by us. The underwriting discounts and
commissions we incur will be treated as syndication expenses.

   Valuation and Tax Basis of Our Properties. The federal income tax
consequences of the ownership and disposition of units will depend in part on
our estimates of the relative fair market values, and determination of the
initial tax basis, of our assets. Although we may from time to time consult
with professional appraisers regarding valuation matters, we will make many of
the relative fair market value estimates ourselves. These estimates, and
determination of basis, are subject to challenge and will not be binding on the
IRS or the courts. If the estimates of fair market value are later found to be
incorrect, the character and amount of items of income, gain, loss or
deductions previously reported by unitholders might change, and unitholders
might be required to adjust their tax liability for prior years and incur
interest and penalties with respect to those adjustments.

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Disposition of Common Units

   Recognition of Gain or Loss. Gain or loss will be recognized on a sale of
units equal to the difference between the amount realized and the unitholder's
tax basis for the units sold. A unitholder's amount realized will be measured
by the sum of the cash or the fair market value of other property received
plus his share of our nonrecourse liabilities. Because the amount realized
includes a unitholder's share of our nonrecourse liabilities, the gain
recognized on the sale of units could result in a tax liability in excess of
any cash received from the sale. We do not currently have any nonrecourse
liabilities.

   Prior distributions from us in excess of cumulative net taxable income for
a common unit that decreased a unitholder's tax basis in that common unit
will, in effect, become taxable income if the common unit is sold at a price
greater than the unitholder's tax basis in that common unit, even if the price
is less than his original cost.

   Except as noted below, gain or loss recognized by a unitholder, other than
a "dealer" in units, on the sale or exchange of a unit held for more than one
year will generally be taxable as capital gain or loss. Capital gain
recognized by an individual on the sale of units held more than 12 months will
generally be taxed at a maximum rate of 20%. A portion of this gain or loss,
which will likely be substantial, however, will be separately computed and
taxed as ordinary income or loss under Section 751 of the Internal Revenue
Code to the extent attributable to Section 751 Assets. Ordinary income
attributable to Section 751 Assets may exceed net taxable gain realized upon
the sale of a unit and may be recognized even if there is a net taxable loss
realized on the sale of a unit. Thus, a unitholder may recognize both ordinary
income and a capital loss upon a sale of units. Net capital loss may offset
capital gains and no more than $3,000 of ordinary income, in the case of
individuals, and may only be used to offset capital gain in the case of
corporations.

   The IRS has ruled that a partner who acquires interests in a partnership in
separate transactions must combine those interests and maintain a single
adjusted tax basis for all those interests. Upon a sale or other disposition
of less than all of those interests, a portion of that tax basis must be
allocated to the interests sold using an "equitable apportionment" method.
Treasury regulations under Section 1223 of the Internal Revenue Code allow a
selling unitholder who can identify common units transferred with an
ascertainable holding period to elect to use the actual holding period of the
common units transferred. Thus, according to the ruling, a common unitholder
will be unable to select high or low basis common units to sell as would be
the case with corporate stock, but, under the Treasury regulations, can
designate specific common units sold for purposes of determining the holding
period of the units sold. A unitholder electing to use the actual holding
period of common units transferred must consistently use that identification
method for all subsequent sales or exchanges of common units. A unitholder
considering the purchase of additional units or a sale of common units
purchased in separate transactions is urged to consult his tax advisor as to
the possible consequences of this ruling and application of the regulations.

   Specific provisions of the Internal Revenue Code affect the taxation of
some financial products and securities, including partnership interests such
as our units, by treating a taxpayer as having sold an "appreciated"
partnership interest, one in which gain would be recognized if it were sold,
assigned or terminated at its fair market value, if the taxpayer or related
persons enter(s) into:

  . a short sale,

   .an offsetting notional principal contract, or

   .a futures or forward contract with respect to the partnership interest or
substantially identical property.

   Moreover, if a taxpayer has previously entered into a short sale, an
offsetting notional principal contract or a futures or forward contract with
respect to the partnership interest, the taxpayer will be treated as having
sold that position if the taxpayer or a related person then acquires the
partnership interest or substantially identical property. The Secretary of
Treasury is also authorized to issue regulations that treat a taxpayer that
enters into

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transactions or positions that have substantially the same effect as the
preceding transactions as having constructively sold the financial position.

   Allocations Between Transferors and Transferees. In general, our taxable
income and losses will be determined annually, will be prorated on a monthly
basis and will be subsequently apportioned among the unitholders in proportion
to the number of units owned by each of them as of the opening of the
applicable exchange on the first business day of the month (the "Allocation
Date"). However, gain or loss realized on a sale or other disposition of our
assets other than in the ordinary course of business will be allocated among
the unitholders on the Allocation Date in the month in which that gain or loss
is recognized. As a result, a unitholder transferring units may be allocated
income, gain, loss and deduction realized after the date of transfer.

   The use of this method may not be permitted under existing Treasury
Regulations. Accordingly, Vinson & Elkins L.L.P. is unable to opine on the
validity of this method of allocating income and deductions between the
transferors and transferees of units. If this method is not allowed under the
Treasury Regulations or only applies to transfers of less than all of the
unitholder's interest, our taxable income or losses might be reallocated among
the unitholders. We are authorized to revise our method of allocation between
transferors and transferees, as well as among, unitholders whose interest
otherwise vary during a taxable period, to conform to a method which is
permitted.

   A unitholder who owns units at any time during a quarter and who disposes of
them prior to the record date set for a cash distribution for that quarter will
be allocated a share of our income, gain, loss and deductions attributable to
that quarter but will not be entitled to receive that cash distribution.

   Notification Requirements. A unitholder who sells or exchanges units is
required to notify us in writing of that sale or exchange within 30 days after
the sale or exchange. We are required to notify the IRS of that transaction and
to furnish specified information to the transferor and transferee. However,
these reporting requirements do not apply to a sale by an individual who is a
citizen of the United States and who effects the sale or exchange through a
broker. Failure to notify us of a purchase may lead to the imposition of
substantial penalties.

   Constructive Termination. We will be considered to have been terminated for
tax purposes if there is a sale or exchange of 50% or more of the total
interests in our capital and profits within a 12-month period. A constructive
termination results in the closing of our taxable year for all unitholders. In
the case of a unitholder reporting on a taxable year other than a fiscal year
ending December 31, the closing of our taxable year may result in more than 12
months of our taxable income or loss being includable in his taxable income for
the year of termination. We would be required to make new tax elections after a
termination, including a new election under Section 754 of the Internal Revenue
Code, and a termination would result in a deferral of any deductions for
depreciation. A termination could also result in penalties if we were unable to
determine that the termination had occurred. Moreover, a termination might
either accelerate the application of, or subject us to, any tax legislation
enacted before the termination.

Uniformity of Units

   Because we cannot match transferors and transferees of units, we must
maintain uniformity of the economic and tax characteristics of the units to a
purchaser of these units. In the absence of uniformity, we may be unable to
completely comply with a number of federal income tax requirements, both
statutory and regulatory. A lack of uniformity can result from a literal
application of Treasury Regulation Section l.167(c)-l(a)(6). Any non-uniformity
could have a negative impact on the value of the units. Please read "--Tax
Consequences of Unit Ownership--Section 754 Election."

   We depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of Contributed Property, to the extent of
any unamortized Book-Tax Disparity, using a rate of

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depreciation or amortization derived from the depreciation or amortization
method and useful life applied to the common basis of that property, or treat
that portion as nonamortizable, to the extent attributable to property the
common basis of which is not amortizable. This method is consistent with the
regulations under Section 743, but is arguably inconsistent with Treasury
Regulation Section l.167(c)-l(a)(6) which is not expected to directly apply to
a material portion of our assets. Please read "--Tax Consequences of Unit
Ownership--Section 754 Election." To the extent that the Section 743(b)
adjustment is attributable to appreciation in value in excess of the
unamortized Book-Tax Disparity, we apply the rules described in the Treasury
Regulations and legislative history. If we determine that this position cannot
reasonably be taken, we may adopt a depreciation and amortization position
under which all purchasers acquiring units in the same month would receive
depreciation and amortization deductions, whether attributable to a common
basis or Section 743(b) adjustment, based upon the same applicable rate as if
they had purchased a direct interest in our property. If this position is
adopted, it may result in lower annual depreciation and amortization deductions
than would otherwise be allowable to some unitholders and risk the loss of
depreciation and amortization deductions not taken in the year that these
deductions are otherwise allowable. This position will not be adopted if we
determine that the loss of depreciation and amortization deductions will have a
material adverse effect on the unitholders. If we choose not to utilize this
aggregate method, we may use any other reasonable depreciation and amortization
method to preserve the uniformity of the intrinsic tax characteristics of any
units that would not have a material adverse effect on the unitholders. The IRS
may challenge any method of depreciating the Section 743(b) adjustment
described in this paragraph. If this challenge were sustained, the uniformity
of units might be affected, and the gain from the sale of units might be
increased without the benefit of additional deductions. Please read "--
Disposition of Common Units--Recognition of Gain or Loss."

Tax-Exempt Organizations and Other Investors

   Ownership of units by employee benefit plans, other tax-exempt
organizations, non-resident aliens, foreign corporations, other non-U.S.
persons and regulated investment companies (mutual funds) raises issues unique
to those investors and, as described below, may have substantially adverse tax
consequences to them. Employee benefit plans and most other organizations
exempt from federal income tax, including individual retirement accounts and
other retirement plans, are subject to federal income tax on unrelated business
taxable income. Virtually all of our income allocated to a unitholder which is
a tax-exempt organization will be unrelated business taxable income and will be
taxable to them.

   A regulated investment company or "mutual fund" is required to derive 90% or
more of its gross income from interest, dividends and gains from the sale of
stocks or securities or foreign currency or specified related sources. It is
not anticipated that any significant amount of our gross income will include
that type of income.

   Non-resident aliens and foreign corporations, trusts or estates that own
units will be considered to be engaged in business in the United States because
of the ownership of units. As a consequence they will be required to file
federal tax returns to report their share of our income, gain, loss or
deduction and pay federal income tax at regular rates on their share of our net
income or gain. Under rules applicable to publicly traded partnerships, we will
withhold at the highest marginal tax rate applicable to individuals on cash
distributions made quarterly to foreign unitholders. Each foreign unitholder
must obtain a taxpayer identification number from the IRS and submit that
number to our transfer agent on a Form W-8 BEN or applicable substitute form in
order to obtain credit for these withholding taxes. A change in applicable law
may require us to change these procedures.

   In addition, because a foreign corporation that owns units will be treated
as engaged in a United States trade or business, that corporation may be
subject to the United States branch profits tax at a rate of 30%, in addition
to regular federal income tax, on its share of our income and gain, as adjusted
for changes in the foreign corporation's "U.S. net equity," which are
effectively connected with the conduct of a United States trade or business.
That tax may be reduced or eliminated by an income tax treaty between the
United States and the country in which the foreign corporate unitholder is a
"qualified resident." In addition, this type of

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unitholder is subject to special information reporting requirements under
Section 6038C of the Internal Revenue Code.

   Under a ruling of the IRS, a foreign unitholder who sells or otherwise
disposes of a unit will be subject to federal income tax on gain realized on
the sale or disposition of that unit to the extent that this gain is
effectively connected with a United States trade or business of the foreign
unitholder. Apart from the ruling, a foreign unitholder will not be taxed or
subject to withholding upon the sale or disposition of a unit if he has owned
less than 5% in value of the units during the five-year period ending on the
date of the disposition and if the units are regularly traded on an
established securities market at the time of the sale or disposition.

Administrative Matters

   Information Returns and Audit Procedures. We intend to furnish to each
unitholder, within 90 days after the close of each calendar year, specific tax
information, including a Schedule K-l, which describes his share of our
income, gain, loss and deduction for our preceding taxable year. In preparing
this information, which will not be reviewed by counsel, we will take various
accounting and reporting positions, some of which have been mentioned earlier,
to determine the unitholders share of income, gain, loss and deduction. We
cannot assure you that those positions will yield a result that conforms to
the requirements of the Internal Revenue Code, Treasury Regulations or
administrative interpretations of the IRS. Neither we nor Vinson & Elkins
L.L.P. can assure prospective unitholders that the IRS will not successfully
contend in court that those positions are impermissible. Any challenge by the
IRS could negatively affect the value of the units.

   The IRS may audit our federal income tax information returns. Adjustments
resulting from an IRS audit may require each unitholder to adjust a prior
year's tax liability, and possibly may result in an audit of that unitholder's
own return. Any audit of a unitholder's return could result in adjustments not
related to our returns as well as those related to our returns.

   Partnerships generally are treated as separate entities for purposes of
federal tax audits, judicial review of administrative adjustments by the IRS
and tax settlement proceedings. The tax treatment of partnership items of
income, gain, loss and deduction are determined in a partnership proceeding
rather than in separate proceedings with the partners. The Internal Revenue
Code requires that one partner be designated as the "Tax Matters Partner" for
these purposes. The partnership agreement names Inergy GP, LLC as our Tax
Matters Partner.

   The Tax Matters Partner has made and will make some elections on our behalf
and on behalf of unitholders. In addition, the Tax Matters Partner can extend
the statute of limitations for assessment of tax deficiencies against
unitholders for items in our returns. The Tax Matters Partner may bind a
unitholder with less than a 1% profits interest in us to a settlement with the
IRS unless that unitholder elects, by filing a statement with the IRS, not to
give that authority to the Tax Matters Partner. The Tax Matters Partner may
seek judicial review, by which all the unitholders are bound, of a final
partnership administrative adjustment and, if the Tax Matters Partner fails to
seek judicial review, judicial review may be sought by any unitholder having
at least a 1% interest in profits or by any group of unitholders having in the
aggregate at least a 5% interest in profits. However, only one action for
judicial review will go forward, and each unitholder with an interest in the
outcome may participate.

   A unitholder must file a statement with the IRS identifying the treatment
of any item on his federal income tax return that is not consistent with the
treatment of the item on our return. Intentional or negligent disregard of
this consistency requirement may subject a unitholder to substantial
penalties.

   Nominee Reporting. Persons who hold an interest in us as a nominee for
another person are required to furnish to us:

     (a) the name, address and taxpayer identification number of the
  beneficial owner and the nominee;

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     (b) whether the beneficial owner is:

       (1) a person that is not a United States person,

       (2) a foreign government, an international organization or any wholly
    owned agency or instrumentality of either of the foregoing, or

       (3) a tax-exempt entity;

     (c) the amount and description of units held, acquired or transferred
  for the beneficial owner; and

     (d) specific information including the dates of acquisitions and
  transfers, means of acquisitions and transfers, and acquisition cost for
  purchases, as well as the amount of net proceeds from sales.

   Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and specific
information on units they acquire, hold or transfer for their own account. A
penalty of $50 per failure, up to a maximum of $100,000 per calendar year, is
imposed by the Internal Revenue Code for failure to report that information to
us. The nominee is required to supply the beneficial owner of the units with
the information furnished to us.

   Registration as a Tax Shelter. The Internal Revenue Code requires that "tax
shelters" be registered with the Secretary of the Treasury. The temporary
Treasury Regulations interpreting the tax shelter registration provisions of
the Internal Revenue Code are extremely broad. It is arguable that we are not
subject to the registration requirement on the basis that we will not
constitute a tax shelter. However, we have registered as a tax shelter with
the Secretary of Treasury in the absence of assurance that we will not be
subject to tax shelter registration and in light of the substantial penalties
which might be imposed if registration is required and not undertaken.

   Our tax shelter registration number is 01204000001. A unitholder who sells
or otherwise transfers a unit in a later transaction must furnish the
registration number to the transferee. The penalty for failure of the
transferor of a unit to furnish the registration number to the transferee is
$100 for each failure. The unitholders must disclose our tax shelter
registration number on Form 8271 to be attached to the tax return on which any
deduction, loss or other benefit we generate is claimed or on which any of our
income is included. A unitholder who fails to disclose the tax shelter
registration number on his return, without reasonable cause for that failure,
will be subject to a $250 penalty for that failure. Any penalties discussed
are not deductible for federal income tax purposes.

   Issuance of this registration number does not indicate that investment in
us or the claimed tax benefits have been reviewed, examined or approved by the
IRS.

   Accuracy-related Penalties. An additional tax equal to 20% of the amount of
any portion of an underpayment of tax that is attributable to one or more
specified causes, including negligence or disregard of rules or regulations,
substantial understatements of income tax and substantial valuation
misstatements, is imposed by the Internal Revenue Code. No penalty will be
imposed, however, for any portion of an underpayment if it is shown that there
was a reasonable cause for that portion and that the taxpayer acted in good
faith regarding that portion.

   A substantial understatement of income tax in any taxable year exists if
the amount of the understatement exceeds the greater of 10% of the tax
required to be shown on the return for the taxable year or $5,000 ($10,000 for
most corporations). The amount of any understatement subject to penalty
generally is reduced if any portion is attributable to a position adopted on
the return:

     (1) for which there is, or was, "substantial authority"; or

     (2) as to which there is a reasonable basis and the pertinent facts of
  that position are disclosed on the return.

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   More stringent rules apply to "tax shelters," a term that in this context
does not appear to include us. If any item of income, gain, loss or deduction
included in the distributive shares of unitholders might result in that kind of
an "understatement" of income for which no "substantial authority" exists, we
must disclose the pertinent facts on our return. In addition, we will make a
reasonable effort to furnish sufficient information for unitholders to make
adequate disclosure on their returns to avoid liability for this penalty.

   A substantial valuation misstatement exists if the value of any property, or
the adjusted basis of any property, claimed on a tax return is 200% or more of
the amount determined to be the correct amount of the valuation or adjusted
basis. No penalty is imposed unless the portion of the underpayment
attributable to a substantial valuation misstatement exceeds $5,000 ($10,000
for most corporations). If the valuation claimed on a return is 400% or more
than the correct valuation, the penalty imposed increases to 40%.

State, Local and Other Tax Considerations

   In addition to federal income taxes, you will be subject to other taxes,
including state and local income taxes, unincorporated business taxes, and
estate, inheritance or intangible taxes that may be imposed by the various
jurisdictions in which we do business or own property. Although an analysis of
those various taxes is not presented here, each prospective unitholder is urged
to consider their potential impact on his investment in us. We presently
anticipate that substantially all of our income will be generated in the
following states: Arkansas, Florida, Georgia, Illinois, Indiana, Michigan,
North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin.
Each of these states, except Florida and Texas, currently imposes a personal
income tax. A unitholder will likely be required to file state income tax
returns and to pay state income taxes in these states and may be subject to
penalties for failure to comply with these requirements. In some states, tax
losses may not produce a tax benefit in the year incurred and also may not be
available to offset income in subsequent taxable years. Some of the states may
require us, or we may elect, to withhold a percentage of income from amounts to
be distributed to a unitholder who is not a resident of the state. Withholding,
the amount of which may be greater or less than a particular unitholder's
income tax liability to the state, generally does not relieve a nonresident
unitholder from the obligation to file an income tax return. Amounts withheld
may be treated as if distributed to unitholders for purposes of determining the
amounts distributed by us. Please read "--Tax Consequences of Unit Ownership--
Entity-Level Collections." Based on current law and our estimate of our future
operations, the managing general partner anticipates that any amounts required
to be withheld will not be material. We may also own property or do business in
other states in the future.

   It is the responsibility of each unitholder to investigate the legal and tax
consequences, under the laws of pertinent states and localities, of his
investment in us. Accordingly, each prospective unitholder should consult, and
must depend upon, his own tax counsel or other advisor with regard to those
matters. Further, it is the responsibility of each unitholder to file all state
and local, as well as federal tax returns, that may be required of him. Vinson
& Elkins L.L.P. has not rendered an opinion on the state or local tax
consequences of an investment in us.

                                      127

              INVESTMENT IN INERGY, L.P. BY EMPLOYEE BENEFIT PLANS

   An investment in us by an employee benefit plan is subject to additional
considerations because the investments of these plans are subject to the
fiduciary responsibility and prohibited transaction provisions of ERISA, and
restrictions imposed by Section 4975 of the Internal Revenue Code. For these
purposes the term "employee benefit plan" includes, but is not limited to,
qualified pension, profit-sharing and stock bonus plans, Keogh plans,
simplified employee pension plans and tax deferred annuities or IRAs
established or maintained by an employer or employee organization. Among other
things, consideration should be given to:

     (a) whether the investment is prudent under Section 404(a)(1)(B) of
  ERISA,

     (b) whether in making the investment, that plan will satisfy the
  diversification requirements of Section 404(a)(1)(C) of ERISA, and

     (c) whether the investment will result in recognition of unrelated
  business taxable income by the plan and, if so, the potential after-tax
  investment return.

   The person with investment discretion with respect to the assets of an
employee benefit plan, often called a fiduciary, should determine whether an
investment in us is authorized by the appropriate governing instrument and is a
proper investment for the plan.

   Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit
employee benefit plans, and also IRAs that are not considered part of an
employee benefit plan, from engaging in specified transactions involving "plan
assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Internal Revenue Code with respect to the
plan.

   In addition to considering whether the purchase of common units is a
prohibited transaction, a fiduciary of an employee benefit plan should consider
whether the plan will, by investing in us, be deemed to own an undivided
interest in our assets, with the result that the managing general partner also
would be a fiduciary of the plan and our operations would be subject to the
regulatory restrictions of ERISA, including its prohibited transaction rules,
as well as the prohibited transaction rules of the Internal Revenue Code.

   The Department of Labor regulations provide guidance with respect to whether
the assets of an entity in which employee benefit plans acquire equity
interests would be deemed "plan assets" under some circumstances. Under these
regulations, an entity's assets would not be considered to be "plan assets" if,
among other things,

     (a) the equity interests acquired by employee benefit plans are publicly
  offered securities; i.e., the equity interests are widely held by 100 or
  more investors independent of the issuer and each other, freely
  transferable and registered under some provisions of the federal securities
  laws,

     (b) the entity is an "operating company," i.e., it is primarily engaged
  in the production or sale of a product or service other than the investment
  of capital either directly or through a majority owned subsidiary or
  subsidiaries, or

     (c) there is no significant investment by benefit plan investors, which
  is defined to mean that less than 25% of the value of each class of equity
  interest, disregarding some interests held by the managing general partner,
  its affiliates, and some other persons, is held by the employee benefit
  plans referred to above, IRAs and other employee benefit plans not subject
  to ERISA, including governmental plans.

   Our assets should not be considered "plan assets" under these regulations
because it is expected that the investment will satisfy the requirements in (a)
above.

   Plan fiduciaries contemplating a purchase of common units should consult
with their own counsel regarding the consequences under ERISA and the Internal
Revenue Code in light of the serious penalties imposed on persons who engage in
prohibited transactions or other violations.

                                      128

                                  UNDERWRITING

   Subject to the terms and conditions of the underwriting agreement among us,
the selling unitholders and the underwriter, the underwriter has agreed to
purchase from us and the selling unitholders the following number of common
units at the offering price less the underwriting discount set forth on the
cover page of this prospectus.

                                                                     Number of
                            Underwriter                             Common Units
                            -----------                             ------------
                                                                 
A.G. Edwards & Sons, Inc. .........................................  1,400,000

   The underwriting agreement provides that the obligations of the underwriter
are subject to certain conditions and that the underwriter will purchase all
such common units if any of the units are purchased. The underwriter is
obligated to take and pay for all of the common units offered hereby, other
than those covered by the over-allotment option described below, if any are
taken.

   The underwriter has advised us that it proposes to offer the common units to
the public at the offering price set forth on the cover page of this prospectus
and to certain dealers at such price less a concession not in excess of $   per
unit. The underwriter may allow, and such dealers may re-allow, a concession
not in excess of $   per unit to certain other dealers. After the offering, the
offering price and other selling terms may be changed by the underwriter.

   Pursuant to the underwriting agreement, we have granted to the underwriter
an option, exercisable for 30 days after the date of this prospectus, to
purchase up to 210,000 additional common units at the offering price, less the
underwriting discount set forth on the cover page of this prospectus, solely to
cover over-allotments.

   To the extent the underwriter exercises such option, the underwriter will
become obligated, subject to certain conditions, to purchase the additional
units, and we will be obligated, pursuant to the option, to sell such units to
the underwriter.

   Inergy, L.P., New Inergy Propane, LLC, the general partners and certain
other affiliates have agreed that during the 90 days after the date of this
prospectus, they will not, without the prior written consent of the
underwriter, directly or indirectly, offer for sale, contract to sell, sell,
distribute, grant any option, right or warrant to purchase, pledge, hypothecate
or otherwise dispose of any common units, any securities convertible into, or
exercisable or exchangeable for, common units or any other rights to acquire
such common units, other than pursuant to employee benefit plans as in
existence as of the date of this prospectus.

   The underwriter may, in its sole discretion, allow any of these parties to
offer for sale, contract to sell, sell, distribute, grant any option, right or
warrant to purchase, pledge, hypothecate or otherwise dispose of any common
units, any securities convertible into, or exercisable or exchangeable for,
common units or any other rights to acquire such common units prior to the
expiration of such 90-day period in whole or in part at anytime without notice.
There are, however, no agreements between the underwriter and these parties
that would allow them to do so as of the date of this prospectus. The
underwriter has informed us that in the event that consent to a waiver of these
restrictions is requested by us or any other person, the underwriter, in
deciding whether to grant its consent, will consider, among other factors, the
unitholder's reasons for requesting the release, the number of units for which
the release is being requested, and market conditions at the time of the
request for such release. However, the underwriter has informed us that as of
the date of this prospectus there

                                      129

are no agreements between the underwriter and any party that would allow such
party to transfer any common units, nor does it have any intention of releasing
any of the common units subject to the lock-up agreements prior to the
expiration of the lock-up period at this time.

   The following table summarizes the discounts that Inergy, L.P. and the
selling unitholders will pay to the underwriter in this offering. These amounts
assume both no exercise and full exercise of the underwriter's option to
purchase additional common units.

                                                       No Exercise Full Exercise
                                                       ----------- -------------
                                                             
Per Unit..............................................     $            $
Total.................................................     $            $

   We expect to incur expenses of approximately $1.2 million in connection with
this offering.

   Inergy, L.P., New Inergy Propane, LLC, the general partners and certain
other affiliates and the selling unitholders have agreed to indemnify the
underwriter against certain liabilities, including liabilities under the
Securities Act.

   In connection with this offering, the underwriter may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

  .  Stabilizing transactions permit bids to purchase the underlying security
     so long as the stabilizing bids do not exceed a specified maximum.

  .  Over-allotment transactions involve sales by the underwriter of the
     common units in excess of the number of units the underwriter is
     obligated to purchase, which creates a syndicate short position. The
     short position may be either a covered short position or a naked short
     position. In a covered short position, the number of units over-allotted
     by the underwriter is not greater than the number of units it may
     purchase in the over-allotment option. In a naked short position, the
     number of units involved is greater than the number of units in the
     over- allotment option. The underwriter may close out any short position
     by either exercising its over-allotment option and/or purchasing common
     units in the open market.

  .  Syndicate covering transactions involve purchases of the common units in
     the open market after the distribution has been completed in order to
     cover syndicate short positions. In determining the source of the common
     units to close out the short position, the underwriter will consider,
     among other things, the price of common units available for purchase in
     the open market as compared to the price at which it may purchase common
     units through the over-allotment option. If the underwriter sells more
     common units than could be covered by the over-allotment option, a naked
     short position, the position can only be closed out by buying common
     units in the open market. A naked short position is more likely to be
     created if the underwriter is concerned that there could be downward
     pressure on the price of the common units in the open market after
     pricing that could adversely affect investors who purchase in the
     offering.

  .  Penalty bids permit the underwriter to reclaim a selling concession from
     a syndicate member when the common units originally sold by the
     syndicate member are purchased in a stabilizing or syndicate covering
     transaction to cover syndicate short positions.

   Similar to other purchase transactions, the underwriter's purchase to cover
the syndicate short sales may have the effect of raising or maintaining the
market price of the common units or preventing or retarding a decline in the
market price of the common units. As a result, the price of the common units
may be higher than the price that might otherwise exist in the open market.

                                      130

   The underwriter will deliver a prospectus to all purchasers of common units
in the short sales. The purchasers of common units in short sales are entitled
to the same remedies under the federal securities laws as any other purchaser
of common units covered by this prospectus.

   The underwriter is not obligated to engage in any of the transactions
described above. If it does engage in any of these transactions, it may
discontinue them at any time.

   Neither Inergy, L.P. nor the underwriter make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common units. In addition, neither
Inergy, L.P. nor the underwriter make any representation that the underwriter
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.

   Because the National Association for Securities Dealers, Inc. views the
common units offered hereby as interests in a direct participation program, the
offering is being made in compliance with Rule 2810 of the NASD's Conduct
Rules. Investor suitability with respect to the common units should be judged
similarly to the suitability with respect to other securities that are listed
for trading on a national securities exchange.

   A.G. Edwards served as one of the underwriters in our initial public
offering that closed on July 31, 2001. Additionally, A.G. Edwards has provided
financial advisory services to Inergy, L.P. and Inergy Partners, L.L.C. for
which it received customary compensation. A.G. Edwards may, from time to time,
engage in transactions with and perform services for us in the ordinary course
of its business.

                          VALIDITY OF THE COMMON UNITS

   The validity of the common units will be passed upon for us by Vinson &
Elkins L.L.P., Houston, Texas. Certain legal matters in connection with the
common units offered hereby will be passed upon for the underwriter by Baker
Botts L.L.P., Houston, Texas.

                                    EXPERTS

   Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of Inergy, L.P. and Subsidiary (successor to Inergy
Partners, LLC and subsidiaries) at September 30, 2000 and 2001, and for each of
the three years in the period ended September 30, 2001, the combined financial
statements of the Hoosier Propane Group at September 30, 1999 and 2000 and
December 31, 2000, and for each of the three years in the period ended
September 30, 2000 and the three months ended December 31, 2000 and the balance
sheet of Inergy GP, LLC at September 30, 2001, as set forth in their reports.
We have included these financial statements in the prospectus and elsewhere in
the registration statement in reliance on Ernst & Young LLP's reports, given on
their authority as experts in accounting and auditing.

   Arthur Andersen LLP, independent auditors, have audited the consolidated
financial statements of Independent Propane Company Holdings at September 30,
2000 and 2001, and for each of the three years in the period ended September
30, 2001, as set forth in their report. We have included these financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Arthur Andersen LLP's report, given on their authority as experts
in accounting and auditing.

                                 OTHER MATTERS

   Arthur Andersen LLP, the independent public accountants for IPC, provided us
with an audit report with respect to IPC's financial statements contained in
this prospectus. Arthur Andersen LLP is the subject of litigation and was
indicted with respect to its activities in connection with Enron Corp. Arthur
Andersen LLP may fail, may merge with or have its assets sold to a third party,
may lose critical personnel or may seek protection from creditors. In the event
that Arthur Andersen LLP fails, does not otherwise continue in business or
seeks protection from creditors, it may become difficult for you to seek
remedies against Arthur Andersen LLP for material misstatements or omissions,
if any, in the registration statement, including the financial statements
covered by their report.

                                      131

                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 regarding the common units. This prospectus does not
contain all of the information found in the registration statement. For further
information regarding Inergy and the common units offer by this prospectus, you
may desire to review the full registration statement, including its exhibits
and schedules, filed under the Securities Act of 1933. The registration
statement of which this prospectus forms a part, including its exhibits and
schedules, may be inspected and copied at the public reference room maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
of the materials may also be obtained from the SEC at prescribed rates by
writing to the public reference room maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the public reference room by calling the SEC at
l-800-SEC-0330.

   The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov. Our registration statement, of which this prospectus
constitutes a part, can be downloaded from the SEC's web site.

   We furnish our unitholders with annual reports containing our audited
financial statements and furnish or make available quarterly reports containing
our unaudited interim financial information for the first three fiscal quarters
of each fiscal year.

                           FORWARD-LOOKING STATEMENTS

   Some of the information in this prospectus may contain forward-looking
statements. All statements other than statements of historical fact are
forward-looking statements. These statements can be identified by the use of
forward-looking terminology including "may," "believe," "will," "expect,"
"anticipate," "estimate," "continue" or other similar words. These statements
discuss future expectations, contain projections of results of operations or of
financial condition or state other "forward-looking" information. These
forward-looking statements involve risks and uncertainties. When considering
these forward-looking statements, you should keep in mind the risk factors and
other cautionary statements in this prospectus. Specific factors could cause
our actual results to differ materially from those contained in any forward-
looking statement. These factors include, but are not limited to:

  . the effect of weather conditions on demand for propane;

  . the price volatility and availability of propane;

  . the availability of capacity to transport propane to market areas and our
    customers;

  . competition from other energy sources and within the propane industry;

  . improvements in energy efficiency and technology trends resulting in
    reduced demand for propane;

  . our ability to achieve expected operating cost savings, synergies and
    productivity improvements from the integration of the propane
    distribution businesses we acquire, including Independent Propane Company
    Holdings;

  . our inability to make business acquisitions on economically acceptable
    terms;

  . our ability to obtain new customers and retain existing customers;

  . operating hazards and risks incidental to transporting, storing and
    distributing propane and related products, including the risk of
    explosions and fires resulting in personal injury and property damage;

  . liability for environmental claims;

  . adverse labor relations;

                                      132

  . governmental legislation and regulation;

  . the condition of the capital markets in the United States; and

  . the political and economic stability of oil producing nations of the
    world.

   When considering our forward-looking statements, you should keep in mind the
risk factors described in the "Risk Factors" section of this prospectus. These
risk factors could cause our actual results to differ materially from those
contained in any forward-looking statement. We will not update our forward-
looking statements unless applicable securities laws require us to do so.

                                      133

                         INDEX TO FINANCIAL STATEMENTS

                                                                        
Inergy, L.P. and Subsidiary (Successor to Inergy Partners, LLC and
 Subsidiaries) Consolidated Financial Statements:
  Report of Independent Auditors..........................................  F-2
  Consolidated Balance Sheets as of September 30, 2000 and 2001 and March
   31, 2002 (unaudited)...................................................  F-3
  Consolidated Statements of Operations for the years ended September 30,
   1999, 2000 and 2001 and the six months ended March 31, 2001 and 2002
   (unaudited)............................................................  F-4
  Consolidated Statements of Redeemable Preferred Members' Interest and
   Members' Equity/Partners' Capital for the years ended September 30,
   1999, 2000 and 2001 and the six months ended March 31, 2002
   (unaudited)............................................................  F-6
  Consolidated Statements of Cash Flows for the years ended September 30,
   1999, 2000 and 2001 and the six months ended March 31, 2001 and 2002
   (unaudited)............................................................  F-9
  Notes to Consolidated Financial Statements.............................. F-11

Independent Propane Company Holdings and Subsidiaries Consolidated
 Financial Statements:
  Report of Independent Public Accountants................................ F-28
  Consolidated Balance Sheets as of September 30, 2000 and 2001........... F-29
  Consolidated Statements of Operations for the years ended September 30,
   1999, 2000 and 2001.................................................... F-30
  Consolidated Statements of Changes in Shareholders' Deficit for the
   years ended September 30, 1999, 2000 and 2001.......................... F-31
  Consolidated Statements of Cash Flows for the years ended September 30,
   1999, 2000 and 2001.................................................... F-32
  Notes to Consolidated Financial Statements.............................. F-33

Hoosier Propane Group Combined Financial Statements:
  Report of Independent Auditors.......................................... F-41
  Combined Balance Sheets as of September 30, 1999 and 2000 and December
   31, 2000............................................................... F-42
  Combined Statements of Income for the years ended September 30, 1998,
   1999 and 2000 and the three months ended December 31, 1999 (unaudited)
   and 2000............................................................... F-43
  Combined Statements of Stockholders' Equity for the years ended
   September 30, 1998, 1999 and 2000 and the three months ended December
   31, 2000............................................................... F-44
  Combined Statements of Cash Flows for the years ended September 30,
   1998, 1999 and 2000 and the three months ended December 31, 1999
   (unaudited) and 2000................................................... F-45
  Notes to Combined Financial Statements.................................. F-46

Inergy GP, LLC Financial Statements:
  Report of Independent Auditors.......................................... F-53
  Balance Sheet as of September 30, 2001.................................. F-54
  Notes to Balance Sheet.................................................. F-55

                                      F-1

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Members
Inergy, L.P. and Subsidiary
(Successor to Inergy Partners, LLC and Subsidiaries)

   We have audited the accompanying consolidated balance sheets of Inergy, L.P.
and Subsidiary (Successor to Inergy Partners, LLC and Subsidiaries) (the
"Partnership") as of September 30, 2000 and 2001, and the related consolidated
statements of operations, redeemable preferred members' interest and members'
equity/partners' capital and cash flows for each of the three years in the
period ended September 30, 2001. 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 auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Inergy, L.P.
and Subsidiary (Successor to Inergy Partners, LLC and Subsidiaries) at
September 30, 2000 and 2001, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended September
30, 2001 in conformity with accounting principles generally accepted in the
United States.

                                          /s/ Ernst & Young LLP

Kansas City, Missouri
December 10, 2001, except for
 Notes 4 and 12, as to which
 the date is December 20, 2001

                                      F-2

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                          CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Unit Data)

                                                   September 30,
                                                  -----------------   March 31,
                                                   2000      2001       2002
                                                  -------  --------  -----------
                                                                     (Unaudited)
                ASSETS (Note 4)
                                                            
Current assets:
  Cash..........................................  $ 1,373  $  2,171   $  2,475
  Accounts receivable, less allowance for
   doubtful accounts of $225 and $186 at
   September 30, 2000 and 2001, respectively and
   $1,537 at March 31, 2002.....................   12,602    11,457     24,111
  Inventories...................................    3,630    12,694     16,591
  Prepaid expenses and other current assets.....    1,014     1,411      1,975
  Assets from price risk management activities..    3,580     9,187      8,897
                                                  -------  --------   --------
Total current assets............................   22,199    36,920     54,049
Property, plant and equipment, at cost:
  Land and buildings............................      740     4,511     11,205
  Office furniture and equipment................      808     1,172      5,857
  Vehicles......................................    4,138    11,435     17,644
  Tanks and plant equipment.....................   30,283    58,737    100,147
                                                  -------  --------   --------
                                                   35,969    75,855    134,853
  Less accumulated depreciation.................   (2,533)   (5,812)    (9,378)
                                                  -------  --------   --------
Net property, plant and equipment...............   33,436    70,043    125,475
Intangible assets (Note 2):
  Covenants not to compete......................    3,228     3,771      6,124
  Deferred financing costs......................      333     2,985      4,977
  Deferred acquisition costs....................      460       115         --
  Customer accounts.............................    3,500    14,000     41,411
  Goodwill......................................    6,880    32,121     47,053
                                                  -------  --------   --------
                                                   14,401    52,992     99,565
  Less accumulated amortization.................   (1,246)   (4,431)    (6,489)
                                                  -------  --------   --------
Net intangible assets...........................   13,155    48,561     93,076
Other...........................................      134       129        473
                                                  -------  --------   --------
Total assets....................................  $68,924  $155,653   $273,073
                                                  =======  ========   ========

   LIABILITIES AND MEMBERS' EQUITY/PARTNERS'
                    CAPITAL
                                                            
Current liabilities:
  Accounts payable..............................  $11,502  $  8,416   $  9,041
  Accrued expenses..............................    3,715     5,679      6,743
  Customer deposits.............................    1,676    10,060      5,314
  Liabilities from price risk management
   activities...................................    2,294     4,612      4,618
  Current portion of long-term debt (Note 4)....      605    10,469      3,722
                                                  -------  --------   --------
Total current liabilities.......................   19,792    39,236     29,438
Deferred income taxes (Note 6)..................      942        --         --
Long-term debt, less current portion (Note 4)...   34,322    43,663    138,442
Redeemable preferred members' interest (Notes 2
 and 7).........................................   10,896        --         --
Members' equity/partners' capital (Notes 2, 4, 7
 and 8):
  Class A preferred interest....................    4,892        --         --
  Common interest...............................   (1,686)       --         --
  Deferred compensation.........................     (234)       --         --
  Common unitholders (1,840,000 and 2,617,872
   units issued and outstanding as of September
   30, 2001 and March 31, 2002, respectively)...       --    24,981     49,514
  Senior subordinated unitholders (3,313,367
   units issued and outstanding as of September
   30, 2001 and March 31, 2002).................       --    45,060     51,421
  Junior subordinated unitholders (572,542 units
   issued and outstanding as of September 30,
   2001 and March 31, 2002).....................       --     1,258      2,358
  Non-managing general partner (2% interest with
   dilutive effect equivalent to 116,855 and
   132,730 units issued and outstanding as of
   September 30, 2001 and March 31, 2002,
   respectively)................................       --     1,455      1,900
                                                  -------  --------   --------
Total members' equity/partners' capital.........    2,972    72,754    105,193
                                                  -------  --------   --------
Total liabilities and members' equity/partners'
 capital........................................  $68,924  $155,653   $273,073
                                                  =======  ========   ========

                            See accompanying notes.

                                      F-3

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands, Except Per Unit Data)

                                                             Six Months Ended
                                 Year Ended September 30,        March 31,
                                 --------------------------  ------------------
                                  1999     2000      2001      2001      2002
                                 -------  -------  --------  --------  --------
                                                                (unaudited)
                                                        
Revenue:
  Propane......................  $16,227  $89,042  $212,441  $165,209  $156,442
  Other........................    2,984    4,553    10,698     5,230     7,618
                                 -------  -------  --------  --------  --------
                                  19,211   93,595   223,139   170,439   164,060
Cost of product sold...........   13,754   81,636   182,582   141,425   113,787
                                 -------  -------  --------  --------  --------
Gross profit...................    5,457   11,959    40,557    29,014    50,273
Expenses:
  Operating and
   administrative..............    4,119    8,990    23,501    11,464    23,326
  Depreciation and
   amortization................      690    2,286     6,532     2,588     5,145
                                 -------  -------  --------  --------  --------
Operating income...............      648      683    10,524    14,962    21,802
Other income (expense):
  Interest expense (Note 4)....     (962)  (2,740)   (6,670)   (3,020)   (3,236)
  Gain (loss) on sale of
   property, plant and
   equipment...................      101       --        37        --      (119)
  Finance charges..............       79      176       290       158        85
  Other........................        5       59       168        87        36
                                 -------  -------  --------  --------  --------
Income (loss) before income
 taxes.........................     (129)  (1,822)    4,349    12,187    18,568
Provision for income taxes.....       56        7        --        --        52
                                 -------  -------  --------  --------  --------
Net income (loss)..............  $  (185) $(1,829) $  4,349  $ 12,187  $ 18,516
                                 =======  =======  ========  ========  ========
Predecessor net income for the
 period from October 1, 2000 to
 July 31, 2001.................                    $  6,664
                                                   ========
Inergy, L.P. net loss for the
 period from July 31, 2001
 through September 30, 2001....                    $ (2,315)
                                                   ========
Partners' interest information
 for the period from July 31,
 2001 through September 30,
 2001 and six months ended
 March 31, 2002:
  Non-managing general
   partners' interest in net
   income (loss)...............                    $    (46)           $    370
                                                   ========            ========

                                      F-4

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

               CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
                      (In Thousands, Except Per Unit Data)

                                             Year Ended           Six Months
                                            September 30,       Ended March 31,
                                       -----------------------  ---------------
                                        1999    2000    2001     2001    2002
                                       ------- ------- -------  ------- -------
                                                                  (Unaudited)
                                                         
Limited partners' interest in net
 loss:
  Common unit interest:
    Allocation of net income (loss)...                 $  (729)         $ 6,702
    Less beneficial conversion value
     allocated to senior subordinated
     units (Notes 1 and 7)............                  (8,600)              --
                                                       -------          -------
    Net common unit interest..........                  (9,329)           6,702
  Senior subordinated interest:
    Allocation of net income (loss)...                  (1,313)           9,758
    Plus beneficial conversion value
     allocated to senior subordinated
     units (Notes 1 and 7)............                   8,600               --
                                                       -------          -------
    Net senior subordinated unit
     interest.........................                   7,287            9,758
  Junior subordinated unit interest...                    (227)           1,686
                                                       -------          -------
Total limited partners' interest in
 net income (loss)....................                 $(2,269)         $18,146
                                                       =======          =======
Net income (loss) per limited partner
 unit:
  Basic...............................                 $ (0.40)         $  2.94
                                                       =======          =======
  Diluted.............................                 $ (0.40)         $  2.90
                                                       =======          =======
Weighted average limited partners'
 units outstanding:
  Basic...............................                   5,726            6,162
                                                       =======          =======
  Diluted.............................                   5,726            6,249
                                                       =======          =======

                            See accompanying notes.

                                      F-5

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

     CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED MEMBERS' INTEREST AND
                       MEMBERS' EQUITY/PARTNERS' CAPITAL
                                (In Thousands)

                                      Members' Equity                      Partners' Capital
                              -------------------------------- ------------------------------------------
                   Redeemable                                                                      Non-
                   Preferred   Class A                         Common     Senior       Junior    Managing  Total Members'
                    Members'  Preferred  Common     Deferred    Unit   Subordinated Subordinated General  Equity/Partners'
                    Interest  Interest  Interest  Compensation Capital Unit Capital Unit Capital Partner      Capital
                   ---------- --------- --------  ------------ ------- ------------ ------------ -------- ----------------
                                                                               
Balance at
September 30,
1998..............  $     --   $ 2,345  $   658     $  (392)   $    --   $    --       $   --     $   --      $  2,611
  Common and
  preferred
  interests issued
  in acquisitions
  (Note 2)........        --     2,548      397          --         --        --           --         --         2,945
  Amortization of
  deferred
  compensation....        --        --       --          78         --        --           --         --            78
  Members'
  distributions...        --        --     (180)         --         --        --           --         --          (180)
  Net loss........        --        --     (185)         --         --        --           --         --          (185)
                    --------   -------  -------     -------    -------   -------       ------     ------      --------
Balance at
September 30,
1999..............        --     4,893      690        (314)        --        --           --         --         5,269
  Redeemable
  preferred
  interests issued
  in acquisitions
  (Note 2)........     9,000        --       --          --         --        --           --         --            --
  Redeemable
  preferred
  interests issued
  for cash, net of
  offering costs
  of $104.........     1,896        --       --          --         --        --           --         --            --
  Redemption of
  preferred
  interest........        --        (1)      --           1         --        --           --         --            --
  Amortization of
  deferred
  compensation....        --        --       --          79         --        --           --         --            79
  Members'
  distributions...        --        --     (547)         --         --        --           --         --          (547)
  Net loss........        --        --   (1,829)         --         --        --           --         --        (1,829)
                    --------   -------  -------     -------    -------   -------       ------     ------      --------
Balance at
September 30,
2000..............    10,896     4,892   (1,686)       (234)        --        --           --         --         2,972

                                      F-6

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

     CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED MEMBERS' INTEREST AND
                 MEMBERS' EQUITY/PARTNERS' CAPITAL (Continued)
                                (In Thousands)

                                      Members' Equity                      Partners' Capital
                              -------------------------------- -------------------------------------------
                   Redeemable                                                                       Non-
                   Preferred   Class A                         Common      Senior       Junior    Managing  Total Members'
                    Members'  Preferred  Common     Deferred    Unit    Subordinated Subordinated General  Equity/Partners'
                    Interest  Interest  Interest  Compensation Capital  Unit Capital Unit Capital Partner      Capital
                   ---------- --------- --------  ------------ -------  ------------ ------------ -------- ----------------
                                                                                
Balance at
September 30,
2000..............  $ 10,896   $ 4,892  $(1,686)    $  (234)   $    --    $    --       $   --     $   --      $  2,972
  Net income
  October 1, 2000
  to July 31,
  2001............        --        --    6,664          --         --         --           --         --         6,664
  Redeemable
  preferred
  interests issued
  for cash, net of
  offering costs
  of $513.........    16,087        --       --          --         --         --           --         --            --
  Redeemable
  preferred
  interests issued
  in acquisition
  (Note 2)........     7,402        --       --          --         --         --           --         --            --
  Inergy Partners,
  LLC members'
  distributions...        --        --   (2,554)         --         --         --           --         --        (2,554)
  Redemption of
  preferred
  interest........        --       (41)       8          --         --         --           --         --           (33)
  Amortization of
  deferred
  compensation....        --        --       --          65         --         --           --         --            65
  Assets
  (liabilities)
  retained by
  Inergy Partners
  LLC.............        --        --     (909)         --         --         --           --         --          (909)
  Accelerated
  vesting of
  deferred
  compensation due
  to initial
  public
  offering........        --        --       --         169         --         --           --         --           169
  Net proceeds
  from initial
  public
  offering........        --        --       --          --     34,310         --           --         --        34,310
  Transfers of
  capital in
  accordance with
  initial public
  offering........   (34,385)   (4,851)  (1,523)         --         --     37,773        1,485      1,501        34,385
  Net loss July
  31, 2001 through
  September 30,
  2001............        --        --       --          --       (729)    (1,313)        (227)       (46)       (2,315)
  Beneficial
  conversion
  feature of the
  conversion of
  certain
  Redeemable
  Preferred
  Members'
  Interests to
  Senior
  Subordinated
  Units...........        --        --       --          --     (8,600)     8,600           --         --            --
                    --------   -------  -------     -------    -------    -------       ------     ------      --------
Balance at
September 30,
2001..............        --        --       --          --     24,981     45,060        1,258      1,455        72,754

                                      F-7

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

     CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED MEMBERS' INTEREST AND
                 MEMBERS' EQUITY/PARTNERS' CAPITAL (Continued)
                                (In Thousands)

                                      Members' Equity                     Partners' Capital
                              ------------------------------- -------------------------------------------
                   Redeemable                                                                      Non-
                   Preferred   Class A                        Common      Senior       Junior    Managing  Total Members'
                    Members'  Preferred  Common    Deferred    Unit    Subordinated Subordinated General  Equity/Partners'
                    Interest  Interest  Interest Compensation Capital  Unit Capital Unit Capital Partner      Capital
                   ---------- --------- -------- ------------ -------  ------------ ------------ -------- ----------------
                                                                               
Balance at
September 30,
2001..............  $     --   $    --  $    --     $  --     $24,981    $45,060       $1,258     $1,455      $ 72,754
  Proceeds from
  issuance of
  common units
  (unaudited).....        --        --       --        --         480         --           --         --           480
  Issuance of
  common units in
  connection with
  acquisition of
  retail propane
  company
  (unaudited).....        --        --       --        --      19,723         --           --         --        19,723
  Contribution
  from non-
  managing general
  partner
  (unaudited).....        --        --       --        --          --         --           --        205           205
  Partners'
  distributions
  (unaudited).....        --        --       --        --      (2,372)    (3,396)        (587)      (130)       (6,485)
  Net income
  (unaudited).....        --        --       --        --       6,702      9,757        1,687        370        18,516
                    --------   -------  -------     -----     -------    -------       ------     ------      --------
Balance at March
31, 2002
(unaudited).......  $     --   $    --  $    --     $  --     $49,514    $51,421       $2,358     $1,900      $105,193
                    ========   =======  =======     =====     =======    =======       ======     ======      ========

                            See accompanying notes.

                                      F-8

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

                                                            Six Months Ended
                               Year Ended September 30          March 31
                              ----------------------------  ------------------
                                1999      2000      2001      2001      2002
                              --------  --------  --------  --------  --------
                                                               (Unaudited)
                                                       
Operating activities
Net income (loss)...........  $   (185) $ (1,829) $  4,349  $ 12,187  $ 18,516
Adjustments to reconcile net
 income (loss) to net cash
 provided by (used in)
 operating activities:
  Provision for doubtful
   accounts.................        77       139       912       812       680
  Depreciation..............       440     1,427     3,438     1,368     3,634
  Amortization..............       250       859     3,094     1,220     1,511
  Amortization of deferred
   financing costs..........        73        87       424       160       547
  Loss (gain) on disposal of
   property, plant and
   equipment................      (101)       --       (37)       --       119
  Net assets (liabilities)
   from price risk
   management activities....     1,206    (2,492)   (3,289)      946       296
  Deferred income taxes.....         8        --        --        39        --
  Deferred compensation.....        78        79       234        --        --
  Changes in operating
   assets and liabilities,
   net of effects from
   acquisition of retail
   propane companies:
    Accounts receivable.....    (3,451)   (5,842)   13,370   (10,869)   (6,532)
    Inventories.............    (3,812)    1,660    (6,154)    2,922       (65)
    Prepaid expenses and
     other current assets...       (86)     (388)     (321)       22       (36)
    Other assets............       (13)     (121)        5        (3)      (93)
    Accounts payable........     2,642     3,836   (19,115)   (3,596)   (1,410)
    Accrued expenses........       913     2,049     1,871       807      (911)
    Customer deposits.......     1,187       314     5,878    (3,421)   (5,623)
                              --------  --------  --------  --------  --------
Net cash provided by (used
 in) operating activities...      (774)     (222)    4,659     2,594    10,633
Investing activities
Acquisition of retail
 propane companies, net of
 cash acquired..............   (11,430)   (9,600)  (56,263)  (56,263)  (84,553)
Purchases of property, plant
 and equipment..............    (1,354)   (2,275)   (4,758)   (1,861)   (2,525)
Deferred financing and
 acquisition costs
 incurred...................      (473)     (573)   (3,114)   (1,989)   (1,979)
Proceeds from sale of
 property, plant and
 equipment..................       127        --       118        --        91
Other.......................        --       (16)       (8)      (66)       --
                              --------  --------  --------  --------  --------
Net cash used in investing
 activities.................   (13,130)  (12,464)  (64,025)  (60,179)  (88,966)

                                      F-9

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 (In Thousands)

                                                            Six Months Ended
                              Year Ended September 30           March 31
                            -----------------------------  -------------------
                              1999      2000      2001       2001      2002
                            --------  --------  ---------  --------  ---------
                                                              (Unaudited)
                                                      
Financing activities
Proceeds from issuance of
 long-term debt...........  $ 25,373  $ 35,787  $ 178,054  $106,675  $ 220,621
Principal payments on
 long-term debt and
 noncompete obligations...   (11,137)  (23,229)  (163,849)  (62,205)  (136,184)
Contribution from non-
 managing general
 partner..................        --        --         --        --        205
Net proceeds from issuance
 of redeemable preferred
 members' interest........        --     1,896     16,087    16,015         --
Net proceeds from issuance
 of common units in
 initial public offering..        --        --     34,310        --         --
Proceeds from issuance of
 common units.............        --        --         --        --        480
Cash retained by Inergy
 Partners LLC.............        --        --     (1,851)       --         --
Redemption of preferred
 stock....................        --        --        (33)       --         --
Distributions to members..      (180)     (547)    (2,554)     (745)    (6,485)
                            --------  --------  ---------  --------  ---------
Net cash provided by
 financing activities.....    14,056    13,907     60,164    59,740     78,637
                            --------  --------  ---------  --------  ---------
Net increase in cash......       152     1,221        798     2,155        304
Cash at beginning of
 period...................        --       152      1,373     1,373      2,171
                            --------  --------  ---------  --------  ---------
Cash at end of period.....  $    152  $  1,373  $   2,171  $  3,528  $   2,475
                            ========  ========  =========  ========  =========
Supplemental disclosure of
 cash flow information
Cash paid during the year
 for interest.............  $    823  $  2,538  $   6,171  $  1,929  $   3,025
                            ========  ========  =========  ========  =========
Supplemental schedule of
 noncash investing and
 financing activities
Additions to covenants not
 to compete through the
 issuance of noncompete
 obligations..............  $  2,052  $     32  $      --  $     --  $      --
                            ========  ========  =========  ========  =========
Acquisitions of retail
 propane companies through
 the issuances of common
 units....................  $  2,945  $  9,000  $   7,402  $  7,402  $  19,723
                            ========  ========  =========  ========  =========
Acquisition of retail
 propane company through
 the issuance of
 subordinated debt, which
 was subsequently retired
 in 2001..................  $     --  $     --  $   5,000  $  5,000  $      --
                            ========  ========  =========  ========  =========

                            See accompanying notes.

                                      F-10

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (In Thousands Except Unit and Per Unit Data)

                          September 30, 2000 and 2001
   (Information Pertaining to the Six Months Ended March 31, 2001 and 2002 is
                                   Unaudited)

1. Accounting Policies

 Organization

   Inergy, L.P. (the Partnership) was formed on March 7, 2001 as a Delaware
limited partnership. The Partnership and its subsidiary Inergy Propane, LLC
(the Operating Company) were formed to acquire, own and operate the propane
business and substantially all the assets and liabilities (other than a portion
of the cash and deferred income tax liabilities) of Inergy Partners, LLC and
subsidiaries (Inergy Partners and referred to subsequent to the initial public
offering described below as the Non-managing General Partner). In addition,
Inergy Sales and Service, Inc. (Services), a subsidiary of the Operating
Company, was formed to acquire and operate the service, work and appliance
parts and sales business of Inergy Partners. The Partnership, the Operating
Company, and Services are collectively referred to hereinafter as the
Partnership Entities. In order to simplify the Partnership's obligations under
the laws of several jurisdictions in which the Partnership will conduct
business, the Partnership's activities are conducted through the Operating
Company.

   The Partnership Entities consummated in July 2001, an initial public
offering (the Offering) of 1,840,000 common units representing limited partner
interests in the Partnership (the Common Units) for an offering price of $22.00
per Common Unit aggregating $40,480 before approximately $6,170 of underwriting
discounts and commissions and other expenses related to the Offering. The
Operating Company assumed the Non-managing General Partner's obligation under
its funded debt in connection with the conveyance in July 2001 (the Partnership
Conveyance) by Inergy GP, LLC (the Managing General Partner) and the Non-
managing General Partner (together referred to as the General Partners), of
substantially all of their assets and liabilities (excluding $1,851 of cash and
the deferred tax liabilities associated with the subsidiaries of Wilson Oil
Company of Johnston County, Inc. (Wilson) and Rolesville Gas & Oil Company,
Inc. (Rolesville)). The net proceeds from the Offering were used to repay the
subordinated debt issued in connection with the acquisition of the Hoosier
Propane Group (Note 2) and a portion of the outstanding credit agreement
borrowings.

   Pursuant to the terms of certain of the redeemable Class A preferred
interest agreements issued by Inergy Partners prior to the Offering, in the
event of an initial public offering, these interests would automatically
convert into senior subordinated units of a master limited partnership. As
such, in conjunction with the Offering, an additional 2,006,456 Senior
Subordinated Units were issued to holders of the remaining redeemable Class A
preferred interests of Inergy Partners, representing a 34.3% limited partner
interest in the Partnership Entities.

   Certain of the redeemable Class A preferred interests of Inergy Partners
contained conversion terms that were more advantageous than the terms of the
other preferred interests issued by Inergy Partners as further described in
Note 7. These beneficial conversion terms resulted in Inergy, L.P. recognizing
a decrease in common unit capital of $8.6 million with a corresponding increase
in senior subordinated unit capital in the fourth quarter of fiscal 2001
following the Offering. Net income available to common unitholders for the
fourth quarter and year ended September 30, 2001 is decreased by $8.6 million
while net income attributable to senior subordinated unitholders is increased
by the same amount.

   Inergy, L.P. has no employees and is managed by Inergy GP, LLC. Pursuant to
the Partnership Agreement, Inergy GP, LLC or any of its affiliates is entitled
to reimbursement for all direct and indirect expenses incurred or payments it
makes on behalf of Inergy, L.P., and all other necessary or appropriate
expenses allocable to Inergy, L.P. or otherwise reasonably incurred by the
Inergy GP, LLC in connection with

                                      F-11

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

operating Inergy, L.P. business. These costs, which totaled approximately
$2,435 and $4,556 for the period from August 1, 2001 through September 30, 2001
and the six months ended March 31, 2002, respectively, include compensation and
benefits paid to officers and employees of Inergy GP, LLC.

   The General Partners own general partner interests representing an aggregate
2% unsubordinated general partner interest in the Partnership and the Operating
Company on a combined basis. In addition, the Non-managing General Partner owns
1,306,911 Senior Subordinated Units and 572,542 Junior Subordinated Units
representing a 32.2% limited partner interest in the Partnership Entities.

 Basis of Presentation

   The accompanying consolidated financial statements presented herein reflect
the effects of the Partnership Conveyance, in which the Partnership Entities
became the successor to the businesses of Inergy Partners. As such, the
consolidated financial statements represent Inergy Partners prior to the
Partnership Conveyance and the Partnership Entities subsequent to the
Partnership Conveyance. Because the Partnership Conveyance was a transfer of
assets and liabilities in exchange for partnership interests among a controlled
group of companies, it has been accounted for in a manner similar to a pooling
of interests, resulting in the presentation of the Partnership Entities as the
successor to the continuing businesses of Inergy Partners. The entity
representative of both the operations of (i) Inergy Partners prior to the
Partnership Conveyance; and (ii) the Partnership Entities subsequent to the
Partnership Conveyance, is referred to herein as "Inergy'. The Non-Managing
General Partner retained those assets and liabilities not conveyed to the
Partnership. All significant intercompany balances and transactions have been
eliminated in consolidation.

 Nature of Operations

   Inergy is engaged primarily in the sale, distribution, marketing and trading
of propane and other natural gas liquids. The retail market is seasonal because
propane is used primarily for heating in residential and commercial buildings,
as well as for agricultural purposes. Inergy's operations are concentrated in
the Midwest and Southeast regions of the United States.

 Accounting for Price Risk Management

   Inergy, through its wholesale operations, offers price risk management
services to its customers and, in addition, trades for its own account (see
Note 3). Financial instruments utilized in connection with trading activities
are accounted for using the mark-to-market method. Under the mark-to-market
method of accounting, forwards, swaps, options and storage contracts are
reflected at fair value, inclusive of reserves, and are shown in the
consolidated balance sheet as assets and liabilities from price risk management
activities. Unrealized gains and losses from newly originated contracts,
contract restructuring and the impact of price movements are recognized in cost
of products sold. Changes in the assets and liabilities from trading and price
risk management activities result primarily from changes in the market prices,
newly originated transactions and the timing of settlement relative to the
receipt of cash for certain contracts. The market prices used to value these
transactions reflect management's best estimate considering various factors
including closing exchange and over-the-counter quotations, time value and
volatility factors underlying the commitments. The values are adjusted to
reflect the potential impact of liquidating Inergy's position in an orderly
manner over a reasonable period of time under present market conditions.

   The cash flow impact of financial instruments is reflected as cash flows
from operating activities in the consolidated statements of cash flows. See
Note 3 for further discussion of Inergy's price risk management activities.

                                      F-12

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

 Revenue Recognition

   Sales of propane are recognized at the time product is shipped or delivered
to the customer. Revenue from the sale of propane appliances and equipment is
recognized at the time of sale or installation. Revenue from repairs and
maintenance is recognized upon completion of the service.

 Credit Concentrations

   Inergy is both a retail and wholesale supplier of propane gas. Inergy
generally extends unsecured credit to its wholesale customers throughout the
Midwestern and Eastern portions of the United States. Credit is generally
extended to retail customers through delivery into company and customer owned
propane gas storage tanks. Provisions for doubtful accounts receivable are
reflected in Inergy's consolidated financial statements and have generally been
within management's expectations.

 Unaudited Financial Information

   The financial information as of March 31, 2002 and for the six-month periods
ended March 31, 2001 and 2002 contained herein is unaudited. The Company
believes this information has been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and Article 10 of Regulation S-X. The Company also believes this
information includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods then ended. The results of operations
for the six-month period ended March 31, 2002 are not necessarily indicative of
the results of operations that may be expected for the entire year.

 Use of Estimates

   The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.

 Inventories

   Inventories for retail operations, which mainly consist of liquid propane,
are stated at the lower of cost, determined using the average cost method or
market. Inventories for wholesale operations, which consist mainly of liquid
propane commodities, are stated at market, as discussed in Note 3. The market
adjustment was an unrealized gain (loss) of $39 and $(396) at September 30,
2000 and 2001, respectively, and $(68) and $1,824 at March 31, 2001 and 2002,
respectively.

 Shipping and Handling Costs

   Shipping and handling costs are recorded as part of cost of products sold at
the time product is shipped or delivered to the customer.

                                      F-13

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 (In Thousands Except Unit and Per Unit Data)

 Property, Plant, and Equipment

   Property, plant, and equipment are stated at cost. Depreciation is computed
by the straight-line method over the assets' estimated useful lives, as
follows:

                                                                           Years
                                                                           -----
                                                                        
   Buildings and improvements.............................................    25
   Office furniture and equipment.........................................  5-10
   Vehicles...............................................................  5-10
   Tanks and plant equipment.............................................. 10-30

 Intangible Assets

   Intangible assets are amortized on a straight-line basis over their
estimated economic lives, as follows:

                                                                         Years
                                                                         -----
                                                                      
   Covenants not to compete............................................. 5-10
   Deferred financing costs.............................................  1-3
   Customer accounts....................................................   15
   Goodwill (prior to adoption of SFAS No. 142 effective October 1,
    2001)...............................................................   15

   Deferred financing costs represent financing costs incurred in obtaining
financing and are being amortized over the term of the debt. Covenants not to
compete, customer accounts and goodwill arose from the various acquisitions by
Inergy and are discussed in Notes 2 and 12.

   Deferred acquisition costs represent costs incurred to date on acquisitions
that Inergy is actively pursuing, most of which relate to the acquisitions
completed subsequent to year end, as discussed in Note 12.

   Inergy reviews its long-lived assets in accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-lived Assets to be Disposed of," for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If such events or changes in circumstances
are present, a loss is recognized if the carrying value of the asset is in
excess of the sum of the undiscounted cash flows expected to result from the
use of the asset and its eventual disposition. An impairment loss is measured
as the amount by which the carrying amount of the asset exceeds the fair value
of the asset. See Recently Issued Accounting Pronouncements discussion below.

 Income Taxes

   The earnings of the Partnership and Operating Company are included in the
Federal and state income tax returns of the individual partners. As a result,
no income tax expense has been reflected in Inergy's consolidated financial
statements relating to the earnings of the Partnership and Operating Company.
Federal and state income taxes are, however, provided on the earnings of
Services. The Partnership entities provide deferred income taxes to recognize
the effect of temporary differences between Services' basis of assets and
liabilities for income tax and financial statement purposes. No income tax
provision was necessary at September 30, 2001. Net earnings for financial
statement purposes may differ significantly from taxable income reportable to
unitholders as a result of differences between the tax basis and the financial
reporting basis of assets and liabilities and the taxable income allocation
requirements under the partnership agreement. Federal and state income tax
expense for periods prior to the Partnership Conveyance relate to Wilson and
Rolesville,

                                     F-14

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

wholly owned subsidiaries of Inergy Partners, which were C Corporations and
accounted for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes. In connection with the Partnership Conveyance, all income tax
liabilities of Inergy Partners were retained by the Non-managing General
Partner.

 Customer Deposits

   Customer deposits primarily represent cash received by Inergy from wholesale
and retail customers for propane purchased that will be delivered at a future
date.

 Fair Value

   The carrying amounts of cash, accounts receivable and accounts payable
approximate their fair value. Based on the estimated borrowing rates currently
available to Inergy for long-term debt with similar terms and maturities, the
aggregate fair value of Inergy's floating rate long-term debt approximates the
aggregate carrying amount as of September 30, 2000 and 2001 and March 31, 2002.

 Income (Loss) per Limited Partner Unit

   Basic net income (loss) per limited partner unit is computed by dividing net
income (loss), after considering the General Partner's interest, by the
weighted average number of Common and Subordinated Units outstanding. Diluted
net income (loss) per limited partner unit is computed by dividing net income
(loss), after considering the General Partner's interest, by the weighted
average number of Common and Subordinated Units outstanding and the dilutive
effect of unit options granted under the long-term incentive plan. Unit options
were antidilutive in 2001 due to the loss incurred for the period from July 31,
2001 through September 30, 2001. As such, basic and diluted net income (loss)
per limited partner unit are identical in 2001.

 Segment Information

   In fiscal 1999, the Company adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes standards
for reporting information about operating segments, as well as related
disclosures about products and services, geographic areas, and major customers.
Further, SFAS No. 131 defines operating segment as components of an enterprise
for which separate financial information is available that is evaluated
regularly by the chief operating decision-maker in deciding how to allocate
resources and assessing performance. In determining the Company's reportable
segments under the provisions of SFAS No. 131, the Company examined the way it
organizes its business internally for making operating decisions and assessing
business performance. See Note 11 for disclosures related to the Company's
retail and wholesale segments. No single customer represents 10% or more of
consolidated revenues. In addition, nearly all of the Company's revenues are
derived from sources within the United States, and all of its long-lived assets
are located in the United States.

 Recently Issued Accounting Pronouncements

   In June 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 141
requires all business combinations initiated after June 30, 2001, to be
accounted for using the purchase method of accounting. Under Statement No. 142,
goodwill is no longer subject to amortization over its estimated useful life.
Rather, goodwill will be subject to at least an annual assessment for
impairment by applying a fair-value-based test. Additionally, an acquired
intangible asset

                                      F-15

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

should be separately recognized if the benefit of the intangible asset is
obtained through contractual or other legal rights, or if the intangible asset
can be sold, transferred, licensed, rented or exchanged, regardless of the
acquirer's intent to do so. Those assets will be amortized over their useful
lives, other than assets what have an indefinite life. Statement No. 142 is
required to be applied starting with fiscal years beginning after December 15,
2001.

   Inergy adopted Statement No. 142 on October 1, 2001 and accordingly has
discontinued the amortization of goodwill existing at the time of adoption.
Under the provisions of Statement No. 142, Inergy has six months from the time
of adoption to have completed the valuation of each of Inergy's operating
segments to determine whether any impairment exists on the date of adoption.
However, management does not believe that any impairment existed at adoption.
The adoption of Statement No. 142 will eliminate goodwill amortization that
would have totaled approximately $2,079 in fiscal 2002, based on the balances
of September 30, 2001, and totaled approximately $1,720 in fiscal 2001.

   In August 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement supersedes FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations--
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. This
statement retains the fundamental provisions of Statement No. 121 for
recognition and measurement of the impairment of long-lived assets to be held
and used, and measurement of long-lived assets to be disposed of by sale. This
statement is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and interim periods within those fiscal
years, with early application encouraged. Management has not determined the
method, timing, or impact of adopting Statement No. 144.

 Reclassifications

   Certain reclassifications have been made to the 1999 and 2000 consolidated
financial statements to conform to the 2001 presentation.

2. Acquisitions

   During fiscal 1999, Inergy acquired substantially all of the assets of Ernie
Lee Oil & LP Gas, LLC (December 1998), Longston Gas & Oil Company, Inc. (May
1999), Castleberry's, Inc. (July 1999), and Bradley Propane, Inc. (September
1999). In addition, Inergy acquired 100% of the oustanding stock of Wilson Oil
Company of Johnston County, Inc. (December 1998) and Rolesville Gas & Oil
Company, Inc. (August 1999) through a stock exchange and a purchase agreement.
These acquired retail companies are involved in the sale and distribution of
propane to local customer bases throughout the United States. The acquisitions
have been accounted for using the purchase method of accounting. The acquired
companies were purchased in separate transactions for an aggregate purchase
price of $19,659 including acquisition costs and $3,232 in liabilities assumed.
The consideration utilized in the fiscal 1999 acquisitions consisted of cash
payments of $11,430 funded by the issuance of long-term debt, common and Class
A preferred interests issued to certain former owners of these companies
totaling $2,945, and the issuance of noncompete obligations in the amount of
$2,052. Of the aggregate purchase price, $2,810 (including cash paid at
closing) was allocated to covenants not to compete. The excess of aggregate
purchase price over the fair market values of the net tangible and

                                      F-16

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

identifiable intangible assets acquired amounted to $942 and has been recorded
as an increase in goodwill. The operating results of all acquisitions are
included in Inergy's consolidated results of operations from the dates of
acquisition.

   During fiscal year 2000, Inergy acquired substantially all of the assets of
Butane-Propane Gas Company of Tenn., Inc. (November 1999) and substantially all
of the assets of Country Gas Company, Inc. (June 2000). These acquired retail
companies are involved in the sale of propane to local customer bases
throughout the United States. The acquisitions have been accounted for using
the purchase method of accounting. The acquired companies were purchased in
separate transactions for an aggregate purchase price of $19,787, including
acquisition costs, and $1,155 in liabilities assumed. The consideration
utilized in the 2000 acquisitions consisted of cash payments of $9,600 funded
by the issuance of long-term debt, redeemable Class A preferred interests
issued to certain former owners of these companies totaling $9,000 (see Note 7)
and the issuance of noncompete obligations in the amount of $32. Of the
aggregate purchase price, $102 (including cash paid at closing) was allocated
to covenants not to compete. The excess of aggregate purchase prices over the
fair market values of the net tangible and identifiable intangible assets
acquired, including $3,500 allocated to customer accounts, amounted to $5,594
and has been recorded as an increase in goodwill. The operating results of all
acquisitions are included in Inergy's consolidated results of operations from
the dates of acquisition.

   On January 12, 2001, Inergy acquired substantially all of the assets and
assumed certain liabilities of Investors 300, Inc., Domex, Inc. and L&L
Leasing, Inc., three companies owned by a common group of shareholders
(referred to as the Hoosier Propane Group). The acquisition has been accounted
for using the purchase method of accounting. The Hoosier Propane Group is
involved in the sale and transportation of propane to local customer bases
throughout the United States. The purchase price of approximately $74.0 million
consisted of cash payments of approximately $55.4 million funded by the
issuance of long-term debt and redeemable Class A preferred interests,
acquisition costs of $0.6 million, a redeemable Class A preferred interest
issued to certain former owners of the Hoosier Propane Group totaling $7.4
million, subordinated debentures issued to the Hoosier Propane Group
shareholders totaling $5.0 million, and $5.6 million of liabilities assumed.
The excess of purchase price over the fair market value of the net tangible and
identifiable intangible assets acquired, including $10,500 allocated to
customer accounts, amounted to $25,241 and has been recorded as an increase in
goodwill. The acquisition was effective January 1, 2001 and Inergy's
consolidated results of operations for the year ended September 30, 2001
include the Hoosier Propane Group operating results from the effective date.

   During November 2000, Inergy also acquired substantially all the assets of
Bear-Man Propane for $520 in cash. Inergy's consolidated results of operations
for the year ended September 30, 2001 include Bear-Man Propane from the date of
acquisition.

                                      F-17

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

   The following unaudited pro forma data summarize the results of operations
for the periods indicated as if these acquisitions had been completed October
1, 1999 and 2000, the beginning of the 2000 and 2001 fiscal years. The pro
forma data give effect to actual operating results prior to the acquisitions
and adjustments to interest expense, goodwill and customer accounts
amortization, and income taxes. These pro forma amounts do not purport to be
indicative of the results that would have actually been obtained if the
acquisitions had occurred on October 1, 1999 and 2000 or that will be obtained
in the future. The pro forma data does not give effect to acquisitions
completed subsequent to September 30, 2001.

                                                                 Year Ended
                                                                September 30,
                                                              ------------------
                                                                2000      2001
                                                              --------  --------
                                                                  
   Sales..................................................... $167,031  $254,680
   Net income (loss).........................................   (3,522)    6,012

3. Price Risk Management and Financial Instruments

   Inergy has recorded its trading activities at fair value in accordance with
Emerging Issues Task Force Issue (EITF) No. 98-10, "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities." EITF No. 98-10
requires energy trading contracts to be recorded at fair value on the
consolidated balance sheet, with the changes in fair value included in
earnings.

 Trading Activities

   Inergy, through its wholesale operations, offers price risk management
services to energy related businesses through a variety of financial and other
instruments including forward contracts involving physical delivery of propane.
In addition, Inergy manages its own trading portfolio using forward physical
and futures contracts. Inergy attempts to balance its contractual portfolio in
terms of notional amounts and timing of performance and delivery obligations.
However, net unbalanced positions can exist or are established based on
assessment of anticipated short-term needs or market conditions.

   The price risk management services are offered to propane retailers and
other related businesses through a variety of financial and other instruments
including forward contracts involving physical delivery of propane, swap
agreements, which require payments to (or receipt of payments from)
counterparties based on the differential between a fixed and variable price for
propane, options and other contractual arrangements.

   Instruments used for trading purposes include forwards, swaps and options,
as defined above, as well as futures contracts.

 Notional Amounts and Terms

   The notional amounts and terms of these financial instruments at September
30, 2000 and 2001 include fixed price payor for 1,526 and 2,505 barrels,
respectively, and fixed price receiver for 1,479 and 2,862 barrels,
respectively. The notional amounts and terms of these financial instruments at
March 31, 2002 include fixed price payor 3,578 barrels and fixed price receiver
for 4,160 barrels.

   Notional amounts reflect the volume of the transactions, but do not
represent the amounts exchanged by the parties to the financial instruments.
Accordingly, notional amounts do not accurately measure Inergy's exposure to
market or credit risks.

                                      F-18

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

 Fair Value

   The fair value of the financial instruments related to price risk management
activities as of September 30, 2000 and 2001 was assets of $3,580 and $9,187,
respectively, and liabilities of $2,294 and $4,612, respectively, related to
propane. The fair value of the financial instruments related to price risk
management activities as of March 31, 2002 was assets of $8,897 and liabilities
of $4,618 related to propane. The effects of all intercompany transactions have
been appropriately eliminated.

   The net change in unrealized gains and losses related to trading and price
risk management activities for the years ended September 30, 1999, 2000, and
2001 of $(154), $1,479, and $2,214, respectively, and $(1,055) and $1,925 for
the six months ended March 31, 2001 and 2002, respectively, are included in
cost of product sold in the accompanying consolidated statements of operations.

 Market and Credit Risk

   Inherent in the resulting contractual portfolio are certain business risks,
including market risk and credit risk. Market risk is the risk that the value
of the portfolio will change, either favorably or unfavorably, in response to
changing market conditions. Credit risk is the risk of loss from nonperformance
by suppliers, customers, or financial counterparties to a contract. Inergy
takes an active role in managing and controlling market and credit risk and has
established control procedures, which are reviewed on an ongoing basis. Inergy
monitors market risk through a variety of techniques, including daily reporting
of the portfolio's value to senior management. Inergy provides for such risks
at the time trading activities are adjusted to fair value and when specific
risks become known. Inergy attempts to minimize credit risk exposure through
credit policies and periodic monitoring procedures and obtaining customer
deposits on sales contracts. The counterparties associated with assets from
price risk management activities as of September 30, 2000 and 2001 and March
31, 2002 are energy marketers.

4. Long-Term Debt

   Long-term debt consisted of the following:

                                                       September 30,
                                                      ---------------  March
                                                       2000    2001   31, 2002
                                                      ------- ------- --------
                                                             
   Credit agreement.................................. $33,250 $53,000 $138,215
   Obligations under noncompetition agreements and
    notes to former owners of businesses acquired....   1,625   1,101    3,929
   Other.............................................      52      31       20
                                                      ------- ------- --------
                                                       34,927  54,132  142,164
   Less current portion..............................     605  10,469    3,722
                                                      ------- ------- --------
                                                      $34,322 $43,663 $138,422
                                                      ======= ======= ========

   During fiscal 2000, Inergy had a credit agreement with a financial
institution providing Inergy with the capacity to borrow up to $41,000 ($9,000
under working capital lines of credit and $32,000 under a long-term acquisition
line of credit). At September 30, 2000, borrowings under the working capital
lines of credit and the acquisition line of credit were $4,900 and $28,350,
respectively. The prime rate and LIBOR plus the applicable spreads were 9.5%
and 9.37% to 9.93%, respectively, at September 30, 2000.

   Inergy's credit agreement was amended in January 2001 in connection with the
Hoosier Propane Group acquisition and resulted in a $96 million facility
consisting of a $25 million revolving working capital line of

                                      F-19

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

credit and an acquisition term note of $71 million, with a maturity date of
January 10, 2004. On July 25, 2001, in conjunction with the Offering (July 2001
amendment), the credit facility was again amended such that Inergy Propane, LLC
was made the sole borrower and resulted in a $30 million revolving working
capital line of credit and a $70 million revolving acquisition facility for
acquisition and growth capital borrowings. The credit facility has a term of
three years expiring July 2004 and is guaranteed by Inergy, L.P. and each
subsidiary of Inergy Propane, LLC. Inergy is required to reduce the principal
outstanding on the revolving working capital line of credit to $4,000 or less
for a minimum of 30 consecutive days during the period commencing March 1 and
ending September 30. As such $4,000 of the outstanding balance at September 30,
2001 has been classified as a long-term liability in the accompanying 2001
consolidated balance sheet. At September 30, 2001, the balance outstanding
under this amended credit facility was $53,000, including $14,000 under the
working capital facility. The prime rate and LIBOR plus the applicable spreads
were between 5.10% and 6.00% for all outstanding debt.

   Inergy's credit agreement was again amended in December 2001 in connection
with the IPC Acquisition (December 2001 amendment), as discussed in Note 12.
This December 2001 amendment resulted in a $195 million facility comprised of a
$50 million revolving working capital facility, a $75 million revolving
acquisition facility and a $70 million term note. The December 2001 amendment
has a term of three years, expiring December 2004 except for the term note
which is due in April 2003, and has similar interest terms to the July 2001
amendment.

   During fiscal 2001, Inergy entered into interest rate hedging agreements in
the form of interest rate swaps. Immediately prior to the closing of the
Offering in July 2001, the interest rate hedging agreements were terminated in
connection with the repayment of the long-term debt with offering proceeds. The
termination of the interest rate swaps resulted in an interest expense charge
of $507 in the fourth quarter of fiscal 2001.

   The credit agreement, including the December 2001 amendment, contains
several covenants which, among other things, require the maintenance of various
financial performance ratios, restrict the payment of dividends to unitholders,
and require financial reports to be submitted periodically to the financial
institutions. Unused borrowings under the credit agreement amounted to $47
million at September 30, 2001.

   Noninterest-bearing obligations due under noncompetition agreements consist
of agreements between Inergy and the sellers of retail propane companies
acquired from fiscal years 1999 through 2001 with payments due through 2009
with imputed interest at 8.5% to 9.0%. Noninterest-bearing obligations consist
of $2,130 and $1,448 in total payments due under noncompetition agreements,
less unamortized discount based on imputed interest of $505 and $347 at
September 30, 2000 and 2001, respectively.

   The aggregate amounts of principal to be paid on the outstanding long-term
debt during the next five years ending September 30 and thereafter, considering
the terms of the credit facilities amended in December 2001 as discussed above,
are as follows:

   Year Ending September 30,
   -------------------------
                                                                     
   2002................................................................ $10,469
   2003................................................................      75
   2004................................................................  43,081
   2005................................................................      86
   2006................................................................      92
   Thereafter..........................................................     329
                                                                        -------
                                                                        $54,132
                                                                        =======

                                      F-20

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

5. Leases

   Inergy has several noncancelable operating leases mainly for office space,
which expire at various times over the next nine years.

   Future minimum lease payments under noncancelable operating leases for the
next five years ending September 30 and thereafter consist of the following:

   Year Ending September 30,
   -------------------------
                                                                      
   2002................................................................. $  513
   2003.................................................................    406
   2004.................................................................    359
   2005.................................................................    222
   2006.................................................................     50
   Thereafter...........................................................     68
                                                                         ------
   Total minimum lease payments......................................... $1,618
                                                                         ======

   Rent expense for all operating leases during 1999, 2000, and 2001 amounted
to $196, $424 and $581, respectively, and $265 and $760 for the six months
ended March 31, 2001 and 2002, respectively.

6. Income Taxes

   Deferred income taxes related to Wilson and Rolesville reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes. Components of the deferred taxes at September 30, 2000 are a
noncurrent deferred tax liability of $942 related to book/tax basis
differences. This liability was excluded from the Partnership Conveyance as
discussed in Note 1.

   The provision for income taxes for the years ended September 30, 1999 and
2000 and the six months ended March 31, 2002 consists of the following:

                                                         September 30,
                                                         --------------  March 31,
                                                          1999    2000     2002
                                                         ------  ------  ---------
                                                                
   Current:
     Federal............................................ $   41  $   --     $45
     State..............................................      7       7       7
                                                         ------  ------     ---
   Total current........................................     48       7      52
   Deferred:
     Federal............................................      7      --      --
     State..............................................      1      --      --
                                                         ------  ------     ---
   Total deferred.......................................      8      --      --
                                                         ------  ------     ---
                                                            $56  $    7     $52
                                                         ======  ======     ===

   For the years ended September 30, 1999 and 2000, the Wilson and Rolesville
effective tax rate differed from the statutory rate primarily due to the effect
of graduated rates and state taxes. There was no provision for income taxes in
fiscal 2001 or for the six months ended March 31, 2001.

                                      F-21

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

7. Redeemable Preferred Members' Interests and Members' Equity

   During December 1999, Inergy issued redeemable Class A preferred interests
to a new member for total proceeds of $2,000 less offering costs of $104.
During June 2000, Inergy issued redeemable Class A preferred interests to
certain former owners of Country Gas Company, Inc. totaling $9,000 in
connection with the acquisition of Country Gas Company, Inc. These preferred
interests were automatically converted into Senior Subordinated Units of
Inergy, L.P. in connection with the Offering. The conversion rates were
determined as of the issuance date based on negotiations between Inergy and the
unrelated third parties and were derived by multiplying the recorded value of
each party's preferred interest by a multiple of 2.25 for the December 1999
transaction and 1.0 for the June 2000 transaction and dividing the resulting
total by the $22.00 unit price in the Offering. The beneficial conversion
feature present in the December 1999 issuance, valued at $2 million, has been
recognized upon completion of the Offering as discussed in Note 1.

   During January 2001, Inergy issued redeemable Class A preferred interests to
new and existing members for total proceeds of $15,000, less offering costs of
$485. The preferred interests were issued to facilitate the refinancing of
Inergy's credit facilities described in Note 4 on a long-term basis and
complete the Hoosier Propane Group acquisition in January 2001. In March and
May 2001, additional redeemable preferred interests were issued at the same
valuation for total proceeds of $1,600 less offering costs of $28.

   These preferred interests were automatically converted into Senior
Subordinated Units of Inergy, L.P. in connection with the Offering. The
conversion rates were determined as of the issuance date based on negotiations
between Inergy and the third party investors and were derived by multiplying
the recorded value of each party's preferred interest by a multiple of 1.4 and
dividing the resulting total by the $22.00 unit price in the Offering. The
beneficial conversion feature present in these preferred interest issuances
valued at $6.6 million has been recognized upon completion of the Offering as
described in Note 1.

   The redeemable preferred interests issued in December 1999, June 2000, and
January 2001 provided the holders the option to require Inergy to redeem the
preferred interests, as provided in the agreements, but no earlier than the
fifth anniversary of the issuance. The preferred interest issued to members for
cash in December 1999 and January 2001 were redeemable in an amount between one
and two times face value at issuance, depending on Inergy's operating
performance, as defined in the agreement. The preferred interests issued to
certain former owners of Country Gas Company, Inc. and the Hoosier Propane
Group were redeemable in an amount equal to face value at issuance plus any
unpaid dividends. No amounts were required to be redeemed during the next five
years following issuance, except in certain circumstances, as provided for in
the agreements. All preferred interests were converted into Senior Subordinated
Units as described above.

   The Class A preferred interest earned cumulative dividends of 8% to 10% per
annum, depending on the date and amount of the preferred interest issued. Class
A preferred members were not entitled to any voting rights. In the event of a
public offering, Inergy was to use its best efforts to permit the holders of
Class A preferred interest units to exchange their Class A preferred interest
units for Common Units, notwithstanding the conversion terms discussed above.
Upon liquidation, Class A preferred members were entitled to an aggregate
preference distribution of the unpaid dividends prior to any liabilities.
Additionally, Class A preferred members were also entitled to preference over
common interests subsequent to the payment of the Company's liabilities.
Distributions totaling $180, $547, and $2,554 were paid to Class A preferred
members in 1999, 2000, and 2001, respectively. Unpaid distributions on
preferred interests as of September 30, 2001 amounted to $0.4 million and were
declared and paid in October 2001.

                                      F-22

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

8. Partners' Capital

   Partners' capital at September 30, 2001 consists of 1,840,000 Common Units
representing a 31.5% limited partner interest, 3,313,367 Senior Subordinated
Units representing a 56.7% limited partner interest, 572,542 Junior
Subordinated Units representing a 9.8% limited partner interest and a 2%
general partner interest.

   The amended and restated Agreement of Limited Partnership of Inergy, L.P.
(Partnership Agreement) contains specific provisions for the allocation of net
earnings and losses to each of the partners for purposes of maintaining the
partner capital accounts.

   During the Subordination Period (as defined below), the Partnership may
issue up to 800,000 additional Common Units (excluding Common Units issued in
connection with conversion of Subordinated Units into Common Units) or an
equivalent number of securities ranking on a parity with the Common Units and
an unlimited number of partnership interests junior to the Common Units without
a Unitholder vote. The Partnership may also issue additional Common Units
during the Subordination Period in connection with certain acquisitions or the
repayment of certain indebtedness. After the Subordination Period, the
Partnership Agreement authorizes the General Partner to cause the Partnership
to issue an unlimited number of limited partner interests of any type without
the approval of any Unitholders.

 Quarterly Distributions of Available Cash

   The Partnership is expected to make quarterly cash distributions of all of
its Available Cash, generally defined as income (loss) before income taxes plus
depreciation and amortization, maintenance capital expenditures and net changes
in reserves established by the General Partner for future requirements. These
reserves are retained to provide for the proper conduct of the Partnership
business, or to provide funds for distributions with respect to any one or more
of the next four fiscal quarters.

   Distributions by the Partnership in an amount equal to 100% of its Available
Cash will generally be made 98% to the Common and Subordinated Unitholders and
2% to the General Partner, subject to the payment of incentive distributions to
the holders of Incentive Distribution Rights to the extent that certain target
levels of cash distributions are achieved. To the extent there is sufficient
Available Cash, the holders of Common Units have the right to receive the
Minimum Quarterly Distribution ($0.60 per Unit), plus any arrearages, prior to
any distribution of Available Cash to the holders of Subordinated Units. Common
Units will not accrue arrearages for any quarter after the Subordination Period
(as defined below) and Subordinated Units will not accrue any arrearages with
respect to distributions for any quarter.

   In general, the Subordination Period will continue indefinitely until the
first day of any quarter beginning after June 30, 2006 for the Senior
Subordinated Units and June 30, 2008 for the Junior Subordinated Units in which
distributions of Available Cash equal or exceed the Minimum Quarterly
Distribution on the Common Units and the Subordinated Units for each of the
three consecutive four-quarter periods immediately preceding such data. Prior
to the end of the Subordination Period, 828,342 Senior Subordinated Units will
convert to Common Units after June 30, 2004 and 143,136 Junior Subordinated
Units will convert to Common Units after June 30, 2006 and another 828,342
Senior Subordinated Units will convert to Common Units after June 30, 2005 and
143,136 Junior Subordinated Units will convert to Common Units after June 30,
2007, if distributions of Available Cash on the Common Units and Subordinated
Units equal or exceed the Minimum Quarterly Distribution for each of the three
consecutive four-quarter periods preceding such date. Upon expiration of the
Subordination Period, all remaining Subordinated Units will convert to Common
Units.

                                      F-23

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

   The Partnership is expected to make distributions of its Available Cash
within 45 days after the end of each fiscal quarter ending December, March,
June, and September to holders of record on the applicable record date. The
Partnership made distributions to unitholders amounting to $6,485 during the
six months ended March 31, 2002.

