Crestwood Equity Partners LP – IPO: ‘424B4’ on 7/26/01

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Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Definitive Prospectus                                272   1.36M 

Document Table of Contents

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                                                    Filed pursuant to Rule 424b4
                                                      Registration No. 333-56976

PROSPECTUS                                                                      

1,600,000 Common Units

Representing Limited Partner Interests

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

We are offering 1,600,000 common units representing limited partner       
interests. This is the initial public offering of our common units. 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. Our subordinated units also represent limited partner   
interests in us. The common units will have priority over the subordinated      
units until the subordination period expires. Our common units have been        
approved for listing on the Nasdaq National Market under the symbol "NRGY."     

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

Investing in our common units involves risks. 
See "Risk Factors" beginning on page 11.

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

PRICE $22.00 PER COMMON UNIT

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

                                                                [Download Table]

                                                            Per                
                                                        Common Unit    Total   
                                                        ----------- -----------
                                                                               
Initial public offering price..........................   $22.00    $35,200,000
Underwriting discount..................................   $ 1.54    $ 2,464,000
Proceeds, before expenses, to Inergy, L.P..............   $20.46    $32,736,000

We have granted the underwriters a 30-day option to purchase up to an     
additional 240,000 common units to cover over-allotments. The underwriters      
expect to deliver the common units to purchasers on or about July 31, 2001.     

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.                                                       
    First Union Securities, Inc.
                                                                   Raymond James

Prospectus dated July 25, 2001

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[PHOTOGRAPHS AND MAP OF INERGY, L.P.'S OPERATIONS]

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TABLE OF CONTENTS 

                                                                [Download Table]

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

PROSPECTUS SUMMARY........................................................    1 
  Inergy, L.P.............................................................    1 
  Summary of Conflicts of Interest and Fiduciary Responsibilities.........    3 
  Partnership Structure and Management....................................    3 
  The Offering............................................................    5 
  Summary Historical and Pro Forma Financial and Operating Data...........    8 

RISK FACTORS..............................................................   11 
  Risks Inherent in our Business..........................................   11 
  Risks Inherent in an Investment in Inergy, L.P..........................   14 
  Tax Risks To Common Unitholders.........................................   18 

USE OF PROCEEDS...........................................................   20 

CAPITALIZATION............................................................   21 

DILUTION..................................................................   22 

CASH DISTRIBUTION POLICY..................................................   23 
  Distributions of Available Cash.........................................   23 
  Operating Surplus and Capital Surplus...................................   23 
  Subordination Period....................................................   24 
  Distributions of Available Cash from Operating Surplus During the             
   Subordination Period...................................................   26 
  Distributions of Available Cash from Operating Surplus After the              
   Subordination Period...................................................   26 
  Incentive Distribution Rights--Hypothetical Annualized Yield............   26 
  Distributions from Capital Surplus......................................   27 
  Adjustment to the Minimum Quarterly Distribution and Target Distribution      
   Levels.................................................................   28 
  Distributions of Cash Upon Liquidation..................................   28 

CASH AVAILABLE FOR DISTRIBUTION...........................................   31 

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.....................   33 

SELECTED HISTORICAL FINANCIAL AND OPERATING DATA..........................   42 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      
 OPERATIONS...............................................................   46 
  General.................................................................   46 
  Inergy Partners, LLC....................................................   48 
  Hoosier Propane Group...................................................   51 
  Country Gas Company, Inc................................................   54 
  Liquidity and Capital Resources.........................................   55 
  Description of Credit Facility..........................................   57 
  Environmental Matters...................................................   58 
  Recent Accounting Pronouncements........................................   59 
  Quantitative and Qualitative Disclosure about Market Risk...............   59 
  Propane Price Risk......................................................   59 

BUSINESS..................................................................   61 
  General.................................................................   61 
  Industry Background and Competition.....................................   62 
  Competitive Strengths...................................................   63 

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                                                                [Download Table]
                                                                               
  Retail Operations........................................................  65
  Wholesale Supply, Marketing and Distribution Operations..................  67
  Transportation Assets, Truck Fabrication and Maintenance.................  67
  Supply...................................................................  67
  Pricing Policy...........................................................  68
  Billing and Collection Procedures........................................  68
  Properties...............................................................  68
  Trademark and Tradenames.................................................  69
  Employees................................................................  69
  Government Regulation....................................................  69
  Litigation...............................................................  70

MANAGEMENT.................................................................  71
  Our Managing General Partner Manages Inergy, L.P.........................  71
  Directors, Executive Officers and Other Key Employees of Inergy GP, LLC..  71
  Reimbursement of Expenses of the Managing General Partner................  73
  Compensation of Directors................................................  74
  Employment Agreements....................................................  74
  Long-Term Incentive Plan.................................................  75
  Unit Purchase Plan.......................................................  77

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............  78

ORGANIZATION OF INERGY, L.P. PRIOR TO AND IMMEDIATELY FOLLOWING THE            
 OFFERING..................................................................  80

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................  83
  Related Party Transactions...............................................  83
  Distributions and Payments to the Managing General Partner and the Non-      
   managing General Partner................................................  84
  Rights of our Managing General Partner and our Non-managing General          
   Partner.................................................................  85
  Contribution Agreement...................................................  85

CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES.......................  86
  Conflicts of Interest....................................................  86

DESCRIPTION OF THE COMMON UNITS............................................  90
  The Units................................................................  90
  Transfer Agent and Registrar.............................................  90

DESCRIPTION OF THE SUBORDINATED UNITS......................................  92
  Limited Voting Rights....................................................  92
  Distributions Upon Liquidation...........................................  92

THE PARTNERSHIP AGREEMENT..................................................  93
  Organization.............................................................  93
  Purpose..................................................................  93
  Power of Attorney........................................................  93
  Capital Contributions....................................................  93
  Limited Liability........................................................  94
  Issuance of Additional Securities........................................  94
  Amendment of the Partnership Agreement...................................  95
  Merger, Sale or Other Disposition of Assets..............................  97
  Termination and Dissolution..............................................  98
  Liquidation and Distribution of Proceeds.................................  98
  Withdrawal or Removal of the General Partners............................  98

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  Transfer of General Partner Interests........................   100
  Transfer of Incentive Distribution Rights....................   100
  Transfer of Ownership Interests in General Partners..........   100
  Change of Management Provisions..............................   100
  Limited Call Right...........................................   101
  Meetings; Voting.............................................   101
  Status as Limited Partner or Assignee........................   102
  Non-Citizen Assignees; Redemption............................   102
  Indemnification..............................................   103
  Books and Reports............................................   103
  Right to Inspect our Books and Records.......................   103
  Registration Rights..........................................   104

UNITS ELIGIBLE FOR FUTURE SALE.................................   105

TAX CONSIDERATIONS.............................................   106
  Partnership Status...........................................   106
  Limited Partner Status.......................................   107
  Tax Consequences of Unit Ownership...........................   108
  Tax Treatment of Operations..................................   113
  Disposition of Common Units..................................   113
  Uniformity of Units..........................................   115
  Tax-Exempt Organizations and Other Investors.................   116
  Administrative Matters.......................................   117
  State, Local and Other Tax Considerations....................   119

INVESTMENT IN INERGY, L.P. BY EMPLOYEE BENEFIT PLANS...........   120

UNDERWRITING...................................................   121

VALIDITY OF THE COMMON UNITS...................................   123

EXPERTS........................................................   123

WHERE YOU CAN FIND MORE INFORMATION............................   124

FORWARD-LOOKING STATEMENTS.....................................   124

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

Appendix A--                                                         
 Form of Amended and Restated Agreement of Limited Partnership..  A-1

Appendix B--Application For Transfer of Common Units...........   B-1

Appendix C--Glossary of Terms..................................   C-1

Appendix D--Pro Forma Available Cash From Operating Surplus....   D-1

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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 is currently conducting the business
that will be transferred to us at the closing of the offering.  
  Inergy, L.P. was formed as a Delaware limited partnership on March
  7, 2001 and will have no operations until closing. Our predecessor
commenced operations in November 1996. The discussion of our    
business throughout this prospectus relates to the business     
operations of Inergy Partners, LLC. To better understand the    
transactions pursuant to which we will assume the assets and    
operations of Inergy Partners, LLC, please read "Organization of
Inergy, L.P. Prior to and Immediately Following the Offering."  

. 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 will not receive a management fee,
but it will be 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 C.                           

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

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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 11 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 eleven propane companies for an aggregate purchase price of    
approximately $120 million. For the fiscal year ended September 30, 2000, on a  
pro forma combined basis we sold approximately 50 million gallons of propane to 
retail customers and approximately 215 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 under four regional brand names and serve           
approximately 71,000 retail customers in Georgia, Illinois, Indiana, Michigan,  
North Carolina, Ohio, Tennessee, Virginia and Wisconsin from 30 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.                 

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     
eleven 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. Our Southeastern operations, which     
accounted for approximately 33% of our pro forma retail volumes for the 
fiscal year ended September 30, 2000, 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.         

. 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, 2000, sales to 
 residential customers represented approximately 70% of our retail propane
gallons sold and approximately 77% of our retail propane gross profits, 
on a pro forma combined basis.                                          

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. Strong Wholesale Supply, Marketing and Distribution Business. Our         
wholesale business provides us with a growing income stream 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 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. At closing, we will have a $70.0 million    
 acquisition facility, approximately $43.3 million of which will be drawn,
and a $30.0 million working capital facility, approximately $6.0 million
of which will be drawn. 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.                                                          

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 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 11.2 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.                                                             

Summary of Risk Factors                                                         

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

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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 will be conducted through, and our operating assets will be
owned by, our subsidiaries. We will own our interests in our subsidiaries       
through our operating company, Inergy Propane, LLC. Upon consummation of this   
offering and related transactions:                                              

. We will 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, will have 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  
 will not receive a management fee, but it will be reimbursed for expenses
incurred on our behalf.                                                 

. Inergy Partners, LLC, our non-managing general partner, will own 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 will 
have 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 will own 100% of our managing general partner and         
substantially all of our non-managing general partner. Inergy Holdings  
will also own 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.                  