 Long-Term Incentive Plan

   An affiliate of Inergy's managing general partners adopted the Inergy Long-
Term Incentive Plan for employees, consultants, and directors of the managing
general partner and employees of its affiliates that perform services for
Inergy. The long-term incentive plan currently permits the grant of awards
covering an aggregate of 589,000 common units, which can be granted in the form
of unit options and/or restricted units; however, not more than 192,000
restricted units may be granted under the plan. With the exception of 28,038
unit options (exercise prices from $3.83 to $10.67) granted to non-executive
employees in exchange for option grants made by the predecessor in fiscal 1999,
all unit options and restricted units granted under the plan will vest no
sooner than, and in the same proportion as, Senior Subordinated Units convert
into Common Units as described above. The compensation committee of the
managing general partner's board of directors administers the plan.

 Restricted Units

   A restricted unit is a "phantom" unit that entitles the grantee to receive a
common unit upon the vesting of the phantom unit, or in the discretion of the
compensation committee, cash equivalent to the value of a common unit. In
general, restricted units granted to employees will vest three years from the
date of grant and are subject to the vesting provisions described above in
connection with the subordination period. In addition, the restricted units
will become exercisable upon a change of control of the managing general
partner or Inergy.

   The restricted units are intended to serve as a means of incentive
compensation for performance and not primarily as an opportunity to participate
in the equity appreciation of the common units. Therefore, plan participants
will not pay any consideration for the common units they receive, and Inergy
will receive no remuneration for the units.

   As of September 30, 2001 and March 31, 2002, there were no restricted units
issued under the long-term incentive plan.

 Unit Options

   Unit options issued under the long-term incentive plan will generally have
an exercise price equal to the fair market value of the units on the date of
grant. In general, unit options will expire after 10 years and are subject to
the vesting provisions described above in connection with the subordination
period. In addition, the unit options will become exercisable upon a change of
control of the managing general partner or Inergy. Subsequent to the Offering,
292,782 unit options were granted to various Inergy employees with exercise
prices ranging from $16.37 to $22.00 per unit. Total unit options outstanding
at September 30, 2001 were 321,820 with exercise prices ranging from $3.83 to
$22.00. During the six months ended March 31, 2002, 77,500 unit options were
granted with exercise prices ranging from $22.49 to $27.65. None of the
outstanding unit options were exercisable at September 30, 2001 or March 31,
2002.

   Inergy applies APB Opinion No. 25, Accounting for Stock Issued to Employees.
Inergy follows the disclosure only provision of SFAS No. 123, Accounting for
Stock-based Compensation. Pro forma net income (loss) and net income (loss) per
limited partner unit under the fair value method of accounting for equity
instruments under SFAS No. 123 would not be materially different from reported
net income (loss) and net income (loss) per limited partner unit.

                                      F-24

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

9. Employee Benefit Plans

   Inergy's subsidiaries have a 401(k) profit-sharing plan for those employees
who have completed one year of service and have attained the age of 21. The
plan permits employees to make contributions up to 15% of their salary and
provides for matching contributions by Inergy. Matching contributions made by
Inergy were $21, $52, and $101 as of September 30, 1999, 2000, and 2001,
respectively.

10. Commitments

   Inergy periodically enters into agreements to purchase fixed quantities of
liquid propane at fixed prices with suppliers. At September 30, 2001, the total
of these firm purchase commitments was approximately $40,244.

   At September 30, 2001, Inergy is contingently liable for letters of credit
outstanding totaling $900, which guarantees various trade activities.

11. Segments

   Inergy's financial statements reflect two reportable segments: retail sales
operations and wholesale sales operations. Inergy's retail sales operations
include propane sales to end users, the sale of propane-related appliances and
service work for propane-related equipment. The wholesale sales operations,
which originated in April 1999, provide marketing and distribution services to
other resellers of propane, including Inergy's retail operations. Inergy's
President and Chief Executive Officer has been identified as the Chief
Operating Decision Maker (CODM). The CODM evaluates performance and allocates
resources based on revenues and gross profit of each segment. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. All intersegment revenues and profits
associated with propane sales and other services between the wholesale and
retail segments have been eliminated.

   The identifiable assets associated with each reportable segment reviewed by
the CODM include accounts receivable and inventories. The net asset/liability
from price risk management, as reported in the accompanying consolidated
balance sheet, is related to the wholesale trading activities and is
specifically reviewed by the CODM. Capital expenditures, reported as purchases
of property, plant and equipment in the accompanying consolidated statements of
cash flows, substantially all relate to the retail sales segment. Inergy does
not report property, plant and equipment, intangible assets, and depreciation
and amortization by segment to the CODM.

   Revenues, gross profit, and identifiable assets for each of Inergy's
reportable segments are presented below.

                                           Six Months Ended March 31, 2002
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $77,229    $104,405    $(17,574)  $164,060
   Gross profit.....................   46,901       3,822        (450)    50,273
   Identifiable assets..............   19,292      21,410          --     40,702

                                      F-25

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

                                           Six Months Ended March 31, 2001
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $53,488    $143,623    $(26,672)  $170,439
   Gross profit.....................   24,251       6,802      (2,039)    29,014
   Identifiable assets..............   12,919      14,835      (1,477)    26,277

                                            Year Ended September 30, 2001
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $71,340    $187,521    $(35,722)  $223,139
   Gross profit.....................   34,633       8,747      (2,823)    40,557
   Identifiable assets..............    5,704      18,447          --     24,151

                                            Year Ended September 30, 2000
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $23,461    $ 78,517    $ (8,383)  $ 93,595
   Gross profit.....................   10,693       2,179        (913)    11,959
   Identifiable assets..............    5,006      11,623        (397)    16,232

                                            Year Ended September 30, 1999
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $ 9,860    $ 10,276    $   (925)  $ 19,211
   Gross profit.....................    4,946         511          --      5,457
   Identifiable assets..............    2,993       8,032        (925)    10,100

12. Subsequent Events

   Effective November 1, 2001, Inergy acquired substantially all of the assets
and assumed certain liabilities of Pro Gas Sales & Service, Spe-D Gas Company,
Great Lakes Propane Company and Ottawa LP Gas Company, four companies under
common control (collectively Pro Gas) $12.5 million in total consideration. Pro
Gas is a retail propane distributor located in central Michigan. Inergy
purchased Pro Gas with cash funded through its credit facility.

   Effective December 20, 2001, IPC Acquisition Corporation, a newly formed and
wholly-owned subsidiary of Inergy Holdings, LLC, purchased all of the
outstanding stock and assumed the outstanding debt of Independent Propane
Company, Inc. for total consideration of $84.8 million including working
capital acquired. Immediately thereafter, Inergy purchased from Inergy
Holdings, LLC substantially all of the assets and assumed certain liabilities
of IPC Acquisition Corporation for $74.6 million in cash, funded through its
credit facility, and the issuance of 759,620 common units with a fair value of
$19.7 million, and $2.5 million of assumed liabilities, for total consideration
of $96.8 million, including $7.5 million paid for working capital acquired (the
IPC Acquisition). The $10.3 million greater consideration paid by Inergy over
that paid by IPC Acquisition Corp. relates to the tax liability generated by
the sale of the assets by IPC Acquisition Corp. to Inergy. Independent Propane
Company, Inc. operates as a retail distributor of propane in seven states, with
its primary operations in Texas.

                                      F-26

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

   The following unaudited pro forma data summarize the results of operations
for the periods indicated as if the Pro Gas and IPC acquisitions had been
completed October 1, 2000 and 2001, the beginning of the 2001 and 2002 fiscal
years and as if the Hoosier Propane Group acquisition effective January 1, 2001
(see Note 2) had been completed October 1, 2000. The pro forma data give effect
to actual operating results prior to the acquisitions and adjustments to
interest expense, goodwill (amortization prior to the October 1, 2001 adoption
of SFAS No. 142) and customer accounts amortization, among other things. These
pro forma amounts do not purport to be indicative of the results that would
have actually been obtained if the acquisitions had occurred on October 1, 2000
and 2001 or that will be obtained in the future.

                                                               Six-Month Period
                                                  Year ended    Ended March 31,
                                                 September 30, -----------------
                                                     2001        2001     2002
                                                 ------------- -------- --------
                                                               
   Revenue......................................   $350,420    $242,327 $178,823
   Net income ..................................   $ 14,877      23,051   20,148

   As discussed in Note 4, Inergy's credit facility was amended in December
2001 in conjunction with the IPC Acquisition.

   On November 14, 2001, Inergy paid a distribution of $0.40 per Common and
Subordinated Unit with a proportionate amount to the 2% nonmanaging general
partner, or an aggregate of $2,337, including $47 to the nonmanaging general
partner.

13. Quarterly Financial Data (Unaudited)

   Summarized unaudited quarterly financial data is presented below. Inergy's
business is seasonal due to weather conditions in its service areas. Propane
sales to residential and commercial customers are affected by winter heating
season requirements, which generally results in higher operating revenues and
net income during the period from October through March of each year and lower
operating revenues and either net losses or lower net income during the period
from April through September of each year. Sales to industrial and agricultural
customers are much less weather sensitive.

                                                   Quarter Ended
                                     ------------------------------------------
                                     December 31 March 31 June 30  September 30
                                     ----------- -------- -------  ------------
                                                       
Fiscal 2001
  Revenues..........................   $72,411   $98,028  $21,803    $30,897
  Operating income (loss)...........     4,076    10,726   (2,200)    (2,078)
  Net income (loss).................     3,209     8,978   (4,162)    (3,676)
  Basic and diluted net income
   (loss) per limited partner unit
   for the period from July 31, 2001
   through September 30, 2001.......                                   (0.40)

Fiscal 2000
  Revenues..........................   $20,563   $29,894  $13,208    $29,930
  Operating income (loss)...........     1,198     2,225   (1,298)    (1,442)
  Net income (loss).................       698     1,663   (1,953)    (2,237)

                                      F-27

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Independent Propane Company Holdings:

   We have audited the accompanying consolidated balance sheets of Independent
Propane Company Holdings (a Delaware corporation) and subsidiaries (the
"Company") as of September 30, 2000 and 2001, and the related consolidated
statements of operations, changes in shareholders' deficit, and cash flows for
each of the three years in the period ended September 30, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Independent Propane Company
Holdings and subsidiaries as of September 30, 2000 and 2001, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2001, in conformity with accounting principles generally
accepted in the United States.

                                          /s/ ARTHUR ANDERSEN LLP

Dallas, Texas,
November 16, 2001

                                      F-28

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          September 30, 2000 and 2001

                                                        2000          2001
                                                    ------------  ------------
                      ASSETS
                                                            
CURRENT ASSETS:
  Cash............................................  $    809,997  $  1,003,667
  Accounts receivable, net of allowance for
   doubtful accounts of approximately $707,000 and
   $867,000, respectively.........................     5,831,190     5,772,793
  Inventories, net................................     3,601,690     3,324,495
  Other current assets............................       396,306       586,764
                                                    ------------  ------------
    Total current assets..........................    10,639,183    10,687,719
                                                    ------------  ------------
PROPERTY, PLANT, AND EQUIPMENT:
  Land............................................     1,663,412     1,515,322
  Buildings.......................................     2,666,662     2,747,273
  Office furniture and equipment..................     3,276,085     3,169,399
  Shop equipment..................................       950,540     1,232,236
  Tanks...........................................    37,083,629    38,166,897
  Vehicles........................................     9,122,812    10,028,647
                                                    ------------  ------------
                                                      54,763,140    56,859,774
  Less--Accumulated depreciation..................   (14,158,003)  (18,201,121)
                                                    ------------  ------------
    Net property, plant, and equipment............    40,605,137    38,658,653
                                                    ------------  ------------
GOODWILL, net of accumulated amortization of
 $5,175,632 and $6,840,356, respectively..........    20,702,730    19,216,266
NONCOMPETITION AGREEMENTS, net of accumulated
 amortization of $1,993,740 and $2,696,431,
 respectively.....................................     2,031,873     1,341,582
DEBT ISSUANCE COSTS, net of accumulated
 amortization of $1,373,892 and $1,730,298,
 respectively.....................................     1,039,870       683,464
OTHER NONCURRENT ASSETS, net......................       389,017       490,517
                                                    ------------  ------------
    Total assets..................................  $ 75,407,810  $ 71,078,201
                                                    ============  ============
      LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
  Accounts payable................................  $  5,322,396  $  4,879,937
  Accrued liabilities.............................     1,399,882     1,466,905
  Short-term notes payable........................       466,000            --
  Current maturities of long-term debt............     4,721,242     6,408,576
                                                    ------------  ------------
    Total current liabilities.....................    11,909,520    12,755,418
                                                    ------------  ------------
CUSTOMER DEPOSITS.................................       241,495       174,823
DEFERRED TAXES, net...............................       100,000       100,000
DIVIDENDS PAYABLE ON SERIES E SENIOR REDEEMABLE
 PREFERRED STOCK..................................     9,466,691    15,143,381
LONG-TERM DEBT, net of current maturities.........    56,687,136    48,557,593
SERIES E SENIOR REDEEMABLE PREFERRED STOCK, 35,000
 shares authorized, 29,000 issued and outstanding,
 $1,000 redemption and carrying value.............    29,000,000    29,000,000
COMMITMENTS AND CONTINGENCIES (Notes 9 and 12)
SHAREHOLDERS' DEFICIT:
  Common stock--par value $.01 per share, 170,613
   and 168,113 shares issued, respectively........         1,706         1,681
  Additional paid-in capital......................     1,221,127     1,221,152
  Retained deficit................................   (24,361,528)  (27,017,510)
                                                    ------------  ------------
                                                     (23,138,695)  (25,794,677)
  Treasury stock--86,033 shares, at cost..........    (8,858,337)   (8,858,337)
                                                    ------------  ------------
    Total shareholders' deficit...................   (31,997,032)  (34,653,014)
                                                    ------------  ------------
    Total liabilities and shareholders' deficit...  $ 75,407,810  $ 71,078,201
                                                    ============  ============

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                      F-29

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
             For the Years Ended September 30, 1999, 2000, and 2001

                                          1999          2000         2001
                                       -----------  ------------  -----------
                                                         
SALES:
  Propane............................. $37,685,218  $ 49,372,705  $67,358,523
  Other...............................   7,304,299     9,600,372    9,061,668
                                       -----------  ------------  -----------
    Total sales.......................  44,989,517    58,973,077   76,420,191
                                       -----------  ------------  -----------
COST OF SALES:
  Propane.............................  12,405,337    24,078,875   34,130,449
  Other...............................   3,631,276     4,249,833    3,630,779
                                       -----------  ------------  -----------
    Total cost of sales...............  16,036,613    28,328,708   37,761,228
                                       -----------  ------------  -----------
GROSS PROFIT..........................  28,952,904    30,644,369   38,658,963

OPERATING EXPENSES:
  Selling, general, and
   administrative.....................  21,305,182    21,922,915   22,321,832
  Depreciation and amortization.......   5,544,293     6,883,411    7,018,730
                                       -----------  ------------  -----------
    Total operating expenses..........  26,849,475    28,806,326   29,340,562
                                       -----------  ------------  -----------
OPERATING PROFIT......................   2,103,429     1,838,043    9,318,401
INTEREST EXPENSE, net.................   5,094,672     7,393,941    6,297,693
                                       -----------  ------------  -----------
NET INCOME (LOSS) BEFORE INCOME
 TAXES................................  (2,991,243)   (5,555,898)   3,020,708
INCOME TAXES..........................          --            --           --
                                       -----------  ------------  -----------
NET INCOME (LOSS).....................  (2,991,243)   (5,555,898)   3,020,708
LESS: DIVIDENDS ON PREFERRED STOCK....  (4,309,777)   (4,945,571)  (5,676,690)
                                       -----------  ------------  -----------
NET LOSS AVAILABLE TO COMMON
 SHAREHOLDERS......................... $(7,301,020) $(10,501,469) $(2,655,982)
                                       ===========  ============  ===========

NET LOSS PER COMMON SHARE:
  Basic and diluted................... $    (42.13) $     (61.07) $    (15.68)

WEIGHTED AVERAGE NUMBER OF COMMON
 SHARES AND COMMON SHARE EQUIVALENTS
 OUTSTANDING:
  Basic and diluted...................     173,304       171,959      169,363

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

                                      F-30

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
             For the Years Ended September 30, 1999, 2000, and 2001

                                 Additional                                Total
                         Common   Paid-in     Retained     Treasury    Shareholders'
                         Stock    Capital     Deficit        Stock        Equity
                         ------  ---------- ------------  -----------  -------------
                                                        
BALANCE, September 30,
 1998................... $1,733  $1,221,100 $ (6,559,039) $(8,858,337) $(14,194,543)
  Preferred stock
   dividends............     --          --   (4,309,777)          --    (4,309,777)
  Net loss..............     --          --   (2,991,243)          --    (2,991,243)
                         ------  ---------- ------------  -----------  ------------
BALANCE, September 30,
 1999...................  1,733   1,221,100  (13,860,059)  (8,858,337)  (21,495,563)
  Cancellation of
   subscription
   receivable...........    (27)         27           --           --            --
  Preferred stock
   dividends............     --          --   (4,945,571)          --    (4,945,571)
  Net loss..............     --          --   (5,555,898)          --    (5,555,898)
                         ------  ---------- ------------  -----------  ------------
BALANCE, September 30,
 2000...................  1,706   1,221,127  (24,361,528)  (8,858,337)  (31,997,032)
  Cancellation of
   subscription
   receivable...........    (25)         25           --           --            --
  Preferred stock
   dividends............     --          --   (5,676,690)          --    (5,676,690)
  Net income............     --          --    3,020,708           --     3,020,708
                         ------  ---------- ------------  -----------  ------------
BALANCE, September 30,
 2001................... $1,681  $1,221,152 $(27,017,510) $(8,858,337) $(34,653,014)
                         ======  ========== ============  ===========  ============

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                      F-31

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
            For the Years Ended September 30, 1999 , 2000, and 2001

                                            1999         2000         2001
                                        ------------  -----------  -----------
                                                          
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss).................... $ (2,991,243) $(5,555,898) $ 3,020,708
  Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities--
    Depreciation and amortization......    5,544,293    6,883,411    7,018,730
    Amortization of debt issuance
     costs.............................      707,265      389,508      356,406
    Changes in, (net of effects from
     acquisitions)--
      Accounts receivable, net.........   (1,019,744)  (2,090,924)      58,397
      Inventories, net.................     (398,640)    (308,756)     277,195
      Other current assets.............     (103,580)      (5,883)    (190,458)
      Accounts payable and accrued
       liabilities.....................    1,174,654    1,517,475     (375,436)
      Customer deposits................       14,150      (45,224)     (66,672)
                                        ------------  -----------  -----------
        Net cash provided by operating
         activities....................    2,927,155      783,709   10,098,870
                                        ------------  -----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures, net............   (3,739,147)  (2,799,446)  (2,736,547)
  Net cash paid in acquisitions........  (18,675,845)  (5,273,317)          --
  (Increase) decrease in other
   noncurrent assets...................      580,909       18,588     (260,444)
                                        ------------  -----------  -----------
        Net cash used in investing
         activities....................  (21,834,083)  (8,054,175)  (2,996,991)
                                        ------------  -----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on short-term notes
   payable.............................     (160,000)  (1,212,000)    (466,000)
  Net (payments) proceeds from credit
   agreement...........................   19,490,330   10,200,878   (4,382,528)
  Proceeds from long-term debt.........      959,873           --           --
  Payments on long-term debt...........   (1,393,486)  (1,601,984)  (2,059,681)
  Debt issuance costs..................     (134,148)      (8,445)          --
                                        ------------  -----------  -----------
        Net cash (used in) provided by
         financing activities..........   18,762,569    7,378,449   (6,908,209)
                                        ------------  -----------  -----------
NET INCREASE (DECREASE) IN CASH........     (144,359)     107,983      193,670
CASH, beginning of period..............      846,373      702,014      809,997
                                        ------------  -----------  -----------
CASH, end of period.................... $    702,014  $   809,997  $ 1,003,667
                                        ============  ===========  ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
  Cash paid during the year for
   interest............................ $  4,340,771  $ 6,904,101  $ 5,864,832
  Noncash activities--
    Debt issued in acquisitions........ $  1,919,000  $   696,500  $        --
    Preferred stock dividends.......... $  4,309,777  $ 4,945,571  $ 5,676,690

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                      F-32

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 2000 and 2001

1. The Company:

   Independent Propane Company Holdings, a Delaware corporation, and
subsidiaries (the "Company"), is a distributor of propane gas and related
merchandise with operations primarily in the Southern and Southeastern United
States. At September 30, 2001, the Company had 44 branch locations and 24
satellite locations. The Company's business expansion to date has occurred
mainly through the acquisitions of other propane outlets. Acquisitions which
occurred during the periods presented in the accompanying consolidated
financial statements are discussed in Note 6.

2. Summary of Significant Accounting Policies:

 Consolidation

   All significant intercompany accounts and transactions have been eliminated
in the accompanying consolidated financial statements.

 Inventories

   Inventories are stated at the lower of cost (weighted average for propane
and first-in, first-out for merchandise) or market.

 Property, Plant, and Equipment

   Property, plant, and equipment are stated at cost. Depreciation on property,
plant, and equipment is calculated using the straight-line method over the
estimated useful lives of the assets. Original cost and related accumulated
depreciation are removed from the accounts in the year assets are retired.
Maintenance and repairs are charged to expense as incurred.

 Intangibles

   Intangible assets include the cost of noncompetition agreements and purchase
price in excess of the estimated fair value of net assets acquired
("goodwill"). The cost of noncompetition agreements is being amortized over
periods of 2 to 7 years, while goodwill is being amortized over 15 years, using
the straight-line method.

 Accounting for the Impairment of Long-Lived Assets

   In accordance with 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," the Company records impairment for losses on its
long-lived assets and goodwill when events or circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of the assets. No
such impairment losses have been recognized to date.

 Debt Issuance Costs

   Debt issuance costs incurred in connection with obtaining and amending the
debt are being amortized over the life of the related loan and are included in
interest expense in the accompanying consolidated statements of operations.

                                      F-33

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 Income Taxes

   Deferred income taxes are recorded, where appropriate, to reflect the
estimated future tax effects of differences between financial statement bases
and tax bases of assets and liabilities.

 Revenue Recognition

   Propane sales are recognized when the product is delivered to the customer.
Other revenue, which primarily includes other fuel sales, merchandise sales,
and tank rental income, is recognized when products are delivered and as
services are rendered.

 Use of Estimates

   The preparation of these consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.

 Credit Concentration

   The Company generally extends credit to its retail customers through
delivery into company and customer owned propane tanks. No individual customer
comprises more than 5% of the Company's business thus reducing the risk as a
result of the large volume of customers. Provisions for doubtful accounts
receivable are reflected in the consolidated financial statements and have
generally been within management's expectations.

 Fair Value of Financial Instruments

   The Company enters into various financial instruments in the normal course
of business. The carrying values of the Company's short-term financial
instruments, including cash, receivables, and short-term notes payable
approximate their fair value because of the short maturity of the instruments.
The carrying value of the long-term debt approximates fair value because of its
variable interest rate.

 New Accounting Standard

   In July 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was
issued. The Company is required to adopt this new standard at the beginning of
fiscal 2003, although early adoption is permitted at the beginning of fiscal
2002. Subsequent to the adoption of SFAS No. 142, recorded goodwill is not
amortized. Adoption of the standard also includes transitional impairment
testing of previously recorded goodwill. The Company has not early adopted this
new standard and has not determined if impairment of goodwill will be required
at the date of adoption.

3. Inventories:

   As of September 30, 2000 and 2001, inventories consisted of:

                                                            2000        2001
                                                         ----------  ----------
                                                               
   Propane.............................................. $2,080,454  $1,845,677
   Merchandise..........................................  1,616,826   1,585,827
   Other fuels..........................................    164,410     152,991
   Reserves.............................................   (260,000)   (260,000)
                                                         ----------  ----------
                                                         $3,601,690  $3,324,495
                                                         ==========  ==========

                                      F-34

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Property, Plant, and Equipment:

   A summary of the estimated useful lives utilized for depreciation purposes
is as follows:

                                                                       Estimated
                                                                         Lives
                                                                        (Years)
                                                                       ---------
                                                                    
   Buildings..........................................................       40
   Office furniture and equipment.....................................  5 to 10
   Shop equipment.....................................................       10
   Tanks..............................................................       20
   Vehicles...........................................................        5

   Depreciation expense related to property, plant, and equipment in 1999,
2000, and 2001 was approximately $3,759,000, $4,658,000, and $4,363,000,
respectively. Certain of the Company's property, plant, and equipment has been
pledged as security under certain long-term debt agreements and the Amended and
Restated Credit Agreement (see Note 8).

5. Intangibles:

   As of September 30, 2000 and 2001, intangibles consisted primarily of
goodwill and noncompetition agreements (see Note 2). Amortization expense
related to intangible assets for 1999, 2000, and 2001 totaled approximately
$1,785,000, $2,225,000, and $2,656,000, respectively.

6. Acquisitions:

   In fiscal 2000, the Company acquired assets of nine Texas propane companies.
The total purchase price for those acquisitions included approximately
$6,044,000 in cash and $697,000 in promissory notes with terms ranging from 1
to 7 years. In fiscal 2001, the Company did not complete any acquisitions.

   In connection with one acquisition, the Company also entered into a certain
noncompetition agreement with the previous owner for approximately $235,000 for
7 years. Purchase price in excess of the fair value of assets acquired of
approximately $3,067,000 was allocated to intangible assets.

7. Short-Term Notes Payable:

   As of September 30, 2000 and 2001, short-term notes payable consisted of
notes payable, at varying interest rates, to previous owners of acquired
companies totaling $466,000 and $0, respectively, payable within one year of
the related acquisition date.

                                      F-35

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Long-Term Debt:

   As of September 30, 2000 and 2001 long-term debt consisted of the following:

                                                            2000        2001
                                                         ----------- -----------
                                                               
Revolving line of credit up to a maximum of $21,000,000
 at September 30, 2000 and 2001, matures on September
 30, 2003, requires monthly payments of interest at
 either the Bank Prime Loan Rate or LIBOR, plus an
 incremental interest rate of up to 4% (10.6% and 7.1%
 at September 30, 2000 and 2001, respectively).........  $17,724,262 $16,541,734
Term A Loan, matures on September 30, 2003, requires
 quarterly payments of principal and interest at either
 the Bank Prime Loan Rate or LIBOR, plus an incremental
 interest rate of up to 4% (10.6% and 7.1% at September
 30, 2000 and 2001, respectively), quarterly
 installments range from $50,000 beginning after June
 30, 2000, to $2,500,000 beginning after December 31,
 2002..................................................   19,000,000  16,000,000
Term B Loan, matures on September 30, 2003, requires
 quarterly payments of principal and interest at either
 the Bank Prime Loan Rate or LIBOR, plus an incremental
 interest rate of up to 4% (10.6% and 7.1% at September
 30, 2000 and 2001, respectively), payable quarterly in
 installments of 0.25% of Term B loan outstanding......   19,650,000  19,450,000
Notes payable to sellers for acquisitions, mature on
 various dates from February 2001 through June 2010,
 principal and interest varying from 8% to 12% payable
 in monthly installments...............................    4,143,209   2,611,987
Other..................................................      890,907     362,448
                                                         ----------- -----------
                                                          61,408,378  54,966,169
Less--Current maturities...............................    4,721,242   6,408,576
                                                         ----------- -----------
Total long-term debt, net of current maturities........  $56,687,136 $48,557,593
                                                         =========== ===========

   The Company has a credit agreement which consists of a revolving line of
credit, Term A loan, and Term B loan (collectively, the "Credit Agreement").
The Credit Agreement matures on September 30, 2003, and is collateralized by
the assets of the Company.

   The Credit Agreement contains various financial covenants under which the
Company is obligated. These financial covenants, among others, include
requirements for debt to cash flow, interest coverage, and fixed charge
coverage. As of September 30, 2001, the Company is in compliance with these
covenants.

   At September 30, 2000 and 2001, the weighted average interest rate for
outstanding balances under this agreement equaled 10.6% and 7.2%, respectively.

   As part of the Credit Agreement, the lender received a warrant to purchase
100 shares of Series D Convertible Preferred Stock (see Note 12). The lender
also invested $1,000,000 in exchange for Series E Preferred Stock and a related
warrant.

                                      F-36

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   Principal maturities of long-term debt outstanding at September 30, 2001,
over the next five fiscal years and thereafter are as follows:

                                                                  
   2002............................................................. $ 6,408,576
   2003.............................................................  47,836,207
   2004.............................................................     263,561
   2005.............................................................     189,356
   2006.............................................................     116,607
   Thereafter.......................................................     151,862
                                                                     -----------
                                                                     $54,966,169
                                                                     ===========

9. Leases:

   The Company rents most of its office and branch location space under leases
which range from 1 to 15 years. The Company also leases vehicles, equipment,
and land under leases ranging from 6 months to 15 years. At September 30, 2001,
the Company was committed to make future rental payments under several long-
term operating lease agreements. The future minimum payments required over the
next five fiscal years and thereafter are summarized below:

                                                                  
   2002............................................................. $  909,784
   2003.............................................................    833,316
   2004.............................................................    688,668
   2005.............................................................    571,441
   2006.............................................................    229,369
   Thereafter.......................................................    290,675
                                                                     ----------
   Total minimum lease payments..................................... $3,523,253
                                                                     ==========

   Total rent expense for the years ended September 30, 1999, 2000, and 2001,
was approximately $820,000, $848,000, and $797,000, respectively, and is
included in selling, general, and administrative expenses.

10. Income Taxes:

   The Company recorded no income tax benefit for the years ended September 30,
1999 and 2000, due to an offsetting amount increasing the valuation allowance.
The Company made no provision for income taxes for the year ended September 30,
2001, due to the utilization of the net operating loss carryforward and a
corresponding reduction in the valuation allowance.

   As of September 30, 2000 and 2001, the tax effects of temporary differences
which gave rise to the net deferred income tax liability were as follows:

                                                         2000         2001
                                                      -----------  -----------
                                                             
   Allowance for doubtful accounts................... $   240,380  $   294,780
   Property, plant, and equipment....................  (2,007,482)  (2,331,079)
   Net operating loss carryforwards..................   4,458,587    3,464,470
   Other.............................................     (58,380)      35,567
   Valuation allowance...............................  (2,733,105)  (1,563,738)
                                                      -----------  -----------
     Net noncurrent deferred tax liability........... $  (100,000) $  (100,000)
                                                      ===========  ===========

                                      F-37

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   As of September 30, 2001, the Company had net operating loss carryforwards
of approximately $10,190,000 for federal income tax purposes. The Company's
income tax provision differed from the federal statutory rate of 34% due to the
establishment of a valuation allowance for the net operating loss
carryforwards, the realization of which cannot be assured at this time.
Substantially all of the net operating loss carryforwards at September 30,
2001, are subject to certain limitations under Internal Revenue Code Section
382.

11. Other Related-Party Transactions:

   For the years ended September 30, 1999, 2000, and 2001, the Company had
purchased legal services totaling approximately $102,000, $86,000, and $32,000,
respectively, from certain shareholders. These legal costs were primarily
associated with the various acquisitions, and the amendments to the Credit
Agreement.

   As of September 30, 1999, 2000, and 2001, in connection with the sale of
stock, the Company had a note receivable from officers of the Company totaling
$653,650, $250,000, and $0, respectively, which are included as a reduction in
additional paid-in capital. The notes bore interest at 8%.

12. Put Warrants:

   In connection with the Credit Agreement, the lender received a warrant to
purchase 100 shares of the Series D Convertible Preferred Stock, $.01 par
value, at an exercise price of $1.00 per share. The warrant is exercisable from
September 11, 1998, through September 11, 2008. The holder of the warrant has
the right to put its warrant to the Company at a price as defined in the Credit
Agreement. The put exercise period is anytime after September 11, 2003. The
warrant is adjusted annually to its fair market value through earnings.

   Series E Senior Redeemable Preferred Stock (Note 13) includes warrants to
purchase 82,492 shares of common stock at an exercise price of $.01 per share.
The warrants may be exercised at any time up to the expiration date of
September 11, 2008. These warrants have a put feature that allows the holder to
put the warrants to the Company after September 11, 2003, at current market
price as defined in the stock purchase agreement. The warrants are adjusted
annually to their fair market value through earnings.

   The fair market value assigned to the warrants upon issuance was $0 and
there has been no change in market value since their issuance.

13. Series E Redeemable Preferred Stock:

   Series E Senior Redeemable Preferred Stock ("Series E") consist of 35,000
designated shares of which 29,000 were issued and outstanding as of September
30, 2000 and 2001. Each share of Series E stock has a liquidation value of
$1,000 plus accrued and unpaid dividends. Dividends accrue at a rate of 14% per
year and are compounded on a quarterly basis and totaled approximately
$15,144,000 at September 30, 2001. Series E stock has an optional redemption
feature that allows the Company to redeem shares at a percentage of liquidation
value. These percentages range from 112% in 1998, to 100% in 2004 and
thereafter, and the percentage reduces 2% per year for all years between 1998
and 2004. The Series E stock is mandatorily redeemed beginning August 31, 2003,
in 6.25% increments of original shares outstanding at the issuance date,
payable quarterly. Any remaining shares outstanding as of August 31, 2005, must
be redeemed in full as of that date.

                                      F-38

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Shareholders' Deficit:

   As of September 30, 2000 and 2001, the Company's authorized capital
structure consisted of 500,000 shares of common stock and 50,000 shares of
preferred stock, all of which have a par value of $.01 per share. Following is
a summary of each class of stock:

  . Common stock--500,000 authorized shares of which 170,613 and 168,113
    shares were issued as of September 30, 2000 and 2001, respectively,
    including 86,033 treasury shares.

  . Series D Convertible Preferred Stock ("Series D")--100 shares designated
    of which no shares are issued. Each share of Series D stock has no
    dividends, unless declared by the Board of Directors of the Company. The
    Series D stock can also be converted into a total of 7,228 shares of
    common stock.

   Certain current and former employees of the Company and other individuals
have stock options exercisable beginning at a date subject to the grant date
and vesting period. The remaining 1,250 unvested stock options vest in March
2002. These options are to purchase shares of common stock of the Company at
values from $5 to $165 per share. At September 30, 2001, the Company had
allocated 28,044 shares of common stock for issuance under the plan. During
2001, 5,000 options were granted that qualify for variable accounting
treatment, which requires the recognition of compensation expense based on
changes in the fair value of the common stock. During 2001, no compensation
expense was recognized. A summary of stock option activity for the years ended
September 30, 1999, 2000, and 2001, is presented in the table below:

                                September 30,   September 30,   September 30,
                                    1999            2000            2001
                               --------------- --------------- ---------------
                                      Weighted        Weighted        Weighted
                                      Average         Average         Average
                                      Exercise        Exercise        Exercise
                               Shares  Price   Shares  Price   Shares  Price
                               ------ -------- ------ -------- ------ --------
                                                    
Outstanding, beginning of
 year......................... 8,299  $121.58  8,299  $121.58  6,210  $106.97
  Granted.....................    --       --     --       --  5,000     5.00
  Exercised...................    --       --     --       --     --       --
  Expired.....................    --       --     --       --  3,044   100.00
  Cancelled...................    --       --  2,089   165.00  2,500   100.00
                               -----  -------  -----  -------  -----  -------
Outstanding, end of year...... 8,299  $121.58  6,210  $106.97  5,666  $ 23.81
                               =====  =======  =====  =======  =====  =======
Exercisable at end of year.... 4,335  $109.99  4,960  $108.73  4,416  $ 29.13
                               =====  =======  =====  =======  =====  =======

   The Company has elected to account for stock-based compensation programs
using the intrinsic value method under Accounting Principles Board Opinion No.
25. The following pro forma disclosures are presented to reflect amounts as if
the fair value method defined in SFAS No. 123 were applied:

                                                  September 30,
                                       --------------------------------------
                                          1999          2000         2001
                                       -----------  ------------  -----------
                                                         
Net loss available to common
 shareholders......................... $(7,792,528) $(10,764,686) $(2,718,513)
Net loss per common share--basic and
 diluted.............................. $    (44.96) $     (62.60) $    (16.05)

   The Company used the minimum value method to estimate the fair values of
options for the above pro forma information. For purposes of the minimum value
method, the Company used risk-free interest rates of 6.7%, 5.1% and 6.3%,
respectively, assumed no volatility or future dividends, and assumed the
expected life of the options to be through the applicable expiration dates.

                                      F-39

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   The following table summarized information about stock options outstanding
at September 30, 2001:

                                                                                Remaining
         Exercise            Number                    Number                  Contractual
          Price            Outstanding               Exercisable                  Life
         --------          -----------               -----------               -----------
                                                                      
          $5.00               5,000                     3,750                      9.1
         $165.00               666                       666                       1.9

15. Subsequent Events (Unaudited):

   On December 19, 2001, IPCH Acquisition Corp., a newly formed and wholly
owned subsidiary of Inergy Holdings, LLC purchased all of the outstanding stock
and assumed the outstanding debt of the Company.

                                      F-40

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Domex, Inc., Investors 300, Inc., L & L Leasing, Inc.

   We have audited the accompanying combined balance sheets as of September 30,
1999 and 2000 and December 31, 2000, of Domex, Inc., Investors 300, Inc. and
L & L Leasing, Inc. (the "Hoosier Propane Group"), and the related combined
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 2000 and the three months ended
December 31, 2000. These financial statements are the responsibility of the
Hoosier Propane Group's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the combined financial position at September 30, 1999
and 2000 and December 31, 2000, of the Hoosier Propane Group, and the combined
results of their operations and their cash flows for each of the three years in
the period ended September 30, 2000 and the three months ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States.

                                          /s/ ERNST & YOUNG LLP

Kansas City, Missouri
May 2, 2001

                                      F-41

                             HOOSIER PROPANE GROUP

                            COMBINED BALANCE SHEETS
                       (In thousands, except share data)

                                                 September 30,
                                               ------------------  December 31,
                                                 1999      2000        2000
                                               --------  --------  ------------
                                                          
               ASSETS (Note 3)
Current assets:
 Cash and cash equivalents...................  $    777  $    702    $  1,711
 Marketable securities.......................       424       460         453
 Accounts receivable.........................     2,482     4,423      13,134
 Inventories.................................     7,537     2,301       3,172
 Prepaid expenses and other current assets...       211       491         207
                                               --------  --------    --------
Total current assets.........................    11,431     8,377      18,677
Property, plant and equipment:
 Land and buildings..........................     2,283     2,310       2,310
 Office furniture and equipment..............       698       704         704
 Vehicles....................................    11,894    12,296      12,363
 Tanks and plant equipment...................    17,523    18,215      18,401
                                               --------  --------    --------
                                                 32,398    33,525      33,778
 Less accumulated depreciation...............   (10,291)  (11,299)    (11,643)
                                               --------  --------    --------
                                                 22,107    22,226      22,135
Intangible assets (Note 2)...................     1,566     1,566       1,566
 Less accumulated amortization...............      (119)     (223)       (249)
                                               --------  --------    --------
                                                  1,447     1,343       1,317
Notes receivable from stockholders (Note 6)..       352       292         285
Other assets.................................       742       879         884
                                               --------  --------    --------
Total assets.................................  $ 36,079  $ 33,117    $ 43,298
                                               ========  ========    ========
    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Notes payable to bank (Note 3)..............  $  3,000  $  1,575    $  5,575
 Accounts payable............................     2,204     1,552       7,576
 Customer deposits...........................     3,678     3,927       2,626
 Accrued expenses............................       689       933       1,460
 Notes payable to stockholders (Note 6)......       --        --          995
 Current portion of long-term debt (Note 3)..       803     4,950       4,668
                                               --------  --------    --------
Total current liabilities....................    10,374    12,937      22,900

Long-term debt, less current portion (Note
 3)..........................................     8,740     2,609       1,600

Notes payable to stockholders (Note 6).......     1,265     1,065         --

Stockholders' equity:
 Common stock, no par value (Note 4).........     1,218     1,218       1,218
 Retained earnings...........................    15,735    16,506      18,805
 Accumulated other comprehensive income......       359       394         387
 Less 520 shares of treasury stock, at cost..    (1,612)   (1,612)     (1,612)
                                               --------  --------    --------
Total stockholders' equity...................    15,700    16,506      18,798
                                               --------  --------    --------
Total liabilities and stockholders' equity...  $ 36,079  $ 33,117    $ 43,298
                                               ========  ========    ========

                            See accompanying notes.

                                      F-42

                             HOOSIER PROPANE GROUP

                         COMBINED STATEMENTS OF INCOME
                                 (In thousands)

                                  Year Ended September      Three Months Ended
                                           30,                 December 31,
                                 -------------------------  -------------------
                                  1998     1999     2000       1999      2000
                                 -------  -------  -------  ----------- -------
                                                            (Unaudited)
                                                         
Revenue:
 Propane.......................  $50,646  $38,792  $58,712    $19,050   $29,174
 Freight.......................    4,806    4,530    5,669      1,367     2,037
 Other.........................      288      356    1,214        363       330
                                 -------  -------  -------    -------   -------
                                  55,740   43,678   65,595     20,780    31,541

Cost of product sold...........   42,823   28,889   49,049     15,604    25,172
                                 -------  -------  -------    -------   -------
Gross profit...................   12,917   14,789   16,546      5,176     6,369

Operating and administrative
 expenses......................    7,617    8,274    9,375      2,493     2,538
Depreciation and amortization..    1,529    1,690    1,623        389       373
                                 -------  -------  -------    -------   -------
Operating income...............    3,771    4,825    5,548      2,294     3,458

Other income (expense):
 Interest expense..............     (594)    (941)  (1,029)      (287)     (246)
 Interest and dividend income..      239      205      230         32        57
 Gain (loss) on sale of
  property, plant and
  equipment....................      (43)     (63)      51         17        10
 Other income, net.............      158      130      184         81        90
                                 -------  -------  -------    -------   -------
                                    (240)    (669)    (564)      (157)      (89)
                                 -------  -------  -------    -------   -------
Net income.....................  $ 3,531  $ 4,156  $ 4,984    $ 2,137   $ 3,369
                                 =======  =======  =======    =======   =======

                            See accompanying notes.

                                      F-43

                             HOOSIER PROPANE GROUP

                  COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (In thousands)

                                            Accumulated
                                               Other                   Total
                          Common Retained  Comprehensive Treasury  Stockholders'
                          Stock  Earnings     Income      Stock       Equity
                          ------ --------  ------------- --------  -------------
                                                    
Balance at September 30,
 1997...................  $1,218 $13,477       $510      $(1,612)     $13,593
Net income..............     --    3,531        --           --         3,531
Net unrealized loss on
 available-for-sale
 securities.............     --      --         (77)         --           (77)
                                                                      -------
Comprehensive income....                                                3,454
Distributions to
 stockholders...........     --   (3,137)       --           --        (3,137)
                          ------ -------       ----      -------      -------
Balance at September 30,
 1998...................   1,218  13,871        433       (1,612)      13,910
Net income..............     --    4,156        --           --         4,156
Net unrealized loss on
 available-for-sale
 securities.............     --      --         (74)         --           (74)
                                                                      -------
Comprehensive income....                                                4,082
Distributions to
 stockholders...........     --   (2,292)       --           --        (2,292)
                          ------ -------       ----      -------      -------
Balance at September 30,
 1999...................   1,218  15,735        359       (1,612)      15,700
Net income..............     --    4,984        --           --         4,984
Net unrealized gain on
 available-for-sale
 securities.............     --      --          35          --            35
                                                                      -------
Comprehensive income....                                                5,019
Distributions to
 stockholders...........     --   (4,213)       --           --        (4,213)
                          ------ -------       ----      -------      -------
Balance at September 30,
 2000...................   1,218  16,506        394       (1,612)      16,506
Net income..............     --    3,369        --           --         3,369
Net unrealized loss on
 available-for-sale
 securities.............     --      --          (7)         --            (7)
                                                                      -------
Comprehensive income....                                                3,362
Distributions to
 stockholders...........     --   (1,070)       --           --        (1,070)
                          ------ -------       ----      -------      -------
Balance at December 31,
 2000...................  $1,218 $18,805       $387      $(1,612)     $18,798
                          ====== =======       ====      =======      =======

                            See accompanying notes.

                                      F-44

                             HOOSIER PROPANE GROUP

                       COMBINED STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                 Year Ended September      Three Months Ended
                                          30,                 December 31,
                                -------------------------  -------------------
                                 1998     1999     2000       1999      2000
                                -------  -------  -------  ----------- -------
                                                           (Unaudited)
                                                        
Operating activities
Net income....................  $ 3,531  $ 4,156  $ 4,984    $ 2,137   $ 3,369
Adjustments to reconcile net
 income to net cash provided
 by (used in) operating
 activities:
  Depreciation................    1,515    1,586    1,519        363       347
  Amortization................       14      104      104         26        26
  (Gain) loss on sale of
   property, plant and
   equipment..................       43       63      (51)       (17)      (10)
  Changes in operating assets
   and liabilities:
   Accounts receivable........     (244)     397   (1,941)    (3,698)   (8,711)
   Inventories................    3,909   (2,557)   5,236      4,214      (871)
   Prepaid expenses and other
    current assets............     (277)     232     (280)       197       284
   Other assets...............      545      (50)    (137)       (12)       (5)
   Accounts payable...........    1,240   (1,157)    (652)     1,069     6,024
   Customer deposits..........   (1,617)  (1,605)     249       (986)   (1,301)
   Accrued expenses...........      186      (17)     243        441       527
                                -------  -------  -------    -------   -------
Net cash provided by (used in)
 operating activities.........    8,845    1,152    9,274      3,734      (321)
Investing activities
Acquisitions..................   (1,266)  (3,850)     --         --        --
Purchases of property, plant
 and equipment................   (2,697)  (2,361)  (1,935)      (709)     (278)
Proceeds from sale of
 property, plant and
 equipment....................      172      385      348         89        32
Purchases of short-term
 investments..................     (901)     --       --         --        --
Proceeds from sale of short-
 term investments.............      --       901      --         --        --
Collections on note receivable
 from stockholder.............       44       32       60          5         7
                                -------  -------  -------    -------   -------
Net cash used in investing
 activities...................   (4,648)  (4,893)  (1,527)      (615)     (239)
Financing activities
Proceeds from issuance of
 notes payable................      --     3,000    2,575      1,000     4,000
Principal payments on notes
 payable......................      --       --    (4,000)    (2,000)      --
Proceeds from issuance of
 long-term debt...............    2,000    5,000      500        500       --
Principal payments on long-
 term debt....................   (1,503)  (3,168)  (2,484)      (176)   (1,291)
Principal payments on notes
 payable to stockholders......      --       --      (200)       --        (70)
Distributions to
 stockholders.................   (3,137)  (2,292)  (4,213)      (331)   (1,070)
                                -------  -------  -------    -------   -------
Net cash provided by (used in)
 financing activities.........   (2,640)   2,540   (7,822)    (1,007)    1,569
                                -------  -------  -------    -------   -------
Net increase (decrease) in
 cash and cash equivalents....    1,557   (1,201)     (75)     2,112     1,009
Cash and cash equivalent at
 beginning of period..........      421    1,978      777        777       702
                                -------  -------  -------    -------   -------
Cash and cash equivalents at
 end of period................  $ 1,978  $   777  $   702    $ 2,889   $ 1,711
                                =======  =======  =======    =======   =======
Supplemental disclosure of
 cash flow information
Cash paid for interest during
 the period...................  $   596  $   937  $ 1,042    $   224   $   245
                                =======  =======  =======    =======   =======
Supplemental schedule of
 noncash financing activity
Acquisition of covenants not
 to compete through the
 issuance of noncompete
 obligations..................  $   949  $   --   $   --     $   --    $   --
                                =======  =======  =======    =======   =======
Note payable issued to seller
 of acquired company..........  $   200  $   --   $   --     $   --    $   --
                                =======  =======  =======    =======   =======

                            See accompanying notes.

                                      F-45

                             HOOSIER PROPANE GROUP

                     NOTES TO COMBINED FINANCIAL STATEMENTS
               (Information pertaining to the three months ended
                        December 31, 1999 is unaudited)
                        (In thousands except share data)

1. Significant Accounting Policies

 Principles of Combination

   The combined financial statements of the Hoosier Propane Group include the
accounts of three companies under common ownership: Domex, Inc., Investors 300,
Inc. and L & L Leasing, Inc. (collectively referred to as the Hoosier Propane
Group). All significant intercompany accounts and transactions have been
eliminated in the combination. Although Domex, Inc.'s year end has historically
been October 31, Investors 300, Inc.'s year end has historically been September
30, and L & L Leasing, Inc.'s year end has historically been December 31, all
accounts have been presented in these combined financial statements as of
September 30, 1999 and 2000 and December 31, 2000 and for each of the three
years in the period ended September 30, 2000 and the three months ended
December 31, 1999 and 2000.

 Business Activities and Credit Concentrations

   The Hoosier Propane Group is involved in the transportation and wholesale
and retail distribution of propane gas. The Hoosier Propane Group also builds
and services trucks used to transport propane gas. The Hoosier Propane Group
generally extends unsecured credit to their wholesale customers in the
midwestern United States. Credit is generally extended to retail customers
through delivery into company and customer owned propane gas storage tanks.

 Unaudited Financial Information

   The financial information for the three-month period ended December 31, 1999
contained herein is unaudited. The Hoosier Propane Group believes this
information has been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
Article 10 of Regulation S-X. The Hoosier Propane Group also believes this
information includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods then ended.

 Use of Estimates

   The preparation of combined financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in the combined financial statements and accompanying notes. Actual results
could differ from those estimates.

 Cash and Cash Equivalents

   All highly liquid debt instruments purchased with a maturity of three months
or less are deemed to be cash and cash equivalents. Cash and cash equivalents
are carried at cost, which approximates fair value.

                                      F-46

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

 Inventories

   Propane inventories are stated at the lower of cost or market. Cost is
determined using a weighted average method for propane and an actual cost basis
for parts and materials. The major components of inventory consist of the
following:

                                                      September 30,
                                                      ------------- December 31,
                                                       1999   2000      2000
                                                      ------ ------ ------------
                                                           
   Propane........................................... $6,769 $1,647    $2,606
   Parts and materials...............................    653    623       561
   Other.............................................    115     31         5
                                                      ------ ------    ------
                                                      $7,537 $2,301    $3,172
                                                      ====== ======    ======

 Property, Plant and Equipment

   Property, plant and equipment are stated at cost. Depreciation of the cost
of the related asset, less estimated salvage value on certain vehicles, is
determined using straight-line and accelerated depreciation methods over the
estimated useful lives of the assets, as follows:

                                                                         Years
                                                                        --------
                                                                     
Buildings.............................................................. 30 to 40
Office furniture and equipment.........................................  5 to 7
Vehicles...............................................................  5 to 7
Tanks and plant equipment..............................................  7 to 50

 Marketable Securities

   Investments in marketable equity securities are classified as available for
sale and are carried at their fair market value. Unrealized gains and losses
are recorded as a separate component of stockholders' equity. The aggregate
cost of the marketable equity securities was $65 at September 30, 1999 and 2000
and at December 31, 2000.

 Intangible Assets

   Intangible assets consist of goodwill and covenants not to compete which
were acquired primarily in the 1998 and 1999 acquisitions described in Note 2
and are amortized on a straight-line basis over their estimated useful lives,
not to exceed 15 years.

   The Hoosier Propane Group reviews its long-lived assets in accordance with
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and Long-lived Assets to be Disposed of," for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If such events or changes
in circumstances are present, a loss is recognized if the carrying value of the
asset is in excess of the sum of the undiscounted cash flows expected to result
from the use of the asset and its eventual disposition. An impairment loss is
measured as the amount by which the carrying amount of the asset exceeds the
fair value of the asset.

 Customer Deposits

   Customer deposits primarily represent cash received by the Hoosier Propane
Group from wholesale and retail customers for propane purchased that will be
delivered at a future date.

                                      F-47

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

 Income Taxes

   The stockholders of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. have elected under Subchapter S of the Internal Revenue Code to
include the income of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. in the stockholders' income for income tax reporting purposes.
Accordingly, Domex, Inc., Investors 300, Inc. and L & L Leasing, Inc. are not
subject to income taxes.

 Revenue Recognition

   The sales and related cost of products and services sold are recognized upon
delivery.

 Fair Value

   The carrying amounts of cash and cash equivalents, short-term investments,
accounts receivable, investments and accounts payable approximate their fair
value. Based on the estimated borrowing rates currently available to the
Hoosier Propane Group for notes payable and long-term debt with similar terms
and maturities, the aggregate fair value of the Hoosier Propane Group's long-
term debt approximates the aggregate carrying amount as of September 30, 1999
and 2000 and December 31, 2000.

 Segment Information

   The Hoosier Propane Group adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," in fiscal 1999. SFAS No. 131
established standards for reporting information about operating segments as
well as related disclosures about products and services, geographic areas and
major customers. In determining the Hoosier Propane Group's reportable segments
under the provisions of SFAS No. 131, the Hoosier Propane Group examined the
way they organize their business internally for making operating decisions and
assessing business performance. Based on this examination, the Hoosier Propane
Group has determined that it has a single reportable segment which engages in
the distribution of propane and related equipment and supplies. No single
customer represents 10% or more of combined revenues. In addition, all of the
Hoosier Propane Group's revenues are derived from sources within the United
States, and all of its long-lived assets are located in the United States.

 Pending Accounting Pronouncement

   In June 1988, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 requires that an entity recognize all derivative instruments as either
assets or liabilities and measure them at fair value. The accounting for
changes in fair value depends on the purpose of the derivative instrument and
whether it is designated and qualifies for hedge accounting. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133 (an
amendment of FASB Statement No. 133)," which deferred the effective date of
SFAS No. 133. The Hoosier Propane Group will be required to adopt SFAS No. 133
in fiscal 2001. As of September 30, 2000, the Hoosier Propane Group's only
derivatives consist of contracts to purchase and sell fixed quantities of
propane at fixed prices over specified periods, aggregating approximately
$5,200 and $5,700, respectively. As of December 31, 2000, the Hoosier Propane
Group had contracts to purchase and sell fixed quantities of propane
aggregating approximately $2,000 and $2,400, respectively. As these commitments
are generally settled by the physical delivery of propane in the normal course
of the Hoosier Propane Group's business, they are excluded from scope of SFAS
No. 133. As such, the fair value of the contracts will not be required to be
reflected in the Hoosier Propane Group's financial position or results of
operations, and the method of accounting for these contracts will be unaffected
by SFAS No. 133.

                                      F-48

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Acquisitions

   In October 1998, the Hoosier Propane Group acquired certain assets of Dekalb
Agra, Inc. (Dekalb) for a cash purchase price of $3,850 which was financed
through the issuance of long-term debt.

   During August 1998, the Hoosier Propane Group acquired certain assets of
Tri-State Propane, Inc. and Wolverine Propane, Inc. for an aggregate purchase
price of $2,416. The acquisitions were financed through cash in the amount of
$1,266, a note payable to the sellers of one of the companies in the amount of
$200 and the issuance of noncompete obligations in the amount of $950.

   Each of the acquired companies is involved in the retail sale of propane to
local customer bases in northern Indiana. The acquisitions have been accounted
for using the purchase method of accounting. Accordingly, the purchase price of
each acquisition has been allocated to assets acquired based on the fair market
values at the date of acquisition. The excess of the purchase price over the
fair market values of the tangible and identifiable intangible assets acquired
has been recorded as goodwill. The Hoosier Propane Group recorded goodwill of
$400 in connection with the Dekalb acquisition and $209 in connection with the
1998 acquisitions. In addition, $950 of the aggregate purchase price in the
1998 acquisitions was allocated to covenants not to compete.

   The operating results of all acquisitions are included in the Hoosier
Propane Group's combined results of operations from the dates of acquisitions.
The following unaudited pro forma data summarize the results of operations for
the year indicated as if this acquisition had been completed October 1, 1997,
the beginning of fiscal 1998. The pro forma data give effect to actual
operating results prior to the acquisitions and adjustments to interest
expense, depreciation expense and amortization of intangible assets. These pro
forma amounts do not purport to be indicative of the results that would have
actually been obtained if the acquisitions had occurred on October 1, 1997 or
that the Hoosier Propane Group will obtain in the future. Reported operating
results for 1999 and 2000 include the results of the acquired companies due to
the dates of acquisition.

                                                                      Pro Forma
                                                                     Fiscal 1998
                                                                     -----------
                                                                     (Unaudited)
                                                                  
   Revenue..........................................................   $60,235
   Net income.......................................................     3,475

3. Notes Payable and Long-Term Debt

   In May 2000, L & L Leasing, Inc. entered into a revolving credit agreement
with a bank which provides available borrowings up to $2,000 collateralized by
L & L Leasing, Inc.'s accounts receivable, inventory and machinery and
equipment balances, under which $1,575 was outstanding at September 30, 2000.
Interest is payable monthly at the bank's prime rate less 0.5% or at the London
Interbank Offered Rate (LIBOR) plus 2%, with principal payable on June 1, 2001.
The effective interest rate was 9% at September 30, 2000 and December 31, 2000.
At December 31, 2000, the outstanding balance under this revolving credit
agreement was $1,575.

   During 1999, Domex, Inc. entered into a revolving credit agreement with a
bank which provided available borrowings up to $6,000, subject to specified
percentages of Domex, Inc.'s accounts receivable, inventory and machinery and
equipment balances, under which $2,500 and $0 was outstanding at September 30,
1999 and 2000, respectively. Interest was payable monthly at the bank's prime
rate less 0.25% or a formula based on eurocurrency funding plus 2%, with
principal payable on May 1, 2000. The effective interest rate was 7.44% at
September 30, 1999. Effective May 1, 2000, Domex, Inc. entered into a new
revolving credit agreement with the bank which provides available borrowings up
to $5,000, collateralized by Domex, Inc.'s accounts receivable and inventory

                                      F-49

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

balances, under which no borrowings were outstanding at September 30, 2000.
Interest is payable monthly at the bank's prime rate less 0.5% or at LIBOR plus
2%, with principal payable on May 1, 2001. At December 31, 2000, the
outstanding balance under this revolving credit agreement was $4,000. The
effective interest rate was 7.51% at December 31, 2000.

   Investors 300, Inc. entered into a revolving credit agreement with a bank
which provides available borrowings up to $500, subject to a specified
percentage of Investors 300, Inc.'s accounts receivable balance, under which
$500 and $-0- was outstanding at September 30, 1999 and 2000, respectively.
Interest on this credit agreement was payable monthly at 8.25%, with principal
payable on May 1, 2000.

   Long-term debt consists of the following:

                                                  September 30,    December 31,
                                                  ---------------  ------------
                                                   1999    2000        2000
                                                  ------  -------  ------------
                                                          
Revolving credit agreement with a bank with
 interest payable monthly at the bank's prime
 rate or a formula based on eurocurrency funding
 plus 2.25% (effective interest rate of 7.63%
 and 8.88% at September 30, 1999 and 2000,
 respectively and 9.5% at December 31, 2000) and
 principal payable on May 1, 2002...............  $2,281  $ 1,000    $ 1,000
Term loan with a bank with monthly payments of
 $50 plus interest at the bank's prime rate or a
 formula based on eurocurrency funding plus
 2.25% (effective interest rate of 7.75% and 9%
 at September 30, 1999 and 2000, respectively
 and 9% at December 31, 2000) with the remaining
 principal balance payable on June 1, 2003, as
 discussed further below........................   6,000    5,400      5,250
Term loan with a bank with monthly payments of
 $4, including interest at the bank's prime rate
 (effective interest rate of 8.25% and 9.5% at
 September 30, 1999 and 2000, respectively),
 with the remaining principal balance payable on
 December 15, 2000..............................     109       76        --
Term loan with a bank with monthly payments of
 $2 plus interest at the bank's prime rate
 (effective interest rate of 8.25% and 9.5% at
 September 30, 1999 and 2000, respectively and
 8.25% at December 31, 2000) with the remaining
 principal balance payable on March 30, 2001....      47       24         18
Noncompete obligations with monthly payments of
 $9, including interest at 7.5%, repaid in
 December 2000..................................     913      875        --
Note payable to sellers of retail propane
 companies acquired in 1998 with monthly
 payments of $2, including interest at 7.5%,
 repaid in December 2000........................     193      184        --
                                                  ------  -------    -------
                                                   9,543    7,559      6,268
Less current portion............................    (803)  (4,950)    (4,668)
                                                  ------  -------    -------
                                                  $8,740  $ 2,609    $ 1,600
                                                  ======  =======    =======

   In July 1999, Investors 300, Inc. entered into an amended and restated
credit agreement with its bank to increase the level of financing and to
refinance most of Investors 300, Inc.'s outstanding long-term debt. This credit
agreement consisted of a $6,000 term loan and a revolving loan of up to $6,000,
subject to specified percentages of the company's accounts receivable,
inventory, and machinery and equipment balances. Investors 300, Inc. must pay
sufficient principal to reduce the outstanding revolving loan balance to an
amount not greater than $5,400 on May 1, 2000 and $600 on May 1, 2001, with the
remaining principal due on June 1, 2003. All of the credit agreements with the
Hoosier Propane Group's bank are collateralized by substantially all of the
assets of

                                      F-50

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

the Hoosier Propane Group and contain covenants which, among other things,
require the maintenance of various financial performance ratios. Repayment of
borrowings pursuant to the credit agreements of each of Domex, Inc., Investors
300, Inc. and L & L Leasing, Inc. is guaranteed by the other companies and, to
a lesser extent, by the stockholders of each of Domex, Inc., Investors 300,
Inc. and L & L Leasing, Inc.

   Due to the sale of the Hoosier Propane Group, as discussed in Note 7,
management elected not to renew or negotiate extensions of its revolving credit
and term loan agreements. As such, much of the Hoosier Propane Group's
outstanding long-term debt is classified as a current liability in the
accompanying fiscal year 2000 combined balance sheet.

   The noncompete obligations and notes payable to sellers of retail propane
companies acquired in 1998 are collateralized by the assets purchased in the
acquisition. These obligations and notes payable are subordinate to the
obligations owed by the Hoosier Propane Group to its bank.

   Principal payments of long-term debt for each of the next five years ended
September 30 and thereafter are as follows:

   Year Ending September 30,
   -------------------------
                                                                      
   2001................................................................. $4,950
   2002.................................................................  1,054
   2003.................................................................    658
   2004.................................................................     63
   2005.................................................................     67
   Thereafter...........................................................    767
                                                                         ------
                                                                         $7,559
                                                                         ======

4. Common Stock

   Shares of common stock of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. are as follows:

                                                         Investors     L & L
                                             Domex, Inc. 300, Inc. Leasing, Inc.
                                             ----------- --------- -------------
                                                          
   Authorized shares........................    1,000      1,000       1,000
   Issued shares............................      666        315         515
   Outstanding shares.......................      346        315         315

5. Employee Benefit Plan

   The Hoosier Propane Group sponsors a multiemployer 401(k) profit-sharing
plan for employees who have completed one year of service and have attained the
age of 21. The Hoosier Propane Group's discretionary contributions charged to
expense were $56, $54 and $55 in 1998, 1999 and 2000, respectively, and $14 for
the three months ended December 31, 2000.

6. Related-Party Transactions

   The Hoosier Propane Group has notes receivable from and notes payable to
various stockholders of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. The notes receivable bear interest of 7% and are due October 31,
2004. The Hoosier Propane Group received interest income from these notes of
$31, $28 and

                                      F-51

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

$25 in 1998, 1999 and 2000, respectively, and $5 for the three months ended
December 31, 2000. The unsecured notes payable bear interest of 7% and mature
on October 1, 2001. The Hoosier Propane Group recorded interest expense related
to these notes of $89, $89 and $88 in 1998, 1999 and 2000, respectively, and
$18 for the three months ended December 31, 2000.

7. Subsequent Event

   On January 12, 2001, the Hoosier Propane Group sold substantially all of
their assets to Inergy Partners, LLC for an aggregate purchase price of
approximately $74,000 including assumed liabilities. A portion of these
proceeds was used to repay in full the Hoosier Propane Group's notes payable to
bank, notes payable to stockholders and long-term debt.

                                      F-52

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Inergy Partners, LLC

   We have audited the accompanying balance sheet of Inergy GP, LLC as of
September 30, 2001. This balance sheet is the responsibility of Inergy
Partners, LLC's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.

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

   In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Inergy GP, LLC at September 30,
2001, in conformity with accounting principles generally accepted in the United
States.

                                          /s/ ERNST & YOUNG LLP

Kansas City, Missouri
May 22, 2002

                                      F-53

                                 INERGY GP, LLC

                                 BALANCE SHEET

                                                                
                                                                   September 30,
                              ASSETS                                   2001
                                                                   -------------

Current assets:
  Cash............................................................ $       1,000
                                                                   -------------
    Total assets.................................................. $       1,000
                                                                   =============

                          OWNER'S EQUITY

Owner's equity.................................................... $       1,000
                                                                   -------------
    Total owner's equity.......................................... $       1,000
                                                                   =============

                             See accompanying note.

                                      F-54

                                 INERGY GP, LLC

                             NOTE TO BALANCE SHEET

1. Nature of Operations

   Inergy GP, LLC is a Delaware limited liability company formed on March 2,
2001 to become the managing general partner of Inergy Partners, L.P. Inergy GP,
LLC is a wholly-owned subsidiary of Inergy Holdings, LLC. Inergy GP, LLC owns a
non-economic managing general partner interest in Inergy, L.P.

   On March 2, 2001, Inergy Holdings, LLC contributed $1,000 to Inergy GP, LLC
in exchange for a 100% ownership interest.

   On March 7, 2001, Inergy GP, LLC received a managing general partner
interest in Inergy, L.P. There have been no other transactions involving Inergy
GP, LLC as of September 30, 2001.

                                      F-55

                                                                     APPENDIX A

                               GLOSSARY OF TERMS

   adjusted operating surplus: For any period, operating surplus generated
during that period is adjusted to:

     (a) decrease operating surplus by:

       (1) any net increase in working capital borrowings during that
    period; and

       (2) any net reduction in cash reserves for operating expenditures
    during that period not relating to an operating expenditure made during
    that period; and

     (b) increase operating surplus by:

       (1) any net decrease in working capital borrowings during that
    period; and

       (2) any net increase in cash reserves for operating expenditures
    during that period required by any debt instrument for the repayment of
    principal, interest or premium.

   Adjusted operating surplus does not include that portion of operating
surplus included in clause (a)(1) of the definition of operating surplus.

   available cash: For any quarter ending prior to liquidation:

     (a) the sum of:

       (1) all cash and cash equivalents of Inergy, L.P. and its
    subsidiaries on hand at the end of that quarter; and

       (2) all additional cash and cash equivalents of Inergy, L.P. and its
    subsidiaries on hand on the date of determination of available cash for
    that quarter resulting from working capital borrowings made after the
    end of that quarter;

     (b) less the amount of any cash reserves that is necessary or
  appropriate in the reasonable discretion of the managing general partner
  to:

       (1) provide for the proper conduct of the business of Inergy, L.P.
    and its subsidiaries (including reserves for future capital expenditures
    and for future credit needs of Inergy, L.P. and its subsidiaries) after
    that quarter;

       (2) comply with applicable law or any debt instrument or other
    agreement or obligation to which Inergy, L.P. or any of its subsidiaries
    is a party or its assets are subject; and

       (3) provide funds for minimum quarterly distributions and cumulative
    common unit arrearages for any one or more of the next four quarters;

provided, however, that the managing general partner may not establish cash
reserves for distributions to the subordinated units unless the managing
general partner has determined that in its judgment the establishment of
reserves will not prevent Inergy, L.P. from distributing the minimum quarterly
distribution on all common units and any cumulative common unit arrearages
thereon for the next four quarters; and

provided, further, that disbursements made by Inergy, L.P. or any of its
subsidiaries or cash reserves established, increased or reduced after the end
of that quarter but on or before the date of determination of available cash
for that quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining available cash, within that quarter if
the managing partner so determines.

   capital account: The capital account maintained for a partner under the
partnership agreement. The capital account of a partner for a common unit, a
senior subordinated unit, a junior subordinated unit, an

                                      A-1

incentive distribution right or any other partnership interest will be the
amount which that capital account would be if that common unit, senior
subordinated unit, junior subordinated unit, incentive distribution right or
other partnership interest were the only interest in Inergy, L.P. held by a
partner.

   capital surplus: All available cash distributed by us from any source will
be treated as distributed from operating surplus until the sum of all available
cash distributed since the closing of the initial public offering equals the
operating surplus as of the end of the quarter before that distribution. Any
excess available cash will be deemed to be capital surplus.

   closing price: The last sale price on a day, regular way, or in case no sale
takes place on that day, the average of the closing bid and asked prices on
that day, regular way, in either case, as reported in the principal
consolidated transaction reporting system for securities listed or admitted to
trading on the principal national securities exchange on which the units of
that class are listed or admitted to trading. If the units of that class are
not listed or admitted to trading on any national securities exchange, the last
quoted price on that day. If no quoted price exists, the average of the high
bid and low asked prices on that day in the over-the-counter market, as
reported by the Nasdaq Stock Market or any other system then in use. If on any
day the units of that class are not quoted by any organization of that type,
the average of the closing bid and asked prices on that day as furnished by a
professional market maker making a market in the units of the class selected by
the managing general partner. If on that day no market maker is making a market
in the units of that class, the fair value of the units on that day as
determined reasonably and in good faith by the managing general partner.

   common unit arrearage: The amount by which the minimum quarterly
distribution for a quarter during the subordination period exceeds the
distribution of available cash from operating surplus actually made for that
quarter on a common unit, cumulative for that quarter and all prior quarters
during the subordination period.

   current market price: For any class of units listed or admitted to trading
on any national securities exchange as of any date, the average of the daily
closing prices for the 20 consecutive trading days immediately prior to that
date.

   incentive distribution right: A non-voting limited partner partnership
interest issued to Inergy Holdings, LLC in connection with the transfer of
substantially all of its member interest in Inergy Propane, LLC to Inergy, L.P.
under the partnership agreement. The partnership interest will confer upon its
holder only the rights and obligations specifically provided in the partnership
agreement for incentive distribution rights.

   incentive distributions: The distributions of available cash from operating
surplus initially made to Inergy Holdings, LLC that are in excess of the non-
managing general partner's 2% general partner interest.

   interim capital transactions: The following transactions if they occur prior
to liquidation:

     borrowings, refinancings or refundings of indebtedness and sales of debt
  securities (other than for working capital borrowings and other than for
  items purchased on open account in the ordinary course of business) by
  Inergy, L.P. or any of its subsidiaries;

     sales of equity interests by Inergy, L.P. or any of its subsidiaries;

     sales or other voluntary or involuntary dispositions of any assets of
  Inergy, L.P. or any of its subsidiaries (other than sales or other
  dispositions of inventory, accounts receivable and other assets in the
  ordinary course of business, and sales or other dispositions of assets as a
  part of normal retirements or replacements).

   operating expenditures: All expenditures of Inergy, L.P. and its
subsidiaries, including, but not limited to, taxes, reimbursements of the
general partners, repayment of working capital borrowings, debt service
payments and capital expenditures, subject to the following:

                                      A-2

     (a) Payments (including prepayments) of principal of and premium on
  indebtedness other than working capital borrowings will not constitute
  operating expenditures.

     (b) Operating expenditures will not include:

       (1) capital expenditures made for acquisitions or for capital
    improvements;

       (2) payment of transaction expenses relating to interim capital
    transactions; or

       (3) distributions to partners.

   operating surplus: For any period prior to liquidation, on a cumulative
basis and without duplication:

     (a) the sum of

       (1) $8.5 million plus all the cash of Inergy, L.P. and its
    subsidiaries on hand as of the closing date of our initial public
    offering;

       (2) all cash receipts of Inergy, L.P. and its subsidiaries for the
    period beginning on the closing date of our initial public offering and
    ending with the last day of that period, other than cash receipts from
    interim capital transactions; and

       (3) all cash receipts of Inergy, L.P. and its subsidiaries after the
    end of that period but on or before the date of determination of
    operating surplus for the period resulting from working capital
    borrowings; less

     (b) the sum of:

       (1) operating expenditures for the period beginning on the closing
    date of our initial public offering and ending with the last day of that
    period; and

       (2) the amount of cash reserves that is necessary or advisable in the
    reasonable discretion of the managing general partner to provide funds
    for future operating expenditures; provided however, that disbursements
    made (including contributions to Inergy, L.P. or its subsidiaries or
    disbursements on behalf of Inergy, L.P. or its subsidiaries) or cash
    reserves established, increased or reduced after the end of that period
    but on or before the date of determination of available cash for that
    period shall be deemed to have been made, established, increased or
    reduced for purposes of determining operating surplus, within that
    period if the managing general partner so determines.

   subordination period: The subordination period will generally extend from
the closing of the initial public offering until the first to occur of:

     (a) the first day of any quarter beginning after June 30, 2006, in the
  case of the senior subordinated units, or June 30, 2008, in the case of the
  junior subordinated units, for which:

       (1) distributions of available cash from operating surplus on each of
    the outstanding common units, senior subordinated units and junior
    subordinated units equaled or exceeded the sum of the minimum quarterly
    distribution on all of the outstanding common units, senior subordinated
    units and junior subordinated units for each of the three consecutive
    non-overlapping four-quarter periods immediately preceding that date;

       (2) the adjusted operating surplus generated during each of the three
    immediately preceding, non-overlapping four-quarter periods equaled or
    exceeded the sum of the minimum quarterly distribution on all of the
    common units, senior subordinated units and junior subordinated units
    that were outstanding during those periods on a fully-diluted basis, and
    the related distribution on the general partner interest in Inergy,
    L.P.; and

       (3) there are no outstanding cumulative common units arrearages.

                                      A-3

     (b) the date on which the managing general partner is removed as general
  partner of Inergy, L.P. upon the requisite vote by the limited partners
  under circumstances where cause does not exist and units held by the
  general partners and their affiliates are not voted in favor of the
  removal.

   working capital borrowings: Borrowings exclusively for working capital
purposes made pursuant to a credit facility or other arrangement requiring all
borrowings thereunder to be reduced to a relatively small amount each year for
an economically meaningful period of time.

                                      A-4

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

   You may rely on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common
units means that information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these common units in any circumstances under
which the offer or solicitation is unlawful.

                                ---------------

                               TABLE OF CONTENTS

                                                                          Page
                                                                          ----
                                                                       
Guide to Reading This Prospectus.........................................  iv
Prospectus Summary.......................................................   1
Risk Factors.............................................................  14
Use of Proceeds..........................................................  24
Capitalization...........................................................  25
Price Range of Common Units and Distributions............................  26
Cash Distribution Policy.................................................  27
Unaudited Pro Forma Consolidated Financial Statements....................  35
Selected Historical Financial and Operating Data.........................  45
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  49
Business.................................................................  68
Management...............................................................  79
Security Ownership of Certain Beneficial Owners and Management...........  87
Selling Unitholders......................................................  90
Certain Relationships and Related Transactions...........................  91
Conflicts of Interest and Fiduciary Responsibilities.....................  94
Description of the Common Units..........................................  98
Description of the Subordinated Units.................................... 100
The Partnership Agreement................................................ 101
Units Eligible for Future Sale........................................... 113
Tax Considerations....................................................... 114
Investment in Inergy, L.P. by Employee Benefit Plans..................... 128
Underwriting............................................................. 129
Validity of the Common Units............................................. 131
Experts.................................................................. 131
Other Matters............................................................ 131
Where You Can Find More Information...................................... 132
Forward-Looking Statements............................................... 132
Index to Financial Statements............................................ F-1
Appendix A--Glossary of Terms............................................ A-1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                             1,400,000 Common Units

                                 [INERGY LOGO]

                                  Representing
                           Limited Partner Interests

                                ---------------

                                   PROSPECTUS

                                ---------------

                           A.G. Edwards & Sons, Inc.

                                       , 2002

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                    PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 13. Other Expenses of Issuance and Distribution.

   Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee and the NASD filing fee,
the amounts set forth below are estimates.

                                                                  
   Registration fee................................................. $    4,925
   NASD filing fee..................................................      5,854
   Nasdaq Stock Market listing fee..................................     16,100
   Printing and engraving expenses..................................    300,000
   Fees and expenses of legal counsel...............................    400,000
   Accounting fees and expenses.....................................    250,000
   Transfer agent and registrar fees................................      5,000
   Miscellaneous....................................................    218,121
                                                                     ----------
     Total.......................................................... $1,200,000
                                                                     ==========

Item 14. Indemnification of Directors and Officers.

   The section of the Prospectus entitled "The Partnership Agreement--
Indemnification" is incorporated herein by this reference. Reference is made to
the Underwriting Agreement filed as Exhibit 1.1 to the Registration Statement.
Subject to any terms, conditions or restrictions set forth in the Partnership
Agreement, Section 17-108 of the Delaware Revised Uniform Limited Partnership
Act empowers a Delaware limited partnership to indemnify and hold harmless any
partner or other person from and against all claims and demands whatsoever.

Item 15. Recent Sales of Unregistered Securities

   No securities of Inergy, L.P. which were not registered under the Securities
Act have been sold by Inergy, L.P. within the past three years, except as
follows:

     1. On December 19, 2001, Inergy, L.P. sold 365,019 common units to IPCH
  Acquisition Corp. in exchange for approximately $9.6 million in cash.

     2. On December 19, 2001, Inergy, L.P. issued 394,601 common units to
  IPCH Acquisition Corp. as partial consideration for the transfer of its
  interest in IPC.

     3. On December 19, 2001, Inergy, L.P. sold 9,126 common units to David
  L. Scott in exchange for approximately $240,000 in cash.

     4. On December 19, 2001, Inergy, L.P. sold 9,126 common units to Robert
  R. Galvin in exchange for approximately $240,000 in cash.

   Each common unit issued in connection with the IPC transaction was valued at
$26.30, the 30-day average trading price of the common units on Nasdaq
immediately prior to December 19, 2001. The issuances of the securities
described above were made in reliance upon the exemption from the registration
requirements provided by Section 4(2) of the Securities Act for transactions by
an issuer not involving a public offering.

                                      II-1

Item 16. Exhibits

   (a) The following documents are filed as exhibits to this registration
statement:

 Exhibit
 Number  Description
 ------- -----------
      
  *1.1   Form of Underwriting Agreement

   3.1   Certificate of Limited Partnership of Inergy, L.P. (incorporated by
         reference to Exhibit 3.1 to Inergy, L.P.'s Registration Statement on
         Form S-1 (Registration No. 333-56976) filed on March 14, 2001)

  *3.2   Amended and Restated Agreement of Limited Partnership of Inergy, L.P.

   3.3   Certificate of Formation as relating to Inergy Propane, LLC, as
         amended (incorporated by reference to Exhibit 3.3 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

  *3.4   Third Amended and Restated Limited Liability Company Agreement of
         Inergy Propane, LLC, dated as of July 31, 2001

   3.5   Certificate of Formation of Inergy GP, LLC (incorporated by reference
         to Exhibit 3.5 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

   3.6   Limited Liability Company Agreement of Inergy GP, LLC (incorporated by
         reference to Exhibit 3.6 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

   3.7   Certificate of Formation as relating to Inergy Partners, LLC, as
         amended (incorporated by reference to Exhibit 3.7 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

  *3.8   Second Amended and Restated Limited Liability Company Agreement of
         Inergy Partners, LLC, dated as of July 31, 2001

   4.1   Specimen Unit Certificate for Senior Subordinated Units (incorporated
         by reference to Exhibit 4.1 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

   4.2   Specimen Unit Certificate for Junior Subordinated Units (incorporated
         by reference to Exhibit 4.2 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

   4.3   Specimen Unit Certificate for Common Units (incorporated by reference
         to Exhibit 4.3 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  *5.1   Opinion of Vinson & Elkins L.L.P. as to the legality of the securities
         being registered

  *8.1   Opinion of Vinson & Elkins L.L.P. relating to tax matters

  10.1   Fourth Amended and Restated Credit Agreement by and among Inergy
         Propane, LLC and the lenders named therein, dated as of December 20,
         2001 (incorporated by reference to Exhibit 10.1 to Inergy, L.P.'s
         Annual Report on Form 10-K filed on December 28, 2001)

 *10.1A  Amendment No. 1 to Fourth Amended and Restated Credit Agreement

  10.2   Asset Purchase Agreement by and between Inergy Partners, LLC and
         Country Gas Company, Inc., dated as of May 20, 2000 (incorporated by
         reference to Exhibit 10.2 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.3   Securities Purchase Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.3 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

                                      II-2

      
  10.4   Investor Rights Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.4 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.5   Asset Purchase Agreement by and among Inergy Partners, LLC and the
         Hoosier Group, dated as of September 8, 2000 (incorporated by
         reference to Exhibit 10.5 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.6   Inergy Employee Long-Term Incentive Plan (incorporated by reference to
         Exhibit 10.6 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.7   Inergy Unit Purchase Plan (incorporated by reference to Exhibit 10.1
         to Inergy, L.P.'s Registration Statement on Form S-8 filed on March 6,
         2002)

  10.8   Employment Agreement--John J. Sherman (incorporated by reference to
         Exhibit 10.8 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.9   Employment Agreement--Phillip L. Elbert (incorporated by reference to
         Exhibit 10.9 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  10.9A  First Amendment to Employment Agreement--Phillip L. Elbert
         (incorporated by reference to Exhibit 10.9A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.10  Employment Agreement--R Brooks Sherman, Jr. (incorporated by reference
         to Exhibit 10.10 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.10A First Amendment to Employment Agreement--R. Brooks Sherman, Jr.
         (incorporated by reference to Exhibit 10.10A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.11  Employment Agreement--Carl A. Hughes (incorporated by reference to
         Exhibit 10.11 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.12  Employment Agreement--Michael D. Fox (incorporated by reference to
         Exhibit 10.12 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001

  10.13  Employment Agreement--William C. Gautreaux (incorporated by reference
         to Exhibit 10.13 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on July 2, 2001

 *10.14  Contribution, Conveyance, Assignment and Assumption Agreement by and
         among Inergy, L.P., Inergy Partners, LLC and the other parties named
         therein, dated as of July 31, 2001

  10.15  Agreement and Plan of Merger, dated as of December 19, 2001 by and
         among Inergy Holders, LLC, IPCH Acquisition Corp., IPCH Merger Corp.,
         Inergy, L.P., Independent Propane Company Holdings, certain holders of
         Series E Preferred Stock of Independent Propane Company Holdings and
         joined in by David L. Scott, Robert R. Galvin and Inergy Propane, LLC.
         (incorporated by reference to Exhibit 2.1 of Inergy, L.P.'s Current
         Report on Form 8-K filed on January 4, 2002)

  10.16  Transaction Agreement dated as of December 19, 2001 by and among
         Inergy, L.P., Inergy GP, LLC, Inergy Propane, LLC, Inergy Sales and
         Service, Inc., Inergy Holdings, LLC, IPCH Acquisition Corp., and IPCH
         Merger Corp. (incorporated by reference to Exhibit 2.2 of Inergy,
         L.P.'s Current Report on Form 8-K filed on January 4, 2002)

                                      II-3

     
  10.17 Registration Rights Agreement entered into as of December 19, 2001 by
        and among Inergy, L.P. and certain investors (incorporated by reference
        to Exhibit 4.1 of Inergy, L.P.'s Current Report on Form 8-K filed on
        January 4, 2002)

  10.18 Registration Rights Agreement entered into as of December 19, 2001 by
        and between Inergy, L.P. and IPCH Acquisition Corp. (incorporated by
        reference to Exhibit 4.2 of Inergy, L.P.'s Current Report on Form 8-K
        filed on January 4, 2002)

 *21.1  List of subsidiaries of Inergy, L.P.

 *23.1  Consent of Ernst & Young LLP

 *23.2  Consent of Arthur Andersen LLP

 *23.3  Consent of Vinson & Elkins L.L.P. (contained in Exhibits 5.1 and 8.1)

 *24.1  Powers of Attorney (included on page II-5)

- --------
* Filed herewith

Item 17. Undertakings.

   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

   The undersigned Registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act,
  the information omitted from the form of prospectus filed as part of this
  Registration Statement in reliance upon Rule 430A and contained in a form
  of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
  497(h) under the Securities Act shall be deemed to be part of this
  Registration Statement as of the time it was declared effective.

     (2) For the purposes of determining any liability under the Securities
  Act, each post-effective amendment that contains a form of prospectus shall
  be deemed to be a new registration statement relating to the securities
  offered therein, and the offering of such securities at that time shall be
  deemed to be the initial bona fide offering thereof.

                                      II-4

                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Kansas City, State of Missouri, on May 23, 2002.

                                          Inergy, L.P.
                                          By: Inergy GP, LLC
                                             its Managing General Partner

                                               /s/ R. Brooks Sherman, Jr.
                                          By: _________________________________
                                          Name: R. Brooks Sherman Jr.
                                          Title: Vice President and Chief
                                          Financial Officer

   Each person whose signature appears below appoints John J. Sherman and R.
Brooks Sherman Jr., and each of them, any of whom may act without the joinder
of the other, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any Registration
Statement (including any amendment thereto) for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them of their or his substitute and substitutes, may lawfully do or cause to be
done by virtue hereof.

   Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed below by the officers and
directors of Inergy GP, LLC, as managing general partner of Inergy, L.P., the
registrant, in the capacities indicated on the dates indicated.

              Signature                          Title                   Date
              ---------                          -----                   ----

         /s/ John J. Sherman           President and Chief           May 23, 2002
______________________________________  Executive Officer and
           John J. Sherman              Chairman of the Board
                                        (principal executive
                                        officer)

         /s/ Philip L. Elbert          Senior Vice President--       May 23, 2002
______________________________________  Operations and Director
           Philip L. Elbert

      /s/ R. Brooks Sherman, Jr.       Chief Financial Officer       May 23, 2002
______________________________________  (principal accounting and
        R. Brooks Sherman Jr.           financial officer)

                                       Director                      May   , 2002
______________________________________
        Richard C. Green, Jr.

        /s/ Warren H. Gfeller          Director                      May 23, 2002
______________________________________
          Warren H. Gfeller

         /s/ David J. Schulte          Director                      May 23, 2002
______________________________________
           David J. Schulte

                                      II-5

                                 EXHIBIT INDEX

 Exhibit
 Number  Description
 ------- -----------
      
  *1.1   Form of Underwriting Agreement

   3.1   Certificate of Limited Partnership of Inergy, L.P. (incorporated by
         reference to Exhibit 3.1 to Inergy, L.P.'s Registration Statement on
         Form S-1 (Registration No. 333-56976) filed on March 14, 2001)

  *3.2   Amended and Restated Agreement of Limited Partnership of Inergy, L.P.

   3.3   Certificate of Formation as relating to Inergy Propane, LLC, as
         amended (incorporated by reference to Exhibit 3.3 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

  *3.4   Third Amended and Restated Limited Liability Company Agreement of
         Inergy Propane, LLC, dated as of July 31, 2001

   3.5   Certificate of Formation of Inergy GP, LLC (incorporated by reference
         to Exhibit 3.5 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

   3.6   Limited Liability Company Agreement of Inergy GP, LLC (incorporated by
         reference to Exhibit 3.6 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

   3.7   Certificate of Formation as relating to Inergy Partners, LLC, as
         amended (incorporated by reference to Exhibit 3.7 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

  *3.8   Second Amended and Restated Limited Liability Company Agreement of
         Inergy Partners, LLC, dated as of July 31, 2001

   4.1   Specimen Unit Certificate for Senior Subordinated Units (incorporated
         by reference to Exhibit 4.1 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

   4.2   Specimen Unit Certificate for Junior Subordinated Units (incorporated
         by reference to Exhibit 4.2 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

   4.3   Specimen Unit Certificate for Common Units (incorporated by reference
         to Exhibit 4.3 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  *5.1   Opinion of Vinson & Elkins L.L.P. as to the legality of the securities
         being registered

  *8.1   Opinion of Vinson & Elkins L.L.P. relating to tax matters

  10.1   Fourth Amended and Restated Credit Agreement by and among Inergy
         Propane, LLC and the lenders named therein, dated as of December 20,
         2001 (incorporated by reference to Exhibit 10.1 to Inergy, L.P.'s
         Annual Report on Form 10-K filed on December 28, 2001)

 *10.1A  Amendment No. 1 to Fourth Amended and Restated Credit Agreement

  10.2   Asset Purchase Agreement by and between Inergy Partners, LLC and
         Country Gas Company, Inc., dated as of May 20, 2000 (incorporated by
         reference to Exhibit 10.2 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.3   Securities Purchase Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.3 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

      
  10.4   Investor Rights Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.4 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.5   Asset Purchase Agreement by and among Inergy Partners, LLC and the
         Hoosier Group, dated as of September 8, 2000 (incorporated by
         reference to Exhibit 10.5 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.6   Inergy Employee Long-Term Incentive Plan (incorporated by reference to
         Exhibit 10.6 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.7   Inergy Unit Purchase Plan (incorporated by reference to Exhibit 10.1
         to Inergy, L.P.'s Registration Statement on Form S-8 filed on March 6,
         2002)

  10.8   Employment Agreement--John J. Sherman (incorporated by reference to
         Exhibit 10.8 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.9   Employment Agreement--Phillip L. Elbert (incorporated by reference to
         Exhibit 10.9 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  10.9A  First Amendment to Employment Agreement--Phillip L. Elbert
         (incorporated by reference to Exhibit 10.9A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.10  Employment Agreement--R Brooks Sherman, Jr. (incorporated by reference
         to Exhibit 10.10 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.10A First Amendment to Employment Agreement--R. Brooks Sherman, Jr.
         (incorporated by reference to Exhibit 10.10A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.11  Employment Agreement--Carl A. Hughes (incorporated by reference to
         Exhibit 10.11 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.12  Employment Agreement--Michael D. Fox (incorporated by reference to
         Exhibit 10.12 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001

  10.13  Employment Agreement--William C. Gautreaux (incorporated by reference
         to Exhibit 10.13 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on July 2, 2001

 *10.14  Contribution, Conveyance, Assignment and Assumption Agreement by and
         among Inergy, L.P., Inergy Partners, LLC and the other parties named
         therein, dated as of July 31, 2001

  10.15  Agreement and Plan of Merger, dated as of December 19, 2001 by and
         among Inergy Holders, LLC, IPCH Acquisition Corp., IPCH Merger Corp.,
         Inergy, L.P., Independent Propane Company Holdings, certain holders of
         Series E Preferred Stock of Independent Propane Company Holdings and
         joined in by David L. Scott, Robert R. Galvin and Inergy Propane, LLC.
         (incorporated by reference to Exhibit 2.1 of Inergy, L.P.'s Current
         Report on Form 8-K filed on January 4, 2002)

  10.16  Transaction Agreement dated as of December 19, 2001 by and among
         Inergy, L.P., Inergy GP, LLC, Inergy Propane, LLC, Inergy Sales and
         Service, Inc., Inergy Holdings, LLC, IPCH Acquisition Corp., and IPCH
         Merger Corp. (incorporated by reference to Exhibit 2.2 of Inergy,
         L.P.'s Current Report on Form 8-K filed on January 4, 2002)

     
  10.17 Registration Rights Agreement entered into as of December 19, 2001 by
        and among Inergy, L.P. and certain investors (incorporated by reference
        to Exhibit 4.1 of Inergy, L.P.'s Current Report on Form 8-K filed on
        January 4, 2002)

  10.18 Registration Rights Agreement entered into as of December 19, 2001 by
        and between Inergy, L.P. and IPCH Acquisition Corp. (incorporated by
        reference to Exhibit 4.2 of Inergy, L.P.'s Current Report on Form 8-K
        filed on January 4, 2002)

 *21.1  List of subsidiaries of Inergy, L.P.