. New Inergy Propane, LLC, a wholly-owned subsidiary of our non-managing    
 general partner, will own 1,306,911 senior subordinated units and 572,542
junior subordinated units, representing an aggregate limited partner    
interest in us of approximately 34%.                                    

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

  The chart on the following page depicts the organization and ownership of us
and our operating company, after giving effect to the offering and the related  
transactions.                                                                   

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THE OFFERING

Common units offered......    1,600,000 common units.                           

                      1,840,000 common units if the underwriters
                         exercise their over-allotment option in full.

Units outstanding after                                                         
this offering.............                                                      
                        1,600,000 common units, representing a 28.6%
                     limited partner interest in Inergy, L.P.;
                             3,313,367 senior subordinated units, representing
                             a 59.2% limited partner interest in Inergy, L.P.;
                  and 572,542 junior subordinated units,
                            representing a 10.2% 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 Appendix C. The amount of available
                             cash may be greater than or less than the minimum
   quarterly distribution.

                       Our pro forma available cash from operating
                         surplus for the twelve months ended March 31,
                          2001 would have been sufficient to allow us to
                            pay the minimum quarterly distribution on all of
                            the common units, all of the senior subordinated
                           units and all of the junior subordinated units.
                       Our pro forma available cash from operating
                           surplus for the fiscal year ended September 30,
                          2000 would have been sufficient to allow us to
     pay the minimum quarterly

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                       distribution on all of our common units and
                      approximately 30% of the minimum quarterly
                             distribution on the senior subordinated units and
                             no distribution on the junior subordinated units.
                          Please read "Cash Available for Distribution."

Subordination periods.....    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 sold in this
                  offering 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, or 50% of the
                           common units outstanding immediately after this
                            offering, without obtaining unitholder approval.
                         We may, however, issue an unlimited number of
                            common units for 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."        

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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 June 30, 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 have been approved for listing   
                          on the Nasdaq National Market under the symbol
"NRGY."             

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL
AND OPERATING DATA

The following table shows selected historical financial data for our      
predecessor, Inergy Partners, LLC, and pro forma financial and operating data   
of Inergy, L.P., in each case for the periods and as of the dates indicated.    
The selected historical financial data for the years ended September 30, 1998,  
1999 and 2000 are derived from the audited financial statements of Inergy       
Partners, LLC. The selected historical financial data for the six months ended  
March 31, 2000 and 2001 are derived from the unaudited financial statements of  
Inergy Partners, LLC. The historical financial and other data of Inergy         
Partners, LLC include the results of operations of Country Gas Company, Inc.    
from June 1, 2000, the date of acquisition, and the results of operations of    
the Hoosier Propane Group from January 1, 2001, the effective date of the       
acquisition.                                                                    

The summary pro forma financial and operating data of Inergy, L.P. reflect
the consolidated historical operating results of Inergy Partners, LLC., Country 
Gas Company, Inc. and the Hoosier Propane Group as adjusted for the offering    
and the related transactions. The summary pro forma financial data are derived  
from the unaudited pro forma financial statements. The pro forma balance sheet  
assumes that the offering and related transactions occurred on March 31, 2001.  
The pro forma statements of operations assume that the Country Gas acquisition, 
the Hoosier Propane Group acquisition and the offering and related transactions 
occurred on October 1, 1999. For a description of all of the assumptions used   
in preparing the summary pro forma 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 the future results that we will have after the offering.   

We define EBITDA as shown in the table on page 9 and elsewhere in this    
prospectus as income before income taxes, plus interest, 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 be read    
together with "Management's Discussion and Analysis of Financial Condition and  
Results of Operations."                                                         

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                                                        [Enlarge/Download Table]

                              Inergy Partners, LLC--Historical                 Inergy, L.P Pro Forma       
                         -----------------------------------------------  -------------------------------- 
                                                      Six Months Ended                  Six Months Ended   
                         Years Ended September 30,        March 31,        Year Ended       March 31,      
                         ---------------------------  ------------------  September 30, ------------------ 
                          1998      1999      2000      2000      2001        2000        2000      2001   
                         -------  --------  --------  --------  --------  ------------- --------  -------- 
                                            (in thousands, except per unit data)                           
                                                                                                           
Statement of Operations                                                                                    
 Data:                                                                                                     
Revenues................ $ 7,507  $ 19,211  $ 93,595  $ 50,457  $170,439    $167,031    $102,847  $201,980 
Cost of product sold....   4,215    13,754    81,636    42,054   141,425     134,534      79,167   166,597 
                         -------  --------  --------  --------  --------    --------    --------  -------- 
Gross profit............   3,292     5,457    11,959     8,403    29,014      32,497      23,680    35,383 
Expenses:                                                                                                  
 Operating and                                                                                             
  administrative(a).....   2,424     4,119     8,990     4,093    11,464      20,155      10,365    13,905 
 Depreciation and                                                                                          
  amortization..........     394       690     2,286       887     2,748       7,806       3,827     3,979 
                         -------  --------  --------  --------  --------    --------    --------  -------- 
Operating income........     474       648       683     3,423    14,802       4,536       9,488    17,499 
Other income (expense):                                                                                    
 Interest expense.......    (569)     (962)   (2,740)   (1,157)   (2,860)     (5,486)     (2,692)   (2,585)
 Interest income........     --        --        --        --        --          239          48        57 
 Gain on sale of                                                                                           
  property, plant and                                                                                      
  equipment.............     --        101       --        --        --           72          92        10 
 Finance charges........      59        79       176        70       158         261         164       170 
 Other..................       1         5        59        25        87         191         129       165 
                         -------  --------  --------  --------  --------    --------    --------  -------- 
Income (loss) before                                                                                       
 income taxes...........     (35)     (129)   (1,822)    2,361    12,187        (187)      7,229    15,316 
Provision for income                                                                                       
 taxes..................     --         56         7       --        --            7         --        --  
                         -------  --------  --------  --------  --------    --------    --------  -------- 
Net income (loss)....... $   (35) $   (185) $ (1,829) $  2,361  $ 12,187    $   (194)   $  7,229  $ 15,316 
                         =======  ========  ========  ========  ========    ========    ========  ======== 
Pro forma non-managing                                                                                     
 general partner's                                                                                         
 interest in net income                                                                                    
 (loss).................                                                    $     (4)   $    145  $    306 
                                                                            ========    ========  ======== 
Pro forma limited                                                                                          
 partners' interest in                                                                                     
 net income (loss)......                                                    $   (190)   $  7,084  $ 15,010 
                                                                            ========    ========  ======== 
Pro forma net income                                                                                       
 (loss) per limited                                                                                        
 partner unit--basic and                                                                                   
 diluted................                                                    $  (0.03)   $   1.32  $   2.74 
                                                                            ========    ========  ======== 
Pro forma weighted                                                                                         
 average limited                                                                                           
 partners' units                                                                                           
 outstanding............                                                       5,435       5,384     5,486 
                                                                            ========    ========  ======== 

Balance Sheet Data (end                                                                                    
 of period):                                                                                               
Current assets.......... $ 2,119  $ 11,390  $ 22,199  $ 12,653  $ 31,306                          $ 29,806 
Total assets............  10,230    38,896    68,924    41,900   150,373                           148,873 
Long-term debt,                                                                                            
 including current                                                                                         
 portion................   5,694    22,337    34,927    24,413    84,398                            54,198 
Redeemable preferred                                                                                       
 members' interest......     --        --     10,896     1,896    34,313                               --  
Members'                                                                                                   
 equity/partners'                                                                                          
 capital................   2,611     5,269     2,972     7,495    14,453                            78,408 

Other Financial Data:                                                                                      
EBITDA (unaudited)...... $   928  $  1,523  $  3,204  $  4,405  $ 17,795    $ 12,866    $ 13,700  $ 21,823 
Net cash provided by                                                                                       
 (used in) operating                                                                                       
 activities.............     362      (847)     (309)     (839)    2,594                                   
Net cash used in                                                                                           
 investing activities...    (727)  (13,057)  (12,377)   (2,756)  (60,179)                                  
Net cash provided by                                                                                       
 financing activities...     336    14,056    13,907     3,796    59,740                                   
Maintenance capital                                                                                        
 expenditures(b)                                                                                           
 (unaudited)............      61       156       283       126       551       1,234         780       708 
Net income (loss)....... $   (35) $   (185) $ (1,829) $  2,361  $ 12,187    $   (194)   $  7,229  $ 15,316 
Plus:                                                                                                      
 Income taxes...........      --        56         7        --        --           7          --        -- 
 Interest expense.......     569       962     2,740     1,157     2,860       5,486       2,692     2,585 
 Depreciation and                                                                                          
  amortization expense..     394       690     2,286       887     2,748       7,806       3,827     3,979 
                         -------  --------  --------  --------  --------    --------    --------  -------- 
                             928     1,523     3,204     4,405    17,795      13,105      13,748    21,880 
Less:                                                                                                      
 Interest income........      --        --        --        --        --         239          48        57 
                         -------  --------  --------  --------  --------    --------    --------  -------- 
EBITDA.................. $   928  $  1,523  $  3,204  $  4,405  $ 17,795    $ 12,866    $ 13,700  $ 21,823 
                         =======  ========  ========  ========  ========    ========    ========  ======== 

Other Operating Data                                                                                       
 (Unaudited):                                                                                              
Retail propane gallons                                                                                     
 sold...................   5,612     8,006    18,112    12,176    34,031      49,184      35,306    42,616 
Wholesale propane                                                                                          
 gallons sold...........     N/A    24,735   146,644    82,064   161,768     215,445     133,664   185,454 

Reconciliation of Net Income (Loss)                                                                        
 to EBITDA:                                                                                                

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--------                                                                        
(a) The historical financial statements include non-cash charges related to     
  amortization of deferred compensation of $78,000 and $79,000 for the years
ended September 30, 1999 and 2000, respectively, and $39,000 for each of
the six month periods ended March 31, 2000 and 2001.                    
(b) 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.                               

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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.   