 *23.1  Consent of Ernst & Young LLP

 *23.2  Consent of Arthur Andersen LLP

 *23.3  Consent of Vinson & Elkins L.L.P. (contained in Exhibits 5.1 and 8.1)

 *24.1  Powers of Attorney (included on page II-5)

- --------
* Filed herewith

                                                                     EXHIBIT 1.1

                                                            DRAFT ________, 2002

                            1,400,000 Common Units

                            UNDERWRITING AGREEMENT
                            ----------------------

                                                                   _______, 2002

A.G. Edwards & Sons, Inc.
[Other Co-Managers]
One North Jefferson Avenue
St. Louis, Missouri 63103

     The undersigned, Inergy, L.P., a Delaware limited partnership (the
"Partnership"), Inergy Propane, LLC, a Delaware limited liability company (the
"Operating Company"), New Inergy Propane, LLC, a Delaware limited liability
company ("New Propane"), IPCH Acquisition Corp., a Delaware corporation
("Acquisition Corp."), Inergy Partners, LLC, a Delaware limited liability
company (the "Non-Managing General Partner"), Inergy GP, LLC, a Delaware limited
liability company (the "Managing General Partner") (the Managing General Partner
and the Non-Managing General Partner are sometimes collectively referred to
herein as the "General Partners"), Inergy Holdings, LLC, a Delaware limited
liability company ("Holdings"), Inergy Sales & Service, Inc., a Delaware
corporation ("Service Sub"), L&L Transportation, LLC, a Delaware limited
liability company ("L&L Transportation"), Inergy Transportation, LLC, a Delaware
limited liability company ("Inergy Transportation") and the persons listed on
Schedule I attached hereto (the "Selling Unitholders"), hereby address you as
the "Underwriters" and hereby confirm their agreement with the Underwriters as
set forth below.  The Partnership, the Operating Company, Service Sub, L&L
Transportation and Inergy Transportation are referred to as the "Partnership
Group."  L&L Transportation and Inergy Transportation are sometimes collectively
referred to herein as the "Operating Subs."  The Partnership, the Operating
Company, New Propane, Acquisition Corp., the General Partners, Holdings, Service
Sub and the Operating Subs are referred to as the "Inergy Parties."  The Inergy
Parties, Wilson Oil Company of Johnston County, Inc., a North Carolina
corporation ("Wilson"), and Rolesville Gas and Oil Company, Inc., a North
Carolina corporation ("Rolesville"), are collectively referred to herein as the
"Inergy Entities."

     It is understood and agreed by all parties that the Partnership was formed
to acquire, own and operate the business and assets of subsidiaries of Holdings.
The partnership agreement of the Partnership was adopted by the Managing General
Partner and the Non-Managing General Partner, in its capacity as the Non-
Managing General Partner and as the organizational limited partner of the
Partnership (the "Organizational Limited Partner"), on March 7, 2001 (as the

                                       1

same has been and may be amended or restated at or prior to the Closing Date,
the "Partnership Agreement"). The Partnership operates its business through the
Operating Company. The Operating Company operates its business through itself,
the Operating Subs and Service Sub. The Managing General Partner serves as the
managing general partner of the Partnership. The Non-Managing General Partner
serves as the non-managing general partner of the Partnership.

     1.   Description of Common Units.  The Partnership and the Selling
Unitholders propose to issue and sell to the Underwriter an aggregate of
1,400,000 common units (the "Firm Units") representing limited partner interests
in the Partnership (the "Common Units").  The Firm Units consist of 1,054,741
Common Units to be issued and sold by the Partnership, and 345,259 Common Units
to be sold by the Selling Unitholders.  Solely for the purpose of covering over-
allotments in the sale of the Firm Units, the Partnership further proposes to
grant to the Underwriters the right to purchase up to an additional 210,000
Common Units (the "Option Units"), as provided in Section 3 of this Agreement.
The Firm Units and the Option Units are herein sometimes referred to as the
"Units" and are more fully described in the Prospectus hereinafter defined.

     2.   Purchase, Sale and Delivery of Firm Units.  On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Partnership and the Selling
Unitholders agree, severally and not jointly, to sell to the Underwriters, and
each such Underwriter agrees, severally and not jointly, (a) to purchase from
the Partnership and the Selling Unitholders, at a purchase price of [$33.00] per
unit, the number of Firm Units set forth opposite the name of such Underwriter
in Schedule II hereto and (b) to purchase from the Partnership any additional
number of Option Units which such Underwriter may become obligated to purchase
pursuant to Section 3 hereof.

     Delivery of the Firm Units will be in book-entry form through the
facilities of The Depository Trust Company, New York, New York ("DTC").
Delivery of the documents required by Section 7 hereof with respect to the Units
shall be made at or prior to 11:00 a.m. on __________, 2002 at Vinson & Elkins
LLP, 2300 First City Tower, 1001 Fannin, Houston, Texas 77002-6760 or at such
other place as may be agreed upon between you and the Partnership (the "Place of
Closing"), or at such other time and date not later than five full business days
thereafter as you and the Partnership may agree, such time and date of payment
and delivery being herein called the "Closing Date."

     The Partnership will cause its transfer agent to deposit as original issue
the Firm Units pursuant to the Full Fast Delivery Program of the DTC.

     It is understood that an Underwriter, individually, may (but shall not be
obligated to) make payment on behalf of the other Underwriters whose funds shall
not have been received prior to the Closing Date for Units to be purchased by
such Underwriter.  Any such payment by an Underwriter shall not relieve the
other Underwriters of any of their obligations hereunder.

                                       2

     It is understood that the Underwriters propose to offer the Units to the
public upon the terms and conditions set forth in the Registration Statement
hereinafter defined.

     3.   Purchase, Sale and Delivery of the Option Units.  The Partnership
hereby grants an option to the Underwriters to purchase from the Partnership up
to 210,000 Option Units, on the same terms and conditions as the Firm Units;
provided, however, that such option may be exercised only for the purpose of
covering any over-allotments that may be made by them in the sale of the Firm
Units.  No Option Units shall be sold or delivered unless the Firm Units
previously have been, or simultaneously are, sold and delivered.

     The option is exercisable by you at any time, and from time to time, before
the expiration of 30 days from the date of the Prospectus (or, if such 30th day
shall be a Saturday or Sunday or a holiday, on the next day thereunder when The
Nasdaq National Market (the "Nasdaq") is open for trading), for the purchase of
all or part of the Option Units covered thereby, by notice given by you to the
Partnership in the manner provided in Section 14 hereof, setting forth the
number of Option Units as to which the Underwriters are exercising the option,
and the date of delivery of said Option Units, which date shall not be more than
five business days after such notice unless otherwise agreed to by the parties.
You may terminate the option at any time, as to any unexercised portion thereof,
by giving written notice to the Partnership to such effect.

     You shall make such allocation of the Option Units among the Underwriters
as may be required to eliminate purchases of fractional units.

     Delivery of the Option Units will be in book-entry form through the
facilities of DTC.  Delivery of the documents required by Section 8 hereof with
respect to the Units shall be made at the Place of Closing at or prior to 11:00
a.m. on the date designated in the notice given by you as provided above, or at
such other time and date as you and the Partnership may agree (which may be the
same as the Closing Date), such time and date of payment and delivery being
herein called the "Option Closing Date."  On the Option Closing Date, the
Partnership shall provide the Underwriters such representations, warranties,
agreements, opinions, letters, certificates and covenants with respect to the
Option Units as are required to be delivered on the Closing Date with respect to
the Firm Units.

     The Partnership will cause its transfer agent to deposit as original issue
the Option Units pursuant to the Full Fast Delivery Program of the DTC.

     4.   Representations, Warranties and Agreements of the Inergy Parties.  The
Inergy Parties jointly and severally represent and warrant to and agree with
each Underwriter that:

                                       3

          (a) Definitions.  A registration statement (Registration
     No.[__________]) on Form S-1 with respect to the Units, including a
     preliminary prospectus, and such amendments to such registration statement
     as may have been required to the date of this Agreement, has been prepared
     by the Partnership pursuant to and in conformity with the requirements of
     the Securities Act of 1933, as amended (the "1933 Act"), and the rules and
     regulations thereunder (the "1933 Act Rules and Regulations") of the
     Securities and Exchange Commission (the "SEC") and has been filed and
     declared effective by the SEC under the 1933 Act.  Copies of such
     registration statement, including any amendments thereto, each related
     preliminary prospectus contained therein, and the exhibits, financial
     statements and schedules thereto have heretofore been delivered by the
     Partnership to you.  A final prospectus containing information permitted to
     be omitted at the time of effectiveness by Rule 430A of the 1933 Act Rules
     and Regulations will be filed promptly by the Partnership with the SEC in
     accordance with Rule 424(b) of the 1933 Act Rules and Regulations.  The
     term "Registration Statement" as used herein means the registration
     statement as amended at the time it became effective under the 1933 Act
     (the "Effective Date"), including financial statements and all exhibits
     and, if applicable, the information deemed to be included by Rule 430A of
     the 1933 Act Rules and Regulations.  If it is contemplated, at the time
     this Agreement is executed, that a post-effective amendment to such
     registration statement will be filed and must be declared effective before
     the offering of Units may commence, the term "Registration Statement" as
     used herein means the registration statement as amended by said post-
     effective amendment.  If an abbreviated registration statement is prepared
     and filed with the SEC in accordance with Rule 462(b) or Rule 462(d) under
     the 1933 Act (an "Abbreviated Registration Statement"), the term
     "Registration Statement" as used in this Agreement includes the Abbreviated
     Registration Statement. The term "Prospectus" as used herein means the
     prospectus as first filed with the SEC pursuant to Rule 424(b) of the 1933
     Act Rules and Regulations.  The term "Preliminary Prospectus" as used
     herein shall mean the preliminary prospectus, dated __________, 2002,
     relating to the Units as such preliminary prospectus shall have been
     amended from time to time prior to the date of the Prospectus.  For
     purposes of this Agreement, the words "amend," "amendment," "amended,"
     "supplement" or "supplemented" with respect to the Registration Statement
     or the Prospectus shall mean amendments or supplements to the Registration
     Statement or the Prospectus, as the case may be.

          (b) No Material Misstatements or Omissions.  Neither the SEC nor any
     state or other jurisdiction or other regulatory body has issued, and
     neither is, to the knowledge of the Inergy Parties, threatening to issue,
     any stop order under the 1933 Act or other order suspending the
     effectiveness of the Registration Statement (as amended or supplemented) or
     preventing or suspending the use of the Preliminary Prospectus or the
     Prospectus or suspending the qualification or registration of the Units for
     offering or sale in any jurisdiction nor instituted or, to the knowledge of
     the Inergy Parties, threatened to institute proceedings for any such
     purpose.  The Registration Statement, in the form in

                                       4

     which it became effective and also in such form as it may be when any post-
     effective amendment thereto becomes effective, and the Prospectus comply or
     will comply, as the case may be, in all material respects with the
     requirements of the 1933 Act and the 1933 Act Rules and Regulations.
     Neither the Registration Statement nor any amendment thereto, as of the
     applicable effective date, contains or will contain, as the case may be,
     any untrue statement of a material fact or omits or will omit to state any
     material fact required to be stated therein or necessary to make the
     statements therein, not misleading, and neither the Preliminary Prospectus,
     the Prospectus nor any supplement thereto contains or will contain, as the
     case may be, any untrue statement of a material fact or omits or will omit
     to state any material fact necessary to make the statements therein, in the
     light of the circumstances under which they were made, not misleading;
     provided, however, that the Partnership makes no representation or warranty
     as to information contained in or omitted from the Registration Statement,
     the Preliminary Prospectus or the Prospectus, or any such amendment or
     supplement, in reliance upon, and in conformity with, written information
     furnished to the Partnership relating to the Underwriters by or on behalf
     of the Underwriters expressly for use in the preparation thereof (as
     provided in Section 15 hereof). Each of the statements made by the
     Partnership in such documents within the coverage of Rule 175(b) of the
     1933 Act Rules and Regulations, including (but not limited to) any
     statements with respect to future available cash or future cash
     distributions of the Partnership or the anticipated ratio of taxable income
     to distributions was made or will be made with a reasonable basis and in
     good faith.

          (c) Formation and Due Qualification of the Partnership.  The
     Partnership has been duly formed and is validly existing in good standing
     as a limited partnership under the Delaware Revised Uniform Limited
     Partnership Act ("Delaware LP Act") with full partnership power and
     authority to own or lease its properties to be owned or leased at the
     Closing Date and to conduct its business to be conducted at the Closing
     Date in all material respects as described in the Registration Statement
     and the Prospectus.  The Partnership is duly registered or qualified as a
     foreign limited partnership for the transaction of business under the laws
     of each jurisdiction in which the character of the business conducted by it
     or the nature or location of the properties owned or leased by it makes
     such registration or qualification necessary, except where the failure so
     to register or qualify would not (i) have a material adverse effect on the
     business, financial condition or results of operations of the Partnership
     Group, taken as a whole ("Material Adverse Effect"), or (ii) subject the
     limited partners of the Partnership to any material liability or
     disability.

          (d) Formation and Due Qualification of Holdings, New Propane, the
     Operating Company and the Operating Subs.  Each of Holdings, New Propane,
     the Operating Company and the Operating Subs has been duly formed and is
     validly existing in good standing as a limited liability company under the
     Delaware Limited Liability

                                       5

     Company Act (the "Delaware LLC Act") with full limited liability company
     power and authority to own or lease its properties to be owned or leased at
     the Closing Date and to conduct its business to be conducted at the Closing
     Date, in each case in all material respects as described in the
     Registration Statement and the Prospectus. Each of Holdings, New Propane,
     the Operating Company and the Operating Subs is duly registered or
     qualified as a foreign limited liability company for the transaction of
     business under the laws of each jurisdiction in which the character of the
     business conducted by it or the nature or location of the properties owned
     or leased by it makes such registration or qualification necessary, except
     where the failure so to register or qualify would not (i) have a Material
     Adverse Effect or (ii) subject the limited partners of the Partnership to
     any material liability or disability.

          (e) Formation and Due Qualification of the General Partners.  Each of
     the General Partners has been duly formed and is validly existing in good
     standing as a limited liability company under the Delaware LLC Act with
     full limited liability company power and authority to own or lease its
     properties to be owned or leased at the Closing Date, to conduct its
     business to be conducted at the Closing Date and to act as a general
     partner of the Partnership, in each case in all material respects as
     described in the Registration Statement and the Prospectus.  Each of the
     General Partners is duly registered or qualified as a foreign limited
     liability company for the transaction of business under the laws of each
     jurisdiction in which the character of the business conducted by it or the
     nature or location of the properties owned or leased by it makes such
     registration or qualification necessary, except where the failure so to
     register or qualify would not (i) have a Material Adverse Effect or (ii)
     subject the limited partners of the Partnership to any material liability
     or disability.

          (f) Formation and Due Qualification of Service Sub and Acquisition
     Corp.  Each of Service Sub and Acquisition Corp. has been duly incorporated
     and is validly existing in good standing under the Delaware General
     Corporation Law ("DGCL") with full corporate power and authority to own or
     lease its properties to be owned or leased at the Closing Date and to
     conduct its business to be conducted at the Closing Date, in all material
     respects as described in the Registration Statement and the Prospectus.
     Each of Service Sub and Acquisition Corp. is duly registered or qualified
     as a foreign corporation for the transaction of business under the laws of
     each jurisdiction in which the character of the business conducted by it or
     the nature or location of the properties owned or leased by it makes such
     registration or qualification necessary, except where the failure so to
     register or qualify would not (i) have a Material Adverse Effect or (ii)
     subject the limited partners of the Partnership to any material liability
     or disability.

          (g) Ownership of the General Partner Interests in the Partnership.
     The Managing General Partner and the Non-Managing General Partner are the
     sole general partners of the Partnership.  The Non-Managing General Partner
     owns a 2% general

                                       6

     partner interest and the Managing General Partner owns a non-economic,
     managing general partner interest; such general partner interests have been
     duly authorized and validly issued in accordance with the Partnership
     Agreement; and each General Partner owns its general partner interest free
     and clear of all liens, encumbrances, security interests, equities, charges
     or claims.

          (h) Ownership of the Subordinated Units, Common Units and the
     Incentive Distribution Rights.  (i) New Propane owns 959,954 senior
     subordinated units ("Senior Subordinated Units") representing senior
     subordinated limited partnership interests in the Partnership and 507,063
     junior subordinated units ("Junior Subordinated Units") representing junior
     subordinated limited partnership interests in the Partnership (the Junior
     Subordinated Units and the Senior Subordinated Units are collectively
     referred to herein as the "Subordinated Units"), (ii) the persons and
     entities listed on Schedule III collectively own 2,353,413 Senior
     Subordinated Units and 65,479 Junior Subordinated Units, (iii) Acquisition
     Corp. owns 394,601 Common Units, and (iv) Holdings owns 10,000 Common Units
     and all of the incentive distribution rights, as defined in the Partnership
     Agreement (the "Incentive Distribution Rights"); and New Propane owns its
     Subordinated Units and Holdings owns its Common Units and the Incentive
     Distribution Rights free and clear of all liens, encumbrances (except
     restrictions on transferability as described in the Prospectus), security
     interests, charges or claims.

          (i) Valid Issuance of the Common Units.  At the Closing Date, there
     will be issued to the Underwriters the Firm Units (assuming no purchase by
     the Underwriters of Option Units); at the Closing Date or the Option
     Closing Date, as the case may be, the Firm Units or the Option Units, as
     the case may be, and the limited partner interests represented thereby, and
     all outstanding Common Units, Subordinated Units and the Incentive
     Distribution Rights of the Partnership, including without limitation the
     Firm Units to be sold by the Selling Unitholders hereunder, will be duly
     authorized by the Partnership Agreement and, when issued and delivered to
     the Underwriters against payment therefor in accordance with the terms
     hereof, will be validly issued, fully paid (to the extent required under
     the Partnership Agreement) and nonassessable (except as such
     nonassessability may be affected by matters described in the Prospectus
     under the caption "The Partnership Agreement--Limited Liability"); and
     other than the Subordinated Units and the Incentive Distribution Rights,
     the Units and the Common Units sold to the public in connection with the
     Partnership's initial public offering will be the only limited partner
     interests of the Partnership issued and outstanding at the Closing Date or
     the Option Closing Date.

          (j) Ownership of the Membership Interests in the Operating Company.
     The Partnership owns 100% of the issued and outstanding membership
     interests in the Operating Company; such membership interests have been
     duly authorized and validly issued in accordance with the limited liability
     company agreement of the Operating

                                       7

     Company (the "Operating Company LLC Agreement") and are fully paid (to the
     extent required under the Operating Company LLC Agreement) and
     nonassessable (except as such nonassessability may be affected by Section
     18-607 of the Delaware LLC Act); and the Partnership owns its membership
     interests free and clear of all liens, encumbrances, security interests,
     equities, charges or claims.

          (k) Ownership of Service Sub.  The Operating Company owns 100% of the
     issued and outstanding capital stock of Service Sub; such capital stock has
     been duly authorized and validly issued and is fully paid and
     nonassessable; and the Operating Company owns such capital stock free and
     clear of all liens, encumbrances, security interests, equities, charges or
     claims.

          (l) Ownership of the Operating Subs.  The Operating Company owns 100%
     of the issued and outstanding membership interests in each of the Operating
     Subs; such membership interests have been duly authorized and validly
     issued in accordance with the limited liability company agreements of the
     Operating Subs (as the same may be amended or restated at or prior to the
     Closing Date, the "Operating Subs LLC Agreements") and are fully paid (to
     the extent required under the Operating Subs LLC Agreements) and
     nonassessable (except as such nonassessability may be affected by Section
     18-607 of the Delaware LLC Act); and the Operating Company owns such
     membership interests free and clear of all liens, encumbrances, security
     interests, equities, charges or claims.

          (m) Ownership of New Propane.  The Non-Managing General Partner owns a
     100% common membership interest in New Propane, Wilson owns 48.4% of the
     preferred membership interests in New Propane, and Rolesville owns 51.6% of
     the preferred membership interests in New Propane; such membership
     interests have been duly authorized and validly issued in accordance with
     New Propane's limited liability company agreement (as the same may be
     amended or restated at or prior to the Closing Date, the "New Propane LLC
     Agreement") and are fully paid (to the extent required under the New
     Propane LLC Agreement) and nonassessable (except as such nonassessability
     may be affected by Section 18-607 of the Delaware LLC Act); and the Non-
     Managing General Partner, Wilson and Rolesville own such membership
     interests free and clear of all liens, encumbrances, security interests,
     equities, charges or claims.

          (n) Ownership of the Managing General Partner.  Holdings owns 100% of
     the issued and outstanding membership interests in the Managing General
     Partner; such membership interests have been duly authorized and validly
     issued in accordance with the Managing General Partner's limited liability
     company agreement (as the same may be amended or restated at or prior to
     the Closing Date, the "Managing General Partner LLC Agreement") and are
     fully paid (to the extent required under the Managing General Partner LLC
     Agreement) and nonassessable (except as such nonassessability may be
     affected by Section 18-607 of the Delaware LLC Act); and Holdings owns such

                                       8

     membership interests free and clear of all liens, encumbrances, security
     interests, equities, charges or claims.

          (o) Ownership of the Non-Managing General Partner.  Holdings owns 100%
     of the issued and outstanding common membership interests in the Non-
     Managing General Partner.  Such membership interests have been duly
     authorized and validly issued in accordance with the Non-Managing General
     Partner's limited liability company agreement (as the same may be amended
     or restated at or prior to the Closing Date, the "Non-Managing General
     Partner LLC Agreement") and are fully paid (to the extent required under
     the Non-Managing General Partner LLC Agreement) and nonassessable (except
     as such nonassessability may be affected by Section 18-607 of the Delaware
     LLC Act); and Holdings owns its membership interests free and clear of all
     liens, encumbrances, security interests, equities, charges or claims.

          (p) Ownership of Acquisition Corp.  Holdings owns 100% of the issued
     and outstanding capital stock of Acquisition Corp.; such capital stock has
     been duly authorized and validly issued and is fully paid and
     nonassessable; and Holdings owns such capital stock free and clear of all
     liens, encumbrances, security interests, equities, charges or claims.

          (q) No Other Subsidiaries. Other than the Partnership's ownership of
     its membership interest in the Operating Company and the Operating
     Company's ownership of its membership interest in the Operating Subs and
     its shares of capital stock of Service Sub, neither the Partnership nor the
     Operating Company own, and at the Closing Date and the Option Closing Date,
     neither will own, directly or indirectly, any equity or long term debt
     securities of any corporation, partnership, limited liability company,
     joint venture, association or other entity.  Other than its ownership of
     its partnership interests in the Partnership, the Managing General Partner
     does not own, and at the Closing Date and the Option Closing Date will not
     own, directly or indirectly, any equity or long-term debt securities of any
     corporation, partnership, limited liability company, joint venture,
     association or other entity.

          (r) No Preemptive Rights, Registration Rights or Options.  Except as
     described in the Prospectus, there are no preemptive rights or other rights
     to subscribe for or to purchase, nor any restriction upon the voting or
     transfer of, (i) any limited partner interests of the Partnership, (ii) any
     membership interests of the Managing General Partner, the Operating
     Company, or the Operating Subs or (iii) any shares of Service Sub, in each
     case pursuant to the partnership agreement or limited liability company
     agreement of such entity (collectively, the "Organizational Agreements") or
     the certificates of incorporation, bylaws and other organizational
     documents (together with the Organization Agreements, the "Organizational
     Documents") or any other agreement or instrument to which any of such
     entities is a party or by which any one of them may be

                                       9

     bound. Neither the filing of the Registration Statement nor the offering or
     sale of the Units as contemplated by this Agreement gives rise to any
     rights for or relating to the registration of any Units or other securities
     of the Partnership, other than as have been waived. Except as described in
     the Prospectus, there are no outstanding options or warrants to purchase
     (A) any Common Units, Senior Subordinated Units, Junior Subordinated Units
     or Incentive Distribution Rights or other interests in the Partnership, (B)
     any membership interests in the Managing General Partner, the Operating
     Company, or the Operating Subs or (C) any shares of Service Sub.

          (s) Authority and Authorization.  The Partnership has all requisite
     power and authority to issue, sell and deliver the Units in accordance with
     and upon the terms and conditions set forth in this Agreement, the
     Partnership Agreement and the Registration Statement and the Prospectus.
     At the Closing Date and the Option Closing Date, all corporate, partnership
     and limited liability company action, as the case may be, required to be
     taken by the Inergy Entities or any of their stockholders, members or
     partners for the authorization, issuance, sale and delivery of the Units
     shall have been validly taken.

          (t) Enforceability of the Underwriting Agreement.  This Agreement has
     been duly executed and delivered by each of the Inergy Parties, and
     constitutes the valid and legally binding agreement of each of the Inergy
     Parties, enforceable against each of the Inergy Parties in accordance with
     its terms, provided that the enforceability thereof may be limited by
     bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
     similar laws relating to or affecting creditors' rights generally and by
     general principles of equity (regardless of whether such enforceability is
     considered in a proceeding in equity or at law); provided, further, that
     the indemnity and contribution provisions hereunder may be limited by
     federal or state securities laws.

          (u) Enforceability of Other Agreements.  At or before the Closing
     Date:

              (i)    The Partnership Agreement has been duly authorized,
     executed and delivered by the General Partners and the Organizational
     Limited Partner and is a valid and legally binding agreement of the General
     Partners and the Organizational Limited Partner, enforceable against the
     General Partners and the Organizational Limited Partner in accordance with
     its terms;

              (ii)   The Operating Company LLC Agreement has been duly
     authorized, executed and delivered by the Partnership and is a valid and
     legally binding agreement of the Partnership, enforceable against it in
     accordance with its terms;

              (iii)  The New Propane LLC Agreement has been duly authorized,
     executed and delivered by the Non-Managing General Partner and will be a
     valid and

                                       10

     binding agreement of the Non-Managing General Partner against it in
     accordance with its terms;

               (iv) The Managing General Partner LLC Agreement has been duly
     authorized, executed and delivered by Holdings and is a valid and legally
     binding agreement of Holdings, enforceable against it in accordance with
     its terms;

               (v)  The Non-Managing General Partner LLC Agreement has been duly
     authorized, executed and delivered by Holdings and is a valid and legally
     binding agreement of Holdings, enforceable against it in accordance with
     its terms;

     provided that, with respect to each agreement described in this Section
     4(u), the enforceability thereof may be limited by bankruptcy, insolvency,
     fraudulent transfer, reorganization, moratorium and similar laws relating
     to or affecting creditors' rights generally and by general principles of
     equity (regardless of whether such enforceability is considered in a
     proceeding in equity or at law); and provided, further, that the indemnity,
     contribution and exoneration provisions contained in any of such agreements
     may be limited by applicable laws and public policy.

          (v)  No Conflicts.  None of the offering, issuance and sale by the
     Partnership of the Units, the execution, delivery and performance of this
     Agreement or the consummation of the transactions contemplated hereby (i)
     conflicted, conflicts or will conflict with or constituted, constitutes or
     will constitute a violation of the Organizational Documents, (ii)
     conflicted, conflicts or will conflict with or constituted, constitutes or
     will constitute a breach or violation of, or a default (or an event which,
     with notice or lapse of time or both, would constitute such a default)
     under any indenture, mortgage, deed of trust, loan agreement, lease or
     other agreement or instrument to which any of the Inergy Entities is a
     party or by which any of them or any of their respective properties may be
     bound, (iii) violated, violates or will violate any statute, law or
     regulation or any order, judgment, decree or injunction of any court or
     governmental agency or body directed to any of the Inergy Entities or any
     of their properties in a proceeding to which any of them or their property
     is a party or (iv) resulted, results or will result in the creation or
     imposition of any lien, charge or encumbrance upon any property or assets
     of any of the Inergy Entities, which conflicts, breaches, violations or
     defaults, in the case of clauses (ii), (iii) or (iv), would, individually
     or in the aggregate, have a Material Adverse Effect.

          (w)  No Consents.  No permit, consent, approval, authorization, order,
     registration, filing or qualification ("consent") of or with any court,
     governmental agency or body having jurisdiction over the Inergy Parties or
     any of their respective properties is required for the offering, issuance
     and sale by the Partnership of the Units, the execution, delivery and
     performance of this Agreement or the consummation by the Inergy Entities of
     the transactions contemplated by this Agreement, except (i) as described in
     the

                                       11

     Prospectus, (ii) for such consents required under the 1933 Act, the
     Securities Exchange Act of 1934, as amended (the "1934 Act") and state
     securities or "Blue Sky" laws, (iii) for such consents which have been, or
     prior to the Closing Date will be, obtained, and (iv) for such consents
     which, if not obtained, would not, individually or in the aggregate, have a
     Material Adverse Effect.

          (x)  No Default.  None of the Inergy Entities is (i) in violation of
     its Organizational Documents, or (ii) in violation of any law, statute,
     ordinance, administrative or governmental rule or regulation applicable to
     it or of any decree of any court or governmental agency or body having
     jurisdiction over it or (iii) in breach, default (or an event which, with
     notice or lapse of time or both, would constitute such a default) or
     violation in the performance of any obligation, agreement or condition
     contained in any bond, debenture, note or any other evidence of
     indebtedness or in any agreement, indenture, lease or other instrument to
     which it is a party or by which it or any of its properties may be bound,
     which breach, default or violation in the case of clause (ii) or (iii)
     would, if continued, have a Material Adverse Effect or could materially
     impair the ability of any of the Inergy Parties to perform their
     obligations under this Agreement.  To the knowledge of the Inergy Parties,
     no third party to any indenture, mortgage, deed of trust, loan agreement or
     other agreement or instrument to which any of the Inergy Entities is a
     party or by which any of them is bound or to which any of their properties
     is subject, is in default under any such agreement, which breach, default
     or violation would, if continued, have a Material Adverse Effect.

          (y)  Conformity of Securities to Descriptions in the Prospectus.  The
     Units, when issued and delivered against payment therefor as provided
     herein will conform in all material respects to the description thereof
     contained in the Prospectus.

          (z)  Independent Public Accountants - Ernst & Young. The accountants,
     Ernst & Young LLP, who have certified or shall certify the audited
     financial statements included in the Registration Statement and the
     Prospectus (or any amendment or supplement thereto), are independent public
     accountants with respect to the Partnership and the General Partners as
     required by the 1933 Act and the applicable published rules and regulations
     thereunder.

          (aa) Independent Public Accountants - Arthur Andersen LLP.  The
     accountants, Arthur Andersen LLP, who have certified or shall certify the
     audited financial statements included in the Registration Statement and the
     Prospectus (or any amendment or supplement thereto), are independent public
     accountants with respect to Independent Propane Company as required by the
     1933 Act and the applicable published rules and regulations thereunder.

                                       12

          (bb) Financial Statements.  At March 31, 2002, the Partnership would
     have had, on the consolidated pro forma basis indicated in the Prospectus
     (and any amendment or supplement thereto), a capitalization as set forth
     therein.  The historical financial statements (including the related notes
     and supporting schedules) included in the Registration Statement and the
     Prospectus (and any amendment or supplement thereto) present fairly in all
     material respects the financial position, results of operations and cash
     flows of the entities purported to be shown thereby on the basis stated
     therein at the respective dates or for the respective periods to which they
     apply and have been prepared in accordance with generally accepted
     accounting principles consistently applied throughout the periods involved,
     except to the extent disclosed therein.  The summary historical and pro
     forma information set forth in the Registration Statement and the
     Prospectus (and any amendment or supplement thereto) under the caption
     "Summary Pro Forma Financial and Operating Data and the selected historical
     information set forth under the caption "Selected Historical Financial and
     Operating Data" is accurately presented in all material respects and
     prepared on a basis consistent with the audited and unaudited historical
     consolidated financial statements and pro forma financial statements, as
     applicable, from which it has been derived.  The pro forma financial
     statements of the Partnership included in the Registration Statement and
     the Prospectus (and any amendment or supplement thereto) have been prepared
     in all material respects in accordance with the applicable accounting
     requirements of Article 11 of Regulation S-X of the Commission; the
     assumptions used in the preparation of such pro forma financial statements
     are, in the opinion of the management of the Managing General Partner,
     reasonable; and the pro forma adjustments reflected in such pro forma
     financial statements have been properly applied to the historical amounts
     in compilation of such pro forma financial statements.

          (cc) No Material Adverse Change.  None of the Inergy Parties has
     sustained since the date of the latest audited financial statements
     included in the Registration Statement and the Prospectus any material loss
     or interference with its business from fire, explosion, flood or other
     calamity, whether or not covered by insurance, or from any labor dispute or
     court or governmental action, investigation, order or decree, otherwise
     than as set forth or contemplated in the Registration Statement and the
     Prospectus.  Except as disclosed in the Registration Statement and the
     Prospectus (or any amendment or supplement thereto), subsequent to the
     respective dates as of which such information is given in the Registration
     Statement and the Prospectus (or any amendment or supplement thereto), (i)
     none of the Inergy Parties has incurred any liability or obligation,
     indirect, direct or contingent, or entered into any transactions, not in
     the ordinary course of business, that, singly or in the aggregate, is
     material to the Partnership Group, (ii) there has not been any material
     change in the capitalization, or material increase in the short-term debt
     or long-term debt, of the Inergy Parties and (iii) there has not been any
     material adverse change, or any development involving or which may
     reasonably be expected to involve, singly or in the aggregate, a
     prospective material adverse change in or affecting

                                       13

     the general affairs, business, prospects, properties, management, condition
     (financial or other), partners' capital, stockholders' equity, net worth or
     results of operations of the Partnership Group.

          (dd) Legal Proceedings or Contracts to be Described or Filed.  There
     are no legal or governmental proceedings pending or, to the knowledge of
     the Inergy Parties, threatened, against any of the Inergy Parties, or to
     which any of the Inergy Parties is a party, or to which any of their
     respective properties is subject, that are required to be described in the
     Registration Statement or the Prospectus but are not described as required,
     and there are no agreements, contracts, indentures, leases or other
     instruments that are required to be described in the Registration Statement
     or the Prospectus or to be filed as exhibits to the Registration Statement
     that are not described or filed as required by the Act.

          (ee) Title to Properties.  The Operating Company, Service Sub and the
     Operating Subs will have good and indefeasible title to all real property
     and good title to all personal property described in the Prospectus to be
     owned by the Operating Company, Service Sub and the Operating Subs, free
     and clear of all liens, claims, security interests or other encumbrances
     except (i) such as are described in the Registration Statement or
     Prospectus or (ii) such as do not materially interfere with the use of such
     properties taken as a whole as they have been used in the past and are
     proposed to be used in the future as described in the Registration
     Statement and the Prospectus.  All real property and buildings held under
     lease or license by the Operating Company, Service Sub and the Operating
     Subs are held by the Operating Company, Service Sub and the Operating Subs
     and enforceable leases or licenses with such exceptions as do not
     materially interfere with the use of such properties taken as a whole as
     they have been used in the past and are proposed to be used in the future
     as described in the Registration Statement and the Prospectus.

          (ff) Permits.  Each of the Operating Company, Service Sub and the
     Operating Subs has, and at the Closing Date will have, such permits,
     consents, licenses, franchises, certificates and authorizations of
     governmental or regulatory authorities ("permits") as are necessary to own
     its properties and to conduct its business in the manner described in the
     Prospectus, subject to such qualifications as may be set forth in the
     Registration Statement and the Prospectus and except for such permits
     which, if not obtained, would not, individually or in the aggregate, have a
     Material Adverse Effect; each of the Operating Company, Service Sub and the
     Operating Subs has fulfilled and performed all its material obligations
     with respect to such permits which are due to have been fulfilled and
     performed by such date and no event has occurred which allows, or after
     notice or lapse of time would allow, revocation or termination thereof or
     results in any impairment of the rights of the holder of any such permit,
     except for such revocations, terminations and impairments that would not,
     individually or in the aggregate, have a Material Adverse

                                       14

     Effect, subject in each case to such qualification as may be set forth in
     the Registration Statement and the Prospectus; and, except as described in
     the Registration Statement and the Prospectus, none of such permits
     contains any restriction that is materially burdensome to the Partnership
     Group taken as a whole.

          (gg) Books and Records.  The Partnership (i) makes and keeps books,
     records and accounts, which, in reasonable detail, accurately and fairly
     reflect the transactions and dispositions of assets and (ii) maintains
     systems of internal accounting controls sufficient to provide reasonable
     assurances that (A) transactions are executed in accordance with
     management's general or specific authorization; (B) transactions are
     recorded as necessary to permit preparation of financial statements in
     conformity with generally accepted accounting principles and to maintain
     accountability for assets; (C) access to assets is permitted only in
     accordance with management's general or specific authorization; and (D) the
     recorded accountability for assets is compared with existing assets at
     reasonable intervals and appropriate action is taken with respect to any
     differences.

          (hh) Tax Returns.  Each of the Inergy Parties has filed (or has
     obtained extensions with respect to) all material federal, state and
     foreign income and franchise tax returns required to be filed through the
     date hereof, which returns are complete and correct in all material
     respects, and has timely paid all taxes shown to be due pursuant to such
     returns, other than those (i) which are being contested in good faith or
     (ii) which, if not paid, would not have a Material Adverse Effect.

          (ii) Investment Company/Public Utility Holding Company.  None of the
     Inergy Parties is now, and after sale of the Units to be sold by the
     Partnership hereunder and application of the net proceeds from such sale as
     described in the Prospectus under the caption "Use of Proceeds," none of
     the Inergy Parties will be, (i) an "investment company" or a company
     "controlled by" an "investment company" within the meaning of the
     Investment Company Act of 1940, as amended, or (ii) a "public utility
     company," "holding company" or a "subsidiary company" of a "holding
     company" or an "affiliate" thereof, under the Public Utility Holding
     Company Act of 1935, as amended.

          (jj) No Environmental Problems.  The Inergy Entities (i) are in
     compliance with any and all applicable foreign, federal, state and local
     laws and regulations relating to the protection of human health and safety
     and the environment or imposing liability or standards of conduct
     concerning any Hazardous Material (as hereinafter defined) ("Environmental
     Laws"), (ii) have received all permits required of them under applicable
     Environmental Laws to conduct their respective businesses and (iii) are in
     compliance with all terms and conditions of any such permit, except where
     such noncompliance with Environmental Laws, failure to receive required
     permits, or failure to comply with the terms and conditions of such permits
     would not, individually or in the

                                       15

     aggregate, have a Material Adverse Effect. The term "Hazardous Material"
     means (A) any "hazardous substance" as defined in the Comprehensive
     Environmental Response, Compensation and Liability Act of 1980, as amended,
     (B) any "hazardous waste" as defined in the Resource Conservation and
     Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any
     polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous,
     dangerous or toxic chemical, material, waste or substance regulated under
     or within the meaning of any other Environmental Law.

          (kk) No Labor Dispute.  No material labor dispute with the employees
     of the Inergy Entities exists or, to the knowledge of the Inergy Parties,
     is imminent.

          (ll) Insurance.  The Inergy Entities maintain insurance covering their
     properties, operations, personnel and businesses against such losses and
     risks as are reasonably adequate to protect them and their businesses in a
     manner consistent with other businesses similarly situated.  None of the
     Inergy Entities has received notice from any insurer or agent of such
     insurer that substantial capital improvements or other expenditures will
     have to be made in order to continue such insurance, and all such insurance
     is outstanding and duly in force on the date hereof and will be outstanding
     and duly in force on the Closing Date.

          (mm) Litigation.  Except as described in the Prospectus, there is (i)
     no action, suit or proceeding before or by any court, arbitrator or
     governmental agency, body or official, domestic or foreign, now pending or,
     to the knowledge of the Inergy Parties, threatened, to which any of the
     Inergy Entities is or may be a party or to which the business or property
     of any of the Inergy Entities is or may be subject, (ii) no statute, rule,
     regulation or order that has been enacted, adopted or issued by any
     governmental agency or proposed by any governmental agency and (iii) no
     injunction, restraining order or order of any nature issued by a federal or
     state court or foreign court of competent jurisdiction to which any of the
     Inergy Entities is or may be subject, that, in the case of clauses (i),
     (ii) and (iii) above, is reasonably likely to (A) individually or in the
     aggregate have a Material Adverse Effect, (B) prevent or result in the
     suspension of the offering and issuance of the Units, or (C) in any manner
     draw into question the validity of this Agreement.

          (nn) Private Placement.  The sale and issuance of the Subordinated
     Units and the Incentive Distribution Rights pursuant to the Partnership
     Agreement are exempt from the registration requirements of the Act and the
     securities laws of any state having jurisdiction with respect thereto.

          (oo) No Distribution of Other Offering Materials.  The Inergy Entities
     have not distributed and, prior to the later to occur of (i) the Closing
     Date and (ii) completion of the distribution of the Units, will not
     distribute, any prospectus (as defined under the Act) in connection with
     the offering and sale of the Units other than the Registration

                                       16

     Statement, the Preliminary Prospectus, the Prospectus or other materials,
     if any, permitted by the Act, including Rule 134 of the general rules and
     regulations thereunder.

          (pp) Listing.  The Units have been approved for quotation on the
     Nasdaq, subject only to official notice of issuance.

          (qq) Price Manipulation.  Except as stated in this Agreement and the
     Prospectus, the Inergy Entities and the directors, officers or controlling
     persons of any such entity have not taken, and will not take, directly or
     indirectly, any action designed to or that might reasonably be expected to
     cause or result in stabilization or manipulation of the price of the Common
     Units to facilitate the sale or resale of the Units.

          Any certificate signed by any officer of any Inergy Party and
     delivered to you or to counsel for the Underwriters shall be deemed a
     representation and warranty by such Inergy Party to each Underwriter as to
     the matters covered thereby.

     5.   Representations, Warranties and Agreements of the Selling Unitholders.
Each Selling Unitholder severally represents, warrants and agrees with each
Underwriter solely with respect to itself that:

          (a)  No Material Misstatements or Omissions. With respect to any
     statements or omissions, if any, made in the section entitled "Selling
     Unitholders" in the Registration Statement and the Prospectus in reliance
     upon and in conformity with written information furnished to the
     Partnership by such Selling Unitholder expressly for use therein, (i)
     neither the Registration Statement nor any amendment thereto omits or will,
     as of the applicable effective date, contains, or will contain, as the case
     may be, any untrue statement of a material fact or omits to or will omit
     state any material fact required to be stated therein or necessary to make
     the statements therein, not misleading, and (ii) neither the Preliminary
     Prospectus, the Prospectus nor any supplement thereto contains or will
     contain, as the case may be, will contain any untrue statement of a
     material fact or omits or will omit to state any material fact necessary to
     make the statements therein, in the light of the circumstances under which
     they were made, not misleading.

          (b)  Formation and Due Qualification of the Selling Unitholder. In the
     event that such Selling Unitholder is a corporation, such Selling
     Unitholder has been duly incorporated and is validly existing in good
     standing as a corporation under the laws of the jurisdiction of its
     incorporation; in the event that such Selling Unitholder is a limited
     partnership, such Selling Unitholder has been duly formed and is validly
     existing in good standing as a limited partnership under the laws of the
     jurisdiction of its formation; and, in the event that such Selling
     Unitholder is a limited liability company, such Selling Unitholder has been
     duly formed and is validly existing under the laws as a limited liability
     company of the jurisdiction of its formation.

                                       17

          (c) No Consents. No permit, consent, approval, authorization, order,
     registration, filing or qualification ("consent") of any court,
     governmental agency or body having jurisdiction over such Selling
     Unitholder or any of its respective properties is required for the
     offering, issuance and sale by such Selling Unitholder of the Firm Units,
     the execution, delivery and performance of this Agreement, the Power of
     Attorney (the "Power of Attorney") hereinafter referred to and the Custody
     Agreement (the "Custody Agreement") hereinafter referred to, except (i) as
     described in the Prospectus, (ii) for such consents required under the 1933
     Act, the 1934 Act and "Blue Sky" laws, (iii) for such consents which have
     been, or prior to the Closing Date will be, obtained, and (iv) for such
     consents which, if not obtained, would not, individually or in the
     aggregate, have a Material Adverse Effect.

          (d) Authority and Authorization. Such Selling Unitholder has all
     requisite power, authority and capacity to issue, sell and deliver the Firm
     Units in accordance with and upon the terms and conditions set forth in
     this Agreement, and the Registration Statement and the Prospectus. At the
     Closing Date all corporate, partnership and limited liability company
     action, as the case may be, required to be taken by such Selling Unitholder
     for the authorization, issuance, sale and delivery of the Firm Units shall
     have been validly taken.

          (f) Enforceability of this Agreement. This Agreement, the Power of
     Attorney and the Custody Agreement have been duly by such Selling
     Unitholder, the transactions contemplated by this Agreement have been duly
     authorized by the Selling Unitholder and, when this Agreement is executed
     and delivered by an Attorney-in-Fact (as defined herein) on behalf of such
     Selling Unitholder, this Agreement will be duly executed and delivered, and
     the Power of Attorney and the Custody Agreement constitute, and this
     Agreement, when executed by an Attorney-in-Fact consistent with the Power
     of Attorney, will constitute, the valid and legally binding agreements of
     such Selling Unitholder enforceable against such Selling Unitholder in
     accordance with their terms provided that the enforceability thereof may be
     limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
     moratorium and similar laws relating to or affecting creditors' rights
     generally and by general principles of equity (regardless of whether such
     enforceability is considered in a proceeding in equity or at law);
     provided, further, that the indemnity and contribution provisions hereunder
     may be limited by federal or state securities laws.

          (g) No Conflicts. None of the offering, issuance and sale by such
     Selling Unitholder of the Firm Units, the execution, delivery and
     performance of this Agreement, the Power of Attorney and the Custody
     Agreement or the consummation of the transactions contemplated hereby (i)
     conflicted, conflicts or will conflict with or constituted, constitutes or
     will constitute a violation of the organizational documents of such Selling
     Unitholder, if not an individual, (ii) conflicted, conflicts or will
     conflict with

                                       18

     or constituted, constitutes or will constitute a breach or violation of, or
     a default (or an event which, with notice or lapse of time or both, would
     constitute such a default) under any indenture, mortgage, deed of trust,
     loan agreement, lease or other agreement or instrument to which such
     Selling Unitholder is a party or by which any of it or any of its
     respective properties may be bound, (iii) violated, violates or will
     violate any statute, law or regulation or any order, judgment, decree or
     injunction of any court or governmental agency or body directed to such
     Selling Unitholder or any of its properties in a proceeding to which it or
     its property is a party or (iv) resulted, results or will result in the
     creation or imposition of any lien, charge or encumbrance upon any property
     or assets of such Selling Unitholder which conflicts, breaches, violations
     or defaults, in the case of clauses (ii), (iii) or (iv), would,
     individually or in the aggregate, have a Material Adverse Effect.

          (g) Title to Firm Units. The Selling Unitholder has, and immediately
     prior to the transfer of the Units to the Underwriter on the Closing Date,
     the Selling Unitholder will have, good and valid title to the Firm Units,
     free and clear of all liens, encumbrances, equities or claims; and, upon
     delivery of the Firm Units and payment therefor, as contemplated in this
     Agreement, the Power of Attorney and the Custody Agreement, good and valid
     title to the Firm Units, free and clear of all liens, pledges,
     encumbrances, equities, or claims, will pass to the several Underwriters.
     No person has any right to acquire from such Selling Unitholder any Units
     to be sold hereunder and such Selling Unitholder is under no obligation,
     whether absolute or contingent, to sell any such Units to any person,
     except as contemplated by this Agreement.

          (h) No Price Manipulation. Except as stated in this Agreement and the
     Prospectus, such Selling Unitholder has not taken, and will not take,
     directly or indirectly, any action to or that might reasonably be expected
     to cause or result in stabilization or manipulation of the price of the
     Common Units to facilitate the sale or resale of the Firm Units.

          (i) Power of Attorney. Such Selling Unitholder has placed in custody
     under the Custody Agreement furnished to such Selling Unitholder and duly
     executed and delivered by such Selling Unitholder to ____________, as
     custodian (the "Custodian"), for delivery under this Agreement,
     certificates in negotiable form representing the Firm Units to be sold by
     such Selling Unitholder hereunder. Such Selling Unitholder specifically
     agrees that the Firm Units represented by the certificates so held in
     custody for such Selling Unitholder are subject to the interest of the
     Underwriters, that the arrangements made by such Selling Unitholder for
     custody are to that extent irrevocable except as provided in the Custody
     Agreement and in the Power of Attorney and that the obligations of such
     Selling Unitholder hereunder shall not be terminated by any act of such
     Selling Unitholder, by operation of law or the occurrence of any other
     event. Such Selling Unitholder has duly and irrevocably executed and
     delivered a Power of Attorney appointing ___________ and _____________ as
     such Selling Unitholder's Attorneys-in-

                                       19

     Fact (the "Attorneys-in-Fact") upon the terms and subject to the conditions
     set forth therein to execute and deliver this Agreement and to take certain
     other action on behalf of such Selling Unitholder as may be necessary or
     desirable in connection with the transactions contemplated by this
     Agreement and the Custody Agreement.

     6.   Additional Covenants.  The Inergy Parties covenant and agree with the
Underwriters that:

          (a) The Partnership will timely transmit copies of the Prospectus, and
     any amendments or supplements thereto, to the SEC for filing pursuant to
     Rule 424(b) of the 1933 Act Rules and Regulations.

          (b) The Partnership will deliver to the Underwriters, and to counsel
     for the Underwriters (i) a signed copy of the Registration Statement as
     originally filed, including copies of exhibits thereto, of any amendments
     and supplements to the Registration Statement and (ii) a signed copy of
     each consent and certificate included in, or filed as an exhibit to, the
     Registration Statement as so amended or supplemented; the Partnership will
     deliver to the Underwriters as soon as practicable after the date of this
     Agreement as many copies of the Prospectus as the Underwriters may
     reasonably request for the purposes contemplated by the 1933 Act; if there
     is a post-effective amendment to the Registration Statement that is not
     effective under the 1933 Act, the Partnership will use its best efforts to
     cause the post-effective amendment to the Registration Statement to become
     effective as promptly as possible, and it will notify you, promptly after
     it shall receive notice thereof, of the time when the post-effective
     amendment to the Registration Statement has become effective; the
     Partnership will promptly advise the Underwriters of any request of the SEC
     for amendment of the Registration Statement or for supplement to the
     Prospectus or for any additional information, and of the issuance by the
     SEC or any state or other jurisdiction or other regulatory body of any stop
     order under the 1933 Act or other order suspending the effectiveness of the
     Registration Statement (as amended or supplemented) or preventing or
     suspending the use of the Preliminary Prospectus or the Prospectus or
     suspending the qualification or registration of the Units for offering or
     sale in any jurisdiction, and of the institution or threat of any
     proceedings therefor, of which the Partnership shall have received notice
     or otherwise have knowledge prior to the completion of the distribution of
     the Units; and the Partnership will use its best efforts to prevent the
     issuance of any such stop order or other order and, if issued, to secure
     the prompt removal thereof.

          (c) The Partnership will not file any amendment or supplement to the
     Registration Statement, the Prospectus (or any other prospectus relating to
     the Units filed pursuant to Rule 424(b) of the 1933 Act Rules and
     Regulations that differs from the Prospectus as filed pursuant to such Rule
     424(b)), of which the Underwriters shall not previously have been advised
     or to which the Underwriters shall have reasonably objected

                                       20

     in writing after being so advised unless the Partnership shall have
     determined based upon the advice of counsel that such amendment or
     supplement is required by law; and the Partnership will promptly notify you
     after it shall have received notice thereof of the time when any amendment
     to the Registration Statement becomes effective or when any supplement to
     the Prospectus has been filed.

          (d) During the period when a prospectus relating to any of the Units
     is required to be delivered under the 1933 Act by any Underwriter or
     dealer, the Partnership will comply, at its own expense, with all
     requirements imposed by the 1933 Act and the 1933 Act Rules and
     Regulations, so far as necessary to permit the continuance of sales of or
     dealing in the Units during such period in accordance with the provisions
     hereof and as contemplated by the Prospectus.

          (e) If, during the period when a prospectus relating to any of the
     Units is required to be delivered under the 1933 Act by any Underwriter or
     dealer, (i) any event relating to or affecting the Partnership or of which
     the Partnership shall be advised in writing by the Underwriters shall occur
     as a result of which, in the opinion of the Partnership or the counsel for
     the Underwriters, the Prospectus as then amended or supplemented would
     include any untrue statement of a material fact or omit to state a material
     fact necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading or (ii) it shall
     be necessary to amend or supplement the Registration Statement or the
     Prospectus to comply with the 1933 Act, the 1933 Act Rules and Regulations,
     the 1934 Act or the 1934 Act Rules and Regulations, the Partnership will
     forthwith at its expense prepare and file with the SEC, and furnish to the
     Underwriters a reasonable number of copies of, such amendment or supplement
     or other filing that will correct such statement or omission or effect such
     compliance.

          (f) During the period when a prospectus relating to any of the Units
     is required to be delivered under the 1933 Act by the Underwriter or
     dealer, the Partnership will furnish such proper information as may be
     lawfully required and otherwise cooperate with you in qualifying the Units
     for offer and sale under the securities or blue sky laws of such
     jurisdictions as the Underwriters may reasonably designate and will file
     and make such statements or reports as are or may be reasonably necessary;
     provided, however, that the Partnership shall not be required to qualify as
     a foreign corporation or to qualify as a dealer in securities or to file a
     general consent to service of process under the laws of any jurisdiction.

          (g) In accordance with Section 11(a) of the 1933 Act and Rule 158 of
     the 1933 Act Rules and Regulations, the Partnership will make generally
     available to its security holders, an earning statement (which need not be
     audited) in reasonable detail covering the 12-month period beginning not
     later than the first day of the month next

                                       21

     succeeding the month in which occurred the effective date (within the
     meaning of Rule 158) of the Registration Statement as soon as practicable
     after the end of such period.

          (h) The Partnership will furnish to its security holders annual
     reports containing financial statements audited by independent public
     accountants and quarterly reports containing financial statements and
     financial information which may be unaudited.  The Partnership will, for a
     period of two years from the Closing Date, furnish or make available to the
     Underwriters a copy of each annual report, quarterly report, current report
     and all other documents, reports and information furnished by the
     Partnership to holders of Units or filed with any securities exchange or
     market pursuant to the requirements of such exchange or market or with the
     SEC pursuant to the 1933 Act or the 1934 Act.  The Partnership will deliver
     to the Underwriters similar reports with respect to any significant
     subsidiaries, as that term is defined in the 1933 Act Rules and
     Regulations, which are not consolidated in the Partnership's financial
     statements.  Any report, document or other information required to be
     furnished under this paragraph (h) shall be furnished as soon as
     practicable after such report, document or information becomes publicly
     available.

          (j) The Partnership, New Propane and the General Partners will not,
     during the 90 days after the date of this prospectus, without the prior
     written consent of A.G. Edwards & Sons, Inc., directly or indirectly, offer
     for sale, contract to sell, sell, distribute, grant any option, right or
     warrant to purchase, pledge, hypothecate or otherwise dispose of any Common
     Units, any securities convertible into, or exercisable or exchangeable for,
     Common Units (other than the Senior Subordinated Units and the Junior
     Subordinated Units) or any other rights to acquire such Common Units, other
     than pursuant to employee benefit plans as in existence as of the date of
     the Prospectus.

          (k) The Partnership will apply the proceeds from the sale of the Units
     as set forth in the description under "Use of Proceeds" in the Prospectus.

          (l) The Partnership will promptly provide you with copies of all
     correspondence to and from, and all documents issued to and by, the SEC in
     connection with the registration of the Units under the 1933 Act.

          (m) The Partnership will use its best efforts to obtain approval for,
     and maintain the quotation of the Units on, the Nasdaq.

          (n) The Partnership will cause its directors and officers to furnish
     to you, on or prior to the date of this Agreement, a letter or letters, in
     form and substance satisfactory to counsel for the Underwriters, pursuant
     to which each such person shall agree not to directly or indirectly, offer
     for sale, contract to sell, sell, distribute, grant any option, right or
     warrant to purchase, pledge, hypothecate or otherwise dispose of any Common
     Units,

                                       22

     or any securities convertible into, or exercisable or exchangeable for,
     Common Units (other than Senior Subordinated Units and Junior Subordinated
     Units) or any other rights to acquire such Common Units, during the 90 days
     after the date of the Prospectus, without the prior written consent of A.
     G. Edwards & Sons, Inc.

          (o) If the Partnership elects to rely on Rule 462(b) under the 1933
     Act, the Partnership shall both file an Abbreviated Registration Statement
     with the SEC in compliance with Rule 462(b) and pay the applicable fees in
     accordance with Rule 111 of the 1933 Act by the earlier of (i) 10:00 p.m.,
     New York time, on the date of this Agreement, and (ii) the time that
     confirmations are given or sent, as specified by Rule 462(b)(2).

          (p) The Partnership shall timely complete all required filings and
     otherwise fully comply in a timely manner with all provisions of the 1934
     Act, including the rules and regulations promulgated thereunder, in
     connection with the registration of the Units thereunder.

     7.   Covenants of the Selling Unitholder.  Each Selling Unitholder
severally, and not jointly, agrees:

          (a) Such Selling Unitholder will furnish to you, on or prior to the
     date of this Agreement, a letter or letters, in form and substance
     satisfactory to counsel for the Underwriters, pursuant to which each such
     Selling Unitholder shall agree not to directly or indirectly, offer for
     sale, contract to sell, sell, distribute, grant any option, right or
     warrant to purchase, pledge, hypothecate or otherwise dispose of any Common
     Units, or any securities convertible into, or exercisable or exchangeable
     for, Common Units or any other rights to acquire such Common Units, during
     the 90 days after the date of the Prospectus, without the prior written
     consent of A.G. Edwards & Sons, Inc.

          (b) That the Firm Units to be sold by such Selling Unitholder
     hereunder is subject to the interest of the Underwriter and that the
     obligations of such Selling Unitholder hereunder shall not be terminated by
     any act of such Selling Unitholder or by operation of law.

          (c) To deliver to the Underwriter at the Closing Date a properly
     completed and executed United States Treasury Department Form W-9.

          (d) To pay the fees and expenses of its counsel and any transfer taxes
     payable in connection with its sale of the Firm Units to the Underwriter.

                                       23

          (e) To deliver to the Underwriter a properly completed and executed
     United States Treasury Department Form W-9 (or other applicable form or
     statement specified by Treasury Department regulations in lieu thereof).

          (f) To deliver to the Attorneys-in-Fact such documentation as the
     Attorneys-in-Fact, the Partnership or the Underwriters or their counsel may
     reasonably request to effectuate any of the provisions hereof, the Custody
     Agreement or the Power of Attorney, all of the foregoing to be in form and
     substance reasonably satisfactory to the Attorneys-in-Fact and the
     Underwriters.

     8.   Conditions of Underwriters' Obligations.  The several obligations of
the Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the accuracy, as of the date hereof and as of the Closing Date (and,
if applicable, the Option Closing Date), of the representations and warranties
of the Inergy Parties and the Selling Unitholders contained herein, to the
performance by the Inergy Parties and the Selling Unitholders of their covenants
and obligations hereunder, and to the following additional conditions:

          (a) The Registration Statement and all post-effective amendments
     thereto shall have become effective not later than 5:30 p.m., New York
     time, on the date hereof, or, with your consent, at a later date and time,
     not later than 1:00 p.m., New York time, on the first business day
     following the date hereof, or at such later date and time as may be
     approved by the Underwriters; if the Partnership has elected to rely on
     Rule 462(b) under the 1933 Act, the Abbreviated Registration Statement
     shall have become effective not later than the earlier of (x) 10:00 p.m.
     New York time, on the date hereof, or (y) at such later date and time as
     may be approved by the Underwriters.  All filings required by Rule 424 and
     Rule 430A of the 1933 Act Rules and Regulations shall have been made.  No
     stop order suspending the effectiveness of the Registration Statement,
     shall have been issued and no proceeding for that purpose shall have been
     initiated or, to the knowledge of the Partnership or any Underwriter,
     threatened or contemplated by the SEC, and any request of the SEC for
     additional information (to be included in the Registration Statement or the
     Prospectus or otherwise) shall have been complied with to the reasonable
     satisfaction of the Underwriters.

          (b) No Underwriter shall have advised the Partnership on or prior to
     the Closing Date (and, if applicable, the Option Closing Date), that the
     Registration Statement or Prospectus or any amendment or supplement thereto
     contains an untrue statement of fact which, in the opinion of counsel to
     the Underwriters, is material, or omits to state a fact which, in the
     opinion of such counsel, is material and is required to be stated therein
     or is necessary to make the statements therein, in light of the
     circumstances under which they were made, not misleading.

                                       24

          (c)  On the Closing Date (and, if applicable, the Option Closing
     Date), you shall have received the opinion of Vinson & Elkins L.L.P.,
     counsel for the Partnership, addressed to you and dated the Closing Date
     (and, if applicable, the Option Closing Date), to the effect that:

               (i)   The Partnership has been duly formed and is validly
          existing in good standing as a limited partnership under the Delaware
          LP Act with all necessary partnership power and authority to own or
          lease its properties and to conduct its business in all material
          respects as described in the Registration Statement and the
          Prospectus.

               (ii)  The Operating Company has been duly formed and is validly
          existing in good standing as a limited liability company under the
          Delaware LLC Act with all necessary limited liability company power
          and authority to own or lease its properties and to conduct its
          business in all material respects as described in the Registration
          Statement and the Prospectus.

               (iii) The Managing General Partner has been duly formed and is
          validly existing in good standing as a limited liability company under
          the Delaware LLC Act with all necessary limited liability company
          power and authority to own or lease its properties, to conduct its
          business and to act as general partner of the Partnership, in each
          case in all material respects as described in the Registration
          Statement and the Prospectus.

               (iv)  The Managing General Partner and the Non-Managing General
          Partner are the sole general partners of the Partnership.  The Non-
          Managing General Partner owns a 2% general partner interest in the
          Partnership and the Managing General Partner owns a non-economic,
          managing general partner interest in the Partnership; such general
          partner interests have been duly authorized and validly issued in
          accordance with the Partnership Agreement; and each General Partner
          owns its general partner interest free and clear of all liens,
          encumbrances, security interests, charges or claims (i) in respect of
          which a financing statement under the Uniform Commercial Code of the
          State of Delaware naming either of such General Partners as debtors is
          on file in the office of the Secretary of State of the State of
          Delaware or (ii) otherwise known to such counsel, without independent
          investigation, other than those created by or arising under the
          Delaware LP Act.

               (v)   The Sponsor Units, the Incentive Distribution Rights and
          the limited partner interests represented thereby have been duly
          authorized and validly issued in accordance with the Partnership
          Agreement, and are fully paid (to the extent required under the
          Partnership Agreement) and nonassessable (except as

                                       25

          such nonassessability may be affected by matters described in the
          Prospectus under the caption "The Partnership Agreement--Limited
          Liability"); and New Propane owns 959,954 Senior Subordinated Units
          and 507,063 Junior Subordinated Units and Holdings owns the Incentive
          Distribution Rights and 10,000 Common Units, in each case, free and
          clear of all liens, encumbrances (except restrictions on
          transferability as described in the Prospectus), security interests,
          charges or claims (i) in respect of which a financing statement under
          the Uniform Commercial Code of the State of Delaware naming New
          Propane or Holdings as debtor is on file in the office of the
          Secretary of State of the State of Delaware or (ii) otherwise known to
          such counsel, without independent investigation, other than those
          created by or arising under the Delaware LP Act.

               (vi)  The Units to be issued and sold to the Underwriters by the
          Partnership pursuant to this Agreement and the limited partner
          interests represented thereby, and all outstanding Common Units,
          Subordinated Units and the Incentive Distribution Rights of the
          Partnership, including without limitation the Firm Units to be sold by
          the Selling Unitholders hereunder have been duly authorized by the
          Partnership Agreement and, when issued and delivered to the
          Underwriters against payment therefor in accordance with the terms
          hereof, will be validly issued, fully paid (to the extent required
          under the Partnership Agreement) and nonassessable (except as such
          nonassessability may be affected by matters described in the
          Prospectus under the caption "The Partnership Agreement--Limited
          Liability"); and other than the Subordinated Units and the Incentive
          Distribution Rights, the Units and the Common Units sold to the public
          in connection with the Partnership's initial public offering will be
          the only limited partner interests of the Partnership issued and
          outstanding at the Closing Date.

               (vii) The Partnership owns a 100% membership interest in the
          Operating Company; such membership interest has been duly authorized
          and validly issued in accordance with the Operating Company LLC
          Agreement and is fully paid (to the extent required under the
          Operating Company LLC Agreement) and nonassessable (except as such
          nonassessability may be affected by matters described in the
          Prospectus under the caption "The Partnership Agreement--Limited
          Liability"); and the Partnership owns its membership interest free and
          clear of all liens, encumbrances, security interests, charges or
          claims (i) in respect of which a financing statement under the Uniform
          Commercial Code of the State of Delaware naming the Partnership as
          debtor is on file in the office of the Secretary of State of the State
          of Delaware or (ii) otherwise known to such counsel, without
          independent investigation, other than those created by or arising
          under the Delaware LP Act.

                                       26

               (viii)  Except as described in the Prospectus, there are no
          preemptive rights or other rights to subscribe for or to purchase, nor
          any restriction upon the voting or transfer of, (i) any limited
          partner interests of the Partnership or (ii) any membership interests
          of the Managing General Partner or the Operating Company pursuant to
          the Partnership Agreement, the Managing General Partner LLC Agreement
          or the Operating Company LLC Agreement, respectively, or, to the
          knowledge of such counsel after due inquiry, any other agreement or
          instrument to which such entities are a party or by which any of them
          may be bound.  To the knowledge of such counsel, neither the filing of
          the Registration Statement nor the offering or sale of the Units as
          contemplated by this Agreement gives rise to any rights for or
          relating to the registration of any Units or other securities of the
          Partnership, other than as have been waived.  To such counsel's
          knowledge after due inquiry, except as described in the Prospectus,
          there are no outstanding options or warrants to purchase (A) any
          Common Units, Senior Subordinated Units, Junior Subordinated Units or
          Incentive Distribution Rights or other partnership interests in the
          Partnership or (B) membership interests of the Managing General
          Partner or the Operating Company.

               (ix)    The Partnership has all requisite power and authority to
          issue, sell and deliver the Units in accordance with and upon the
          terms and conditions set forth in this Agreement, the Partnership
          Agreement and the Registration Statement and the Prospectus in
          accordance with and upon the terms and conditions set forth in the
          Partnership Agreement.

               (x)     The Underwriting Agreement has been duly executed and
          delivered by the Partnership, the Managing General Partner and the
          Operating Company.

               (xi)    Each of the Partnership Agreement, the Managing General
          Partner LLC Agreement and the Operating Company LLC Agreement has been
          duly authorized and validly executed and delivered by Holdings, the
          Partnership, the Managing General Partner or the Operating Company
          party thereto.  Each of the Partnership Agreement, the Managing
          General Partner LLC Agreement and the Operating Company LLC Agreement
          constitutes a valid and legally binding agreement of the parties
          thereto, enforceable against such entity in accordance with its
          respective terms, subject to (i) applicable bankruptcy, insolvency,
          fraudulent transfer, reorganization, moratorium and similar laws
          relating to or affecting creditors' rights generally and by general
          principles of equity (regardless of whether such enforceability is
          considered in a proceeding in equity or at law) and (ii) public
          policy, applicable law relating to fiduciary duties and
          indemnification and an implied covenant of good faith and fair
          dealing.

                                       27

               (xii)  None of the offering, issuance and sale by the Partnership
          of the Units, the execution, delivery and performance of this
          Agreement by the Partnership, the Managing General Partner and the
          Operating Company, or the consummation by the Partnership, the
          Managing General Partner and the Operating Company of the transactions
          contemplated hereby (i) constitutes or will constitute a violation of
          the Partnership Agreement, the Managing General Partner LLC Agreement
          or the Operating Company LLC Agreement (ii) violates or will violate
          the Delaware LP Act, the Delaware LLC Act, the DGCL or federal law or
          (iii) results or will result in the creation or imposition of any
          lien, charge or encumbrance upon any property or assets of the
          Partnership, the Managing General Partner or the Operating Company,
          which breaches, violations, defaults or liens, in the case of clauses
          (ii) or (iii), would, individually or in the aggregate, have a
          material adverse effect on the condition (financial or other),
          business or results of operations of the Partnership Group.

               (xiii) No permit, consent, approval, authorization, order,
          registration, filing or qualification ("consent") of or with any
          federal or Delaware court, governmental agency or body having
          jurisdiction over the Partnership, the Managing General Partner or the
          Operating Company is required for the offering, issuance and sale by
          the Partnership of the Units, the execution, delivery and performance
          of this Agreement by the Managing General Partner, the Partnership and
          the Operating Company that is party thereto or the consummation by the
          Partnership, the Managing General Partner and the Operating Company of
          the transactions contemplated by this Agreement, except for such
          consents required under the 1933 Act, the 1934 Act and state
          securities or "Blue Sky" laws, as to which such counsel need not
          express any opinion.

               (xiv)  The statements in the Registration Statement and
          Prospectus under the captions "Cash Distribution Policy," "Business--
          Government Regulation," "Conflicts of Interest and Fiduciary
          Responsibilities," "Description of the Common Units," "Description of
          the Subordinated Units," "The Partnership Agreement" and "Investment
          in the Inergy, L.P. by Employee Benefit Plans," insofar as they refer
          to statements of law or legal conclusions, are accurate and complete
          in all material respects, and the Common Units, the Senior
          Subordinated Units, the Junior Subordinated Units and the Incentive
          Distribution Rights conform in all material respects to the
          descriptions thereof contained in the Registration Statement and the
          Prospectus under the captions "Prospectus Summary--The Offering,"
          "Cash Distribution Policy," "Description of the Common Units,"
          "Description of the Subordinated Units" and "The Partnership
          Agreement."

                                       28

               (xv)    The opinion of Vinson & Elkins L.L.P. that is filed as
          Exhibit [___] to the Registration Statement is confirmed and the
          Underwriters may rely upon such opinion as if it were addressed to
          them.

               (xvi)   The Registration Statement was declared effective under
          the 1933 Act on ________, 2002; to the knowledge of such counsel, no
          stop order suspending the effectiveness of the Registration Statement
          has been issued and no proceedings for that purpose have been
          instituted or threatened by the Commission; and any required filing of
          the Prospectus pursuant to Rule 424(b) has been made in the manner and
          within the time period required by such Rule.

               (xvii)  The Registration Statement and the Prospectus (except for
          the financial statements and the notes and the schedules thereto, and
          the other financial, statistical and accounting data included in the
          Registration Statement or the Prospectus, as to which such counsel
          need not express any opinion) comply as to form in all material
          respects with the requirements of the Act and the rules and
          regulations promulgated thereunder.

               (xviii) To the knowledge of such counsel, (i) there are no legal
          or governmental proceedings pending or threatened against any of the
          Inergy Entities or to which any of the Inergy Entities is a party or
          to which any of their respective properties is subject that are
          required to be described in the Prospectus but are not so described as
          required and (ii) there are no agreements, contracts, indentures,
          leases or other instruments that are required to be described in the
          Registration Statement or the Prospectus or to be filed as exhibits to
          the Registration Statement that are not described or filed as required
          by the Act.

               (xix)   None of the Inergy Parties is an "investment company" as
          such term is defined in the Investment Company Act of 1940, as
          amended.

               (xx)    None of the Partnership, the Managing General Partner or
          the Operating Company is a "public utility company" or a "holding
          company" within the meaning of the Public Utility Holding Company Act
          of 1935, as amended.

               In addition, such counsel shall state that they have participated
          in conferences with officers and other representatives of the Inergy
          Parties and the independent public accountants of the Partnership and
          the Underwriters, at which the contents of the Registration Statement
          and the Prospectus and related matters were discussed, and although
          such counsel has not independently verified, is not passing on, and is
          not assuming any responsibility for the accuracy, completeness or
          fairness of the statements contained in, the Registration Statement
          and the Prospectus (except to the extent specified in the foregoing
          opinion), based on the

                                       29

          foregoing, no facts have come to such counsel's attention that cause
          such counsel to believe that the Registration Statement (other than
          (i) the financial statements included therein, including the notes and
          schedules thereto and the auditors' reports thereon, and (ii) the
          other financial data included therein, as to which such counsel need
          express no belief), as of its effective date contained an untrue
          statement of a material fact or omitted to state a material fact
          required to be stated therein or necessary to make the statements
          therein not misleading, or that the Prospectus (other than (i) the
          financial statements included therein, including the notes and
          schedules thereto and the auditors' reports thereon, and (ii) the
          other financial data included therein, as to which such counsel need
          express no belief), as of its issue date and the Closing Date
          contained an untrue statement of a material fact or omitted to state a
          material fact necessary to make the statements therein, in the light
          of the circumstances under which they were made, not misleading.

               In rendering such opinion, such counsel may (A) rely in respect
          of matters of fact upon representations of the Inergy Parties set
          forth in this Agreement and upon certificates of officers and
          employees of the Inergy Entities and upon information obtained from
          public officials, (B) assume that all documents submitted to them as
          originals are authentic, that all copies submitted to them conform to
          the originals thereof, and that the signatures on all documents
          examined by them are genuine, (C) state that their opinion is limited
          to federal laws, the Delaware LP Act, the Delaware LLC Act, and the
          DGCL, and (D) state that they express no opinion with respect to state
          or local taxes or tax statutes to which any of the limited partners of
          the Partnership or any of the other Inergy Entities may be subject.

          (d)  On the Closing Date (and, if applicable, the Option Closing
     Date), you shall have received the opinion of Stinson Morrison Hecker LLP,
     counsel for the Partnership, addressed to you and dated the Closing Date
     (and, if applicable, the Option Closing Date), to the effect that:

               (i)   The Partnership is duly registered or qualified as a
          foreign limited partnership for the transaction of business under the
          laws of the jurisdictions set forth on Exhibit A to this Agreement.

               (ii)  The Operating Company is duly registered or qualified as a
          foreign limited liability company for the transaction or business
          under the laws of the jurisdictions set forth on Exhibit A to this
          Agreement.

               (iii) Each of Holdings, New Propane and the Operating Subs has
          been duly formed and is validly existing in good standing as a limited
          liability company

                                       30

          under the Delaware LLC Act with all necessary limited liability
          company power and authority to own or lease its properties and to
          conduct its business in each case in all material respects as
          described in the Registration Statement and the Prospectus. Each of
          Holdings, New Propane and the Operating Subs is duly registered or
          qualified as a foreign limited liability company for the transaction
          of business under the laws of the jurisdictions set forth on Exhibit A
          to this Agreement.

               (iv)  The Managing General Partner is duly registered or
          qualified as a foreign limited liability company for the transaction
          of business under the laws of the jurisdictions set forth on Exhibit A
          to this Agreement.

               (v)   The Non-Managing General Partner has been duly formed and
          is validly existing in good standing as a limited liability company
          under the Delaware LLC Act with all necessary limited liability
          company power and authority to own or lease its properties and to
          conduct its business and to act as a general partner of the
          Partnership in all material respects as described in the Registration
          Statement and the Prospectus. The Non-Managing General Partner is duly
          registered or qualified as a foreign limited liability company for the
          transaction of business under the laws of the jurisdictions set forth
          on Exhibit A to this Agreement.

               (vi)  Each of Service Sub and Acquisition Corp. has been duly
          incorporated and is validly existing in good standing as a corporation
          under the DGCL with all necessary corporate power and authority to own
          or lease its properties and to conduct its business in all material
          respects as described in the Registration Statement and the
          Prospectus.  Each of Service Sub and Acquisition Corp. is duly
          registered or qualified as a foreign corporation for the transaction
          of business under the laws of the jurisdictions set forth on Exhibit A
          to this Agreement.

               (vii) The Operating Company owns of record 100% of the issued
          and outstanding capital stock of Service Sub; such capital stock has
          been duly authorized and validly issued and is fully paid and
          nonassessable; and the Operating Company owns such capital stock free
          and clear of all liens, encumbrances, security interests, charges or
          claims (i) in respect of which a financing statement under the Uniform
          Commercial Code of the State of Delaware naming the Operating Company
          as debtor is on file in the office of the Secretary of State of the
          State of Delaware or (ii) otherwise known to such counsel, without
          independent investigation, other than those created by or arising
          under the DGCL.

                                       31

               (viii)  The Operating Company owns of record 100% of the issued
          and outstanding membership interests in each of the Operating Subs;
          such membership interests have been duly authorized and validly issued
          in accordance with the Operating Subs LLC Agreements and are fully
          paid (to the extent required under the Operating Subs LLC Agreements)
          and nonassessable (except as such nonassessability may be affected by
          Section 18-607 of the Delaware LLC Act); and the Operating Company
          owns such membership interests free and clear of all liens,
          encumbrances, security interests, charges or claims (i) in respect of
          which a financing statement under the Uniform Commercial Code of the
          State of Delaware naming the Operating Company as debtor is on file in
          the office of the Secretary of State of the State of Delaware or (ii)
          otherwise known to such counsel, without independent investigation,
          other than those created by or arising under the Delaware LLC Act.

               (ix)    The Non-Managing General Partner owns of record 100% of
          the issued and outstanding common membership interests in New Propane,
          Wilson owns of record 48.4% of the issued and outstanding preferred
          membership interests in New Propane, and Rolesville owns of record
          51.6% of the issued and outstanding preferred membership interests in
          New Propane; such membership interests have been duly authorized and
          validly issued in accordance with the New Propane LLC Agreement and
          are fully paid (to the extent required under the New Propane LLC
          Agreement) and nonassessable (except as such nonassessability may be
          affected by Section 18-607 of the Delaware LLC Act); and the Non-
          Managing General Partner, Wilson and Rolesville own such membership
          interests free and clear of all liens, encumbrances, security
          interests, charges or claims (i) in respect of which a financing
          statement under the Uniform Commercial Code of the State of Delaware
          naming the Non-Managing General Partner, Wilson or Rolesville as
          debtor is on file in the office of the Secretary of State of the State
          of Delaware or (ii) otherwise known to such counsel, without
          independent investigation, other than those created by or arising
          under the Delaware LLC Act.

               (x)     Holdings owns of record 100% of the issued and
          outstanding membership interests of the Managing General Partner. Such
          membership interests have been duly authorized and validly issued and
          are fully paid (to the extent required under the Holdings LLC
          Agreement) and nonassessable (except as such nonassessability may be
          affected by Section 18-607 of the Delaware LLC Act); and Holdings owns
          such membership interests free and clear of all liens, encumbrances,
          security interests, charges or claims (i) in respect of which a
          financing statement under the Uniform Commercial Code of the State of
          Delaware naming Holdings as debtor is on file in the office of the
          Secretary of State of the State of Delaware or (ii) otherwise known to
          such counsel, without

                                       32

          independent investigation, other than those created by or arising
          under the Delaware LLC Act.

               (xi)    Holdings owns of record 100% of the issued and
          outstanding common membership interests in the Non-Managing General
          Partner; such membership interests have been duly authorized and
          validly issued and are fully paid (to the extent required under the
          Holdings LLC Agreement) and nonassessable (except as such
          nonassessability may be affected by Section 18-607 of the Delaware LLC
          Act); and Holdings owns such membership interests free and clear of
          all liens, encumbrances, security interests, charges or claims (i) in
          respect of which a financing statement under the Uniform Commercial
          Code of the State of Delaware naming Holdings as debtor is on file in
          the office of the Secretary of State of the State of Delaware or (ii)
          otherwise known to such counsel, without independent investigation,
          other than those created by or arising under the Delaware LLC Act.

               (xii)   Holdings owns of record 100% of the issued and
          outstanding capital stock of Acquisition Corp.; such capital stock has
          been duly authorized and validly issued and is fully paid and
          nonassessable; and Holdings owns such capital stock free and clear of
          all liens, encumbrances, security interests, charges or claims (i) in
          respect of which a financing statement under the Uniform Commercial
          Code of the State of Delaware naming Holdings as debtor is on file in
          the office of the Secretary of State of the State of Delaware or (ii)
          otherwise known to such counsel, without independent investigation,
          other than those created by or arising under the DGCL.

               (xiii)  Except as described in the Prospectus and as set forth in
          Article VII of the Non-Managing General Partner LLC Agreement, there
          are no preemptive rights or other rights to subscribe for or to
          purchase, nor any restrictions upon the voting or transfer of (i) any
          membership interests of the Non-Managing General Partner, New Propane
          or the Operating Subs or (ii) any shares of Service Sub, pursuant to
          the Non-Managing General Partner LLC Agreement, the New Propane LLC
          Agreement, the Operating Subs LLC Agreement, the Certificate of
          Incorporation or Bylaws of the Service Sub, respectively, or, to the
          knowledge of such counsel after due inquiry, any other agreement or
          instrument to which such entities are a party or by which any of them
          may be bound.  To the knowledge of such counsel, neither the filing of
          the Registration Statement nor the offering or sale of the Units as
          contemplated by this Agreement gives rise to any rights for or
          relating to the registration of any Units or other securities of the
          Partnership, other than as have been waived.  To such counsel's
          knowledge after due inquiry, except as described in the Prospectus,
          there are no outstanding options or warrants to

                                       33

          purchase (A) any membership interests of the Non-Managing General
          Partner, New Propane or the Operating Subs or (B) any shares of
          Service Sub.

               (xiv)   None of the offering, issuance and sale by the
          Partnership of the Units, the execution, delivery and performance of
          this Agreement by the Partnership, the Managing General Partner and
          the Operating Company or the consummation by the Partnership, the
          Managing General Partner and the Operating Company of the transactions
          contemplated hereby (i) constitutes or will constitute a violation of
          the Organizational Documents (other than the Partnership Agreement,
          the Managing General Partner LLC Agreement or the Operating Company
          LLC Agreement) or (ii) constitutes or will constitute a breach or
          violation of, or a default (or an event which, with notice or lapse of
          time or both, would constitute such a default) under, any agreement,
          lease or other instrument known to such counsel (excluding any
          Organizational Document) to which any of the Inergy Entities or any of
          their properties may be bound, which breaches, violations or defaults,
          in the case of clause (ii), would, individually or in the aggregate,
          have a Material Adverse Effect.

               (xv)    None of the execution, delivery and performance of this
          Agreement by the Inergy Entities which are parties hereto (other than
          the execution, delivery and performance of this Agreement by the
          Partnership, the Managing General Partner and the Operating Company),
          or the consummation of the transactions contemplated hereby (other
          than the consummation by the Partnership, the Managing General Partner
          and the Operating Company of the transactions contemplated by this
          Agreement (i) constitutes or will constitute a violation of the
          Organizational Documents, (ii) constitutes or will constitute a breach
          or violation of, or a default (or an event which, with notice or lapse
          of time or both, would constitute such a default) under, any
          agreement, lease or other instrument known to such counsel (excluding
          any Organizational Document) to which any of the Inergy Entities or
          any of their properties may be bound, (iii) violates or will violate
          the Delaware LP Act, the Delaware LLC Act, the DGCL or federal law or
          (iv) results or will result in the creation or imposition of any lien,
          charge or encumbrance upon any property or assets of any of the Inergy
          Entities, which breaches, violations, defaults or liens, in the cases
          of clauses (ii), (iii) or (iv), would, individually or in the
          aggregate, have a material adverse effect on the condition (financial
          or other), business or results of operations of the Partnership Group
          taken as a whole.

               (xvi)   No permit, consent, approval, authorization, order,
          registration, filing or qualification ("consent") of or with any
          federal or Delaware court, governmental agency or body having
          jurisdiction over any of the Inergy Parties is required for the
          offering, issuance and sale by the Partnership of the Units

                                       34

          (excluding any consent, required by any federal or Delaware court,
          governmental agency or body having jurisdiction over the Partnership,
          the Managing General Partner or the Operating Company), the execution,
          delivery and performance of this Agreement by the Inergy Entities that
          are parties thereto (excluding the execution, delivery and performance
          of this Agreement by the Managing General Partner, the Partnership and
          the Operating Company) or the consummation by the Inergy Parties of
          the transactions contemplated by this Agreement except for such
          consents required under the 1933 Act, the 1934 Act and state
          securities or "Blue Sky" laws, as to which such counsel need not
          express any opinion.

               (xvii)  The statements in the Registration Statement and the
          Prospectus under the captions "Management's Discussion and Analysis of
          Financial Condition and Results of Operations--Description of
          Indebtedness," and "Certain Relationships and Related Transactions--
          Related Party Transactions," insofar as they constitute descriptions
          of agreements or refer to statements of law or general conclusions,
          are accurate and complete in all material respects.

               (xviii) This Agreement has been duly executed and delivered by
          each of Holdings, the Non-Managing General Partner, New Propane,
          Service Sub, Acquisition Corp. and the Operating Subs.

               (xix)   To the knowledge of such counsel after due inquiry, none
          of the Inergy Entities is in (i) violation of its Organizational
          Documents, or of any law, statute, ordinance, administrative or
          governmental rule or regulation applicable to it or of any decree of
          any court or governmental agency or body having jurisdiction over it
          which violation would reasonably be expected to have a Material
          Adverse Effect or (ii) breach, default (or an event which, with notice
          or lapse of time or both, would constitute such a default) or
          violation in the performance of any obligation, agreement or condition
          contained in any bond, debenture, note or any other evidence of
          indebtedness or in any agreement, indenture, lease or other instrument
          to which it is a party or by which it or any of its properties may be
          bound, which breach, default or violation would, if continued, have a
          Material Adverse Effect or could materially impair the ability of any
          of the Inergy Entities to perform their obligations under this
          Agreement.

               (xx)    To the knowledge of such counsel after due inquiry, each
          of the Inergy Entities has such permits, consents, licenses,
          franchises, certificates and authorizations of governmental or
          regulatory authorities ("permits") as are necessary to own its
          properties and to conduct its business in the manner described in the
          Prospectus, subject to such qualifications as may be set forth in the
          Prospectus and except for such permits which, if not obtained, would
          not reasonably be expected to have, individually or in the aggregate,
          a Material

                                       35

          Adverse Effect and, to the knowledge of such counsel after due
          inquiry, none of the Inergy Entities has received any notice of
          proceedings relating to the revocation or modification of any such
          permits which, individually or in the aggregate, if the subject of an
          unfavorable decision, ruling or finding, would reasonably be expected
          to have a Material Adverse Effect.

               (xxi)   The persons and entities listed on Schedule II own of
          record the Senior Subordinated Units in the Partnership set forth
          opposite their respective names.

               (xxii)  Except as described in the Prospectus, to the knowledge
          of such counsel after due inquiry, there is no litigation, proceeding
          or governmental investigation pending or threatened against any of the
          Inergy Entities or to which any of the Inergy Entities is a party or
          to which any of their respective properties is subject, which, if
          adversely determined to such Inergy Entities, is reasonably likely to
          have a Material Adverse Effect.

               In addition, such counsel shall state that they have participated
          (to the extent set forth in such opinion) in conferences with officers
          and other representatives of the Inergy Parties and the independent
          public accountants of the Partnership and the Underwriters, at which
          the contents of the Registration Statement and the Prospectus and
          related matters were discussed, and although such counsel has not
          independently verified, is not passing on, and is not assuming any
          responsibility for the accuracy, completeness or fairness of the
          statements contained in, the Registration Statement and the Prospectus
          (except to the extent specified in the foregoing opinion), based on
          the foregoing, no facts have come to such counsel's attention that
          causes such counsel to believe that the Registration Statement (other
          than (i) the financial statements included therein, including the
          notes and schedules thereto and the auditors' reports thereon, (ii)
          the other financial data included therein, (iii) any summaries of the
          Partnership Agreement, and (iv) the information contained under "Tax
          Considerations" as to which such counsel need express no belief), as
          of its effective date contained an untrue statement of a material fact
          or omitted to state a material fact required to be stated therein or
          necessary to make the statements therein not misleading, or that the
          Prospectus (other than (i) the financial statements included therein,
          including the notes and schedules thereto and the auditors' reports
          thereon, (ii) the other financial data included therein, (iii) any
          summaries of the Partnership Agreement, and (iv) the information
          contained under "Tax Considerations" as to which such counsel need
          express no belief), as of its issue date and the Closing Date
          contained an untrue statement of a material fact or omitted to state a
          material fact necessary to make the statements therein, in the light
          of the circumstances under which they were made, not misleading.

                                       36

               In rendering such opinion, such counsel may (A) rely in respect
          of matters of fact upon representations of the Inergy Parties officers
          and employees of the Inergy Entities (B) assume that all documents
          submitted to them as originals are authentic, that all copies
          submitted to them conform to the originals thereof, and that the
          signatures on all documents examined by them are genuine, (C) state
          that their opinion is limited to federal laws, the Delaware LP Act,
          the Delaware LLC Act, the DGCL and the laws of the State of Missouri,
          excepting therefrom municipal and local ordinances and regulations,
          (D) with respect to the opinions expressed in subparagraphs (i)
          through (vi) above as to the due qualification or registration as a
          foreign limited partnership, corporation or limited liability company,
          as the case may be, of Holdings, the Partnership, the General
          Partners, the Operating Company, the Operating Subs, New Propane and
          Service Sub, state that such opinions are based upon certificates of
          foreign qualification or registration provided by the Secretary of
          State of the States of the States listed on Exhibit A to such opinion
          (each of which shall be dated as of a date not more than fourteen days
          prior to the Closing Date and shall be provided to you), (E) state
          that they express no opinion with respect to the accuracy or
          descriptions of real or personal property, and (F) state that they
          express no opinion with respect to state or local taxes or tax
          statutes to which any of the limited partners of the Partnership or
          any of the other Inergy Entities may be subject.

          (e)  On the Closing Date, you shall have received the opinion of
     [Stinson Morrison Hecker LLP], counsel for the Selling Unitholders
     addressed to you and dated the Closing Date, to the effect that:

               (i)    Each Selling Unitholder that is a corporation has been
     duly incorporated and is validly existing in good standing as a corporation
     under the laws of the jurisdiction of its incorporation; each Selling
     Unitholder that is a limited partnership has been duly formed and is
     validly existing in good standing as a limited partnership under the laws
     of the jurisdiction of its formation; and each such Selling Unitholder that
     is a limited liability company has been duly formed and is validly existing
     in good standing as a limited liability company under the laws of the
     jurisdiction of its formation.

               (ii)   No permit, consent, approval, authorization, order,
     registration, filing or qualification ("consent") of any court,
     governmental agency or body having jurisdiction over such Selling
     Unitholder or any of its respective properties is required for the
     offering, issuance and sale by such Selling Unitholder of the Firm Units,
     the execution, delivery and performance of this Agreement, the Power of
     Attorney (the "Power of Attorney") hereinafter referred to and the Custody
     Agreement (the "Custody Agreement") hereinafter referred to, except (i) as
     described in the Prospectus, (ii) for such consents required under the 1933
     Act, the 1934 Act and "Blue Sky" laws, (iii) for such

                                       37

     consents which have been, or prior to the Closing Date will be, obtained,
     and (iv) for such consents which, if not obtained, would not, individually
     or in the aggregate, have a Material Adverse Effect.

               (iii)  Such Selling Unitholder has all requisite power, authority
     and capacity to issue, sell and deliver the Firm Units in accordance with
     and upon the terms and conditions set forth in this Agreement, and the
     Registration Statement and the Prospectus.  At the Closing Date all
     corporate, partnership and limited liability company action, as the case
     may be, required to be taken by such Selling Unitholder for the
     authorization, issuance, sale and delivery of the Firm Units shall have
     been validly taken.

               (iv)   This Agreement, the Power of Attorney and the Custody
     Agreement have been duly by such Selling Unitholder, the transactions
     contemplated by this Agreement have been duly authorized by the Selling
     Unitholder and, when this Agreement is executed and delivered by an
     Attorney-in-Fact (as defined herein) on behalf of such Selling Unitholder,
     this Agreement will be duly executed and delivered, and the Power of
     Attorney and the Custody Agreement constitute, and this Agreement, when
     executed by an Attorney-in-Fact consistent with the Power of Attorney, will
     constitute, the valid and legally binding agreements of such Selling
     Unitholder enforceable against such Selling Unitholder in accordance with
     their terms provided that the enforceability thereof may be limited by
     bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
     similar laws relating to or affecting creditors' rights generally and by
     general principles of equity (regardless of whether such enforceability is
     considered in a proceeding in equity or at law); provided, further, that
     the indemnity and contribution provisions hereunder may be limited by
     federal or state securities laws.

               (v)    None of the offering, issuance and sale by such Selling
     Unitholder of the Firm Units, the execution, delivery and performance of
     this Agreement, the Power of Attorney and the Custody Agreement or the
     consummation of the transactions contemplated hereby (i) conflicted,
     conflicts or will conflict with or constituted, constitutes or will
     constitute a violation of the organizational documents of such Selling
     Unitholder (if not an individual), (ii) conflicted, conflicts or will
     conflict with or constituted, constitutes or will constitute a breach or
     violation of, or a default (or an event which, with notice or lapse of time
     or both, would constitute such a default) under any indenture, mortgage,
     deed of trust, loan agreement, lease or other agreement or instrument to
     which such Selling Unitholder is a party or by which any of it or any of
     its respective properties may be bound, (iii) violated, violates or will
     violate any statute, law or regulation or any order, judgment, decree or
     injunction of any court or governmental agency or body directed to such
     Selling Unitholder or any of its properties in a proceeding to which it or
     its property is a party or (iv) resulted, results or will result in the
     creation or imposition of any lien, charge or encumbrance upon any property
     or assets of such Selling

                                       38

     Unitholder which conflicts, breaches, violations or defaults, in the case
     of clauses (ii), (iii) or (iv), would, individually or in the aggregate,
     have a Material Adverse Effect.

               (vi)   The Selling Unitholder has, and immediately prior to the
     transfer of the Units to the Underwriter on the Closing Date, the Selling
     Unitholder will have, good and valid title to the Firm Units, free and
     clear of all liens, encumbrances, equities or claims; and, upon delivery of
     the Firm Units and payment therefor, as contemplated in this Agreement, the
     Power of Attorney and the Custody Agreement, good and valid title to the
     Firm Units, free and clear of all liens, pledges, encumbrances, equities,
     or claims, will pass to the several Underwriters.  No person has any right
     to acquire from such Selling Unitholder any Units to be sold hereunder and
     such Selling Unitholder is under no obligation, whether absolute or
     contingent, to sell any such Units to any person, except as contemplated by
     this Agreement.

               (vii)  Such Selling Unitholder has placed in custody under the
     Custody Agreement furnished to such Selling Unitholder and duly executed
     and delivered by such Selling Unitholder to ____________, as custodian (the
     "Custodian"), for delivery under this Agreement, certificates in negotiable
     form representing the Firm Units to be sold by such Selling Unitholder
     hereunder.  Such Selling Unitholder has duly and irrevocably executed and
     delivered a Power of Attorney appointing ___________ and _____________ as
     such Selling Unitholder's Attorneys-in-Fact (the "Attorneys-in-Fact") upon
     the terms and subject to the conditions set forth therein to execute and
     deliver this Agreement and to take certain other action on behalf of such
     Selling Unitholder as may be necessary or desirable in connection with the
     transactions contemplated by this Agreement and the Custody Agreement.

          In rendering such opinion, such counsel may (A) rely in respect of
     matters of fact upon representations of the Selling Unitholder(s) set forth
     in this Agreement and upon certificates of the Selling Unitholder(s) and
     upon information obtained from public officials and (B) assume that the
     documents submitted to them as originals thereof, and that the signatures
     on all documents examined by such counsel are genuine, and the legal
     capacity of natural persons.

          (f)  You shall have received on the Closing Date (and, if applicable,
     the Option Closing Date), from Baker Botts L.L.P., counsel to the
     Underwriters, such opinion or opinions, dated the Closing Date (and, if
     applicable, the Option Closing Date) with respect to such matters as you
     may reasonably require; and the Partnership shall have furnished to such
     counsel such documents as they reasonably request for the purposes of
     enabling them to review or pass on the matters referred to in this Section
     8 and in order to evidence the accuracy, completeness and satisfaction of
     the representations, warranties and conditions herein contained.

                                       39

          (g) You shall have received at or prior to the Closing Date from Baker
     Botts L.L.P. a memorandum or memoranda, in form and substance satisfactory
     to you, with respect to the qualification for offering and sale by the
     Underwriters of the Units under state securities or Blue Sky laws of such
     jurisdictions as the Underwriters may have designated to the Partnership.

          (h) On the date of this Agreement and on the Closing Date (and, if
     applicable, the Option Closing Date), you shall have received from Ernst &
     Young LLP, a letter or letters, dated the date of this Agreement and the
     Closing Date (and, if applicable, the Option Closing Date), respectively,
     in form and substance satisfactory to you, confirming that they are
     independent public accountants with respect to the Partnership and the
     General Partners within the meaning of the 1933 Act and 1933 Act Rules and
     Regulations, and stating to the effect set forth in Schedule IV hereto.

          (i) Except as set forth in the Registration Statement and the
     Prospectus, (i) none of the members of the Partnership Group shall have
     sustained since the date of the latest audited financial statements
     included or in the Registration Statement and in the Prospectus any loss or
     interference with its business from fire, explosion, flood or other
     calamity, whether or not covered by insurance, or from any labor dispute or
     court or governmental action, order or decree; and (ii) subsequent to the
     respective dates as of which such information is given in the Registration
     Statement and the Prospectus (or any amendment or supplement thereto), none
     of the Inergy Entities shall have incurred any liability or obligation,
     direct or contingent, or entered into any transactions, and there shall not
     have been any change in the capital stock or short-term or long-term debt
     of the Partnership Group or any change, or any development involving or
     which might reasonably be expected to involve a prospective change in the
     condition (financial or other), net worth, business, affairs, management,
     prospects, results of operations or cash flow of the Partnership or its
     subsidiaries, the effect of which, in any such case described in clause (i)
     or (ii), is in your judgment so material or adverse as to make it
     impracticable or inadvisable to proceed with the public offering or the
     delivery of the Units being delivered on such Closing Date (and, if
     applicable, the Option Closing Date) on the terms and in the manner
     contemplated in the Prospectus.

          (j) There shall not have occurred any of the following:  (i) a
     suspension or material limitation in trading in securities generally on the
     Nasdaq or the establishing on such exchanges or market by the SEC or by
     such exchanges or markets of minimum or maximum prices which are not in
     force and effect on the date hereof; (ii) a suspension or material
     limitation in trading in the Partnership's securities on the Nasdaq or the
     establishing on such market by the SEC or by such market of minimum or
     maximum prices which are not in force and effect on the date hereof; (iii)
     a general moratorium on commercial banking activities declared by either
     federal or any Missouri authorities; (iv) the outbreak or escalation of
     hostilities involving the United States or the declaration

                                       40

     by the United States of a national emergency or war, which in your judgment
     makes it impracticable or inadvisable to proceed with the public offering
     or the delivery of the Units in the manner contemplated in the Prospectus;
     or (v) any calamity or crisis, change in national, international or world
     affairs, act of God, change in the international or domestic markets, or
     change in the existing financial, political or economic conditions in the
     United States or elsewhere, the effect of which on the financial markets of
     the United States is such as to make it in your judgment impracticable or
     inadvisable to proceed with the public offering or the delivery of the
     Units in the manner contemplated in the Prospectus.

          (k)  You shall have received a certificate, dated the Closing Date
     (and, if applicable, the Option Closing Date) and signed by (x) the
     President and Chief Executive Officer and (y) the Vice President and Chief
     Financial Officer of the Managing General Partner, in their capacities as
     such, stating that:

               (i)   the condition set forth in Section 8(a) has been fully
          satisfied;

               (ii)  they have carefully examined the Registration Statement and
          the Prospectus as amended or supplemented and nothing has come to
          their attention that would lead them to believe that either the
          Registration Statement or the Prospectus, or any amendment or
          supplement thereto as of their respective effective, issue or filing
          dates, contained, and the Prospectus as amended or supplemented and at
          such Closing Date, contains any untrue statement of a material fact,
          or omits to state a material fact required to be stated therein or
          necessary in order to make the statements therein, in light of the
          circumstances under which they were made, not misleading;

               (iii) since the Effective Date, there has occurred no event
          required to be set forth in an amendment or supplement to the
          Registration Statement or the Prospectus which has not been so set
          forth;

               (iv)  all representations and warranties made herein by the
          Inergy Parties are true and correct at such Closing Date, with the
          same effect as if made on and as of such Closing Date, and all
          agreements herein to be performed or complied with by the Inergy
          Parties on or prior to such Closing Date have been duly performed and
          complied with by the Inergy Parties;

               (v)   each of the Inergy Parties has performed all obligations
          required to be performed by it pursuant to this Agreement;

               (vi)  no stop order has been issued;

                                       41

               (vii)   the Units have been approved for listing on the Nasdaq;
          and

               (viii)  covering such other matters as you may reasonably
          request.

          (l)  You shall have received a certificate from each Selling
     Unitholder, dated the Closing Date and signed by, or on behalf of, the
     Selling Unitholder, stating that the representations, warranties and
     agreements of the Selling Unitholder contained herein are true and correct
     as of the Closing Date and that the Selling Unitholder has complied with
     all agreements contained herein to be performed by the Selling Unitholder
     at or prior to the Closing Date.

          (l)  The Inergy Parties shall not have failed, refused, or been
     unable, at or prior to the Closing Date (and, if applicable, the Option
     Closing Date) to have performed any agreement on their part to be performed
     or any of the conditions herein contained and required to be performed or
     satisfied by them at or prior to such Closing Date.

          (m)  The Partnership shall have furnished to you at the Closing Date
     (and, if applicable, the Option Closing Date) such further information,
     opinions, certificates, letters and documents as you may have reasonably
     requested.

          (n)  The Units shall have been approved for trading upon official
     notice of issuance on the Nasdaq.

          (o)  You shall have received duly and validly executed letter
     agreements referred to in Section 6(m) hereof.

          All such opinions, certificates, letters and documents will be in
     compliance with the provisions hereof only if they are satisfactory in form
     and substance to you and to Baker Botts L.L.P., counsel for the several
     Underwriters.  The Partnership and the Selling Unitholders will furnish you
     with such signed and conformed copies of such opinions, certificates,
     letters and documents as you may request.

          If any of the conditions specified above in this Section 7 shall not
     have been satisfied at or prior to the Closing Date (and, if applicable,
     the Option Closing Date) or waived by you in writing, this Agreement may be
     terminated by you on notice to the Partnership and the Selling Unitholders.

     9.   Indemnification and Contribution. (a) The Inergy Parties and the
Selling Unitholders, jointly and severally, will indemnify and hold harmless
each Underwriter from and against any losses, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the 1933 Act, or
otherwise, insofar as such losses, damages or liabilities (or actions or claims
in respect thereof) arise out of or are based upon (i) an untrue statement or

                                       42

alleged untrue statement of a material fact contained in the Registration
Statement or any amendment or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Prospectus or the Prospectus or in any amendment or supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, and will reimburse
the Underwriter for any legal or other expenses incurred by the Underwriter in
connection with investigating, preparing, pursuing or defending against or
appearing as a third party witness in connection with any such loss, damage,
liability or action or claim, including, without limitation, any investigation
or proceeding by any governmental agency or body, commenced or threatened,
including the reasonable fees and expenses of counsel to the indemnified party,
as such expenses are incurred (including such losses, damages, liabilities or
expenses to the extent of the aggregate amount paid in settlement of any such
action or claim, provided that (subject to Section 9(c) hereof) any such
settlement is effected with the written consent of the Partnership); provided,
however, that the Inergy Parties and the Selling Unitholders shall not be liable
in any such case to the extent, but only to the extent, that any such loss,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the Preliminary
Prospectus, the Registration Statement, the Prospectus or any other prospectus
relating to the Units, or any such amendment or supplement, in reliance upon and
in conformity with written information relating to the Underwriters furnished to
the Partnership by you or by any Underwriter through you, expressly for use in
the preparation thereof (as provided in Section 15 hereof).

          (b) Each Underwriter will indemnify and hold harmless the Inergy
     Parties from and against any losses, damages or liabilities to which the
     Inergy Parties and the Selling Unitholders may become subject, under the
     1933 Act, the 1934 Act or otherwise, insofar as such losses, damages or
     liabilities (or actions or claims in respect thereof) arise out of or are
     based upon (i) an untrue statement or alleged untrue statement of a
     material fact contained in the Registration Statement or any amendment or
     supplement thereto, or arise out of are based upon the omission or alleged
     omission to state therein a material fact required to be stated therein or
     necessary to make the statements therein not misleading, or (ii) any untrue
     statement or alleged untrue statement of a material fact contained in the
     Preliminary Prospectus or the Prospectus or in any amendment or supplement
     thereto, or arise out of or are based upon any omission or alleged omission
     to state therein a material fact necessary to make the statements therein,
     in light of the circumstances in which they were made, not misleading, in
     each case to the extent, but only to the extent, that such untrue statement
     or alleged untrue statement or omission or alleged omission was made in the
     Preliminary Prospectus, the Registration Statement, the Prospectus or any
     such amendment or supplement, in reliance upon and in conformity with
     written information relating to the Underwriters furnished to the
     Partnership by you or by any Underwriter through you, expressly for use in
     the preparation thereof (as

                                       43

     provided in Section 15 hereof), and will reimburse the Inergy Parties and
     the Selling Unitholders for any legal or other expenses incurred by the
     Inergy Parties and the Selling Unitholders in connection with investigating
     or defending any such action or claim as such expenses are incurred
     (including such losses, damages, liabilities or expenses to the extent of
     the aggregate amount paid in settlement of any such action or claim,
     provided that (subject to Section 9(c) hereof) any such settlement is
     effected with the written consent of the Underwriters).

          (c) Promptly after receipt by an indemnified party under Section 9(a)
     or 9(b) hereof of notice of the commencement of any action, such
     indemnified party shall, if a claim in respect thereof is to be made
     against an indemnifying party under Section 9(a) or 9(b) hereof, notify
     each such indemnifying party in writing of the commencement thereof, but
     the failure so to notify such indemnifying party shall not relieve such
     indemnifying party from any liability except to the extent that it has been
     prejudiced in any material respect by such failure or from any liability
     that it may have to any such indemnified party otherwise than under Section
     9(a) or 9(b) hereof.  In case any such action shall be brought against any
     such indemnified party and it shall notify each indemnifying party of the
     commencement thereof, each such indemnifying party shall be entitled to
     participate therein and, to the extent that it shall wish, jointly with any
     other indemnifying party under Section 9(a) or 9(b) hereof similarly
     notified, to assume the defense thereof, with counsel satisfactory to such
     indemnified party (who shall not, except with the consent of such
     indemnified party, be counsel to such indemnifying party), and, after
     notice from such indemnifying party to such indemnified party of its
     election so to assume the defense thereof, such indemnifying party shall
     not be liable to such indemnified party under Section 9(a) or 9(b) hereof
     for any legal expenses of other counsel or any other expenses, in each case
     subsequently incurred by such indemnified party, in connection with the
     defense thereof other than reasonable costs of investigation.  The
     indemnified party shall have the right to employ its own counsel in any
     such action, but the fees and expenses of such counsel shall be at the
     expense of such indemnified party unless (i) the employment of counsel by
     such indemnified party at the expense of the indemnifying party has been
     authorized by the indemnifying party, (ii) the indemnified party shall have
     been advised by such counsel that there may be a conflict of interest
     between the indemnifying party and the indemnified party in the conduct of
     the defense, or certain aspects of the defense, of such action (in which
     case the indemnifying party shall not have the right to direct the defense
     of such action with respect to those matters or aspects of the defense on
     which a conflict exists or may exist on behalf of the indemnified party) or
     (iii) the indemnifying party shall not in fact have employed counsel
     reasonably satisfactory to such indemnified party to assume the defense of
     such action, in any of which events such fees and expenses to the extent
     applicable shall be borne, and shall be paid as incurred, by the
     indemnifying party.  If at any time such indemnified party shall have
     requested such indemnifying party under Section 9(a) or 9(b) hereof to
     reimburse such indemnified party for fees and expenses of counsel, such
     indemnifying party agrees that it shall be liable for any

                                       44

     settlement of the nature contemplated by Section 9(a) or 9(b) hereof
     effected without its written consent if (i) such settlement is entered into
     more than 60 days after receipt by such indemnifying party of such request
     for reimbursement, (ii) such indemnifying party shall have received notice
     of the terms of such settlement at least 45 days prior to such settlement
     being entered into and (iii) such indemnifying party shall not have
     reimbursed such indemnified party in accordance with such request for
     reimbursement prior to the date of such settlement. No such indemnifying
     party shall, without the written consent of such indemnified party, effect
     the settlement or compromise of, or consent to the entry of any judgment
     with respect to, any pending or threatened action or claim in respect of
     which indemnification or contribution may be sought hereunder (whether or
     not such indemnified party is an actual or potential party to such action
     or claim) unless such settlement, compromise or judgment (A) includes an
     unconditional release of such indemnified party from all liability arising
     out of such action or claim and (B) does not include a statement as to or
     an admission of fault, culpability or a failure to act, by or on behalf of
     any such indemnified party. In no event shall such indemnifying parties be
     liable for the fees and expenses of more than one counsel, including any
     local counsel, for all such indemnified parties in connection with any one
     action or separate but similar or related actions in the same jurisdiction
     arising out of the same general allegations or circumstances.

          (d) If the indemnification provided for in this Section 9 is
     unavailable to or insufficient to indemnify or hold harmless an indemnified
     party under Section 9(a) or 9(b) hereof in respect of any losses, damages
     or liabilities (or actions or claims in respect thereof) referred to
     therein, then each indemnifying party under Section 9(a) or 9(b) hereof
     shall contribute to the amount paid or payable by such indemnified party as
     a result of such losses, damages or liabilities (or actions or claims in
     respect thereof) in such proportion as is appropriate to reflect the
     relative benefits received by the Inergy Parties, the Selling Unitholders,
     and the Underwriter, from the offering of the Units.  If, however, the
     allocation provided by the immediately preceding sentence is not permitted
     by applicable law or if the indemnified party failed to give the notice
     required under Section 9(c) hereof and such indemnifying party was
     prejudiced in a material respect by such failure, then each such
     indemnifying party shall contribute to such amount paid or payable by such
     indemnified party in such proportion as is appropriate to reflect not only
     such relative benefits but also the relative fault, as applicable, of the
     Inergy Parties, the Selling Unitholders, and the Underwriter in connection
     with the statements or omissions that resulted in such losses, damages or
     liabilities (or actions or claims in respect thereof), as well as any other
     relevant equitable considerations.  The relative benefits received by, as
     applicable, the Inergy Parties, the Selling Unitholders and the
     Underwriter, shall be deemed to be in the same proportion as the total net
     proceeds from such offering (before deducting expenses) received by the
     Partnership bear to the total underwriting discounts and commissions
     received by the Underwriter.  The relative fault, as applicable, of the
     Inergy Parties, the Selling Unitholders and the Underwriter, shall be
     determined by

                                       45

     reference to, among other things, whether the untrue or alleged untrue
     statement of a material fact or the omission or alleged omission to state a
     material fact relates to information supplied by the Inergy Parties, the
     Selling Unitholders, or the Underwriter, and the parties' relative intent,
     knowledge, access to information and opportunity to correct or prevent such
     statement or omission. The Inergy Parties, the Selling Unitholders and the
     Underwriter agree that it would not be just and equitable if contribution
     pursuant to this Section 9(d) were determined by pro rata allocation (even
     if the Underwriter were treated as one entity for such purpose) or by any
     other method of allocation that does not take account of the equitable
     considerations referred to above in this Section 9(d). The amount paid or
     payable by such an indemnified party as a result of the losses, damages or
     liabilities (or actions or claims in respect thereof) referred to above in
     this Section 9(d) shall be deemed to include any legal or other expenses
     incurred by such indemnified party in connection with investigating or
     defending any such action or claim. Notwithstanding the provisions of this
     Section 9(d), the Underwriter shall not be required to contribute any
     amount in excess of the amount by which the total price at which the Units
     underwritten by it and distributed to the public were offered to the public
     exceeds the amount of any damages that the Underwriter has otherwise been
     required to pay by reason of such untrue or alleged untrue statement or
     omission or alleged omission. No person guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
     shall be entitled to contribution from any person who was not guilty of
     such fraudulent misrepresentation.

          (e) The obligations of the Inergy Parties under this Section 9 shall
     be in addition to any liability that the Inergy Parties and the Selling
     Unitholders may otherwise have and shall extend, upon the same terms and
     conditions, to each officer, director, employee, agent or other
     representative and to each person, if any, who controls the Underwriter
     within the meaning of the 1933 Act; and the obligations of any Underwriters
     under this Section 9 shall be in addition to any liability that the
     respective Underwriters may otherwise have and shall extend, upon the same
     terms and conditions, to each officer and director of the Partnership and
     the Managing General Partner who signed the Registration Statement and to
     each person, if any, who controls the Inergy Parties or the Selling
     Unitholders within the meaning of the 1933 Act.

     10.  Representations and Agreements to Survive Delivery.  The respective
representations, warranties, agreements and statements of the Inergy Parties,
the Selling Unitholders and the Underwriters, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain operative and in full force and effect regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of the
Underwriter or any controlling person of the Underwriter, the Inergy Parties,
the Selling Unitholders or any of its officers, directors or any controlling
persons and shall survive delivery of and payment for the Units hereunder.

                                       46

     11.  Substitution of Underwriters. (a) If any Underwriter shall default in
its obligation to purchase the Units which it has agreed to purchase hereunder,
you may in your discretion arrange for another party or other parties to
purchase such Units on the terms contained herein.  If within thirty-six hours
after such default by any Underwriter, you do not arrange for the purchase of
such Units, then the Partnership shall be entitled to a further period of
thirty-six hours within which to procure another party or parties reasonably
satisfactory to you to purchase such Units on such terms.  In the event that,
within the respective prescribed periods, you notify the Partnership that you
have so arranged for the purchase of such Units, or the Partnership notifies you
that it has so arranged for the purchase of such Units, you or the Partnership
shall have the right to postpone the Closing Date for a period of not more than
seven days, in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Partnership agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary.  The term "Underwriter" as used in this Agreement shall include
any persons substituted under this Section 11 with like effect as if such person
had originally been a party to this Agreement with respect to such Units.

          (b) If, after giving effect to any arrangements for the purchase of
     the Units of a defaulting Underwriter or Underwriters made by you and the
     Partnership as provided in subsection (a) above, the aggregate number of
     Units which remains unpurchased does not exceed one-eleventh of the total
     Units to be sold on the Closing Date, then the Partnership shall have the
     right to require each non-defaulting Underwriter to purchase the Units
     which you agreed to purchase hereunder and in addition, to require each
     non-defaulting Underwriter to purchase it pro rata share (based on the
     number of Units which such Underwriter agreed to purchase hereunder) of the
     Units of such defaulting Underwriter or Underwriters for which such
     arrangements have not been made; but nothing herein shall relieve a
     defaulting Underwriter from liability for its default.

          (c) If, after giving effect to any arrangements for the purchase of
     the Units of a defaulting Underwriter or Underwriters made by you and the
     Partnership as provided in subsection (a) above, the number of Units which
     remains unpurchased exceeds one-eleventh of the total Units to be sold on
     the Closing Date, or if the Partnership shall not exercise the right
     described in subsection (b) above to require to purchase Units of the
     defaulting Underwriter or Underwriters, then this Agreement (or, with
     respect to the Option Closing Date, the obligations of the Underwriters to
     purchase and of the Partnership to sell the Option Units) shall thereupon
     terminate, without liability on the part of the Partnership except for the
     expenses to be borne by the Partnership and the Underwriters as provided in
     Section 12 hereof and the indemnity and contribution agreements in Section
     8 hereof; but nothing herein shall relieve a defaulting Underwriter from
     liability for its default.

                                       47

     12.  Termination.  (a)  This Agreement may be terminated by you at any time
at or prior to the Closing Date by notice to the Partnership and the Selling
Unitholders if any condition specified in Section 8 hereof shall not have been
satisfied on or prior to the Closing Date.  Any such termination shall be
without liability of any party to any other party except as provided in Sections
9 and 13 hereof.

          (b)  This Agreement also may be terminated by you, by notice to the
     Partnership and the Selling Unitholders, as to any obligation of the
     Underwriters to purchase the Option Units, if any condition specified in
     Section 7 hereof shall not have been satisfied at or prior to the Option
     Closing Date or as provided in Section 10 of this Agreement.

          If you terminate this Agreement as provided in Sections 12(a) or
     12(b), you shall notify the Partnership and the Selling Unitholders by
     telephone or telegram, confirmed by letter.

     13.  Costs and Expenses.  The Partnership will bear and pay the costs and
expenses incident to the registration of the Units and public offering thereof,
including, without limitation, (a) all expenses (including stock transfer taxes)
incurred in connection with the delivery to the Underwriters of the Units, the
filing fees of the SEC, the fees and expenses of the Partnership's counsel and
accountants and the fees and expenses of counsel for the Partnership, (b)  the
preparation, printing, filing, delivery and shipping of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto (except as otherwise expressly provided in Section 6(d)
hereof) and the printing, delivery and shipping of this Agreement and other
underwriting documents, including the Agreement Among Underwriters, the Selected
Dealer Agreement, Underwriters' Questionnaires and Powers of Attorney and Blue
Sky Memoranda, and any instruments or documents related to any of the foregoing,
(c) the furnishing of copies of such documents (except as otherwise expressly
provided in Section 6(d) hereof) to the Underwriters, (d) the registration or
qualification of the Units for offering and sale under the securities laws of
the various states and other jurisdictions, including the fees and disbursements
of counsel to the Underwriters relating to such registration or qualification
and in connection with preparing any Blue Sky Memoranda or related analysis, (e)
the filing fees of the NASD (if any) and fees and disbursements of counsel to
the Underwriters relating to any review of the offering by the NASD, (f) all
printing and engraving costs related to preparation of the certificates for the
Units, including transfer agent and registrar fees, (g) all fees and expenses
relating to the authorization of the Units for trading on the Nasdaq (h) all
travel expenses, including air fare and accommodation expenses, of
representatives of the Partnership in connection with the offering of the Units,
and (i) all of the other costs and expenses incident to the performance by the
Partnership of the registration and offering of the Units; provided, that
(except as otherwise provided in this Section 13) the Underwriters will bear and
pay all of its own costs and expenses, including the fees and expenses of the
Underwriters'

                                       48

counsel, the Underwriters' transportation expenses and any advertising costs and
expenses incurred by the Underwriters incident to the public offering of the
Units.

     If this Agreement is terminated by you in accordance with the provisions of
Section 12(a) (other than pursuant to Section 11 or 8(i)), the Partnership shall
reimburse the Underwriter for all of their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of counsel to the Underwriters.

     14.  Notices.  All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o A.G. Edwards & Sons, Inc. at One North Jefferson
Avenue, St. Louis, Missouri 63103, Attention: Curtis H. Goot, Managing Director,
Corporate Finance, facsimile number (314) 955-7387, with a copy to Doug Kelly,
Attention: General Counsel, facsimile number (314) 955-5913, or if sent to the
Partnership shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed to the Partnership at Inergy, L.P., 1101 Walnut, Suite
1500, Kansas City, Missouri 64106, facsimile number (816) 842-1904. Notice to
any Underwriter pursuant to Section 9 shall be mailed, delivered, sent by
facsimile transmission, or telegraphed and confirmed to such underwriter's
address as it appears in the Underwriters' Questionnaire furnished in connection
with the offering of the Units or as otherwise furnished to the Partnership.

     15.  Information Furnished by the Underwriter.  The statements set forth in
the table on the cover page of the Prospectus and the statements in the table in
the [first paragraph, the third, eleventh, twelfth, thirteenth, fourteenth,
fifteenth, eighteenth and nineteenth paragraphs and the third sentence of the
seventh paragraph] under the caption "Underwriting" in the Prospectus constitute
the only information furnished by or on behalf of the Underwriters through you
as such information is referred to in Section 4(a)(ii) and Section 9 hereof.

     16.  Parties.  This Agreement shall inure to the benefit of and be binding
upon the Underwriters, the Inergy Parties, the Selling Unitholders and, to the
extent provided in Sections 9 and 10, the officers and directors of the Managing
General Partner and each person who controls the Partnership or any Underwriter
and their respective heirs, executors, administrators, successors and assigns.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, corporation or other entity any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective successors and assigns and said controlling persons
and said officers and directors, and for the benefit of no other person,
corporation or other entity.  No purchaser of any of the Units from the
Underwriter shall be construed a successor or assign by reason merely of such
purchase.

                                       49

     In all dealings hereunder, you shall act on behalf of each of the several
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of the Underwriters, made or
given by you jointly or by A.G. Edwards & Sons, Inc. on behalf of you as the
Underwriters, as if the same shall have been made or given in writing by the
Underwriters.

     17.  Counterparts.  This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.

     18.  Pronouns.  Whenever a pronoun of any gender or number is used herein,
it shall, where appropriate, be deemed to include any other gender and number.

     19.  Time of Essence.  Time shall be of the essence of this Agreement.

     20.  Applicable Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Missouri, without giving effect to the
choice of law or conflict of laws principles thereof.

                                       50

     If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Inergy Parties, and the Selling
Unitholders and the Underwriters.

INERGY HOLDINGS, LLC                INERGY, L.P.

                                    By:  Inergy GP, LLC (its General Partner)

By:_____________________________
   John J. Sherman, President
                                    By:________________________________________
                                       John J. Sherman
                                       President of Inergy GP, LLC

INERGY PARTNERS, LLC                INERGY PROPANE, LLC

By:_____________________________    By:________________________________________
   John J. Sherman, President          John J. Sherman, President

INERGY GP, LLC                      L & L TRANSPORTATION, LLC

By:_____________________________    By:________________________________________
   John J. Sherman, President          John J. Sherman, President

NEW INERGY PROPANE, LLC             INERGY TRANSPORTATION, LLC

By:_____________________________    By:________________________________________
   John J. Sherman, President          John J. Sherman, President

INERGY SALES & SERVICE, INC.        ACQUISITION CORP.

By:_____________________________    By:________________________________________
     John J. Sherman, President     Title:_____________________________________

                   Signature Page to Underwriting Agreement

Selling Unitholders

By:_________________________
   [Attorney-in-Fact]
   Attorney-in-Fact

By:_________________________
   [Attorney-in-Fact]
   Attorney-in-Fact

                   Signature Page to Underwriting Agreement

Accepted in St. Louis,
Missouri as of the date
first above written on
behalf of ourselves and each
of the several Underwriters
named in Schedule II hereto.

A.G. Edwards & Sons, Inc.

[Other Co-Managers]

By:  A.G. Edwards & Sons, Inc.

By:___________________________
Title:________________________

                   Signature Page to Underwriting Agreement

                                  SCHEDULE I

Name                                                     Number of Units
- ----                                                     ---------------

JP Morgan Partners (SBIC), LLC                                314,671
Heller Financial, Inc.                                         12,587
Triad Ventures Limited II, L.P.                                12,587
Summit Capital Inc.                                             4,825
Stephen Boane                                                     378
Summit Capital Group, LLC                                         151
John L. Long, Jr.                                                  60

Total                                                         345,259
                                                              =======

                                  Schedule I

                                  SCHEDULE II

Name                                          Number of Units
- ----                                          ---------------

A. G. Edwards & Sons, Inc.                    _______________

[Other Co-Managers]                           _______________

                                  Schedule II

                                 SCHEDULE III

     Persons and Entities who own Senior Subordinated Units of the Partnership

KCEP Ventures II, LP
Country Partners
Domex, Inc.
Investors 300, Inc.
L&L Leasing, Inc.
Moramerica Capital Corporation
NDSBIC, L.P.
Kansas Venture Capital, Inc.
Midstates Capital, L.P.
Diamond State Ventures, L.P.
Rocky Mountain Mezzanine
Firstar Capital Corporation
Eagle Fund II, L.P.
RNG Investments L.P.
KCEP Ventures III, LP
Clayton-Hamilton, LLC

                                  Schedule II

                                  SCHEDULE IV

     Pursuant to Section 6(g) of the Underwriting Agreement, Ernst & Young
L.L.P. shall furnish letters to the Underwriter to the effect that:

          (i)   They are independent certified public accountants with respect
to the General Partners and the Partnership within the meaning of the 1933 Act
and the applicable Rules and Regulations thereunder.

          (ii)  In their opinion, the financial statements audited by them and
included in the Prospectus or the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the 1933
Act and the applicable Rules and Regulations with respect to registration
statements on Form S-1.

          (iii) On the basis of limited procedures, not constituting an audit
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred to
below, performing the procedures specified by the AICPA for a review of interim
financial information as discussed in SAS No. 71, Interim Financial Information,
on the latest available interim financial statements of the Partnership Group,
inspection of the minute books of the Partnership Group since the date of the
latest audited financial statements included in the Prospectus, inquiries of
officials of the Partnership Group responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to believe that:

                (A) any material modifications should be made to the unaudited
          statements of consolidated income, statements of consolidated
          financial position and statements of consolidated cash flows included
          in the Prospectus for them to be in conformity with generally accepted
          accounting principles, or the unaudited statements of consolidated
          income, statements of consolidated financial position and statements
          of consolidated cash flows included in the Prospectus do not comply as
          to form in all material respects with the applicable accounting
          requirements of the 1933 Act and the related published Rules and
          Regulations thereunder.

               (B) any unaudited pro forma consolidated condensed financial
          statements included in the Prospectus do not comply as to form in all
          material respects with the applicable accounting requirements of the
          1933 Act and the published rules and regulations thereunder or the pro
          forma adjustments have not been properly applied to the historical
          amounts in the compilation of those statements.

                                  Schedule IV

               (C) as of a specified date not more than five days prior to the
          date of such letter, there have been any changes in the consolidated
          capital stock or any increase in the consolidated long-term debt of
          the Partnership Group, or any decreases in consolidated working
          capital, net current assets or net assets, or any changes in any other
          items specified by the Underwriter, in each case as compared with
          amounts shown in the latest balance sheet included in the Prospectus,
          except in each case for changes, increases or decreases which the
          Prospectus discloses have occurred or may occur or which are described
          in such letter.

               (D) for the period from the date of the latest financial
          statements included in the Prospectus to the specified date referred
          to in Clause (C) there were any decreases in consolidated net revenues
          or operating profit or the total or per share amounts of consolidated
          net income or any changes in any other items specified by the
          Underwriter, in each case as compared with the comparable period of
          the preceding year and with any other period of corresponding length
          specified by the Underwriter, except in each case for changes,
          decreases or increases which the Prospectus discloses have occurred or
          may occur or which are described in such letter.

          (iv) In addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraph (iii) above, they have
carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the Underwriter,
which are derived from the general accounting records of the Partnership Group
for the periods covered by their reports and any interim or other periods since
the latest period covered by their reports, which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Underwriter, and have compared certain of such amounts,
percentages and financial information with the accounting records of the
Partnership Group and have found them to be in agreement.

                                  Schedule IV

                                                                     Exhibit 3.2

                             AMENDED AND RESTATED

                       AGREEMENT OF LIMITED PARTNERSHIP

                                      OF

                                 INERGY, L.P.

                               TABLE OF CONTENTS

                                                                                       
                                            ARTICLE I
                                           DEFINITIONS

Section 1.1.  Definitions...............................................................   1
Section 1.2.  Construction..............................................................  20

                                            ARTICLE II
                                           ORGANIZATION

Section 2.1.  Formation................................................................   20
Section 2.2.  Name.....................................................................   21
Section 2.3.  Registered Office; Registered Agent; Principal Office; Other Offices.....   21
Section 2.4.  Purpose and Business.....................................................   21
Section 2.5.  Powers...................................................................   22
Section 2.6.  Power of Attorney........................................................   22
Section 2.7.  Term.....................................................................   23
Section 2.8.  Title to Partnership Assets..............................................   24

                                          ARTICLE III
                                   RIGHTS OF LIMITED PARTNERS

Section 3.1.  Limitation of Liability..................................................   24
Section 3.2.  Management of Business...................................................   24
Section 3.3.  Outside Activities of the Limited Partners...............................   25
Section 3.4.  Rights of Limited Partners...............................................   25

                                       ARTICLE IV
            CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
                          REDEMPTION OF PARTNERSHIP INTERESTS

Section 4.1.  Certificates.............................................................   26
Section 4.2.  Mutilated, Destroyed, Lost or Stolen Certificates........................   26
Section 4.3.  Record Holders...........................................................   27
Section 4.4.  Transfer Generally.......................................................   27
Section 4.5.  Registration and Transfer of Limited Partner Interests...................   28
Section 4.6.  Transfer of the Managing  General Partner's General Partner Interest.....   29
Section 4.7.  Transfer of Incentive Distribution Rights................................   30
Section 4.8.  Restrictions on Transfers................................................   30
Section 4.9.  Citizenship Certificates; Non-citizen Assignees..........................   31
Section 4.10. Redemption of Partnership Interests of Non-citizen Assignees.............   32

                                       ARTICLE V
               CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

Section 5.1.  Organizational Contributions.............................................   33
Section 5.2.  Contributions by the Non-Managing General Partner and its Affiliates.....   33
Section 5.3.  Contributions by Initial Limited Partners................................   34
Section 5.4.  Interest and Withdrawal..................................................   34

                               -i-

                                                                                       
Section 5.5.  Capital Accounts..........................................................  34
Section 5.6.  Issuances of Additional Partnership Securities............................  37
Section 5.7.  Limitations on Issuance of Additional Partnership Securities..............  38
Section 5.8.  Conversion of Subordinated Units..........................................  40
Section 5.9.  Limited Preemptive Right..................................................  44
Section 5.10. Splits and Combinations...................................................  44
Section 5.11. Fully Paid and Non-Assessable Nature of Limited Partner Interests.........  45

                                            ARTICLE VI
                                    ALLOCATIONS AND DISTRIBUTIONS

Section 6.1.  Allocations for Capital Account Purposes..................................  45
Section 6.2.  Allocations for Tax Purposes..............................................  53
Section 6.3.  Requirement and Characterization of Distributions; Distributions to
              Record Holders............................................................  55
Section 6.4.  Distributions of Available Cash from Operating Surplus....................  56
Section 6.5.  Distributions of Available Cash from Capital Surplus......................  58
Section 6.6.  Adjustment of Minimum Quarterly Distribution and Target Distribution
              Levels....................................................................  58
Section 6.7.  Special Provisions Relating to the Holders of Senior Subordinated
              Units and Junior Subordinated Units.......................................  59
Section 6.8.  Special Provisions Relating to the Holders of Incentive
              Distribution Rights.......................................................  59
Section 6.9.  Entity-Level Taxation.....................................................  60

                                            ARTICLE VII
                                 MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1.  Management................................................................  60
Section 7.2.  Certificate of Limited Partnership........................................  62
Section 7.3.  Restrictions on General Partners' Authority...............................  63
Section 7.4.  Reimbursement of the General Partners.....................................  63
Section 7.5.  Outside Activities........................................................  64
Section 7.6.  Loans from the General Partners; Loans or Contributions from the
              Partnership; Contracts with Affiliates; Certain Restrictions on the
              General Partners..........................................................  65
Section 7.7.  Indemnification...........................................................  67
Section 7.8.  Liability of Indemnitees..................................................  69
Section 7.9.  Resolution of Conflicts of Interest.......................................  69
Section 7.10. Other Matters Concerning the General Partners.............................  71
Section 7.11. Purchase or Sale of Partnership Securities................................  71
Section 7.12. Registration Rights of the General Partners and their Affiliates..........  72
Section 7.13. Reliance by Third Parties.................................................  74

                                       ARTICLE VIII
                           BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 8.1.  Records and Accounting....................................................  74
Section 8.2.  Fiscal Year...............................................................  75
Section 8.3.  Reports...................................................................  75

                                     -ii-

                                                                                                        

                                                      ARTICLE IX
                                                     TAX MATTERS

Section 9.1.      Tax Returns and Information............................................................  75
Section 9.2.      Tax Elections..........................................................................  75
Section 9.3.      Tax Controversies......................................................................  76
Section 9.4.      Withholding............................................................................  76

                                                       ARTICLE X
                                                  ADMISSION OF PARTNERS

Section 10.1.     Admission of Initial Limited Partners..................................................  76
Section 10.2.     Admission of Substituted Limited Partner...............................................  77
Section 10.3.     Admission of Successor General Partners................................................  77
Section 10.4.     Admission of Additional Limited Partners...............................................  77
Section 10.5.     Amendment of Agreement and Certificate of Limited Partnership..........................  78

                                                       ARTICLE XI
                                            WITHDRAWAL OR REMOVAL OF PARTNERS

Section 11.1.     Withdrawal of the Managing General Partner.............................................  78
Section 11.2.     Removal of the Managing General Partner................................................  80
Section 11.3.     Interest of Departing Partner and Successor General Partners...........................  80
Section 11.4.     Withdrawal of Non-Managing General Partner.............................................  82
Section 11.5.     Termination of Subordination Period, Conversion of Senior Subordinated Units
                  and Junior Units and Extinguishment of Cumulative Common Unit
                  Arrearages.............................................................................  83
Section 11.6.     Withdrawal of Limited Partners.........................................................  83

                                                       ARTICLE XII
                                               DISSOLUTION AND LIQUIDATION

Section 12.1.     Dissolution............................................................................  83
Section 12.2.     Continuation of the Business of the Partnership After Dissolution......................  84
Section 12.3.     Liquidator.............................................................................  84
Section 12.4.     Liquidation............................................................................  85
Section 12.5.     Cancellation of Certificate of Limited Partnership.....................................  86
Section 12.6.     Return of Contributions................................................................  86
Section 12.7.     Waiver of Partition....................................................................  86
Section 12.8.     Capital Account Restoration............................................................  86

                                                         ARTICLE XIII
                                  AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

Section 13.1.     Amendment to be Adopted Solely by the Managing General Partner.........................  87
Section 13.2.     Amendment Procedures...................................................................  88
Section 13.3.     Amendment Requirements.................................................................  88
Section 13.4.     Special Meetings.......................................................................  89
Section 13.5.     Notice of a Meeting....................................................................  90
Section 13.6.     Record Date............................................................................  90

                                     -iii-

                                                                                         
Section 13.7.     Adjournment.............................................................  90
Section 13.8.     Waiver of Notice; Approval of Meeting; Approval of Minutes..............  90
Section 13.9.     Quorum..................................................................  91
Section 13.10.    Conduct of a Meeting....................................................  91
Section 13.11.    Action Without a Meeting................................................  92
Section 13.12.    Voting and Other Rights.................................................  92

                                               ARTICLE XIV
                                                 MERGER

Section 14.1.     Authority...............................................................  93
Section 14.2.     Procedure for Merger or Consolidation...................................  93
Section 14.3.     Approval by Limited Partners of Merger or Consolidation.................  94
Section 14.4.     Certificate of Merger...................................................  95
Section 14.5.     Effect of Merger........................................................  95

                                               ARTICLE XV
                               RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS

Section 15.1.     Right to Acquire Limited Partner Interests..............................  95

                                             ARTICLE XVI
                                         GENERAL PROVISIONS

Section 16.1.     Addresses and Notices...................................................  97
Section 16.2.     Further Action..........................................................  98
Section 16.3.     Binding Effect..........................................................  98
Section 16.4.     Integration.............................................................  98
Section 16.5.     Creditors...............................................................  98
Section 16.6.     Waiver..................................................................  98
Section 16.7.     Counterparts............................................................  98
Section 16.8.     Applicable Law..........................................................  99
Section 16.9.     Invalidity of Provisions................................................  99
Section 16.10.    Consent of Partners.....................................................  99

                                     -iv-

             AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
                                      OF
                                 INERGY, L.P.

     THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF INERGY, L.P.
dated as of July 31, 2001, is entered into by and among Inergy GP LLC, a
Delaware limited liability company, as the Managing General Partner, Inergy
Partners, LLC, a Delaware limited liability company, as the Non-Managing General
Partner and as the Organizational Limited Partner, New Inergy Propane, LLC, a
Delaware limited liability company, Inergy Holdings, LLC, a Delaware limited
liability company, together with any other Persons who become Partners in the
Partnership or parties hereto as provided herein.  In consideration of the
covenants, conditions and agreements contained herein, the parties hereto hereby
agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

Section 1.1.  Definitions.

     The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.

     "Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction.

     "Additional Book Basis" means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to
such Carrying Value as a result of Book-Up Events.  For purposes of determining
the extent that Carrying Value constitutes Additional Book Basis:

          (i)  Any negative adjustment made to the Carrying Value of an Adjusted
     Property as a result of either a Book-Down Event or a Book-Up Event shall
     first be deemed to offset or decrease that portion of the Carrying Value of
     such Adjusted Property that is attributable to any prior positive
     adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.

          (ii) If Carrying Value that constitutes Additional Book Basis is
     reduced as a result of a Book-Down Event and the Carrying Value of other
     property is increased as a result of such Book-Down Event, an allocable
     portion of any such increase in Carrying Value shall be treated as
     Additional Book Basis; provided that the amount treated as Additional Book
     Basis pursuant hereto as a result of such Book-Down Event shall not exceed
     the amount by which the Aggregate Remaining Net Positive Adjustments after
     such Book-Down Event exceeds the remaining Additional Book Basis
     attributable to all

     of the Partnership's Adjusted Property after such Book-Down Event
     (determined without regard to the application of this clause (ii) to such
     Book-Down Event).

     "Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis.  To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period exceeds the Aggregate
Remaining Net Positive Adjustments as of the beginning of such period (the
"Excess Additional Book Basis"), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without regard to
this sentence as the Excess Additional Book Basis bears to the Additional Book
Basis as of the beginning of such period.

     "Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.

     "Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)).  The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulation Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.  The "Adjusted
Capital Account" of a Partner in respect of a General Partner Interest, a Common
Unit, a Senior Subordinated Unit, a Junior Subordinated Unit or an Incentive
Distribution Right or any other specified interest in the Partnership shall be
the amount which such Adjusted Capital Account would be if such General Partner
Interest, Common Unit, Senior Subordinated Unit, Junior Subordinated Unit,
Incentive Distribution Right or other interest in the Partnership were the only
interest in the Partnership held by a Partner from and after the date on which
such General Partner Interest, Common Unit, Senior Subordinated Unit, Junior
Subordinated Unit, Incentive Distribution Right or other interest was first
issued.

     "Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in Working
Capital Borrowings with respect to such period and (ii) any net reduction in
cash reserves for Operating Expenditures with respect to such period not
relating to an Operating Expenditure made with respect to such period, and (b)
plus (i) any net decrease in Working Capital Borrowings with respect to such
period and (ii) any net increase in cash reserves for Operating Expenditures
with respect to such period required by any debt instrument for the repayment of
principal, interest or premium.  Adjusted

                                      -2-

Operating Surplus does not include that portion of Operating Surplus included in
clause (a)(i) of the definition of Operating Surplus.

     "Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).

     "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question.  As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.

     "Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.

     "Agreed Allocation" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).

     "Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the Managing General Partner using such reasonable method of valuation as it
may adopt.  The Managing General Partner shall, in its discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate Agreed
Value of Contributed Properties contributed to the Partnership in a single or
integrated transaction among each separate property on a basis proportional to
the fair market value of each Contributed Property.

     "Agreement" means this Amended and Restated Agreement of Limited
Partnership of Inergy, L.P., as it may be amended, supplemented or restated from
time to time.

     "Assignee" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.

     "Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.

     "Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date,

                                      -3-

          (a)  the sum of (i) all cash and cash equivalents of the Partnership
     Group on hand at the end of such Quarter, and (ii) all additional cash and
     cash equivalents of the Partnership Group on hand on the date of
     determination of Available Cash with respect to such Quarter resulting from
     Working Capital Borrowings made subsequent to the end of such Quarter, less

          (b)  the amount of any cash reserves that is necessary or appropriate
     in the reasonable discretion of the Managing General Partner to (i) provide
     for the proper conduct of the business of the Partnership Group (including
     reserves for future capital expenditures and for anticipated future credit
     needs of the Partnership Group) subsequent to such Quarter, (ii) comply
     with applicable law or any loan agreement, security agreement, mortgage,
     debt instrument or other agreement or obligation to which any Group Member
     is a party or by which it is bound or its assets are subject or (iii)
     provide funds for distributions under Section 6.4 or 6.5 in respect of any
     one or more of the next four Quarters; provided, however, that the Managing
     General Partner may not establish cash reserves pursuant to (iii) above if
     the effect of such reserves would be that the Partnership is unable to
     distribute the Minimum Quarterly Distribution on all Common Units, plus any
     Cumulative Common Unit Arrearage on all Common Units, with respect to such
     Quarter; and, provided further, that disbursements made by a Group Member
     or cash reserves established, increased or reduced after the end of such
     Quarter but on or before the date of determination of Available Cash with
     respect to such Quarter shall be deemed to have been made, established,
     increased or reduced, for purposes of determining Available Cash, within
     such Quarter if the Managing General Partner so determines.

          Notwithstanding the foregoing, "Available Cash" with respect to the
     Quarter in which the Liquidation Date occurs and any subsequent Quarter
     shall equal zero.

     "Book Basis Derivative Items" means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted Property).

     "Book-Down Event" means an event which triggers a negative adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).

     "Book-Tax Disparity" means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date.  A
Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.

     "Book-Up Event" means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).

                                      -4-

     "Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Missouri shall not be regarded as a
Business Day.

     "Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5.  The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, a Senior Subordinated Unit, a Junior
Subordinated Unit, an Incentive Distribution Right or any other Partnership
Interest shall be the amount which such Capital Account would be if such General
Partner Interest, Common Unit, Senior Subordinated Unit, Junior Subordinated
Unit, Incentive Distribution Right or other Partnership Interest were the only
interest in the Partnership held by a Partner from and after the date on which
such General Partner Interest, Common Unit, Senior Subordinated Unit, Junior
Subordinated Unit, Incentive Distribution Right or other Partnership Interest
was first issued.

     "Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement or the Contribution and Conveyance Agreement.

     "Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member or (b) acquisition of existing, or the
construction of new capital assets (including, without limitation, retail
distribution centers, propane tanks, pipeline systems, storage facilities and
related assets), in each case made to increase the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such addition, improvement,
acquisition or construction.

     "Capital Surplus" has the meaning assigned to such term in Section 6.3(a).

     "Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the Managing
General Partner.

     "Cause" means a court of competent jurisdiction has entered a final, non-
appealable judgment finding the Managing General Partner liable for actual
fraud, gross negligence or willful or wanton misconduct in its capacity as a
general partner of the Partnership.

     "Certificate" means a certificate (i) substantially in the form of Exhibit
A to this Agreement, (ii) issued in global form in accordance with the rules and
regulations of the Depositary or (iii) in such other form as may be adopted by
the Managing General Partner in its discretion, issued by the Partnership
evidencing ownership of one or more Common Units or a certificate, in such form
as may be adopted by the Managing General Partner in its discretion, issued by
the Partnership evidencing ownership of one or more other Partnership
Securities.

                                      -5-

     "Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.

     "Citizenship Certification" means a properly completed certificate in such
form as may be specified by the Managing General Partner by which an Assignee or
a Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.

     "Claim" has the meaning assigned to such term in Section 7.12(c).

     "Closing Date" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.

     "Closing Price" has the meaning assigned to such term in Section 15.1(a).

     "Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time.  Any reference herein to a specific section or sections of
the Code shall be deemed to include a reference to any corresponding provision
of successor law.

     "Combined Interest" has the meaning assigned to such term in Section
11.3(a).

     "Commission" means the United States Securities and Exchange Commission.

     "Common Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and Assignees, and having
the rights and obligations specified with respect to Common Units in this
Agreement. The term "Common Unit" does not refer to a Senior Subordinated Unit
or a Junior Subordinated Unit prior to its conversion into a Common Unit
pursuant to the terms hereof.

     "Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).

     "Conflicts Committee" means a committee of the Board of Directors of the
Managing General Partner composed entirely of two or more directors who are not
(a) security holders, officers or employees of the Managing General Partner, (b)
officers, directors or employees of any Affiliate of the Managing General
Partner or (c) holders of any ownership interest in the Partnership Group other
than Common Units and who also meet the independence standards required to serve
on an audit committee of a board of directors by the National Securities
Exchange on which the Common Units are listed for trading.

     "Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership.  Once the

                                      -6-

Carrying Value of a Contributed Property is adjusted pursuant to Section 5.5(d),
such property shall no longer constitute a Contributed Property, but shall be
deemed an Adjusted Property.

     "Contribution and Conveyance Agreement" means that certain Contribution,
Conveyance, Assumption and Assignment Agreement, dated as of the Closing Date,
among the Managing General Partner, the Non-Managing General Partner, the
Partnership, the Operating Company and certain other parties, together with the
additional conveyance documents and instruments contemplated or referenced
thereunder.

     "Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).

     "Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).

     "Current Market Price" has the meaning assigned to such term in Section
15.1(a).

     "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. (S) 17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.

     "Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1, 11.2 or 11.4.

     "Depositary" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.

     "Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).

     "Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner or Assignee
does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.

     "Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).

     "Final Subordinated Units" has the meaning assigned to such term in Section
6.1(d)(x).

     "First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).

                                      -7-

     "First Target Distribution" means $0.66 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.66 multiplied by a fraction of which the
numerator is the number of days in such period, and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.

     "Fully Diluted Basis" means, when calculating the number of Outstanding
Units for any period, a basis that includes, in addition to the Outstanding
Units, all Partnership Securities and options, rights, warrants and appreciation
rights relating to an equity interest in the Partnership (a) that are
convertible into or exercisable or exchangeable for Partnership Units that are
senior to or pari passu with the Junior Subordinated Units, (b) whose
conversion, exercise or exchange price is less than the Current Market Price on
the date of such calculation, and (c) that may be converted into or exercised or
exchanged for such Partnership Units during the Quarter following the end of the
last Quarter contained in the period for which the calculation is being made
without the satisfaction of any contingency beyond the control of the holder
other than the payment of consideration and the compliance with administrative
mechanics applicable to such conversion, exercise or exchange; provided that for
purposes of determining the number of Outstanding Units on a Fully Diluted Basis
when calculating whether the Subordination Period has ended or Senior
Subordinated Units or Junior Subordinated Units are entitled to convert into
Common Units pursuant to Section 5.8, such Partnership Securities, options,
rights, warrants and appreciation rights shall be deemed to have been
Outstanding Units only for the four Quarters that comprise the last four
Quarters of the measurement period; provided, further, that if consideration
will be paid to any Group Member in connection with such conversion, exercise or
exchange, the number of Partnership Units to be included in such calculation
shall be that number equal to the difference between (i) the number of
Partnership Units issuable upon such conversion, exercise or exchange and (ii)
the number of Partnership Units which such consideration would purchase at the
Current Market Price.

     "General Partners" means the Managing General Partner and the Non-Managing
General Partner and their successors and permitted assigns as managing general
partner and non-managing general partner, respectively, of the Partnership.

     "General Partner Interest" means the ownership interest of a General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which may be evidenced by
Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which a General Partner is entitled as provided
in this Agreement, together with all obligations of a General Partner to comply
with the terms and provisions of this Agreement.

     "Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any Partnership Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, Partnership Securities.

     "Group Member" means a member of the Partnership Group.

                                      -8-

     "Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).

     "Incentive Distribution Right" means a non-voting Limited Partner Interest
issued to Inergy Holdings, LLC pursuant to Section 5.2, which Partnership
Interest will confer upon the holder thereof only the rights and obligations
specifically provided in this Agreement with respect to Incentive Distribution
Rights (and no other rights otherwise available to or other obligations of a
holder of a Partnership Interest).  Notwithstanding anything in this Agreement
to the contrary, the holder of an Incentive Distribution Right shall not be
entitled to vote such Incentive Distribution Right on any Partnership matter
except as may otherwise be required by law.

     "Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(vi),
(vii) and (viii) and 6.4(b)(iii), (iv) and (v).

     "Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).

     "Indemnitee" means (a) each General Partner, (b) any Departing Partner, (c)
any Person who is or was an Affiliate of a General Partner or any Departing
Partner, (d) any Person who is or was a member, partner, officer, director,
employee, agent or trustee of any Group Member, a General Partner or any
Departing Partner or any Affiliate of any Group Member, a General Partner or any
Departing Partner, and (e) any Person who is or was serving at the request of a
General Partner or any Departing Partner or any Affiliate of a General Partner
or any Departing Partner as an officer, director, employee, member, partner,
agent, fiduciary or trustee of another Person; provided, that a Person shall not
be an Indemnitee by reason of providing, on a fee-for-services basis, trustee,
fiduciary or custodial services.

     "Initial Common Units" means the Common Units sold in the Initial Offering.

     "Initial Limited Partners" means Inergy Partners, LLC, New Inergy Propane,
LLC and the Underwriters, in each case upon being admitted to the Partnership in
accordance with Section 10.1.

     "Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.

     "Initial Unit Price" means (a) with respect to the Common Units, the Senior
Subordinated Units and the Junior Subordinated Units, the initial public
offering price per Common Unit at which the Underwriters offered the Common
Units to the public for sale as set forth on the cover page of the prospectus
included as part of the Registration Statement and first issued at or after the
time the Registration Statement first became effective or (b) with respect to
any other class or series of Units, the price per Unit at which such class or
series of Units is initially sold by the Partnership, as determined by the
Managing General Partner, in each case adjusted as the Managing General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of Units.

                                      -9-

     "Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date:  (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than Working Capital
Borrowings and other than for items purchased on open account in the ordinary
course of business) by any Group Member; (b) sales of equity interests by any
Group Member (including the Common Units sold to the Underwriters pursuant to
the exercise of their over-allotment option); and (c) sales or other voluntary
or involuntary dispositions of any assets of any Group Member other than (i)
sales or other dispositions of inventory, accounts receivable and other assets
in the ordinary course of business, and (ii) sales or other dispositions of
assets as part of normal retirements or replacements.

     "Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.

     "Junior Subordinated Units" means a Unit representing a fractional part of
the Partnership Interests of all Limited Partners and Assignees, and having the
rights and obligations specified with respect to Junior Subordinated Units in
this Agreement.

     "Limited Partner" means, unless the context otherwise requires, (a) the
Organizational Limited Partner prior to its withdrawal from the Partnership,
each Initial Limited Partner, each Substituted Limited Partner, each Additional
Limited Partner and any Departing Partner upon the change of its status from
General Partner to Limited Partner pursuant to Section 11.3 or (b) solely for
purposes of Articles V, VI, VII and IX, each Assignee; provided, however, that
when the term "Limited Partner" is used herein in the context of any vote or
other approval, including without limitation Articles XIII and XIV, such term
shall not, solely for such purpose, include any holder of an Incentive
Distribution Right except as may otherwise be required by law.

     "Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Senior Subordinated Units, Junior Subordinated Units, Incentive Distribution
Rights or other Partnership Securities or a combination thereof or interest
therein, and includes any and all benefits to which such Limited Partner or
Assignee is entitled as provided in this Agreement, together with all
obligations of such Limited Partner or Assignee to comply with the terms and
provisions of this Agreement; provided, however, that when the term "Limited
Partner Interest" is used herein in the context of any vote or other approval,
including without limitation Articles XIII and XIV, such term shall not, solely
for such purpose, include any holder of an Incentive Distribution Right except
as may otherwise be required by law.

     "Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
reconstitute the Partnership and continue its business has expired without such
an election being made, and (b) in the case of any other event giving rise to
the dissolution of the Partnership, the date on which such event occurs.

                                      -10-

     "Liquidator" means one or more Persons selected by the Managing General
Partner to perform the functions described in Section 12.3 as liquidating
trustee of the Partnership within the meaning of the Delaware Act.

     "Managing General Partner" means Inergy GP, LLC and its successors and
permitted assigns as managing general partner of the Partnership.

     "Merger Agreement" has the meaning assigned to such term in Section 14.1.

     "Minimum Quarterly Distribution" means $0.60 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.60 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.

     "National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq National Market or any successor thereto.

     "Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.

     "Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year.  The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section 6.1(d); provided that
the determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.

     "Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year.  The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d); provided that the
determination of the

                                      -11-

items that have been specially allocated under Section 6.1(d) shall be made as
if Section 6.1(d)(xii) were not in this Agreement.

     "Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and Book-
Down Events.

     "Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date.  The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).

     "Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date.  The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).

     "Non-citizen Assignee" means a Person whom the Managing General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the Managing General Partner has become the
Substituted Limited Partner, pursuant to Section 4.9.

     "Non-Managing General Partner" means Inergy Partners, LLC and its
successors and permitted assigns as non-managing general partner of the
Partnership.

     "Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.

     "Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (including, without limitation, any expenditures described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(b), are attributable to a Nonrecourse
Liability.

     "Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).

     "Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b).

     "Operating Company" means Inergy Propane, LLC, a Delaware limited liability
company, and any successors thereto.

                                      -12-

     "Operating Company Agreement" means the Limited Liability Company Agreement
of the Operating Company, as it may be amended, supplemented or restated from
time to time.

     "Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the Managing General
Partner, repayment of Working Capital Borrowings, debt service payments, and
capital expenditures, subject to the following:

          (a)  Payments (including prepayments) of principal of and premium on
     indebtedness other than Working Capital Borrowings shall not constitute
     Operating Expenditures.

          (b)  Operating Expenditures shall not include (i) capital expenditures
     made for Acquisitions or for Capital Improvements, (ii) payment of
     transaction expenses relating to Interim Capital Transactions or (iii)
     distributions to Partners. Where capital expenditures are made in part for
     Acquisitions or for Capital Improvements and in part for other purposes,
     the Managing General Partner's good faith allocation between the amounts
     paid for each shall be conclusive.

     "Operating Surplus" means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,

          (a)  the sum of (i) $8.5 million plus all cash and cash equivalents of
     the Partnership Group on hand as of the close of business on the Closing
     Date, (ii) all cash receipts of the Partnership Group for the period
     beginning on the Closing Date and ending with the last day of such period,
     other than cash receipts from Interim Capital Transactions (except to the
     extent specified in Section 6.5) and (iii) all cash receipts of the
     Partnership Group after the end of such period but on or before the date of
     determination of Operating Surplus with respect to such period resulting
     from Working Capital Borrowings, less

          (b)  the sum of (i) Operating Expenditures for the period beginning on
     the Closing Date and ending with the last day of such period and (ii) the
     amount of cash reserves that is necessary or advisable in the reasonable
     discretion of the Managing General Partner to provide funds for future
     Operating Expenditures; provided, however, that disbursements made
     (including contributions to a Group Member or disbursements on behalf of a
     Group Member) or cash reserves established, increased or reduced after the
     end of such period but on or before the date of determination of Available
     Cash with respect to such period shall be deemed to have been made,
     established, increased or reduced, for purposes of determining Operating
     Surplus, within such period if the Managing General Partner so determines.

     Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.

     "Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or either of the General Partners or any of their
Affiliates) acceptable to the Managing General Partner in its reasonable
discretion.

                                      -13-

     "Option Closing Date" means the date or dates on which any Common Units are
sold by the Partnership to the Underwriters upon exercise of the Over-Allotment
Option.

     "Organizational Limited Partner" means Inergy Partners, LLC in its capacity
as the organizational limited partner of the Partnership pursuant to this
Agreement.

     "Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partners or their Affiliates) beneficially owns 20% or more of
any Outstanding Partnership Securities of any class then Outstanding, all
Partnership Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to be Outstanding when sending notices of a
meeting of Limited Partners to vote on any matter (unless otherwise required by
law), calculating required votes, determining the presence of a quorum or for
other similar purposes under this Agreement, except that Common Units so owned
shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such
Common Units shall not, however, be treated as a separate class of Partnership
Securities for purposes of this Agreement); provided, further, that the
foregoing limitation shall not apply (i) to any Person or Group who acquired 20%
or more of any Outstanding Partnership Securities of any class then Outstanding
directly from the General Partners or their Affiliates, (ii) to any Person or
Group who acquired 20% or more of any Outstanding Partnership Securities of any
class then Outstanding directly or indirectly from a Person or Group described
in clause (i) provided that the General Partners shall have notified such Person
or Group in writing that such limitation shall not apply or (iii) to any Person
or Group who acquired 20% or more of any Partnership Securities issued by the
Partnership with the approval of the board of directors of the Managing General
Partner.

     "Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.

     "Parity Units" means Common Units and all other Units of any other class or
series that have the right to receive (i) distributions of Available Cash from
Operating Surplus pursuant to each of subclauses (a)(i) and (a)(ii) of Section
6.4 in the same order of priority with respect to the participation of Common
Units in such distributions or (ii) to participate in allocations of Net
Termination Gain pursuant to Section 6.1(c)(i)(B) in the same order of priority
with the Common Units, in each case regardless of whether the amounts or value
so distributed or allocated on each Parity Unit equals the amount or value so
distributed or allocated on each Common Unit.  Units whose participation in such
(i) distributions of Available Cash from Operating Surplus and (ii) allocations
of Net Termination Gain are subordinate in order of priority to such
distributions and allocations on Common Units shall not constitute Parity Units
even if such Units are convertible under certain circumstances into Common Units
or Parity Units.

     "Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).

     "Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).

                                      -14-

     "Partner Nonrecourse Deductions" means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.

     "Partners" means the General Partners and the Limited Partners.

     "Partnership" means Inergy, L.P., a Delaware limited partnership, and any
successors thereto.

     "Partnership Group" means the Partnership, the Operating Company and any
Subsidiary of any such entity, treated as a single consolidated entity.

     "Partnership Interest" means an interest in the Partnership, which shall
include the General Partner Interests and Limited Partner Interests.

     "Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).

     "Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including without
limitation, Common Units, Senior Subordinated Units, Junior Subordinated Units
and Incentive Distribution Rights.

     "Percentage Interest" means as of any date of determination (a) as to the
Non-Managing General Partner (with respect to its General Partner Interest),
2.0%, (b) as to any Unitholder or Assignee holding Units, the product obtained
by multiplying (i) 98% less the percentage applicable to paragraph (c) by (ii)
the quotient obtained by dividing (A) the number of Units held by such
Unitholder or Assignee by (B) the total number of all Outstanding Units, and (c)
as to the holders of additional Partnership Securities issued by the Partnership
in accordance with Section 5.6, the percentage established as a part of such
issuance.  The Percentage Interest with respect to the Managing General
Partner's General Partner Interest shall be zero.  The Percentage Interest with
respect to an Incentive Distribution Right shall at all times be zero.

     "Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.

     "Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partners or any Affiliate of either of the General
Partners who holds Units.

     "Pro Rata" means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative Percentage
Interests, (b) when modifying Partners and Assignees, apportioned among all
Partners and Assignees in accordance with their relative Percentage Interests
and (c) when modifying holders of Incentive Distribution Rights, apportioned
equally among all holders of Incentive Distribution Rights in accordance with
the relative number of Incentive Distribution Rights held by each such holder.

                                      -15-

     "Purchase Date" means the date determined by the Managing General Partner
as the date for purchase of all Outstanding Units of a certain class (other than
Units owned by the General Partners and their Affiliates) pursuant to Article
XV.

     "Quarter" means, unless the context requires otherwise, a fiscal quarter,
or with respect to the first fiscal quarter after the Closing Date the portion
of such fiscal quarter after the Closing Date, of the Partnership.

     "Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.

     "Record Date" means the date established by the Managing General Partner
for determining (a) the identity of the Record Holders entitled to notice of, or
to vote at, any meeting of Limited Partners or entitled to vote by ballot or
give approval of Partnership action in writing without a meeting or entitled to
exercise rights in respect of any lawful action of Limited Partners or (b) the
identity of Record Holders entitled to receive any report or distribution or to
participate in any offer.

     "Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to other Partnership Securities, the Person in
whose name any such other Partnership Security is registered on the books which
the Managing General Partner has caused to be kept as of the opening of business
on such Business Day.

     "Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.

     "Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-56976) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.

     "Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units, Senior
Subordinated Units or Junior Subordinated Units, the excess of (a) the Net
Positive Adjustments of the Unitholders holding Common Units, Senior
Subordinated Units or Junior Subordinated Units as of the end of such period
over (b) the sum of those Partners' Share of Additional Book Basis Derivative
Items for each prior taxable period, (ii) with respect to the Non-Managing
General Partner (as holder of the Non-Managing Partner's General Partner
Interest), the excess of (a) the Net Positive Adjustments of the Non-Managing
General Partner as of the end of such period over (b) the sum of the

                                      -16-

Share of Additional Book Basis Derivative Items of the holders of the Incentive
Distribution Rights for each prior taxable period.

     "Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).

     "Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.

     "Second Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(F).

     "Second Target Distribution" means $0.75 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.75 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.

     "Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.

     "Senior Subordinated Units" means a Unit representing a fractional part of
the Partnership Interests of all Limited Partners and Assignees, and having the
rights and obligations specified with respect to Senior Subordinated Units in
this Agreement.

     "Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units, Senior Subordinated
Units or Junior Subordinated Units, the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the Unitholders' Remaining Net
Positive Adjustments as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustments as of that time, (ii) with respect to the
Non-Managing General Partner (as holder of the Non-Managing Partner's General
Partner Interest), the amount that bears the same ratio to such additional Book
Basis Derivative Items as the Non-Managing General Partner's Remaining Net
Positive Adjustments as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustment as of that time, and (iii) with respect to the
Partners holding Incentive Distribution Rights, the amount that bears the same
ratio to such Additional Book Basis Derivative Items as the Remaining Net
Positive Adjustments of the Partners holding the Incentive Distribution Rights
as of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time.

     "Special Approval" means approval by a majority of the members of the
Conflicts Committee.

                                      -17-

     "Subordinated Unit" means a Senior Subordinated Unit or a Junior
Subordinated Unit.  The term "Subordinated Unit" as used herein does not include
a Common Unit or Parity Unit.  A Subordinated Unit that is convertible into a
Common Unit or a Parity Unit shall not constitute a Common Unit or Parity Unit
until such conversion occurs.

     "Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:

          (a) the first day of any Quarter beginning after June 30, 2006, in the
     case of the Senior Subordinated Units, or June 30, 2008, in the case of the
     Junior Subordinated Units, in respect of which (i) (A) distributions of
     Available Cash from Operating Surplus on each of the Outstanding Common
     Units, Senior Subordinated Units and Junior Subordinated Units and any
     other Outstanding Units that are senior or equal in right of distribution
     to the Junior Subordinated Units with respect to each of the three
     consecutive, non-overlapping four-Quarter periods immediately preceding
     such date equaled or exceeded the sum of the Minimum Quarterly Distribution
     (or portion thereof for the first fiscal quarter after the Closing Date) on
     all Outstanding Common Units, Senior Subordinated Units and Junior
     Subordinated Units during such periods and any other Outstanding Units that
     are senior or equal in right of distribution to the Junior Subordinated
     Units and (B) the Adjusted Operating Surplus generated during each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of the Minimum Quarterly
     Distribution on all of the Common Units, Senior Subordinated Units and
     Junior Subordinated Units and any other Units that are senior or equal in
     right of distribution to the Junior Subordinated Units that were
     Outstanding during such periods on a Fully Diluted Basis, plus the related
     distribution on the General Partner Interest during such periods and (ii)
     there are no Cumulative Common Unit Arrearages; and

          (b) the date on which the Managing General Partner is removed as
     general partner of the Partnership upon the requisite vote by holders of
     Outstanding Units under circumstances where Cause does not exist and Units
     held by the General Partners and their Affiliates are not voted in favor of
     such removal.

     "Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such-Person.

                                      -18-

     "Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.

     "Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).

     "Third Target Distribution" means $0.90 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.90 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.

     "Third Target Liquidation Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(G).

     "Trading Day" has the meaning assigned to such term in Section 15.1(a).

     "Transfer" has the meaning assigned to such term in Section 4.4(a).

     "Transfer Agent" means such bank, trust company or other Person (including
the Managing General Partner or one of its Affiliates) as shall be appointed
from time to time by the Partnership to act as registrar and transfer agent for
the Common Units; provided that if no Transfer Agent is specifically designated
for any other Partnership Securities, the Managing General Partner shall act in
such capacity.

     "Transfer Application" means an application and agreement for transfer of
Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.

     "Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.

     "Underwriting Agreement" means the Underwriting Agreement dated July 25,
2001 among the Underwriters, the Partnership and certain other parties,
providing for the purchase of Common Units by such Underwriters.

     "Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units and Subordinated Units but shall not include (i) a
General Partner Interest or (ii) Incentive Distribution Rights.

     "Unitholders" means the holders of Common Units and Subordinated Units.

     "Unit Majority" means, during the Subordination Period, at least a majority
of the Outstanding Common Units (excluding Common Units owned by the General
Partners and their Affiliates), voting as a class, and at least a majority of
the Outstanding Senior Subordinated Units and Junior Subordinated Units, voting
together as a single class, and thereafter, at least a majority of the
Outstanding Common Units.

                                      -19-

     "Unpaid MQD" has the meaning assigned to such term in Section 6.1(c)(i)(B).

     "Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).

     "Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).

     "Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the Managing General
Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of such Units.

     "US GAAP" means United States Generally Accepted Accounting Principles
consistently applied.

     "Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).

     "Working Capital Borrowings" means borrowings exclusively for working
capital purposes made pursuant to a credit facility or other arrangement
requiring all such borrowings thereunder to be reduced to a relatively small
amount each year (or for the year in which the Initial Offering is consummated,
the 12-month period beginning on the Closing Date) for an economically
meaningful period of time.

Section 1.2.  Construction.

     Unless the context requires otherwise:  (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.

                                  ARTICLE II
                                 ORGANIZATION

Section 2.1.  Formation.

     The Managing General Partner, the Non-Managing General Partner and the
Organizational Limited Partner have previously formed the Partnership as a
limited partnership pursuant to the provisions of the Delaware Act and hereby
amend and restate the original

                                      -20-

Agreement of Limited Partnership of Inergy, L.P. in its entirety. This amendment
and restatement shall become effective on the date of this Agreement. Except as
expressly provided to the contrary in this Agreement, the rights, duties
(including fiduciary duties), liabilities and obligations of the Partners and
the administration, dissolution and termination of the Partnership shall be
governed by the Delaware Act. All Partnership Interests shall constitute
personal property of the owner thereof for all purposes and a Partner has no
interest in specific Partnership property.

Section 2.2.  Name.

     The name of the Partnership shall be "Inergy, L.P."  The Partnership's
business may be conducted under any other name or names deemed necessary or
appropriate by the Managing General Partner in its sole discretion, including
the name of the Managing General Partner.  The words "Limited Partnership,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary for the purpose of complying with the laws of any jurisdiction
that so requires.  The Managing General Partner in its discretion may change the
name of the Partnership at any time and from time to time and shall notify the
Limited Partners of such change in the next regular communication to the Limited
Partners.

Section 2.3.  Registered Office; Registered Agent; Principal Office; Other
              Offices.

     Unless and until changed by the Managing General Partner, the registered
office of the Partnership in the State of Delaware shall be located at 1209
Orange Street, Wilmington, Delaware 19801, and the registered agent for service
of process on the Partnership in the State of Delaware at such registered office
shall be The Corporation Trust Company.  The principal office of the Partnership
shall be located at 1101 Walnut, Suite 1500, Kansas City, Missouri 64106 or such
other place as the Managing General Partner may from time to time designate by
notice to the Limited Partners.  The Partnership may maintain offices at such
other place or places within or outside the State of Delaware as the Managing
General Partner deems necessary or appropriate.  The address of the Managing
General Partner shall be 1101 Walnut, Suite 1500, Kansas City, Missouri 64106 or
such other place as the Managing General Partner may from time to time designate
by notice to the Limited Partners.

Section 2.4.  Purpose and Business.

     The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a member of the Operating Company and, in connection
therewith, to exercise all the rights and powers conferred upon the Partnership
as a member of the Operating Company pursuant to the Operating Company Agreement
or otherwise, (b) engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage indirectly in, any business activity that the Operating Company is
permitted to engage in by the Operating Company Agreement and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity, (c)
engage directly in, or enter into or form any corporation, partnership, joint
venture, limited liability company or other entity or arrangement to engage
indirectly in, any business activity that the Managing General Partner approves
and which lawfully may be conducted by a limited partnership organized pursuant
to the Delaware Act and,

                                      -21-

in connection therewith, to exercise all of the rights and powers conferred upon
the Partnership pursuant to the agreements relating to such business activity;
provided, however, that the Managing General Partner reasonably determines, as
of the date of the acquisition or commencement of such activity, that such
activity (i) generates "qualifying income" (as such term is defined pursuant to
Section 7704 of the Code) or a Subsidiary, or a Partnership activity that
generates qualifying income, or (ii) enhances the operations of an activity of
the Operating Company and (d) do anything necessary or appropriate to the
foregoing, including the making of capital contributions or loans to a Group
Member. The Managing General Partner has no obligation or duty to the
Partnership, the Limited Partners, the Non-Managing General Partner or the
Assignees to propose or approve, and in its discretion may decline to propose or
approve, the conduct by the Partnership of any business.

Section 2.5.  Powers.

     The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.

Section 2.6.  Power of Attorney.

              (a)  Each Limited Partner and each Assignee hereby constitutes and
appoints the Managing General Partner and, if a Liquidator shall have been
selected pursuant to Section 12.3, the Liquidator (and any successor to the
Liquidator by merger, transfer, assignment, election or otherwise) and each of
their authorized officers and attorneys-in-fact, as the case may be, with full
power of substitution, as his true and lawful agent and attorney-in-fact, with
full power and authority in his name, place and stead, to:

              (i)  execute, swear to, acknowledge, deliver, file and record in
     the appropriate public offices (A) all certificates, documents and other
     instruments (including this Agreement and the Certificate of Limited
     Partnership and all amendments or restatements hereof or thereof) that the
     Managing General Partner or the Liquidator deems necessary or appropriate
     to form, qualify or continue the existence or qualification of the
     Partnership as a limited partnership (or a partnership in which the limited
     partners have limited liability) in the State of Delaware and in all other
     jurisdictions in which the Partnership may conduct business or own
     property; (B) all certificates, documents and other instruments that the
     Managing General Partner or the Liquidator deems necessary or appropriate
     to reflect, in accordance with its terms, any amendment, change,
     modification or restatement of this Agreement; (C) all certificates,
     documents and other instruments (including conveyances and a certificate of
     cancellation) that the Managing General Partner or the Liquidator deems
     necessary or appropriate to reflect the dissolution and liquidation of the
     Partnership pursuant to the terms of this Agreement; (D) all certificates,
     documents and other instruments relating to the admission, withdrawal,
     removal or substitution of any Partner pursuant to, or other events
     described in, Article IV, X, XI or XII; (E) all certificates, documents and
     other instruments relating to the determination of the rights, preferences
     and privileges of any class or series of Partnership Securities issued
     pursuant to Section 5.6; and (F) all certificates, documents

                                      -22-

     and other instruments (including agreements and a certificate of merger)
     relating to a merger or consolidation of the Partnership pursuant to
     Article XIV; and

          (ii) execute, swear to, acknowledge, deliver, file and record all
     ballots, consents, approvals, waivers, certificates, documents and other
     instruments necessary or appropriate, in the discretion of the Managing
     General Partner or the Liquidator, to make, evidence, give, confirm or
     ratify any vote, consent, approval, agreement or other action that is made
     or given by the Partners hereunder or is consistent with the terms of this
     Agreement or is necessary or appropriate, in the discretion of the Managing
     General Partner or the Liquidator, to effectuate the terms or intent of
     this Agreement; provided, that when required by Section 13.3 or any other
     provision of this Agreement that establishes a percentage of the Limited
     Partners or of the Limited Partners of any class or series required to take
     any action, the Managing General Partner and the Liquidator may exercise
     the power of attorney made in this Section 2.6(a)(ii) only after the
     necessary vote, consent or approval of the Limited Partners or of the
     Limited Partners of such class or series, as applicable.

     Nothing contained in this Section 2.6(a) shall be construed as authorizing
the Managing General Partner to amend this Agreement except in accordance with
Article XIII or as may be otherwise expressly provided for in this Agreement.

          (b)  The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be bound
by any representation made by the Managing General Partner or the Liquidator
acting in good faith pursuant to such power of attorney; and each such Limited
Partner or Assignee, to the maximum extent permitted by law, hereby waives any
and all defenses that may be available to contest, negate or disaffirm the
action of the Managing General Partner or the Liquidator taken in good faith
under such power of attorney. Each Limited Partner or Assignee shall execute and
deliver to the Managing General Partner or the Liquidator, within 15 days after
receipt of the request therefor, such further designation, powers of attorney
and other instruments as the Managing General Partner or the Liquidator deems
necessary to effectuate this Agreement and the purposes of the Partnership.

Section 2.7.  Term.

     The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the dissolution of the Partnership in accordance with the
provisions of Article XII.  The existence of the Partnership as a separate legal
entity shall continue until the cancellation of the Certificate of Limited
Partnership as provided in the Delaware Act.

                                      -23-

Section 2.8.  Title to Partnership Assets.

     Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof.  Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the Managing General Partner, one or more of its Affiliates or one or more
nominees, as the Managing General Partner may determine.  The Managing General
Partner hereby declares and warrants that any Partnership assets for which
record title is held in the name of the Managing General Partner or one or more
of its Affiliates or one or more nominees shall be held by the Managing General
Partner or such Affiliate or nominee for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
Managing General Partner shall use reasonable efforts to cause record title to
such assets (other than those assets in respect of which the Managing General
Partner determines that the expense and difficulty of conveyancing makes
transfer of record title to the Partnership impracticable) to be vested in the
Partnership as soon as reasonably practicable; provided, further, that, prior to
the withdrawal or removal of the Managing General Partner or as soon thereafter
as practicable, the Managing General Partner shall use reasonable efforts to
effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the Managing General Partner.  All Partnership assets shall be recorded as the
property of the Partnership in its books and records, irrespective of the name
in which record title to such Partnership assets is held.

                                  ARTICLE III
                          RIGHTS OF LIMITED PARTNERS

Section 3.1.  Limitation of Liability.

     The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.

Section 3.2.  Management of Business.

     No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware Act)
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership.  Any
action taken by any Affiliate of a General Partner or any officer, director,
employee, manager, member, general partner, agent or trustee of a General
Partner or any of its Affiliates, or any officer, director, employee, manager,
member, general partner, agent or trustee of a Group Member, in its capacity as
such, shall not be deemed to be participation in the control of the business of
the Partnership by a limited partner of the Partnership (within the meaning of
Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners or Assignees under this
Agreement.

                                      -24-

Section 3.3.  Outside Activities of the Limited Partners.

     Subject to the provisions of Section 7.5, any Limited Partner or Assignee
shall be entitled to and may have business interests and engage in business
activities in addition to those relating to the Partnership, including business
interests and activities in direct competition with the Partnership Group.
Neither the Partnership nor any of the other Partners or Assignees shall have
any rights by virtue of this Agreement in any business ventures of any Limited
Partner or Assignee.

Section 3.4.  Rights of Limited Partners.

              (a)    In addition to other rights provided by this Agreement or
        by applicable law, and except as limited by Section 3.4(b), each Limited
        Partner shall have the right, for a purpose reasonably related to such
        Limited Partner's interest as a limited partner in the Partnership, upon
        reasonable written demand and at such Limited Partner's own expense:

              (i)    to obtain true and full information regarding the status of
        the business and financial condition of the Partnership;

              (ii)   promptly after becoming available, to obtain a copy of the
        Partnership's federal, state and local income tax returns for each year;

              (iii)  to have furnished to him a current list of the name and
        last known business, residence or mailing address of each Partner;

              (iv)   to have furnished to him a copy of this Agreement and the
        Certificate of Limited Partnership and all amendments thereto, together
        with a copy of the executed copies of all powers of attorney pursuant to
        which this Agreement, the Certificate of Limited Partnership and all
        amendments thereto have been executed;

              (v)    to obtain true and full information regarding the amount of
        cash and a description and statement of the Net Agreed Value of any
        other Capital Contribution by each Partner and which each Partner has
        agreed to contribute in the future, and the date on which each became a
        Partner; and

              (vi)   to obtain such other information regarding the affairs of
        the Partnership as is just and reasonable.

              (b)    The Managing General Partner may keep confidential from the
Limited Partners and Assignees, for such period of time as the Managing General
Partner deems reasonable, (i) any information that the Managing General Partner
reasonably believes to be in the nature of trade secrets or (ii) other
information the disclosure of which the Managing General Partner in good faith
believes (A) is not in the best interests of the Partnership Group, (B) could
damage the Partnership Group or (C) that any Group Member is required by law or
by agreement with any third party to keep confidential (other than agreements
with Affiliates of the Partnership the primary purpose of which is to circumvent
the obligations set forth in this Section 3.4).

                                      -25-

                                  ARTICLE IV
       CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
                      REDEMPTION OF PARTNERSHIP INTERESTS

Section 4.1.  Certificates.

     Upon the Partnership's issuance of Common Units, Senior Subordinated Units
or Junior Subordinated Units to any Person, the Partnership shall issue one or
more Certificates in the name of such Person evidencing the number of such Units
being so issued.  In addition, (a) upon a Managing General Partner's request,
the Partnership shall issue to it one or more Certificates in the name of such
Managing General Partner evidencing its interests in the Partnership; (b) upon
the request of the Non-Managing General Partner, the Partnership shall issue to
it one or more Certificates in the name of the Non-Managing General Partner
evidencing its interests in the Partnership; and (c) upon the request of any
Person owning Incentive Distribution Rights or any other Partnership Securities
other than Common Units, Senior Subordinated Units or Junior Subordinated Units,
the Partnership shall issue to such Person one or more certificates evidencing
such Incentive Distribution Rights or other Partnership Securities other than
Common Units, Senior Subordinated Units or Junior Subordinated Units.
Certificates shall be executed on behalf of the Partnership by the Chairman of
the Board, President or any Vice President and the Secretary or any Assistant
Secretary of the Managing General Partner.  No Common Unit Certificate shall be
valid for any purpose until it has been countersigned by the Transfer Agent;
provided, however, that if the Managing General Partner elects to issue Common
Units in global form, the Common Unit Certificates shall be valid upon receipt
of a certificate from the Transfer Agent certifying that the Common Units have
been duly registered in accordance with the directions of the Partnership and
the Underwriters.  Subject to the requirements of Section 6.7(b), the Partners
holding Certificates evidencing Senior Subordinated Units or Junior Subordinated
Units may exchange such Certificates for Certificates evidencing Common Units on
or after the date on which such Senior Subordinated Units or Junior Subordinated
Units are converted into Common Units pursuant to the terms of Section 5.8.

Section 4.2.  Mutilated, Destroyed, Lost or Stolen Certificates.

              (a)  If any mutilated Certificate is surrendered to the Transfer
Agent, the appropriate officers of the Managing General Partner on behalf of the
Partnership shall execute, and the Transfer Agent shall countersign and deliver
in exchange therefor, a new Certificate evidencing the same number and type of
Partnership Securities as the Certificate so surrendered.

              (b)  The appropriate officers of the Managing General Partner on
behalf of the Partnership shall execute and deliver, and the Transfer Agent
shall countersign a new Certificate in place of any Certificate previously
issued if the Record Holder of the Certificate:

              (i)  makes proof by affidavit, in form and substance satisfactory
     to the Partnership, that a previously issued Certificate has been lost,
     destroyed or stolen;

              (ii) requests the issuance of a new Certificate before the
     Partnership has notice that the Certificate has been acquired by a
     purchaser for value in good faith and without notice of an adverse claim;

                                      -26-

          (iii) if requested by the Partnership, delivers to the Partnership a
     bond, in form and substance satisfactory to the Partnership, with surety or
     sureties and with fixed or open penalty as the Partnership may reasonably
     direct, in its sole discretion, to indemnify the Partnership, the Partners,
     the Managing General Partner and the Transfer Agent against any claim that
     may be made on account of the alleged loss, destruction or theft of the
     Certificate; and

          (iv)  satisfies any other reasonable requirements imposed by the
     Partnership.

     If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Limited Partner Interests represented by the
Certificate is registered before the Partnership, the Managing General Partner
or the Transfer Agent receives such notification, the Limited Partner or
Assignee shall be precluded from making any claim against the Partnership, the
Managing General Partner or the Transfer Agent for such transfer or for a new
Certificate.

          (c)   As a condition to the issuance of any new Certificate under this
Section 4.2, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.

Section 4.3.  Record Holders.

     The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Partnership Interest on the part of any other Person, regardless of whether
the Partnership shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule, regulation, guideline or requirement of
any National Securities Exchange on which such Partnership Interests are listed
for trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the
foregoing) is acting as nominee, agent or in some other representative capacity
for another Person in acquiring and/or holding Partnership Interests, as between
the Partnership on the one hand, and such other Persons on the other, such
representative Person (a) shall be the Partner or Assignee (as the case may be)
of record and beneficially, (b) must execute and deliver a Transfer Application
and (c) shall be bound by this Agreement and shall have the rights and
obligations of a Partner or Assignee (as the case may be) hereunder and as, and
to the extent, provided for herein.

Section 4.4.  Transfer Generally.

          (a)   The term "transfer," when used in this Agreement with respect to
a Partnership Interest, shall be deemed to refer to a transaction by which a
General Partner assigns its General Partner Interest to another Person who
becomes a General Partner, by which the holder of a Limited Partner Interest
assigns such Limited Partner Interest to another Person who is or becomes a
Limited Partner or an Assignee, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise.

                                      -27-

          (b)  No Partnership Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article IV. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article IV shall be null and void.

          (c)  Nothing contained in this Agreement shall be construed to prevent
a disposition by any member of a General Partner of any or all of the issued and
outstanding membership interests of such General Partner.

Section 4.5.  Registration and Transfer of Limited Partner Interests.

          (a)  The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the Managing General Partner on behalf of the Partnership shall
execute and deliver, and in the case of Common Units, the Transfer Agent shall
countersign and deliver, in the name of the holder or the designated transferee
or transferees, as required pursuant to the holder's instructions, one or more
new Certificates evidencing the same aggregate number and type of Limited
Partner Interests as was evidenced by the Certificate so surrendered.

          (b)  Except as otherwise provided in Section 4.9, the Partnership
shall not recognize any transfer of Limited Partner Interests until the
Certificates evidencing such Limited Partner Interests are surrendered for
registration of transfer and such Certificates are accompanied by a Transfer
Application duly executed by the transferee (or the transferee's attorney-in-
fact duly authorized in writing). No charge shall be imposed by the Partnership
for such transfer; provided, that as a condition to the issuance of any new
Certificate under this Section 4.5, the Partnership may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
with respect thereto.

          (c)  Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.

          (d)  Until admitted as a Substituted Limited Partner pursuant to
Section 10.2, the Record Holder of a Limited Partner Interest shall be an
Assignee in respect of such Limited Partner Interest. Limited Partners may
include custodians, nominees or any other individual or entity in its own or any
representative capacity.

          (e)  A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this

                                      -28-

Agreement, (iii) represented and warranted that such transferee has the right,
power and authority and, if an individual, the capacity to enter into this
Agreement, (iv) granted the powers of attorney set forth in this Agreement and
(v) given the consents and approvals and made the waivers contained in this
Agreement.