The amount of cash needed to pay the minimum quarterly distribution for   
four quarters on the common units, the subordinated units and the general       
partner interest to be outstanding immediately after the offering is            
approximately $13.4 million. If we had completed the transactions contemplated  
in this prospectus on October 1, 1999, pro forma available cash from operating  
surplus generated during the fiscal year ended September 30, 2000 would have    
been approximately $6.4 million. This amount would have been sufficient to      
allow us to pay the minimum quarterly distribution on all of the common units   
and approximately 30% of the minimum quarterly distribution on the senior       
subordinated units, but would have been insufficient to allow us to pay any     
distribution on the junior subordinated units. For a calculation of our         
ability to make distributions to you based on our pro forma results for the     
fiscal year ended September 30, 2000 and for the twelve months ended March 31,  
2001, please read "Cash Available for Distribution" and Appendix D. The terms   
"available cash" and "operating surplus" are technical terms which are          
precisely defined in our partnership agreement. We have included these          
definitions in our glossary. "Available cash" generally means cash on hand at   
the end of the quarter, including any working capital borrowings, less          
appropriate reserves. "Operating surplus" generally means cash received from    
our operations, as opposed to long-term borrowings or major asset sales, less   
our operating expenses.                                                         

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, 2000, approximately 72% 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                                                                   

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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. We believe the EBITDA we generated during     
fiscal 1999 and 2000 was adversely affected primarily due to this abnormally    
warm weather.                                                                   

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.                                          

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

During the fiscal year ended September 30, 2000, BP Amoco p.l.c. accounted
for approximately 19% of our volume of propane purchases on a pro forma         
combined basis. Substantially all 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. In the event that we are unable to purchase   
propane from this supplier, 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.                                                                     

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.                                                  

If we do not 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         
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 make acquisitions at            
attractive prices. We cannot assure you that we will be able 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:                                               

. This offering will not provide us with any cash for acquisitions and we   
 expect we will use our cash from operations primarily for reinvestment in
our business and distributions to unitholders.                          

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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, any debt incurred to finance acquisitions may 
affect our ability to make distributions to the unitholders.              

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

Moreover, any acquisition involves 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.                               

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

As of June 30, 2001, our total long-term indebtedness was approximately   
$77.6 million. Upon completion of the offering, we expect our total outstanding 
long-term indebtedness to be approximately $50.3 million, including             
approximately $43.3 million under our acquisition facility, $6.0 million under  
our working capital facility and $1.0 million of other indebtedness. Our        
payment of principal and interest on the indebtedness will reduce the cash      
available for distribution on the units. We will be prohibited by our credit    
facility from making cash distributions during an event of default under any of 
our indebtedness. Furthermore, our leverage and various limitations in the      
credit facility may reduce our ability to incur additional indebtedness, to     
engage in some transactions and to capitalize on acquisition or other business  
opportunities. 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.     

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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.                               

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 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.                                                      

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                     

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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 our executive officers and directors will control approximately    
42% of all the units, the managing general partner currently cannot be removed  
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.                                     

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.                                                        

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You will experience immediate and substantial dilution in net tangible book   
value of $16.86 per common unit.                                              

The initial public offering price of $22.00 per unit exceeds pro forma net
tangible book value of $5.14 per unit. As a result, you will incur immediate    
and substantial dilution of $16.86 per common unit. This dilution is caused by  
two principal factors. The first factor causing dilution is related to the      
fact that our general partners, their affiliates and other existing investors   
acquired interests in our predecessor at equivalent per unit prices less than   
the public offering price. These parties will receive subordinated units in     
exchange for their interests in our predecessor. Although these units are       
subordinate to the common units, dilution to new investors is calculated based  
on total units to be outstanding after the offering. The second factor is       
related to the significant base of intangible assets we have acquired in        
recent years. As these assets are excluded from net tangible book value, upon   
which the dilution calculation is based, the difference between the offering    
price and net tangible book value per common unit is significant.               

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,                   

. 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.                                                                   

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 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 will indirectly own an aggregate 
limited partner interest of approximately 34% 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.                   

. 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.                                                   

Unitholders may have limited liquidity for their units, a trading market may  
not develop for the units and you may not be able to resell your units at the 
initial public offering price.                                                

Prior to the offering, there has been no public market for the common     
units. After the offering, there will be only 1,600,000 publicly-traded common  
units. We do not know the extent to which investor interest will                

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lead to the development of a trading market or how liquid that market might be. 
You may not be able to resell your common units at or above the initial public  
offering price. Additionally, the lack of liquidity may result in wide bid-ask  
spreads, contribute to significant fluctuations in the market price of the      
common units and limit the number of investors who are able to buy the common   
units.                                                                          

Tax Risks To Common Unitholders                                                 

You should 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 federal income tax treatment of an investment in our common 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%. 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. As a result, if we are treated as a corporation there    
would be a material reduction in the after-tax return to the unitholders,       
likely causing substantial reduction in the value of our common units.          

 Current law may change so as to 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 decreased to reflect that impact on us.  

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

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 bear the costs of any contest with the IRS, principally   
legal, accounting and related fees, either directly or indirectly.              

You may be required to pay taxes even if you do not receive any cash          
distributions.                                                                

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                                  

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common unit, even if the price you receive is less than your original cost. A   
substantial portion of the amount you realize, whether or not representing      
gain, may 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, 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 organizations       
exempt from federal income tax, including individual retirement accounts and    
other retirement plans, will 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 marginal tax rate applicable to            
individuals, and non-U.S. persons will be required to file federal income tax   
returns and pay tax on their share of our taxable income.                       

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

  We intend to register with the IRS as a "tax shelter." We will advise you of
our tax shelter registration number once that number has been assigned. The IRS 
requires that some types of entities, including some partnerships, register as  
"tax shelters" in response to the perception that they claim tax benefits that  
the IRS may believe to 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.         

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 reduce 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 and in which you do not   
reside. You may be required to file state and local income tax returns and pay  
state and local income taxes in many or all of the jurisdictions in which we do 
business. 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: Georgia, Illinois, Indiana,   
Michigan, Missouri, North Carolina, Ohio, Tennessee and Wisconsin. Each of      
these states 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 United States 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.           

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USE OF PROCEEDS 

We will receive net proceeds of approximately $30.2 million (or $35.1     
million if the underwriters exercise their over-allotment option) from the sale 
of the 1,600,000 common units offered by this prospectus, after deducting       
underwriting discounts and estimated offering expenses. We intend to use $5.0   
million of the net proceeds of this offering to repay our subordinated debt in  
full and $25.2 million to repay a portion of our borrowings under our bank      
credit facility. We will use any net proceeds from the exercise of the over-    
allotment option to further repay borrowings under our bank credit faciltiy.    

 Our subordinated debt bears interest at 9% per annum and matures on January
12, 2004. As of June 30, 2001, total borrowings under our credit facility were  
approximately $71.5 million and had a weighted average interest rate of 7.14%.  
The credit facility has a maturity date of January 10, 2004. We incurred all of 
our debt to fund our acquisitions and for working capital purposes.             

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CAPITALIZATION

 The following table shows (1) our historical capitalization as of March 31,
2001 on an actual basis, and (2) our pro forma capitalization as of March 31,   
2001, as adjusted to reflect the offering of the common units and the           
application of the net proceeds we receive in the offering as described under   
"Use of Proceeds." 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.                                          

                                                                [Download Table]

                                                  As of March 31, 2001          
                                            ----------------------------------- 
                                                      Offering       Pro Forma  
                                             Actual  Adjustments    as Adjusted 
                                            -------- -----------    ----------- 
                                                     (in thousands)             
                                                                                
Cash and cash equivalents.................. $  3,528  $ (1,500)(a)   $  2,028   
                                            ========  ========       ========   
Debt:                                                                           
  Current portion of long-term debt........ $  5,631  $    --        $  5,631   
  Long-term debt, less current portion.....   73,767   (25,200)(b)     48,567   
  Subordinated debt........................    5,000    (5,000)(c)        --    
                                            --------  --------       --------   
    Total debt.............................   84,398   (30,200)        54,198(e)
                                            --------  --------       --------   
Redeemable preferred members' interest.....   34,313   (34,313)(d)        --    
Members' equity/partners' capital:                                              
  Members' equity..........................   14,453      (558)(a)        --    
                                                       (13,895)(d)              
  Common unitholders.......................      --     21,600 (d)     21,600   
  Senior subordinated unitholders..........      --     51,485 (d)     51,485   
  Junior subordinated unitholders..........      --      3,755 (d)      3,755   
  Non-managing general partner.............      --      1,568 (d)      1,568   
                                            --------  --------       --------   
    Total members' equity/partners'                                             
     capital...............................   14,453    63,955         78,408   
                                            --------  --------       --------   
      Total capitalization................. $133,164  $   (558)      $132,606   
                                            ========  ========       ========   

--------                                                                        
(a) Reflects the $558,000 reduction in members' equity related to $1,500,000 of 
  cash and the $942,000 deferred tax liabilities of Inergy Partners, LLC not
transferred to Inergy, L.P. in connection with the offering.            
(b)  Reflects the repayment of a portion of the borrowings under our bank       
credit facility.                                                      
(c)  Reflects the repayment in full of our subordinated debt.                   
(d)  For an explanation of the allocation of the members' equity accounts to    
    partners' capital accounts, please read the footnotes to the unaudited pro
    forma consolidated balance sheet. Upon the closing of this offering, there
 will be issued and outstanding 1,600,000 common units, 3,313,367 senior
  subordinated units, 572,542 junior subordinated units and the 2% general
partner interest (which has a dilutive effect equivalent to 111,957   
units).                                                               
(e)  Upon consummation of this offering, we expect to have total indebtedness   
of approximately $50.3 million.                                       

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DILUTION

On a pro forma basis as of March 31, 2001 after giving effect to the      
offering of common units and the related transactions, our net tangible book    
value was $28.8 million, or $5.14 per common unit. Purchasers of common units   
in this offering will experience immediate dilution in net tangible book value  
per common unit for financial accounting purposes, as illustrated in the        
following table:                                                                

                                                                [Download Table]
                                                                            
Initial public offering price per common unit...............          $22.00
Pro forma net tangible book value per common unit before the                
 offering(a)................................................  $(0.36)       
Increase in net tangible book value per common unit                         
 attributable to new investors..............................    5.50        
                                                              ------        
Less: Pro forma net tangible book value per common unit                     
 after the offering(b)......................................            5.14
                                                                      ------
Immediate dilution in net tangible book value per common                    
 unit to new investors......................................          $16.86
                                                                      ======