          (f)  Each General Partner and its Affiliates shall have the right at
any time to transfer their Senior Subordinated Units, Junior Subordinated Units
and Common Units (whether issued upon conversion of the Subordinated Units or
otherwise) to one or more Persons.

Section 4.6.  Transfer of the Managing  General Partner's General Partner
Interest.

          (a)  Subject to Section 4.6(c) below, prior to June 30, 2011, the
Managing General Partner shall not transfer all or any part of its General
Partner Interest to a Person unless such transfer (i) has been approved by the
prior written consent or vote of the holders of at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partners
and their Affiliates) or (ii) is of all, but not less than all, of its General
Partner Interest to (A) an Affiliate of the Managing General Partner (other than
an individual) or (B) another Person (other than an individual) in connection
with the merger or consolidation of the Managing General Partner with or into
another Person (other than an individual) or the transfer by such General
Partner of all or substantially all of its assets to another Person (other than
an individual).

          (b)  Subject to Section 4.6(c) below, on or after June 30, 2011, a
General Partner may transfer all or any of its General Partner Interest without
Unitholder approval.

          (c)  Notwithstanding anything herein to the contrary, no transfer by a
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of such General Partner under this Agreement and to be bound by the
provisions of this Agreement, (ii) the Partnership receives an Opinion of
Counsel that such transfer would not result in the loss of limited liability of
any Limited Partner or of any member of the Operating Company or cause the
Partnership or the Operating Company to be treated as an association taxable as
a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not already so treated or taxed), (iii) in the case of
the Managing General Partner's General Partner Interest, such transferee also
agrees to purchase all (or the appropriate portion thereof, if applicable) of
the partnership or membership interest of the Managing General Partner as the
general partner or managing member, if any, of each other Group Member and (iv)
in the case of the Non-Managing Partner's General Partner Interest, (x) such
transferee also agrees to purchase all (or the appropriate portion thereof, if
applicable) of the partnership or membership interest of the Non-Managing
General Partner as the general partner or member, if any, of each other Group
Member and (y) the Managing General Partner consents to such transfer. In the
case of a transfer pursuant to and in compliance with this Section 4.6, the
transferee or successor (as the case may be) shall, subject to compliance with
the terms of Section 10.3, be admitted to the Partnership as a General Partner
immediately prior to the transfer of the Partnership Interest, and the business
of the Partnership shall continue without dissolution.

                                      -29-

Section 4.7.  Transfer of Incentive Distribution Rights.

     Prior to June 30, 2011, a holder of Incentive Distribution Rights may
transfer any or all of the Incentive Distribution Rights held by such holder
without any consent of the Unitholders (a) to an Affiliate of such holder (other
than an individual) or (b) to another Person (other than an individual) in
connection with (i) the merger or consolidation of such holder of Incentive
Distribution Rights with or into such other Person or (ii) the transfer by such
holder of all or substantially all of its assets to such other Person provided
that the transferee also owns, controls or is controlled by the owner of the
Managing General Partner.  Any other transfer of the Incentive Distribution
Rights prior to June 30, 2011, shall require the prior approval of holders at
least a majority of the Outstanding Common Units (excluding Common Units held by
the General Partners and their Affiliates).  On or after June 30, 2011, the Non-
Managing General Partner, Inergy Holdings, LLC, or any other holder of Incentive
Distribution Rights may transfer any or all of its Incentive Distribution Rights
without Unitholder approval.  Notwithstanding anything herein to the contrary,
no transfer of Incentive Distribution Rights to another Person shall be
permitted unless the transferee agrees to be bound by the provisions of this
Agreement.

Section 4.8.  Restrictions on Transfers.

          (a)  Except as provided in Section 4.8(d) below, but notwithstanding
the other provisions of this Article IV, no transfer of any Partnership
Interests shall be made if such transfer would (i) violate the then applicable
federal or state securities laws or rules and regulations of the Commission, any
state securities commission or any other governmental authority with
jurisdiction over such transfer, (ii) terminate the existence or qualification
of the Partnership or Operating Company under the laws of the jurisdiction of
its formation, or (iii) cause the Partnership or Operating Company to be treated
as an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not already so treated or taxed).

          (b)  The Managing General Partner may impose restrictions on the
transfer of Partnership Interests if a subsequent Opinion of Counsel determines
that such restrictions are necessary to avoid a significant risk of the
Partnership or Operating Company becoming taxable as a corporation or otherwise
to be taxed as an entity for federal income tax purposes. The restrictions may
be imposed by making such amendments to this Agreement as the Managing General
Partner may determine to be necessary or appropriate to impose such
restrictions; provided, however, that any amendment that the Managing General
Partner believes, in the exercise of its reasonable discretion, could result in
the delisting or suspension of trading of any class of Limited Partner Interests
on the principal National Securities Exchange on which such class of Limited
Partner Interests is then traded must be approved, prior to such amendment being
effected, by the holders of at least a majority of the Outstanding Limited
Partner Interests of such class.

          (c)  The transfer of a Subordinated Unit that has converted into a
Common Unit shall be subject to the restrictions imposed by Section 6.7(b).

          (d)  Nothing contained in this Article IV, or elsewhere in this
Agreement, shall preclude the settlement of any transactions involving
Partnership Interests entered into through

                                      -30-

the facilities of any National Securities Exchange on which such Partnership
Interests are listed for trading.

Section 4.9.  Citizenship Certificates; Non-citizen Assignees.

          (a)  If any Group Member is or becomes subject to any federal, state
or local law or regulation that, in the reasonable determination of the Managing
General Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
Managing General Partner may request any Limited Partner or Assignee to furnish
to the Managing General Partner, within 30 days after receipt of such request,
an executed Citizenship Certification or such other information concerning his
nationality, citizenship or other related status (or, if the Limited Partner or
Assignee is a nominee holding for the account of another Person, the
nationality, citizenship or other related status of such Person) as the Managing
General Partner may request. If a Limited Partner or Assignee fails to furnish
to the Managing General Partner within the aforementioned 30-day period such
Citizenship Certification or other requested information or if upon receipt of
such Citizenship Certification or other requested information the Managing
General Partner determines, with the advice of counsel, that a Limited Partner
or Assignee is not an Eligible Citizen, the Partnership Interests owned by such
Limited Partner or Assignee shall be subject to redemption in accordance with
the provisions of Section 4.10. In addition, the Managing General Partner may
require that the status of any such Partner or Assignee be changed to that of a
Non-citizen Assignee and, thereupon, the Managing General Partner shall be
substituted for such Non-citizen Assignee as the Limited Partner in respect of
his Limited Partner Interests.

          (b)  The Managing General Partner shall, in exercising voting rights
in respect of Limited Partner Interests held by it on behalf of Non-citizen
Assignees, distribute the votes in the same ratios as the votes of Partners
(including without limitation the General Partners) in respect of Limited
Partner Interests other than those of Non-citizen Assignees are cast, either
for, against or abstaining as to the matter.

          (c)  Upon dissolution of the Partnership, a Non-citizen Assignee shall
have no right to receive a distribution in kind pursuant to Section 12.4 but
shall be entitled to the cash equivalent thereof, and the Partnership shall
provide cash in exchange for an assignment of the Non-citizen Assignee's share
of the distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).

          (d)  At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.10, and upon his admission pursuant to Section 10.2, the Managing
General Partner shall cease to be deemed to be the Limited Partner in respect of
the Non-citizen Assignee's Limited Partner Interests.

                                      -31-

Section 4.10.  Redemption of Partnership Interests of Non-citizen Assignees.

          (a)   If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the Managing General Partner that such Limited Partner or
Assignee is an Eligible Citizen or has transferred his Partnership Interests to
a Person who is an Eligible Citizen and who furnishes a Citizenship
Certification to the Managing General Partner prior to the date fixed for
redemption as provided below, redeem the Partnership Interest of such Limited
Partner or Assignee as follows:

          (i)   The Managing General Partner shall, not later than the 30th day
     before the date fixed for redemption, give notice of redemption to the
     Limited Partner or Assignee, at his last address designated on the records
     of the Partnership or the Transfer Agent, by registered or certified mail,
     postage prepaid. The notice shall be deemed to have been given when so
     mailed. The notice shall specify the Redeemable Interests, the date fixed
     for redemption, the place of payment, that payment of the redemption price
     will be made upon surrender of the Certificate evidencing the Redeemable
     Interests and that on and after the date fixed for redemption no further
     allocations or distributions to which the Limited Partner or Assignee would
     otherwise be entitled in respect of the Redeemable Interests will accrue or
     be made.

          (ii)  The aggregate redemption price for Redeemable Interests shall be
     an amount equal to the Current Market Price (the date of determination of
     which shall be the date fixed for redemption) of Limited Partner Interests
     of the class to be so redeemed multiplied by the number of Limited Partner
     Interests of each such class included among the Redeemable Interests. The
     redemption price shall be paid, in the discretion of the Managing General
     Partner, in cash or by delivery of a promissory note of the Partnership in
     the principal amount of the redemption price, bearing interest at the rate
     of 10% annually and payable in three equal annual installments of principal
     together with accrued interest, commencing one year after the redemption
     date.

          (iii) Upon surrender by or on behalf of the Limited Partner or
     Assignee, at the place specified in the notice of redemption, of the
     Certificate evidencing the Redeemable Interests, duly endorsed in blank or
     accompanied by an assignment duly executed in blank, the Limited Partner or
     Assignee or his duly authorized representative shall be entitled to receive
     the payment therefor.

          (iv)  After the redemption date, Redeemable Interests shall no longer
     constitute issued and Outstanding Limited Partner Interests.

          (b)   The provisions of this Section 4.10 shall also be applicable to
     Limited Partner Interests held by a Limited Partner or Assignee as nominee
     of a Person determined to be other than an Eligible Citizen.

                                      -32-

          (c)  Nothing in this Section 4.10 shall prevent the recipient of a
notice of redemption from transferring his Limited Partner Interest before the
redemption date if such transfer is otherwise permitted under this Agreement.
Upon receipt of notice of such a transfer, the Managing General Partner shall
withdraw the notice of redemption, provided the transferee of such Limited
Partner Interest certifies to the satisfaction of the Managing General Partner
in a Citizenship Certification delivered in connection with the Transfer
Application that he is an Eligible Citizen. If the transferee fails to make such
certification, such redemption shall be effected from the transferee on the
original redemption date.

                                   ARTICLE V
          CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

Section 5.1.  Organizational Contributions.

     In connection with the formation of the Partnership under the Delaware Act,
Managing General Partner has been admitted as the Managing General Partner of
the Partnership without any economic interest in the Partnership, the Non-
Managing General Partner made an initial Capital Contribution to the Partnership
in the amount  of $10.00 for an interest in the Partner-Group and has been
admitted as the Non-Managing General Partner of the Partnership and the
Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $990.00 for an interest in the Partnership and has
been admitted as a Limited Partner of the Partnership.  As of the Closing Date,
the interest of the Organizational Limited Partner shall be redeemed as provided
in the Contribution and Conveyance Agreement; the initial Capital Contribution
of each Partner shall thereupon be refunded; and the Organizational Limited
Partner shall cease to be a Limited Partner of the Partnership.  Ninety-nine
percent of any interest or other profit that may have resulted from the
investment or other use of such initial Capital Contribution shall be allocated
and distributed to the Organizational Limited Partner, and the balance thereof
shall be allocated and distributed to the Non-Managing General Partner.

Section 5.2.  Contributions by the Non-Managing General Partner and its
Affiliates.

          (a)  On the Closing Date and pursuant to the Contribution and
Conveyance Agreement, (i) the Non-Managing General Partner shall contribute to
the Partnership, as a Capital Contribution, all of its interest in the Operating
Company in exchange for (A) the 2% Non-Managing General Partner Interest,
subject to all of the rights, privileges and duties of the Non-Managing General
Partner under this Agreement, (B) 3,143,143 Senior Subordinated Units, (C)
497,839 Junior Subordinated Units, (D) the Incentive Distribution Rights and (E)
the assumption by the Partnership of all liability for funded debt of the Non-
Managing General Partner and (ii) New Inergy Propane, LLC shall contribute to
the Partnership, as a Capital Contribution, its preferred interest in the
Operating Company in exchange for 170,224 Senior Subordinated Units and 74,703
Junior Subordinated Units.

          (b)  Upon the issuance of any additional Limited Partner Interests by
the Partnership (other than the issuance of the Common Units issued in the
Initial Offering or pursuant to the Over-Allotment Option), the Non-Managing
General Partner shall be required to make additional Capital Contributions equal
to 1/98th of any amount contributed to the Partnership by the Limited Partners
in exchange for such additional Limited Partner Interests.

                                      -33-

Except as set forth in the immediately preceding sentence and Article XII, the
General Partners shall not be obligated to make any additional Capital
Contributions to the Partnership.

Section 5.3.  Contributions by Initial Limited Partners.

          (a)  On the Closing Date and pursuant to the Underwriting Agreement,
each Underwriter shall contribute to the Partnership cash in an amount equal to
the Issue Price per Initial Common Unit multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Closing Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership shall issue Common Units to each Underwriter on
whose behalf such Capital Contribution is made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by or
on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.

          (b)  Upon the exercise of the Over-Allotment Option, each Underwriter
shall contribute to the Partnership cash in an amount equal to the Issue Price
per Initial Common Unit, multiplied by the number of Common Units specified in
the Underwriting Agreement to be purchased by such Underwriter at the Option
Closing Date. In exchange for such Capital Contributions by the Underwriters,
the Partnership shall issue Common Units to each Underwriter on whose behalf
such Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash contributions to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Initial Common Unit.

          (c)  No Limited Partner Interests will be issued or issuable as of or
at the Closing Date other than (i) the Common Units issuable pursuant to
subparagraph (a) hereof in aggregate number equal to 1,600,000 Units, (ii) the
"Option Units" as such term is used in the Underwriting Agreement issuable upon
exercise of the Over-Allotment Option pursuant to subparagraph (b) hereof in an
aggregate number of up to 240,000 Units, (iii) the 3,313,367 Senior Subordinated
Units and the 572,542 Junior Subordinated Units issuable to Inergy Partners, LLC
and New Inergy Propane, LLC pursuant to Section 5.2 hereof, and (iv) the
Incentive Distribution Rights.

Section 5.4.  Interest and Withdrawal.

     No interest on Capital Contributions shall be paid by the Partnership.  No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement.  Except to
the extent expressly provided in this Agreement, no Partner or Assignee shall
have priority over any other Partner or Assignee either as to the return of
Capital Contributions or as to profits, losses or distributions.  Any such
return shall be a compromise to which all Partners and Assignees agree within
the meaning of 17-502(b) of the Delaware Act.

Section 5.5.  Capital Accounts.

          (a)  The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any

                                      -34-

other method acceptable to the Managing General Partner in its sole discretion)
owning a Partnership Interest a separate Capital Account with respect to such
Partnership Interest in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions made to the Partnership with respect to such
Partnership Interest pursuant to this Agreement and (ii) all items of
Partnership income and gain (including, without limitation, income and gain
exempt from tax) computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1, and decreased by
(x) the amount of cash or Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Partnership Interest
pursuant to this Agreement and (y) all items of Partnership deduction and loss
computed in accordance with Section 5.5(b) and allocated with respect to such
Partnership Interest pursuant to Section 6.1.

          (b)   For purposes of computing the amount of any item of income,
gain, loss or deduction which is to be allocated pursuant to Article VI and is
to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:

          (i)   Solely for purposes of this Section 5.5, the Partnership shall
     be treated as owning directly its proportionate share (as determined by the
     Managing General Partner based upon the provisions of the Operating Company
     Agreement) of all property owned by the Operating Company or any other
     Subsidiary that is classified as a partnership for federal income tax
     purposes.

          (ii)  All fees and other expenses incurred by the Partnership to
     promote the sale of (or to sell) a Partnership Interest that can neither be
     deducted nor amortized under Section 709 of the Code, if any, shall, for
     purposes of Capital Account maintenance, be treated as an item of deduction
     at the time such fees and other expenses are incurred and shall be
     allocated among the Partners pursuant to Section 6.1.

          (iii) Except as otherwise provided in Treasury Regulation Section
     1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
     and deduction shall be made without regard to any election under Section
     754 of the Code which may be made by the Partnership and, as to those items
     described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
     regard to the fact that such items are not includable in gross income or
     are neither currently deductible nor capitalized for federal income tax
     purposes. To the extent an adjustment to the adjusted tax basis of any
     Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
     required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
     be taken into account in determining Capital Accounts, the amount of such
     adjustment in the Capital Accounts shall be treated as an item of gain or
     loss.

          (iv)  Any income, gain or loss attributable to the taxable disposition
     of any Partnership property shall be determined as if the adjusted basis of
     such property as of

                                      -35-

     such date of disposition were equal in amount to the Partnership's Carrying
     Value with respect to such property as of such date.

          (v)   In accordance with the requirements of Section 704(b) of the
     Code, any deductions for depreciation, cost recovery or amortization
     attributable to any Contributed Property shall be determined as if the
     adjusted basis of such property on the date it was acquired by the
     Partnership were equal to the Agreed Value of such property. Upon an
     adjustment pursuant to Section 5.5(d) to the Carrying Value of any
     Partnership property subject to depreciation, cost recovery or
     amortization, any further deductions for such depreciation, cost recovery
     or amortization attributable to such property shall be determined (A) as if
     the adjusted basis of such property were equal to the Carrying Value of
     such property immediately following such adjustment and (B) using a rate of
     depreciation, cost recovery or amortization derived from the same method
     and useful life (or, if applicable, the remaining useful life) as is
     applied for federal income tax purposes; provided, however, that, if the
     asset has a zero adjusted basis for federal income tax purposes,
     depreciation, cost recovery or amortization deductions shall be determined
     using any reasonable method that the Managing General Partner may adopt.

          (vi)  If the Partnership's adjusted basis in a depreciable or cost
     recovery property is reduced for federal income tax purposes pursuant to
     Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
     shall, solely for purposes hereof, be deemed to be an additional
     depreciation or cost recovery deduction in the year such property is placed
     in service and shall be allocated among the Partners pursuant to Section
     6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
     shall, to the extent possible, be allocated in the same manner to the
     Partners to whom such deemed deduction was allocated.

          (c)   (i)  A transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.

          (ii)  Immediately prior to the transfer of a Subordinated Unit or of a
     Subordinated Unit that has converted into a Common Unit pursuant to Section
     5.8 by a holder thereof (other than a transfer to an Affiliate unless the
     Managing General Partner elects to have this subparagraph 5.5(c)(ii)
     apply), the Capital Account maintained for such Person with respect to its
     Subordinated Units or converted Subordinated Units will (A) first, be
     allocated to the Subordinated Units or converted Subordinated Units to be
     transferred in an amount equal to the product of (x) the number of such
     Subordinated Units or converted Subordinated Units to be transferred and
     (y) the Per Unit Capital Amount for a Common Unit, and (B) second, any
     remaining balance in such Capital Account will be retained by the
     transferor, regardless of whether it has retained any Subordinated Units or
     converted Subordinated Units. Following any such allocation, the
     transferor's Capital Account, if any, maintained with respect to the
     retained Subordinated Units or converted Subordinated Units, if any, will
     have a balance equal to the amount allocated under clause (B) above, and
     the transferee's Capital Account established with respect to the
     transferred Subordinated Units or converted Subordinated Units will have a
     balance equal to the amount allocated under clause (A) above.

                                      -36-

          (d)  (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or
Contributed Property or the conversion of a General Partner's Combined Interest
to Common Units pursuant to Section 11.3(b), the Capital Account of all Partners
and the Carrying Value of each Partnership property immediately prior to such
issuance shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1(c) in the same manner as any item
of gain or loss actually recognized during such period would have been
allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the Managing General
Partner using such reasonable method of valuation as it may adopt; provided,
however, that the Managing General Partner, in arriving at such valuation, must
take fully into account the fair market value of the Partnership Interests of
all Partners at such time. The Managing General Partner shall allocate such
aggregate value among the assets of the Partnership (in such manner as it
determines in its discretion to be reasonable) to arrive at a fair market value
for individual properties.

          (ii) In accordance with Treasury Regulation Section 1.704-
     1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a
     Partner of any Partnership property (other than a distribution of cash that
     is not in redemption or retirement of a Partnership Interest), the Capital
     Accounts of all Partners and the Carrying Value of all Partnership property
     shall be adjusted upward or downward to reflect any Unrealized Gain or
     Unrealized Loss attributable to such Partnership property, as if such
     Unrealized Gain or Unrealized Loss had been recognized in a sale of such
     property immediately prior to such distribution for an amount equal to its
     fair market value, and had been allocated to the Partners, at such time,
     pursuant to Section 6.1(c) in the same manner as any item of gain or loss
     actually recognized during such period would have been allocated. In
     determining such Unrealized Gain or Unrealized Loss the aggregate cash
     amount and fair market value of all Partnership assets (including, without
     limitation, cash or cash equivalents) immediately prior to a distribution
     shall (A) in the case of an actual distribution which is not made pursuant
     to Section 12.4 or in the case of a deemed contribution and/or
     distribution, be determined and allocated in the same manner as that
     provided in Section 5.5(d)(i) or (B) in the case of a liquidating
     distribution pursuant to Section 12.4, be determined and allocated by the
     Liquidator using such reasonable method of valuation as it may adopt.

Section 5.6.  Issuances of Additional Partnership Securities.

          (a)  Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as shall be established by the Managing General Partner in its
sole discretion, all without the approval of any Limited Partners.

                                      -37-

          (b)  Each additional Partnership Security authorized to be issued by
the Partnership pursuant to Section 5.6(a) may be issued in one or more classes,
or one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the Managing General Partner in
the exercise of its sole discretion, including (i) the right to share
Partnership profits and losses or items thereof; (ii) the right to share in
Partnership distributions; (iii) the rights upon dissolution and liquidation of
the Partnership; (iv) whether, and the terms and conditions upon which, the
Partnership may redeem the Partnership Security; (v) whether such Partnership
Security is issued with the privilege of conversion or exchange and, if so, the
terms and conditions of such conversion or exchange; (vi) the terms and
conditions upon which each Partnership Security will be issued, evidenced by
certificates and assigned or transferred; and (vii) the right, if any, of each
such Partnership Security to vote on Partnership matters, including matters
relating to the relative designations, preferences, rights, powers and duties of
such Partnership Security.

          (c)  The Managing General Partner is hereby authorized and directed to
take all actions that it deems necessary or appropriate in connection with (i)
each issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this Section
5.6, (ii) the conversion of the Non-Managing General Partner Interest and
Incentive Distribution Rights into Units pursuant to the terms of this
Agreement, (iii) the admission of Additional Limited Partners and (iv) all
additional issuances of Partnership Securities. The Managing General Partner is
further authorized and directed to specify the relative rights, powers and
duties of the holders of the Units or other Partnership Securities being so
issued. The Managing General Partner shall do all things necessary to comply
with the Delaware Act and is authorized and directed to do all things it deems
to be necessary or advisable in connection with any future issuance of
Partnership Securities or in connection with the conversion of the Non-Managing
General Partner Interest and Incentive Distribution Rights into Units pursuant
to the terms of this Agreement, including compliance with any statute, rule,
regulation or guideline of any federal, state or other governmental agency or
any, National Securities Exchange on which the Units or other Partnership
Securities are listed for trading.

Section 5.7.  Limitations on Issuance of Additional Partnership Securities.

     The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:

          (a)  Until all Outstanding Senior Subordinated Units have been
converted into Common Units, the Partnership shall not issue (and shall not
issue any options, rights, warrants or appreciation rights relating to) an
aggregate of more than 800,000 additional Parity Units without the prior
approval of the holders of a Unit Majority. In applying this limitation, there
shall be excluded Common Units and other Parity Units issued (A) in connection
with the exercise of the Over-Allotment Option pursuant to Section 5.3(b), (B)
in accordance with Section 5.7(b), (C) upon conversion of Subordinated Units
pursuant to Section 5.8, (D) upon conversion of the Non-Managing General Partner
Interest and Incentive Distribution Rights pursuant to Section 11.3(b), (E)
pursuant to the employee benefit plans of the Managing General Partner, the
Partnership or any other Group Member, (F) upon a conversion or exchange of
Parity Units issued after the date hereof into Common Units or other Parity
Units; provided that

                                      -38-

the total amount of Available Cash required to pay the Minimum Quarterly
Distribution on the Common Units and all Parity Units does not increase as a
result of this conversion or exchange and (G) in the event of a combination or
subdivision of Common Units.

          (b)  The Partnership may also issue an unlimited number of Parity
Units, prior to the end of the Subordination Period and without the prior
approval of the Unitholders, if such issuance occurs (i) in connection with an
Acquisition or a Capital Improvement or (ii) within 365 days of, and the net
proceeds from such issuance are used to repay debt incurred in connection with,
an Acquisition or a Capital Improvement, in each case where such Acquisition or
Capital Improvement involves assets that, if acquired by the Partnership as of
the date that is one year prior to the first day of the Quarter in which such
Acquisition is to be consummated or such Capital Improvement is to be completed,
would have resulted, on a pro forma basis, in an increase in:

          (A)  the amount of Adjusted Operating Surplus generated by the
               Partnership on a per-Unit basis (for all Outstanding Units) with
               respect to the four most recently completed Quarters taken as a
               whole (on a pro forma basis as described below) as compared to

          (B)  the actual amount of Adjusted Operating Surplus generated by the
               Partnership on a per-Unit basis (for all Outstanding Units)
               (excluding Adjusted Operating Surplus attributable to the
               Acquisition or Capital Improvement) with respect to such four
               most recently completed Quarters taken as a whole.

     If the issuance of Parity Units with respect to an Acquisition or Capital
Improvement occurs within the first four full Quarters after the Closing Date,
then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if
any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of the
Partnership generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis consistent with the procedures, as applicable, set
forth in Appendix D to the Registration Statement.  Furthermore, the amount in
clause (A) shall be determined on a pro forma basis assuming that (1) all of the
Parity Units to be issued in connection with or within 365 days of such
Acquisition or Capital Improvement had been issued and outstanding, (2) all
indebtedness for borrowed money to be incurred or assumed in connection with
such Acquisition or Capital Improvement (other than any such indebtedness that
is to be repaid with the proceeds of such issuance of Parity Units) had been
incurred or assumed, in each case as of the commencement of such four-Quarter
period, (3) the personnel expenses that would have been incurred by the
Partnership in the operation of the acquired assets are the personnel expenses
for employees to be retained by the Partnership in the operation of the acquired
assets, and (4) the non-personnel costs and expenses are computed on the same
basis as those incurred by the Partnership in the operation of the Partnership's
business at similarly situated Partnership facilities.

          (c)  During the Subordination Period, without the prior approval of
the holders of a Unit Majority, the Partnership shall not issue any additional
Partnership Securities (or options, rights, warrants or appreciation rights
related thereto) (i) that are entitled in any Quarter

                                      -39-

to receive in respect of the Subordination Period any distribution of Available
Cash from Operating Surplus before the Common Units and any Parity Units have
received (or amounts have been set aside for payment of) the Minimum Quarterly
Distribution and any Cumulative Common Unit Arrearage for such Quarter or (ii)
that are entitle to allocations in respect of the Subordination Period of Net
Termination Gain before the Common Units and any Parity Units have been
allocated Net Termination Gain pursuant to Section 6.1(c)(i)(B).

          (d)  During the Subordination Period, without the prior approval of
the holders of a Unit Majority, the Partnership may issue additional Partnership
Securities (or options, rights, warrants or appreciation rights related thereto)
(i) that are not entitled in any Quarter during the Subordination Period to
receive any distributions of Available Cash from Operating Surplus until after
the Common Units and any Parity Units have received (or amounts have been set
aside for payment of) the Minimum Quarterly Distribution and any Cumulative
Common Unit Arrearage for such Quarter and (ii) that are not entitled to
allocations in respect of the Subordination Period of Net Termination Gain
before the Common Units and Parity Units have been allocated Net Termination
Gain pursuant to Section 6.1(c)(i)(B), even if (A) the amount of Available Cash
from Operating Surplus to which each such Partnership Security is entitled to
receive after the Minimum Quarterly Distribution and any Cumulative Common Unit
Arrearage have been paid or set aside for payment on the Common Units exceeds
the Minimum Quarterly Distribution, (B) the amount of Net Termination Gain to be
allocated to such Partnership Security after Net Termination Gain has been
allocated to any Common Units and Parity Units pursuant to Section 6.1(c)(i)(B)
exceeds the amount of such Net Termination Gain to be allocated to each Common
Unit or Parity Unit or (C) the holders of such additional Partnership Securities
have the right to require the Partnership or its Affiliates to repurchase such
Partnership Securities at a discount, par or a premium.

          (e)  No fractional Units shall be issued by the Partnership.

Section 5.8.  Conversion of Subordinated Units.

          (a)  A total of 828,342 of the outstanding Senior Subordinated Units
will convert into Common Units on a one-for-one basis immediately after the
distribution of Available Cash to Partners pursuant to Section 6.3(a) in respect
of any Quarter ending on or after June 30, 2004, in respect of which:

          (i)  distributions under Section 6.4 in respect of all Outstanding
     Common Units, Senior Subordinated Units and Junior Subordinated Units and
     any other Outstanding Units that are senior or equal in right of
     distribution to the Junior Subordinated Units with respect to each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of the Minimum Quarterly
     Distribution on all of the Outstanding Common Units, Senior Subordinated
     Units and Junior Subordinated Units and any other Outstanding Units that
     are senior or equal in right of distribution to the Junior Subordinated
     Units during such periods;

          (ii) the Adjusted Operating Surplus generated during each of the three
     consecutive, non-overlapping four-Quarter periods immediately preceding
     such date

                                      -40-

     equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
     the Common Units, Senior Subordinated Units, Junior Subordinated Units and
     any other Units that are senior or equal in right of distribution to the
     Junior Subordinated Units that were Outstanding during such periods on a
     Fully-Diluted Basis, plus the related distribution on the General Partner
     Interests during such periods; and

          (iii) the Cumulative Common Unit Arrearage on all of the Common Units
     is zero.

          (b)   An additional 828,342 of the Outstanding Senior Subordinated
Units will convert into Common Units on a one-for-one basis immediately after
the distribution of Available Cash to Partners pursuant to Section 6.3(a) in
respect of any Quarter ending on or after June 30, 2005, in respect of which:

          (i)   distributions under Section 6.4 in respect of all Outstanding
     Common Units, Senior Subordinated Units and Junior Subordinated Units and
     any other Outstanding Units that are senior or equal in right of
     distribution to the Junior Subordinated Units with respect to each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of the Minimum Quarterly
     Distribution on all of the Outstanding Common Units, Senior Subordinated
     Units and Junior Subordinated Units and any other Outstanding Units that
     are senior or equal in right of distribution to the Junior Subordinated
     Units during such periods;

          (ii)  the Adjusted Operating Surplus generated during each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of the Minimum Quarterly
     Distribution on all of the Common Units, Senior Subordinated Units, Junior
     Subordinated Units and any other Units that are senior or equal in right of
     distribution to the Junior Subordinated Units that were Outstanding during
     such periods on a Fully Diluted Basis, plus the related distribution on the
     General Partner Interests during such periods; and

          (iii) the Cumulative Common Unit Arrearage on all of the Common Units
     is zero;

provided, however, that the conversion of Senior Subordinated Units pursuant to
this Section 5.8(b) may not occur until at least one year following the
conversion of Senior Subordinated Units pursuant to Section 5.8(a).

          (c)   A total of 143,136 of the outstanding Junior Subordinated Units
will convert into Common Units on a one-for-one basis immediately after the
distribution of Available Cash to Partners pursuant to Section 6.3(a) in respect
of any Quarter ending on or after June 30, 2006, in respect of which:

          (i)   distributions under Section 6.4 in respect of all Outstanding
     Common Units, Senior Subordinated Units and Junior Subordinated Units and
     any other Outstanding Units that are senior or equal in right of
     distribution to the Junior Subordinated Units with respect to each of the
     three consecutive, non-overlapping four-

                                      -41-

     Quarter periods immediately preceding such date equaled or exceeded the sum
     of the Minimum Quarterly Distribution on all of the Outstanding Common
     Units, Senior Subordinated Units and Junior Subordinated Units and any
     other Outstanding Units that are senior or equal in right of distribution
     to the Junior Subordinated Units during such periods;

          (ii)   the Adjusted Operating Surplus generated during each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of the Minimum Quarterly
     Distribution on all of the Common Units, Senior Subordinated Units, Junior
     Subordinated Units and any other Units that are senior or equal in right of
     distribution to the Junior Subordinated Units that were Outstanding during
     such periods on a Fully-Diluted Basis, plus the related distribution on the
     General Partner Interests during such periods; and

          (iii)  the Cumulative Common Unit Arrearage on all of the Common Units
     is zero.

          (d)    An additional 143,136 of the Outstanding Junior Subordinated
Units will convert into Common Units on a one-for-one basis immediately after
the distribution of Available Cash to Partners pursuant to Section 6.3(a) in
respect of any Quarter ending on or after June 30, 2007, in respect of which:

          (i)    distributions under Section 6.4 in respect of all Outstanding
     Common Units, Senior Subordinated Units and Junior Subordinated Units and
     any other Outstanding Units that are senior or equal in right of
     distribution to the Junior Subordinated Units with respect to each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of the Minimum Quarterly
     Distribution on all of the Outstanding Common Units, Senior Subordinated
     Units and Junior Subordinated Units and any other Outstanding Units that
     are senior or equal in right of distribution to the Junior Subordinated
     Units during such periods;

          (ii)   the Adjusted Operating Surplus generated during each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of the Minimum Quarterly
     Distribution on all of the Common Units, Senior Subordinated Units, Junior
     Subordinated Units and any other Units that are senior or equal in right of
     distribution to the Junior Subordinated Units that were Outstanding during
     such periods on a Fully-Diluted Basis, plus the related distribution on the
     General Partner Interests during such periods; and

          (iii)  the Cumulative Common Unit Arrearage on all of the Common Units
     is zero;

provided, however, that the conversion of Junior Subordinated Units pursuant to
this Section 5.8(d) may not occur until at least one year following the
conversion of Junior Subordinated Units pursuant to Section 5.8(c).

                                      -42-

          (e)  In the event that less than all of the Outstanding Senior
Subordinated Units shall convert into Common Units pursuant to Section 5.8(a) or
5.8(b) at a time when there shall be more than one holder of Senior Subordinated
Units, then, unless all of the holders of Senior Subordinated Units shall agree
to a different allocation, the Senior Subordinated Units that are to be
converted into Common Units shall be allocated among the holders of Senior
Subordinated Units pro rata based on the number of Senior Subordinated Units
held by each such holder.

          (f)  In the event that less than all of the Outstanding Junior
Subordinated Units shall convert into Common Units pursuant to Section 5.8(c) or
5.8(d) at a time when there shall be more than one holder of Junior Subordinated
Units, then, unless all of the holders of Junior Subordinated Units shall agree
to a different allocation, the Junior Subordinated Units that are to be
converted into Common Units shall be allocated among the holders of Junior
Subordinated Units pro rata based on the number of Junior Subordinated Units
held by each such holder.

          (g)  Any Subordinated Units that are not converted into Common Units
pursuant to Sections 5.8(a), 5.8(b), 5.8(c) and 5.8(d) shall convert into Common
Units on a one-for-one basis immediately after the distribution of Available
Cash to Partners pursuant to Section 6.3(a) in respect of the final Quarter of
the Subordination Period.

          (h)  Notwithstanding any other provision of this Agreement, all
Outstanding Junior Subordinated Units will convert into Common Units on a one-
for-one basis immediately after the distribution of Available Cash to Partners
pursuant to Section 6.3(a) in respect of any Quarter ending on or after June 30,
2006, in respect of which

          (i)   distributions under Section 6.4 in respect of all Outstanding
     Common Units, Senior Subordinated Units and Junior Subordinated Units and
     any other Outstanding Units that are senior or equal in right of
     distribution to the Junior Subordinated Units with respect to each of the
     three consecutive, non-overlapping four-Quarter periods immediately prior
     to such date have equaled or exceeded $2.80 per Unit,

          (ii)  the Adjusted Operating Surplus generated during each of the
     three consecutive, non-overlapping four-Quarter periods immediately
     preceding such date equaled or exceeded the sum of $2.80 on all of the
     Common Units, Senior Subordinated Units, Junior Subordinated Units and any
     other Units that are senior or equal in night of distribution to the Junior
     Subordinated Units that were Outstanding during such periods on a Fully-
     Diluted Basis, plus the related distribution on the General Partner
     Interests during such periods;

          (iii) no Senior Subordinated Units are outstanding, and

          (iv)  the Cumulative Common Unit Arrearage on all of the Common Units
     is zero.

          (i)   Notwithstanding any other provision of this Agreement, all the
then Outstanding Subordinated Units will automatically convert into Common Units
on a one-for-one basis as set forth in, and pursuant to the terms of, Section
11.5.

                                      -43-

          (j)   A Subordinated Unit that has converted into a Common Unit shall
be subject to the provisions of Section 6.7(b).

Section 5.9.  Limited Preemptive Right.

     Except as provided in this Section 5.9 and in Section 5.2, no Person shall
have any preemptive, preferential or other similar right with respect to the
issuance of any Partnership Security, whether unissued, held in the treasury or
hereafter created. The Non-Managing General Partner shall have the right, which
it may from time to time assign in whole or in part to any of its Affiliates, to
purchase Partnership Securities from the Partnership whenever, and on the same
terms that, the Partnership issues Partnership Securities to Persons other than
the Non-Managing General Partner and its Affiliates, to the extent necessary to
maintain the Percentage Interests of the Non-Managing General Partner and its
Affiliates equal to that which existed immediately prior to the issuance of such
Partnership Securities.

Section 5.10. Splits and Combinations.

          (a)  Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with
adjustments of distribution levels), the Partnership may make a Pro Rata
distribution of Partnership Securities to all Record Holders or may effect a
subdivision or combination of Partnership Securities so long as, after any such
event, each Partner shall have the same Percentage Interest in the Partnership
as before such event, and any amounts calculated on a per Unit basis (including
any Common Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a
number of Units (including the number of Senior Subordinated Units and Junior
Subordinated Units that may convert prior to the end of the Subordination Period
and the number of additional Parity Units that may be issued pursuant to Section
5.7 without a Unitholder vote) are proportionately adjusted retroactive to the
beginning of the Partnership.

          (b)  Whenever such a distribution, subdivision or combination of
Partnership Securities is declared, the Managing General Partner shall select a
Record Date as of which the distribution, subdivision or combination shall be
effective and shall send notice thereof at least 20 days prior to such Record
Date to each Record Holder as of a date not less than 10 days prior to the date
of such notice. The Managing General Partner also may cause a firm of
independent public accountants selected by it to calculate the number of
Partnership Securities to be held by each Record Holder after giving effect to
such distribution, subdivision or combination. The Managing General Partner
shall be entitled to rely on any certificate provided by such firm as conclusive
evidence of the accuracy of such calculation.

          (c)  Promptly following any such distribution, subdivision or
combination, the Partnership may issue Certificates to the Record Holders of
Partnership Securities as of the applicable Record Date representing the new
number of Partnership Securities held by such Record Holders, or the Managing
General Partner may adopt such other procedures as it may deem appropriate to
reflect such changes. If any such combination results in a smaller total number
of Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.

                                      -44-

          (d)  The Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of Units. If a distribution,
subdivision or combination of Units would result in the issuance of fractional
Units but for the provisions of Section 5.7(d) and this Section 5.10(d), each
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).

Section 5.11.  Fully Paid and Non-Assessable Nature of Limited Partner
Interests.

     All Limited Partner Interests issued pursuant to, and in accordance with
the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non assessability
may be affected by Section 17-607 of the Delaware Act.

                                  ARTICLE VI
                         ALLOCATIONS AND DISTRIBUTIONS

Section 6.1.  Allocations for Capital Account Purposes.

     For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.

          (a)  Net Income.  After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated as follows:

          (i)   First, 100% to the Non-Managing General Partner in an amount
     equal to the aggregate Net Losses allocated to the Non-Managing General
     Partner pursuant to Section 6.1(b)(iii) for all previous taxable years
     until the aggregate Net Income allocated to the Non-Managing General
     Partner pursuant to this Section 6.1(a)(i) for the current taxable year and
     all previous taxable years is equal to the aggregate Net Losses allocated
     to the Non-Managing General Partner pursuant to Section 6.1(b)(iii) for all
     previous taxable years;

          (ii)  Second, 2% to the Non-Managing General Partner in an amount
     equal to the aggregate Net Losses allocated to the Non-Managing General
     Partner pursuant to Section 6.1(b)(ii) for all previous taxable years and
     98% to the Unitholders, in accordance with their respective Percentage
     Interests, until the aggregate Net Income allocated to such Partners
     pursuant to this Section 6.1(a)(ii) for the current taxable year and all
     previous taxable years is equal to the aggregate Net Losses allocated to
     such Partners pursuant to Section 6.1(b)(ii) for all previous taxable
     years; and

          (iii) Third, the balance, if any, 2% to the Non-Managing General
     Partner and 98% to the Unitholders, in accordance with their respective
     Percentage Interests.

                                      -45-

          (b)  Net Losses.  After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated as follows:

          (i)   First, 2% to the Non-Managing General Partner and 98% to the
     Unitholders, in accordance with their respective Percentage Interests,
     until the aggregate Net Losses allocated pursuant to this Section 6.1(b)(i)
     for the current taxable year and all previous taxable years is equal to the
     aggregate Net Income allocated to such Partners pursuant to Section
     6.1(a)(iii) for all previous taxable years, provided that the Net Losses
     shall not be allocated pursuant to this Section 6.1(b)(i) to the extent
     that such allocation would cause any Unitholder to have a deficit balance
     in its Adjusted Capital Account at the end of such taxable year (or
     increase any existing deficit balance in its Adjusted Capital Account);

          (ii)  Second, 2% to the Non-Managing General Partner and 98% to the
     Unitholders in accordance with their respective Percentage Interests;
     provided, that Net Losses shall not be allocated pursuant to this Section
     6.1(b)(ii) to the extent that such allocation would cause any Unitholder to
     have a deficit balance in its Adjusted Capital Account at the end of such
     taxable year (or increase any existing deficit balance in its Adjusted
     Capital Account);

          (iii) Third, the balance, if any, 100% to the Non-Managing General
     Partner.

          (c)   Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.

          (i)   If a Net Termination Gain is recognized (or deemed recognized
     pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
     among the Partners in the following manner (and the Capital Accounts of the
     Partners shall be increased by the amount so allocated in each of the
     following subclauses, in the order listed, before an allocation is made
     pursuant to the next succeeding subclause):

          (A)   First, to each Partner having a deficit balance in its Capital
                Account, in the proportion that such deficit balance bears to
                the total deficit balances in the Capital Accounts of all
                Partners, until each such Partner has been allocated Net
                Termination Gain equal to any such deficit balance in its
                Capital Account;

                                      -46-

          (B)   Second, 98% to all Unitholders holding Common Units, Pro Rata,
                and 2% to the Non-Managing General Partner until the Capital
                Account in respect of each Common Unit then Outstanding is equal
                to the sum of (1) its Unrecovered Capital plus (2) the Minimum
                Quarterly Distribution for the Quarter during which the
                Liquidation Date occurs, reduced by any distribution pursuant to
                Section 6.4(a)(i) or (b)(i) with respect to such Common Unit for
                such Quarter (the amount determined pursuant to this clause (2)
                is hereinafter defined as the "Unpaid MQD") plus (3) any then
                existing Cumulative Common Unit Arrearage;

          (C)   Third, if such Net Termination Gain is recognized (or is deemed
                to be recognized) prior to the expiration of the Subordination
                Period, 98% to all Unitholders holding Senior Subordinated
                Units, Pro Rata, and 2% to the Non-Managing General Partner
                until the Capital Account in respect of each Senior Subordinated
                Unit then Outstanding equals the sum of (1) its Unrecovered
                Capital, determined for the taxable year (or portion thereof) to
                which this allocation of gain relates, plus (2) the Minimum
                Quarterly Distribution for the Quarter during which the
                Liquidation Date occurs, reduced by any distribution pursuant to
                Section 6.4(a)(iii) with respect to such Senior Subordinated
                Unit for such Quarter;

          (D)   Fourth, if such Net Termination Gain is recognized (or is deemed
                to be recognized) prior to the expiration of the Subordination
                Period, 98% to all Unitholders holding Junior Subordinated
                Units, Pro Rata, and 2% to the Non-Managing General Partner
                until the Capital Account in respect of each Junior Subordinated
                Unit then Outstanding equals the sum of (1) its Unrecovered
                Capital, determined for the taxable year (or portion thereof) to
                which this allocation of gain relates, plus (2) the Minimum
                Quarterly Distribution for the Quarter during which the
                Liquidation Date occurs, reduced by any distribution pursuant to
                Section 6.4(a)(iv) with respect to such Junior Subordinated Unit
                for such Quarter;

          (E)   Fifth, 98% to all Unitholders, Pro Rata, and 2% to the Non-
                Managing General Partner until the Capital Account in respect of
                each Common Unit then Outstanding is equal to the sum of (1) its
                Unrecovered Capital, plus (2) the Unpaid MQD, plus (3) any then
                existing Cumulative Common Unit Arrearage, plus (4) the excess
                of (aa) the First Target Distribution less the Minimum Quarterly
                Distribution for each Quarter of the Partnership's existence
                over (bb) the cumulative per Unit amount of any distributions of
                Available Cash that is deemed to be Operating Surplus made
                pursuant to Sections 6.4(a)(v) and 6.4(b)(ii) (the sum of (1)
                plus (2) plus (3) plus (4) is hereinafter defined as the "First
                Liquidation Target Amount");

          (F)   Sixth, 85% to all Unitholders, Pro Rata, 13% to the holders of
                the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
                Managing General Partner until the Capital Account in respect of
                each Common Unit then Outstanding is equal to the sum of (1) the
                First Liquidation Target

                                      -47-

                Amount, plus (2) the excess of (aa) the Second Target
                Distribution less the First Target Distribution for each Quarter
                of the Partnership's existence over (bb) the cumulative per Unit
                amount of any distributions of Available Cash that is deemed to
                be Operating Surplus made pursuant to Sections 6.4(a)(vi) and
                6.4(b)(iii) (the sum of (1) plus (2) is hereinafter defined as
                the "Second Liquidation Target Amount");

          (G)   Seventh, 75% to all Unitholders, Pro Rata, 23% to the holders of
                the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
                Managing General Partner until the Capital Account in respect of
                each Common Unit then Outstanding is equal to the sum of (1) the
                Second Liquidation Target Amount, plus (2) the excess of (aa)
                the Third Target Distribution less the Second Target
                Distribution for each Quarter of the Partnership's existence
                over (bb) the cumulative per Unit amount of any distributions of
                Available Cash that is deemed to be Operating Surplus made
                pursuant to Sections 6.4(a)(vii) and 6.4(b)(iv) (the sum of (1)
                plus (2) is hereinafter defined as the "Third Liquidation Target
                Amount");

          (H)   Finally, any remaining amount 50% to all Unitholders, Pro Rata,
                48% to the holders of the Incentive Distribution Rights, Pro
                Rata, and 2% to the Non-Managing General Partner.

          (ii)  If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated among
the Partners in the following manner:

          (A)   First, if such Net Termination Loss is recognized (or is deemed
                to be recognized) prior to the conversion of the last
                Outstanding Junior Subordinated Unit, 98% to the Unitholders
                holding Junior Subordinated Units, Pro Rata, and 2% to the Non-
                Managing General Partner until the Capital Account in respect of
                each Junior Subordinated Unit then Outstanding has been reduced
                to zero;

          (B)   Second, if such Net Termination Loss is recognized (or is deemed
                to be recognized) prior to the conversion of the last
                Outstanding Senior Subordinated Unit, 98% to the Unitholders
                holding Senior Subordinated Units, Pro Rata, and 2% to the Non-
                Managing General Partner until the Capital Account in respect of
                each Senior Subordinated Unit then Outstanding has been reduced
                to zero;

          (C)   Third, 98% to all Unitholders holding Common Units, Pro Rata,
                and 2% to the Non-Managing General Partner until the Capital
                Account in respect of each Common Unit then Outstanding has been
                reduced to zero; and

          (D)   Fourth, the balance, if any, 100% to the Non-Managing General
                Partner.

          (d)   Special Allocations.  Notwithstanding any other provision of
this Section 6.1, the following special allocations shall be made for such
taxable period:

                                      -48-

     (i)   Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership Minimum
Gain during any Partnership taxable period, each Partner shall be allocated
items of Partnership income and gain for such period (and, if necessary,
subsequent periods) in the manner and amounts provided in Treasury Regulation
Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor
provision. For purposes of this Section 6.1(d), each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(d) with respect to such taxable period
(other than an allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This
Section 6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.

     (ii)  Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding
the other provisions of this Section 6.1 (other than Section 6.1(d)(i)), except
as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable
period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the
beginning of such taxable period shall be allocated items of Partnership income
and gain for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(d),
each Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d), other than
Section 6.1(d)(i) and other than an allocation pursuant to Sections 6.1(d)(vi)
and 6.1(d)(vii), with respect to such taxable period. This Section 6.1(d)(ii) is
intended to comply with the chargeback of items of income and gain requirement
in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.

     (iii) Priority Allocations.

     (A)   If the amount of cash or the Net Agreed Value of any property
           distributed (except cash or property distributed pursuant to Section
           12.4) to any Unitholder with respect to its Units for a taxable year
           is greater (on a per Unit basis) than the amount of cash or the Net
           Agreed Value of property distributed to the other Unitholders with
           respect to their Units (on a per Unit basis), then (1) each
           Unitholder receiving such greater cash or property distribution shall
           be allocated gross income in an amount equal to the product of (aa)
           the amount by which the distribution (on a per Unit basis) to such
           Unitholder exceeds the distribution (on a per Unit basis) to the
           Unitholders receiving the smallest distribution and (bb) the number
           of Units owned by the Unitholder receiving the greater distribution;
           and (2) the Non-Managing General Partner shall be allocated gross
           income in an aggregate amount equal to 1/98/th/ of the sum of the
           amounts allocated in clause (1) above.

                                      -49-

     (B)   After the application of Section 6.1(d)(iii)(A), all or any portion
           of the remaining items of Partnership gross income or gain for the
           taxable period, if any, shall be allocated 100% to the holders of
           Incentive Distribution Rights, Pro Rata, until the aggregate amount
           of such items allocated to the holders of Incentive Distribution
           Rights pursuant to this paragraph 6.1(d)(iii)(B) for the current
           taxable year and all previous taxable years is equal to the
           cumulative amount of all Incentive Distributions made to the holders
           of Incentive Distribution Rights from the Closing Date to a date 45
           days after the end of the current taxable year.

     (iv)  Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations promulgated under Section 704(b)
of the Code, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as possible
unless such deficit balance is otherwise eliminated pursuant to Section
6.1(d)(i) or (ii).

     (v)   Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period in
excess of the sum of (A) the amount such Partner is required to restore pursuant
to the provisions of this Agreement and (B) the amount such Partner is deemed
obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and
1.704-2(i)(5), such Partner shall be specially allocated items of Partnership
gross income and gain in the amount of such excess as quickly as possible;
provided, that an allocation pursuant to this Section 6.1(d)(v) shall be made
only if and to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in this
Section 6.1 have been tentatively made as if this Section 6.1(d)(v) were not in
this Agreement.

     (vi)  Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the Managing General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the other Partners, to revise the prescribed ratio to
the numerically closest ratio that does satisfy such requirements.

     (vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any taxable period shall be allocated 100% to the Partner that bears the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk
of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
Deductions attributable thereto shall be

                                      -50-

allocated between or among such Partners in accordance with the ratios in which
they share such Economic Risk of Loss.

     (viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain
and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.

     (ix)   Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(c)
of the Code is required, pursuant to Treasury Regulation Section 1.704-
1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the
amount of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Treasury Regulations.

     (x)    Economic Uniformity. At the election of the Managing General Partner
with respect to any taxable period ending upon, or after, the termination of the
Subordination Period with respect to any class of Units, all or a portion of the
remaining items of Partnership gross income or gain for such taxable period,
after taking into account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Units of that class that are Outstanding
as of the termination of the Subordination Period ("Final Subordinated Units")
in the proportion of the number of Final Subordinated Units held by such Partner
to the total number of Final Subordinated Units then Outstanding, until each
such Partner has been allocated an amount of gross income or gain which
increases the Capital Account maintained with respect to such Final Subordinated
Units to an amount equal to the product of (A) the number of Final Subordinated
Units held by such Partner and (B) the Per Unit Capital Amount for a Common
Unit. The purpose of this allocation is to establish uniformity between the
Capital Accounts underlying Final Subordinated Units and the Capital Accounts
underlying Common Units held by Persons other than the General Partners and
their Affiliates immediately prior to the conversion of such Final Subordinated
Units into Common Units. This allocation method for establishing such economic
uniformity will only be available to the Managing General Partner if the method
for allocating the Capital Account maintained with respect to the Subordinated
Units between the transferred and retained Subordinated Units pursuant to
Section 5.5(c)(ii) does not otherwise provide such economic uniformity to the
Final Subordinated Units.

     (xi)   Curative Allocation.

     (A)    Notwithstanding any other provision of this Section 6.1, other than
            the Required Allocations, the Required Allocations shall be taken
            into account in making the Agreed Allocations so that, to the extent
            possible, the net amount of items of income, gain, loss and
            deduction allocated to each

                                      -51-

                Partner pursuant to the Required Allocations and the Agreed
                Allocations, together, shall be equal to the net amount of such
                items that would have been allocated to each such Partner under
                the Agreed Allocations had the Required Allocations and the
                related Curative Allocation not otherwise been provided in this
                Section 6.1. Notwithstanding the preceding sentence, Required
                Allocations relating to (1) Nonrecourse Deductions shall not be
                taken into account except to the extent that there has been a
                decrease in Partnership Minimum Gain and (2) Partner Nonrecourse
                Deductions shall not be taken into account except to the extent
                that there has been a decrease in Partner Nonrecourse Debt
                Minimum Gain. Allocations pursuant to this Section 6.1(d)(xi)(A)
                shall only be made with respect to Required Allocations to the
                extent the General Partner reasonably determines that such
                allocations will otherwise be inconsistent with the economic
                agreement among the Partners. Further, allocations pursuant to
                this Section 6.1(d)(xi)(A) shall be deferred with respect to
                allocations pursuant to clauses (1) and (2) hereof to the extent
                the Managing General Partner reasonably determines that such
                allocations are likely to be offset by subsequent Required
                Allocations.

          (B)   The Managing General Partner shall have reasonable discretion,
                with respect to each taxable period, to (1) apply the provisions
                of Section 6.1(d)(xi)(A) in whatever order is most likely to
                minimize the economic distortions that might otherwise result
                from the Required Allocations, and (2) divide all allocations
                pursuant to Section 6.1(d)(xi)(A) among the Partners in a manner
                that is likely to minimize such economic distortions.

          (xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any recognition
of a Net Termination Loss, the following rules shall apply:

          (A)   In the case of any allocation of Additional Book Basis
                Derivative Items (other than an allocation of Unrealized Gain or
                Unrealized Loss under Section 5.5(d) hereof), the Managing
                General Partner shall allocate additional items of gross income
                and gain away from the holders of Incentive Distribution Rights
                to the Unitholders and the Non-Managing General Partner, or
                additional items of deduction and loss away from the Unitholders
                and the Non-Managing General Partner to the holders of Incentive
                Distribution Rights, to the extent that the Additional Book
                Basis Derivative Items allocated to the Unitholders or the Non-
                Managing General Partner exceed their Share of Additional Book
                Basis Derivative Items. For this purpose, the Unitholders and
                the Non-Managing General Partner shall be treated as being
                allocated Additional Book Basis Derivative Items to the extent
                that such Additional Book Basis Derivative Items have reduced
                the amount of income that would otherwise have been allocated to
                the Unitholders or the Non-Managing General Partner under the
                Partnership Agreement (e.g., Additional Book Basis Derivative
                Items taken into account in computing cost of goods sold would
                reduce the

                                      -52-

                amount of book income otherwise available for allocation among
                the Partners). Any allocation made pursuant to this Section
                6.1(d)(xii)(A) shall be made after all of the other Agreed
                Allocations have been made as if this Section 6.1(d)(xii) were
                not in this Agreement and, to the extent necessary, shall
                require the reallocation of items that have been allocated
                pursuant to such other Agreed Allocations.

          (B)   In the case of any negative adjustments to the Capital Accounts
                of the Partners resulting from a Book-Down Event or from the
                recognition of a Net Termination Loss, such negative adjustment
                (1) shall first be allocated, to the extent of the Aggregate
                Remaining Net Positive Adjustments, in such a manner, as
                reasonably determined by the Managing General Partner, that to
                the extent possible the aggregate Capital Accounts of the
                Partners will equal the amount which would have been the Capital
                Account balance of the Partners if no prior Book-Up Events had
                occurred, and (2) any negative adjustment in excess of the
                Aggregate Remaining Net Positive Adjustments shall be allocated
                pursuant to Section 6.1(c) hereof.

          (C)   In making the allocations required under this Section
                6.1(d)(xii), the Managing General Partner, in its sole
                discretion, may apply whatever conventions or other methodology
                it deems reasonable to satisfy the purpose of this Section
                6.1(d)(xii).

Section 6.2.  Allocations for Tax Purposes.

          (a)   Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.

          (b)   In an attempt to eliminate Book-Tax Disparities attributable to
a Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:

          (i)   (A)  In the case of a Contributed Property, such items
     attributable thereto shall be allocated among the Partners in the manner
     provided under Section 704(c) of the Code that takes into account the
     variation between the Agreed Value of such property and its adjusted basis
     at the time of contribution; and (B) any item of Residual Gain or Residual
     Loss attributable to a Contributed Property shall be allocated among the
     Partners in the same manner as its correlative item of "book" gain or loss
     is allocated pursuant to Section 6.1.

          (ii)  (A)  In the case of an Adjusted Property, such items shall (1)
     first, be allocated among the Partners in a manner consistent with the
     principles of Section 704(c) of the Code to take into account the
     Unrealized Gain or Unrealized Loss attributable to

                                      -53-

     such property and the allocations thereof pursuant to Section 5.5(d)(i) or
     5.5(d)(ii), and (2) second, in the event such property was originally a
     Contributed Property, be allocated among the Partners in a manner
     consistent with Section 6.2(b)(i)(A); and (B) any item of Residual Gain or
     Residual Loss attributable to an Adjusted Property shall be allocated among
     the Partners in the same manner as its correlative item of "book" gain or
     loss is allocated pursuant to Section 6.1.

          (iii) The Managing General Partner shall apply the principles of
     Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.

          (c)   For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the Managing General Partner shall have sole discretion to (i)
adopt such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise
to preserve or achieve uniformity of the Limited Partner Interests (or any class
or classes thereof). The Managing General Partner may adopt such conventions,
make such allocations and make such amendments to this Agreement as provided in
this Section 6.2(c) only if such conventions, allocations or amendments would
not have a material adverse effect on the Partners, the holders of any class or
classes of Limited Partner Interests issued and Outstanding or the Partnership,
and if such allocations are consistent with the principles of Section 704 of the
Code.

          (d)   The Managing General Partner in its discretion may determine to
depreciate or amortize the portion of an adjustment under Section 743(b) of the
Code attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate derived
from the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Treasury Regulation Section 1.167(c)-1(a)(6) or any successor
regulations thereto. If the Managing General Partner determines that such
reporting position cannot reasonably be taken, the Managing General Partner may
adopt depreciation and amortization conventions under which all purchasers
acquiring Limited Partner Interests in the same month would receive depreciation
and amortization deductions, based upon the same applicable rate as if they had
purchased a direct interest in the Partnership's property. If the Managing
General Partner chooses not to utilize such aggregate method, the Managing
General Partner may use any other reasonable depreciation and amortization
conventions to preserve the uniformity of the intrinsic tax characteristics of
any Limited Partner Interests that would not have a material adverse effect on
the Limited Partners or the Record Holders of any class or classes of Limited
Partner Interests.

          (e)   Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 6.2, be characterized as Recapture Income in the same proportions and to
the same extent as such Partners (or their predecessors in interest)

                                      -54-

have been allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.

          (f)  All items of income, gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.

          (g)  Each item of Partnership income, gain, loss and deduction, shall
for federal income tax purposes, be determined on an annual basis and prorated
on a monthly basis and shall be allocated to the Partners as of the opening of
the New York Stock Exchange on the first Business Day of each month; provided,
however, that (i) such items for the period beginning on the Closing Date and
ending on the last day of the month in which the Option Closing Date or the
expiration of the Over-allotment Option occurs shall be allocated to the
Partners as of the opening of the New York Stock Exchange on the first Business
Day of the next succeeding month; and provided, further, that gain or loss on a
sale or other disposition of any assets of the Partnership or any other
extraordinary item of income or loss realized and recognized other than in the
ordinary course of business, as determined by the Managing General Partner in
its sole discretion, shall be allocated to the Partners as of the opening of the
New York Stock Exchange on the first Business Day of the month in which such
gain or loss is recognized for federal income tax purposes. The Managing General
Partner may revise, alter or otherwise modify such methods of allocation as it
determines necessary or appropriate in its sole discretion, to the extent
permitted or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.

          (h)  Allocations that would otherwise be made to a Limited Partner
under the provisions of this Article VI shall instead be made to the beneficial
owner of Limited Partner Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the Managing General Partner in its sole discretion.

Section 6.3.  Requirement and Characterization of Distributions; Distributions
              to Record Holders.

          (a)  Within 45 days following the end of each Quarter commencing with
the Quarter ending on September 30, 2001, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners as of the Record Date selected by the Managing
General Partner in its reasonable discretion. All amounts of Available Cash
distributed by the Partnership on any date from any source shall be deemed to be
Operating Surplus until the sum of all amounts of Available Cash theretofore
distributed by the Partnership to the Partners pursuant to Section 6.4 equals
the Operating Surplus from the Closing Date through the close of the immediately
preceding Quarter. Any remaining amounts of Available Cash distributed by the
Partnership on such date shall, except as otherwise provided in Section

                                      -55-

6.5, be deemed to be "Capital Surplus." All distributions required to be made
under this Agreement shall be made subject to Section 17-607 of the Delaware
Act.

          (b)  Notwithstanding Section 6.3(a), in the event of the dissolution
and liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.

          (c)  The Managing General Partner shall have the discretion to treat
taxes paid by the Partnership on behalf of, or amounts withheld with respect to,
all or less than all of the Partners, as a distribution of Available Cash to
such Partners.

          (d)  Each distribution in respect of a Partnership Interest shall be
paid by the Partnership, directly or through the Transfer Agent or through any
other Person or agent, only to the Record Holder of such Partnership Interest as
of the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.

Section 6.4.  Distributions of Available Cash from Operating Surplus.

          (a)  During Subordination Period. Available Cash with respect to any
Quarter within the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5 shall, subject to Section 17-
607 of the Delaware Act, be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:

          (i)   First, 98% to the Unitholders holding Common Units, Pro Rata,
     and 2% to the Non-Managing General Partner until there has been distributed
     in respect of each Common Unit then Outstanding an amount equal to the
     Minimum Quarterly Distribution for such Quarter;

          (ii)  Second, 98% to the Unitholders holding Common Units, Pro Rata,
     and 2% to the Non-Managing General Partner until there has been distributed
     in respect of each Common Unit then Outstanding an amount equal to the
     Cumulative Common Unit Arrearage existing with respect to such Quarter;

          (iii) Third, 98% to the Unitholders holding Senior Subordinated Units,
     Pro Rata, and 2% to the Non-Managing General Partner until there has been
     distributed in respect of each Senior Subordinated Unit then Outstanding an
     amount equal to the Minimum Quarterly Distribution for such Quarter;

          (iv)  Fourth, 98% to the Unitholders holding Junior Subordinated
     Units, Pro Rata, and 2% to the Non-Managing General Partner until there has
     been distributed in respect of each Junior Subordinated Unit then
     Outstanding an amount equal to the Minimum Quarterly Distribution for such
     Quarter;

                                      -56-

          (v)     Fifth, 98% to all Unitholders, Pro Rata, and 2% to the Non-
     Managing General Partner until there has been distributed in respect of
     each Unit then Outstanding an amount equal to the excess of the First
     Target Distribution over the Minimum Quarterly Distribution for such
     Quarter;

          (vi)    Sixth, 85% to all Unitholders, Pro Rata, 13% to the holders of
     the Incentive Distribution Rights, Pro Rata, and 2% to the Non-Managing
     General Partner until there has been distributed in respect of each Unit
     then Outstanding an amount equal to the excess of the Second Target
     Distribution over the First Target Distribution for such Quarter;

          (vii)   Seventh, 75% to all Unitholders, Pro Rata, 23% to the holders
     of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-Managing
     General Partner until there has been distributed in respect of each Unit
     then Outstanding an amount equal to the excess of the Third Target
     Distribution over the Second Target Distribution for such Quarter; and

          (viii)  Thereafter, 50% to all Unitholders, Pro Rata, 48% to the
     holders of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
     Managing General Partner;

provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(a)(viii).

          (b)    After Subordination Period. Available Cash with respect to any
Quarter after the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of
the Delaware Act, shall be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:

          (i)    First, 98% to all Unitholders, Pro Rata, and 2% to the Non-
     Managing General Partner until there has been distributed in respect of
     each Unit then Outstanding an amount equal to the Minimum Quarterly
     Distribution for such Quarter;

          (ii)   Second, 98% to all Unitholders, Pro Rata, and 2% to the Non-
     Managing General Partner until there has been distributed in respect of
     each Unit then Outstanding an amount equal to the excess of the First
     Target Distribution over the Minimum Quarterly Distribution for such
     Quarter;

          (iii)  Third, 85% to all Unitholders, Pro Rata, and 13% to the holders
     of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-Managing
     General Partner until there has been distributed in respect of each Unit
     then Outstanding an amount equal to the excess of the Second Target
     Distribution over the First Target Distribution for such Quarter;

                                      -57-

          (iv)   Fourth, 75% to all Unitholders, Pro Rata, and 23% to the
     holders of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
     Managing General Partner until there has been distributed in respect of
     each Unit then Outstanding an amount equal to the excess of the Third
     Target Distribution over the Second Target Distribution for such Quarter;
     and

          (v)    Thereafter, 50% to all Unitholders, Pro Rata, and 48% to the
     holders of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
     Managing General Partner;

provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section 6.4(b)(v).

Section 6.5.  Distributions of Available Cash from Capital Surplus.

     Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise, 98%
to all Unitholders, Pro Rata, and 2% to the Non-Managing General Partner until a
hypothetical holder of a Common Unit acquired on the Closing Date has received
with respect to such Common Unit, during the period since the Closing Date
through such date, distributions of Available Cash that are deemed to be Capital
Surplus in an aggregate amount equal to the Initial Unit Price. Available Cash
that is deemed to be Capital Surplus shall then be distributed 98% to all
Unitholders holding Common Units, Pro Rata, and 2% to the Non-Managing General
Partner until there has been distributed in respect of each Common Unit then
Outstanding an amount equal to the Cumulative Common Unit Arrearage. Thereafter,
all Available Cash shall be distributed as if it were Operating Surplus and
shall be distributed in accordance with Section 6.4.

Section 6.6.  Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.

          (a)  The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution, Third Target Distribution Common Unit Arrearages and
Cumulative Common Unit Arrearages shall be proportionately adjusted in the event
of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction of
which the numerator is the Unrecovered Capital of the Common Units immediately
after giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.

                                      -58-

          (b)  The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution and Third Target Distribution shall also be subject
to adjustment pursuant to Section 6.9.

Section 6.7.  Special Provisions Relating to the Holders of Senior Subordinated
Units and Junior Subordinated Units.

          (a)  Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Senior Subordinated Unit or a Junior Subordinated Unit shall have all of the
rights and obligations of a Unitholder holding Common Units hereunder; provided,
however, that immediately upon the conversion of Subordinated Units into Common
Units pursuant to Section 5.8, the Unitholder holding a Subordinated Unit shall
possess all of the rights and obligations of a Unitholder holding Common Units
hereunder, including the right to vote as a Common Unitholder and the right to
participate in allocations of income, gain, loss and deduction and distributions
made with respect to Common Units; provided, however, that such converted
Subordinated Units shall remain subject to the provisions of Sections
5.5(c)(ii), 6.1(d)(x) and 6.7(b).

          (b)  The Unitholder holding a Senior Subordinated Unit or a Junior
Subordinated Unit which has converted into a Common Unit pursuant to Section 5.8
shall not be issued a Common Unit Certificate pursuant to Section 4.1, and shall
not be permitted to transfer its converted Subordinated Units to a Person which
is not an Affiliate of the holder until such time as the Managing General
Partner determines, based on advice of counsel, that a converted Subordinated
Unit should have, as a substantive matter, like intrinsic economic and federal
income tax characteristics, in all material respects, to the intrinsic economic
and federal income tax characteristics of an Initial Common Unit. In connection
with the condition imposed by this Section 6.7(b), the Managing General Partner
may take whatever reasonable steps are required to provide economic uniformity
to the converted Subordinated Units in preparation for a transfer of such
converted Subordinated Units, including the application of Sections 5.5(c)(ii)
and 6.1(d)(x); provided, however, that no such steps may be taken that would
have a material adverse effect on the Unitholders holding Common Units
represented by Common Unit Certificates.

Section 6.8.  Special Provisions Relating to the Holders of Incentive
Distribution Rights.

     Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights,
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of the
holders of Outstanding Units, (ii) be entitled to any distributions other than
as provided in Sections 6.4(a)(vi), (vii) and (viii), 6.4(b)(iii), (iv) and (v),
and 12.4 or (iii) be allocated items of income, gain, loss or deduction other
than as specified in this Article VI.

                                      -59-

Section 6.9.  Entity-Level Taxation.

     If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership or
the Operating Company to be treated as an association taxable as a corporation
or otherwise subjects the Partnership or the Operating Company to entity-level
taxation for federal income tax purposes, the then applicable Minimum Quarterly
Distribution, First Target Distribution, Second Target Distribution and Third
Target Distribution shall be adjusted to equal the product obtained by
multiplying (a) the amount thereof by (b) one minus the sum of (i) the highest
marginal federal corporate (or other entity, as applicable) income tax rate of
the Partnership or the Operating Company for the taxable year of the Partnership
or the Operating Company in which such Quarter occurs (expressed as a
percentage) plus (ii) the effective overall state and local income tax rate
(expressed as a percentage) applicable to the Partnership or the Operating
Company for the calendar year next preceding the calendar year in which such
Quarter occurs (after taking into account the benefit of any deduction allowable
for federal income tax purposes with respect to the payment of state and local
income taxes), but only to the extent of the increase in such rates resulting
from such legislation or interpretation. Such effective overall state and local
income tax rate shall be determined for the taxable year next preceding the
first taxable year during which the Partnership or the Operating Company is
taxable for federal income tax purposes as an association taxable as a
corporation or is otherwise subject to entity-level taxation by determining such
rate as if the Partnership or the Operating Company had been subject to such
state and local taxes during such preceding taxable year.

                                  ARTICLE VII
                     MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1.  Management.

          (a)  The Managing General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the Managing General Partner, and
neither the Non-Managing General Partner nor any Limited Partner or Assignee
shall have any management power over the business and affairs of the
Partnership. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the Managing General Partner under any other provision of this Agreement, the
Managing General Partner, subject to Section 7.3, shall have full power and
authority to do all things and on such terms as it, in its sole discretion, may
deem necessary or appropriate to conduct the business of the Partnership, to
exercise all powers set forth in Section 2.5 and to effectuate the purposes set
forth in Section 2.4, including the following:

          (i)   the making of any expenditures, the lending or borrowing of
     money, the assumption or guarantee of, or other contracting for,
     indebtedness and other liabilities, the issuance of evidences of
     indebtedness, including indebtedness that is convertible into Partnership
     Securities, and the incurring of any other obligations;

                                      -60-

          (ii)   the making of tax, regulatory and other filings, or rendering
     of periodic or other reports to governmental or other agencies having
     jurisdiction over the business or assets of the Partnership;

          (iii)  the acquisition, disposition, mortgage, pledge, encumbrance,
     hypothecation or exchange of any or all of the assets of the Partnership or
     the merger or other combination of the Partnership with or into another
     Person (the matters described in this clause (iii) being subject, however,
     to any prior approval that may be required by Section 7.3);

          (iv)   the use of the assets of the Partnership (including cash on
     hand) for any purpose consistent with the terms of this Agreement,
     including the financing of the conduct of the operations of the Partnership
     Group; subject to Section 7.6(a), the lending of funds to other Persons
     (including the Operating Company); the repayment of obligations of the
     Partnership Group and the making of capital contributions to any member of
     the Partnership Group;

          (v)    the negotiation, execution and performance of any contracts,
     conveyances or other instruments (including instruments that limit the
     liability of the Partnership under contractual arrangements to all or
     particular assets of the Partnership, with the other party to the contract
     to have no recourse against the General Partners or their assets other than
     their interest in the Partnership, even if same results in the terms of the
     transaction being less favorable to the Partnership than would otherwise be
     the case);

          (vi)   the distribution of Partnership cash;

          (vii)  the selection and dismissal of employees (including employees
     having titles such as "president," "vice president," "secretary" and
     "treasurer") and agents, outside attorneys, accountants, consultants and
     contractors and the determination of their compensation and other terms of
     employment or hiring;

          (viii) the maintenance of such insurance for the benefit of the
     Partnership Group and the Partners as it deems necessary or appropriate;

          (ix)   the formation of, or acquisition of an interest in, and the
     contribution of property and the making of loans to, any further limited or
     general partnerships, joint ventures, limited liability companies,
     corporations or other relationships (including the acquisition of interests
     in, and the contributions of property to, the Operating Company from time
     to time) subject to the restrictions set forth in Section 2.4;

          (x)    the control of any matters affecting the rights and obligations
     of the Partnership, including the bringing and defending of actions at law
     or in equity and otherwise engaging in the conduct of litigation and the
     incurring of legal expense and the settlement of claims and litigation;

          (xi)   the indemnification of any Person against liabilities and
     contingencies to the extent permitted by law;

                                      -61-

          (xii)  the entering into of listing agreements with any National
     Securities Exchange and the delisting of some or all of the Limited Partner
     Interests from, or requesting that trading be suspended on, any such
     exchange (subject to any prior approval that may be required under Section
     4.8);

          (xiii) unless restricted or prohibited by Section 5.7, the purchase,
     sale or other acquisition or disposition of Partnership Securities, or the
     issuance of additional options, rights, warrants and appreciation rights
     relating to Partnership Securities; and

          (xiv)  the undertaking of any action in connection with the
     Partnership's participation in the Operating Company as a member.

          (b)    Notwithstanding any other provision of this Agreement, the
Operating Company Agreement, the Delaware Act or any applicable law, rule or
regulation, each of the Partners and the Assignees and each other Person who may
acquire an interest in Partnership Securities hereby (i) approves, ratifies and
confirms the execution, delivery and performance by the parties thereto of the
Operating Company Agreement, the Underwriting Agreement, the Contribution and
Conveyance Agreement, and the other agreements and other described in or filed
as exhibits to the Registration Statement that are related to the transactions
contemplated by the Registration Statement; (ii) agrees that the Managing
General Partner (on its own or through any officer of the Partnership) is
authorized to execute, deliver and perform the agreements referred to in clause
(i) of this sentence and the other agreements, acts, transactions and matters
described in or contemplated by the Registration Statement on behalf of the
Partnership without any further act, approval or vote of the Partners or the
Assignees or the other Persons who may acquire an interest in Partnership
Securities; and (iii) agrees that the execution, delivery or performance by the
General Partners, any Group Member or any Affiliate of any of them, of this
Agreement or any agreement authorized or permitted under this Agreement
(including the exercise by the Managing General Partner or any Affiliate of the
Managing General Partner of the rights accorded pursuant to Article XV), shall
not constitute a breach by the General Partners of any duty that the General
Partners may owe the Partnership or the Limited Partners or any other Persons
under this Agreement (or any other agreements) or of any duty stated or implied
by law or equity.

Section 7.2.  Certificate of Limited Partnership.

     The Managing General Partner has caused the Certificate of Limited
Partnership to be filed with the Secretary of State of the State of Delaware as
required by the Delaware Act and shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be determined by the Managing
General Partner in its sole discretion to be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware or any other state in which the Partnership
may elect to do business or own property.  To the extent that such action is
determined by the Managing General Partner in its sole discretion to be
reasonable and necessary or appropriate, the Managing General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all things to maintain the Partnership as a limited partnership (or a
partnership or other entity in which the limited partners have limited
liability) under the laws of the State of Delaware or of any other

                                      -62-

state in which the Partnership may elect to do business or own property. Subject
to the terms of Section 3.4(a), the Managing General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate
of Limited Partnership, any qualification document or any amendment thereto to
any Limited Partner.

Section 7.3.  Restrictions on General Partners' Authority.

          (a)  The General Partners may not, without written approval of the
specific act by holders of all of the Outstanding Limited Partner Interests or
by other written instrument executed and delivered by holders of all of the
Outstanding Limited Partner Interests subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, except as
otherwise provided in this Agreement, (i) committing any act that would make it
impossible to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner; or (v) transferring its interest as
general partner of the Partnership.

          (b)  Except as provided in Articles XII and XIV, no General Partner
may sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Operating Company, without the approval
of holders of a Unit Majority; provided however that this provision shall not
preclude or limit the General Partners' ability to mortgage, pledge, hypothecate
or grant a security interest in all or substantially all of the assets of the
Partnership or Operating Company and shall not apply to any forced sale of any
or all of the assets of the Partnership or Operating Company pursuant to the
foreclosure of, or other realization upon, any such encumbrance. Without the
approval of holders of a Unit Majority, the Managing General Partner shall not,
on behalf of the Partnership, (i) consent to any amendment to the Operating
Company Agreement or, except as expressly permitted by Section 7.9(d), take any
action permitted to be taken by a member of the Operating Company, in either
case, that would adversely affect the Limited Partners (including any particular
class of Partnership Interests as compared to any other class of Partnership
Interests) in any material respect or (ii) except as permitted under Sections
4.6, 11.1 and 11.2, elect or cause the Partnership to elect a successor general
partner of the Partnership.

Section 7.4.  Reimbursement of the General Partners.

          (a)  Except as provided in this Section 7.4 and elsewhere in this
Agreement, the General Partners shall not be compensated for their services as
general partners or managing members of any Group Member.

          (b)  The Managing General Partner shall be reimbursed on a monthly
basis, or such other reasonable basis as the Managing General Partner may
determine in its sole discretion, for (i) all direct and indirect expenses it
incurs or payments it makes on behalf of the Partnership (including salary,
bonus, incentive compensation and other amounts paid to any Person including
Affiliates of the Managing General Partner to perform services for the
Partnership or for the Managing General Partner in the discharge of its duties
to the Partnership),

                                      -63-

and (ii) all other necessary or appropriate expenses allocable to the
Partnership or otherwise reasonably incurred by the Managing General Partner in
connection with operating the Partnership's business (including expenses
allocated to the Managing General Partner by its Affiliates). The Managing
General Partner shall determine the expenses that are allocable to the
Partnership in any reasonable manner determined by the Managing General Partner
in its sole discretion. Reimbursements pursuant to this Section 7.4 shall be in
addition to any reimbursement to the General Partners as a result of
indemnification pursuant to Section 7.7.

          (c)  Subject to Section 5.7, the Managing General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices
(including plans, programs and practices involving the issuance of Partnership
Securities or options to purchase Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant to,
any employee benefit plan, employee program or employee practice maintained or
sponsored by the Managing General Partner or any one of its Affiliates, in each
case for the benefit of employees of the Managing General Partner, any Group
Member or any Affiliate, or any of them, in respect of services performed,
directly or indirectly, for the benefit of the Partnership Group. The
Partnership agrees to issue and sell to the Managing General Partner or any of
its Affiliates any Partnership Securities that the Managing General Partner or
such Affiliates are obligated to provide to any employees pursuant to any such
employee benefit plans, employee programs or employee practices. Expenses
incurred by the Managing General Partner in connection with any such plans,
programs and practices (including the net cost to the Managing General Partner
or such Affiliates of Partnership Securities purchased by the Managing General
Partner or such Affiliates from the Partnership to fulfill options or awards
under such plans, programs and practices) shall be reimbursed in accordance with
Section 7.4(b). Any and all obligations of the Managing General Partner under
any employee benefit plans, employee programs or employee practices adopted by
the Managing General Partner as permitted by this Section 7.4(c) shall
constitute obligations of the Managing General Partner hereunder and shall be
assumed by any successor Managing General Partner approved pursuant to Section
11.1, 11.2 or 11.4 or the transferee of or successor to all of the Managing
General Partner's General Partner Interest.

Section 7.5.  Outside Activities.

          (a)  After the Closing Date, the Managing General Partner, for so long
as it is a General Partner of the Partnership (i) agrees that its sole business
will be to act as a general partner or managing member of the Partnership and
any other partnership or limited liability company of which the Partnership or
the Operating Company is, directly or indirectly, a partner or member and to
undertake activities that are ancillary or related thereto (including being a
limited partner in the Partnership) and (ii) shall not engage in any business or
activity or incur any debts or liabilities except in connection with or
incidental to (A) its performance as general partner or managing member of one
or more Group Members or as described in or contemplated by the Registration
Statement or (B) the acquiring, owning or disposing of debt or equity securities
in any Group Member.

          (b)  Except as specifically restricted by Section 7.5(a), each
Indemnitee (other than the Managing General Partner) shall have the right to
engage in businesses of every type

                                      -64-

and description and other activities for profit and to engage in and possess an
interest in other business ventures of any and every type or description,
whether in businesses engaged in or anticipated to be engaged in by any Group
Member, independently or with others, including business interests and
activities in direct competition with the business and activities of any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to any Group Member or any Partner or Assignee.
Neither any Group Member, any Limited Partner nor any other Person shall have
any rights by virtue of this Agreement, the Operating Company Agreement or the
partnership relationship established hereby or thereby in any business ventures
of any Indemnitee.

          (c)  Subject to the terms of Section 7.5(a) and Section 7.5(b), but
otherwise notwithstanding anything to the contrary in this Agreement, (i) the
engaging in competitive activities by any Indemnitees (other than the Managing
General Partner) in accordance with the provisions of this Section 7.5 is hereby
approved by the Partnership and all Partners, (ii) it shall be deemed not to be
a breach of the General Partners' fiduciary duties or any other obligation of
any type whatsoever of the General Partners for the Indemnitees (other than the
Managing General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership and (iii) the General
Partners and the Indemnities shall have no obligation to present business
opportunities to the Partnership.

          (d)  The General Partners and any of their Affiliates may acquire
Units or other Partnership Securities in addition to those acquired on the
Closing Date and, except as otherwise provided in this Agreement, shall be
entitled to exercise all rights of a General Partner or Limited Partner, as
applicable, relating to such Units or Partnership Securities.

          (e)  The term "Affiliates" when used in Section 7.5(a) and Section
7.5(d) with respect to the General Partner shall not include any Group Member or
any Subsidiary of the Group Member.

          (f)  Anything in this Agreement to the contrary notwithstanding, to
the extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of
this Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partners to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partners have complied with their
fiduciary duties in connection with determinations made by it under this Section
7.5.

Section 7.6.  Loans from the General Partners; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partners.

          (a)  Each of the General Partners or any of their Affiliates may lend
to any Group Member, and any Group Member may borrow from a General Partner or
any of its Affiliates, funds needed or desired by the Group Member for such
periods of time and in such amounts as the Managing General Partner may
determine; provided, however, that in any such case the lending party may not
charge the borrowing party interest at a rate greater than the rate that would
be charged the borrowing party or impose terms less favorable to the borrowing
party

                                      -65-

than would be charged or imposed on the borrowing party by unrelated lenders on
comparable loans made on an arm's-length basis (without reference to the lending
party's financial abilities or guarantees). The borrowing party shall reimburse
the lending party for any costs (other than any additional interest costs)
incurred by the lending party in connection with the borrowing of such funds.
For purposes of this Section 7.6(a) and Section 7.6(b), the term "Group Member"
shall include any Affiliate of a Group Member that is controlled by the Group
Member. No Group Member may lend funds to a General Partner or any of its
Affiliates (other than another Group Member).

          (b)  The Partnership may lend or contribute to any Group Member, and
any Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the Managing General Partner; provided,
however, that the Partnership may not charge the Group Member interest at a rate
less than the rate that would be charged to the Group Member (without reference
to the General Partners' financial abilities or guarantees) by unrelated lenders
on comparable loans. The foregoing authority shall be exercised by the Managing
General Partner in its sole discretion and shall not create any right or
benefit. in favor of any Group Member or any other Person.

          (c)  The General Partners may, or may enter into an agreement with any
of their Affiliates to, render services to a Group Member or to the General
Partners in the discharge of their duties as general partners of the
Partnership. Any services rendered to a Group Member by a General Partner or any
of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).

          (d)  The Partnership Group may transfer assets to joint ventures,
other partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.

          (e)  Neither General Partner nor any of their Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution and
Conveyance Agreement and any other transactions described in or contemplated by
the Registration Statement, (ii) any transaction approved by Special Approval,
(iii) any transaction, the terms of which are no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties, or (iv) any transaction that, taking into account the totality of
the relationships between the parties involved (including other transactions
that may be particularly favorable or advantageous to the Partnership), is
equitable to the Partnership. With respect to

                                      -66-

any contribution of assets to the Partnership in exchange for Partnership
Securities, the Conflicts Committee, in determining whether the appropriate
number of Partnership Securities are being issued, may take into account, among
other things, the fair market value of the assets, the liquidated and contingent
liabilities assumed, the tax basis in the assets, the extent to which tax-only
allocations to the transferor will protect the existing partners of the
Partnership against a low tax basis, and such other factors as the Conflicts
Committee deems relevant under the circumstances.

          (f)  The General Partners and their Affiliates will have no obligation
to permit any Group Member to use any facilities or assets of the General
Partners and their Affiliates, except as may be provided in contracts entered
into from time to time specifically dealing with such use, nor shall there be
any obligation on the part of the General Partners or their Affiliates to enter
into such contracts.

          (g)  Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.

Section 7.7.  Indemnification.

          (a)  To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partners) not opposed to, the best interests of the Partnership and, with
respect to any criminal proceeding, had no reasonable cause to believe its
conduct was unlawful; provided, further, no indemnification pursuant to this
Section 7.7 shall be available to the General Partners with respect to their
obligations incurred pursuant to the Underwriting Agreement or the Contribution
and Conveyance Agreement (other than obligations incurred by the General
Partners on behalf of the Partnership or the Operating Company). 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 create a
presumption that the Indemnitee acted in a manner contrary to that specified
above. Any indemnification pursuant to this Section 7.7 shall be made only out
of the assets of the Partnership, it being agreed that the General Partners
shall not be personally liable for such indemnification and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate such indemnification.

          (b)  To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Partnership of any undertaking by or on behalf of the Indemnitee to repay such

                                      -67-

amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.

          (c)  The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the holders of Outstanding Limited Partner
Interests, as a matter of law or otherwise, both as to actions in the
Indemnitee's capacity as an Indemnitee and as to actions in any other capacity
(including any capacity under the Underwriting Agreement), and shall continue as
to an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.

          (d)  The Partnership may purchase and maintain (or reimburse the
General or their Affiliates for the cost of) insurance, on behalf of the General
Partners, their Affiliates and such other Persons as the Managing General
Partner shall determine, against any liability that may be asserted against or
expense that may be incurred by such Person in connection with the Partnership's
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.

          (e)  For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by the Indemnitee with respect to any employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is in, or not opposed to, the best interests of the
Partnership.

          (f)  In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.

          (g)  An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 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.

          (h)  The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.

          (i)  No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims

                                      -68-

arising from or relating to matters occurring, in whole or-in part, prior to
such amendment, modification or repeal, regardless of when such claims may arise
or be asserted.

Section 7.8.  Liability of Indemnitees.

          (a)  Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Partnership Securities, for losses sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith.

          (b)  Subject to its obligations and duties as Managing General Partner
set forth in Section 7.1(a), the Managing General Partner may exercise any of
the powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents, and the Managing
General Partner shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by the Managing General Partner in good faith.

          (c)  To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Partners, the General Partners and any other Indemnitee acting in
connection with the Partnership's business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.

          (d)  Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partners, and the Partnership's and General Partners' directors,
officers and employees under this Section 7.8 as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.

Section 7.9.  Resolution of Conflicts of Interest.

          (a)  Unless otherwise expressly provided in this Agreement or the
Operating Company Agreement, whenever a potential conflict of interest exists or
arises between a General Partner or any of its Affiliates, on the one hand, and
the Partnership, the Operating Company, any Partner or any Assignee, on the
other, any resolution or course of action by a General Partner or its Affiliates
in respect of such conflict of interest shall be permitted and deemed approved
by all Partners, and shall not constitute a breach of this Agreement, of the
Operating Company Agreement, of any agreement contemplated herein or therein, or
of any duty stated or implied by law or equity, if the resolution or course of
action is, or by operation of this Agreement is deemed to be, fair and
reasonable to the Partnership. The Managing General Partner shall be authorized
but not required in connection with its resolution of such conflict of interest
to seek Special Approval of such resolution. Any conflict of interest and any
resolution of such conflict

                                      -69-

of interest shall be conclusively deemed fair and reasonable to the Partnership
if such conflict of interest or resolution is (i) approved by Special Approval
(as long as the material facts known to the Managing General Partner or any of
its Affiliates regarding any proposed transaction were disclosed to the
Conflicts Committee at the time it gave its approval), (ii) on terms no less
favorable to the Partnership than those generally being provided to or available
from unrelated third parties or (iii) fair to the Partnership, taking into
account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous
to the Partnership). The Managing General Partner may also adopt a resolution or
course of action that has not received Special Approval. The Managing General
Partner (including the Conflicts Committee in connection with any Special
Approval) shall be authorized in connection with its determination of what is
"fair and reasonable" to the Partnership and in connection with its resolution
of any conflict of interest to consider (A) the relative interests of any party
to such conflict, agreement, transaction or situation and the benefits and
burdens relating to such interest; (B) any customary or accepted industry
practices and any customary or historical dealings with a particular Person; (C)
any applicable generally accepted accounting practices or principles; and (D)
such additional factors as the Managing General Partner (including the Conflicts
Committee) determines in its sole discretion to be relevant, reasonable or
appropriate under the circumstances. Nothing contained in this Agreement,
however, is intended to nor shall it be construed to require the Managing
General Partner (including the Conflicts Committee) to consider the interests of
any Person other than the Partnership. In the absence of bad faith by the
Managing General Partner, the resolution, action or terms so made, taken or
provided by the Managing General Partner with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Delaware Act or any other law, rule or
regulation.

          (b)  Whenever this Agreement or any other agreement contemplated
hereby provides that the Managing General Partner or any of its Affiliates is
permitted or required to make a decision (i) in its "sole discretion" or
"discretion," that it deems "necessary or appropriate" or "necessary or
advisable" or under a grant of similar authority or latitude, except as
otherwise provided herein, the Managing General Partner or such Affiliate shall
be entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, the Operating Company, any Limited Partner
or any Assignee, (ii) it may make such decision in its sole discretion
(regardless of whether there is a reference to "sole discretion" or
"discretion") unless another express standard is provided for, or (iii) in "good
faith" or under another express standard, the Managing General Partner or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the Operating Company
Agreement, any other agreement contemplated hereby or under the Delaware Act or
any other law, rule or regulation. In addition, any actions taken by the
Managing General Partner or such Affiliate consistent with the standards of
"reasonable discretion" set forth in the definitions of Available Cash or
Operating Surplus shall not constitute a breach of any duty of the Managing
General Partner to the Partnership or the Limited Partners. The Managing General
Partner shall have no duty, express or implied, to sell or otherwise dispose of
any asset of the Partnership Group other than in the ordinary course of
business. No borrowing by any Group Member or the approval thereof by the
Managing General Partner shall be deemed to constitute a breach of any duty of
the Managing General Partner to the Partnership

                                      -70-

or the Limited Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to (A) enable distributions to the Non-
Managing General Partner or its Affiliates (including in their capacities as
Limited Partners) to exceed 2% of the total amount distributed to all partners
or (B) hasten the expiration of the Subordination Period or the conversion of
any Senior Subordinated Units or Junior Subordinated Units into Common Units.