--------                                                                        
(a) Determined by dividing the total number of units (3,313,367 senior          
subordinated units, 572,542 junior subordinated units and the 2% general
  partner interest, which has a dilutive effect equivalent to 111,957 units)
to be issued to Inergy Holdings and its subsidiaries and other investors
  for their contribution of assets and liabilities to Inergy, L.P., into the
net tangible book value of the contributed assets and liabilities       
 (including $34.3 million of redeemable preferred members' interests to be
exchanged for senior subordinated units, less $558,000 of net assets not
transferred to Inergy, L.P.).                                           
(b) Determined by dividing the total number of units (1,600,000 common units,   
  3,313,367 senior subordinated units, 572,542 junior subordinated units and
  the 2% general partner interest, which has a dilutive effect equivalent to
  111,957 units) to be outstanding after the offering into the pro forma net
   tangible book value of Inergy, L.P., after giving effect to the application
of the net proceeds of the offering.                                    
 The dilution presented is caused by two principal factors. The first factor
causing dilution is related to the fact that our general partners, their        
affiliates and other existing investors acquired interests in our predecessor   
at equivalent per unit prices less than the public offering price. These        
parties will receive subordinated units in exchange for their interests in our  
predecessor. Although these units are subordinate to the common units, dilution 
to new investors is calculated based on total units to be outstanding after the 
offering. The second factor is related to the significant base of intangible    
assets we have acquired in recent years. As these assets are excluded from net  
tangible book value, upon which the dilution calculation is based, the          
difference between the offering price and net tangible book value per common    
unit is significant.                                                            

The following table sets forth the number of units that we will issue and 
the total consideration contributed to us by the general partners, their        
affiliates and other investors in respect of their units and by the purchasers  
of common units in this offering upon consummation of the transactions          
contemplated by this prospectus:                                                

                                                                [Download Table]

                                     Units Acquired                        
                                    -----------------     Total            
                                     Number   Percent Consideration Percent
                                    --------- ------- ------------- -------
                                                                           
General Partners, their affiliates                                         
 and other investors(a)...........  3,997,866   71.4%  $48,208,000    57.8%
New investors.....................  1,600,000   28.6%   35,200,000    42.2%
                                    ---------  -----   -----------   ----- 
  Total...........................  5,597,866  100.0%  $83,408,000   100.0%
                                    =========  =====   ===========   ===== 

--------                                                                        
(a) Upon the consummation of the transactions contemplated by this prospectus,  
   (i) Inergy Holdings and its subsidiaries will own an aggregate of 1,306,911
senior subordinated units,  572,542 junior subordinated units and the 2%
   general partner interest, which has a dilutive effect equivalent to 111,957
 units, and (ii) other investors will own an aggregate of 2,006,456 senior
subordinated units.                                                     

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CASH DISTRIBUTION POLICY

Distributions of Available Cash                                                 

General. Within approximately 45 days after the end of each quarter,      
beginning with the quarter ending September 30, 2001, we will distribute all of 
our available cash to unitholders of record on the applicable record date. We   
will adjust the minimum quarterly distribution for the period from the closing  
of the offering through September 30, 2001 based on the actual length of the    
period.                                                                         

 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. As reflected below, our definition of operating surplus        
contains an $8.5 million basket. This basket does not reflect actual cash on    
hand at closing that is available for distribution to our unitholders. Rather,  
it 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 on the closing date of this offering,                    

. plus $8.5 million (as described above),                                   

. plus all of our cash receipts since the closing of this 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 closing of this          
offering, including the repayment of working capital borrowings, but not
the repayment of other borrowings, and including maintenance capital    
expenditures.                                                           

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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 will 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 all 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.       

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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.                

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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-- 
Hypothetical Annualized Yield" 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-- 
Hypothetical Annualized Yield" below.                                   

Incentive Distribution Rights--Hypothetical Annualized Yield                    

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"),                     

. 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"),                                                         

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. 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.                                                                   

  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 and a hypothetical annualized percentage yield to be realized by a       
unitholder at each target distribution level. For purposes of the following     
table, we calculated the annualized percentage yield on a pretax basis assuming 
that (1) the common unit was purchased at an amount equal to $22.00 per common  
unit and (2) we distributed each quarter during the first year following the    
investment the amount set forth under the column "Total Quarterly Distribution  
Target Amount." We also based the calculations on the assumption that the       
quarterly distribution amounts shown do not include any common unit arrearages. 
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.                                   

                                                        [Enlarge/Download Table]

                                                                     Marginal Percentage        
                                                                  Interest in Distributions     
                                                              ----------------------------------
                                                                            Non-                
                             Total Quarterly     Hypothetical             managing              
                           Distribution Target    Annualized              General     Inergy    
                                 Amount             Yield     Unitholders Partner  Holdings, LLC
                         ----------------------- ------------ ----------- -------- -------------
                                                                                                
Minimum Quarterly                                                                               
 Distribution...........          $0.60              10.9%         98%        2%         --     
First Target                                                                                    
 Distribution...........       up to $0.66        up to 12.0%      98%        2%         --     
Second Target                                                                                   
 Distribution........... above $0.66 up to $0.75  up to 13.6%      85%        2%         13%    
Third Target                                                                                    
 Distribution........... above $0.75 up to $0.90  up to 16.4%      75%        2%         23%    
Thereafter..............       above $0.90        above 16.4%      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 this 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 that 
was issued in the offering, 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.                         

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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 this 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 "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 issued in this offering 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 holder 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,          

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. 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.                                                                     

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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.                              

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CASH AVAILABLE FOR DISTRIBUTION 

  Available cash for any quarter will consist generally of all cash on hand at
the end of that quarter as adjusted for reserves. Operating surplus generally   
consists of cash on hand at closing of this offering, plus cash generated from  
operations after deducting related expenditures and other items, plus working   
capital borrowings after the end of the quarter. Our definition of operating    
surplus contains an $8.5 million basket. This basket does not reflect actual    
cash on hand at closing that is available for distribution to our unitholders.  
Rather, it 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.             

The amount of available cash from operating surplus needed to pay the     
minimum quarterly distribution for one quarter and for four quarters on the     
common units, the senior subordinated units and junior subordinated units, and  
the 2% general partner interest to be outstanding immediately after the         
transactions is approximately:                                                  

                                                                [Download Table]

                                                               One     Four  
                                                             Quarter Quarters
                                                             ------- --------
                                                                             
Common Units................................................ $  960  $ 3,840 
  2% General Partner Interest...............................     20       79 
Senior Subordinated Units...................................  1,988    7,952 
  2% General Partner Interest...............................     40      162 
Junior Subordinated Units...................................    344    1,374 
  2% General Partner Interest...............................      7       28 
                                                             ------  ------- 
    Total................................................... $3,359  $13,435 
                                                             ======  ======= 

The following table shows the calculation of pro forma available cash from
operating surplus for the year ended September 30, 2000 and the twelve months   
ended March 31, 2001, and represents the combined results of operations Inergy  
Partners, LLC, the Hoosier Propane Group and Country Gas Company, Inc., as      
adjusted for the offering. The amounts of pro forma operating surplus shown do  
not include cash on hand at closing or the $8.5 million basket. These results   
should be read in conjunction with the Inergy, L.P. Unaudited Pro Forma         
Consolidated Statement of Operations, the Inergy Partners, LLC Financial        
Statements, the Country Gas Company, Inc. Financial Statements and the Hoosier  
Propane Group Financial Statements.                                             

                                                                [Download Table]

                                                                  Twelve Months 
                                                   Year Ended         Ended     
                                               September 30, 2000 March 31, 2001
                                               ------------------ --------------
                                                          (unaudited)           
                                                        (in thousands)          
                                                                                
Pro forma income (loss) before income taxes..       $  (187)         $ 7,900    
Pro forma depreciation and amortization......         7,806            7,958    
Pro forma net changes in working capital                                        
 accounts including liabilities from price                                      
 risk management activities(a)(b)............         3,364           (3,800)   
                                                    -------          -------    
Pro forma net cash provided by operating                                        
 activities..................................        10,983           12,058    
Pro forma cash interest expense..............         5,486            5,379    
Pro forma cash interest income...............          (239)            (248)   
Pro forma net changes in working capital                                        
 accounts including liabilities from price                                      
 risk management activities(a)(b)............        (3,364)           3,800    
                                                    -------          -------    
Pro forma EBITDA(c)..........................        12,866           20,989    
Less:                                                                           
  Pro forma cash interest expense............        (5,486)          (5,379)   
  Pro forma maintenance capital                                                 
   expenditures(d)...........................        (1,234)          (1,162)   
Plus:                                                                           
  Pro forma cash interest income.............           239              248    
                                                    -------          -------    
Pro forma available cash from operating                                         
 surplus(e)(f)...............................       $ 6,385          $14,696    
                                                    =======          =======    

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--------                                                                        
(a)   Our working capital is affected by the seasonality of the propane         
business; however, working capital has generally been positive on a 
historical basis. From time to time we utilize our revolving credit 
facility to meet short-term working capital needs such as those     
associated with the timing of accounts receivable collections.      
     Substantially all of our remaining investing and financing activities are
    related to the acquisition of retail propane companies and do not affect
operating cash flows.                                               
(b)   Changes in the assets and liabilities from trading and price risk         
   management activities, which are current assets and liabilities, result
  primarily from changes in market prices, newly originated transactions
    and the timing of settlement relative to the receipt of cash for certain
contracts.                                                          
(c) "EBITDA" shown in the table above is defined as income before income taxes, 
   plus interest, 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 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 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.   
(d) We determined these amounts by combining actual amounts of maintenance      
capital expenditures for Inergy Partners, LLC, Country Gas Company, Inc.
and the Hoosier Propane Group.                                          
(e) The pro forma adjustments in the pro forma financial statements are based   
   upon currently available information and certain estimates and assumptions.
  The pro forma financial statements do not purport to present the financial
position or results of operations of Inergy, L.P. had the acquisition of
Country Gas Company, Inc. and the Hoosier Propane Group and the         
 transactions to be effected at the closing of this offering actually been
completed as of the date indicated. Furthermore, the pro forma financial
  statements are based on accrual accounting concepts whereas available cash
from operating surplus is defined in the partnership agreement on a cash
  accounting basis. As a consequence, the amount of pro forma cash available
   from operating surplus shown above should be viewed as a general indication
of the amounts of available cash from operating surplus that may in fact
  have been generated by Inergy, L.P. had it been formed in earlier periods.
(f) Upon completion of the offering, we anticipate that we will incur           
   incremental general and administrative expenses (e.g. costs associated with
  reports to unitholders, preparation of tax information for unitholders and
   investor relations) at an annual rate of approximately $500,000, which have
not been included in the pro forma amounts above.                       

Our pro forma available cash from operating surplus for the twelve months 
ended March 31, 2001 would have been sufficient to allow us to pay the minimum  
quarterly distribution on all of the common units, all of the senior            
subordinated units and all of the junior subordinated units. Our pro forma      
available cash from operating surplus for the fiscal year ended September 30,   
2000 would have been sufficient to allow us to pay the minimum quarterly        
distribution on all of our common units and approximately 30% of the minimum    
quarterly distribution on the senior subordinated units and no distribution on  
the junior subordinated units. Please read "Cash Available for Distribution."   

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 
For the Year Ended September 30, 2000 and 
as of and for the Six Months Ended March 31, 2000 and 2001

The unaudited pro forma consolidated balance sheet of Inergy, L.P. as of  
March 31, 2001 was prepared to reflect the effects of the formation of Inergy,  
L.P. and related transactions as if the formation had been completed in its     
entirety, and the related transactions had been completed, as of March 31,      
2001.                                                                           

The unaudited pro forma consolidated statements of operations of Inergy,  
L.P. for the year ended September 30, 2000 and for the six months ended March   
31, 2000 and 2001 were prepared to reflect the effects of the formation of      
Inergy, L.P. and related transactions as if the formation had been completed in 
its entirety, and the related transactions had been completed, as of October 1, 
1999.                                                                           

The unaudited pro forma consolidated financial statements of Inergy, L.P. 
have been derived from the audited historical statement of operations of Inergy 
Partners, LLC for the year ended September 30, 2000, and the unaudited          
historical financial statements of Inergy Partners, LLC as of and for the six   
months ended March 31, 2000 and 2001, and from the historical statements of     
income of the Hoosier Propane Group, Country Gas Company, Inc. and Butane-      
Propane Gas Company of Tennessee, Inc. until the date of acquisition, 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, 2001 reflects only three months of pre-acquisition operations of the  
Hoosier Propane Group and the unaudited pro forma consolidated statement of     
income for the year ended September 30, 2000 reflects only eight months of pre- 
acquisition operations of Country Gas Company, Inc. and one month of pre-       
acquisition operations of Butane-Propane Company of Tennessee, Inc.             

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

.  the acquisition in purchase business combinations of assets of the       
  Hoosier Propane Group in January 2001, Country Gas Company, Inc. in June
  2000 and Butane-Propane Gas Company of Tennessee, Inc. in November 1999.
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:                                                           

                                                                [Download Table]

                                                     Hoosier Country Butane-
                                                     Propane   Gas   Propane
                                                      Group  Company Gas Co.
                                                     ------- ------- -------
                                                          (in millions)     
                                                                            
Cash................................................  $56.0   $ 8.4   $1.2  
Assumed liabilities.................................    5.6     1.2     --  
9% redeemable preferred interests...................    7.4     9.0     --  
9% subordinated debentures..........................    5.0      --     --  
                                                      -----   -----   ----  
                                                      $74.0   $18.6   $1.2  
                                                      =====   =====   ====  
Property, plant and equipment.......................  $34.9   $ 8.3   $1.1  
Goodwill............................................   25.2     5.6     --  
Customer accounts...................................   10.5     3.5     --  
Covenant not to compete.............................    0.5     0.1     --  
Current assets......................................    2.9     1.1    0.1  
                                                      -----   -----   ----  
                                                      $74.0   $18.6   $1.2  
                                                      =====   =====   ====  

We determined the fair value of the property and equipment acquired by  
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 book value of current  
assets acquired was generally considered fair value due to their rapid  
turnover.                                                               

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The 9% redeemable preferred interests issued in the acquisitions of the 
Hoosier Propane Group and Country Gas Company, Inc. will automatically  
convert on a one-for-one basis into 10.2% and 12.3%, respectively, of   
the senior subordinated units to be outstanding following this offering.

.   the issuance in January 2001 of $14.5 million (net of offering costs of 
  $471,000) of 9% Class A preferred interests by Inergy Partners, LLC in
a private placement completed in conjunction with the acquisition of
   the Hoosier Propane Group (these preferred interests will automatically
 convert into 28.8% of the senior subordinated units to be outstanding
following this offering),                                           

.   the issuance in March 2001 of $1.5 million of 9% Class A preferred      
  interests by Inergy Partners, LLC in connection with the exercise of a
 warrant issued in conjunction with the January 2001 private placement
  (these preferred interests will automatically convert into 2.9% of the
 senior subordinated units to be outstanding following this offering),
and                                                                 

.  the incurrence of $78.3 million of indebtedness under our bank credit    
facility and related repayment of approximately $36.1 million of      
indebtedness and accrued interest.                                    

  The second set of adjustments reflect the offering and related transactions,
including:                                                                      

.  the public offering of 1,600,000 common units of Inergy, L.P. at an      
initial public offering price of $22.00 per common unit,              

.  the issuance to Inergy Partners, LLC of the 2% general partner interest, 

.  the issuance of 1,306,911 senior subordinated units and 572,542 junior   
subordinated units to an affiliate of Inergy Holdings,                

.  the issuance of 2,006,456 senior subordinated units to owners of certain 
acquired businesses and other investors in exchange for Class A       
preferred interests of Inergy Partners, LLC,                          

.  the application of the net proceeds of this offering to repay $30.2      
million of indebtedness, and                                          

.  the payment of approximately $5.0 million of underwriting fees and       
commissions and other fees and expenses associated with this offering.

Upon completion of the offering, we anticipate that we will incur         
incremental general and administrative costs (e.g. costs associated with        
reports to unitholders, preparation of tax information for unitholders and      
investor relations) at an annual rate of approximately $500,000. The unaudited  
pro forma consolidated financial statements do not include these estimated      
incremental costs.                                                              

 The unaudited pro forma consolidated financial statements do not purport to
present the financial position or 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  
of Inergy Partners, LLC and the notes thereto, the audited historical financial 
statements of Hoosier Propane Group and the notes thereto, and the audited      
historical financial statements of Country Gas Company, Inc. and the notes      
thereto, appearing elsewhere in this prospectus.                                

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INERGY, L.P.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 2001
(in thousands)

                                                        [Enlarge/Download Table]

                                     Inergy                                          
                                   Partners,     Pro Forma                           
                          Inergy,   LLC and    Capitalization  Offering    Pro Forma 
                           L.P.   Subsidiaries  Adjustments   Adjustments As Adjusted
                          ------- ------------ -------------- ----------- -----------
                                                                                     
         ASSETS                                                                      
Current assets:                                                                      
  Cash..................   $ --     $  3,528      $(1,500)A     $35,200 B  $  2,028  
                                                                 (5,000)C            
                                                                (30,200)D            
  Accounts receivable,                                                               
   net..................     --       22,660                                 22,660  
  Inventories...........     --        3,617                                  3,617  
  Prepaid expenses and                                                               
   other current                                                                     
   assets...............     --        1,068                                  1,068  
  Assets from price risk                                                             
   management                                                                        
   activities...........     --          433                                    433  
                           -----    --------      -------       -------    --------  
Total current assets....     --       31,306       (1,500)                   29,806  
Property, plant and                                                                  
 equipment, at cost:                  73,127                                 73,127  
  Less accumulated                                                                   
   depreciation.........     --       (3,829)                                (3,829) 
                           -----    --------      -------       -------    --------  
Net property, plant and                                                              
 equipment..............     --       69,298                                 69,298  
Intangible assets:                                                                   
  Covenants not to                                                                   
   compete..............     --        3,763                                  3,763  
  Deferred financing                                                                 
   costs................     --        1,989                                  1,989  
  Deferred acquisition                                                               
   costs................     --          111                                    111  
  Customer accounts.....     --       14,000                                 14,000  
  Goodwill..............     --       32,063                                 32,063  
                           -----    --------      -------       -------    --------  
                                      51,926                                 51,926  
  Less accumulated                                                                   
   amortization.........     --       (2,294)                                (2,294) 
                           -----    --------      -------       -------    --------  
Net intangible assets...     --       49,632                                 49,632  
Other...................     --          137                                    137  
                           -----    --------      -------       -------    --------  
Total assets............   $ --     $150,373      $(1,500)      $   --     $148,873  
                           =====    ========      =======       =======    ========  