          (c)  Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.

          (d)  The Unitholders hereby authorize the Managing General Partner, on
behalf of the Partnership as a partner or member of a Group Member, to approve
of actions by the general partner or managing member of such Group Member
similar to those actions permitted to be taken by the Managing General Partner
pursuant to this Section 7.9.

Section 7.10.  Other Matters Concerning the General Partners.

          (a)  A General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.

          (b)  A General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that such General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.

          (c)  A General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.

          (d)  Any standard of care and duty imposed by this Agreement or under
the Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited to the extent permitted by law, as required to permit the
General Partners to act under this Agreement or any other agreement contemplated
by this Agreement and to make any decision pursuant to the authority prescribed
in this Agreement, so long as such action is reasonably believed by the Managing
General Partner to be in, or not inconsistent with, the best interests of the
Partnership.

Section 7.11.  Purchase or Sale of Partnership Securities.

     The Managing General Partner may cause the Partnership to purchase or
otherwise acquire Partnership Securities; provided that, except as permitted
pursuant to Section 4.10, the Managing General Partner may not cause any Group
Member to purchase Subordinated Units during the Subordination Period.  As long
as Partnership Securities are held by any Group

                                      -71-

Member, such Partnership Securities shall not be considered Outstanding for any
purpose, except as otherwise provided herein. The General Partners or any of
their Affiliates may also purchase or otherwise acquire and sell or otherwise
dispose of Partnership Securities for their own account, subject to the
provisions of Articles IV and X.

Section 7.12.  Registration Rights of the General Partners and their Affiliates.

          (a)  If (i) either of the General Partners or any Affiliate of either
of the General Partners (including for purposes of this Section 7.12, any Person
that is an Affiliate of either of the General Partners at the date of this
Agreement notwithstanding that it may later cease to be an Affiliate of the
General Partner) holds Partnership Securities that it desires to sell and (ii)
Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144)
or another exemption from registration is not available to enable such holder of
Partnership Securities (the "Holder") to dispose of the number of Partnership
Securities it desires to sell at the time it desires to do so without
registration under the Securities Act, then upon the request of such General
Partner or any of its Affiliates, the Partnership shall file with the Commission
as promptly as practicable after receiving such request, and use all reasonable
efforts to cause to become effective and remain effective for a period of not
less than six months following its effective date or such shorter period as
shall terminate when all Partnership Securities covered by such registration
statement have been sold, a registration statement under the Securities Act
registering the offering and sale of the number of Partnership Securities
specified by the Holder; provided, however, that the Partnership shall not be
required to effect more than three registrations pursuant to this Section
7.12(a); and provided further, that if the Conflicts Committee determines in its
good faith judgment that a postponement of the requested registration for up to
six months would be in the best interests of the Partnership and its Partners
due to a pending transaction, investigation or other event, the filing of such
registration statement or the effectiveness thereof may be deferred for up to
six months, but not thereafter. In connection with any registration pursuant to
the immediately preceding sentence, the Partnership shall promptly prepare and
file (x) such documents as may be necessary to register or qualify the
securities subject to such registration under the securities laws of such states
as the Holder shall reasonably request; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Partnership would become subject to general service of process or to
taxation or qualification to do business as a foreign corporation or partnership
doing business in such jurisdiction solely as a result of such registration, and
(y) such documents as may be necessary to apply for listing or to list the
Partnership Securities subject to such registration on such National Securities
Exchange as the Holder shall reasonably request, and do any and all other acts
and things that may reasonably be necessary or advisable to enable the Holder to
consummate a public sale of such Partnership Securities in such states. Except
as set forth in Section 7.12(c), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.

          (b)  If the Partnership shall at any time propose to file a
registration statement under the Securities Act for an offering of equity
securities of the Partnership for cash (other than an offering relating solely
to an employee benefit plan), the Partnership shall use all reasonable efforts
to include such number or amount of securities held by the Holder in such
registration statement as the Holder shall request. If the proposed offering
pursuant to this Section 7.12(b)

                                      -72-

shall be an underwritten offering, then, in the event that the managing
underwriter or managing underwriters of such offering advise the Partnership and
the Holder in writing that in their opinion the inclusion of all or some of the
Holder's Partnership Securities would adversely and materially affect the
success of the offering, the Partnership shall include in such offering only
that number or amount, if any, of securities held by the Holder which, in the
opinion of the managing underwriter or managing underwriters, will not so
adversely and materially affect the offering. Except as set forth in Section
7.12(c), all costs and expenses of any such registration and offering (other
than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.

          (c)  If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent, permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
attorneys' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.12(c) as a "claim" and in
the plural as "claims") based upon, arising out of or resulting from any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which any Partnership Securities were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.

          (d)  The provisions of Section 7.12(a) and 7.12(b) shall continue to
be applicable with respect to the General Partners (and any of the General
Partners' Affiliates) after they cease to be Partners of the Partnership, during
a period of two years subsequent to the effective date of such cessation and for
so long thereafter as is required for the Holder to sell all of the Partnership
Securities with respect to which it has requested during such two-year period
inclusion in a registration statement otherwise filed or that a registration
statement be filed; provided, however, that the Partnership shall not be
required to file successive registration statements covering the same
Partnership Securities for which registration was demanded during such two-year
period. The provisions of Section 7.12(c) shall continue in effect thereafter.

                                      -73-

          (e)  (e) Any request to register Partnership Securities pursuant to
this Section 7.12 shall (i) specify the Partnership Securities intended to be
offered and sold by the Person making the request, (ii) express such Person's
present intent to offer such shares for distribution, (iii) describe the nature
or method of the proposed offer and sale of Partnership Securities, and (iv)
contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.

Section 7.13.  Reliance by Third Parties.

     Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the Managing
General Partner and any officer of the Managing General Partner authorized by
the Managing General Partner to act on behalf of and in the name of the
Partnership has full power and authority to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the Managing General Partner or any such officer as if it
were the Partnership's sole party in interest, both legally and beneficially.
Each Limited Partner hereby waives any and all defenses or other remedies that
may be available against such Person to contest, negate or disaffirm any action
of the Managing General Partner or any such officer in connection with any such
dealing.  In no event shall any Person dealing with the Managing General Partner
or any such officer or its representatives be obligated to ascertain that the
terms of the Agreement have been complied with or to inquire into the necessity
or expedience of any act or action of the Managing General Partner or any such
officer or its representatives.  Each and every certificate, document or other
instrument executed on behalf of the Partnership by the Managing General Partner
or its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.

                                 ARTICLE VIII
                    BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 8.1.  Records and Accounting.

     The Managing General Partner shall keep or cause to be kept at the
principal office of the Partnership appropriate books and records with respect
to the Partnership's business, including all books and records necessary to
provide to the Limited Partners any information required to be provided pursuant
to Section 3.4(a).  Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including the record of the
Record Holders and Assignees of Units or other Partnership Securities, books of
account and records of Partnership proceedings, may be kept on, or be in the
form of, computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within

                                      -74-

a reasonable period of time. The books of the Partnership shall be maintained,
for financial reporting purposes, on an accrual basis in accordance with U.S.
GAAP.

Section 8.2.  Fiscal Year.

     The fiscal year of the Partnership shall be a fiscal year ending December
31.

Section 8.3.  Reports.

          (a)  As soon as practicable, but in no event later than 120 days after
the close of each fiscal year of the Partnership, the Managing General Partner
shall cause to be mailed or furnished to each Record Holder of a Unit as of a
date selected by the Managing General Partner in its discretion, an annual
report containing financial statements of the Partnership for such fiscal year
of the Partnership, presented in accordance with U.S. GAAP, including a balance
sheet and statements of operations, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants selected by
the Managing General Partner.

          (b)  As soon as practicable, but in no event later than 90 days after
the close of each Quarter except the last Quarter of each fiscal year, the
Managing General Partner shall cause to be mailed or furnished to each Record
Holder of a Unit, as of a date selected by the Managing General Partner in its
discretion, a report containing unaudited financial statements of the
Partnership and such other information as may be required by applicable law,
regulation or rule of any National Securities Exchange on which the Units are
listed for trading, or as the Managing General Partner determines to be
necessary or appropriate.

                                  ARTICLE IX
                                  TAX MATTERS

Section 9.1.  Tax Returns and Information.

     The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31.  The tax information
reasonably required by Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends.  The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.

Section 9.2.  Tax Elections.

          (a)  The Partnership shall make the election under Section 754 of the
Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the Managing
General Partner's determination that such revocation is in the best interests of
the Limited Partners. Notwithstanding any other provision herein contained, for
the purposes of computing the adjustments under Section 743(b) of the Code, the
Managing General Partner shall be authorized (but not required) to adopt a
convention whereby the price paid by a transferee of a Limited Partner Interest
will be deemed to be the lowest quoted closing price of the Limited Partner
Interests on any National Securities Exchange

                                      -75-

on which such Limited Partner Interests are traded during the calendar month in
which such transfer is deemed to occur pursuant to Section 6.2(g) without regard
to the actual price paid by such transferee.

          (b)  The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.

          (c)  Except as otherwise provided herein, the Managing General Partner
shall determine whether the Partnership should make any other elections
permitted by the Code.

Section 9.3.  Tax Controversies.

     Subject to the provisions hereof, the Managing General Partner is
designated as the Tax Matters Partner (as defined in the Code) and is authorized
and required to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with the Managing General Partner
and to do or refrain from doing any or all things reasonably required by the
Managing General Partner to conduct such proceedings.

Section 9.4.  Withholding.

     Notwithstanding any other provision of this Agreement, the Managing General
Partner is authorized to take any action that it determines in its discretion to
be necessary or appropriate to cause the Partnership and the Operating Company
to comply with any withholding requirements established under the Code or any
other federal, state or local law including, without limitation, pursuant to
Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the
Partnership is required or elects to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to
any Partner or Assignee (including, without limitation, by reason of Section
1446 of the Code), the amount withheld may at the discretion of the Managing
General Partner be treated by the Partnership as a distribution of cash pursuant
to Section 6.3 in the amount of such withholding from such Partner.

                                   ARTICLE X
                             ADMISSION OF PARTNERS

Section 10.1.  Admission of Initial Limited Partners.

     Upon the issuance by the Partnership of Common Units, Senior Subordinated
Units, Junior Subordinated Units and Incentive Distribution Rights to Inergy
Partners, LLC, New Inergy Propane, LLC, Inergy Holdings, LLC and the
Underwriters as described in Section 5.3 in connection with the Initial
Offering, the Managing General Partner shall admit such parties to the
Partnership as Initial Limited Partners in respect of the Common Units, Senior
Subordinated Units, Junior Subordinated Units or Incentive Distribution Rights
issued to them.

                                      -76-

Section 10.2.  Admission of Substituted Limited Partner.

     By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interests so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the Managing General Partner consents thereto, which consent may be
given or withheld in the Managing General Partner's discretion, and (y) when any
such admission is shown on the books and records of the Partnership. If such
consent is withheld, such transferee shall be an Assignee. An Assignee shall
have an interest in the Partnership equivalent to that of a Limited Partner with
respect to allocations and distributions, including liquidating distributions,
of the Partnership. With respect to voting rights attributable to Limited
Partner Interests that are held by Assignees, the Managing General Partner shall
be deemed to be the Limited Partner with respect thereto and shall, in
exercising the voting rights in respect of such Limited Partner Interests on any
matter, vote such Limited Partner Interests at the written direction of the
Assignee who is the Record Holder of such Limited Partner Interests. If no such
written direction is received, such Limited Partner Interests will not be voted.
An Assignee shall have no other rights of a Limited Partner.

Section 10.3.  Admission of Successor General Partners.

     A successor General Partner approved pursuant to Section 11.1, 11.2 or 11.4
or the transferee of or successor to such General Partner Interest pursuant to
Section 4.6 who is proposed to be admitted as a successor General Partner shall
be admitted to the Partnership as the Non-Managing General Partner or the
Managing General Partner, as the case may be, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner
pursuant to Section 11.1, 11.2 or 11.4 or the transfer of such General Partner's
General Partner Interest pursuant to Section 4.6; provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.6 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.

Section 10.4.  Admission of Additional Limited Partners.

          (a)  A Person (other than the General Partners, an Initial Limited
Partner or a Substituted Limited Partner) who makes a Capital Contribution to
the Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only

                                      -77-

upon furnishing to the Managing General Partner (i) evidence of acceptance in
form satisfactory to the Managing General Partner of all of the terms and
conditions of this Agreement, including the power of attorney granted in Section
2.6, and (ii) such other documents or instruments as may be required in the
discretion of the Managing General Partner to effect such Person's admission as
an Additional Limited Partner.

          (b)  Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the Managing General Partner, which consent may be given or withheld in the
Managing General Partner's discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the Managing General Partner to such
admission.

Section 10.5.  Amendment of Agreement and Certificate of Limited Partnership.

     To effect the admission to the Partnership of any Partner, the Managing
General Partner shall take all steps necessary and appropriate under the
Delaware Act to amend the records of the Partnership to reflect such admission
and, if necessary, to prepare as soon as practicable an amendment to this
Agreement and, if required by law, the Managing General Partner shall prepare
and file an amendment to the Certificate of Limited Partnership, and the
Managing General Partner may for this purpose, among others, exercise the power
of attorney granted pursuant to Section 2.6.

                                  ARTICLE XI
                       WITHDRAWAL OR REMOVAL OF PARTNERS

Section 11.1.  Withdrawal of the Managing General Partner.

          (a)   The Managing General Partner shall be deemed to have withdrawn
from the Partnership upon the occurrence of any one of the following events
(each such event herein referred to as an "Event of Withdrawal");

          (i)   The Managing General Partner voluntarily withdraws from the
     Partnership by giving written notice to the other Partners;

          (ii)  The Managing General Partner transfers all of its rights as
     Managing General Partner pursuant to Section 4.6;

          (iii) The Managing General Partner is removed pursuant to Section
     11.2;

          (iv)  The Managing General Partner (A) makes a general assignment for
     the benefit of creditors; (B) files a voluntary bankruptcy petition for
     relief under Chapter 7 of the United States Bankruptcy Code; (C) files a
     petition or answer seeking for itself a liquidation, dissolution or similar
     relief (but not a reorganization) under any law; (D) files an answer or
     other pleading admitting or failing to contest the material allegations of
     a petition filed against the Managing General Partner in a proceeding of
     the type described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E)
     seeks, consents to or acquiesces in

                                      -78-

     the appointment of a trustee (but not a debtor-in-possession), receiver or
     liquidator of the Managing General Partner or of all or any substantial
     part of its properties;

          (v)    A final and non-appealable order of relief under Chapter 7 of
     the United States Bankruptcy Code is entered by a court with appropriate
     jurisdiction pursuant to a voluntary or involuntary petition by or against
     the Managing General Partner; or

          (vi)   (A) in the event the Managing General Partner is a corporation,
     a certificate of dissolution or its equivalent is filed for the Managing
     General Partner, or 90 days expire after the date of notice to the Managing
     General Partner of revocation of its charter without a reinstatement of its
     charter, under the laws of its state of incorporation; (B) in the event the
     Managing General Partner is a partnership or a limited liability company,
     the dissolution and commencement of winding up of the Managing General
     Partner; (C) in the event the Managing General Partner is acting in such
     capacity by virtue of being a trustee of a trust, the termination of the
     trust; (D) in the event the Managing General Partner is a natural person,
     his death or adjudication of incompetency; and (E) otherwise in the event
     of the termination of the Managing General Partner.

     If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A),
(B), (C) or (E) occurs, the withdrawing Managing General Partner shall give
notice to the Limited Partners within 30 days after such occurrence.  The
Partners hereby agree that only the Events of Withdrawal described in this
Section 11.1 shall result in the withdrawal of the Managing General Partner from
the Partnership.

          (b)    Withdrawal of the Managing General Partner from the Partnership
upon the occurrence of an Event of Withdrawal shall not constitute a breach of
this Agreement under the following circumstances: (i) at any time during the
period beginning on the Closing Date and ending at 12:00 midnight, Eastern
Standard Time, on June 30, 2011, the Managing General Partner voluntarily
withdraws by giving at least 90 days' advance notice of its intention to
withdraw to the Limited Partners; provided that prior to the effective date of
such withdrawal, the withdrawal is approved by Unitholders holding at least a
majority of the Outstanding Common Units (excluding Common Units held by the
General Partners and their Affiliates) and the Managing General Partner delivers
to the Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that
such withdrawal (following the selection of the successor Managing General
Partner) would not result in the loss of the limited liability of any Limited
Partner or of a member of the Operating Company or cause the Partnership or the
Operating Company to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such); (ii) at any time after 12:00 midnight,
Eastern Standard Time, on June 30, 2011, the Managing General Partner
voluntarily withdraws by giving at least 90 days' advance notice to the
Unitholders, such withdrawal to take effect on the date specified in such
notice; (iii) at any time that the Managing General Partner ceases to be the
Managing General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant
to Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any
time that the Managing General Partner voluntarily withdraws by giving at least
90 days' advance notice of its intention to withdraw to the Limited Partners,
such withdrawal to take effect on the date specified in the notice, if at the
time such notice is given one Person and its Affiliates (other than the Managing
General Partner and their Affiliates) own beneficially or of record or control
at least 50% of the

                                      -79-

Outstanding Units. The withdrawal of the Managing General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the Managing General Partner as general partner or managing
member, to the extent applicable, of the other Group Members. If the Managing
General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the
holders of a Unit Majority, may, prior to the effective date of such withdrawal,
elect a successor Managing General Partner. The Person so elected as successor
Managing General Partner shall automatically become the successor general
partner or managing member, to the extent applicable, of the other Group Members
of which the Managing General Partner is a general partner or a managing member.
If, prior to the effective date of the Managing General Partner's withdrawal
pursuant to Section 11.1(a)(i), a successor is not selected by the Unitholders
as provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any
successor Managing General Partner elected in accordance with the terms of this
Section 11.1 shall be subject to the provisions of Section 10.3.

Section 11.2.  Removal of the Managing General Partner.

     The Managing General Partner may be removed if such removal is approved by
the Unitholders holding at least 66 2/3% of the Outstanding Units (including
Units held by the General Partners and their Affiliates). Any such action by
such holders for removal of the Managing General Partner must also provide for
the election of a successor Managing General Partner by the Unitholders holding
a Unit Majority (including Units held by the General Partners and their
Affiliates). Such removal shall be effective immediately following the admission
of a successor Managing General Partner pursuant to Section 10.3. The removal of
the Managing General Partner shall also automatically constitute the removal of
the Managing General Partner as general partner or managing member, to the
extent applicable, of the other Group Members of which the Managing General
Partner is a general partner or a managing member. If a Person is elected as a
successor Managing General Partner in accordance with the terms of this Section
11.2, such Person shall, upon admission pursuant to Section 10.3, automatically
become a successor general partner or managing member, to the extent applicable,
of the other Group Members of which the Managing General Partner is a general
partner or a managing member. The right of the holders of Outstanding Units to
remove the Managing General Partner shall not exist or be exercised unless the
Partnership has received an opinion opining as to the matters covered by a
Withdrawal Opinion of Counsel. Any successor Managing General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.3.

Section 11.3.  Interest of Departing Partner and Successor General Partners.

          (a)    In the event of (i) withdrawal of a General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of a the Managing General Partner by the holders of Outstanding Units
under circumstances where Cause does not exist, if a successor General Partner
is elected in accordance with the terms of Section 11.1, 11.2 or 11.4, the
Departing Partner shall have the option exercisable prior to the effective date
of the departure of such Departing Partner to require its successor to purchase
(x) its General Partner Interest, (y) its general partner interest (or
equivalent interest), if any, in the other Group Members and (z) in the case of
the withdrawal or removal of the Managing General Partner,

                                      -80-

Inergy Holdings, LLC shall have the right to require the successor Managing
General Partner to purchase the Incentive Distribution Rights and the General
Partner Interest held by Non-Managing General Partner ((x), (y) and (z)
collectively, the "Combined Interest") in exchange for an amount in cash equal
to the fair market value of such Combined Interest, such amount to be determined
and payable as of the effective date of its departure. If the Managing General
Partner is removed by the Unitholders under circumstances where Cause exists or
if the Managing General Partner withdraws under circumstances where such
withdrawal violates this Agreement, and if a successor Managing General Partner
is elected in accordance with the terms of Section 11.1 or 11.2, such successor
shall have the option, exercisable prior to the effective date of the departure
of such Departing Partner, to purchase the Combined Interest of the Departing
Partner for such fair market value of such Combined Interest of the Departing
Partner. In either event, the Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by the Managing
General Partner for the benefit of the Partnership or the other Group Members.

     For purposes of this Section 11.3(a), the fair market value of a Departing
Partner's Combined Interest shall be determined by agreement between the
Departing Partner and its successor or, failing agreement within 30 days after
the effective date of such Departing Partner's departure, by an independent
investment banking firm or other independent expert selected by the Departing
Partner and its successor, which, in turn, may rely on other experts, and the
determination of which shall be conclusive as to such matter.  If such parties
cannot agree upon one independent investment banking firm or other independent
expert within 45 days after the effective date of such departure, then the
Departing Partner shall designate an independent investment banking firm or
other independent expert, the Departing Partner's successor shall designate an
independent investment banking firm or other independent expert, and such firms
or experts shall mutually select a third independent investment banking firm or
independent expert, which third independent investment banking firm or other
independent expert shall determine the fair market value of the Combined
Interest of the Departing Partner.  In making its determination, such third
independent investment banking firm or other independent expert may consider the
then current trading price of Units on any National Securities Exchange on which
Units are then listed, the value of the Partnership's assets, the rights and
obligations of the Departing Partner and other factors it may deem relevant.

          (b)  If the Combined Interest is not purchased in the manner set forth
in Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the Combined Interest of the Departing Partner to Common Units
will be characterized as if such General Partner (or its transferee) contributed
its Combined Interest to the Partnership in exchange for the newly issued Common
Units.

                                      -81-

          (c)  If a successor Non-Managing General Partner is elected in
accordance with the terms of Section 11.1, 11.2 or 11.4 and the option described
in Section 11.3(a) is not exercised, the successor Non-Managing General Partner
shall, at the effective date of its admission to the Partnership, contribute to
the Partnership cash in the amount equal to its Percentage Interest of 1/98th of
the Net Agreed Value of the Partnership's assets on such date. In such event,
such successor Non-Managing General Partner shall, subject to the following
sentence, be entitled to 2% of all Partnership allocations and distributions.
The Managing General Partner shall cause this Agreement to be amended to reflect
that, from and after the date of such successor Non-Managing General Partner's
admission, the successor Non-Managing General Partner's interest in all
Partnership distributions and allocations shall be 2%.

Section 11.4.  Withdrawal of Non-Managing General Partner.

          (a)  The Non-Managing General Partner may withdraw from the
Partnership in the capacity of Non-Managing General Partner (i) upon 90 days'
advance written notice to the Managing General Partner or (ii) by transferring
its General Partner Interest in the Partnership pursuant to Section 4.6 hereof.
Such withdrawal shall take effect on the date specified in such notice. Upon
receiving such notice, the Managing General Partner shall select a successor
Non-Managing General Partner within such 90-day period. Any withdrawal of the
Non-Managing General Partner shall not become effective unless the Partnership
has received by the end of such 90-day period a Withdrawal Opinion of Counsel
that such withdrawal will not result in the loss of limited liability of any
Limited Partner or of a member of the Operating Company or cause the Partnership
or the Operating Company to be treated as a corporation or as an association
taxable as a corporation for federal income tax purposes. Following any
withdrawal of the Non-Managing General Partner, the business and operations of
the Partnership shall be continued by the Managing General Partner.

          (b)  In addition to the voluntary withdrawal described above, the Non-
Managing General Partner shall be deemed to have withdrawn (i) when and if, the
Non-Managing General Partner (A) makes a general assignment for the benefit of
creditors, (B) files a voluntary bankruptcy petition, (C) files a petition or
answer seeking for itself a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law, (D)
files an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Non-Managing General Partner in a
proceeding of the type described in clauses (A)-(C) of this subsection, or (E)
seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Non-Managing General Partner or of all or any substantial part
of its properties; or (ii), when a final and non-appealable judgment is entered
by a court with appropriate jurisdiction ruling that the Non-Managing General
Partner is bankrupt or insolvent, or a final and non-appealable order for relief
is entered by a court with appropriate jurisdiction against the Non-Managing
General Partner, in each case under any federal or state bankruptcy or
insolvency laws as now or hereinafter in effect; or (iii) (A) in the event the
Non-Managing General Partner is a corporation, when a certificate of dissolution
or its equivalent is filed for the Non-Managing General Partner, or 90 days
expire after the date of notice to the Non-Managing General Partner of
revocation of its charter without a reinstatement of its charter, under the laws
of its state of incorporation, (B) in the event the Non-Managing General Partner
is a partnership or a limited liability company, the dissolution and
commencement of winding up of the Non-Managing General Partner, (C) in the event
the Non-Managing General Partner is acting in such

                                      -82-

capacity by virtue of being a trustee of a trust, the termination of the trust,
(D) in the event the Non-Managing General Partner is a natural person, his death
or adjudication of incompetency, and (E) otherwise in the event of the
termination of the Non-Managing General Partner.

          (c)  Notwithstanding the other provisions of this Section 11.4, a
successor Non-Managing General Partner need not be selected if the Partnership
has received an Opinion of Counsel that the failure to select a successor would
not cause the Partnership or the Operating Company to be treated as a
corporation or as an association taxable as a corporation for federal income tax
purposes.

Section 11.5.  Termination of Subordination Period, Conversion of Senior
Subordinated Units and Junior Subordinated Units and Extinguishment of
Cumulative Common Unit Arrearages.

     Notwithstanding any provision of this Agreement, if the Managing General
Partner is removed as general partner of the Partnership under circumstances
where Cause does not exist and Units held by the General Partners and their
Affiliates are not voted in favor of such removal, (i) the Subordination Period
will end and all Outstanding Senior Subordinated Units and Junior Subordinated
Units will immediately and automatically convert into Common Units on a one-for-
one basis and (ii) all Cumulative Common Unit Arrearages on the Common Units
will be extinguished.

Section 11.6.  Withdrawal of Limited Partners.

     No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited Partner
Interest becomes a Record Holder of the Limited Partner Interest so transferred,
such transferring Limited Partner shall cease to be a Limited Partner with
respect to the Limited Partner Interest so transferred.

                                  ARTICLE XII
                          DISSOLUTION AND LIQUIDATION

Section 12.1.  Dissolution.

     The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor Managing General Partner or a successor Non-Managing General Partner
in accordance with the terms of this Agreement or by the withdrawal of the Non-
Managing General Partner pursuant to Section 11.4.  Upon the removal or
withdrawal of the Managing General Partner, if a successor Managing General
Partner is elected pursuant to Section 11.1 or 11.2, the Partnership shall not
be dissolved and such successor Managing General Partner shall continue the
business of the Partnership.  The Partnership shall dissolve, and (subject to
Section 12.2) its affairs shall be wound up, upon:

          (a)   an Event of Withdrawal of the Managing General Partner as
provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor
is elected and an Opinion of Counsel is received as provided in Section 11.1(b)
or 11.2 and such successor is admitted to the Partnership pursuant to Section
10.3;

                                      -83-

          (b)   an election to dissolve the Partnership by the Managing General
Partner that is approved by the holders of a Unit Majority;

          (c)   the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or

          (d)   the sale of all or substantially all of the assets and
properties of the Partnership Group.

Section 12.2.  Continuation of the Business of the Partnership After
Dissolution.

     Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the Managing General Partner as provided
in Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Unit Majority may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as the successor managing general partner a
Person approved by the holders of a Unit Majority.  Unless such an election is
made within the applicable time period as set forth above, the Partnership shall
conduct only activities necessary to wind up its affairs.  If such an election
is so made, then:

          (i)   the reconstituted Partnership shall continue unless earlier
     dissolved in accordance with this Article XII;

          (ii)  if the successor Managing General Partner is not the former
     Managing General Partner, then the interest of the former Managing General
     Partner shall be treated in the manner provided in Section 11.3; and

          (iii) all necessary steps shall be taken to cancel this Agreement and
     the Certificate of Limited Partnership and to enter into and, as necessary,
     to file a new partnership agreement and certificate of limited partnership,
     and the successor managing general partner may for this purpose exercise
     the powers of attorney granted the Managing General Partner pursuant to
     Section 2.6; provided, that the right of the holders of a Unit Majority to
     approve a successor Managing General Partner and to reconstitute and to
     continue the business of the Partnership shall not exist and may not be
     exercised unless the Partnership has received an Opinion of Counsel that
     (x) the exercise of the right would not result in the loss of limited
     liability of any Limited Partner and (y) neither the Partnership, the
     reconstituted limited partnership nor the Operating Company would be
     treated as an association taxable as a corporation or otherwise be taxable
     as an entity for federal income tax purposes upon the exercise of such
     right to continue.

Section 12.3.  Liquidator.

     Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the Managing General

                                      -84-

Partner shall select one or more Persons to act as Liquidator. The Liquidator
(if other than the Managing General Partner) shall be entitled to receive such
compensation for its services as may be approved by holders of at least a
majority of the Outstanding Common Units, Senior Subordinated Units and Junior
Subordinated Units voting as a single class. The Liquidator (if other than the
Managing General Partner) shall agree not to resign at any time without 15 days'
prior notice and may be removed at any time, with or without cause, by notice of
removal approved by holders of at least a majority of the Outstanding Common
Units, Senior Subordinated Units and Junior Subordinated Units voting as a
single class. Upon dissolution, removal or resignation of the Liquidator, a
successor and substitute Liquidator (who shall have and succeed to all rights,
powers and duties of the original Liquidator) shall within 30 days thereafter be
approved by holders of at least a majority of the Outstanding Common Units,
Senior Subordinated Units and Junior Subordinated Units voting as a single
class. The right to approve a successor or substitute Liquidator in the manner
provided herein shall be deemed to refer also to any such successor or
substitute Liquidator approved in the manner herein provided. Except as
expressly provided in this Article XII, the Liquidator approved in the manner
provided herein shall have and may exercise, without further authorization or
consent of any of the parties hereto, all of the powers conferred upon the
Managing General Partner under the terms of this Agreement (but subject to all
of the applicable limitations, contractual and otherwise, upon the exercise of
such powers, other than the limitation on sale set forth in Section 7.3(b)) to
the extent necessary or desirable in the good faith judgment of the Liquidator
to carry out the duties and functions of the Liquidator hereunder for and during
such period of time as shall be reasonably required in the good faith judgment
of the Liquidator to complete the winding up and liquidation of the Partnership
as provided for herein.

Section 12.4.  Liquidation.

     The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:

          (a)  Disposition of Assets. The assets may be disposed of by public or
private sale or by distribution in kind to one or more Partners on such terms as
the Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Partners. The Liquidator may, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or some of
the Partnership's assets would be impractical or would cause undue loss to the
Partners. The Liquidator may, in its absolute discretion, distribute the
Partnership's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Partners.

          (b)  Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to the Liquidator as compensation for serving in such capacity
(subject to the terms of Section 12.3) and amounts to Partners otherwise than in
respect of their distribution rights under Article VI. With respect to any
liability that is contingent, conditional or unmatured or is

                                      -85-

otherwise not yet due and payable, the Liquidator shall either settle such claim
for such amount as it thinks appropriate or establish a reserve of cash or other
assets to provide for its payment. When paid, any unused portion of the reserve
shall be distributed as additional liquidation proceeds.

          (c)  Liquidation Distributions. All property and all cash in excess of
that required to discharge liabilities as provided in Section 12.4(b) shall be
distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).

Section 12.5.  Cancellation of Certificate of Limited Partnership.

     Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.

Section 12.6.  Return of Contributions.

     No General Partner shall be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners or Unitholders, or any portion thereof, it being expressly understood
that any such return shall be made solely from Partnership assets.

Section 12.7.  Waiver of Partition.

     To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.

Section 12.8.  Capital Account Restoration.

     No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership.  Each
General Partner shall be obligated to restore any negative balance in its
Capital Account upon liquidation of its interest in the Partnership by the end
of the taxable year of the Partnership during which such liquidation occurs, or,
if later, within 90 days after the date of such liquidation.

                                      -86-

                                 ARTICLE XIII
           AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

Section 13.1.  Amendment to be Adopted Solely by the Managing General Partner.

     Each Partner agrees that the Managing General Partner, without the approval
of any Partner or Assignee, may amend any provision of this Agreement and
execute, swear to, acknowledge, deliver, file and record whatever documents may
be required in connection therewith, to reflect:

          (a)  a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;

          (b)  admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;

          (c)  a change that, in the sole discretion of the Managing General
Partner, is necessary or advisable to qualify or continue the qualification of
the Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure that
the Partnership and the Operating Company will not be treated as an association
taxable as a corporation or otherwise taxed as an entity for federal income tax
purposes;

          (d)  a change that, in the discretion of the Managing General Partner,
(i) does not adversely affect the Limited Partners (including any particular
class of Partnership Interests as compared to other classes of Partnership
Interests) in any material respect, (ii) is necessary or advisable to (A)
satisfy any requirements, conditions or guidelines contained in any opinion,
directive, order, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute (including the
Delaware Act) or (B) facilitate the trading of the Limited Partner Interests
(including the division of any class or classes of Outstanding Limited Partner
Interests into different classes to facilitate uniformity of tax consequences
within such classes of Limited Partner Interests) or comply with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Limited Partner Interests are or will be listed for trading,
compliance with any of which the Managing General Partner determines in its
discretion to be in the best interests of the Partnership and the Limited
Partners, (iii) is necessary or advisable in connection with action taken by the
Managing General Partner pursuant to Section 5.10 or (iv) is required to effect
the intent expressed in the Registration Statement or the intent of the
provisions of this Agreement or is otherwise contemplated by this Agreement;

          (e)  a change in the fiscal year or taxable year of the Partnership
and any changes that, in the discretion of the Managing General Partner, are
necessary or advisable as a result of a change in the fiscal year or taxable
year of the Partnership including, if the Managing General Partner shall so
determine, a change in the definition of "Quarter" and the dates on which
distributions are to be made by the Partnership;

                                      -87-

          (f)  an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or either of the General Partners or their directors,
officers, trustees or agents from in any manner being subjected to the
provisions of the Investment Company Act of 1940, as amended, the Investment
Advisers Act of 1940, as amended, or "plan asset" regulations adopted under the
Employee Retirement Income Security Act of 1974, as amended, regardless of
whether such are substantially similar to plan asset regulations currently
applied or proposed by the United States Department of Labor;

          (g)  subject to the terms of Section 5.7, an amendment that, in the
discretion of the Managing General Partner, is necessary or advisable in
connection with the authorization of issuance of any class or series of
Partnership Securities pursuant to Section 5.6;

          (h)  any amendment expressly permitted in this Agreement to be made by
the Managing General Partner acting alone;

          (i)  an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;

          (j)  an amendment that, in the discretion of the Managing General
Partner, is necessary or advisable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited liability
company or other entity, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 2.4;

          (k)  a merger or conveyance pursuant to Section 14.3(d); or

          (l)  any other amendments substantially similar to the foregoing.

Section 13.2.  Amendment Procedures.

     Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed only by or with the consent of the
Managing General Partner which consent may be given or withheld in its sole
discretion.  A proposed amendment shall be effective upon its approval by the
holders of a Unit Majority, unless a greater or different percentage is required
under this Agreement or by Delaware law.  Each proposed amendment that requires
the approval of the holders of a specified percentage of Outstanding Units shall
be set forth in a writing that contains the text of the proposed amendment.  If
such an amendment is proposed, the Managing General Partner shall seek the
written approval of the requisite percentage of Outstanding Units or call a
meeting of the Unitholders to consider and vote on such proposed amendment.  The
Managing General Partner shall notify all Record Holders upon final adoption of
any such proposed amendments.

Section 13.3.  Amendment Requirements.

          (a)  Notwithstanding the provisions of Sections 13.1 and 13.2, no
provision of this Agreement that establishes a percentage of Outstanding Units
(including Units deemed owned by the General Partners) required to take any
action shall be amended, altered, changed,

                                      -88-

repealed or rescinded in any respect that would have the effect of reducing such
voting percentage unless such amendment is approved by the written consent or
the affirmative vote of holders of Outstanding Units whose aggregate Outstanding
Units constitute not less than the voting requirement sought to be reduced.

          (b)  Notwithstanding the provisions of Sections 13.1 and 13.2, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner without its consent, unless such shall be deemed to have occurred as a
result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any
way the amounts distributable, reimbursable or otherwise payable to, either of
the General Partners or any of their Affiliates without the consent of the
Managing General Partner, which consent may be given or withheld in its sole
discretion, (iii) change Section 12.1(b), or (iv) change the term of the
Partnership or, except as set forth in Section 12.1(b), give any Person the
right to dissolve the Partnership.

          (c)  Except as provided in Section 14.3, and except as otherwise
provided, and without limitation of the Managing General Partner's authority to
adopt amendments to this Agreement without the approval of any Partners or
Assignees as contemplated in Section 13.1, any amendment that would have a
material adverse effect on the rights or preferences of any class of Partnership
Interests in relation to other classes of Partnership Interests must be approved
by the holders of not less than a majority of the Outstanding Partnership
Interests of the class affected.

          (d)  Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by Section
14.3(b), no amendments shall become effective without the approval of the
holders of at least 90% of the Outstanding Units voting as a single class unless
the Partnership obtains an Opinion of Counsel to the effect that such amendment
will not affect the limited liability of any Limited Partner under applicable
law.

          (e)  Except as provided in Section 13.1, this Section 13.3 shall only
be amended with the approval of the holders of at least 90% of the Outstanding
Units.

Section 13.4.  Special Meetings.

     All acts of Limited Partners to be taken pursuant to this Agreement shall
be taken in the manner provided in this Article XIII.  Special meetings of the
Limited Partners may be called by the Managing General Partner or by Limited
Partners owning 20% or more of the Outstanding Partnership Securities of the
class or classes for which a meeting is proposed.  Limited Partners shall call a
special meeting by delivering to the Managing General Partner one or more
requests in writing stating that the signing Limited Partners wish to call a
special meeting and indicating the general or specific purposes for which the
special meeting is to be called.  Within 60 days after receipt of such a call
from Limited Partners or within such greater time as may be reasonably necessary
for the Partnership to comply with any statutes, rules, regulations, listing,
agreements or similar requirements governing the holding of a meeting or the
solicitation of proxies for use at such a meeting, the Managing General Partner
shall send a notice of the meeting to the Limited Partners either directly or
indirectly through the Transfer Agent.  A

                                      -89-

meeting shall be held at a time and place determined by the Managing General
Partner on a date not less than 10 days nor more than 60 days after the mailing
of notice of the meeting. Limited Partners shall not vote on matters that would
cause the Limited Partners to be deemed to be taking part in the management and
control of the business and affairs of the Partnership so as to jeopardize the
Limited Partners' limited liability under the Delaware Act or the law of any
other state in which the Partnership is qualified to do business.

Section 13.5.  Notice of a Meeting.

     Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders of the class or classes of Limited Partner Interests for which a
meeting is proposed in writing by mail or other means of written communication
in accordance with Section 16.1.  The notice shall be deemed to have been given
at the time when deposited in the mail or sent by other means of written
communication.

Section 13.6.  Record Date.

     For purposes of determining the Limited Partners entitled to notice of or
to vote at a meeting of the Limited Partners or to give approvals without a
meeting as provided in Section 13.11 the Managing General Partner may set a
Record Date, which shall not be less than 10 nor more than 60 days before (a)
the date of the meeting (unless such requirement conflicts with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Limited Partner Interests are listed for trading, in which case the
rule, regulation, guideline or requirement of such exchange shall govern) or (b)
in the event that approvals are sought without a meeting, the date by which
Limited Partners are requested in writing by the Managing General Partner to
give such approvals.

Section 13.7.  Adjournment.

     When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 45 days.  At the adjourned
meeting, the Partnership may transact any business which might have been
transacted at the original meeting.  If the adjournment is for more than 45 days
or if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XIII.

Section 13.8.  Waiver of Notice; Approval of Meeting; Approval of Minutes.

     The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present, either in
person or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof.  All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting.  Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner does not approve, at
the beginning of the meeting, of the transaction of any business because the

                                      -90-

meeting is not lawfully called or convened; and except that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting

Section 13.9.  Quorum.

     The holders of a majority of the Outstanding Partnership Securities of the
class or classes for which a meeting has been called (including Limited Partner
Interests deemed owned by the General Partners) represented in person or by
proxy shall constitute a quorum at a meeting of Limited Partners of such class
or classes unless any such action by the Limited Partners requires approval by
holders of a greater percentage of such Limited Partner Interests, in which case
the quorum shall be such greater percentage.  At any meeting of the Limited
Partners duly called and held in accordance with this Agreement at which a
quorum is present, the act of Limited Partners holding Outstanding Partnership
Securities that in the aggregate represent a majority of the Outstanding
Partnership Securities entitled to vote and be present in person or by proxy at
such meeting shall be deemed to constitute the act of all Limited Partners,
unless a greater or different percentage is required with respect to such action
under the provisions of this Agreement, in which case the act of the Limited
Partners holding Outstanding Partnership Securities that in the aggregate
represent at least such greater or different percentage shall be required.  The
Limited Partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Limited Partners to leave less than a quorum, if any action
taken (other than adjournment) is approved by the required percentage of
Outstanding Partnership Securities specified in this Agreement (including
Outstanding Partnership Securities deemed owned by the General Partners).  In
the absence of a quorum any meeting of Limited Partners may be adjourned from
time to time by the affirmative vote of holders of at least a majority of the
Outstanding Partnership Securities entitled to vote at such meeting (including
Outstanding Partnership Securities deemed owned by the General Partners)
represented either in person or by proxy, but no other business may be
transacted, except as provided in Section 13.7.

Section 13.10.  Conduct of a Meeting.

     The Managing General Partner shall have full power and authority concerning
the manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including the determination of Persons entitled to vote,
the existence of a quorum, the satisfaction of the requirements of Section 13.4,
the conduct of voting, the validity and effect of any proxies and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting.  The Managing General Partner shall
designate a Person to serve as chairman of any meeting and shall further
designate a Person to take the minutes of any meeting.  All minutes shall be
kept with the records of the Partnership maintained by the Managing General
Partner.  The Managing General Partner may make such other regulations
consistent with applicable law and this Agreement as it may deem advisable
concerning the conduct of any meeting of the Limited Partners or solicitation of
approvals in writing, including regulations in regard to the appointment of
proxies, the appointment and duties of inspectors of votes and approvals, the
submission and examination of proxies and other evidence of the right to vote,
and the revocation of approvals in writing.

                                      -91-

Section 13.11.  Action Without a Meeting.

     If authorized by the Managing General Partner, any action that may be taken
at a meeting of the Limited Partners may be taken without a meeting if an
approval in writing setting forth the action so taken is signed by Limited
Partners owning not less than the minimum percentage of the Outstanding Limited
Partner Interests (including Limited Partner Interests deemed owned by the
General Partner) that would be necessary to authorize or take such action at a
meeting at which all the Limited Partners were present and voted (unless such
provision conflicts with any rule, regulation, guideline or requirement of any
National Securities Exchange on which the Limited Partner Interests are listed
for trading, in which case the rule, regulation, guideline or requirement of
such exchange shall govern).  Prompt notice of the taking of action without a
meeting shall be given to the Limited Partners who have not approved in writing.
The Managing General Partner may specify that any written ballot submitted to
Limited Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time period, which shall be not less than
20 days, specified by the Managing General Partner.  If a ballot returned to the
Partnership does not vote all of the Limited Partner Interests held by the
Limited Partners the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests that were not voted.  If approval of
the taking of any action by the Limited Partners is solicited by any Person
other than by or on behalf of the Managing General Partner, the written
approvals shall have no force and effect unless and until (a) they are deposited
with the Partnership in care of the Managing General Partner, (b) approvals
sufficient to take the action proposed are dated as of a date not more than 90
days prior to the date sufficient approvals are deposited with the Partnership
and (c) an Opinion of Counsel is delivered to the Managing General Partner to
the effect that the exercise of such right and the action proposed to be taken
with respect to any particular matter (i) will not cause the Limited Partners to
be deemed to be taking part in the management and control of the business and
affairs of the Partnership so as to jeopardize the Limited Partners' limited
liability, and (ii) are otherwise permissible under the state statutes then
governing the rights, duties and liabilities of the Partnership and the
Partners.

Section 13.12.  Voting and Other Rights.

          (a)  Only those Record Holders of the Limited Partner Interests on the
Record Date set pursuant to Section 13.6 (and also subject to the limitations
contained in the definition of "Outstanding") shall be entitled to notice of,
and to vote at, a meeting of Limited Partners or to act with respect to matters
as to which the holders of the Outstanding Limited Partner Interests have the
right to vote or to act. All references in this Agreement to votes of, or other
acts that may be taken by, the Outstanding Limited Partner Interests shall be
deemed to be references to the votes or acts of the Record Holders of such
Outstanding Limited Partner Interests.

          (b)  With respect to Limited Partner Interests that are held for a
Person's account by another Person (such as a broker, dealer, bank, trust
company or clearing corporation, or an agent of any of the foregoing), in whose
name such Limited Partner Interests are registered, such other Person shall, in
exercising the voting rights in respect of such Limited Partner Interests on any
matter, and unless the arrangement between such Persons provides otherwise, vote
such Limited Partner Interests in favor of, and at the direction of, the Person
who is the beneficial owner, and the Partnership shall be entitled to assume it
is so acting without further

                                      -92-

inquiry. The provisions of this Section 13.12(b) (as well as all other
provisions of this Agreement) are subject to the provisions of Section 4.3.

                                  ARTICLE XIV
                                    MERGER

Section 14.1.  Authority.

     The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.

Section 14.2.  Procedure for Merger or Consolidation.

     Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the Managing General Partner.  If the Managing
General Partner shall determine, in the exercise of its discretion, to consent
to the merger or consolidation, the Managing General Partner shall approve the
Merger Agreement, which shall set forth:

          (a)  The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;

          (b)  The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");

          (c)  The terms and conditions of the proposed merger or consolidation;

          (d)  The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;

          (e)  A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership, operating agreement or other

                                      -93-

similar charter or governing document) of the Surviving Business Entity to be
effected by such merger or consolidation;

          (f)  The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and

          (g)  Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Managing General
Partner.

Section 14.3.  Approval by Limited Partners of Merger or Consolidation.

          (a)  Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.

          (b)  Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the affirmative vote or consent of the holders of a
Unit Majority unless the Merger Agreement contains any provision that, if
contained in an amendment to this Agreement, the provisions of this Agreement or
the Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Limited Partner Interests or of any class of
Limited Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.

          (c)  Except as provided in Section 14.3(d), after such approval by
vote or consent of the Limited Partners, and at any time prior to the filing of
the certificate of merger pursuant to Section 14.4, the merger or consolidation
may be abandoned pursuant to provisions therefor, if any, set forth in the
Merger Agreement.

          (d)  Notwithstanding anything else contained in this Article XIV or in
this Agreement, the Managing General Partner is permitted, in its discretion,
without Limited Partner approval, to merge the Partnership or any Group Member
into, or convey all of the Partnership's assets to, another limited liability
entity which shall be newly formed and shall have no assets, liabilities or
operations at the time of such Merger other than those it receives from the
Partnership or other Group Member if (i) the Managing General Partner has
received an Opinion of Counsel that the merger or conveyance, as the case may
be, would not result in the loss of the limited liability of any Limited Partner
or any member in the Operating Company or cause the Partnership or the Operating
Company to be treated as an association taxable as a corporation or otherwise to
be taxed as an entity for federal income tax purposes (to the extent not
previously treated as such), (ii) the sole purpose of such merger or conveyance
is to effect a mere change in the legal form of the Partnership into another
limited liability entity and (iii) the governing

                                      -94-

instruments of the new entity provide the Limited Partners and the General
Partners with the same rights and obligations as are herein contained.

Section 14.4.  Certificate of Merger.

     Upon the required approval by the Managing General Partner and the
Unitholders of a Merger Agreement, a certificate of merger shall be executed and
filed with the Secretary of State of the State of Delaware in conformity with
the requirements of the Delaware Act.

Section 14.5.  Effect of Merger.

          (a)   At the effective time of the certificate of merger:

          (i)   all of the rights, privileges and powers of each of the business
     entities that has merged or consolidated, and all property, real, personal
     and mixed, and all debts due to any of those business entities and all
     other things and causes of action belonging to each of those business
     entities, shall be vested in the Surviving Business Entity and after the
     merger or consolidation shall be the property of the Surviving Business
     Entity to the extent they were of each constituent business entity;

          (ii)  the title to any real property vested by deed or otherwise in
     any of those constituent business entities shall not revert and is not in
     any way impaired because of the merger or consolidation;

          (iii) all rights of creditors and all liens on or security interests
     in property of any of those constituent business entities shall be
     preserved unimpaired; and

          (iv)  all debts, liabilities and duties of those constituent business
     entities shall attach to the Surviving Business Entity and may be enforced
     against it to the same extent as if the debts, liabilities and duties had
     been incurred or contracted by it.

          (b)   A merger or consolidation effected pursuant to this Article
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.

                                  ARTICLE XV
                  RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS

Section 15.1.  Right to Acquire Limited Partner Interests.

          (a)  Notwithstanding any other provision of this Agreement, if at any
time not more than 20% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partners and their
Affiliates, the Managing General Partner shall then have the right, which right
it may assign and transfer in whole or in part to the Partnership or any
Affiliate of the Managing General Partner, exercisable in its sole discretion,
to purchase all, but not less than all, of such Limited Partner Interests of
such class then Outstanding held by Persons other than the General Partners and
their Affiliates, at the greater of (x) the Current Market Price as of the date
three days prior to the date that the notice described in Section 15 is mailed
and (y) the highest price paid by a General Partner or any of its Affiliates for
any such

                                      -95-

Limited Partner Interest of such class purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) "Current Market Price" as of any date of any class
of Limited Partner Interests means the average of the daily Closing Prices (as
hereinafter defined) per limited partner interest of such class for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) "Closing Price" for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange on which such Limited Partner Interests of such class are
listed or admitted to trading or, if such Limited Partner Interests of such
class are not listed or admitted to trading on any National Securities Exchange,
the last quoted price on such day or, if not so quoted, the average of the high
bid and low asked prices on such day in the over-the-counter market, as reported
by the Nasdaq Stock Market or any other system then in use, or, if on any such
day such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in such Limited Partner
Interests of such class selected by the Managing General Partner, or if on any
such day no market maker is making a market in such Limited Partner Interests of
such class, the fair value of such Limited Partner Interests on such day as
determined reasonably and in good faith by the Managing General Partner; and
(iii) "Trading Day" means a day on which the principal National Securities
Exchange on which such Limited Partner Interests of any class are listed or
admitted to trading is open for the transaction of business or, if Limited
Partner Interests of a class are not listed or admitted to trading on any
National Securities Exchange, a day on which banking institutions in New York
City generally are open.

          (b)  If the Managing General Partner, any Affiliate of the Managing
General Partner or the Partnership elects to exercise the right to purchase
Limited Partner Interests granted pursuant to Section 15.1(a), the Managing
General Partner shall deliver to the Transfer Agent notice of such election to
purchase (the "Notice of Election to Purchase") and shall cause the Transfer
Agent to mail a copy of such Notice of Election to Purchase to the Record
Holders of Limited Partner Interests of such class (as of a Record Date selected
by the Managing General Partner) at least 10, but not more than 60, days prior
to the Purchase Date. Such Notice of Election to Purchase shall also be
published for a period of at least three consecutive days in at least two daily
newspapers of general circulation printed in the English language and published
in the Borough of Manhattan, New York. The Notice of Election to Purchase shall
specify the Purchase Date and the price (determined in accordance with Section
15.1(a)) at which Limited Partner Interests will be purchased and state that the
Managing General Partner, its Affiliate or the Partnership, as the case may be,
elects to purchase such Limited Partner Interests, upon surrender of
Certificates representing such Limited Partner Interests in exchange for
payment, at such office or offices of the Transfer Agent as the Transfer Agent
may specify, or as may be required by any National Securities Exchange on which
such Limited Partner Interests are listed or admitted to trading. Any such
Notice of Election to Purchase mailed to a Record Holder of Limited Partner
Interests at his address as reflected in the records of the Transfer Agent shall
be conclusively presumed to have been given regardless of whether the owner
receives such notice. On or prior to the Purchase Date, the Managing General
Partner, its Affiliate or the Partnership, as the case may be, shall deposit
with the Transfer Agent cash in an amount sufficient to pay the aggregate
purchase price of all of such Limited Partner Interests to be purchased in
accordance

                                      -96-

with this Section 15.1. If the Notice of Election to Purchase shall have been
duly given as aforesaid at least 10 days prior to the Purchase Date, and if on
or prior to the Purchase Date the deposit described in the preceding sentence
has been made for the benefit of the holders of Limited Partner Interests
subject to purchase as provided herein, then from and after the Purchase Date,
notwithstanding that any Certificate shall not have been surrendered for
purchase, all rights of the holders of such Limited Partner Interests (including
any rights pursuant to Articles IV, V, VI, and XII) shall thereupon cease,
except the right to receive the purchase price (determined in accordance with
Section 15.1(a)) for Limited Partner Interests therefor, without interest, upon
surrender to the Transfer Agent of the Certificates representing such Limited
Partner Interests, and such Limited Partner Interests shall thereupon be deemed
to be transferred to the Managing General Partner, its Affiliate or the
Partnership, as the case may be, on the record books of the Transfer Agent and
the Partnership, and the General Partner or any Affiliate of the Managing
General Partner, or the Partnership, as the case may be, shall be deemed to be
the owner of all such Limited Partner Interests from and after the Purchase Date
and shall have all rights as the owner of such Limited Partner Interests
(including all rights as owner of such Limited Partner Interests pursuant to
Articles IV, V, VI and XII).

          (c)  At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.

                                  ARTICLE XVI
                              GENERAL PROVISIONS

Section 16.1.  Addresses and Notices.

     Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below.  Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise.  An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the Managing
General Partner, the Transfer Agent or the mailing organization shall be prima
facie evidence of the giving or making of such notice, payment or report.  If
any notice, payment or report addressed to a Record Holder at the address of
such Record Holder appearing on the books and records of the Transfer Agent or
the Partnership is returned by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver it, such
notice, payment or report and any subsequent notices, payments and reports shall
be deemed to have been duly given or made without further mailing (until such
time as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his

                                      -97-

address) if they are available for the Partner or Assignee at the principal
office of the Partnership for a period of one year from the date of the giving
or making of such notice, payment or report to the other Partners and Assignees.
Any notice to the Partnership shall be deemed given if received by the Managing
General Partner at the principal office of the Partnership designated pursuant
to Section 2.3. The Managing General Partner may rely and shall be protected in
relying on any notice or other document from a Partner, Assignee or other Person
if believed by it to be genuine.

Section 16.2.  Further Action.

     The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.

Section 16.3.  Binding Effect.

     This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.

Section 16.4.  Integration.

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

Section 16.5.  Creditors.

     None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.

Section 16.6.  Waiver.

     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 waiver of any
such breach of any other covenant, duty, agreement or condition.

Section 16.7.  Counterparts.

     This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.

                                      -98-

Section 16.8.  Applicable Law.

     This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.

Section 16.9.  Invalidity of Provisions.

     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 contained herein shall not be affected thereby.

Section 16.10.  Consent of Partners.

     Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.

                    [Rest of Page Intentionally Left Blank]

                                      -99-

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above:

                              MANAGING GENERAL PARTNER:

                              INERGY GP, LLC

                              By:____________________________________
                              Name:__________________________________
                              Title:_________________________________

                              NON-MANAGING GENERAL PARTNER:

                              INERGY PARTNERS, LLC

                              By:____________________________________
                              Name:__________________________________
                              Title:_________________________________

                              ORGANIZATIONAL LIMITED PARTNER:

                              INERGY PARTNERS, LLC

                              By:____________________________________
                              Name:__________________________________
                              Title:_________________________________

                              LIMITED PARTNERS:

                              All Limited Partners now and hereafter admitted as
                              Limited Partners of the Partnership, pursuant to
                              powers of attorney now and hereafter executed in
                              favor of, and granted and delivered to the
                              Managing General Partner.

                              NEW INERGY PROPANE, LLC

                              By:____________________________________
                              Name:__________________________________
                              Title:_________________________________

                                     -100-

                              INERGY HOLDINGS, LLC

                              By:____________________________________
                              Name:__________________________________
                              Title:_________________________________

                                     -101-

                                   EXHIBIT A
                              to the Amended and
                 Restated Agreement of Limited Partnership of
                                 Inergy, L.P.
                      Certificate Evidencing Common Units
                   Representing Limited Partner Interests in
                                 Inergy, L.P.

No. __________                                           __________ Common Units

     In accordance with Section 4.1 of the Amended and Restated Agreement of
Limited Partnership of Inergy, L.P., as amended, supplemented or restated from
time to time (the "Partnership Agreement"), Inergy, L.P., a Delaware limited
partnership (the "Partnership"), hereby certifies that ____________________ (the
"Holder") is the registered owner of Common Units representing limited partner
interests in the Partnership (the "Common Units") transferable on the books of
the Partnership, in person or by duly authorized attorney, upon surrender of
this Certificate properly endorsed and accompanied by a properly executed
application for transfer of the Common Units represented by this Certificate.
The rights, preferences and limitations of the Common Units are set forth in,
and this Certificate and the Common Units represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Partnership
Agreement.  Copies of the Partnership Agreement are on file at, and will be
furnished without charge on delivery of written request to the Partnership at,
the principal office of the Partnership located at 1101 Walnut, Suite 1500,
Kansas City, Missouri 64106. Capitalized terms used herein but not defined shall
have the meanings given them in the Partnership Agreement.

     The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.

     This Certificate shall not be valid far any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.

Dated:_______________              Inergy, L.P.

Countersigned and Registered by:   By:  Inergy GP LLC, its Managing General
                                        Partner

                                   By:__________________________________________
as Transfer Agent and Registrar    Name:________________________________________

By:____________________________    By:__________________________________________
     Authorized Signature               Secretary

                                     -102-

                           [Reverse of Certificate]

                                 ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:

TEN COM -  as tenants in common            UNIF GIFT/TRANSFERS MIN ACT
TEN ENT -  as tenants by the entireties    __________ Custodian _________
                                           (Cust)                    (Minor)
JT TEN -   as joint tenants with right of  under Uniform Gifts/Transfers to CD
           survivorship and not as         Minors Act (State)
           tenants in common

     Additional abbreviations, though not in the above list, may also be used.

                          ASSIGNMENT OF COMMON UNITS
                                      in
                                 INERGY, L.P.
             IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
                   DUE TO TAX SHELTER STATUS OF INERGY, L.P.

     You have acquired an interest in Inergy, L.P., 1101 Walnut, Suite 1500,
Kansas City, Missouri 64106, whose taxpayer identification number is 43-1918951.
The Internal Revenue Service has issued Inergy, L.P. the following tax shelter
registration number:

     YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE IF
YOU CLAIM ANY DEDUCTION, LOSS, CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME
BY REASON OF YOUR INVESTMENT IN INERGY, L.P.

     You must report the registration number as well as the name and taxpayer
identification number of Inergy, L.P. on Form 8271.  FORM 8271 MUST BE ATTACHED
TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS, CREDIT OR OTHER TAX
BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN INERGY, L.P.

     If you transfer your interest in Inergy, L.P. to another person, you are
required by the Internal Revenue Service to keep a list containing (a) that
person's name, address and taxpayer identification number, (b) the date on which
you transferred the interest and (c) the name, address and tax shelter
registration number of Inergy, L.P.  If you do not want to keep such a list, you
must (1) send the information specified above to the Partnership, which will
keep the list for this tax shelter, and (2) give a copy of this notice to the
person to whom you transfer your interest.  Your failure to comply with any of
the above-described responsibilities could result in the imposition of a penalty
under Section 6707(b) or 6708(a) of the Internal Revenue Code of 1986, as
amended, unless such failure is shown to be due to reasonable cause.

                                     -103-

     ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR
THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE
INTERNAL REVENUE SERVICE.

     FOR VALUE RECEIVED, hereby assigns, conveys, sells and transfers unto

________________________________    _______________________________________
(Please print or typewrite name     (Please insert Social Security or other
and address of Assignee)            identifying number of Assignee)

__________ Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint __________ as its attorney-in-fact with full power of
substitution to transfer the same on the books of Inergy, L.P.

Date:                         NOTE: The signature to any endorsement hereon must
                                    correspond with the name as written upon
                                    the face of this Certificate in every
                                    particular, without alteration, enlargement
                                    or change.

SIGNATURE(S) MUST BE                (Signature)
GUARANTEED BY A MEMBER
FIRM OF THE NATIONAL
ASSOCIATION OF
SECURITIES DEALERS, INC.            (Signature)
OR BY A COMMERCIAL BANK
OR TRUST COMPANY
SIGNATURE(S) GUARANTEED

     No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units to
be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge.  A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.

                                     -104-

                   APPLICATION FOR TRANSFER OF COMMON UNITS

     The undersigned ("Assignee") hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.

     The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of Inergy, L.P. (the "Partnership"),
as amended, supplemented or restated to the date hereof (the "Partnership
Agreement"), (b) represents and warrants that the Assignee has all right, power
and authority and, if an individual, the capacity necessary to enter into the
Partnership Agreement, (c) appoints the Managing General Partner of the
Partnership and, if a Liquidator shall be appointed, the Liquidator of the
Partnership as the Assignee's attorney-in-fact to execute, swear to, acknowledge
and file any document, including, without limitation, the Partnership Agreement
and any amendment thereto and the Certificate of Limited Partnership of the
Partnership and any amendment thereto, necessary or appropriate for the
Assignee's admission as a Substituted Limited Partner and as a party to the
Partnership Agreement, (d) gives the powers of attorney provided for in the
Partnership Agreement, and (e) makes the waivers and gives the consents and
approvals contained in the Partnership Agreement. Capitalized terms not defined
herein have the meanings assigned to such terms in the Partnership Agreement.

Date:__________________

___________________________________________   _________________________________
Social Security or other identifying number         Signature of Assignee

___________________________________________   _________________________________
Purchase Price including commissions, if any    Name and Address of Assignee

Type of Entity (check one):

     [_]  Individual           [_]  Partnership         [_]  Corporation

     [_]  Trust                [_]  Other (specify)

Nationality (check one):

     [_]  U.S. Citizen, Resident or Domestic Entity

     [_]  Foreign Corporation  [_]  Non-resident Alien

     If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.

     Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Partnership must withhold tax with respect to certain transfers of
property if a holder of an interest in the Partnership is a foreign person.  To
inform the Partnership that no withholding is

                                     -105-

required with respect to the undersigned interestholder's interest in it, the
undersigned hereby certifies the following (or, if applicable, certifies the
following on behalf of the interestholder).

Complete Either A or B:

A.   Individual Interestholder

     1.   I am not a non-resident alien for purposes of U.S. income taxation.

     2.   My U.S. taxpayer identification number (Social Security Number) is
          __________.

     3.   My home address is _____________________________________________.

B.   Partnership, Corporation or Other Interestholder

     1.   ________________ is not a foreign corporation, foreign partnership,
          foreign trust (Name of Interestholder) or foreign estate (as those
          terms are defined in the Code and Treasury Regulations).

     2.   The interestholder's U.S. employer identification number is ________.

     3.   The interestholder's office address and place of incorporation (if
          applicable) is ___________.

     The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.

     The interestholder understands that this certificate may be disclosed to
the Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.

     Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of:

                        ________________________________
                             Name of Interestholder

                        ________________________________
                               Signature and Date

                        ________________________________
                             Title (if applicable)

     Note:  If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function.  If the Assignee is a broker,

                                     -106-

dealer, bank, trust company, clearing corporation, other nominee owner or an
agent of any of the foregoing, the above certification as to any person for whom
the Assignee will hold the Common Units shall be made to the best of the
Assignee's knowledge.

                                     -107-

                                                                     EXHIBIT 3.4

                          THIRD AMENDED AND RESTATED

                      LIMITED LIABILITY COMPANY AGREEMENT

                                      OF

                              INERGY PROPANE, LLC

                               TABLE OF CONTENTS

                                   ARTICLE I
                                  DEFINITIONS

Section 1.1      Definitions.............................................   2
Section 1.2      Construction............................................   7

                                   ARTICLE II
                                  ORGANIZATION

Section 2.1      Formation...............................................    7
Section 2.2      Name....................................................    8
Section 2.3      Registered Office; Registered Agent; Principal Office;
                  Other Offices..........................................    8
Section 2.4      Purpose and Business....................................    8
Section 2.5      Powers..................................................    9
Section 2.6      Power of Attorney.......................................    9
Section 2.7      Term....................................................   10
Section 2.8      Title to Company Assets.................................   10

                                  ARTICLE III
                               RIGHTS OF MEMBERS

Section 3.1      Limitation of Liability.................................   11
Section 3.2      Outside Activities of the Members.......................   11
Section 3.3      Rights of Members.......................................   11

                                   ARTICLE IV
                             TRANSFERS OF INTERESTS

Section 4.1      Transfer Generally......................................   12
Section 4.2      Transfer of MLP's Membership Interest...................   12
Section 4.3      Transfer of Other Membership Interests..................   12
Section 4.4      Restrictions on Transfers...............................   13

                                   ARTICLE V
                CAPITAL CONTRIBUTIONS AND ISSUANCE OF INTERESTS

Section 5.1      Prior to Closing Date...................................   13
Section 5.2      Contributions at Closing................................   13
Section 5.3      Additional Capital Contributions........................   14
Section 5.4      Interest and Withdrawal.................................   14
Section 5.5      Loans from Members......................................   14
Section 5.6      Issuances of Additional Company Securities..............   14
Section 5.7      Limited Preemptive Rights...............................   15
Section 5.8      Fully Paid and Non-Assessable Nature of Membership
                  Interests..............................................   15

                                   ARTICLE VI
                         ALLOCATIONS AND DISTRIBUTIONS

Section 6.1      Allocations.............................................   16
Section 6.2      Distributions...........................................   16

                                       i

                                  ARTICLE VII
                      MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1       Management.............................................   16
Section 7.2       The Board of Directors; Appointment; Manner of Acting..   18
Section 7.3       Removal of Members of the Board of Directors...........   19
Section 7.4       Resignations of Members of the Board of Directors......   19
Section 7.5       Vacancies on the Board of Directors....................   19
Section 7.6       Meetings; Committees...................................   19
Section 7.7       Restrictions on Board of Directors' Authority..........   20
Section 7.8       Reimbursement of the Managing General Partner; Benefit
                   Plans.................................................   21
Section 7.9       Outside Activities.....................................   21
Section 7.10      Loans from the General Partners; Loans or Contributions
                   from the Company; Contracts with Affiliates...........   22
Section 7.11      Indemnification........................................   24
Section 7.12      Liability of Indemnitees...............................   25
Section 7.13      Resolution of Conflicts of Interest....................   26
Section 7.14      Other Matters Concerning the Board of Directors........   27
Section 7.15      Reliance by Third Parties..............................   28

                                  ARTICLE VIII
                                    OFFICERS

Section 8.1       Officers...............................................   29
Section 8.2       Compensation...........................................   31

                                   ARTICLE IX
                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1       Records and Accounting.................................   31
Section 9.2       Fiscal Year............................................   31

                                   ARTICLE X
                                  TAX MATTERS

Section 10.1      Tax Returns and Information............................   31
Section 10.2      Tax Elections..........................................   31

                                   ARTICLE XI
                              ADMISSION OF MEMBERS

Section 11.1      Admission of MLP.......................................   32
Section 11.2      Admission of Substituted Members.......................   32
Section 11.3      Admission of Additional Members........................   32
Section 11.4      Amendment of Agreement and Certificate of Formation....   33

                                  ARTICLE XII
                             WITHDRAWAL OF MEMBERS

Section 12.1      Withdrawal of Members..................................   33

                                      ii

                                  ARTICLE XIII
                          DISSOLUTION AND LIQUIDATION

Section 13.1      Dissolution............................................   33
Section 13.2      Liquidator.............................................   33
Section 13.3      Liquidation............................................   34
Section 13.4      Cancellation of Certificate of Formation...............   34
Section 13.5      Return of Capital Contributions........................   35
Section 13.6      Waiver of Partition....................................   35
Section 13.7      Capital Account Restoration............................   35

                                  ARTICLE XIV
                             AMENDMENT OF AGREEMENT

Section 14.1      Amendment to be Adopted Solely by the Board of
                    Directors............................................   35
Section 14.2      Amendment Procedures...................................   36

                                   ARTICLE XV
                                     MERGER

Section 15.1      Authority..............................................   37
Section 15.2      Procedure for Merger or Consolidation..................   37
Section 15.3      Approval by Members of Merger or Consolidation.........   38
Section 15.4      Certificate of Merger..................................   38
Section 15.5      Effect of Merger.......................................   39

                                  ARTICLE XVI
                               GENERAL PROVISIONS

Section 16.1       Addresses and Notices.................................   39
Section 16.2       Further Action........................................   39
Section 16.3       Binding Effect........................................   39
Section 16.4       Integration...........................................   40
Section 16.5       Creditors.............................................   40
Section 16.6       Waiver................................................   40
Section 16.7       Counterparts..........................................   40
Section 16.8       Applicable Law........................................   40
Section 16.9       Invalidity of Provisions..............................   40
Section 16.10      Consent of Members....................................   40

                                      iii

                           THIRD AMENDED AND RESTATED
                       LIMITED LIABILTY COMPANY AGREEMENT
                                       OF
                              INERGY PROPANE, LLC

     THIS THIRD AMENDED AND RESTATED LIMITED LIABILTY COMPANY AGREEMENT OF
INERGY PROPANE, LLC, dated as of July 31, 2001, is entered into by and among
Inergy, L.P., a Delaware limited partnership ("MLP"), Inergy Partners, LLC, a
Delaware limited liability company ("Inergy Partners"), Rolesville Gas and Oil
Company, Inc., a North Carolina corporation ("Rolesville Gas"), Wilson Oil
Company of Johnston County, Inc., a North Carolina corporation ("Wilson Oil"),
together with any other Persons who hereafter become Members in the Company or
parties hereto as provided herein.

                                R E C I T A L S:
                                - - - - - - - -

     WHEREAS, Inergy Partners and Warren Rogers, individually ("Rogers"), caused
Inergy Propane, LLC (referred to herein as the "Company" and formerly known as
McCracken Oil & Propane Company, LLC ) to be formed as a limited liability
company under the Delaware Limited Liability Company Act on October 25, 1996.

     WHEREAS, Inergy Partners, Rogers and an employee investor group entered
into a Limited Liability Company Agreement relating to the Company on November
4, 1996, as amended on October 21, 1997.

     WHEREAS, Rogers and the members of the employee investor group exchanged
their membership interests in the Company for cash or certain membership
interests in Inergy Partners pursuant to certain Consents to Exchange of
Interests, each dated as of September 30, 1998, and as a result are no longer
members of the Company.

     WHEREAS, Inergy Partners later amended and restated in its entirety the
Limited Liability Company Agreement on September 30, 1998.

     WHEREAS, Inergy Partners, Rolesville Gas and Wilson Oil amended and
restated in its entirety the first amended and restated Limited Liability
Company Agreement by executing a second amended and restated Limited Liability
Company Agreement on September 30, 1999, to, among other things, provide for
common and preferred limited liability company interests, change the name of the
limited liability company to Inergy Propane, LLC and admit certain new Members
to the Company.

     WHEREAS, Inergy Partners, Rolesville Gas and Wilson Oil amended Article V
of the second amended and restated Limited Liability Company Agreement in June
2001, to, among other things, provide for a board of directors and officers.

     WHEREAS, Inergy Partners, Rolesville Gas and Wilson Oil now desire to
execute this third amended and restated Limited Liability Company Agreement in
connection with the initial public offering of Inergy, L.P., and in connection
therewith, Inergy Partners, Rolesville Gas and Wilson Oil desire to withdraw
from the Company.

     NOW THEREFORE, in consideration of the covenants, conditions and agreements
contained herein, the parties hereto hereby enter into this Agreement:

                                   ARTICLE I
                                  DEFINITIONS

Section 1.1  Definitions.

     The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.

     "Act" means the Delaware Limited Liability Company Act, 6 Del. C. (S) 18-
101, et seq., as amended, supplemented or restated from time to time, and any
successor to such statute.

     "Additional Member" means a Person admitted to the Company as a Member
pursuant to Section 11.3 and who is shown as such on the books and records of
the Company.

     "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.

     "Agreement" means this Amended and Restated Limited Liability Company
Agreement of Inergy Propane, LLC, as it may be amended, supplemented or restated
from time to time. The Agreement shall constitute a "limited liability company
agreement" as such term is defined in the Act.

     "Assignee" means a Person to whom one or more Membership Interests have
been transferred in a manner permitted under this Agreement, but who has not
been admitted as a Substituted Member.

     "Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.

     "Audit Committee" means a committee of the Board of Directors of the
Company, which shall be composed of the individuals who serve from time to time
as members of the audit committee of the board of directors of the Managing
General Partner.

     "Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date,

                                       2

          (a) the sum of (i) all cash and cash equivalents of the Company Group
on hand at the end of such Quarter, and (ii) all additional cash and cash
equivalents of the Company Group on hand on the date of determination of
Available Cash with respect to such Quarter resulting from Working Capital
Borrowings made subsequent to the end of such Quarter, less

          (b) the amount of any cash reserves that is necessary or appropriate
in the reasonable discretion of the Board of Directors to (i) provide for the
proper conduct of the business of the Company Group (including reserves for
future capital expenditures and for anticipated future credit needs of the
Company Group) subsequent to such Quarter, (ii) comply with applicable law or
any loan agreement, security agreement, mortgage, debt instrument or other
agreement or obligation to which any Group Member is a party or by which it is
bound or its assets are subject or (iii) provide funds for distributions under
Section 6.4 or 6.5 of the MLP Agreement in respect of any one or more of the
next four Quarters; provided, however, that the Board of Directors may not
establish cash reserves pursuant to (iii) above if the effect of such reserves
would be that the MLP is unable to distribute the Minimum Quarterly Distribution
on all Common Units, plus any Cumulative Common Unit Arrearage on all Common
Units, with respect to such Quarter; and provided further that disbursements
made by a Group Member or cash reserves established, increased or reduced after
the end of such Quarter but on or before the date of determination of Available
Cash with respect to such Quarter shall be deemed to have been made,
established, increased or reduced, for purposes of determining Available Cash,
within such Quarter if the Board of Directors so determines.

     Notwithstanding the foregoing, "Available Cash" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.

     "Bank Credit Agreement" means the Credit Agreement, dated as of July 25,
2001 among the Company, as Borrower, First Union National Bank, as
Administrative Agent, and the other lenders party thereto.

     "Board of Directors" means the board of directors of the Company, which
shall be composed of the individuals who serve from time to time as directors of
the Managing General Partner, to whom the MLP irrevocably delegates, and in
which is vested, pursuant to Section 7.1, the power to manage the business and
activities of the Company.

     "Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Missouri shall not be regarded as a
Business Day.

     "Capital Contribution" means any cash, cash equivalents or the value of
Contributed Property that a Member contributes to the Company pursuant to this
Agreement or the Contribution Agreement.

     "Cause" means a court of competent jurisdiction has entered a final, non-
appealable judgment finding a Person liable for actual fraud, gross negligence
or willful or wanton misconduct in its capacity as a member of the Board of
Directors.

                                       3

     "Certificate of Formation" means the Certificate of Formation of the
Company filed with the Secretary of State of the State of Delaware as referenced
in Section 2.1, as such Certificate of Formation may be amended, supplemented or
restated from time to time.

     "Closing Date" means the first date on which Common Units are sold by the
MLP to the Underwriters pursuant to the provisions of the Underwriting
Agreement.

     "Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
successor law.

     "Commission" means the United States Securities and Exchange Commission.

     "Common Unit" has the meaning assigned to such term in the MLP Agreement.

     "Company" means Inergy Propane, LLC, a Delaware limited liability company,
and any successors thereto.

     "Company Group" means the Company and any Subsidiary of the Company,
treated as a single consolidated entity.

     "Company Security" means any class or series of membership interest in the
Company.

     "Conflicts Committee" means a committee of the Board of Directors of the
Company, which shall be composed of the individuals who serve from time to time
as members of the conflicts committee of the board of directors of the Managing
General Partner.

     "Contributed Property" means each property or other asset, in such form as
may be permitted by the Act, but excluding cash, contributed to the Company.

     "Contribution Agreement" means the Contribution, Conveyance, Assignment and
Assumption Agreement, dated the Closing Date, among the Company, the MLP and
certain other parties named therein, together with any additional documents and
instruments contemplated or referenced thereunder.

     "Director" means a member of the Board of Directors.

     "General Partners" means the Managing General Partner and the Non-Managing
General Partner and their successors and permitted assigns as managing general
partner and non-managing general partner, respectively, of the MLP.

     "Group Member" means a member of the Company Group.

     "Indemnitee" means (a) the members of the Board of Directors or the members
of the board of directors of the MLP or any other Group Member, (b) the General
Partners, (c) any Person who is or was a member, partner, director, officer,
employee, agent or trustee of any Group Member, the MLP, the General Partners or
any of their respective Affiliates and (d) any Person who is or was serving at
the request of the Board of Directors as a member, partner,

                                       4

director, officer, employee, partner, agent, fiduciary or trustee of another
Person, in each case, acting in such capacity, provided, that a Person shall not
be an Indemnitee by reason of providing, on a fee-for-services basis, trustee,
fiduciary or custodial services.

     "Inergy Partners" has the meaning assigned to such term in the introductory
paragraph.

     "Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.

     "Liquidation Date" means the date on which any event giving rise to the
dissolution of the Company occurs.

     "Liquidator" means one or more Persons selected by the Board of Directors
to perform the functions described in Section 13.2 as liquidating trustee of the
Company within the meaning of the Act.

     "Managing General Partner" means Inergy GP, LLC, a Delaware limited
liability company, and the managing general partner of the MLP, and its
successors and permitted assigns as managing general partner of the MLP.

     "Member" means any Person that is admitted to the Company as a member
pursuant to the terms and conditions of this Agreement; but the term Member
shall not include any Person from and after the time such Person withdraws as a
Member from the Company.

     "Membership Interest" means the ownership interest of a Member in the
Company.

     "Merger Agreement" has the meaning assigned to such term in Section 15.1.

     "Minimum Quarterly Distribution" has the meaning assigned to such term in
the MLP Agreement.

     "MLP" has the meaning assigned to such term in the recitals.

     "MLP Agreement" means the Amended and Restated Agreement of Limited
Partnership of Inergy, L.P., as it may be amended, supplemented or restated from
time to time.

     "MLP Security" has the meaning assigned to the term "Partnership Security"
in the MLP Agreement.

     "National Securities Exchange" has the meaning assigned to such term in the
MLP Agreement.

     "Non-Managing General Partner" means Inergy Partners, LLC, a Delaware
limited liability company, and the non-managing general partner of the MLP, and
its successors and permitted assigns as non-managing general partner of the MLP.

     "Officers" means the officers of the Company as described in Article VIII.

                                       5

     "Opinion of Counsel" means a written opinion of counsel (which may be
regular counsel to the Company or the MLP or any of their respective Affiliates)
acceptable to the Board of Directors in its reasonable discretion.

     "Percentage Interest" means the percentage interest in the Company held by
each Member upon completion of the transactions in Section 5.2 and shall mean,
as to the MLP, 100%.

     "Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.

     "Pro Rata" means, when modifying Members and Assignees, apportioned among
all Members and Assignees in accordance with their relative Percentage
Interests.

     "Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Company.

     "Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-56976) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under the
Securities Act to register the offering and sale of the Common Units in the
Initial Offering.

     "Rogers" has the meaning assigned to such term in the recitals.

     "Rolesville Gas" has the meaning assigned to such term in the introductory
paragraph.

     "Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.

     "Special Approval" means approval by a majority of the members of the
Conflicts Committee.

     "Subordinated Unit" has the meaning assigned to such term in the MLP
Agreement.

     "Subordination Period" has the meaning assigned to such term in the MLP
Agreement.

     "Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership

                                       6

interest or (ii) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.

     "Substituted Member" means a Person who is admitted as a Member to the
Company pursuant to Section 11.2 in place of and with all the rights of a Member
and who is shown as a Member on the books and records of the Company.

     "Surviving Business Entity" has the meaning assigned to such term in
Section 15.2(b).

     "Transfer" has the meaning assigned to such term in Section 4.1(a).

     "Underwriter" means each Person named as an underwriter in the Underwriting
Agreement who purchases Common Units pursuant thereto.

     "Underwriting Agreement" means, collectively, the Underwriting Agreement
dated July 25, 2001 among the Company, the MLP, the Managing General Partner,
the Underwriters and certain other parties, providing for the purchase of Common
Units by such Underwriters.

     "Unit" has the meaning assigned to such term in the MLP Agreement.

     "Unit Majority" has the meaning assigned to such term in the MLP Agreement.

     "U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.

     "Wilson Oil" has the meaning assigned to such term in the introductory
paragraph.

     "Working Capital Borrowings" has the meaning assigned to such term in the
MLP Agreement.

Section 1.2  Construction.

     Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.

                                  ARTICLE II
                                  ORGANIZATION

Section 2.1  Formation.

     Inergy Partners, LLC, a Delaware limited liability company, and Rogers,
individually, previously formed the Company as a limited liability company
pursuant to the provisions of the Act by virtue of the filing of the Certificate
of Formation with the Secretary of State of the State of Delaware on October 25,
1996.

                                       7

Section 2.2  Name.

     The name of the Company shall be "Inergy Propane, LLC". The Company's
business may be conducted under any other name or names deemed necessary or
appropriate by the Board of Directors in its sole discretion, including, if
consented to by the Managing General Partner (on behalf of the MLP), the name of
the MLP. The words "Limited Liability Company," "L.L.C." or "LLC" or similar
words or letters shall be included in the Company's name where necessary for the
purpose of complying with the laws of any jurisdiction that so requires. The
Board of Directors in its discretion may change the name of the Company at any
time and from time to time and shall notify the other Member(s) of such change
in the next regular communication to the Members.

Section 2.3  Registered Office; Registered Agent; Principal Office; Other
             Offices.

     Unless and until changed by the Board of Directors, the registered office
of the Company in the State of Delaware shall be located at 1209 Orange Street,
New Castle County, Wilmington, Delaware 19801, and the registered agent for
service of process on the Company in the State of Delaware at such registered
office shall be The Corporation Trust Company. The principal office of the
Company shall be located at 1101 Walnut, Suite 1500, Kansas City, Missouri
64106 or such other place as the Board of Directors may from time to time
designate by notice to the Members. The Company may maintain offices at such
other place or places within or outside the State of Delaware as the Board of
Directors deems necessary or appropriate.

Section 2.4  Purpose and Business.

     The purpose and nature of the business to be conducted by the Company shall
be to (a) manage, operate, lease, sell and otherwise deal with any and all
assets or properties contributed to the Company by the Members or hereafter
acquired by the Company, (b) serve as the sole member or stockholder of its
Subsidiaries and, in connection therewith, to exercise all the rights and powers
conferred upon the Company as the sole member or stockholder of such
Subsidiaries pursuant to the operating agreements or charter documents of each
of such Subsidiaries, (c) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any type of business or activity engaged in
by the Company and its Subsidiaries and their predecessors prior to the Closing
Date and, in connection therewith, to exercise all of the rights and powers
conferred upon the Company pursuant to the agreements relating to such business
activity, (d) engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage indirectly in, any business activity that is approved by the Board of
Directors and which lawfully may be conducted by a limited liability company
organized pursuant to the Act and, in connection therewith, to exercise all of
the rights and powers conferred upon the Company pursuant to the agreements
relating to such business activity, and (e) do anything necessary or appropriate
to the foregoing, including the making of capital contributions or loans to a
Group Member, the MLP or any Subsidiary thereof; provided, however, in the case
of (c) and (d) above, that the Board of Directors reasonably determines, as of
the date of the acquisition or commencement of such activity, that such activity
(i) generates "qualifying income" (as such term is defined pursuant to Section
7704 of the Code) or (ii)

                                       8

enhances the operations of an activity of the Company or the MLP that generates
qualifying income. The Board of Directors has no obligation or duty to the
Company, the Members, or the Assignees to propose or approve, and in its
discretion may decline to propose or approve, the conduct by the Company of any
business.

Section 2.5  Powers.

     The Company shall be empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described in Section 2.4 and for
the protection and benefit of the Company.

Section 2.6  Power of Attorney.

     (a) Each Member and each Assignee hereby constitutes and appoints the
President of the Company and, if a Liquidator shall have been selected pursuant
to Section 13.3, the Liquidator (and any successor to the Liquidator by merger,
transfer, assignment, election or otherwise) and each of their authorized
officers and attorneys-in-fact, as the case may be, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in his name, place and stead, to:

         (i) execute, swear to, acknowledge, deliver, file and record in the
     appropriate public offices (A) all certificates, documents and other
     instruments (including this Agreement and all amendments or restatements
     hereof and all amendments and restatements of the Certificate of Formation)
     that the Board of Directors or the Liquidator deems necessary or
     appropriate to form, qualify or continue the existence or qualification of
     the Company as a limited liability company in the State of Delaware and in
     all other jurisdictions in which the Company may conduct business or own
     property; (B) all certificates, documents and other instruments that the
     Board of Directors or the Liquidator deems necessary or appropriate to
     reflect, in accordance with its terms, any amendment, change, modification
     or restatement of this Agreement; (C) all certificates, documents and other
     instruments (including conveyances and a certificate of cancellation) that
     the Board of Directors or the Liquidator deems necessary or appropriate to
     reflect the dissolution and liquidation of the Company pursuant to the
     terms of this Agreement; (D) all certificates, documents and other
     instruments relating to the admission, withdrawal, removal or substitution
     of any Member pursuant to, or other events described in, Article IV, XI,
     XII or XIII; (E) all certificates, documents and other instruments relating
     to the determination of the rights, preferences and privileges of any class
     or series of Membership Interests issued pursuant hereto; and (F) all
     certificates, documents and other instruments (including agreements and a
     certificate of merger) relating to a merger or consolidation of the Company
     pursuant to Article XV; and

         (ii) execute, swear to, acknowledge, deliver, file and record all
     ballots, consents, approvals, waivers, certificates, documents and other
     instruments necessary or appropriate, in the discretion of the Board of
     Directors or the Liquidator, to make, evidence, give, confirm or ratify any
     vote, consent, approval, agreement or other action that is made or given by
     the Members hereunder or is consistent with the terms of this

                                       9

     Agreement or is necessary or appropriate, in the discretion of the Board of
     Directors or the Liquidator, to effectuate the terms or intent of this
     Agreement; provided, that when required by any provision of this Agreement
     that establishes a percentage of the Members or of the Members of any class
     or series required to take any action, the Board of Directors and the
     Liquidator may exercise the power of attorney made in this Section
     2.6(a)(ii) only after the necessary vote, consent or approval of the
     Members or of the Members of such class or series, as applicable.

     Nothing contained in this Section 2.6(a) shall be construed as authorizing
the Board of Directors to amend this Agreement except in accordance with Article
XIV or as may be otherwise expressly provided for in this Agreement.

     (b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and, to the maximum
extent permitted by law, not be affected by the subsequent death, incompetency,
disability, incapacity, dissolution, bankruptcy or termination of any Member or
Assignee and the transfer of all or any portion of such Member's or Assignee's
Membership Interest and shall extend to such Member's or Assignee's successors
and assigns. Each such Member or Assignee hereby agrees to be bound by any
representation made by the President or the Liquidator acting in good faith
pursuant to such power of attorney; and each such Member or Assignee, to the
maximum extent permitted by law, hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of the President or the
Liquidator taken in good faith under such power of attorney. Each Member or
Assignee shall execute and deliver to the President or the Liquidator, within 15
days after receipt of the request therefor, such further designation, powers of
attorney and other instruments as the President or the Liquidator deems
necessary to effectuate this Agreement and the purposes of the Company.

Section 2.7  Term.

     The term of the Company commenced upon the filing of the Certificate of
Formation in accordance with the Act and shall continue in existence in
perpetuity or until the earlier dissolution of the Company in accordance with
the provisions of Article XIII. The existence of the Company as a separate legal
entity shall continue until the cancellation of the Certificate of Formation as
provided in the Act.

Section 2.8  Title to Company Assets.

     Title to Company assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Company as an entity,
and no Member, individually or collectively, shall have any ownership interest
in such Company assets or any portion thereof.

                                       10

                                  ARTICLE III
                               RIGHTS OF MEMBERS

Section 3.1  Limitation of Liability.

     The Members shall have no liability under this Agreement except as
expressly provided in this Agreement or in the Act.

Section 3.2  Outside Activities of the Members.

     Subject to the provisions of Section 7.9 and the Contribution Agreement,
which shall continue to be applicable to the Persons referred to therein,
regardless of whether such Persons shall also be Members or Assignees, any
Member or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Company,
including business interests and activities in direct competition with the
Company Group. Neither the Company nor any other Member or Assignee shall have
any rights by virtue of this Agreement in any business ventures of any Member or
Assignee.

Section 3.3  Rights of Members.

     (a) In addition to other rights provided by this Agreement or by applicable
law, and except as limited by Section 3.3(b), each Member shall have the right,
for a purpose reasonably related to such Member's interest as a member in the
Company, upon reasonable written demand and at such Member's own expense:

         (i) to obtain true and full information regarding the status of the
     business and financial condition of the Company;

         (ii) promptly after becoming available, to obtain a copy of the
     Company's federal, state and local income tax returns for each year;

         (iii) to have furnished to him a current list of the name and last
     known business, residence or mailing address of each Member;

         (iv) to have furnished to him a copy of this Agreement and the
     Certificate of Formation and all amendments thereto, together with a copy
     of the executed copies of all powers of attorney pursuant to which this
     Agreement, the Certificate of Formation and all amendments thereto have
     been executed;

         (v) to obtain true and full information regarding the amount of cash
     and a description and statement of the Capital Contributions made by each
     Member and which each Member has agreed to contribute in the future, and
     the date on which each became a Member; and

         (vi) to obtain such other information regarding the affairs of the
     Company as is just and reasonable.

                                       11

     (b) The Board of Directors may keep confidential from the Members and
Assignees, for such period of time as the Board of Directors deems reasonable,
(i) any information that the Board of Directors reasonably believes to be in the
nature of trade secrets or (ii) other information the disclosure of which the
Board of Directors in good faith believes (A) is not in the best interests of
the Company Group, (B) could damage the Company Group or (C) that any Group
Member is required by law or by agreement with any third party to keep
confidential (other than agreements with Affiliates of the Company the primary
purpose of which is to circumvent the obligations set forth in this Section
3.3).

                                  ARTICLE IV
                             TRANSFERS OF INTERESTS

Section 4.1  Transfer Generally.