LIABILITIES AND MEMBERS'                                                             
    EQUITY/ PARTNERS'                                                                
         CAPITAL                                                                     
Current liabilities:                                                                 
  Accounts payable......   $ --     $ 10,797      $             $          $ 10,797  
  Accrued expenses......     --        4,616                                  4,616  
  Customer deposits.....     --          761                                    761  
  Liabilities from price                                                             
   risk management                                                                   
   activities...........     --           93                                     93  
  Current portion of                                                                 
   long-term debt.......     --        5,631                                  5,631  
                           -----    --------      -------       -------    --------  
Total current                                                                        
 liabilities............     --       21,898                                 21,898  
Deferred income taxes...     --          942         (942)A                     --   
Long-term debt, less                                                                 
 current portion........     --       78,767                    (30,200)D    48,567  
Redeemable preferred                                                                 
 members' interest......     --       34,313      (34,313)E                     --   
Members'                                                                             
 equity/partners'                                                                    
 capital:                                                                            
  Class A preferred                                                                  
   interest.............     --        4,851       (4,851)F                     --   
  Common interest.......     --        9,797         (558)A                     --   
                                                     (195)G                          
                                                   (9,044)F                          
  Deferred                                                                           
   compensation.........     --         (195)         195 G                     --   
  Common unitholders                                                                 
   (1,600,000 units                                                                  
   issued and                                                                        
   outstanding, pro                                                                  
   forma as adjusted)...     --          --                      35,200 B    21,600  
                                                                 (5,000)C            
                                                                 (8,600)E            
  Senior subordinated                                                                
   unitholders                                                                       
   (3,313,367 units                                                                  
   issued and                                                                        
   outstanding, pro                                                                  
   forma as adjusted)...     --          --        34,313 E       8,600 E    51,485  
                                                    9,662 F                          
                                                   (1,090)H                          
  Junior subordinated                                                                
   unitholders (572,542                                                              
   units issued and                                                                  
   outstanding, pro                                                                  
   forma as adjusted)...     --          --         4,233 F                   3,755  
                                                     (478)H                          
  Non-managing general                                                               
   partner (2% interest                                                              
   with dilutive effect                                                              
   equivalent to 111,957                                                             
   units issued and                                                                  
   outstanding, pro                                                                  
   forma as adjusted)...     --          --         1,568 H                   1,568  
                           -----    --------      -------       -------    --------  
Total members'                                                                       
 equity/partners'                                                                    
 capital................     --       14,453       33,755        30,200      78,408  
                           -----    --------      -------       -------    --------  
Total liabilities and                                                                
 members'                                                                            
 equity/partners'                                                                    
 capital................   $ --     $150,373      $(1,500)      $   --     $148,873  
                           =====    ========      =======       =======    ========  

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INERGY, L.P.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended March 31, 2001 
(in thousands, except per unit data)

                                                        [Enlarge/Download Table]

                                                            Hoosier                                     
                                       Inergy Partners, LLC Propane  Acquisition  Offering    Pro Forma 
                          Inergy, L.P.   and Subsidiaries    Group   Adjustments Adjustments As Adjusted
                          ------------ -------------------- -------  ----------- ----------- -----------
                                                                                                        
Revenues.................     $ --           $170,439       $31,541    $           $          $201,980  
Cost of product sold.....       --            141,425        25,172                            166,597  
                              ----           --------       -------    -------     ------     --------  
Gross profit.............       --             29,014         6,369                             35,383  
Expenses:                                                                                               
 Operating and                                                                                          
  administrative.........       --             11,464         2,538        (97)I                13,905  
 Depreciation and                                                                                       
  amortization...........       --              2,748           373        692 J                 3,979  
                                                                           166 K                        
                              ----           --------       -------    -------     ------     --------  
Operating income.........       --             14,802         3,458       (761)                 17,499  
Other income (expense):                                                                                 
 Interest expense........       --             (2,860)         (246)       246 L    1,320 N     (2,585) 
                                                                        (1,045)M                        
 Interest income.........       --                 --            57                                 57  
 Gain on sale of                                                                                        
  property, plant and                                                                                   
  equipment..............       --                 --            10                                 10  
 Finance charges.........       --                158            12                                170  
 Other...................       --                 87            78                                165  
                              ----           --------       -------    -------     ------     --------  
Income before income                                                                                    
 tax.....................       --             12,187         3,369     (1,560)     1,320       15,316  
Provision for income                                                                                    
 taxes...................       --                 --            --                                     
                              ----           --------       -------    -------     ------     --------  
Net income...............     $ --           $ 12,187       $ 3,369    $(1,560)    $1,320     $ 15,316  
                              ====           ========       =======    =======     ======     ========  
Non-managing general                                                                                    
 partner's interest in                                                                                  
 net income..............                                                                     $    306 O
                                                                                              ========  
Limited partners'                                                                                       
 interest in net income:                                                                                
 Common unit interest....                                                                     $  4,381  
 Senior subordinated unit                                                                               
  interest...............                                                                        9,067  
 Junior subordinated unit                                                                               
  interest...............                                                                        1,562  
                                                                                              --------  
  Total limited partners'                                                                               
   interest in net                                                                                      
   income................                                                                     $ 15,010  
                                                                                              ========  
Net income per limited                                                                                  
 partner unit--basic and                                                                                
 diluted.................                                                                     $   2.74  
                                                                                              ========  
Weighted average limited                                                                                
 partners' units                                                                                        
 outstanding.............                                                                        5,486  
                                                                                              ========  

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INERGY, L.P.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended March 31, 2000 
(in thousands, except per unit data)

                                                        [Enlarge/Download Table]

                                     Inergy              Country                                                     
                                  Partners, LLC Hoosier    Gas    Butane Propane                                     
                          Inergy,      and      Propane  Company, Gas Company of  Acquisition  Offering    Pro Forma 
                           L.P.   Subsidiaries   Group     Inc.   Tennessee, Inc. Adjustments Adjustments As Adjusted
                          ------- ------------- -------  -------- --------------- ----------- ----------- -----------
                                                                                                                     
Revenues.................  $--       $50,457    $45,750   $6,550        $90         $           $          $102,847  
Cost of product sold.....   --        42,054     33,762    3,294         57                                  79,167  
                           ----      -------    -------   ------        ---         -------     ------     --------  
Gross profit.............   --         8,403     11,988    3,256         33                                  23,680  
Expenses:                                                                                                            
 Operating and                                                                                                       
  administrative.........   --         4,093      5,224    1,341         30            (323)I                10,365  
 Depreciation and                                                                                                    
  amortization...........   --           887        708      228          2           1,364 J                 3,827  
                                                                                        306 P                        
                                                                                        332 K                        
                           ----      -------    -------   ------        ---         -------     ------     --------  
Operating income.........   --         3,423      6,056    1,687          1          (1,679)                  9,488  
Other income (expense):                                                                                              
 Interest expense........   --        (1,157)      (531)     --          --             531 L    1,397 N     (2,692) 
                                                                                     (2,932)M                        
 Interest income.........   --           --          48      --          --                                      48  
 Gain on sale of                                                                                                     
  property, plant and                                                                                                
  equipment..............   --           --          59       33         --                                      92  
 Finance charges.........   --            70         40       54         --                                     164  
 Other...................   --            25        104      --          --                                     129  
                           ----      -------    -------   ------        ---         -------     ------     --------  
Income before income                                                                                                 
 tax.....................   --         2,361      5,776    1,774          1          (4,080)     1,397        7,229  
Provision for income                                                                                                 
 taxes...................   --           --         --       --          --                                          
                           ----      -------    -------   ------        ---         -------     ------     --------  
Net income...............  $--       $ 2,361    $ 5,776   $1,774        $ 1         $(4,080)    $1,397     $  7,229  
                           ====      =======    =======   ======        ===         =======     ======     ========  
Non-managing general                                                                                                 
 partner's interest in                                                                                               
 net income..............                                                                                  $    145 O
                                                                                                           ========  
Limited partners'                                                                                                    
 interest in net income:                                                                                             
 Common unit interest....                                                                                  $  2,067  
 Senior subordinated unit                                                                                            
  interest...............                                                                                     4,280  
 Junior subordinated unit                                                                                            
  interest...............                                                                                       737  
                                                                                                           --------  
  Total limited partners'                                                                                            
   interest in net                                                                                                   
   income................                                                                                  $  7,084  
                                                                                                           ========  
Net income per limited                                                                                               
 partner unit--basic and                                                                                             
 diluted.................                                                                                  $   1.32  
                                                                                                           ========  
Weighted average limited                                                                                             
 partners' units                                                                                                     
 outstanding.............                                                                                     5,384  
                                                                                                           ========  

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INERGY, L.P.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended September 30, 2000 
(in thousands, except per unit data)

                                                        [Enlarge/Download Table]

                                     Inergy              Country                                                    
                                  Partners, LLC Hoosier    Gas    Butane-Propane                                    
                          Inergy,      and      Propane  Company, Gas Company of Acquisition  Offering    Pro Forma 
                           L.P.   Subsidiaries   Group     Inc.   Tennessee,Inc. Adjustments Adjustments As Adjusted
                          ------- ------------- -------  -------- -------------- ----------- ----------- -----------
                                                                                                                    
Revenues................  $  --      $93,595    $65,595   $7,751       $90         $           $          $167,031  
Cost of product sold....              81,636     49,049    3,792        57                                 134,534  
                          ------     -------    -------   ------       ---         -------     ------     --------  
Gross profit............     --       11,959     16,546    3,959        33                                  32,497  
Expenses:                                                                                                           
 Operating and                                                                                                      
  administrative........     --        8,990      9,375    2,220        30            (460)I                20,155  
 Depreciation and                                                                                                   
  amortization..........     --        2,286      1,623      304         2           2,521 J                 7,806  
                                                                                       407 P                        
                                                                                       663 K                        
                          ------     -------    -------   ------       ---         -------     ------     --------  
Operating income........     --          683      5,548    1,435         1          (3,131)                  4,536  
Other income (expense):                                                                                             
 Interest expense.......     --       (2,740)    (1,029)     --         --           1,029 L    2,868 N     (5,486) 
                                                                                    (5,614)M                        
 Interest income........     --          --         230        9        --                                     239  
 Gain on sale of                                                                                                    
  property, plant and                                                                                               
  equipment.............     --          --          51       21        --                                      72  
 Finance charges........     --          176         52       33        --                                     261  
 Other..................     --           59        132      --         --                                     191  
                          ------     -------    -------   ------       ---         -------     ------     --------  
Income (loss) before                                                                                                
 income tax.............     --       (1,822)     4,984    1,498         1          (7,716)     2,868         (187) 
Provision for income                                                                                                
 taxes..................     --            7        --       --         --                                       7  
                          ------     -------    -------   ------       ---         -------     ------     --------  
Net income (loss).......  $  --      $(1,829)   $ 4,984   $1,498       $ 1         $(7,716)    $2,868     $   (194) 
                          ======     =======    =======   ======       ===         =======     ======     ========  
Non-managing general                                                                                                
 partner's interest in                                                                                              
 net loss...............                                                                                  $     (4)O
                                                                                                          ========  
Limited partners'                                                                                                   
 interest in net loss:                                                                                              
 Common unit interest...                                                                                  $    (55) 
 Senior subordinated                                                                                                
  unit interest.........                                                                                      (115) 
 Junior subordinated                                                                                                
  unit interest.........                                                                                       (20) 
                                                                                                          --------  
  Total limited                                                                                                     
   partners' interest in                                                                                            
   net loss.............                                                                                  $   (190) 
                                                                                                          ========  
Net loss per limited                                                                                                
 partner unit--basic and                                                                                            
 diluted................                                                                                  $  (0.03) 
                                                                                                          ========  
Weighted average limited                                                                                            
 partners' units                                                                                                    
 outstanding............                                                                                     5,435  
                                                                                                          ========  

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INERGY, L.P.

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS 

Six Months Ended March 31, 2000 and 2001 and
Year Ended September 30, 2000 

(A) Reflects $1.5 million of cash and $942,000 of deferred tax liabilities that 
Inergy Partners, LLC is retaining when it transfers the remainder of its
assets and liabilities to Inergy, L.P. immediately prior to the         
consummation of the offering.                                           

(B) Reflects the gross proceeds to Inergy, L.P. of $35.2 million from the       
  issuance and sale of 1,600,000 common units at an offering price of $22.00
per common unit.                                                        

(C) Reflects the payment of the underwriters' discounts and commissions and     
offering expenses, estimated to be $5.0 million.                        

(D) Reflects the partial repayment of the borrowings under our bank credit      
  facility and repayment of its subordinated debt with the proceeds from the
sale of the common units in this offering.                              

(E) Reflects the conversion of $34.3 million in Inergy Partners, LLC redeemable 
   preferred interests held by owners of certain acquired businesses and other
   investors into 2,006,456 senior subordinated units of Inergy, L.P. pursuant
to Inergy Partners, LLC's limited liability company agreement. The      
preferred interests issued in December 1999 for $2 million in cash and  
those issued in January and March of 2001 for $16.5 million in cash     
contained conversion terms more advantageous than the terms of the other
   preferred interests issued by Inergy Partners, LLC. The conversion terms of
 these preferred interests were established as of the date of issuance and
all of these preferred interests automatically convert into senior      
subordinated units in connection with the offering. The December 1999   
issuance is convertible into senior subordinated units at a multiple of 
   2.25 to 1 and the issuances in January and March of 2001 are convertible at
a multiple of 1.4 to 1. These terms allow the holders to receive more   
  senior subordinated units than if their conversion terms were on a 1 for 1
 basis, similar to other preferred interests. The estimated value of these
beneficial conversion features, approximately $8.6 million, will be     
recognized upon completion of this offering.                            

As reflected in the unaudited pro forma consolidated balance sheet, this    
results in a decrease in common unit capital of $8.6 million with a         
corresponding increase in senior subordinated unit capital. On the initial  
statement of operations of Inergy, L.P. subsequent to the completion of     
this offering, net income available to common unitholders will be decreased 
by $8.6 million since this amount will be attributable to senior            
subordinated unitholders and presented as such after net income on the      
statement of operations. This non-cash beneficial conversion amount is not  
reflected in the accompanying pro forma statements of operations but will   
be included in the initial financial information released by us after the   
offering.                                                                   

(F) Reflects the allocation of the remainder of the Class A preferred interest  
 ($4.9 million) and the common interest ($9.0 million) in Inergy Partners,
 LLC to senior subordinated units and junior subordinated units of Inergy,
  L.P. The dollar amounts assigned are based on the pro rata number of units
of each class issued (1,306,911 senior subordinated units and 572,542   
junior subordinated units).                                             

(G) Reflects the accelerated vesting of the Class A preferred interests         
recorded as deferred compensation in connection with the offering. In   
connection with the accelerated vesting, the balance of deferred        
 compensation ($195,000 as of March 31, 2001) will be recognized as a non-
cash compensation expense upon completion of the offering. This non-cash
compensation expense is not reflected in the accompanying pro forma     
statements of operations.                                               

(H) Reflects the issuance by Inergy, L.P. of a 2% general partner interest to   
Inergy Partners, LLC.                                                   

(I) Reflects reduction in operating costs resulting from the Hoosier Propane    
 Group and Country Gas Company Inc. acquisitions, consisting of eliminated
salary and benefit expenses of certain former owners of the             

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acquired businesses whose employment ceased following the acquisitions. No
employees were hired and no incremental costs were incurred to replace    
these individuals or their respective duties. For the six months ended    
 March 31, 2001, the entire amount of this acquisition adjustment relates to
the Hoosier Program Group. For the year ended September 30, 2000, $393,000
of this acquisition adjustment relates to the Hoosier Propane Group and   
 $67,000 relates to Country Gas Company, Inc. For the six months ended March
31, 2000, $299,000 of this acquisition adjustment relates to the Hoosier  
Propane Group and $24,000 relates to Country Gas Company, Inc.            

(J) 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, as follows:                  

                                                                [Download Table]

                                                            Depreciation and      
                                                              Amortization        
                                                       ---------------------------
                                                                      Six Months  
                                                                      Ended March 
                                                        Year Ended        31,     
                                                       September 30, -------------
                             Amount     Composite Life     2000       2000   2001 
                         -------------- -------------- ------------- ------ ------
                         (in thousands)   (in years)         (in thousands)       
                                                                                  
Property, plant and                                                               
 equipment (excluding                                                             
 land)..................    $33,423         19.67(a)      $1,699     $  850 $  850
Covenants not to                                                                  
 compete................        465          7.00             66         33     33
Customer accounts.......     10,500         15.00            700        350    350
Goodwill................     25,183         15.00          1,679        839    839
                                                          ------     ------ ------
                                                           4,144      2,072  2,072
Historical depreciation                                                           
 and amortization                                                                 
 expense of the Hoosier                                                           
 Propane Group..........                                   1,623        708  1,380
                                                          ------     ------ ------
Pro forma adjustment to                                                           
 depreciation and                                                                 
 amortization expense...                                  $2,521     $1,364 $  692
                                                          ======     ====== ======

--------                                                                    
(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.                               

(K) Reflects amortization of the deferred financing fees over the three year    
  term of our predecessor's bank credit facility, which was used to fund the
 acquisition of the Hoosier Propane Group and repay certain existing debt.

(L) Reflects the reduction of interest expense related to the Hoosier Propane   
Group debt that was not assumed in the acquisition.                     

(M) Reflects the adjustment to interest expense resulting from the acquisition  
 related transactions described on pages 33 and 34, reconciled as follows:

                                                                [Download Table]

                                                             Six Months     
                                              Year Ended   Ended March 31,  
                                             September 30, ---------------- 
                                                 2000       2000     2001   
                                             ------------- -------  ------- 
                                                    (in thousands)          
                                                                            
Historical interest expense attributable to                                 
 debt refinanced in connection with the                                     
 acquisition of the Hoosier Propane Group,                                  
 interest based on LIBOR plus 2.75% to                                      
 3.5%......................................     $(2,548)   $(1,039) $(2,704)
Pro forma interest expense attributable to                                  
 the financing of the Hoosier Propane Group                                 
 acquisition and the refinancing of                                         
 existing indebtedness:                                                     
  Interest on term loans at weighted                                        
   average rates in effect during the year                                  
   ended September 30, 2000 and the six                                     
   months ended March 31, 2000 and 2001                                     
   ranging from 9.59% to 10.10% for the                                     
   year ended September 30, 2000, 8.69% to                                  
   9.18% for the six months ended March 31,                                 
   2001 and 9.30% to 9.80% for the six                                      
   months ended March 31, 2000, based on                                    
   3-month LIBOR plus 3.0% to 3.5%.........       7,044      3,417    3,198 
  Interest on revolving credit facility at                                  
   9.33% for the year ended September 30,                                   
   2000 and 9.10% and 9.19% for the six                                     
   months ended March 31, 2001 and 2000,                                    
   respectively............................         668        329      326 
  Interest on subordinated debt at 9.00%                                    
   per annum...............................         450        225      225 
                                                -------    -------  ------- 
                                                  8,162      3,971    3,749 
                                                -------    -------  ------- 
    Pro forma adjustment to interest                                        
     expense...............................     $ 5,614    $ 2,932  $ 1,045 
                                                =======    =======  ======= 

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The interest rates used in determining the amount of pro forma interest     
expense were based upon Inergy Partners, LLC's weighted average borrowing   
rate under its bank facility during the periods presented. Assuming a       
change in the interest rate on Inergy Partners, LLC's floating rate debt of 
1/8%, interest expense would have been approximately $98,000 and $49,000    
greater or lesser than the amounts shown above for the fiscal year ended    
September 30, 2000 and the six months ended March 31, 2001, respectively.   

(N) Reflects reduction of interest expense resulting from the retirement of     
$5.0 million of our subordinated debt bearing interest at 9% and $25.2  
million of term loans with a weighted average interest rate of 9.59% for
the year ended September 30, 2000 and 8.69% and 9.30% for the six months
ended March 31, 2001 and 2000, respectively.                            