     (a) The term "transfer," when used in this Agreement with respect to a
Membership Interest, shall be deemed to refer to a transaction by which the
holder of a Membership Interest assigns such Membership Interest to another
Person who is or becomes a Member or an Assignee, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise.

     (b) No Membership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Membership Interest not made in
accordance with this Article IV shall be null and void.

     (c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any member of the General Partners of any or all of the issued
and outstanding membership interests in the General Partners.

Section 4.2  Transfer of MLP's Membership Interest.

     If the Managing General Partner (acting on behalf of the MLP) transfers its
interest as the managing general partner of the MLP to any Person in accordance
with the provisions of the MLP Agreement, the Managing General Partner shall
contemporaneously therewith transfer all, but not less than all, of the MLP's
Membership Interest to such Person, and the other Members hereby expressly
consent to such transfer.

Section 4.3   Transfer of Other Membership Interests.

     A Member, other than the MLP, may transfer all, but not less than all, of
its Membership Interest in connection with the merger, consolidation or other
combination of such Member with or into any other Person or the transfer by such
Member of all or substantially all of its assets to another Person, and
following any such transfer such Person may become a Substituted Member pursuant
to Article XI. Except as set forth in the immediately preceding sentence and in
Section 5.2, or in connection with any pledge of (or any related foreclosure on)
a Member's Membership Interest solely for the purpose of securing, directly or
indirectly, indebtedness of the Company, the MLP or such Member, and except for
the transfers contemplated by Sections 5.2 and 11.1, a

                                       12

Member may not transfer all or any part of its Membership Interest or withdraw
from the Company.

Section 4.4  Restrictions on Transfers.

     (a) Notwithstanding the other provisions of this Article IV, no transfer of
any Membership Interest shall be made if such transfer would (i) violate the
then applicable federal or state securities laws or rules and regulations of the
Commission, any state securities commission or any other governmental authority
with jurisdiction over such transfer, (ii) terminate the existence or
qualification of the Company or the MLP under the laws of the jurisdiction of
its formation or (iii) cause the Company or the MLP to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes (to the extent not already so treated or taxed).

     (b) The Board of Directors may impose restrictions on the transfer of
Membership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Company or the MLP
becoming taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes. The restrictions may be imposed by making such
amendments to this Agreement as the Board of Directors may determine to be
necessary or appropriate to impose such restrictions.

                                   ARTICLE V
                CAPITAL CONTRIBUTIONS AND ISSUANCE OF INTERESTS

Section 5.1  Prior to Closing Date.

     Immediately prior to the Closing Date, the Membership Interests in the
Company were held by the parties hereto as follows:

                                                                                                 Common               Preferred
                                           Common                   Preferred                  Percentage            Percentage
          Party                       Capital Account            Capital Account                Interest              Interest
          -----                       ---------------            ---------------               ----------            ----------
                                                                                                         
Inergy, L.P.                                --                              --                     --                       --
Inergy Partners, LLC                        (1)                             --                    100%                      --
Rolesville Gas and Oil
 Company, Inc.                              --                      $2,780,000                     --                  51.5925%
Wilson Oil Company of
 Johnston County, Inc.                      --                      $2,608,385                     --                  48.4075%

_______________
(1)  The capital of the Company not allocated to Rolesville Gas or Wilson Oil in
     respect of their respective preferred capital accounts is allocated to the
     capital account of Inergy Partners, LLC.

Section 5.2      Contributions at Closing.

                                       13

     (a) On the Closing Date and pursuant to the Contribution Agreement, Inergy
Partners shall transfer substantially all of its wholesale assets to the Company
as a capital contribution.

     (b) On the Closing Date and pursuant to the Contribution Agreement,
Rolesville Gas and Wilson Oil will contribute their respective preferred
interests in the Company (set forth in Section 5.1 above) for a similar
preferred interest in New Inergy Propane, LLC, a Delaware limited liability
company.

     (c) On the Closing Date and pursuant to the Contribution Agreement, New
Inergy Propane, LLC will contribute its preferred interest in the Company to the
MLP in exchange for Units.

     (d) On the Closing Date and pursuant to the Contribution Agreement, the MLP
shall contribute the cash received from the Initial Offering of Common Units and
from other sources to the Company as an additional capital contribution.

     (e) Following the foregoing transactions, and by execution of this
Agreement, all preferred interests of the Company are cancelled and the MLP
shall hold 100% of the common Membership Interest in the Company.

Section 5.3      Additional Capital Contributions.

     With the consent of the Board of Directors, any Member may, but shall not
be obligated to, make additional Capital Contributions to the Company.

Section 5.4  Interest and Withdrawal.

     No interest shall be paid by the Company on Capital Contributions. No
Member or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Company may be considered as such by
law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Member or Assignee shall have
priority over any other Member or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Members or Assignees agree within the meaning of
Section 18-502(b) of the Act.

Section 5.5  Loans from Members.

     Loans by a Member to the Company shall not constitute Capital
Contributions. If any Member shall advance funds to the Company in excess of the
amounts required hereunder to be contributed by it to the capital of the
Company, the making of such excess advances shall not result in any increase in
the amount of the Capital Account of such Member. The amount of any such excess
advances shall be a debt obligation of the Company to such Member and shall be
payable or collectible only out of the Company assets in accordance with the
terms and conditions upon which such advances are made.

Section 5.6  Issuances of Additional Company Securities.

                                       14

     (a) The Company may issue additional Company Securities and options,
rights, warrants and appreciation rights relating to the Company Securities for
any Company purpose at any time and from time to time to such Persons for such
consideration and on such terms and conditions as shall be established by the
Board of Directors and approved by the Members. The issuance by the Company of
Company Securities or rights, warrants or appreciation rights in respect thereof
shall be deemed an amendment to this Agreement.

     (b) Each additional Company Security authorized to be issued by the Company
pursuant to Section 5.6(a) may be issued in one or more classes, or one or more
series of any such classes, with such designations, preferences, rights, powers
and duties (which may be senior to existing classes and series of Company
Securities), as shall be fixed by the Board of Directors and approved by the
Members, including (i) the right to share Company profits and losses or items
thereof; (ii) the right to share in Company distributions; (iii) the rights upon
dissolution and liquidation of the Company; (iv) whether, and the terms and
conditions upon which, the Company may redeem the Company Security; (v) whether
such Company Security is issued with the privilege of conversion or exchange
and, if so, the terms and conditions of such conversion or exchange; (vi) the
terms and conditions upon which each Company Security will be issued, evidenced
by certificates and assigned or transferred; and (vii) the right, if any, of
each such Company Security to vote on Company matters, including matters
relating to the relative designations, preferences, rights, powers and duties of
such Company Security.

     (c) The Board of Directors is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Company Securities and options, rights, warrants and appreciation
rights relating to Company Securities pursuant to this Section 5.6, (ii) the
admission of Additional Members and (iii) all additional issuances of Company
Securities. The Board of Directors is further authorized and directed to specify
the relative rights, powers and duties of the holders of the Membership
Interests or other Company Securities being so issued, subject to the approval
of the Members. The Board of Directors shall do all things necessary to comply
with the Act and is authorized and directed to do all things it deems necessary
or advisable in connection with any future issuance of Company Securities,
including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency.

Section 5.7  Limited Preemptive Rights.

     No Person shall have preemptive, preferential or other similar rights with
respect to (a) additional Capital Contributions; (b) issuance or sale of any
class or series of Membership Interests, whether unissued, held in the treasury
or hereafter created; (c) issuance of any obligations, evidences of indebtedness
or other securities of the Company convertible into or exchangeable for, or
carrying or accompanied by any rights to receive, purchase or subscribe to, any
such Membership Interests; (d) issuance of any right of subscription to or right
to receive, or any warrant or option for the purchase of, any such Membership
Interests; or (e) issuance or sale of any other securities that may be issued or
sold by the Company.

Section 5.8  Fully Paid and Non-Assessable Nature of Membership Interests.

                                       15

     All Membership Interests issued pursuant to, and in accordance with the
requirements of this Article V shall be fully paid and non-assessable Membership
Interests, except as such non-assessability may be affected by Section 18-607 of
the Act.

                                  ARTICLE VI
                         ALLOCATIONS AND DISTRIBUTIONS

Section 6.1  Allocations.

     All income, gain, loss, deductions and items of income shall be allocated
to the Members in proportion to their ownership unless otherwise required by the
Code.

Section 6.2  Distributions.

     (a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on September 30, 2001, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 18-607 of the Act, be
distributed in accordance with this Article VI by the Company to the Members in
accordance with their respective Percentage Interests. The immediately preceding
sentence shall not require any distribution of cash if and to the extent such
distribution would be prohibited by applicable law or by any loan agreement,
security agreement, mortgage, debt instrument or other agreement or obligation
to which the Company is a party or by which it is bound or its assets are
subject. All distributions required to be made under this Agreement shall be
made subject to Section 18-607 of the Act.

     (b) Notwithstanding Section 6.2(a), in the event of the dissolution and
liquidation of the Company, all receipts received during or after the Quarter in
which the Liquidation Date occurs, other than from borrowings described in
(a)(ii) of the definition of Available Cash, shall be applied and distributed
solely in accordance with, and subject to the terms and conditions of, Section
13.3.

     (c) The Board of Directors shall have the discretion to treat taxes paid by
the Company on behalf of, or amounts withheld with respect to, all or less than
all of the Members, as a distribution of Available Cash to such Members.

                                  ARTICLE VII
                      MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1  Management.

     (a) Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Company shall be
exclusively vested in the Board of Directors, and subject to the direction of
the Board of Directors and in accordance with Article VIII, the Officers. Except
as otherwise expressly provided in this Agreement, neither the Managing General
Partner (acting on behalf of the MLP) nor any Member shall have any management
power or control over the business and affairs of the Company. Thus, except as
otherwise expressly provided in this Agreement, the business and affairs of the
Company shall be managed by or under the direction of the Board of Directors,
and the day-to-day activities of the Company shall be conducted on the Company's
behalf by the Officers, who shall be agents

                                       16

of the Company. Except as otherwise provided in this Agreement, the authority,
functions, duties and responsibilities of the Board of Directors and of the
Officers shall be identical to the authority, functions, duties and
responsibilities of the board of directors and officers, respectively, of a
corporation organized under the Delaware General Corporation Law.

     (b) Consistent with the management powers delegated to the Board of
Directors pursuant to the provisions of this Agreement, the Board of Directors
shall have the powers now or hereafter granted a board of directors of a limited
liability company under the Act or any other applicable law and, except as
otherwise expressly provided in this Agreement, shall have full power and
authority to do all things and on such terms as it may deem necessary or
appropriate to conduct the business of the Company, to exercise all powers set
forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4,
including the following:

         (i) the making of any expenditures, the lending or borrowing of money,
     the assumption or guarantee of, or other contracting for, indebtedness and
     other liabilities, the issuance of evidences of indebtedness, including
     indebtedness that is convertible into a Membership Interest, and the
     incurring of any other obligations;

         (ii) the making of tax, regulatory and other filings, or rendering of
     periodic or other reports to governmental or other agencies having
     jurisdiction over the business or assets of the Company;

         (iii) the acquisition, disposition, mortgage, pledge, encumbrance,
     hypothecation or exchange of any or all of the assets of the Company or the
     merger or other combination of the Company with or into another Person;

         (iv) the use of the assets of the Company (including cash on hand) for
     any purpose consistent with the terms of this Agreement, including the
     financing of the conduct of the operations of the Company Group, the
     lending of funds to other Persons (including the MLP or any Group Member),
     the repayment of obligations of the MLP or Company Group and the making of
     capital contributions to any Group Member;

         (v) the negotiation, execution and performance of any contracts,
     conveyances or other instruments (including instruments that limit the
     liability of the Company under contractual arrangements to all or
     particular assets of the Company, with the other party to the contract to
     have no recourse against the MLP or its assets other than its interest in
     the Company, even if same results in the terms of the transaction being
     less favorable to the Company than would otherwise be the case);

         (vi) the distribution of Company cash;

         (vii) the selection and dismissal of Officers and agents, outside
     attorneys, accountants, consultants and contractors and the determination
     of their compensation and other terms of employment or hiring;

         (viii) the maintenance of such insurance for the benefit of the Company
     Group and the Members as it deems necessary or appropriate;

                                       17

         (ix) the formation of, or acquisition of an interest in, and the
     contribution of property and the making of loans to, any further limited or
     general partnerships, joint ventures, corporations or other relationships
     subject to the restrictions set forth in Section 2.4;

         (x) the control of any matters affecting the rights and obligations of
     the Company, including the bringing and defending of actions at law or in
     equity and otherwise engaging in the conduct of litigation and the
     incurring of legal expense and the settlement of claims and litigation;

         (xi) the indemnification of any Person against liabilities and
     contingencies to the extent permitted by law;

         (xii) the purchase, sale or other acquisition or disposition of
     Membership Interests, or the issuance of additional options, rights,
     warrants and appreciation rights relating to Membership Interests; and

         (xiii) the undertaking of any action in connection with the Company's
     participation in its Subsidiaries as the sole member or stockholder.

     (c) Notwithstanding any other provision of this Agreement, the MLP
Agreement, the Act or any applicable law, rule or regulation, each Member and
each other Person who may acquire a Membership Interest in the Company hereby
(i) approves, ratifies and confirms the execution, delivery and performance by
the parties thereto of the Underwriting Agreement, the Contribution Agreement,
and the other agreements and documents described in or filed as exhibits to the
Registration Statement that are related to the transactions contemplated by the
Registration Statement; (ii) agrees that the Board of Directors (on its own or
through any duly authorized Officer of the Company) is authorized to execute,
deliver and perform the agreements referred to in clause (i) of this sentence
and the other agreements, acts, transactions and matters described in or
contemplated by the Registration Statement on behalf of the Company without any
further act, approval or vote of the Members or Assignees or the other Persons
who may acquire an interest in the Company; and (iii) agrees that the execution,
delivery or performance by the Board of Directors (on its own or through any
duly authorized Officer), the MLP, any Group Member or any Affiliate of any of
them, of this Agreement or any agreement authorized or permitted under this
Agreement (including the exercise by the Board of Directors of the rights
accorded pursuant to Article XV), shall not constitute a breach by the Board of
Directors of any duty that the Board of Directors may owe the Company or the
Members or any other Persons under this Agreement (or any other agreements) or
of any duty stated or implied by law or equity.

Section 7.2  The Board of Directors; Appointment; Manner of Acting.

     (a) The Board of Directors shall consist of the individuals who from time
to time serve as members of the board of directors of the Managing General
Partner.

     (b) Each member of the Board of Directors shall have one vote. The vote of
a majority of the members of the Board of Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. A majority
of the number of members of the

                                       18

Board of Directors then in office shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than a quorum
is present at a meeting, a majority of the members of the Board of Directors
present at such meeting may adjourn the meeting from time to time, without
notice other than announcement at the meeting until a quorum shall be present.

Section 7.3  Removal of Members of the Board of Directors.

     Any member of the Board of Directors may be removed with or without Cause,
by the affirmative vote of the majority of the members of the Board of Directors
of the Managing General Partner, but only if such person is also removed as a
member of the Managing General Partner's board of directors, provided that his
or her successor on the Managing General Partner's board of directors is elected
or appointed in the manner set forth in the MLP Agreement.  If an individual who
is a member of the board of directors of the Managing General Partner is removed
from such board, such individual will automatically be removed from the Board of
Directors.

Section 7.4  Resignations of Members of the Board of Directors.

     Any member of the Board of Directors may resign at any time by giving
written notice to the Board of Directors.  Such resignation shall take effect at
the time specified therein, but only if such person also resigns from the
Managing General Partner's board of directors.  If an individual who is a member
of the board of directors of the Managing General Partner resigns from such
board, such individual will automatically be deeded to have resigned from the
Board of Directors.

Section 7.5  Vacancies on the Board of Directors.

     If any Director is removed, resigns or is otherwise unable to serve as
member of the Board of Directors, the Board of Directors shall in its sole
discretion appoint an individual to fill the vacancy for the unexpired term of
such Director's predecessor in office, who shall be the same individual
appointed to fill the corresponding vacancy on the Managing General Partner's
board of directors.

Section 7.6  Meetings; Committees.

     (a) Regular meetings of the Board of Directors shall be held at such times
and places as shall be designated from time to time by resolution of the Board
of Directors. Notice of such regular meetings shall not be required. Special
meetings of the Board of Directors may be called by written request of a
majority of the members of the Board of Directors, on at least 48 hours prior
written notice to the other members. Any such notice, or waiver thereof, need
not state the purpose of such meeting except as may otherwise be required by
law. Attendance of a member of the Board of Directors at a meeting (including
pursuant to the penultimate sentence of this Section 7.6(a)) shall constitute a
waiver of notice of such meeting, except where such member attends the meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened. Any action required
or permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting, without prior notice and without a vote if a consent or
consents in writing, setting forth the action

                                       19

so taken, is signed by all the members of the Board of Directors. Members of the
Board of Directors may participate in and hold meetings by means of conference
telephone, videoconference or similar communications equipment by means of which
all Persons participating in the meeting can hear each other, and participation
in such meetings shall constitute presence in person at the meeting. The Board
of Directors may establish any additional rules governing the conduct of its
meetings that are not inconsistent with the provisions of this Agreement.

     (b) The Board of Directors shall appoint the Audit Committee and Conflicts
Committee to consist solely of the individuals who serve from time to time as
members of the audit committee and conflicts committee, respectively, of the
Managing General Partner. Each of the Audit Committee and the Conflicts
Committee shall perform the functions delegated to it pursuant to the terms of
this Agreement and such other matters as may be delegated to it from time to
time by resolution of the Board of Directors. The Board of Directors, by a
majority of the entire Board of Directors, may appoint one or more additional
committees of the Board of Directors to consist of one or more members of the
Board of Directors, which committees shall have and may exercise such of the
powers and authority of the Board of Directors (including in respect of Section
7.1) with respect to the management of the business and affairs of the Company
as may be provided in a resolution of the Board of Directors. Any committee
designated pursuant to this Section 7.6(b) shall choose its own chairman, shall
keep regular minutes of its proceedings and report the same to the Board of
Directors when requested, shall fix its own rules or procedures and shall meet
at such times and at such place or places as may be provided by such rules or by
resolution of such committee or resolution of the Board of Directors. At every
meeting of any such committee, the presence of a majority of all the members
thereof shall constitute a quorum and the affirmative vote of a majority of the
members present shall be necessary for the taking of any action. Subject to the
first sentence of this Section 7.6(b), the Board of Directors may designate one
or more members of the Board of Directors as alternate members of any committee
who may replace any absent or disqualified member at any meeting of such
committee. Subject to the first sentence of this Section 7.6(b), in the absence
or disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of the absent or disqualified member.

Section 7.7  Restrictions on Board of Directors' Authority.

     (a) The Board of Directors may not, without written approval of the
specific act by the Members or by other written instrument executed and
delivered by the Members subsequent to the date of this Agreement, take any
action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Company; (ii) possessing Company
property, or assigning any rights in specific Company property, for other than a
Company purpose; (iii) admitting a Person as a Member; or (iv) amending this
Agreement in any manner.

     (b) Except as provided in Articles XIII and XV, the Board of Directors may
not sell, exchange or otherwise dispose of all or substantially all of the
Company's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation

                                       20

or other combination) or approve on behalf of the Company the sale, exchange or
other disposition of all or substantially all of the assets of the Company,
without the approval of the Members; provided, however, that this provision
shall not preclude or limit the Board of Directors' ability to mortgage, pledge,
hypothecate or grant a security interest in all or substantially all of the
assets of the Company and shall not apply to any forced sale of any or all of
the assets of the Company pursuant to the foreclosure of, or other realization
upon, any such encumbrance.

Section 7.8  Reimbursement of the Managing General Partner; Benefit Plans.

     (a) The Managing General Partner shall be reimbursed on a monthly basis, or
such other reasonable basis as the Board of Directors may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Company (including salary, bonus, incentive compensation
and other amounts paid to any Person including Affiliates of the Managing
General Partner to perform services for the Company or for the Board of
Directors in the discharge of its duties to the Company), and (ii) all other
necessary or appropriate expenses allocable to the Company or otherwise
reasonably incurred by the Managing General Partner in furtherance of the
Company's business (including expenses allocated to the Managing General Partner
by its Affiliates). Reimbursements pursuant to this Section 7.8 shall be in
addition to any reimbursement to the Managing General Partner as a result of
indemnification pursuant to Section 7.11.

     (b) The Board of Directors, in its sole discretion and without the approval
of any Member (who shall have no right to vote in respect thereof), may propose
and adopt on behalf of the Company employee benefit plans, employee programs and
employee practices, or cause the Company to issue Company Securities, in
connection with or pursuant to any employee benefit plan, employee program or
employee practice maintained or sponsored by any Group Member or any Affiliate
thereof, in each case for the benefit of employees of the Managing General
Partner, any Group Member or any Affiliate thereof, or any of them, in respect
of services performed, directly or indirectly, for the benefit of the Company
Group.

Section 7.9  Outside Activities.

     (a) After the Closing Date, the Managing General Partner, for so long as it
is the Managing General Partner of the MLP, (i) agrees that its sole business
will be to act as the Managing General Partner of the MLP and a general partner
or managing member of any other partnership or limited liability company of
which the MLP or the Company is, directly or indirectly, a partner or member and
to undertake activities that are ancillary or related thereto (including being a
limited partner in the MLP) or (ii) shall not engage in any business or activity
or incur any debts or liabilities except in connection with or incidental to (A)
its performance as managing general partner of the MLP or as general partner or
managing member of one or more Group Members or as described in or contemplated
by the Registration Statement or (B) the acquiring, owning or disposing of debt
or equity securities in any Group Member.

     (b) Except as specifically restricted by the MLP Agreement, each Indemnitee
shall have the right to engage in businesses of every type and description and
other activities for profit and to engage in and possess an interest in other
business ventures of any and every type or

                                       21

description, whether in businesses engaged in or anticipated to be engaged in by
any Group Member, independently or with others, including business interests and
activities in direct competition with the business and activities of any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to any Group Member or any Member or Assignee.
Neither any Group Member, any Member nor any other Person shall have any rights
by virtue of this Agreement or the relationship established hereby in any
business ventures of any Indemnitee.

     (c) Subject to the terms of Section 7.9(a) and Section 7.9(b), but
otherwise notwithstanding anything to the contrary in this Agreement, (i) the
engaging in competitive activities by any Indemnitees in accordance with the
provisions of this Section 7.9 is hereby approved by the Company and all
Members, (ii) it shall be deemed not to be a breach of the Board of Directors'
fiduciary duty or any other obligation of any type whatsoever of the Board of
Directors for the Indemnitees to engage in such business interests and
activities in preference to or to the exclusion of the Company and (iii) the
Indemnitees shall have no obligation to present business opportunities to the
Company.

     (d) The General Partners and any of their Affiliates may acquire Units or
other MLP Securities, in addition to those acquired on the Closing Date and,
except as otherwise provided in this Agreement, shall be entitled to exercise
all rights relating to such Units or MLP Securities.

     (e) The term "Affiliates" when used in Section 7.5(a) and 7.5(d) with
respect to the Managing General Partner shall not include any Group Member or
any Subsidiary of the Group Member.

     (f) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.11, 7.12, 7.13, 7.14 or other Sections of
this Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the Board of Directors to the Company and its
Members, or to constitute a waiver or consent by the Members to any such
restriction, such provisions shall be inapplicable and have no effect in
determining whether the Board of Directors has complied with its fiduciary
duties in connection with determinations made by it under this Section 7.9.

Section 7.10  Loans from the General Partners; Loans or Contributions from the
Company; Contracts with Affiliates.

     (a) The General Partners or their Affiliates may lend to any Group Member,
and any Group Member may borrow from the Company or any of its Affiliates, funds
needed or desired by any Group Member for such periods of time and in such
amounts as the Board of Directors may determine; provided, however, that in any
such case the lending party may not charge the borrowing party interest at a
rate greater than the rate that would be charged the borrowing party or impose
terms less favorable to the borrowing party than would be charged or imposed on
the borrowing party by unrelated lenders on comparable loans made on an arm's-
length basis (without reference to the lending party's financial abilities or
guarantees). The borrowing party shall reimburse the lending party for any costs
(other than any additional interest

                                       22

costs) incurred by the lending party in connection with the borrowing of such
funds. For purposes of this Section 7.10(a) and Section 7.10(b), the term "Group
Member" shall include any Affiliate of a Group Member that is controlled by the
Group Member. No Group Member may lend funds to the General Partners or any of
their Affiliates (other than the MLP, a subsidiary of the MLP or another Group
Member).

     (b) The General Partners may themselves, or may enter into an agreement
with any of their Affiliates to, render services to a Group Member or to the MLP
in the discharge of its duties as general partners of the MLP. Any services
rendered to a Group Member by the General Partners or any of their Affiliates
shall be on terms that are fair and reasonable to the Company, provided,
however, that the requirements of this Section 7.10(b) shall be deemed satisfied
as to (a) any transaction approved by Special Approval, (ii) any transaction,
the terms of which are not less favorable to the Company Group than those
generally being provided to or available from unrelated third parties or (iii)
any transaction that, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Company Group), is equitable to
the Company Group. The provisions of Section 7.8 shall apply to the rendering of
services described in this Section 7.10(b).

     (c) The Company may lend or contribute to any Group Member, and any Group
Member may borrow from the Company, funds on terms and conditions established in
the sole discretion of the Board of Directors; provided, however, that the
Company may not charge the Group Member interest at a rate less than the rate
that would be charged to the Group Member by unrelated lenders on comparable
loans. The foregoing authority shall be exercised by the Board of Directors in
its sole discretion and shall not create any right or benefit in favor of any
Group Member or any other Person.

     (d) The Company Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.

     (e) Neither the General Partners nor any of their Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the Company,
directly or indirectly, except pursuant to transactions that are fair and
reasonable to the Company; provided, however, that the requirements of this
Section 7.10(e) shall be deemed to be satisfied as to (i) the transactions
effected pursuant to Sections 5.2 and 5.3, the Contribution Agreement and any
other transactions described in or contemplated by the Registration Statement,
(ii) any transaction approved by Special Approval, (iii) any transaction, the
terms of which are no less favorable to the Company than those generally being
provided to or available from unrelated third parties, or (iv) any transaction
that, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Company), is equitable to the Company.

     (f) The General Partners and their Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partners
and their Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with

                                       23

such use, nor shall there be any obligation on the part of the General Partners
or their Affiliates to enter into such contracts.

     (g) Without limitation of Sections 7.10(a) through 7.10(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Members.

Section 7.11  Indemnification.

     (a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, all Indemnitees shall be indemnified and
held harmless by the Company from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as an Indemnitee; provided, that in each case the Indemnitee acted in
good faith and in a manner that such Indemnitee reasonably believed to be in, or
not opposed to, the best interests of the Company and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.11
shall be available to the General Partners with respect to their obligations
incurred pursuant to the Underwriting Agreement or the Contribution Agreement
(other than obligations incurred by the General Partners on behalf of the MLP or
the Company). 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 create a presumption that the Indemnitee acted in a manner
contrary to that specified above. Any indemnification pursuant to this Section
7.11 shall be made only out of the assets of the Company, it being agreed that
the General Partners shall not be personally liable for such indemnification and
shall have no obligation to contribute or loan any monies or property to the
Company to enable it to effectuate such indemnification.

     (b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee who is indemnified pursuant to Section
7.11(a) in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Company prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Company of any
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
be determined that the Indemnitee is not entitled to be indemnified as
authorized in this Section 7.11.

     (c) The indemnification provided by this Section 7.11 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the Members, as a matter of law or otherwise, both as to
actions in the Indemnitee's capacity as an Indemnitee and as to actions in any
other capacity (including any capacity under the Underwriting Agreement and the
Bank Credit Agreement), and shall continue as to an Indemnitee who has ceased to
serve in such capacity and shall inure to the benefit of the heirs, successors,
assigns and administrators of the Indemnitee.

                                       24

     (d) The Company may purchase and maintain (or reimburse the members of the
Board of Directors, the General Partners or their Affiliates for the cost of)
insurance, on behalf of the Board of Directors, its Affiliates and such other
Persons as the Board of Directors shall determine, against any liability that
may be asserted against or expense that may be incurred by such Person in
connection with the Company's activities or such Person's activities on behalf
of the Company, regardless of whether the Company would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.

     (e) For purposes of this Section 7.11, the Company shall be deemed to have
requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Company also imposes duties
on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 7.11(a); and action taken or omitted by it with
respect to any employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Company.

     (f) In no event may an Indemnitee subject the Members to personal liability
by reason of the indemnification provisions set forth in this Agreement. (g) An
Indemnitee shall not be denied indemnification in whole or in part under this
Section 7.11 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.

     (h) The provisions of this Section 7.11 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.

     (i) No amendment, modification or repeal of this Section 7.11 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Company, nor the
obligations of the Company to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.11 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.

Section 7.12  Liability of Indemnitees.

     (a) Notwithstanding anything to the contrary set forth in this Agreement or
the MLP Agreement, no Indemnitee shall be liable for monetary damages to the
Company, the Members, the Assignees or any other Persons who have acquired
interests in the Company or MLP Securities, for losses sustained or liabilities
incurred as a result of any act or omission if such Indemnitee acted in good
faith.

     (b) Subject to its obligations and duties set forth in Section 7.1(a), the
Board of Directors may exercise any of the powers granted to it by this
Agreement and perform any of

                                       25

the duties imposed upon it hereunder either directly or by or through its
agents, and the Board of Directors shall not be responsible for any misconduct
or negligence on the part of any such agent appointed by the Board of Directors
in good faith.

     (c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Company or
to the Members, the Board of Directors and any other Indemnitee acting in
connection with the Company's business or affairs shall not be liable to the
Company or to any Member for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they restrict or
otherwise modify the duties and liabilities of an Indemnitee otherwise existing
at law or in equity, are agreed by the Members to replace such other duties and
liabilities of such Indemnitee.

     (d) Any amendment, modification or repeal of this Section 7.12 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Company, the Members, the Board of
Directors, and the Member's directors, officers and employees under this Section
7.12 as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.

Section 7.13  Resolution of Conflicts of Interest.

     (a) Unless otherwise expressly provided in this Agreement, whenever a
potential conflict of interest exists or arises between the General Partners or
any of their Affiliates, on the one hand, and the Company, any Member or any
Assignee, on the other, any resolution or course of action by the Board of
Directors or its Affiliates in respect of such conflict of interest shall be
permitted and deemed approved by all Members, and shall not constitute a breach
of this Agreement, of any agreement contemplated herein, or of any duty stated
or implied by law or equity, if the resolution or course of action is, or by
operation of this Agreement is deemed to be, fair and reasonable to the Company.
The Board of Directors shall be authorized but not required in connection with
its resolution of such conflict of interest to seek Special Approval of such
resolution. Any conflict of interest and any resolution of such conflict of
interest shall be conclusively deemed fair and reasonable to the Company if such
conflict of interest or resolution is (i) approved by Special Approval (as long
as the material facts known to the Board of Directors or any of its Affiliates
regarding any proposed transaction were disclosed to the Conflicts Committee at
the time it gave its approval), (ii) on terms no less favorable to the Company
than those generally being provided to or available from unrelated third parties
or (iii) fair to the Company, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Company). The Board of
Directors may also adopt a resolution or course of action that has not received
Special Approval. The Board of Directors (including the Conflicts Committee in
connection with Special Approval) shall be authorized in connection with its
determination of what is "fair and reasonable" to the Company and in connection
with its resolution of any conflict of interest to consider (A) the relative
interests of any party to such conflict, agreement, transaction or situation and
the benefits and burdens relating to such interest; (B) any customary or
accepted industry practices and any customary or historical dealings with a
particular Person; (C) any applicable generally accepted accounting practices or
principles; and (D) such additional

                                       26

factors as the Board of Directors (including the Conflicts Committee) determines
in its sole discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to nor
shall it be construed to require the Board of Directors (including the Conflicts
Committee) to consider the interests of any Person other than the Company. In
the absence of bad faith by the Board of Directors, the resolution, action or
terms so made, taken or provided by the Board of Directors with respect to such
matter shall not constitute a breach of this Agreement or any other agreement
contemplated herein or a breach of any standard of care or duty imposed herein
or therein or, to the extent permitted by law, under the Act or any other law,
rule or regulation.

     (b) Whenever this Agreement or any other agreement contemplated hereby
provides that the Board of Directors or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems "necessary or appropriate" or "necessary or advisable" or under a grant
of similar authority or latitude, except as otherwise provided herein, the Board
of Directors or such Affiliate shall be entitled to consider only such interests
and factors as it desires and shall have no duty or obligation to give any
consideration to any interest of, or factors affecting, the MLP, the Company,
any Member or any Assignee, (ii) it may make such decision in its sole
discretion (regardless of whether there is a reference to "sole discretion" or
"discretion") unless another express standard is provided for, or (iii) in "good
faith" or under another express standard, the Board of Directors or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the MLP Agreement or any
other agreement contemplated hereby or under the Act or any other law, rule or
regulation. In addition, any actions taken by the Board of Directors or such
Affiliate consistent with the standards of "reasonable discretion" set forth in
the definition of Available Cash shall not constitute a breach of any duty of
the Board of Directors to the Company or the Members. The Board of Directors
shall have no duty, express or implied, to sell or otherwise dispose of any
asset of the Company Group other than in the ordinary course of business. No
borrowing by any Group Member or the approval thereof by the Board of Directors
shall be deemed to constitute a breach of any duty of the Board of Directors to
the Company or the Members by reason of the fact that the purpose or effect of
such borrowing is directly or indirectly to (A) enable distributions by the MLP
to the Managing General Partner or its Affiliates to exceed 2% of the total
amount distributed to all partners or (B) hasten the expiration of the
Subordination Period or the conversion of any Subordinated Units into Common
Units.

     (c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.

Section 7.14  Other Matters Concerning the Board of Directors.

     (a) The Board of Directors may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.

                                       27

     (b) The Board of Directors may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the Board of Directors reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.

     (c) The Board of Directors shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Company.

     (d) Any standard of care and duty imposed by this Agreement or under the
Act or any applicable law, rule or regulation shall be modified, waived or
limited, to the extent permitted by law, as required to permit the Board of
Directors to act under this Agreement or any other agreement contemplated by
this Agreement and to make any decision pursuant to the authority prescribed in
this Agreement, so long as such action is reasonably believed by the Board of
Directors to be in, or not inconsistent with, the best interests of the Company.

     (e)  Each Director shall be deemed a "manager" for purposes of the Act.

Section 7.15  Reliance by Third Parties.

     Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Company shall be entitled to assume that the Board of Directors
and any Officer authorized by the Board of Directors to act on behalf of and in
the name of the Company has full power and authority to encumber, sell or
otherwise use in any manner any and all assets of the Company and to enter into
any authorized contracts on behalf of the Company, and such Person shall be
entitled to deal with the Board of Directors or any such Officer as if it were
the Company's sole party in interest, both legally and beneficially. Each Member
hereby waives any and all defenses or other remedies that may be available
against such Person to contest, negate or disaffirm any action of the Board of
Directors or any such officer in connection with any such dealing. In no event
shall any Person dealing with the Board of Directors or any such officer or its
representatives be obligated to ascertain that the terms of the Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the Board of Directors or any such officer or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Company by the Board of Directors or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (a) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (b) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Company and (c) such
certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Company.

                                       28

                                 ARTICLE VIII
                                    OFFICERS

Section 8.1  Officers.

     (a) Generally. The Board of Directors, as set forth below, shall appoint
agents of the Company, referred to as "Officers" of the Company as described in
this Section 8.1. Unless provided otherwise by resolution of the Board of
Directors, the Officers shall have the titles, power, authority and duties
described below in this Section 8.1.

     (b) Titles and Number. The Officers shall be the Chairman of the Board of
Directors (unless the Board of Directors provides otherwise), the President, any
and all Vice Presidents, the Secretary and any and all Assistant Secretaries and
any Treasurer and any and all Assistant Treasurers and any other Officers
appointed pursuant to this Section 8.1. There shall be appointed from time to
time, in accordance with this Section 8.1, such Vice Presidents, Secretaries,
Assistant Secretaries, Treasurers and Assistant Treasurers as the Board of
Directors may desire. Any person may hold two or more offices.

         (i) Chairman of the Board of Directors. The Board of Directors, in its
     discretion, may elect an individual who is a Director to serve as Chairman
     of the Board. The Chairman shall preside at all meetings of the Board of
     Directors.

         (ii) President. The Board of Directors shall elect an individual to
     serve as President. The President shall be the chief executive officer of
     the Company. The President may sign, with the secretary, an assistant
     secretary or any other proper officer of the Company thereunto duly
     authorized by the Board of Directors, any deeds, mortgages, bonds,
     contracts or other instruments which the Board of Directors has authorized
     to be executed except in cases where the execution thereof shall be
     expressly delegated by the Board of Directors or by this Agreement to some
     other officer or agent of the Company or shall be required by law to be
     otherwise executed. In general, the President shall perform all duties
     incident to the office of President and chief executive officer of the
     Company and such other duties as may be prescribed from time to time by the
     Board of Directors.

         (iii) Vice Presidents. The Board of Directors, in its discretion, may
     elect one or more Vice Presidents. In the absence of the President or in
     the event of the President's inability or refusal to act, the Vice
     President (or in the event there be more than one vice president, the vice
     presidents in the order designated, or in the absence of any designation,
     then in the order of their election) shall perform the duties of the
     President, and the Vice President, when so acting, shall have all of the
     powers and be subject to all the restrictions upon the President. Each Vice
     President shall perform such other duties as from time to time may be
     assigned by the President or the Board of Directors.

         (iv) Secretary and Assistant Secretaries. The Board of Directors, in
     its discretion, may elect a Secretary and one or more Assistant
     Secretaries. The Secretary shall record or cause to be recorded in books
     provided for that purpose the minutes of the meetings or actions of the
     Board of Directors and of the Members, shall see that all

                                       29

     notices are duly given in accordance with the provisions of this Agreement
     and as required by law, shall be custodian of all records (other than
     financial), shall see that the books, reports, statements, certificates and
     all other documents and records required by law are properly kept and
     filed, and, in general, shall perform all duties incident to the office of
     Secretary and such other duties as may, from time to time, be assigned to
     him by this Agreement, the Board of Directors or the President. The
     Assistant Secretaries shall exercise the powers of the Secretary during
     that Officer's absence or inability or refusal to act.

         (v) Treasurer and Assistant Treasurers. The Board of Directors, in its
     discretion, may elect a Treasurer and one or more Assistant Treasurers. The
     Treasurer shall keep or cause to be kept the books of account of the
     Company and shall render statements of the financial affairs of the Company
     in such form and as often as required by this Agreement, the Board of
     Directors or the President. The Treasurer, subject to the order of the
     Board of Directors, shall have the custody of all funds and securities of
     the Company. The Treasurer shall perform all other duties commonly incident
     to his office and shall perform such other duties and have such other
     powers as this Agreement, the Board of Directors or the President, shall
     designate from time to time. The Assistant Treasurers shall exercise the
     power of the Treasurer during that Officer's absence or inability or
     refusal to act. Each of the Assistant Treasurers shall possess the same
     power as the Treasurer to sign all certificates, contracts, obligations and
     other instruments of the Company. If no Treasurer or Assistant Treasurer is
     appointed and serving or in the absence of the appointed Treasurer and
     Assistant Treasurer, the President and chief executive officer, or such
     other Officer as the Board of Directors shall select, shall have the powers
     and duties conferred upon the Treasurer.

     (c) Other Officers and Agents. The Board of Directors may appoint such
other Officers and agents as may from time to time appear to be necessary or
advisable in the conduct of the affairs of the Company, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.

     (d) Appointment and Term of Office. The Officers shall be appointed by the
Board of Directors at such time and for such terms as the Board of Directors
shall determine. Any Officer may be removed, with or without Cause, only by the
Board of Directors. Vacancies in any office may be filled only by the Board of
Directors.

     (e) Powers of Attorney. The Board of Directors may grant powers of attorney
or other authority as appropriate to establish and evidence the authority of the
Officers and other Persons.

     (f) Officers' Delegation of Authority. Unless otherwise provided by
resolution of the Board of Directors, no Officer shall have the power or
authority to delegate to any Person such Officer's rights and powers as an
Officer to manage the business and affairs of the Partnership.

                                       30

Section 8.2  Compensation.

     The Officers shall receive such compensation for their services as may be
designated by the Board of Directors.  In addition, the Officers shall be
entitled to be reimbursed for out-of-pocket costs and expenses incurred in the
course of their service hereunder.  The members of the Board of Directors who
are not employees of the Company or its Affiliates shall receive such
compensation for their services as members of the Board of Directors or members
of a committee of the Board of Directors shall determine.  In addition, the
members of the Board of Directors shall be entitled to be reimbursed for out-of-
pocket costs and expenses incurred in the course of their service hereunder.

                                  ARTICLE IX
                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1  Records and Accounting

     The Board of Directors shall keep or cause to be kept at the principal
office of the Company appropriate books and records with respect to the
Company's business, including all books and records necessary to provide to the
Members any information required to be provided pursuant to Section 3.4(a). Any
books and records maintained by or on behalf of the Company in the regular
course of its business, including books of account and records of Company
proceedings, may be kept on, or be in the form of, computer disks, hard drives,
punch cards, magnetic tape, photographs, micrographics or any other information
storage device; provided, that the books and records so maintained are
convertible into clearly legible written form within a reasonable period of
time. The books of the Company shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with U.S. GAAP.

Section 9.2  Fiscal Year.

     The fiscal year of the Company shall be a fiscal year ending September 30.

                                   ARTICLE X
                                  TAX MATTERS

Section 10.1  Tax Returns and Information.

     The Company shall timely file all returns of the Company that are required
for federal, state and local income tax purposes on the basis of the accrual
method and a taxable year ending on December 31. The tax information reasonably
required by the Members for federal and state income tax reporting purposes with
respect to a taxable year shall be furnished to them within 90 days of the close
of the calendar year in which the Company's taxable year ends. The
classification, realization and recognition of income, gain, losses and
deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.

Section 10.2  Tax Elections.

     (a) The Company shall not elect to be treated as a corporation under the
Code.

                                       31

     (b) Except as otherwise provided herein, the Board of Directors shall
determine whether the Company should make any other elections permitted by the
Code.

                                  ARTICLE XI
                              ADMISSION OF MEMBERS

Section 11.1  Admission of MLP.

     Upon the consummation of the transfers and conveyances described in Section
5.2, the MLP shall be admitted as a Member, Inergy Partners, Rolesville Gas and
Wilson Oil shall withdraw from the Company and shall no longer be Members, and
the MLP shall be the only Member of the Company.

Section 11.2  Admission of Substituted Members.

     By transfer of a Membership Interest in accordance with Article IV, the
transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Member subject to the conditions of, and in the
manner permitted under, this Agreement. A transferor of a Membership Interest
shall, however, only have the authority to convey to a purchaser or other
transferee (a) the right to negotiate such Membership Interest to a purchaser or
other transferee and (b) the right to request admission as a Substituted Member
to such purchaser or other transferee in respect of the transferred Membership
Interests. Each transferee of a Membership Interest shall be an Assignee and be
deemed to have applied to become a Substituted Member with respect to the
Interests so transferred to such Person. Such Assignee shall become a
Substituted Member (x) at such time as the Members consent thereto, which
consent may be given or withheld in the Members' discretion, and (y) when any
such admission is shown on the books and records of the Company. If such consent
is withheld, such transferee shall remain an Assignee. An Assignee shall have an
interest in the Company equivalent to that of a Member with respect to
allocations and distributions, including liquidating distributions, of the
Company. With respect to voting rights attributable to Membership Interests that
are held by Assignees, the Board of Directors shall be deemed to be the Member
with respect thereto and shall, in exercising the voting rights in respect of
such Interests on any matter, vote such Membership Interests at the written
direction of the Assignee. If no such written direction is received, such
Membership Interests will not be voted. An Assignee shall have no other rights
of a Member.

Section 11.3  Admission of Additional Members.

     (a) A Person (other than a Substituted Member) who makes a Capital
Contribution to the Company or acquires Company Securities in accordance with
this Agreement shall be admitted to the Company as an Additional Member only
upon furnishing to the Board of Directors (i) evidence of acceptance in form
satisfactory to the Board of Directors of all of the terms and conditions of
this Agreement, including the power of attorney granted in Section 2.6, and (ii)
such other documents or instruments as may be required in the discretion of the
Board of Directors to effect such Person's admission as an Additional Member.

     (b) Notwithstanding anything to the contrary in this Section 11.3, no
Person shall be admitted as an Additional Member without the consent of the
Board of Directors, which consent may be given or withheld in the Board of
Directors' discretion. The admission of any

                                       32

Person as an Additional Member shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the Company,
following the consent of the Board of Directors to such admission.

Section 11.4  Amendment of Agreement and Certificate of Formation.

     To effect the admission to the Company of any Member, the Board of
Directors shall take all steps necessary and appropriate under the Act to amend
the records of the Company to reflect such admission and, if necessary, to
prepare as soon as practicable an amendment to this Agreement and, if required
by law, the Board of Directors shall prepare and file an amendment to the
Certificate of Formation, and the Board of Directors may for this purpose, among
others, exercise the power of attorney granted pursuant to Section 2.6.

                                  ARTICLE XII
                             WITHDRAWAL OF MEMBERS

Section 12.1  Withdrawal of Members.

     Without the prior written consent of the Board of Directors, which may be
granted or withheld in its sole discretion, and except as provided in Section
11.1, no Member shall have the right to withdraw from the Company.

                                 ARTICLE XIII
                          DISSOLUTION AND LIQUIDATION

Section 13.1  Dissolution.

     The Company shall not be dissolved by the admission of Substituted Members
or Additional Members in accordance with the terms of this Agreement. The
Company shall dissolve, and its affairs shall be wound up, upon:

     (a) an election to dissolve the Company by the Board of Directors that is
approved by all of the Members;

     (b) the entry of a decree of judicial dissolution of the Company pursuant
to the provisions of the Act;

     (c) the sale of all or substantially all of the assets and properties of
the Company Group; or

     (d) the dissolution of the MLP.

Section 13.2  Liquidator.

     Upon dissolution of the Company, the Board of Directors shall select one or
more Persons to act as Liquidator. The Liquidator shall be entitled to receive
such compensation for its services as may be approved by a majority of the
Members. The Liquidator shall agree not to resign at any time without 15 days'
prior notice and may be removed at any time, with or without

                                       33

cause, by notice of removal approved by a majority of the Members. Upon
dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by holders of at least a majority of the Members. The right to approve a
successor or substitute Liquidator in the manner provided herein shall be deemed
to refer also to any such successor or substitute Liquidator approved in the
manner herein provided. Except as expressly provided in this Article XIII, the
Liquidator approved in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all of
the powers conferred upon the Board of Directors under the terms of this
Agreement (but subject to all of the applicable limitations, contractual and
otherwise, upon the exercise of such powers, other than the limitation on sale
set forth in Section 7.7(a)) to the extent necessary or desirable in the good
faith judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding up
and liquidation of the Company as provided for herein.

Section 13.3  Liquidation.

     The Liquidator shall proceed to dispose of the assets of the Company,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Members, subject to Section 18-804 of the Act and the following:

     (a) Disposition of Assets. The assets may be disposed of by public or
private sale or by distribution in kind to one or more Members on such terms as
the Liquidator and such Member or Members may agree. If any property is
distributed in kind, the Member receiving the property shall be deemed for
purposes of Section 13.3(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Members. The Liquidator may, in its absolute discretion, defer
liquidation or distribution of the Company's assets for a reasonable time if it
determines that an immediate sale or distribution of all or some of the
Company's assets would be impractical or would cause undue loss to the Members.
The Liquidator may, in its absolute discretion, distribute the Company's assets,
in whole or in part, in kind if it determines that a sale would be impractical
or would cause undue loss to the Members.

     (b) Discharge of Liabilities. Liabilities of the Company include amounts
owed to Members otherwise than in respect of their distribution rights under
Article VI. With respect to any liability that is contingent, conditional or
unmatured or is otherwise not yet due and payable, the Liquidator shall either
settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.

     (c) Liquidation Distributions. All property and all cash in excess of that
required to discharge liabilities as provided in Section 13.3(b) shall be
distributed to the Members in proportion to their ownership interests.

Section 13.4  Cancellation of Certificate of Formation.

                                       34

     Upon the completion of the distribution of Company cash and property as
provided in Section 13.3 in connection with the liquidation of the Company, the
Company shall be terminated and the Certificate of Formation, as well as all
qualifications of the Company as a foreign limited liability company in
jurisdictions other than the State of Delaware, shall be canceled and such other
actions as may be necessary to terminate the Company shall be taken.

Section 13.5  Return of Capital Contributions.

     The MLP shall not be personally liable for, and shall have no obligation to
contribute or loan any monies or property to the Company to enable it to
effectuate, the return of the Capital Contributions of the Members, or any
portion thereof, it being expressly understood that any such return shall be
made solely from Company assets.

Section 13.6  Waiver of Partition.

     To the maximum extent permitted by law, each Member hereby waives any right
to partition of the Company property.

Section 13.7  Capital Account Restoration.

     No Member shall have any obligation to restore any negative balance in its
Capital Account upon liquidation of the Company.

                                  ARTICLE XIV
                             AMENDMENT OF AGREEMENT

Section 14.1  Amendment to be Adopted Solely by the Board of Directors.

     Each Member agrees that the Board of Directors, without the approval of any
Member, may amend any provision of this Agreement and execute, swear to,
acknowledge, deliver, file and record whatever documents may be required in
connection therewith, to reflect:

     (a) a change in the name of the Company, the location of the principal
place of business of the Company, the registered agent of the Company or the
registered office of the Company;

     (b) admission, substitution, withdrawal or removal of Members in accordance
with this Agreement;

     (c) a change that, in the sole discretion of the Board of Directors, is
necessary or advisable to qualify or continue the qualification of the Company
as a limited liability company in which the Members have limited liability under
the laws of any state or to ensure that neither the Company nor the MLP will be
treated as an association taxable as a corporation or otherwise taxed as an
entity for federal income tax purposes;

     (d) a change that, in the discretion of the Board of Directors, (i) does
not adversely affect the Members in any material respect, (ii) is necessary or
advisable to (A) satisfy any requirements, conditions or guidelines contained in
any opinion, directive, order, ruling or

                                       35

regulation of any federal or state agency or judicial authority or contained in
any federal or state statute (including the Act) or (B) facilitate the trading
of limited partner interests of the MLP (including the division of any class or
classes of outstanding limited partner interests of the MLP into different
classes to facilitate uniformity of tax consequences within such classes of
limited partner interests of the MLP) or comply with any rule, regulation,
guideline or requirement of any National Securities Exchange on which such
limited partner interests are or will be listed for trading, compliance with any
of which the Board of Directors determines in its discretion to be in the best
interests of the MLP and the limited partners of the MLP, (iii) is required to
effect the intent expressed in the Registration Statement or the intent of the
provisions of this Agreement or is otherwise contemplated by this Agreement or
(iv) is required to conform the provisions of this Agreement with the provisions
of the MLP Agreement as the provisions of the MLP Agreement may be amended,
supplemented or restated from time to time;

     (e) a change in the fiscal year or taxable year of the Company and any
changes that, in the discretion of the Board of Directors, are necessary or
advisable as a result of a change in the fiscal year or taxable year of the
Company including, if the Board of Directors shall so determine, a change in the
definition of "Quarter" and the dates on which distributions are to be made by
the Company;

     (f) an amendment that is necessary, in the Opinion of Counsel, to prevent
the Company or its directors, officers, trustees or agents from in any manner
being subjected to the provisions of the Investment Company Act of 1940, as
amended, the Investment Advisers Act of 1940, as amended, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
as amended, regardless of whether such are substantially similar to plan asset
regulations currently applied or proposed by the United States Department of
Labor;

     (g) any amendment expressly permitted in this Agreement to be made by the
Board of Directors acting alone;

     (h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 15.3;

     (i) an amendment that, in the discretion of the Board of Directors, is
necessary or advisable to reflect, account for and deal with appropriately the
formation by the Company of, or investment by the Company in, any corporation,
partnership, joint venture, limited liability company or other entity, in
connection with the conduct by the Company of activities permitted by the terms
of Section 2.4;

     (j) a merger or conveyance pursuant to Section 15.3(d); or

     (k) any other amendments substantially similar to the foregoing.

Section 14.2  Amendment Procedures.

     Except with respect to amendments of the type described in Section 14.1,
all amendments to this Agreement shall be made in accordance with the following
requirements.  Amendments to this Agreement may be proposed only by or with the
consent of the Board of Directors which

                                       36

consent may be given or withheld in its sole discretion. A proposed amendment
shall be effective upon its approval by the Members.

                                  ARTICLE XV
                                    MERGER

Section 15.1  Authority.

     The Company may merge or consolidate with one or more corporations, limited
liability companies, business trusts or associations, real estate investment
trusts, common law trusts or unincorporated businesses, including a general
partnership or limited partnership, formed under the laws of the State of
Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article

Section 15.2  Procedure for Merger or Consolidation.

     Merger or consolidation of the Company pursuant to this Article XV requires
the prior approval of the Board of Directors. If the Board of Directors shall
determine, in the exercise of its discretion, to consent to the merger or
consolidation, the Board of Directors shall approve the Merger Agreement, which
shall set forth:

     (a) The names and jurisdictions of formation or organization of each of the
business entities proposing to merge or consolidate;

     (b) The name and jurisdiction of formation or organization of the business
entity that is to survive the proposed merger or consolidation (the "Surviving
Business Entity");

     (c) The terms and conditions of the proposed merger or consolidation;

     (d) The manner and basis of exchanging or converting the equity securities
of each constituent business entity for, or into, cash, property or general or
limited partner interests, rights, securities or obligations of the Surviving
Business Entity; and (i) if any general or limited partner interests, securities
or rights of any constituent business entity are not to be exchanged or
converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;

     (e) A statement of any changes in the constituent documents or the adoption
of new constituent documents (the articles or certificate of incorporation,
articles of trust, declaration of trust, certificate or agreement of limited
partnership or other similar charter or

                                       37

governing document) of the Surviving Business Entity to be effected by such
merger or consolidation;

     (f) The effective time of the merger, which may be the date of the filing
of the certificate of merger pursuant to Section 15.4 or a later date specified
in or determinable in accordance with the Merger Agreement (provided, that if
the effective time of the merger is to be later than the date of the filing of
the certificate of merger, the effective time shall be fixed no later than the
time of the filing of the certificate of merger and stated therein); and

     (g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Board of Directors.

Section 15.3  Approval by Members of Merger or Consolidation.

     (a) Except as provided in Section 15.3(d), the Board of Directors, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Members, whether at a special meeting or by written
consent, in either case in accordance with the requirements of Article XIV. A
copy or a summary of the Merger Agreement shall be included in or enclosed with
the notice of a special meeting or the written consent.

     (b) Except as provided in Section 15.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the Members.

     (c) Except as provided in Section 15.3(d), after such approval by vote or
consent of the Members, and at any time prior to the filing of the certificate
of merger pursuant to Section 15.4, the merger or consolidation may be abandoned
pursuant to provisions therefor, if any, set forth in the Merger Agreement.

     (d) Notwithstanding anything else contained in this Article XV or in this
Agreement, the Board of Directors is permitted, in its discretion, without
Member approval, to merge the Company or any Group Member into, or convey all of
the Company's assets to, another limited liability entity which shall be newly
formed and shall have no assets, liabilities or operations at the time of such
Merger other than those it receives from the Company or other Group Member if
(i) the Board of Directors has received an Opinion of Counsel that the merger or
conveyance, as the case may be, would not result in the loss of the limited
liability of any Member or any limited partner in the MLP or cause the Company
or the MLP to be treated as an association taxable as a corporation or otherwise
to be taxed as an entity for federal income tax purposes (to the extent not
previously treated as such), (ii) the sole purpose of such merger or conveyance
is to effect a mere change in the legal form of the Company into another limited
liability entity and (iii) the governing instruments of the new entity provide
the Members with the same rights and obligations as are herein contained.

Section 15.4  Certificate of Merger.

     Upon the required approval by the Board of Directors and the Members of a
Merger Agreement, a certificate of merger shall be executed and filed with the
Secretary of State of the State of Delaware in conformity with the requirements
of the Act.

                                       38

Section 15.5  Effect of Merger.

     (a) At the effective time of the certificate of merger:

         (i) all of the rights, privileges and powers of each of the business
     entities that has merged or consolidated, and all property, real, personal
     and mixed, and all debts due to any of those business entities and all
     other things and causes of action belonging to each of those business
     entities, shall be vested in the Surviving Business Entity and after the
     merger or consolidation shall be the property of the Surviving Business
     Entity to the extent they were of each constituent business entity;

         (ii) the title to any real property vested by deed or otherwise in any
     of those constituent business entities shall not revert and is not in any
     way impaired because of the merger or consolidation;

         (iii) all rights of creditors and all liens on or security interests in
     property of any of those constituent business entities shall be preserved
     unimpaired; and

         (iv) all debts, liabilities and duties of those constituent business
     entities shall attach to the Surviving Business Entity and may be enforced
     against it to the same extent as if the debts, liabilities and duties had
     been incurred or contracted by it.

     (b) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another.

                                  ARTICLE XVI
                               GENERAL PROVISIONS

Section 16.1  Addresses and Notices.

     Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Member under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication to
the Member at the address described below. Any notice to the Company shall be
deemed given if received by the Board of Directors at the principal office of
the Company designated pursuant to Section 2.3. The Board of Directors may rely
and shall be protected in relying on any notice or other document from a Member,
Assignee or other Person if believed by it to be genuine.

Section 16.2  Further Action.

     The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.

Section 16.3   Binding Effect.

                                       39

     This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.

Section 16.4  Integration.

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

Section 16.5  Creditors.

     None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Company.

Section 16.6  Waiver.

     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 waiver of any
such breach of any other covenant, duty, agreement or condition.

Section 16.7  Counterparts.

     This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto, independently of the signature of any other party.

Section 16.8  Applicable Law.

     This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.

Section 16.9  Invalidity of Provisions.

     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 contained herein shall not be affected thereby.

Section 16.10  Consent of Members.

     Each Member hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Members, such action may be so taken upon the
concurrence of less than all of the Members and each Member shall be bound by
the results of such action.

                                 *  *  *  *  *

                                       40

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

                         SOLE MEMBER:

                         INERGY, L.P.

                         By: Inergy GP, LLC, its managing general partner

                         By:
                                -----------------------------------------------
                         Name:
                         Title:

                         WITHDRAWING MEMBERS:

                         INERGY PARTNERS, LLC

                         By:
                                -----------------------------------------------
                         Name:
                         Title:

                         ROLESVILLE GAS AND OIL COMPANY, INC.

                         By:
                                -----------------------------------------------
                         Name:
                         Title:

                         WILSON OIL COMPANY OF JOHNSTON COUNTY, INC.

                         By:
                                -----------------------------------------------
                         Name:
                         Title:

                         GENERAL PARTNERS:

                         INERGY GP, LLC

                         By:
                                -----------------------------------------------
                         Name:
                         Title:

                         INERGY PARTNERS, LLC

                         By:
                                -----------------------------------------------
                         Name:
                         Title:

                                       41

                                                                     EXHIBIT 3.8

                           SECOND AMENDED AND RESTATED

                       LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                              INERGY PARTNERS, LLC

                                 (JULY 31, 2001)

                                Table of Contents

                                                                            Page
                                                                            ----
ARTICLE I  DEFINITIONS....................................................    2
   1.1  Definitions Generally.............................................    2
   1.2  Terms Defined Herein..............................................    2
   1.3  Other Definitional Provisions.....................................    6

ARTICLE II  BUSINESS PURPOSES AND OFFICES.................................    6
   2.1  Name; Business Purpose............................................    6
   2.2  Powers............................................................    7
   2.3  Principal Office..................................................    7
   2.4  Registered Office and Registered Agent............................    7
   2.5  Amendment of the Certificate......................................    7
   2.6  Liability of Members..............................................    7
   2.7  Authority; Investment Intent; Restriction Against Transfer........    7

ARTICLE III  CAPITAL CONTRIBUTIONS AND LOANS..............................    8
   3.1  Capital Accounts and Percentage Interests.........................    8
   3.2  Additional Capital Calls..........................................    8
   3.3  Percentage Interest Adjustments...................................    8
   3.4  Capital Account Adjustments and Revaluation.......................    9
   3.5  Capital Accounts..................................................   10
   3.6  Capital Withdrawal Rights, Interest and Priority..................   11
   3.7  Loans.............................................................   11

ARTICLE IV  ALLOCATIONS AND DISTRIBUTIONS.................................   11
   4.1  Distributions to Pay Taxes........................................   11
   4.2  [Not Used]........................................................   11
   4.3  Additional Cash Distributions.....................................   11
   4.4  Liquidation Distributions.........................................   11
   4.5  Profits, Losses and Distributive Shares of Tax Items..............   12
   4.6  Allocation of Operating Income, Income, Loss and Credits..........   12
   4.7  Special Rules Regarding Allocations...............................   13
   4.8  Withholding of Distributions......................................   15
   4.9  No Priority.......................................................   16
   4.10  Tax Withholding..................................................   16
   4.11  Reserves.........................................................   16

ARTICLE V  MANAGEMENT.....................................................   16
   5.1  Management........................................................   16
   5.2  Voting............................................................   16
   5.3  Officers..........................................................   16
   5.4  Meetings of the Voting Members....................................   16
   5.5  Notice of Meeting.................................................   17
   5.6  Waiver of Notice..................................................   17

                                       i

                                Table of Contents
                                   (continued)

                                                                            Page
                                                                            ----
   5.7  Action Without a Meeting..........................................   17
   5.8  Non-Voting Members................................................   17
   5.9  Definitions.......................................................   17
   5.10  Limitation of Liability..........................................   18
   5.11  Right to Indemnification.........................................   18
   5.12  Enforcement of Indemnification...................................   19
   5.13  Advancement of Expenses..........................................   19
   5.14  Non-Exclusivity..................................................   19
   5.15  Insurance........................................................   20
   5.16  Amendment and Vesting of Rights..................................   20
   5.17  Severability.....................................................   20
   5.18  Contracts with Members or their Affiliates.......................   20
   5.19  Other Business Ventures..........................................   20

ARTICLE VI  ACCOUNTING AND BANK ACCOUNTS..................................   21
   6.1  Fiscal Year.......................................................   21
   6.2  Books and Records.................................................   21
   6.3  Tax Information...................................................   21
   6.4  Tax Returns and Elections; Tax Matters Partner....................   21
   6.5  Section 754 Election..............................................   22
   6.6  Bank Accounts.....................................................   22

ARTICLE VII  TRANSFERS OF INTERESTS.......................................   22
   7.1  General Transfer Restrictions.....................................   22
   7.2  First Offer Right.................................................   22
   7.3  Exempt Transfers..................................................   24
   7.4  Third Party Offer to Purchase.....................................   24
   7.5  Third Party Offer to Acquire the Entire Company...................   24
   7.6  [Not Used]........................................................   24
   7.7  Substitute Members................................................   25
   7.8  Effect of Admission as a Substitute Member........................   25
   7.9  Additional Members................................................   25
   7.10  Applicability....................................................   25
   7.11  Termination of Employment........................................   26
   7.12  Valuation of Interests...........................................   26
   7.13  Buy-Back Provisions..............................................   26
   7.14  Payment upon Buy-Back............................................   26
   7.15  Resignation......................................................   26
   7.16  Miscellaneous Provisions Regarding Article VII...................   26

ARTICLE VIII  DISSOLUTION AND TERMINATION.................................   28
   8.1  Events Causing Dissolution........................................   28
   8.2  Effect of Dissolution.............................................   28

                                       ii

                                Table of Contents
                                   (continued)

                                                                            Page
                                                                            ----
   8.3  Application of Proceeds...........................................   29
   8.4  Continuing Obligations............................................   29

ARTICLE IX  MISCELLANEOUS.................................................   29
   9.1  Title to Assets...................................................   29
   9.2  Nature of Interest in the Company.................................   29
   9.3  Notices...........................................................   29
   9.4  Waiver of Default.................................................   29
   9.5  No Third Party Rights.............................................   30
   9.6  Entire Agreement..................................................   30
   9.7  Amendments to this Agreement......................................   30
   9.8  Severability......................................................   30
   9.9  Binding Agreement.................................................   30
   9.10  Headings.........................................................   30
   9.11  Counterparts.....................................................   30
   9.12  Governing Law....................................................   31
   9.13  Remedies.........................................................   31

EXHIBIT A         Members Capital Accounts and Percentage Interests
SCHEDULE A        Not Used
SCHEDULE B        Valuation Formula

                                      iii

                           SECOND AMENDED AND RESTATED
                       LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                              INERGY PARTNERS, LLC

     THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") is entered into as of July 31, 2001, among the present members of
Inergy Partners, LLC, a Delaware limited liability company (the "Company").

                                    RECITALS

     A. The Company was originally organized as a limited liability company
under the Delaware Limited Liability Company Act on November 8, 1996, and its
original name was "Mid-Atlantic Energy, LLC."

     B. The Limited Liability Company Agreement for the Company was amended and
restated on September 30, 1998 and 10 amendments thereto have since been entered
into, with Amendment No. 10 being entered into on May 2, 2001.

     C. As a result of such amendments, a number of members were admitted to the
Company as holders of common and preferred interests.

     D. On the date hereof, a limited partnership organized by the Company has
effected a public offering of limited partnership interests and certain other
transactions have occurred pursuant to a Contribution, Conveyance and Assignment
Agreement among various parties, including the Company, of even date herewith.

     E. In addition, the Company, Inergy Holdings, LLC and certain holders of
Class A Preferred Interest of the Company have entered into separate agreements
pursuant to which, among other things, such holders of Class A Preferred
Interests have either (1) exchanged such interests for interests in the
aforementioned public limited partnership and therefore are no longer Members of
the Company or (2) exchanged their Class A Preferred Interests for common
interests in the Company.

     F. As a result of the aforementioned agreements and actions, the Company no
longer has outstanding any Class A Preferred Interests and all Members of the
Company hold common interests in the Company and such Members have agreed to
this Second Amended and Restated Limited Liability Company Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree to amend and restate the Initial LLC
Agreement in its entirety as follows:

                                   ARTICLE I.

                                   DEFINITIONS

     1.1 Definitions Generally. Unless defined specifically herein, terms
relating to a limited liability company shall have the meanings given to them in
the Delaware Limited Liability Company Act.

     1.2 Terms Defined Herein. As used herein, the following terms shall have
the following meanings, unless the context otherwise specifies:

     "Act" means the Delaware Limited Liability Company Act, as amended from
time to time.

     "Additional Capital Call" has the meaning set forth in Section 3.2 hereof.

     "Additional Distributions" has the meaning set forth in Section 4.3 hereof.

     "Adjusted Capital Account Deficit" means, with respect to each Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments: (i)
increased for any amounts such Member is unconditionally obligated to restore
and the amount of such Member's share of Company Minimum Gain and Member Minimum
Gain after taking into account any changes during such year; and (ii) reduced by
the items described in Treasury Regulations (S)1.704-1(b)(2)(ii)(d)(4), (5) and
(6).

     "Affiliate" means any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such Person. For
the purposes of this definition, "control," when used with respect to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.

     "Agreement" means this Second Amended and Restated Limited Liability
Company Agreement of Inergy Partners, LLC, as amended from time to time.

     "Bankruptcy", with respect to any Person, means the entry of an order for
relief against such Person under the Federal Bankruptcy Code or the insolvency
of such Person under any state insolvency act.

     "Bradley Members" are those members designated as such on Exhibit A hereto
and their successors and permitted assigns.

     "Business Day" shall mean any day other than a Saturday or Sunday or a day
on which banking institutions in Kansas City, Missouri are authorized or
obligated to close.

     "Capital Account" means the separate account established and maintained by
the Company for each Member pursuant to Section 3.5 hereof.

                                       2

     "Certificate" means the Certificate of Formation of the Company filed with
the Secretary of State of Delaware, as amended from time to time.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or the corresponding provisions of future laws.

     "Company" means Inergy Partners, LLC, a Delaware limited liability company.

     "Company Minimum Gain" shall have the same meaning as the term "partnership
minimum gain" set forth in Treasury Regulation (S)1.704-2(d)(1). Company Minimum
Gain shall be determined, first, by computing for each Nonrecourse Debt any gain
that the Company would realize if the Company disposed of the property subject
to that liability for no consideration other than full satisfaction of such
liability and, then, aggregating the separately computed gains. For purposes of
computing gain, the Company shall use the basis of such property that is used
for purposes of determining the amount of the Capital Accounts under Section 3.5
hereof. In any taxable year in which a Revaluation occurs, the net increase or
decrease in Company Minimum Gain for such taxable year shall be determined by:
(1) calculating the net decrease or increase in Company Minimum Gain using the
current year's book value and the prior year's amount of Company Minimum Gain,
and (2) adding back any decrease in Company Minimum Gain arising solely from the
Revaluation.

     "Contributing Member" has the meaning set forth in Section 3.3 hereof.

     "Credits" means all tax credits allowed by the Code with respect to
activities of the Company or the Property.

     "Distributions" means any distributions by the Company to the Members of
Liquidation Proceeds, Tax Distributions or Additional Distributions.

     "EBITDA" means the net income of the Operating Company before provision for
income taxes determined in accordance with GAAP plus the amount included in such
net income for interest, depreciation and amortization of intangible items.

     "Employee Member " means an individual or entity designated as such on
Exhibit A hereto, and their successors and permitted assigns.

     "Exempt Transfer" has the meaning set forth in Section 7.3 hereof.

     "Fair Value" of an asset means its fair market value.

     "GAAP" means generally accepted accounting principles.

     "Holdings" means Inergy Holdings, LLC, a Delaware limited liability
company.

     "Illiquid Assets" has the meaning set forth in Section 3.4 hereof.

     "Income" and "Loss" mean, respectively, for each fiscal year or other
period, an amount equal to the Company's taxable income or loss for such year or
period, determined in accordance

                                       3

with Code Section 703(a), except that for this purpose (i) all items of income,
gain, deduction or loss required to be separately stated by Code Section
703(a)(1) shall be included in taxable income or loss; (ii) tax exempt income
shall be added to taxable income or loss; (iii) any expenditures described in
Code Section 705(a)(2)(B) (or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulation (S)1.704-1(b)(2)(iv)(i)) and not otherwise
taken into account in computing taxable income or loss shall be subtracted; and
(iv) taxable income or loss shall be adjusted to reflect any item of income or
loss specially allocated in Article IV hereof and the Company's taxable income
shall be reduced or its loss increased by the amount of Operating Income
allocated pursuant to Section 4.6(a)(ii)(A) hereof.

     "Inergy Propane" means Inergy Propane, LLC, a Delaware limited liability
company.

     "Initial Contributions" means either the initial or the restated value of
the capital contributed by the Members for their Interests.

     "Interest" means all of a Member's rights and interests in the Company in
such Member's capacity as a Member, all as provided in the Act, the Certificate
and this Agreement, including, without limitation, the Member's interest in the
capital, income, gain, deductions, basis, and credits of the Company. All
Interest in the Company is common interest.

     "Liquidation Proceeds" means all Property at the time of liquidation of the
Company and all proceeds thereof.

     "Member" means each Person executing this Agreement, including a Substitute
Member, if any.

     "Member Minimum Gain" shall have the same meaning as the term "partner
nonrecourse debt minimum gain" as set forth in Treasury Regulation
(S)1.704-2(i)(3). With respect to each Member Nonrecourse Debt, Member Minimum
Gain shall be determined by computing for each Member Nonrecourse Debt any gain
that the Company would realize if the Company disposed of the property subject
to that liability for no consideration other than full satisfaction of such
liability. For purposes of computing gain, the Company shall use the basis of
such property that is used for purposes of determining the amount of the Capital
Accounts under Section 3.5 hereof. In any taxable year in which a Revaluation
occurs, the net increase or decrease in Member Minimum Gain for such taxable
year shall be determined by: (1) calculating the net decrease or increase in
Member Minimum Gain using the current year's book value and the prior year's
amount of Member Minimum Gain, and (2) adding back any decrease in Member
Minimum Gain arising solely from the Revaluation.

     "Member Nonrecourse Debt" shall have the same meaning as the term "partner
nonrecourse debt" set forth in Treasury Regulation (S)1.704-2(b)(4).

     "Member Nonrecourse Deductions" shall have the same meaning as the term
"partner nonrecourse deductions" set forth in Treasury Regulation
(S)1.704-2(i)(2). Generally, the amount of Member Nonrecourse Deductions with
respect to a Member Nonrecourse Debt for a fiscal year equals the net increase
during the year in the amount of the Member Minimum Gain (determined in
accordance with Treasury Regulation (S)1.704-2(i)) reduced (but not below zero)

                                       4

by the aggregate distributions made during the year of proceeds of Member
Nonrecourse Debt and allocable to the increase in Member Minimum Gain determined
according to the provisions of Treasury Regulation (S)1.704-2(i).

     "Non-Contributing Member" has the meaning set forth in Section 3.3 hereof.

     "Non-Exempt Transfer" means any Transfer that is not an exempt transfer
under Section 7.3 hereof.

     "Nonrecourse Debt" means a Company liability with respect to which no
Member bears the economic risk of loss as determined under Treasury Regulations
(S)(S)1.752-1(a)(2) and 1.752-2.

     "Nonrecourse Deductions" shall have the same meaning as the term
"nonrecourse deductions" set forth in Treasury Regulation (S)1.704-2(c).
Generally, the amount of Nonrecourse Deductions for a fiscal year equals the net
increase in the amount of Company Minimum Gain (determined in accordance with
Treasury Regulation (S)1.704-2(d)) during such year reduced (but not below zero)
by the aggregate distributions made during the year of proceeds of a Nonrecourse
Debt that are allocable to the increase in Company Minimum Gain, determined
according to the provisions of Treasury Regulation (S)1.704-2(c) and (h).

     "Non-Voting Member" is a Member who is not entitled to vote in any matter
requiring a vote under the terms of this Agreement.

     "Operating Companies" means Inergy Propane and such other entities in which
the Company may from time to time acquire and own, directly or indirectly,
voting control.

     "Operating Income" means Income, unless otherwise designated by a Voting
Member Majority.

     "Percentage Interest" means a Member's percentage as set forth on Schedule
A attached hereto, as adjusted from time to time pursuant to this Agreement.

     "Person" means any individual, partnership, limited liability company,
corporation, association, cooperative, estate, trust, custodian, nominee or any
other individual or entity in its own or any representative capacity.

     "Property" means all properties and assets, including intellectual
property, contract rights and other intangible assets, that the Company may own
or otherwise have an interest in from time to time.

     "Representative" has the meaning set forth in Section 5.1 hereof.

     "Reserves" means amounts set aside from time to time by the Members
pursuant to Section 4.10 hereof.

     "Revaluation" shall mean the occurrence of any event described in clause
(x), (y) or (z) of Section 3.5(b) hereof in which the book basis of Property is
adjusted to its Fair Value.

                                       5

     "Substitute Member" has the meaning set forth in Section 7.7 hereof.

     "Tax Distribution" has the meaning set forth in Section 4.1 hereof.

     "Tax Matters Partner" means the Member designated pursuant to Section 6.4
hereof to represent the Company in matters before the Internal Revenue Service.

     "Transfer" means (i) when used as a verb, to give, sell, exchange, assign,
transfer, lease, pledge, hypothecate, bequeath, devise or otherwise dispose of
or encumber, and (ii) when used as a noun, the nouns corresponding to such
verbs, in either case voluntarily or involuntarily, by operation of law or
otherwise.

     "Transferee" has the meaning set forth in Section 7.1 hereof.

     "Transferor" has the meaning set forth in Section 7.2 hereof.

     "Treasury Regulations" means the regulations promulgated by the Treasury
Department with respect to the Code, as such regulations are amended from time
to time, or the corresponding provisions of future regulations.

     "Voting Member" is a Member who is entitled to vote in all matters
requiring a vote under the terms of this Agreement.

     "Voting Member Majority" means those Voting Members holding a majority of
the Percentage Interests held by all Voting Members.

     1.3 Other Definitional Provisions.

          (a) As used in this Agreement, accounting terms not defined in this
     Agreement, and accounting terms partly defined to the extent not defined,
     shall have the respective meanings given to them under GAAP.

          (b) The words "hereof," "herein" and "hereunder" and words of similar
     import when used in this Agreement shall refer to this Agreement as a whole
     and not to any particular provision of this Agreement, and section,
     subsection, schedule and exhibit references are to this Agreement unless
     otherwise specified.

          (c) Words of the masculine gender shall be deemed to include the
     feminine or neuter genders, and vice versa, where applicable. Words of the
     singular number shall be deemed to include the plural number, and vice
     versa, where applicable.

                                       6

                                   ARTICLE II

                          BUSINESS PURPOSES AND OFFICES

     2.1 Name; Business Purpose.

          (a) The name of the Company shall be as stated in the Certificate. The
     name of the Company may be changed from time to time by the Voting Member
     Majority.

          (b) The purpose of the Company is to:

               (i) invest in and act as the Non-Managing General Partner of
          Inergy, L.P., a Delaware limited partnership;

               (ii) invest in and be the sole owner of common units of New
          Inergy Propane, LLC, a Delaware limited liability company;

               (iii) invest, directly or indirectly through other entities in
          Inergy Propane, to do any and all things necessary or incidental
          thereto; and

               (iv) to engage in such other business as the Voting Member
          Majority deems in the best interests of the Company.

     2.2 Powers. The Company may carry on any lawful business, purpose or
activity permitted by the Act and shall possess and may exercise all the powers
granted by the Act, any other law, or this Agreement, together with any powers
incidental thereto, as far as such powers and privileges are necessary or
convenient to the conduct, promotion or attainment of the business, purposes or
activities of the Company.

     2.3 Principal Office. The principal office of the Company shall be located
at 1101 Walnut, Suite 1500, Kansas City, Missouri 64106, or at such other
place(s) as the Voting Member Majority may determine from time to time.

     2.4 Registered Office and Registered Agent. The location of the registered
office and the name of the registered agent of the Company in the State of
Delaware shall be as stated in the Certificate. The registered office and
registered agent of the Company in the State of Delaware may be changed, from
time to time, by the Voting Member Majority.

     2.5 Amendment of the Certificate. The Company shall amend the Certificate
at such time or times and in such manner as may be approved by the Voting Member
Majority or as required by the Act or this Agreement.

     2.6 Liability of Members. No Member, Representative or officer, solely by
reason of being a Member, Representative or officer, shall be liable, under a
judgment, decree or order of a court, or in any other manner, for any debt,
obligation or liability of the Company, whether arising in contract, tort or
otherwise, or for the acts or omissions of the other Members or any other
Representative or officer of the Company. The failure of the Company to observe
any formalities or requirements relating to the exercise of its powers or
management of its business

                                       7

or affairs under this Agreement or the Act shall not be grounds for imposing
liability on the Members, Representatives or officers for liabilities of the
Company.

     2.7 Authority; Investment Intent; Restriction Against Transfer. Each Member
warrants to the Company and to the other Members that: (a) the Member is duly
organized, validly existing and in good standing under the laws of its state of
organization, if applicable, and that the Member has the requisite power and
authority to execute this Agreement and to perform its obligations hereunder;
(b) the Member is acquiring an Interest for such Member's own account as an
investment and without any intent to distribute such Interest or any portion
thereof or interest therein; and (c) the Member acknowledges that the Interests
have not been registered under the Securities Act of 1933 or any state
securities laws, and such Member's Interest may not be resold or transferred
except as provided in Article VII hereof and except pursuant to a registration
statement under or an exemption from the registration provisions of the federal
and applicable state securities laws.

                                  ARTICLE III

                         CAPITAL CONTRIBUTIONS AND LOANS

     3.1 Capital Accounts and Percentage Interests. The Capital Account and the
Percentage Interest, as the case may be, of each Member shall be as set forth
opposite such Member's name on Exhibit A attached hereto.

     3.2 Additional Capital Calls. The Members recognize that the Company may
require from time to time capital in order to accomplish the purpose and
business of the Company. Accordingly, additional cash capital contributions
("Additional Capital Calls") may be called for from time to time by the Voting
Member Majority. Within ten Business Days after the date such Additional Capital
Call is declared by the Voting Member Majority, each Member shall be entitled to
contribute, in cash, to the capital of the Company an amount (the "Additional
Contribution") equal to such Member's Percentage Interest at the time of the
Additional Capital Call multiplied by the aggregate additional capital
contributions. No Member shall be obligated to make any Additional Contributions
to the Company and, accordingly, no Member shall be liable for damage to the
Company or any other Member as a result of the failure of such Member to make
any such Additional Contributions. The remedies set forth in Section 3.3 below
shall be the sole remedies for any such failure.

     3.3 Percentage Interest Adjustments.

          (a) If the Capital Accounts of the Members are adjusted pursuant to
     Section 3.5(b), then, after such adjustments are made, the Percentage
     Interests of the Members will be correspondingly adjusted as follows:

               (i) Effective as of ten Business Days after the last date a
          capital contribution under Section 3.2 above may be made, the
          Percentage Interests of the Members shall be automatically adjusted to
          take account of such failure of such Member to make such capital
          contribution. The Percentage Interest of each Member shall be the
          respective percentage obtained by dividing the total balance

                                       8

          in such Member's Capital Account as of such date by the total balance
          in all Members' Capital Accounts as of such date. Any payment by a
          Contributing Member of all or a portion of a Non-Contributing Member's
          contribution pursuant to Section 3.3(a)(ii) below shall result in a
          comparable adjustment in the Percentage Interests of the Members. The
          sum of the Percentage Interests of the Members, as adjusted in
          accordance with this Section 3.3(a)(i), shall equal 100%.

               (ii) If any Member fails for any reason to make in a timely
          manner any part or all of an Additional Contribution called for under
          Section 3.2 (the "Unpaid Additional Contribution"), such Member shall
          be deemed a "Non-Contributing Member" and the Company shall promptly
          give written notice of the failure to contribute to all Members. Each
          of the Members contributing their pro-rata share of an Additional
          Contribution (the "Contributing Members") shall have the right, but
          not the obligation, for a period of 10 days after notice of such
          failure to contribute by a Non-Contributing Member is given, to
          contribute to the Company an amount equal to (A) the amount of each
          Non-Contributing Member's Unpaid Additional Contribution multiplied by
          a fraction the numerator of which is the Contributing Member's
          Percentage Interest at the time of the Additional Capital Call and the
          denominator of which is the sum of the Percentage Interests of all
          Contributing Members who desire to contribute to the Company such
          Contributing Members' pro-rata share of the Non-Contributing Member's
          Unpaid Additional Contribution or (B) such greater amount of the
          Non-Contributing Member's Unpaid Additional Contribution as shall be
          agreed upon by all of such Contributing Members. Upon the payment by
          the Contributing Members of all or a portion of the Non-Contributing
          Member's Unpaid Additional Contribution, the Percentage Interests of
          the Members shall be adjusted as provided in Section 3.3(a)(i) above.

          (b) The Company shall not dissolve as a result of any failure by a
     Member to make a capital contribution under Section 3.2 above, unless the
     Voting Member Majority following such a failure elects to dissolve the
     Company.

     3.4 Capital Account Adjustments and Revaluation. If a Member fails for any
reason to make a capital contribution under Section 3.2 above within ten
Business Days after the last date such capital contribution may be made (the
"Default Date"), then the Capital Accounts of the Members will be adjusted
pursuant to Section 3.5(b) hereof. For purposes of adjustments made pursuant to
this Section 3.4, the Fair Value of the Company's assets shall be determined as
follows:

          (a) Cash, deposit accounts, United States securities with a maturity
     of 90 days or less or other cash equivalents shall be valued at the
     principal or par amounts with accrued interest thereon, if any, through the
     Default Date.

          (b) All securities and commodities which are traded on a generally
     recognized exchange shall be valued at the closing price, or if applicable
     the average of the bid and ask price, on the Default Date.

                                       9

          (c) All assets of the Company which are not described in subparagraphs
     (i) or (ii) above and which would be current assets of the Company under
     the accrual method of accounting shall be valued in an amount equal to
     their book value determined in accordance with generally accepted
     accounting principles consistently applied as if the Company applied the
     accrual method of accounting.

          (d) Except as to the value of the Company's interests in the Operating
     Companies, all assets not described in the preceding subparagraphs (i)
     through (iii) (the "Illiquid Assets") shall be valued in an amount equal to
     the Fair Value of such Illiquid Assets as determined by a Voting Member
     Majority.

          (e) The Company's interests in the Operating Companies shall be valued
     using the methods described in (i) through (iv) above for the valuation of
     assets held by the Operating Companies (based on the entire equity
     interests of the Operating Companies) multiplied by the Company's
     percentage interests in the equity of the Operating Companies at the time
     of such valuation.

     3.5 Capital Accounts.

     (a) A separate Capital Account shall be maintained for each Member. Each
Member's Capital Account shall be (i) increased by (a) the amount of money
contributed by such Member, (b) the Fair Value of property contributed by such
Member (net of liabilities secured by such contributed property that the Company
is considered to assume or take subject to under Code Section 752), (c)
allocations to such Member, pursuant to Article IV hereof, of Company income and
gain (or items thereof), and (d) to the extent not already netted out under
clause (ii)(b) below, the amount of any Company liabilities assumed by the
Member or which are secured by any property distributed to such Member; and (ii)
decreased by (a) the amount of money distributed to such Member, (b) the Fair
Value of property distributed to such Member (net of liabilities secured by such
distributed property that such Member is considered to assume or take subject to
under Code Section 752), (c) allocations to such Member, pursuant to Article IV
hereof, of Company loss and deductions (or items thereof), and (d) to the extent
not already netted out under clause (i)(b) above, the amount of any liabilities
of the Member assumed by the Company or which are secured by any property
contributed by such Member to the Company.

     In the event any Interest is transferred in accordance with the terms of
this Agreement, the Transferee shall succeed to the Capital Account of the
Transferor to the extent it relates to the transferred interest, and the Capital
Account of each Transferee shall be increased and decreased in the manner set
forth above.

     (b) In the event of (x) an additional capital contribution by a Member that
results in a shift in Percentage Interests, (y) the distribution by the Company
to a Member of more than a de minimis amount of property (other than cash) or a
distribution of property as consideration for an Interest or (z) the liquidation
of the Company within the meaning of Treasury Regulation
(S)1.704-1(b)(2)(ii)(g), the book basis of the Property shall be adjusted to
Fair Value and the Capital Accounts of the Members shall be

                                       10

adjusted simultaneously to reflect the aggregate net adjustment to book basis as
if the Company recognized gain or loss equal to the amount of such aggregate net
adjustment.

     (c) In the event that Property is subject to Code Section 704(c) or is
revalued on the books of the Company in accordance with paragraph (b) above
pursuant to Treasury Regulation (S)1.704-1(b)(2)(iv)(f), the Members' Capital
Accounts shall be adjusted in accordance with Treasury Regulation
(S)1.704-1(b)(2)(iv)(g) for allocations to the Members of depreciation,
amortization and gain or loss, as computed for book purposes (and not tax
purposes) with respect to such Property.

     (d) The foregoing provisions of this Section 3.5 and the other provisions
of this Agreement relating to the maintenance of the Capital Accounts are
intended to comply with Treasury Regulations (S)(S)1.704-1(b) and 1.704-2, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulations. In the event the Members determine that it is prudent or advisable
to modify the manner in which the Capital Accounts, or any increases or
decreases therein, are computed in order to comply with such Treasury
Regulations, the Members may cause such modification to be made, provided such
modification is not likely to have a material effect on the amounts
distributable to any Member upon the dissolution of the Company.

     3.6 Capital Withdrawal Rights, Interest and Priority. Except as expressly
provided in this Agreement, no Member shall be entitled to withdraw or reduce
such Member's Capital Account or to receive any Distributions. No Member shall
be entitled to demand or receive any Distributions in any form other than in
cash. No Member shall be entitled to receive or be credited with any interest on
the balance in such Member's Capital Account at any time. Except as may be
otherwise expressly provided herein, no Member shall have any priority over any
other Member as to the return of the balance in such Member's Capital Account.

     3.7 Loans. Any Member may advance funds as a loan to the Company in such
amounts, at such times and on such terms and conditions as may be approved by
the Voting Member Majority. Loans by a Member to the Company shall not be
considered as contributions to the capital of the Company.

                                   ARTICLE IV

                          ALLOCATIONS AND DISTRIBUTIONS

     4.1 Distributions to Pay Taxes. With respect to any tax year in which the
Company shall report taxable income, the Company shall distribute to the
Members, based upon their respective Percentage Interests at the time of such
distribution, an aggregate amount equal to the Company's taxable income, plus or
minus other items of income, gain, loss or deduction passing through to the
Members, times the sum of the effective applicable Federal income tax rate and
the higher of North Carolina or Missouri state income tax rates and assuming
that each Member is an individual paying Federal and state income tax at the
highest marginal income tax rates with respect to the applicable type of income
(a "Tax Distribution"). All Tax Distributions shall be made at a time sufficient
to enable the Members to pay any required estimated tax payments.

                                       11

     4.2 [Not Used]

     4.3 Additional Cash Distributions. The Company shall make, from time to
time, such distributions as shall be determined by the Voting Member Majority
(an "Additional Distribution"). Such Additional Distributions shall be
distributed to the Members in accordance with their respective Percentage
Interests, as adjusted.

     4.4 Liquidation Distributions. Liquidation Proceeds shall be distributed in
the following order of priority:

          (a) First, to the payment of debts and liabilities of the Company
     (including to Members to the extent otherwise permitted by law) and the
     expenses of liquidation.

          (b) Next, to the setting up of such reserves as the Person required or
     authorized by law to wind up the Company's affairs may reasonably deem
     necessary or appropriate for any disputed, contingent or unforeseen
     liabilities or obligations of the Company, provided that any such reserves
     shall be paid over by such Person to an independent escrow agent, to be
     held by such agent or its successor for such period as such Person shall
     deem advisable for the purpose of applying such reserves to the payment of
     such liabilities or obligations and, at the expiration of such period, the
     balance of such reserves, if any, shall be distributed as hereinafter
     provided.

          (c) Next, to the Members in proportion to and to the extent of their
     respective positive Capital Account balances after taking into account the
     allocation of all Operating Income, Income or Loss pursuant to this
     Agreement for the fiscal year(s) in which the Company is liquidated.

          (d) Next, to the Members in accordance with their respective
     Percentage Interests, as adjusted.

     4.5 Profits, Losses and Distributive Shares of Tax Items. The Company's net
income or net loss, as the case may be, for each fiscal year of the Company or
part thereof, as determined in accordance with such method of accounting as may
be adopted for the Company pursuant to Article VI hereof, shall be allocated to
the Members for both financial accounting and income tax purposes as set forth
in this Article IV, except as otherwise provided for herein or unless decided
otherwise by the Voting Member Majority.

     4.6 Allocation of Operating Income, Income, Loss and Credits.

     (a) Operating Income, Income or Loss and Credits shall be allocated among
the Members as follows:

          (i) Loss shall be allocated among the Members in the following order
     of priority:

               (A) First to the Members in proportion to and to the extent of
          their respective positive Capital Account balances; then

                                       12

               (B) To the Members in accordance with their respective Percentage
          Interests, as adjusted.

          (ii) Operating Income, Income and Credits shall be allocated among the
     Members in the following order of priority:

               (A) Income shall be allocated to the Members, on a pro rata basis
          in accordance with the amounts previously allocated to such Members
          under Section 4.6(a)(i)(B) hereof, until the cumulative amount of
          Income allocated pursuant to this subparagraph (B) equals the
          cumulative amount of Losses allocated to the Members pursuant to
          Section 4.6(a)(i)(B) hereof; then

               (B) Income shall be allocated to the Members, on a pro rata basis
          in accordance with the amounts previously allocated to such Members
          under Section 4.6(a)(i)(A) hereof, until the cumulative amount of
          Income allocated pursuant to this subparagraph (D) equals the
          cumulative amount of Losses allocated to the Members pursuant to
          Section 4.6(a)(i)(A) hereof; then

               (C) Income and Credits shall be allocated to the Members in
          accordance with their respective Percentage Interests, as adjusted.

          To the extent there is any adjustment in the respective Percentage
     Interests of the Members, Operating Income, Income, Loss and Credits shall
     be allocated among the pre-adjustment and post-adjustment periods as
     provided in Section 4.7(k) below.

     4.7 Special Rules Regarding Allocations. Notwithstanding the foregoing
provisions of this Article IV, the following special rules shall apply in
allocating the net income or net loss of the Company:

          (a) Section 704(c) and Revaluation Allocations. In accordance with
     Code Section 704(c) and the Treasury Regulations thereunder, income, gain,
     loss and deduction with respect to any property contributed to the capital
     of the Company shall, solely for tax purposes, be allocated between the
     Members so as to take account of any variation between the adjusted basis
     of such property to the Company for federal income tax purposes and its
     Fair Value at the time of contribution. In the event of a Revaluation,
     subsequent allocations of income, gain, loss and deduction with respect to
     such property shall take account of any variation between the adjusted
     basis of such property to the Company for federal income tax purposes and
     its Fair Value immediately after the adjustment in the same manner as under
     Code Section 704(c) and the Treasury Regulations thereunder. Any elections
     or other decisions relating to such allocations shall be made by the
     Members in a manner that reasonably reflects the purpose and intention of
     this Agreement. Allocations pursuant to this Section 4.7(a) are solely for
     income tax purposes and shall not affect, or in any way be taken into
     account in computing, for book purposes, each Member's Capital Account, or
     share of income or loss, pursuant to any provision of this Agreement.

                                       13

          (b) Minimum Gain Chargeback. Notwithstanding any other provision of
     this Article IV, if there is a net decrease in Company Minimum Gain during
     a Company taxable year, each Member shall be allocated items of income and
     gain for such year (and, if necessary, for subsequent years) in an amount
     equal to that Member's share of the net decrease in Company Minimum Gain
     during such year (hereinafter referred to as the "Minimum Gain Chargeback
     Requirement"). A Member's share of the net decrease in Company Minimum Gain
     is the amount of the total decrease multiplied by the Member's percentage
     share of the Company Minimum Gain at the end of the immediately preceding
     taxable year. A Member is not subject to the Minimum Gain Chargeback
     Requirement to the extent: (1) the Member's share of the net decrease in
     Company Minimum Gain is caused by a guarantee, refinancing or other change
     in the debt instrument causing it to become partially or wholly recourse
     debt or a Member Nonrecourse Debt, and the Member bears the economic risk
     of loss for the newly guaranteed, refinanced or otherwise changed
     liability; (2) the Member contributes capital to the Company that is used
     to repay the Nonrecourse Debt and the Member's share of the net decrease in
     Company Minimum Gain results from the repayment; or (3) the Minimum Gain
     Chargeback Requirement would cause a distortion and the Commissioner of the
     Internal Revenue Service waives such requirement.

          A Member's share of Company Minimum Gain shall be computed in
     accordance with Treasury Regulation (S)1.704-2(g) and as of the end of any
     Company taxable year shall equal: (1) the sum of the Nonrecourse Deductions
     allocated to that Member up to that time and the distributions made to that
     Member up to that time of proceeds of a Nonrecourse Debt allocable to an
     increase of Company Minimum Gain, minus (2) the sum of that Member's
     aggregate share of net decrease in Company Minimum Gain plus that Member's
     aggregate share of decreases resulting from revaluations of Property
     subject to Nonrecourse Debts. In addition, a Member's share of Company
     Minimum Gain shall be adjusted for the conversion of recourse and Member
     Nonrecourse Debts into Nonrecourse Debts in accordance with Treasury
     Regulation (S)1.704-2(g)(3). In computing the above, amounts allocated or
     distributed to the Member's predecessor in interest shall be taken into
     account.

          (c) Member Minimum Gain Chargeback. Notwithstanding any other
     provision of this Article IV other than Section 4.7(b) above, if there is a
     net decrease in Member Minimum Gain during a Company taxable year, each
     Member who has a share of the Member Minimum Gain (determined under
     Treasury Regulations (S)1.704-2(i)(5) as of the beginning of the year)
     shall be allocated items of income and gain for such year (and, if
     necessary, for subsequent years) equal to that Member's share of the net
     decrease in Member Minimum Gain. In accordance with Treasury Regulations
     (S)1.704-2(i)(4), a Member is not subject to this Member Minimum Gain
     Chargeback requirement to the extent the net decrease in Member Minimum
     Gain arises because the liability ceases to be Member Nonrecourse Debt due
     to a conversion, refinancing or other change in the debt instrument that
     causes it to be partially or wholly a Nonrecourse Debt. The amount that
     would otherwise be subject to the Member Minimum Gain Chargeback
     requirement is added to the Member's share of Company Minimum Gain.

                                       14

          (d) Qualified Income Offset. In the event a Member unexpectedly
     receives an adjustment, allocation or distribution described in Treasury
     Regulation (S)1.704.1(b)(2)(ii)(d)(4), (5) or (6), that causes or increases
     such Member's Adjusted Capital Account Deficit, items of Company income and
     gain shall be specially allocated to such Member in an amount and manner
     sufficient to eliminate such Adjusted Capital Account Deficit as quickly as
     possible, provided that an allocation under this Section 4.7(d) shall be
     made if and only to the extent such Member would have an Adjusted Capital
     Account Deficit after all other allocations under this Article IV have been
     made.

          (e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
     or other period shall be allocated to the Members in proportion to their
     Percentage Interests, as adjusted.

          (f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
     shall be allocated to the Member that bears the risk of loss with respect
     to the loan to which such Member Nonrecourse Deductions are attributable in
     accordance with Treasury Regulation (S)1.704-2(i).

          (g) Curative Allocations. Any special allocations of items of income,
     gain, deduction or loss pursuant to Sections 4.7(b), (c), (d), (e) and (f)
     hereof shall be taken into account in computing subsequent allocations of
     income and gain pursuant to this Article IV, so that the net amount of any
     items so allocated and all other items allocated to each Member pursuant to
     this Article IV shall, to the extent possible, be equal to the net amount
     that would have been allocated to each such Member pursuant to the
     provisions of this Article IV if such adjustments, allocations or
     distributions had not occurred. In addition, allocations pursuant to this
     Section 4.7(g) with respect to Nonrecourse Deductions in Section 4.7(e)
     above and Member Nonrecourse Deductions in Section 4.7(f) above shall be
     deferred to the extent the Members reasonably determine that such
     allocations are likely to be offset by subsequent allocations of Company
     Minimum Gain or Member Minimum Gain, respectively.

          (h) Loss Allocation Limitation. Notwithstanding the other provisions
     of this Article IV, unless otherwise agreed to by the Voting Member
     Majority, no Member shall be allocated Loss in any taxable year that would
     cause or increase an Adjusted Capital Account Deficit as of the end of such
     taxable year.

          (i) Share of Nonrecourse Liabilities. Solely for purposes of
     determining a Member's proportionate share of the "excess nonrecourse
     liabilities" of the Company within the meaning of Treasury Regulation
     (S)1.752-3(a)(3), each Member's interest in Company profits is equal to
     such Member's respective Percentage Interest, as adjusted.

          (j) Compliance with Treasury Regulations. The foregoing provisions of
     this Section 4.7 are intended to comply with Treasury Regulation
     (S)(S)1.704-1(b), 1.704-2 and 1.752-1 through 1.752-5, and shall be
     interpreted and applied in a manner consistent with such Treasury
     Regulations. In the event it is determined by the Voting Member Majority
     that it is prudent or advisable to amend this Agreement in order to comply
     with such

                                       15

     Treasury Regulations, the Voting Member Majority is empowered to so amend
     or modify this Agreement, notwithstanding any other provision of this
     Agreement.

          (k) General Allocation Provisions. For purposes of determining the
     Operating Income, Income, Loss or any other items for any period, Operating
     Income, Income, Loss or any such other items shall be determined on a daily
     basis, using any permissible method under Code Section 706 and the Treasury
     Regulations thereunder.

     4.8 Withholding of Distributions. Notwithstanding any other provision of
this Agreement, a Voting Member Majority (or any Person required or authorized
by law to wind up the Company's affairs) may suspend, reduce or otherwise
restrict Distributions of Liquidation Proceeds or Additional Distributions for
such time as a Voting Member Majority deems appropriate.

     4.9 No Priority. Except as may be otherwise expressly provided herein, no
Member shall have priority over the other Members as to Company income, gain,
loss, credits and deductions or distributions.

     4.10 Tax Withholding. Notwithstanding any other provision of this
Agreement, the Voting Member Majority is authorized to take any action that they
determine to be necessary or appropriate to cause the Company to comply with any
withholding requirements established under any federal, state or local tax law,
including, without limitation, withholding on any Distribution to any Member.
For the purposes of this Article IV, any amount withheld on any Distribution and
paid over to the appropriate governmental body shall be treated as if such
amount had in fact been distributed to the Member.

     4.11 Reserves. The Voting Member Majority shall have the right to
establish, maintain and expend Reserves to provide for working capital, for
future maintenance, repair or replacement of the Property, for debt service, for
future investments and for such other purposes as the Voting Member Majority may
deem necessary or advisable.

                                   ARTICLE V

                                   MANAGEMENT

     5.1 Management. The business and affairs of the Company shall be managed by
the Voting Member Majority. A Voting Member shall act through one or more
persons (a "Representative") as it shall designate by notice to the other Voting
Members.

     5.2 Voting. All Members, other than Employee Members and the Bradley
Members, shall be Voting Members to the extent of their Interests. All Employee
Members and the Bradley Members shall have no right to vote with respect to
their Interest. The Voting Members shall be entitled to vote on all matters
requiring a vote under the terms of this Agreement. Each Voting Member shall
vote according to their respective Percentage Interests in the Company. Upon the
Transfer of an Interest pursuant to the terms of this Agreement, each Interest
shall retain any and all voting rights associated therewith.

                                       16

     5.3 Officers. The Voting Members may delegate their powers and authority
under this Agreement in whole or in part to one or more officers of the Company
as the Voting Member Majority deems appropriate, which officer shall have such
power and authority as the Voting Member Majority deems appropriate.

     5.4 Meetings of the Voting Members. Meetings of the Voting Members shall
not be required to be held at any regular frequency, but, instead, shall be held
upon the call of any Voting Member holding more than 20% in Percentage Interest,
acting through one or more of its Representatives. All meetings of the Voting
Members shall be held at the principal office of the Company or at such other
place, either within or without the State of Delaware, as shall be designated by
the person calling the meeting and stated in the notice of the meeting or in a
duly executed waiver of notice thereof. Representatives may participate in a
meeting of the Voting Members by means of conference telephone or video
equipment or similar communications equipment whereby all Representatives
participating in the meeting can hear each other, and participation in a meeting
in this manner shall constitute presence in person at the meeting.

     5.5 Notice of Meeting. Notice of each meeting of the Voting Members,
stating the place, day and hour of the meeting, shall be given by the Voting
Member calling the meeting to the other Voting Members at least three Business
Days before the day on which the meeting is to be held. "Notice" and "call" with
respect to such meetings shall be deemed to be synonymous.

     5.6 Waiver of Notice. Whenever any notice is required to be given to any
Voting Member under the provisions of this Agreement, a waiver thereof in
writing signed by such Member, acting through one or more of its
Representatives, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice. Attendance of a Representative
at any meeting of the Voting Members shall constitute a waiver of notice of such
meeting by the Voting Member he/she represents except where a Representative
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.

     5.7 Action Without a Meeting. Any action that is required to or may be
taken at a meeting of the Voting Members may be taken without a meeting if
consents in writing, setting forth the action so taken, are signed by one or
more of the Representatives of the Voting Member Majority. Such consents shall
have the same force and effect as a unanimous vote at a meeting duly held.

     5.8 Non-Voting Members. Non-Voting Members shall have no right to notice of
or to attend any meeting of the Voting Members.

     5.9 Definitions. For purposes of Sections 5.9 through 5.17 hereof,
inclusive, references to:

          (a) The "Company" shall include, in addition to the resulting or
     surviving limited liability company, any constituent limited liability
     company (including any constituent of a constituent) absorbed in a
     consolidation or merger so that any Person who is or was a manager or
     officer of such constituent limited liability company, or is or was serving
     at the request of such constituent limited liability company as a director,

                                       17

     officer or in any other comparable position of any Other Enterprise shall
     stand in the same position under the provisions of this Article V with
     respect to the resulting or surviving limited liability company as such
     Person would if such Person had served the resulting or surviving limited
     liability company in the same capacity;

          (b) "Other Enterprises" or "Other Enterprise" shall include, without
     limitation, any other limited liability company, corporation, partnership,
     joint venture, trust or employee benefit plan, in which a Person is serving
     at the request of the Company;

          (c) "fines" shall include any excise taxes assessed against a person
     with respect to an employee benefit plan;

          (d) "defense" shall include investigations of any threatened, pending
     or completed action, suit or proceeding as well as appeals thereof and
     shall also include any defensive assertion of a cross-claim or
     counterclaim;

          (e) "serving at the request of the Company" shall include any service
     as a director, officer, Representative or in any other comparable position
     that imposes duties on, or involves services by, a Person with respect to
     any Other Enterprise; and a Person who acted in good faith and in a manner
     such Person reasonably believed to be in or not opposed to the interest of
     any Other Enterprise shall be deemed to have acted "in the best interest of
     the Company" as referred to in this Article V; and "Officer" shall include
     any "Authorized Person" who is authorized to act on behalf of the Company
     pursuant to the terms hereof, whether or not such person has been
     designated an officer of the Company; and

          (f) "officer" shall include an "authorized person" who is authorized
     to act on behalf of the Company pursuant to the terms hereof, whether or
     not such person has been designated an officer of the Company.

     5.10 Limitation of Liability. No Person shall be liable to the Company or
its Members for any loss, damage, liability or expense suffered by the Company
or its Members on account of any action taken or omitted to be taken by such
Person as an officer of the Company or as a Representative or by such Person
while serving at the request of the Company as a director, officer or in any
other comparable position of any Other Enterprise, if such Person discharges
such Person's duties in good faith, and in a manner such Person reasonably
believes to be in or not opposed to the best interests of the Company. The
liability of an officer or Representative hereunder shall be limited only for
those actions taken or omitted to be taken by such Person in the discharge of
such Person's obligations in connection with the management of the business and
affairs of the Company or any Other Enterprise. The foregoing limitation of
liability shall apply to all officers and to all Persons who serve as a
Representative at any time.

     5.11 Right to Indemnification. The Company shall indemnify each Person who
has been or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or appellate (regardless of whether such action,
suit or proceeding is by or in the right of the Company or by third parties) by
reason of the fact that such Person is or was a Voting Member of the Company,

                                       18

an officer of the Company, a Representative or is or was serving at the request
of the Company as a director, officer or in any other comparable position of any
Other Enterprise, against all liabilities and expenses, including, without
limitation, judgments, amounts paid in settlement, attorneys' fees, ERISA excise
taxes or penalties, fines and other expenses, actually and reasonably incurred
by such Person in connection with such action, suit or proceeding (including,
without limitation, the investigation, defense, settlement or appeal of such
action, suit or proceeding); provided, however, that the Company shall not be
required to indemnify or advance expenses to any Person on account of such
Person's conduct that was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct; provided, further, that the
Company shall not be required to indemnify or advance expenses to any Person in
connection with an action, suit or proceeding initiated by such Person unless
the initiation of such action, suit or proceeding was authorized in advance by
the Voting Members; provided, however, that an officer or Representative shall
be indemnified hereunder only for those actions taken or omitted to be taken by
such Person in the discharge of such Person's obligations in connection with the
management of the business and affairs of the Company or any Other Enterprise.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or under a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that such Person's conduct was
finally adjudged to have been knowingly fraudulent, deliberately dishonest or
willful misconduct. The foregoing right to indemnification shall apply to all
Persons serving as officers and to all Persons who serve as a Representative at
any time or who serve at any time at the request of the Company as a director,
officer or in any other comparable position of any Other Enterprise. Nothing
herein prevents any Member from indemnifying its representatives or officers
under such Member's organizational documents or other agreements. If any Person
is entitled to indemnification both from the Company and from a Member, then
indemnification would come first from the Company and thereafter from the
Member.

     5.12 Enforcement of Indemnification. In the event the Company refuses to
indemnify any Person who may be entitled to be indemnified or to have expenses
advanced under this Article V, such Person shall have the right to maintain an
action in any court of competent jurisdiction against the Company to determine
whether or not such Person is entitled to such indemnification or advancement of
expenses hereunder. If such court action is successful and the Person is
determined to be entitled to such indemnification or advancement of expenses,
such Person shall be reimbursed by the Company for all fees and expenses
(including attorneys' fees) actually and reasonably incurred in connection with
any such action (including, without limitation, the investigation, defense,
settlement or appeal of such action).

     5.13 Advancement of Expenses. Expenses (including attorneys' fees)
reasonably incurred in defending an action, suit or proceeding, whether civil,
criminal, administrative, investigative or appellate, shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the Person subject thereto to
repay such amount if it shall ultimately be determined that such Person is not
entitled to indemnification by the Company. In no event shall any advance be
made in instances where the Voting Members or legal counsel for the Company
reasonably determines that such Person would not be entitled to indemnification
hereunder.

                                       19

     5.14 Non-Exclusivity. The indemnification and advancement of expenses
provided by this Article V shall not be exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any statute, or any agreement, vote of Voting Members, policy of insurance or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding their respective offices, and shall not limit in
any way any right that the Company may have to make additional indemnifications
with respect to the same or different Persons or classes of Persons. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article V shall continue as to a Person who has ceased to be an officer of
the Company, a Representative or a Person eligible for designation as a
Representative and as to a Person who has ceased serving at the request of the
Company as a director, officer or in any other comparable position of any Other
Enterprise and shall inure to the benefit of the heirs, executors and
administrators of such Person.

     5.15 Insurance. The Voting Member Majority may cause the Company to
purchase and maintain insurance on behalf of any Person who is or was an
officer, agent or employee of the Company or a Representative or is or was
serving at the request of the Company as a director, officer or in any other
comparable position of any Other Enterprise, against any liability asserted
against such Person and incurred by such Person in any such capacity, or arising
out of such Person's status as such, whether or not the Company would have the
power, or the obligation, to indemnify such Person against such liability under
the provisions of this Article V.

     5.16 Amendment and Vesting of Rights. The rights granted or created hereby
shall be vested in each Person entitled to indemnification hereunder as a
bargained-for, contractual condition of such Person's serving or having served
as an officer of the Company or a Representative or serving at the request of
the Company as a director, officer or in any other comparable position of any
Other Enterprise and, while this Article V may be amended or repealed, no such
amendment or repeal shall release, terminate or adversely affect the rights of
such Person under this Article V with respect to any (a) act taken or the
failure to take any act by such Person prior to such amendment or repeal, or (b)
any action, suit or proceeding concerning such act or failure to act filed after
such amendment or repeal.

     5.17 Severability. If any provision of this Article V or the application of
any such provision to any Person or circumstance is held invalid, illegal or
unenforceable for any reason whatsoever, the remaining provisions of this
Article V and the application of such provision to other Persons or
circumstances shall not be affected thereby and, to the fullest extent possible,
the court finding such provision invalid, illegal or unenforceable shall modify
and construe the provision so as to render it valid and enforceable as against
all Persons and to give the maximum possible protection to Persons subject to
indemnification hereby within the bounds of validity, legality and
enforceability. Without limiting the generality of the foregoing, if any officer
of the Company, any Representative or any Person who is or was serving at the
request of the Company as a director, officer or in any other comparable
position of any Other Enterprise is entitled under any provision of this Article
V to indemnification by the Company for some or a portion of the judgments,
amounts paid in settlement, attorneys' fees, ERISA excise taxes or penalties,
fines or other expenses actually and reasonably incurred by any such Person in
connection with any threatened, pending or completed action, suit or proceeding
(including, without limitation, the investigation, defense, settlement or appeal
of such action, suit or proceeding), whether civil, criminal, administrative,
investigative or appellate, but not, however,

                                       20

for all of the total amount thereof, the Company shall nevertheless indemnify
such Person for the portion thereof to which such Person is entitled.

     5.18 Contracts with Members or their Affiliates. All contracts or
transactions between the Company and one of its Members or officers or between
the Company and another limited liability company, corporation, partnership,
association or other organization in which a Member has a financial interest or
with which such Member is affiliated are permissible if such contract or
transaction, and such Member's or officer's interest therein, are fully
disclosed to the Voting Members and approved by the Voting Member Majority.

     5.19 Other Business Ventures. Any Member may engage in, or possess an
interest in, other business ventures of every nature and description,
independently or with others, whether or not similar or identical to the
business of the Company, and neither the Company nor any other Member shall have
any right by virtue of this Agreement in or to such other business ventures or
to the income or profits derived therefrom. The Members and Representatives
shall not be required to devote all of their time or business efforts to the
affairs of the Company, but shall devote so much of their time and attention to
the Company as is reasonably necessary and advisable to manage the affairs of
the Company to the best advantage of the Company. The foregoing shall not
supersede any employment, confidentiality, noncompete or other specific
agreement that may exist between the Company (or an Affiliate of the Company)
and any Member (or an Affiliate of any Member).

                                   ARTICLE VI

                          ACCOUNTING AND BANK ACCOUNTS

     6.1 Fiscal Year. The fiscal year and taxable year of the Company shall end
on such date as is adopted by the Voting Member Majority.

     6.2 Books and Records. At all times during the existence of the Company,
the Company shall cause to be maintained full and accurate books of account,
which shall reflect all Company transactions and be appropriate and adequate for
the Company's business. The books and records of the Company shall be maintained
at the principal office of the Company. Each Member or its representatives shall
have the right during ordinary business hours and upon reasonable notice to
inspect and copy (at such Member's own expense) all books and records of the
Company. The Voting Member Majority may cause the Company to retain a firm of
certified public accountants of recognized standing to audit the financial
statements of the Company.

     6.3 Tax Information. As soon as practicable after the end of each fiscal
year, there shall be prepared and delivered to each Member all information with
respect to the Company necessary for the preparation of the Members' federal and
state income tax returns.

     6.4 Tax Returns and Elections; Tax Matters Partner. The Company shall cause
to be prepared and timely filed all federal, state and local income tax returns
and other returns or statements required of the Company by applicable law. The
Company shall claim all deductions and make such elections for federal or state
income tax purposes that the Members reasonably

                                       21

believe will produce the most favorable tax results for the Members. Holdings is
hereby designated as the Company's "Tax Matters Partner," as defined in the
Code, and in such capacity is hereby authorized and empowered to act for and
represent the Company and each of the Members before the Internal Revenue
Service in any audit or examination of any Company tax return and before any
court selected by the Members for judicial review of any adjustment assessed by
the Internal Revenue Service. Holdings does hereby accept such designation.
Holdings shall provide the other Members with written notice of any federal
income tax audit and shall keep the other Members informed of all material
developments involved in such proceedings. The Members specifically acknowledge,
without limiting the general applicability of this Section 6.4, that Holdings
shall not be liable, responsible or accountable in damages or otherwise to the
Company or any Member with respect to any action taken by it in its capacity as
the Tax Matters Partner, provided that Holdings acted in a manner it believed to
be in the best interests of the Company and its Members. All reasonable
out-of-pocket expenses incurred by Holdings in its capacity as the Tax Matters
Partner shall be considered expenses of the Company for which Holdings shall be
entitled to full reimbursement. Nothing in this Section 6.4 shall limit the
ability of the Members to take any action in their individual capacity relating
to tax audit matters that is left to the determination of an individual partner
under Code Section 6222 through Code Section 6232.

     6.5 Section 754 Election. In the event a distribution of Company assets
occurs that satisfies the provisions of Section 734 of the Code, upon the
determination of the Voting Member Majority, the Company shall elect, pursuant
to Section 754 of the Code, to adjust the basis of the Property to the extent
allowed by Section 734 and shall cause such adjustments to be made and
maintained. Any additional accounting expenses incurred by the Company in
connection with making or maintaining any such basis adjustment shall be
reimbursed to the Company from time to time by the distributee who benefits from
the making and maintenance of such basis adjustment.

     6.6 Bank Accounts. All funds of the Company shall be deposited in a
separate bank, money market or similar account(s) approved by the Voting Member
Majority and in the Company's name. Withdrawals therefrom shall be made only by
such persons as are authorized by the Voting Member Majority.

                                  ARTICLE VII

                             TRANSFERS OF INTERESTS

     7.1 General Transfer Restrictions. No Member may Transfer all or any part
of such Member's Interest, except (i) pursuant to the provisions of Section 7.2,
(ii) pursuant to an Exempt Transfer or (iii) with the written consent of all the
Voting Members; provided, however, that, notwithstanding, the described clauses
(i), (ii) and (iii) above, no Transfer shall be permitted if it would result in
the "termination" of the Company pursuant to (S)708 of the Code. Any purported
Transfer of an Interest in violation of the terms of this Agreement shall be
null and void and of no effect. Any permitted Transfer shall be effected by a
written instrument and shall be effective as of the date specified in such
instrument. Any person receiving an Interest from a Member in a permitted
Transfer shall not become a Substitute Member except in accordance with Section
7.7. Any assignee of an Interest as allowed by this Section 7.1 who does not
become a Substitute

                                       22

Member as provided in Section 7.7 (a "Transferee") shall not be a Member and
shall not have any right to vote as a Member or to participate in the management
of the business and affairs of the Company, such right to vote such Interest and
to participate in the management of the business and affairs of the Company
continuing with the Transferor. The Transferee shall, however, be entitled to
distributions and allocations of the Company, as provided in Article IV of this
Agreement, attributable to the Interest that is the subject of the Transfer to
such Transferee. Any Transferee desiring to make a further Transfer shall become
subject to all of the provisions of this Article VII to the same extent and in
the same manner as any Member desiring to make any Transfer.

     7.2 First Offer Right.

     (a) If any Member (the "Transferor") wishes to make a Non-Exempt Transfer
of Interests, then, at least 25 Business Days before making any such Non-Exempt
Transfer (the "First Offer Election Period"), the Transferor will deliver a
written notice (the "First Offer Notice") to the Company and to all Voting
Members (the "Offerees").

     (b) The First Offer Notice will specify the proposed percentage and type of
Interests to be the subject of such Transfer (the "Offered Interests") and
disclose in reasonable detail the proposed terms and conditions of the Transfer.
The purchase price for any such Transfer shall be payable at the closing of the
transaction in cash or, at the option of the Offerees, with a promissory note
payable in regular installments over a period of no more than five years bearing
interest at a rate equal to the Company's cost of funds.

     (c) The Offerees may, in the aggregate, give notice to elect to purchase
all (but not less than all) of the Offered Interests, at the price and on the
terms specified in the First Offer Notice by delivering written notice of such
election (the "First Offer Election Notice") to the Transferor within 15
Business Days after delivery of the First Offer Notice. If more than one Offeree
(other than the Company) gives notice of election to purchase the Offered
Interests, they shall be entitled to purchase such Offered Interests in
proportion to their existing Percentage Interests, as adjusted, of the Company,
unless they agree otherwise. If the Offerees (other than the Company) do not
elect to purchase all of the Offered Interests, the Company may give notice to
elect to purchase all (but not less than all) of the Offered Interests by
delivering written notice to the Transferor within 7 Business Days after the
expiration of the period referred to in the first sentence of this clause (c).

     (d) If any Offerees have elected to purchase any Offered Interests, the
transfer of such shares will be consummated as soon as practical (but in any
event within 10 Business Days) after the expiration of the First Offer Election
Period. If the Offerees have not elected to purchase all of the Offered
Interests, the Transferor may, within 90 days after the expiration of the First
Offer Election Period, transfer all (but not less than all) of such Offered
Interests to one or more Third Parties at a price and on terms no more favorable
to the Third Parties than offered to the Offerees in the First Offer Notice;
provided, however, that prior to such Transfer, such Third Parties shall have
agreed in writing to be bound by the provisions of this Agreement and shall have
delivered to the

                                       23

Company an executed counterpart of this Agreement. Any Offered Interests not
transferred within such 90-day period will be subject to the provisions of this
Section 7.2 upon any subsequent transfer.

     (e) Notwithstanding the foregoing, unless the Transferor shall have
consented to the purchase of less than all of the Offered Interests, no Offeree
may purchase any Offered Interests unless all of the Offered Interests are to be
purchased by the Offerees.

     (f) Any and all rights associated with any Interest shall be retained by
each Offered Interest sold or otherwise transferred pursuant to this Section
7.2.

     7.3 Exempt Transfers. The restrictions contained in this Article VII will
not apply with respect to:

          (a) any Transfer to the spouse of a Member;

          (b) any Transfer to a lineal descendant, natural or adopted, of a
     Member or to the spouse of any such lineal descendant;

          (c) any Transfer to the trustee of a trust for the substantial benefit
     of a Member and/or one or more persons described in (i) or (ii) above;

          (d) any Transfer to John Sherman or any entity of which the vote is
     controlled by John Sherman; or

          (e) any Transfer to the Company;

provided, however, that the restrictions contained in this Article VII and, in
the case of an Interest held at any time by an Employee Member, Sections 7.10
through 7.14 hereof will continue to be applicable to the Interests after any
such Transfer, other than a Transfer to the Company (but with the buy-back
provisions of Section 7.13 being based upon the employment status of the
original Employee Member), and before any such Transfer is effected the
transferees of such Interests, other than the Company, shall agree in writing to
be bound by all the provisions of this Agreement and shall execute and deliver
to the Company a counterpart of this Agreement.

     7.4 Third Party Offer to Purchase. If a third party (a "Proposed
Purchaser") makes an offer (the "Third Party Offer") to purchase the Interest of
a Member or Members, and such purchase would enable the Proposed Purchaser to
acquire one or more Members' Interests, which Members' Interests include in the
aggregate more than 50% in Percentage Interest, then within ten Business Days
after the issuance of the Third Party Offer to a Member or Members, the Proposed
Purchaser shall issue to the other Members an offer (the "Tag-Along Offer")
whereby such Members, individually, may elect, within 30 days after receipt of
the Tag-Along Offer, one of the following alternatives:

          (a) To sell any or all of its Interest to the Proposed Purchaser under
     the same terms and conditions as the Third Party Offer; or

                                       24

          (b) To take no action and continue to hold its Interest in the
     Company.

     7.5 Third Party Offer to Acquire the Entire Company. If a third party makes
an offer (the "Purchase Offer") to purchase all of the Interests in the Company
for an identical price per Percentage Interest, and the holders of more than 50%
in Percentage Interest desire to accept the Purchase Offer, then the other
Members hereby agree to participate in such sale on the same terms and
conditions as the Purchase Offer.

     7.6 [Not Used].

     7.7 Substitute Members. No assignee of all or part of a Member's Interest
shall become a Member in place of the Member assigning the Interest (a
"Substitute Member") unless and until:

          (a) The transferring Member has stated such intention in the
     instrument of assignment;

          (b) The Transferee has executed an instrument accepting and adopting
     the terms and provisions of this Agreement;

          (c) The Transferee delivers an opinion of Counsel acceptable to the
     Company that the Transfer will not result in a termination of the Company
     pursuant to Section 708 of the Code and such Transfer is exempt from
     registration under all applicable securities laws;

          (d) The transferring Member or Transferee has paid all reasonable
     expenses of the Company in connection with the admission of the Transferee
     as a Substitute Member; and

          (e) All non-transferring Voting Members in their sole and absolute
     discretion have consented in writing to such Transferee becoming a
     Substitute Member.

Upon satisfaction of all of the foregoing conditions with respect to a
particular Transferee, the Voting Members shall cause this Agreement to be duly
amended to reflect the admission of the Transferee as a Substitute Member.

     7.8 Effect of Admission as a Substitute Member. Unless and until admitted
as a Substitute Member pursuant to Section 7.7 hereof, a Transferee shall not be
entitled to exercise any rights of a Member in the Company, including the right
to vote, grant approvals or give consents with respect to such Interest, the
right to require any information or accounting with respect to the Company's
business or the right to inspect the Company's books and records, but such
Transferee shall only be entitled to receive, to the extent of the Interest
transferred to it, the Distributions to which the transferring Member would be
entitled. A Transferee that has become a Substitute Member has, to the extent of
the Interest transferred to it, all the rights and powers of the Person for whom
it is substituted and is subject to the restrictions and liabilities of a Member
under this Agreement and the Act. Upon admission of a Transferee as a Substitute
Member, the transferring Member shall cease to be a Member of the Company to the
extent of such Interest.

                                       25

A Person shall not cease to be a Member upon assignment of all of such Member's
Interest unless and until the Transferee becomes a Substitute Member.

     7.9 Additional Members. Additional Members (whether Voting Members or
Non-Voting Members) may be admitted to the Company and additional Interests may
be issued only by the consent of a Voting Member Majority, and the Percentage
Interests shall be adjusted as approved by such Voting Member Majority.

     7.10 Applicability. The provisions of Sections 7.10, 7.11, 7.12, 7.13 and
7.14 hereof shall apply only to the Interests held by Employee Members.

     7.11 Termination of Employment. Upon the termination of an Employee
Member's employment with Inergy Partners, for any reason or no reason, the
Employee Member shall sell and the Company shall buy such Employee Member's
Interest or Interests in the Company, at a purchase price determined by a
predetermined valuation formula, as set forth in Section 7.12 below, and subject
to the terms and conditions set forth in Sections 7.13 and 7.14 below.

     7.12 Valuation of Interests. The Interests held by the Employee Members
shall be valued by the Company as of September 30th of each year using the
valuation formula set forth in Schedule B attached hereto. The valuation
determined each year by the valuation formula set forth in Schedule B is
hereinafter referred to as the "EBITDA Valuation." The EBITDA Valuation
determined as of September 30th of each year shall be used for the ensuing
twelve-month period to determine the price at which an Employee Member's
Interest is repurchased by the Company pursuant to Section 7.11 hereof.

     7.13 Buy-Back Provisions. Upon the termination of an Employee Member's
employment with Inergy Partners, for any reason or no reason, the Employee
Member shall sell and the Company shall buy such Employee Member's Interest in
the Company subject to the following terms and conditions:

     If an Employee Member leaves the employment of Inergy Partners by reason of
     resigning, being terminated with or without cause or due to such Employee
     Member's normal retirement, death or disability at any time, then the
     Employee Member shall sell and the Company shall buy such Employee Member's
     Interest in the Company at a purchase price equal to the EBITDA Valuation
     on the date such Employee Member's employment with Inergy Partners
     terminate.

     7.14 Payment upon Buy-Back. Upon the termination of an Employee Member's
employment with Inergy Partners such that the Company will buy such Employee
Member's Interest pursuant to the buy-back provisions set forth in Section 7.13
above, the Company shall pay the purchase price for the Interest as determined
pursuant to Section 7.13 above, in cash, or at the Company's option, pay all or
any part of the purchase price in equal quarterly installment payments over a
period of 5 years, bearing interest at the applicable federal rate under Section
1274 of the Internal Revenue Code of 1986, as amended.

                                       26

     7.15 Resignation. No Member may resign or withdraw from the Company. Except
as provided in Section 8.1(c) of this Agreement, upon the occurrence of any
event that terminates the continued membership of a Member in the Company, the
Company shall not be dissolved.

     7.16 Miscellaneous Provisions Regarding Article VII.

     (a) Without limiting any of the foregoing, the Members shall not, and shall
cause each of their respective affiliates not to, (i) take any action the effect
of which would prevent or frustrate the carrying out of the procedures
contemplated by this Article VII or (ii) at any time (whether before or after
any termination of this Agreement) make any assertion, claim or defense that
this Article VII or any of the provisions hereof violate or are inconsistent
with the terms of this Agreement or any laws or public policies.

     (b) At the closing of any purchase and sale of a Interest under this
Article VII, the purchaser and the selling Member shall deliver such
certificates and such assignment documents in customary form as may be
reasonably requested in order to consummate the transaction, and, unless
otherwise specified herein, the purchaser shall deliver the purchase price in
immediately available funds to such bank account as shall have been specified by
the selling Member at least three Business Days prior to the closing (or, if no
such notice has been given, by delivery of a certified or bank check). At such
closing, the selling Member shall sell and transfer its Interest to the
purchaser free and clear of Liens other than Liens arising out of Company
financing and shall so warrant to the purchaser. The selling Member shall also
represent and warrant to the purchaser that the selling Member has good and
marketable title to the Interest being sold and transferred. In addition, each
of the selling Member and the purchaser shall make customary representations and
warranties to the other including representations and warranties with respect to
organization, valid existence, authorization, and non-contravention. With
respect to obligations arising out of Company financing, the purchaser shall, in
addition to paying the purchase price, either (i) satisfy or otherwise obtain
release from all liability on the part of the selling Member and its Affiliates
with respect to all obligations of the Company, including debt and lease
obligations, which such selling Member and/or its Affiliates shall have
guaranteed, or (ii) indemnify and hold harmless the selling Member and its
Affiliates against such liability and secure such indemnification with a letter
of credit or payment bond reasonably satisfactory to such selling Member. As
used herein, "Lien" shall mean, as to any Interest, liens, encumbrances,
security interests and other rights, interest or claims of others therein
(including, without limitation, warrants, options, rights of first refusal,
rights of first offer, co-sale and similar rights).

     (c) If, with respect to any purchase and sale of a Interest under this
Article VII, the selling Member is not present at the time and place designated
for a closing, or, if present, fails to produce the certificates or assignment
documents reasonably requested to consummate the transaction or fails to satisfy
any other obligation to be satisfied at the closing, as aforesaid, for any
reason whatsoever or no reason, then the purchase price and any other document
or instrument required by the Company at the closing ("Closing Documentation")
shall be deposited with the President of the Company. The foregoing shall
constitute valid payment even though the selling Member shall voluntarily
encumber and dispose of said Interests contrary to the

                                       27

provisions hereof and irrespective of the fact that any pledgee, transferee or
other person may thereby have acquired said Interests or the fact that
certificates or assignment documents for any of said Interests may have been
delivered to any pledgee, transferee or other person.

     If the Closing Documentation is deposited with the President of the Company
as provided herein, then from and after the date of such deposit and even if the
certificates evidencing said Interests or the assignment documents have not been
delivered to the Company, the purchase of said Interests shall be deemed to have
been fully effected and all title and interest in and to the Interests so
purchased shall be deemed to have been vested in the Company, and all rights of
the selling Member or of any transferee, assignee or any other person having an
interest therein, as a Member of the Company or otherwise, shall terminate
except for the right to receive the Closing Documentation, but without interest;
and the President of the Company, as attorney-in-fact for and in the name of the
selling Member, shall cause the Interests so purchased to be transferred on the
books and records of the Company to the Company, and shall issue a new
certificate or certificates therefor to the purchaser(s) thereof. The selling
Member does hereby irrevocably appoint and designate the President of the
Company and his successors in office as his attorney-in-fact, for and on his
behalf, to receive, receipt for, hold and collect the said Closing
Documentation, to effect the transfer of said Interests on the books and records
of the Company, and to issue said certificate or certificates in the manner
above provided. The selling Member shall be entitled to receive the Closing
Documentation upon delivery to the Company of the certificates evidencing the
Interests so purchased, and assignment documents duly indorsed for transfer, as
aforesaid, together with any document or instrument required of such Member.

                                  ARTICLE VIII

                           DISSOLUTION AND TERMINATION

     8.1 Events Causing Dissolution. The Company shall be dissolved only upon
the first to occur of the following events:

          (a) December 31, 2026.

          (b) The election to dissolve being made by a Voting Member Majority.

          (c) At any time there are no Members, provided that the Company shall
     not be dissolved if within 90 days after the occurrence of the event that
     terminated the continued membership of the last remaining Member, the
     personal representative of the last remaining Member agrees in writing to
     continue the Company and to the admission of the personal representative of
     such Member or its nominee or designee to the Company as a Member,
     effective as of the occurrence of the event that terminated the continued
     membership of the last remaining Member.

          (d) Upon the entry of a decree of dissolution with respect to the
     Company under Section 18-802 of the Act.

                                       28

          (e) When the Company is not the surviving entity in a merger or
     consolidation under the Act.

     8.2 Effect of Dissolution. Except with respect to an event referred to in
Section 8.1(e) of this Agreement, and except as otherwise provided in this
Agreement, upon the dissolution of the Company, the Voting Members or surviving
Voting Member, as the case may be, shall take such actions as may be required
pursuant to the Act and shall proceed to wind up, liquidate and terminate the
business and affairs of the Company. In connection with such winding up, the
Voting Members or surviving Voting Member shall have the authority to liquidate
and reduce to cash (to the extent necessary or appropriate) the assets of the
Company as promptly as is consistent with obtaining Fair Value therefor, to
apply and distribute the proceeds of such liquidation and any remaining assets
in accordance with the provisions of Section 8.3 hereof, and to do any and all
acts and things authorized by, and in accordance with, the Act and other
applicable laws for the purpose of winding up and liquidation.

     8.3 Application of Proceeds. Upon dissolution and liquidation of the
Company, the assets of the Company shall be applied and distributed in the order
of priority set forth in Section 4.4 hereof.

     8.4 Continuing Obligations. In the event any Member is required to assume
or pay any debt, expense, obligation or liability of the Company following
dissolution or termination, first, the Members shall pay and indemnify such
Member for their respective Percentage Interest of such debt, expense,
obligation or liability required to be paid by such Member to the extent of
assets distributed to such Members.

                                   ARTICLE IX

                                  MISCELLANEOUS

     9.1 Title to Assets. Title to the Property and all other assets acquired by
the Company shall be held in the name of the Company. No Member shall
individually have any ownership interest or rights in the Property or any other
assets of the Company, except indirectly by virtue of such Member's ownership of
an Interest. No Member shall have any right to seek or obtain a partition of the
Property or other assets of the Company, nor shall a Member have the right to
any specific assets of the Company upon the liquidation of or any distribution
from the Company.

     9.2 Nature of Interest in the Company. An Interest shall be personal
property for all purposes.

     9.3 Notices. Any notice, demand, request or other communication required or
permitted to be given pursuant to this Agreement or the Act to the Company, a
Member, or any other Person (a "Notice") shall be sufficient if in writing and
if hand-delivered, mailed or sent by commercial overnight delivery service, to
the Company at its principal office or to a Member at the address of the Member
as it appears on the records of the Company or if sent by facsimile transmission
to the telephone number, if any, of the recipient's facsimile machine as such
telephone number appears on the records of the Company. All Notices that are
mailed shall be

                                       29

deemed to be given when deposited in the United States mail, postage prepaid.
All Notices that are hand-delivered shall be deemed to be given upon delivery.
All notices that are given by commercial overnight delivery shall be deemed to
be given upon delivery by the delivery service. All Notices that are given by
facsimile transmission shall be deemed to be given upon receipt.

     9.4 Waiver of Default. No consent or waiver, express or implied, by the
Company or a Member with respect to any breach or default by the other Members
hereunder shall be deemed or construed to be a consent or waiver with respect to
any other breach or default by such Member of the same provision or any other
provision of this Agreement. Failure on the part of the Company or a Member to
complain of any act or failure to act of the other Members or to declare such
other Member in default shall not be deemed to constitute a waiver by the
Company or the Members of any rights hereunder.

     9.5 No Third Party Rights. None of the provisions contained in this
Agreement shall be for the benefit of or enforceable by any third parties,
including, but not limited to, creditors of the Company; provided, however, the
Company may enforce any right granted to the Company under the Act, the
Certificate or this Agreement.

     9.6 Entire Agreement. This Agreement, together with the Certificate,
constitutes the entire agreement between the Members, in such capacity, relative
to the formation, operation and continuation of the Company.

     9.7 Amendments to this Agreement.

     (a) Except as otherwise provided herein, this Agreement shall not be
modified or amended in any manner other than by the written agreement of the
Voting Member Majority at the time of such modification or amendment; provided,
however, any amendment affecting the allocation of Income and Loss to a Member
shall be approved by that Member.

     (b) This Agreement may be amended by the Voting Member Majority, without
any execution of such amendment by all Members, in order to reflect the
occurrence of any of the following events provided that all of the conditions,
if any, contained in the relevant sections of this Agreement with respect to
such event have been satisfied:

          (i) an adjustment of the Percentage Interests upon a Member's failure
     to make a capital contribution as required hereunder; and

          (ii) the modification of this Agreement to comply with the relevant
     tax laws pursuant to Sections 3.6 or 4.7(j) hereof.

     9.8 Severability. In the event any provision of this Agreement is held to
be illegal, invalid or unenforceable to any extent, the legality, validity and
enforceability of the remainder of this Agreement shall not be affected thereby
and shall remain in full force and effect and shall be enforced to the greatest
extent permitted by law.

                                       30

     9.9 Binding Agreement. Subject to the restrictions on the disposition of
Interests herein contained, the provisions of this Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors and permitted assigns.

     9.10 Headings. The headings of Sections of this Agreement are for
convenience of reference only and shall not be considered in construing or
interpreting any of the terms or provisions hereof.

     9.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one agreement.

     9.12 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.

     9.13 Remedies. In the event of a default by a Member in the performance of
any obligation undertaken in this Agreement, in addition to any other remedy
available to the non-defaulting Members, the defaulting Member shall pay to the
non-defaulting Members all costs, damages, and expenses, including reasonable
attorneys' fees, incurred by the non-defaulting Member as a result of such
default. In the event that any dispute arises with respect to the enforcement,
interpretation, or application of this Agreement and court proceedings are
instituted to resolve such dispute, the prevailing party in such court
proceedings shall be entitled to recover from the non-prevailing party all costs
and expenses, including, but not limited to, reasonable attorneys' fees,
incurred by the prevailing party in such court proceedings.

                                       31

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

                              INERGY HOLDINGS, LLC*

                              By /s/ John J. Sherman
                                ----------------------------
                                Name: John J. Sherman
                                Title: President

*    Inergy Holdings, LLC is signing on behalf of itself as a Member of Inergy
     Partners and, pursuant to agreement (as evidenced by a signed letter
     agreement from each of such persons), on behalf of the following Members:

     Alton Parker Carter                 Gregory L. Chappell
     Randy Claiborne                     Richard A. Garner
     Elaine H. Johnson                   Cynthia B. Kibler
     H. Faye Owen                        Elaine H. Trujillo
     James Warren Rogers                 Zero Butane Gas, Inc.
     Donald Ray Kerr                     John W. Thompson
     Judy G. Carpenter                   Michael L. Hendren
     Peter H. Wilson                     George Upchurch, Sr.
     Shirley Upchurch                    George Upchurch, Jr.
     Inergy Holdings, LLC

                                    EXHIBIT A

                MEMBER CAPITAL ACCOUNTS AND PERCENTAGE INTERESTS

Employee Members              Capital Accounts                Percentage
- ----------------              ----------------                ----------
Alton Parker Carter                 16,190                      0.0365%
Gregory L. Chappell                 16,190                      0.0365%
Randy Claiborne                      8,093                      0.0182%
Richard A. Garner                    8,093                      0.0182%
Elaine H. Johnson                    9,744                      0.0220%
Cynthia B. Kibler                   32,337                      0.0729%
H. Faye Owen                         8,093                      0.0182%
Elaine H. Trujillo                  32,337                      0.0729%
James Warren Rogers              1,117,095                      2.5177%

Bradley Members               Capital Accounts                Percentage
- ---------------               ----------------                ----------
Zero Butane Gas, Inc.            2,346,546                      5.2887%
Donald Ray Kerr                    177,107                      0.3992%
John W. Thompson                    49,288                      0.1111%
Judy G. Carpenter                   12,381                      0.0279%

Other Members                 Capital Accounts                Percentage
- -------------                 ----------------                ----------
Michael L. Hendren               1,564,520                      3.5262%
Peter H. Wilson                    745,784                      1.6809%
George Upchurch, Sr.               204,000                      0.4598%
Shirley Upchurch                    96,000                      0.2164%
George Upchurch, Jr.               100,000                      0.2254%
Inergy Holdings, LLC            37,825,231                     85.2514%

                                   SCHEDULE A

                                   [Not Used]

                                   SCHEDULE B

                              INERGY PARTNERS, LLC
                                VALUATION FORMULA

     The following formula sets forth the method that will be used to value the
Company at September 30th of each year. The value determined by the valuation
formula set forth below will then be used as a basis for determining the price
at which an Employee Member's Interest in the Company will be repurchased by the
Company upon the termination of such an Employee Member's employment with Inergy
Propane. The following formula will be determined from the consolidated
financial statements of the Company.

                 EBITDA for the fiscal year ended September 30th

                                  PLUS OR MINUS

                          the Weather Adjustment Factor

                                     EQUALS

                                 Adjusted EBITDA

                                   MULTIPLY BY

                             the Valuation Multiple

                                     EQUALS

                   the value of the Company before adjustments

                                      PLUS

                       Fixed Asset Purchases after April 1

                                  PLUS OR MINUS

                               Net Working Capital

                                      MINUS

                                 Long-Term Debt

                                     EQUALS

                              the EBITDA Valuation

     The EBITDA Valuation determined pursuant to the valuation formula set forth
above will be calculated with reference to the following assumptions and
definitions:

1.   "EBITDA" means earnings before interest, taxes, depreciation and
     amortization.

2.   The "Weather Adjustment Factor" will be determined pursuant to the
     following formula:

         Actual Degree Days for period from April through March
         Less:     Normal Degree Days of 3,750
         Equals:   Degree Day deviation from normal
         Times:    Actual propane and distillate gallons per Degree Day for
                     period from October through March
         Equals:   Estimated impact on gallons sold
         Times:    90% of actual propane and distillate unit gross profit for
                      period from October through March
         Equals:   Weather Adjustment Factor

         "Degree Days" represent the difference between sixty-five degrees
         Fahrenheit and the mean temperature on a given day, provided that the
         mean temperature on such day is less than sixty-five degrees
         Fahrenheit.

3.   The "Valuation Multiple" will be equal to 6; provided, however, the Company
     and each Employee Members shall have the option of engaging, at their own
     expense, a third party mutually agreeable to the Company and such Employee
     Member to determine the Valuation Multiple to be used to determine the
     EBITDA Valuation for any year. Such third party shall determine the
     Valuation Multiple by valuing the Company as a going concern facing a
     change of control transaction. No minority discount shall be applied by
     such third party in determining the Valuation Multiple.

4.   The EBITDA in a given year will receive minimal benefit for Fixed Assets
     acquired after the middle of the year. Therefore, only the amount of Fixed
     Assets purchased after April 1 of a given year will be added into the
     valuation formula.

5.   The current portion of long-term debt is included in Long-Term Debt rather
     than Net Working Capital.

                                                                     EXHIBIT 5.1

                     [LETTERHEAD OF VINSON & ELKINS L.L.P.]

May 24, 2002

Inergy, L.P.
1101 Walnut, Suite 1500
Kansas City, Missouri 64106

         Re:   Inergy, L.P.
               Registration Statement on Form S-1
               Filed May 24, 2002

Ladies and Gentlemen:

     We have acted as counsel to Inergy, L.P., a Delaware limited partnership
(the "Partnership"), Inergy GP, LLC, a Delaware limited liability company and
the managing general partner of the Partnership (the "Managing General
Partner"), and Inergy Holdings, LLC, a Delaware limited liability company and
the non-managing general partner of the Partnership (the "Non-Managing General
Partner" and collectively with the Managing General Partner, the "General
Partners"), in connection with the registration under the Securities Act of
1933, as amended (the "Securities Act") of the offering and sale of up to an
aggregate of 1,610,000 common units (including 345,259 common units to be sold
by certain selling unitholders and up to 210,000 common units subject to an over
allotment option granted by the Partnership to the underwriter) (collectively
the "Common Units") representing limited partner interests in the Partnership.

     As the basis for the opinion hereinafter expressed, we examined such
statutes, including the Delaware Uniform Revised Limited Partnership Act,
corporate records and documents, certificates of corporate and public officials,
and other instruments and documents as we deemed necessary or advisable for the
purposes of this opinion. In such examination, we assumed the authenticity of
all documents submitted to us as originals and the conformity with the original
documents of all documents submitted to us as copies.

     Based on the foregoing and on such legal considerations as we deem
relevant, we are of the opinion that:

     1.   The Partnership has been duly formed and is validly existing as a
          limited partnership under the Delaware Revised Uniform Limited
          Partnership Act.

Inergy, L.P.
Page 2
May 24, 2002

     2.   The presently outstanding Common Units owned by the selling
          unitholders to be sold to the underwriter are duly authorized, validly
          issued, fully paid and nonassessable.

     3.   The Common Units to be sold by the Partnership to the underwriter,
          when issued and paid for as contemplated by the Partnership's
          Registration Statement on Form S-1 relating to the Common Units, will
          be duly authorized, validly issued, fully paid and nonassessable.

     We hereby consent to the reference to us under the heading "Validity of the
Common Units" in the prospectus forming a part of the Registration Statement and
to the filing of this opinion as an exhibit to the Registration Statement, but
we do not thereby admit that we are within the class of persons whose consent is
required under the provisions of the Securities Act or the rules and regulations
of the Securities and Exchange Commission issued thereunder.

                                          Very truly yours,

                                          /s/ VINSON & ELKINS L.L.P.

                                          VINSON & ELKINS L.L.P.

                                                                     EXHIBIT 8.1
                    [LETTERHEAD OF VINSON & ELKINS L.L.P.]

                                 May 24, 2002

Inergy, L.P.
1101 Walnut, Suite 1500
Kansas City, Missouri 64106

         RE:      INERGY, L.P.; REGISTRATION STATEMENT ON FORM S-1

Ladies and Gentlemen:

         We have acted as counsel to Inergy, L.P., a Delaware limited
partnership (the "Partnership"), Inergy GP, LLC, a Delaware limited liability
company and the managing general partner of the Partnership (the "Managing
General Partner"), and Inergy Holdings, LLC, a Delaware limited liability
company and the non-managing general partner of the Partnership (the
"Non-Managing General Partner" and collectively with the Managing General
Partner, the "General Partners"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of the offering and
sale of up to 1,610,000 common units representing limited partner interests in
the Partnership (the "Common Units") pursuant to a Registration Statement on
Form S-1 (the "Registration Statement"). In connection therewith, we prepared
the discussion set forth under the caption "Tax Considerations" in the
Registration Statement (the "Discussion"). Capitalized terms not defined herein
shall have the meanings ascribed to them in the Registration Statement.

         All statements of legal conclusions contained in the Discussion, unless
otherwise noted, are our opinion with respect to the matters set forth therein
as of the effective date of the Registration Statement. In addition, we are of
the opinion that the federal income tax discussion in the Registration Statement
with respect to those matters as to which no legal conclusions are provided is
an accurate discussion of such federal income tax matters (except for the
representations and statements of fact of the Partnership and its General
Partners, included in the Discussion, as to which we express no opinion).

Page 2
May 24, 2002

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
This consent does not constitute an admission that we are "experts" within the
meaning of such term as used in the Securities Act of 1933, as amended.

                                             Very truly yours,

                                             /s/ Vinson & Elkins L.L.P.
                                             -----------------------------------
                                             VINSON & ELKINS L.L.P.

                                                                   Exhibit 10.1A
                                AMENDMENT NO. 1
                                      TO
                 FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

          This AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") dated as of May 15, 2002, is by and between INERGY PROPANE,
       ---------
LLC, a Delaware limited liability company (the "Borrower"); each of the Lenders
                                                --------
that is a signatory hereto (each, individually, a "Lender" and, collectively,
                                                   ------
the "Lenders"); and WACHOVIA BANK, NATIONAL ASSOCIATION (f/k/a FIRST UNION
     -------
NATIONAL BANK), as Administrative Agent for the Lenders (in such capacity,
together with its successors and assigns in such capacity, the "Administrative
                                                                --------------
Agent").
- -----

                                  WITNESSETH:

          WHEREAS, the Borrower, the Administrative Agent and the Lenders are
parties to that certain Fourth Amended and Restated Credit Agreement dated as of
December 20, 2001 (the "Credit Agreement");
                        ----------------

          WHEREAS, the Borrower has requested, and the Administrative Agent and
the Required Lenders have agreed, on the terms set forth in this Amendment, that
the IPC Acquisition Facility Termination Date be extended from December 19,
2002, to April 1, 2003;

          WHEREAS, as permitted pursuant to Section 5(b) of the Credit
Agreement, the Borrower intends to incur Permitted Private Placement Debt;

          WHEREAS, in connection with the incurrence of the Permitted Private
Placement Debt, the Borrower has requested and the Administrative Agent and the
Required Lenders have agreed, on the terms and conditions set forth in this
Amendment, to amend certain provisions of the Credit Agreement (i) to permit the
proceeds of the Permitted Private Placement Debt to prepay the outstanding
principal balance of the Permitted Acquisition Facility prior to the repayment
of a portion of the IPC Acquisition Facility and (ii) to permit the Borrower to
use the Permitted Acquisition Facility to repay the IPC Acquisition Loan in
full; and

          WHEREAS, the Borrower, the Administrative Agent and the Required
Lenders have agreed to execute this Amendment in order to document the above-
described modifications to the terms of the Credit Agreement.

          NOW THEREFORE, the parties hereto hereby agree as follows:

          Section 1.  Definitions; Incorporation of Recitals.  Except as
                      --------------------------------------
otherwise defined in this Amendment, capitalized terms used herein and not
otherwise defined herein have the meanings ascribed thereto in the Credit
Agreement.  Each of the above recitals is incorporated herein and made a part
hereof.

          Section 2.  Amendments to Credit Agreement.  Subject to the
                      ------------------------------
satisfaction of the conditions precedent specified in Section 4 below, but
effective as of the date hereof, the Credit Agreement shall be amended as
follows:

                                Amendment No. 1

          2.01.  Definitions.  Section 1.01 of the Credit Agreement shall be
                 -----------
amended as follows:

          (a)    The definition of "IPC Acquisition Facility Termination Date"
is deleted in its entirety and replaced with the following:

          "IPC Acquisition Facility Termination Date" means the earlier to occur
     of (a) April 1, 2003, and (b) the Termination Date.

          2.02.  Order of Application of Mandatory Prepayments.  Section 4.02(h)
                 ---------------------------------------------
of the Credit Agreement is deleted in its entirety and replaced with the
following:

          (h)    Order of Application of Mandatory Prepayments.  Any prepayment
                 ---------------------------------------------
     pursuant to Sections 4.02(f) or (g) shall be applied first to permanently
     reduce the outstanding principal balance of the IPC Acquisition Loan, and,
     upon payment in full thereof, then to the outstanding principal balance of
     the Permitted Acquisition Loans, and, upon payment in full thereof, then to
     the outstanding principal balance of the Swingline Loans, and, upon payment
     in full thereof, then to the outstanding principal balance of the Working
     Capital Loans; provided, however, that the Borrower, at its election, may
     apply any such prepayment first to the outstanding principal balance of the
     Permitted Acquisition Loans, and, upon payment in full thereof, then, the
     balance of such prepayment to permanently reduce a portion of the
     outstanding principal balance of the IPC Acquisition Loan, so long as
     immediately after any such prepayment, the Borrower prepays the outstanding
     principal balance of the IPC Acquisition Loan in an amount equal to the
     amount of the prepayment of the Permitted Acquisition Loan.  Each such
     prepayment shall be accompanied by any amount required to be paid pursuant
     to Section 4.14.
        ------------

          2.03.  Use of Proceeds.  Section 8.08 of the Credit Agreement is
                 ---------------
amended by deleting subsection (ii) thereof in its entirety and replacing
subsection (ii) with the following:

          (ii)   the Permitted Acquisition Loans for refinancing indebtedness of
     the Borrower under the Existing Credit Agreement, for refinancing the IPC
     Acquisition Loan, Permitted Acquisitions, Expansion Capital Expenditures
     and the payment of fees and expenses incurred in connection with this
     Agreement and the other Credit Documents and the transactions contemplated
     hereby and thereby;

          Section 2.04.  General.  References (a) in the Credit Agreement
                         -------
(including references to the Credit Agreement as amended hereby) to "this
Agreement" (and indirect references such as "hereunder," "hereof" and words of
like import referring to the Credit Agreement), and (b) in the other Credit
Documents to "the Credit Agreement" and "the Agreement" (and indirect references
such as "thereunder," "thereof" and words of like import referring to the Credit
Agreement), shall be deemed to be references to the Credit Agreement as amended
by this Amendment.

          Section 3.     Representations and Warranties.  The Borrower
                         ------------------------------
represents and warrants to the Lenders and the Administrative Agent that: (a)
the representations and warranties set forth in Article VI of the Credit
Agreement are true and complete on the date hereof as if made on and as

                                Amendment No. 1

of the date hereof and as if each reference in said Article VI to "this
Agreement" includes reference to this Amendment; and (b) no Default or Event of
Default has occurred and is continuing on the date hereof.

          Section 4.     Conditions Precedent.  As provided in Section 2 above,
                         --------------------
the amendments to the Credit Agreement set forth in Section 2 shall become
effective as of the date hereof, upon the satisfaction of the following
conditions precedent:

                  4.01.  Execution.  This Amendment shall have been executed and
                         ---------
delivered by the Borrower, the Administrative Agent and the Required Lenders.

                  4.02.  Documents; Fees.  The Administrative Agent shall have
                         ---------------
received the following documents, each of which shall be satisfactory to the
Administrative Agent in form and substance:

                  (a)    Corporate Documents.  All documents that the
                         -------------------
Administrative Agent may reasonably request relating to the existence of the
Borrower, the corporate authority for, and the validity and enforceability of,
this Amendment, the Loan Documents as amended hereby, and any other matters
relevant hereto, all in form and substance satisfactory to the Administrative
Agent.

                  (b)    Other Documents.  Such other documents, approvals and
                         ---------------
opinions as the Administrative Agent may reasonably request.

                  (c)    Fees.  Receipt by the Administrative Agent (for its own
                         ----
account and the account of the Lenders, as applicable) of all fees required to
be received in connection with this Amendment.

          Section 5.  Extension Fee.  In the event that the IPC Acquisition Loan
                      -------------
is not prepaid in full by December 19, 2002, the Borrower shall pay to the
Administrative Agent for the account of the Lenders, a fee equal to twenty-five
(25) basis points multiplied by the outstanding principal balance of the IPC
Acquisition Loan as of December 19, 2002.

          Section 6.  Expenses.  The Borrower shall pay (a) all out-of-pocket
                      --------
expenses of the Administrative Agent (including reasonable fees and
disbursements of counsel for the Administrative Agent) in connection with the
preparation of this Amendment and any other instruments or documents to be
delivered hereunder, any waiver or consent hereunder or thereunder or any
amendment hereof or thereof or any Default hereunder or thereunder; and (b) if
an Event of Default occurs, all out-of-pocket expenses incurred by the
Administrative Agent and each of the Lenders, including fees and disbursements
of counsel of the Administrative Agent and each Lender, in connection with such
Event of Default and collection and other enforcement proceedings resulting
therefrom, including out-of-pocket expenses incurred in enforcing the Credit
Agreement as amended by this Amendment, and the other Credit Documents.

          Section 7.  Miscellaneous.  Except as herein provided, the Credit
                      -------------
Agreement and all other Credit Documents shall remain unchanged and shall
continue to be in full force and effect and are hereby ratified and confirmed in
all respects.  This Amendment may be executed in any

                                Amendment No. 1

number of counterparts, all of which taken together shall constitute one and the
same amendatory instrument, and any of the parties hereto may execute this
Amendment by signing any such counterpart. This Amendment shall be governed by,
and construed in accordance with, the law of the State of Missouri.

                       [NO ADDITIONAL TEXT ON THIS PAGE]

                                Amendment No. 1

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.

                                        INERGY PROPANE, LLC

                                        By: /s/ John J. Sherman
                                           -------------------------------------
                                          Name:  John J. Sherman
                                          Title:  President

                                        WACHOVIA BANK, NATIONAL ASSOCIATION
                                        (f/k/a First Union National Bank), as
                                        Lender, as Swingline Lender and as
                                        Issuing Lender

                                        By: /s/ Joe K. Dancy
                                           -------------------------------------
                                          Name:   Joe K. Dancy
                                          Title:  Vice President

                                        FLEET NATIONAL BANK, as Syndication
                                        Agent and as Lender

                                        By: /s/ Allison I. Ross
                                           -------------------------------------
                                          Name:   Allison I. Ross
                                          Title:  Vice President

                                        BANK OF OKLAHOMA, N.A., as Documentation
                                        Agent and as Lender

                                        By: /s/ Chris Amburgy
                                           -------------------------------------
                                          Name:   Chris Amburgy
                                          Title:  Vice President

                                        U.S. BANK, N.A. (f/k/a FIRSTAR BANK,
                                        N.A. OVERLAND PARK, as Syndication Agent
                                        and as Lender

                                        By: /s/ Paul Tamasco
                                           -------------------------------------
                                           Name:   Paul Tamasco
                                           Title:  Senior Loan Officer

                                        WELLS FARGO BANK TEXAS, N.A., as Lender

                                        By: /s/ J. Alan Alexander
                                           -------------------------------------
                                          Name:   J. Alan Alexander
                                          Title:  Vice President

                                        TEAMBANK, N.A., as Lender

                                        By: /s/ Rick P. Bartley
                                           -------------------------------------
                                          Name:   Rick P. Bartley
                                          Title:  President & CEO

THIS AMENDMENT ACCEPTED AND AGREED
TO THIS ___ DAY OF MAY, 2002, BY EACH OF
THE BELOW GUARANTORS:

INERGY, L.P.

By:  Inergy GP, LLC, its Managing Partner

     By: /s/ John J. Sherman
        ----------------------------
       Name:   John J. Sherman
       Title:  President

INERGY TRANSPORTATION, LLC

By: /s/ John J. Sherman
   ---------------------------------
  Name:   John J. Sherman
  Title:  President

L & L TRANSPORTATION, LLC

By: /s/ John J. Sherman
   ---------------------------------
  Name:   John J. Sherman
  Title:  President

INERGY SALES & SERVICE, INC.

By: /s/ John J. Sherman
   ---------------------------------
  Name:   John J. Sherman
  Title:  President

IPCH ACQUISITION CORP.

By: /s/ John J. Sherman
   ---------------------------------
  Name:   John J. Sherman
  Title:  President

                                                                   EXHIBIT 10.14

                    CONTRIBUTION, CONVEYANCE, ASSIGNMENT AND
                              ASSUMPTION AGREEMENT

     THIS AGREEMENT (the "Agreement"), is made this 31st day of July, 2001, by
and among the following parties:

          INERGY PARTNERS, LLC, a Delaware limited liability company
          ("Partners");
          INERGY PROPANE, LLC, a Delaware limited liability company ("Propane");
          NEW INERGY PROPANE, LLC, a Delaware limited liability company ("New
          Propane");
          INERGY, L. P., a Delaware limited partnership ("MLP");
          INERGY GP, LLC, a Delaware limited liability company ("GP");
          INERGY HOLDINGS, LLC, a Delaware limited liability company
          ("Holdings");
          INERGY SALES & SERVICE, INC., a Delaware corporation ("Inergy S & S");
          WILSON OIL COMPANY OF JOHNSTON COUNTY, INC., a North Carolina
          corporation ("Wilson");
          ROLESVILLE GAS AND OIL COMPANY, a North Carolina corporation
          ("Rolesville"); and
          L & L TRANSPORTATION, LLC, a Delaware limited liability company
          ("L & L Transportation").

     WITNESSETH:

     WHEREAS, Holdings has caused to be organized GP as a Delaware limited
liability company and, in that regard, acquired all of the interests in GP in
exchange for a cash capital contribution of $1,000; and

     WHEREAS, Partners has caused to be organized New Propane as a Delaware
limited liability company and, in that regard, acquired all of the interests in
New Propane in exchange for a cash capital contribution of $1,000; and

     WHEREAS, GP and Partners have caused to be organized MLP as a Delaware
limited partnership of which GP is the managing general partner (with no
economic interest) and of which Partners is a non-managing general partner with
a 2% non-managing general partner interest and is a limited partner with a 98%
limited partner interest, all in exchange for an aggregate cash contribution by
Partners to MLP of $1,000; and

     WHEREAS, Propane has caused to be organized Inergy S & S as a Delaware
corporation of which Propane acquired all of the issued and outstanding capital
stock of Inergy S & S which was received in exchange for a cash contribution by
Propane to Inergy S & S of $1,000; and

     WHEREAS, attached hereto as Exhibit A is a diagram of the ownership
structure of each of the parties hereto as it existed immediately prior to the
transactions provided for herein; and

     WHEREAS, MLP has filed a registration statement (together with all
amendments thereto, the "Registration Statement") with the Securities and
Exchange Commission to register the sale to the public of Common Units (the "MLP
Common Units") of MLP (such sale to be referred to herein as the "IPO"); and

     WHEREAS, MLP has entered into an underwriting agreement (the "Underwriting
Agreement") with a group of underwriters respecting such IPO and caused the
Registration Statement to become effective to permit the sale of MLP Common
Units to the public; and

     WHEREAS, there are various transactions among the parties hereto which must
occur preparatory to completing such IPO, and the parties desire to effect such
transactions as hereinafter set forth;

     NOW, THEREFORE, the parties hereto do hereby agree as follows:

                                   ARTICLE I

                  CONTRIBUTIONS OF ASSETS AND VARIOUS INTERESTS

     1. Contribution of Assets by Partners to Propane. By its execution and
delivery of this Agreement and as a capital contribution to Propane, Partners
hereby grants, contributes, transfers, assigns and conveys to Propane, its
successors and assigns, for its and their own use forever, all right, title and
interest in and to the assets used in the wholesale propane business conducted
by Partners and listed on Exhibit B hereto (the "Assets") other than (a)
$1,837,000 in cash and cash equivalents held by Partners and (b) the stock of
Wilson. Propane hereby accepts the Assets as a capital contribution.

     TO HAVE AND HOLD the Assets unto Propane, its successors and assigns,
together with all and singular the rights and appurtenances thereto in anywise
belonging, subject, however, to the terms and conditions stated in this
Agreement, forever.

     2. Contribution of Partners' Interest in Propane to MLP and Issuance of MLP
Units to Partners.

     (a) By its execution and delivery of this Agreement, Partners hereby
grants, contributes, transfers, assigns and conveys to MLP, its successors and
assigns, for its and their own use forever, all right, title and interest in and
to the 100% common interest in Propane owned by Partners (the "Partners Interest
in Propane").

     TO HAVE AND HOLD the Partners Interest in Propane unto MLP, its successors
and assigns, together with all and singular the rights and appurtenances thereto

                                       2

in anywise belonging, subject, however, to the terms and conditions stated in
this Agreement, forever.

     (b) The grant, contribution, transfer, assignment and conveyance provided
for in Section 2(a) above is hereby accepted by MLP and MLP hereby (i) agrees to
the continuation of Partners' 2% non-managing general partner Interest in MLP
and all rights related thereto, (ii) issues to Partners 3,143,143 Senior
Subordinated Units of MLP ("MLP Senior Subordinated Units"), (iii) issues to
Partners 497,839 Junior Subordinated Units of MLP ("MLP Junior Subordinated
Units"), (iv) issues to Partners the Incentive Distribution Rights of MLP and
(v) subject to Article III hereof, assumes the obligations of Partners under
certain Subordinated Debentures, dated January 12, 2001, in the aggregate
principal amount of $5,000,000 (the "Subordinated Debentures").

     (c) By its execution and delivery of this Agreement, Wilson and Rolesville
each hereby consents to the transfer referenced in Section 2(a) above.

     3. Contribution of MLP Units by Partners to New Propane. By its execution
and delivery of this Agreement, Partners hereby grants, contributes, transfers,
conveys and assigns to New Propane, its successors and assigns, for its and
their own use forever, all right, title and interest in and to 1,136,687 MLP
Senior Subordinated Units and 497,839 MLP Junior Subordinated Units owned by
Partners in exchange for the continuation of Partners' ownership of 100% of the
common interest of New Propane (the "New Propane Common Interest"). New Propane
hereby accepts such transfer of MLP Senior Subordinated Units and MLP Junior
Subordinated Units from Partners and acknowledges the issuance to and ownership
by Partners of all of the New Propane Common Interest.

     TO HAVE AND HOLD the 1,136,687 MLP Senior Subordinated Units and 497,839
MLP Junior Subordinated Units unto New Propane, its successors and assigns,
together with all and singular the rights and appurtenances thereto in anywise
belonging, subject, however, to the terms and conditions stated in this
Agreement, forever.

     TO HAVE AND HOLD the New Propane Common Interest unto Partners, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     4. Rolesville and Wilson Exchanges.

     (a) By its execution and delivery of this Agreement, Rolesville hereby
grants, contributes, transfers, conveys and assigns to New Propane, its
successors and assigns, for its and their own use forever, all right, title and
interest in and to a $2,780,000 preferred interest in Propane owned by
Rolesville (the "Rolesville Propane Interest") in exchange for a $2,780,000
preferred interest in New Propane (the "Rolesville New Propane Interest").

                                       3

     TO HAVE AND HOLD the Rolesville Propane Interest unto New Propane, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     TO HAVE AND HOLD the Rolesville New Propane Interest unto Rolesville, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     (b) By its execution and delivery of this Agreement, Wilson, hereby grants,
contributes, transfers, conveys and assigns to New Propane, its successors and
assigns, for its and their own use forever, all right, title and interest in and
to a $2,608,385 preferred interest in Propane owned by Wilson (the "Wilson
Propane Interest") in exchange for a $2,608,385 preferred interest in New
Propane (the "Wilson New Propane Interest").

     TO HAVE AND HOLD the Wilson Propane Interest unto New Propane, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     TO HAVE AND HOLD the Wilson New Propane Interest unto Wilson, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     (c) New Propane hereby accepts the assignments and transfers made in
Sections 4(a) and 4(b) and acknowledges the issuance of the preferred interests
in New Propane as referenced in said sections.

     5. Contribution of Preferred Interest in Propane Held by New Propane. By
its execution and delivery of this Agreement, New Propane hereby grants,
contributes, transfers, conveys and assigns to MLP, its successors and assigns,
for its and their own use forever, all right, title and interest in and to a
$5,388,385 preferred interest in Propane held by New Propane (the "New Propane
Interest in Propane") in exchange for 170,224 MLP Senior Subordinated Units and
74,703 MLP Junior Subordinated Units. MLP hereby accepts the foregoing transfer
and assignment and acknowledges the issuance of the foregoing MLP Units to New
Propane.

     TO HAVE AND HOLD the New Propane Interest in Propane unto MLP, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     TO HAVE AND HOLD the 170,224 MLP Senior Subordinated Units and 74,703 MLP
Junior Subordinated Units unto New Propane, its successors and assigns,

                                       4

together with all and singular the rights and appurtenances thereto in anywise
belonging, subject, however, to the terms and conditions stated in this
Agreement, forever.

     6. Contribution of Cash by Public to MLP. The parties to this Agreement
acknowledge a cash contribution of $40,480,000 ($37,646,400 after payment of
underwriting discounts and commissions) from the public to the MLP in exchange
for 1,840,000 MLP Common Units. The foregoing includes exercise of the
underwriters' over-allotment option granted in the Underwriting Agreement.

     7. Contribution of Cash by MLP to Propane. By its execution and delivery of
this Agreement, MLP hereby grants, contributes, transfers, conveys and assigns
to Propane, its successors and assigns, for its and their own use forever, all
cash and cash equivalents MLP holds as a result of the transactions described
above, as a result of the IPO and otherwise. Propane hereby accepts such cash as
a capital contribution.

     8. Propane Uses Cash to Pay Transaction Costs. By its execution and
delivery of this Agreement, Propane hereby agrees to use the cash contributed by
MLP to Propane pursuant to Section 7 above to pay all transaction costs relating
to the IPO (estimated to be $5.3 million, including approximately $2.8 million
in underwriting discounts and commissions) and retire approximately $35,180,000
of Propane's outstanding indebtedness.

     9. Transfer of Incentive Distribution Rights by Partners to Holdings. By
its execution and delivery of this Agreement, Partners hereby grants,
contributes, transfers, conveys and assigns to Holdings, its successors and
assigns, for its and their own use forever, all of its right, title and interest
in and to the Incentive Distribution Rights of MLP in redemption of a one-tenth
of one percent (.1%) common interest in Partners held by Holdings (the "Holdings
Interest in Partners").

     TO HAVE AND HOLD the Incentive Distribution Rights unto Holdings, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     TO HAVE AND HOLD the Holdings Interest in Partners unto New Propane, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     10. Redemption of Certain Preferred Interest in Partners. By its execution
and delivery of this Agreement, Partners hereby agrees to distribute to certain
members of Partners an aggregate of 2,006,456 MLP Senior Subordinated Units in
redemption of $44,142,032 in preferred interests (after giving effect to certain
provisions of Partners' Limited Liability Company Agreement which adjust the
preferred capital accounts of certain holders of preferred interests as a result
of the IPO) held by such members of Partners.

                                       5

     TO HAVE AND HOLD 2,006,456 MLP Senior Subordinated Units unto certain
members of Partners, its successors and assigns, together with all and singular
the rights and appurtenances thereto in anywise belonging, subject, however, to
the terms and conditions stated in this Agreement, forever.

                                   ARTICLE II

                              POST-CLOSING MATTERS

     1. Transfer of Assets to S & S Services. By its execution and delivery of
this Agreement, Propane hereby grants, contributes, transfers, conveys and
assigns to S & S Services, its successors and assigns, for its and their own use
forever, all of their respective right, title and interest in and to the assets
(the "Sales and Service Assets") listed on Exhibit C as a capital contribution
to S & S Services by Propane. S & S Services accepts the Sales and Service
Assets as a capital contribution.

     TO HAVE AND HOLD the Sales and Service Assets unto S & S Services, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.

     2. Redemption of MLP Limited Partner Interest Held by Partners. By its
execution and delivery of this Agreement, MLP hereby agrees to redeem the
limited partner interest in MLP held by Partners (as the Organizational Limited
Partner) in exchange for $990 in cash.

                                   ARTICLE III

                        ASSUMPTION OF CERTAIN LIABILITIES

     1. Assumption of Certain Liabilities of Partners by Propane. In connection
with the contribution by Partners of the Assets to Propane, as set forth in
Section 1 of Article I and, with respect to the Subordinated Debentures pursuant
to Section 2 of Article I, Propane hereby assumes and agrees to duly and timely
pay, perform and discharge all of the Assumed Liabilities, to the full extent
that Partners has been heretofore or would have been in the future, were it not
for the execution and delivery of this Agreement, obligated to pay, perform and
discharge such Assumed Liabilities; provided, however, that said assumption and
agreement to duly and timely pay, perform and discharge the Assumed Liabilities
shall not (i) increase the obligation of Propane with respect to the Assumed
Liabilities beyond that of Partners, (ii) waive any valid defense that was
available to Propane with respect to such Assumed Liabilities or (iii) enlarge
any rights or remedies of any third party under any of the Assumed Liabilities.

     2. As used in this Article III, the term "Assumed Liabilities" means all of
Partners' liabilities arising from or relating to the Subordinated Debentures
and the Assets, of every kind, character and description, whether known or
unknown, accrued or

                                       6

contingent, and whether or not reflected on the books and records of Partners,
excluding liabilities for which Partners has agreed to indemnify the MLP
Entities (as hereinafter defined) pursuant to Article IV.

                                   ARTICLE IV

                                 INDEMNIFICATION

     1. Indemnification.

     (a) Partners, on behalf of itself and its Affiliates (as defined in the
Amended and Restated Agreement of Limited Partnership of the MLP) excluding the
MLP Entities (as hereinafter defined), shall indemnify, defend and hold harmless
the MLP, Propane, Inergy S&S, L&L Transportation LLC and Inergy Transportation
LLC (the "MLP Entities") from and against all federal, state and local income
tax liabilities attributable to the operation of the Assets and to the operation
of the Assets of Propane, in each case, prior to the date of this Agreement,
including any such income tax liabilities of any of Partners and its Affiliates
that may result from the consummation of the transactions provided for in
Sections 1, 2(a) and 5 of Article I of this Agreement.

     (b) As used in this Article IV, the term "Indemnifying Party" refers to
Partners in the case of any indemnification obligation arising under paragraph
(a) above, and the term "Indemnified Party" refers to the MLP Entities, as
applicable, in the case of any indemnification obligation arising under
paragraph (a) above.

     (c) If any action, suit or proceeding shall be brought against an
Indemnified Party, or if the Indemnified Party should otherwise become aware of
facts giving rise to a claim for indemnification pursuant to paragraph (a)
above, the Indemnified Party shall promptly notify the Indemnifying Party in
writing specifying the nature of and specific basis for such claim.

     (d) The Indemnifying Party shall have the right to control all aspects of
the defense of (and any counterclaims with respect to) any claims brought
against the Indemnified Party that are covered by the indemnification set forth
in paragraph (a) above including, without limitation, the selection of counsel,
determination of whether to appeal any decision of any court and the settling of
any such matter or any issues relating thereto; provided, however, that no such
settlement shall be entered into without the consent of the Indemnified Party
unless it includes a full release of the Indemnified Party from such matter or
issues, as the case may be.

     (e) The Indemnified Party agrees, at its own cost and expense, to cooperate
fully with the Indemnifying Party with respect to all aspects of the defense of
any claims covered by the indemnification set forth in paragraph (a) above,
including, without limitation, the prompt furnishing to the Indemnifying Party
of any correspondence or other notice relating thereto that the Indemnified
Party may receive, permitting the name(s) of the Indemnified Party to be
utilized in connection with such defense, the making available to the
Indemnifying Party of any files, records or other

                                       7

information of the Indemnified Party that the Indemnifying Party considers
relevant to such defense and the making available to the Indemnifying Party of
any employees of the Indemnified Party; provided, however, that in connection
therewith the Indemnifying Party agrees to use reasonable efforts to minimize
the impact thereof on the operations of such Indemnified Party. In no event
shall the obligation of the Indemnified Party to cooperate with the Indemnifying
Party as set forth in the immediately preceding sentence be construed as
imposing upon the Indemnified Party an obligation to hire and pay for counsel in
connection with the defense of any claims covered by the indemnification set
forth in this Article IV; provided, however, that an Indemnified Party may, at
its own option, cost and expense, hire and pay for counsel in connection with
any such defense. The Indemnifying Party agrees to keep any such counsel hired
by the Indemnified Party reasonably informed as to the status of any such
defense, but the Indemnifying Party shall have the right to retain sole control
over such defense.

         (f) In determining the amount of any Losses (as hereinafter defined)
for which any Indemnified Party is entitled to indemnification under this
Article V, the gross amount thereof will be reduced by any insurance proceeds
realized or to be realized by such Indemnified Party, and such correlative
insurance benefit shall be net of any insurance premium that becomes due as a
result of such claim. "Losses" shall mean means all liabilities, losses, costs,
damages (including punitive, consequential and treble damages), penalties or
expenses (including, without limitation, reasonable attorneys' fees and expenses
and costs of investigation and litigation), and also including any expenditures
or expenses incurred to cover, remedy or rectify any such Losses.

                                    ARTICLE V

                                  MISCELLANEOUS

     1. Order of Transactions. The transactions provided for in Articles I, II
and III of this Agreement shall be completed in the following order:

          (a) First, the transactions provided for in Articles I and III shall
     be completed;

          (b) Second, the transactions provided for in Article II shall be
     completed.

     2. Amendments to Organizational Documents.

     (a) The Agreement of Limited Partnership of MLP will be amended and
restated to reflect the matters set forth in Articles I and II of this
Agreement.

     (b) The Limited Liability Company Agreements of the following will be
amended (or amended and restated) to reflect the applicable matters set forth in
Articles I and II of this Agreement:

          (i) Partners;

                                       8

          (ii) New Propane; and
          (iii) Propane.

     3. Representations and Warranties. Each party hereto represents and
warrants to each of the other parties hereto as follows:

          (a) Such party has the right, power and authority for, and has taken
     all necessary corporate and other action to authorize, the execution,
     delivery and performance of this Agreement;

          (b) This Agreement has been duly executed and delivered by the duly
     authorized officers of such party and constitutes the legal, valid and
     binding obligation of such party, enforceable in accordance with its terms;
     and

          (c) Any property or right being transferred and assigned by such party
     hereunder to another party is owned by such transferor/assignor, free and
     clear of all liens, claims and encumbrances, and upon such transfer the
     transferee/assignee will succeed to all right, title and ownership in such
     property or right, other than any security interest, mortgage, lien, claim
     or encumbrance created pursuant to the Third Amended and Restated Credit
     Agreement, dated as of July 25, 2001, among Propane, First Union National
     Bank, as Administrative Agent, and the Lenders named therein.

THE PARTIES ACKNOWLEDGE AND AGREE THAT, EXCEPT FOR THE FOREGOING REPRESENTATIONS
AND WARRANTIES, ALL PROPERTY AND RIGHTS TRANSFERRED AND ASSIGNED PURSUANT TO
THIS AGREEMENT ARE BEING TRANSFERRED AND ASSIGNED ON AN AS-IS, WHERE-IS BASIS,
AND NO OTHER REPRESENTATIONS OR WARRANTIES ARE MADE WITH RESPECT TO SUCH
PROPERTY OR RIGHTS.

     4. Costs. Each transferee/assignee hereunder shall pay all sales, use and
similar taxes arising out of the contributions, conveyances and deliveries to be
made hereunder, and shall pay all documentary, filing, recording, transfer,
deed, and conveyance taxes and fees required in connection therewith.

     5. Headings. All 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.

     6. Successors and Assigns. The Agreement shall be binding upon and inure to
the benefit of the parties signatory hereto and their respective successors and
assigns.

     7. No Third Party Rights. The provisions of this Agreement are intended to
bind the parties signatory hereto as to each other and are not intended to and
do not create rights in any other person or confer upon any other person any
benefits, rights or remedies and no person is or is intended to be a third party
beneficiary of any of the provisions of this Agreement.

                                       9

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

     9. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Missouri applicable to contracts made
and to be performed wholly within such state without giving effect to conflict
of law principles thereof.

     10. Severability. If any of the provisions of this Agreement are held by
any court of competent jurisdiction to contravene, or to be invalid under, the
laws of any political body having jurisdiction over the subject matter hereof,
such contravention or invalidity shall not invalidate the entire Agreement.
Instead, this Agreement shall be construed as if it did not contain the
particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give effect to
the intention of the parties as expressed in this Agreement at the time of
execution of this Agreement.

     11. Deed; Bill of Sale; Assignment. To the extent required by applicable
law, this Agreement shall also constitute a "deed," "bill of sale" or
"assignment" of the Assets.

     12. Amendment or Modification. This Agreement may be amended or modified
from time to time only by the written agreement of all the parties hereto.

     13. Integration. This Agreement supersedes all previous understandings or
agreements between the parties, whether oral or written, with respect to its
subject matter. This document is an integrated agreement which contains the
entire understanding of the parties. No understanding, representation, promise
or agreement, whether oral or written, is intended to be or shall be included in
or form part of this Agreement unless it is contained in a written amendment
hereto executed by the parties hereto after the date of this Agreement.

     14. Further Assurances. Each party hereto agrees to execute and deliver
such additional instruments, documents and certifications and to take such other
action as is necessary or appropriate to carry out the purpose and intent of
this Agreement and the transactions contemplated herein.

                                       10

     IN WITNESS WHEREOF, the undersigned have executed the foregoing Agreement
as of the day and year first above written.

INERGY HOLDINGS, LLC                        INERGY, L. P.

                                            By:  Inergy GP, LLC
                                                   (its General Partner)
By
   ---------------------------------
     John J. Sherman, President

                                                 By
                                                    ----------------------------
                                                    John J. Sherman
                                                    President of Inergy GP, LLC

INERGY PARTNERS, LLC                        INERGY PROPANE, LLC

By                                          By
   ---------------------------------           ---------------------------------
     John J. Sherman, President                John J. Sherman, President

INERGY GP, LLC                              L & L TRANSPORTATION, LLC

By                                          By
   ---------------------------------           ---------------------------------
     John J. Sherman, President                John J. Sherman, President

NEW INERGY PROPANE, LLC                     INERGY TRANSPORTATION, LLC

By                                          By
   ---------------------------------           ---------------------------------
     John J. Sherman, President                John J. Sherman, President

INERGY SALES & SERVICE, INC.                WILSON OIL COMPANY OF
                                            JOHNSTON COUNTY, INC.

By                                          By
   ---------------------------------           ---------------------------------
     John J. Sherman, President                John J. Sherman, President

                                       11

ROLESVILLE GAS AND OIL                      L & L TRANSPORTATION, LLC
COMPANY

By                                          By
   ---------------------------------           ---------------------------------
     John J. Sherman, President                John J. Sherman, President

                                       12

                                    EXHIBIT B

                         Description of Wholesale Assets

All of the following assets of Inergy Partners, LLC:

     Cash (other than $1,837,000)
     Accounts receivable (excluding intercompany balances with Wilson Oil Co.)
     Propane inventory
     Prepaid insurance
     Other prepaid expenses
     Inventory deposits
     Fixed assets:
          Leasehold improvements
          Furniture and fixtures
          Computer equipment
     Intangible assets:
          Goodwill
          Customer accounts
          Organization costs
          Deferred financing costs
          Deferred acquisition costs
     Lease relating to office space at 1101 Walnut, Suite 1500, Kansas
     City, Missouri

                                    EXHIBIT C

            Inergy Propane Assets to be Transferred to S & S Services

All of the following assets of Inergy Propane, LLC:

     All appliance inventories (excluding those in Indiana and Michigan),
     including:

          Gas grills
          Artificial fireplace logs
          Space and room heaters
          Radio Shack inventories
          Other miscellaneous appliances
     Parts and fittings inventories relating to the above appliances and propane
     tank repairs (excluding those in Indiana and Michigan)
     Other tangible assets:

          Service vehicles:
                  Location                  No. of vehicles
                  Tennessee                        6
                  North Carolina                  10
                  Illinois                         3

     Radio Shack stores and related furniture and fixtures

                                                                    EXHIBIT 21.1

                         Subsidiaries of Inergy, L.P.

Name                                            Jurisdiction
- ----                                            ------------
Inergy Propane, LLC                             Delaware
L & L Transportation, LLC                       Delaware
Inergy Transportation, LLC                      Delaware
Inergy Sales & Service, Inc.                    Delaware

                                                                    EXHIBIT 23.1

                        CONSENT OF INDEPENDENT AUDITORS

Board of Directors and Members
Inergy, L.P.

We consent to the references to our firm under the caption "Experts" and to the
use of our report dated December 10, 2001, except for Notes 4 and 12, as to
which the date is December 20, 2001, with respect to Inergy, L.P. and
subsidiary; our report dated May 2, 2001 with respect to the Hoosier Propane
Group; and our report dated May 22, 2002 with respect to Inergy GP, LLC, in the
Registration Statement (Form S-1) and related Prospectus of Inergy, L.P. for the
registration of 1,400,000 common units.

                                /s/ Ernst & Young LLP

Kansas City, Missouri
May 23, 2002

                                                                    EXHIBIT 23.2

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made a part of this
registration statement.

                                /s/ Arthur Andersen LLP

Dallas, Texas
May 23, 2002