(O)  The non-managing general partner's allocation of net income (loss) is      
   based on its 2% general partner interest in Inergy, L.P. The non-managing
general partner's 2% allocation of net income (loss) has been deducted
  before calculating the net income (loss) per limited partners' unit. The
computation of net income (loss) per limited partner unit assumes that
 1,600,000 common units, 3,313,367 senior subordinated units and 572,542
    junior subordinated units were outstanding at all times during the periods
presented except for 204,545 senior subordinated units related to a   
 December 1999 issuance of $2 million in redeemable preferred interests,
 which are considered outstanding for only nine months of the year ended
September 30, 2000. Therefore, the weighted average limited partners' 
   units outstanding are 5,434,773 for the year ended September 30, 2000 and
   5,383,636 and 5,485,909 for the six months ended March 31, 2000 and 2001,
respectively. These weighted average limited partners' unit amounts   
   further assume that the redeemable preferred interests, issued during the
year ended September 30, 2000 in conjunction with the acquisition of  
   Country Gas Company, Inc. and those issued in January 2001 in conjunction
    with the acquisition of the Hoosier Propane Group and the equity financing
    related thereto, which are being converted into senior subordinated units,
and the common units issued in this offering, are outstanding for all 
periods presented.                                                    

(P)  Reflects pro forma depreciation and amortization based on the portion of   
the purchase price of Country Gas Company, Inc. allocated to property,
plant and equipment and intangible assets, as follows:                

                                                                [Download Table]

                                                           Depreciation and    
                                                             Amortization      
                                                       ------------------------
                                                                     Six Months
                                                        Year Ended     Ended   
                                                       September 30, March 31, 
                             Amount     Composite Life     2000         2000   
                         -------------- -------------- ------------- ----------
                         (in thousands)   (in years)        (in thousands)     
                                                                               
Property, plant and                                                            
 equipment..............     $8,347         18.55         $  450        $225   
Covenants not to                                                               
 compete................        102         10.00             10           5   
Customer accounts.......      3,500         15.00            233         117   
Goodwill................      5,594         15.00            373         187   
                                                          ------        ----   
                                                           1,066         534   
Historical depreciation                                                        
 and amortization                                                              
 expense of Country Gas                                                        
 Company, Inc. .........                                     659         228   
                                                          ------        ----   
Pro forma adjustment to                                                        
 depreciation and                                                              
 amortization expense...                                  $  407        $306   
                                                          ======        ====   

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SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

The following table sets forth selected financial data and other operating
data of our predecessor, Inergy Partners, LLC, the Hoosier Propane Group and    
Country Gas Company, Inc. Inergy Partners, LLC was formed on November 8, 1996   
to acquire the propane and fuel oil operations of McCracken Enterprises, Inc.   
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 Partners for    
the six months ended March 31, 2000 and 2001 are derived from the unaudited     
financial statements of Inergy Partners, LLC. The historical financial data of  
Inergy Partners, LLC include the results of operations of Country Gas Company,  
Inc. from June 1, 2000, the date of acquisition, and 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 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  
and 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 Country Gas Company, Inc. as of and for the years ended May  
31, 1998, 1999 and 2000 are derived from the audited financial statements of    
Country Gas Company, Inc.                                                       

  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, 2001    
are not necessarily indicative of the results that can be expected for the      
entire year ending September 30, 2001.                                          

 "EBITDA" shown in the table below is defined as income before income taxes,
plus interest, 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.                            

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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."                                           

                                                        [Enlarge/Download Table]

                                            Inergy Partners, LLC                         
                         --------------------------------------------------------------- 
                                                                       Six Months Ended  
                         November 8, 1996 Years Ended September 30,       March 31,      
                         to September 30, ---------------------------  ----------------- 
                               1997        1998      1999      2000     2000      2001   
                         ---------------- -------  --------  --------  -------  -------- 
                                               (in thousands)            (unaudited)     
                                                                                         
Statement of Operations                                                                  
 Data:                                                                                   
Revenues................     $ 6,966      $ 7,507  $ 19,211  $ 93,595  $50,457  $170,439 
Costs of product sold...       4,366        4,215    13,754    81,636   42,054   141,425 
                             -------      -------  --------  --------  -------  -------- 
Gross profit............       2,600        3,292     5,457    11,959    8,403    29,014 
Expenses:                                                                                
  Operating and                                                                          
   administrative(a)....       2,196        2,424     4,119     8,990    4,093    11,464 
  Depreciation and                                                                       
   amortization.........         325          394       690     2,286      887     2,748 
                             -------      -------  --------  --------  -------  -------- 
Operating income........          79          474       648       683    3,423    14,802 
Other income (expense):                                                                  
  Interest expense......        (398)        (569)     (962)   (2,740)  (1,157)   (2,860)
  Gain on sale of                                                                        
   property, plant and                                                                   
   equipment............         --           --        101       --       --        --  
  Finance charges.......          44           59        79       176       70       158 
  Other.................           1            1         5        59       25        87 
                             -------      -------  --------  --------  -------  -------- 
Income (loss) before                                                                     
 income taxes...........        (274)         (35)     (129)   (1,822)   2,361    12,187 
Provision for income                                                                     
 taxes..................         --           --         56         7      --        --  
                             -------      -------  --------  --------  -------  -------- 
Net income (loss).......     $  (274)     $   (35) $   (185) $ (1,829) $ 2,361  $ 12,187 
                             =======      =======  ========  ========  =======  ======== 

Balance Sheet Data (end                                                                  
 of period):                                                                             
Current assets..........     $ 2,282      $ 2,119  $ 11,390  $ 22,199  $12,653  $ 31,306 
Total assets............       8,457       10,230    38,896    68,924   41,900   150,373 
Long-term debt,                                                                          
 including current                                                                       
 portion................       5,382        5,694    22,337    34,927   24,413    84,398 
Redeemable preferred                                                                     
 members' interest......         --           --        --     10,896    1,896    34,313 
Members' equity.........       1,209        2,611     5,269     2,972    7,495    14,453 

Other Financial Data:                                                                    
EBITDA (unaudited)......     $   449      $   928  $  1,523  $  3,204  $ 4,405  $ 17,795 
Net cash provided by                                                                     
 (used in) operating                                                                     
 activities.............         555          362      (847)     (309)    (839)    2,594 
Net cash used in                                                                         
 investing activities...      (6,640)        (727)  (13,057)  (12,377)  (2,756)  (60,179)
Net cash provided by                                                                     
 financing activities...       6,114          336    14,056    13,907    3,796    59,740 
Maintenance capital                                                                      
 expenditures(b)                                                                         
 (unaudited)............         -- (c)        61       156       283      126       551 
Net income (loss).......     $  (274)     $   (35) $   (185) $ (1,829) $ 2,361  $ 12,187 
Plus:                                                                                    
  Income taxes..........         --           --         56         7      --        --  
  Interest expense......         398          569       962     2,740    1,157     2,860 
  Depreciation and                                                                       
   amortization                                                                          
   expense..............         325          394       690     2,286      887     2,748 
                             -------      -------  --------  --------  -------  -------- 
                                 449          928     1,523     3,204    4,405    17,795 
Less:                                                                                    
  Interest income.......         --           --        --        --       --        --  
                             -------      -------  --------  --------  -------  -------- 
EBITDA..................     $   449      $   928  $  1,523  $  3,204  $ 4,405  $ 17,795 
                             =======      =======  ========  ========  =======  ======== 

Other Operating Data                                                                     
 (unaudited):                                                                            
Retail propane gallons                                                                   
 sold...................       4,765        5,612     8,006    18,112   12,176    34,031 
Wholesale propane                                                                        
 gallons sold...........         N/A          N/A    24,735   146,644   82,064   161,768 

Reconciliation of Net Income (Loss) to EBITDA:                                  
--------                                                                        
(a) The historical financial statements include non-cash charges related to     
  amortization of deferred compensation of $78,000 and $79,000 for the years
ended September 30, 1999 and 2000, respectively, and $39,000 for each of
the six month periods ended March 31, 2000 and 2001.                    
(b) 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.                               
(c) Maintenance capital expenditures are not available for this period.         

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                                                                [Download Table]

                                           Hoosier Propane Group               
                                ---------------------------------------------- 
                                      Years Ended          Three Months Ended  
                                     September 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 
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 
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 
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 
                                =======  =======  =======    =======   ======= 

Reconciliation of Net Income to EBITDA:                                         
--------                                                                        
(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.                               

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                                                                [Download Table]

                                                        Country Gas Company,    
                                                                Inc.            
                                                        ----------------------- 
                                                         Years Ended May 31,    
                                                        ----------------------- 
                                                         1998     1999    2000  
                                                        -------  ------  ------ 
                                                           (in thousands)       
                                                                                
Statement of Income Data:                                                       
Revenues............................................... $ 8,167  $8,487  $9,641 
Cost of product sold...................................   3,396   3,181   4,672 
                                                        -------  ------  ------ 
Gross profit...........................................   4,771   5,306   4,969 
Expenses:                                                                       
  Operating and administrative.........................   2,755   3,003   3,176 
  Depreciation and amortization........................     312     354     342 
                                                        -------  ------  ------ 
Operating income.......................................   1,704   1,949   1,451 
Other income:                                                                   
  Interest income......................................     165     176     145 
  Gain on sales of assets..............................      26     304      21 
                                                        -------  ------  ------ 
Net income............................................. $ 1,895  $2,429  $1,617 
                                                        =======  ======  ====== 
Balance Sheet Data (end of period):                                             
Current assets......................................... $ 3,583  $2,784  $2,942 
Total assets...........................................   6,455   6,094   6,178 
Stockholders' equity...................................   6,241   5,810   5,867 
Other Financial Data:                                                           
EBITDA (unaudited)..................................... $ 2,042  $2,607  $1,814 
Net cash provided by operating activities..............   2,553   2,595   1,529 
Net cash used in investing activities..................    (446)   (574)   (201)
Net cash used in financing activities..................  (1,690) (2,860) (1,560)
Maintenance capital expenditures(a) (unaudited)........     230     175     187 
Other Operating Data (unaudited):                                               
Retail propane gallons sold............................   8,381  10,421   9,882 

Reconciliation of Net Income to EBITDA:                                         
Net income............................................. $ 1,895  $2,429  $1,617 
Plus:                                                                           
  Depreciation expense.................................     312     354     342 
                                                        -------  ------  ------ 
                                                          2,207   2,783   1,959 
Less:                                                                           
  Interest income......................................     165     176     145 
                                                        -------  ------  ------ 
EBITDA................................................. $ 2,042  $2,607  $1,814 
                                                        =======  ======  ====== 

--------                                                                        
(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.                               

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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, 2000, on a pro forma combined 
basis we sold approximately 50 million gallons of propane to retail customers   
and approximately 215 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.                                           

Since the inception of our predecessor, Inergy Partners, LLC, in November 
1996, we have acquired 11 propane companies for an aggregate purchase price of  
approximately $120 million, including 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 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, 2000, we sold 
approximately 70% of our retail gallons to residential customers, 20% to        
industrial and commercial customers and, 10% to agricultural customers. Sales   
to residential customers during that period accounted for approximately 77% of  
our pro forma 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, 2000, approximately 72% 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.                                                                      

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.                                                         

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"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. As expected, in periods of increasing costs, we have experienced  
a decline in our gross profit as a percentage of revenues. Our retail propane   
operations generated margins averaging $0.44 per retail gallon for the fiscal   
year ended September 30, 2000 on a pro forma basis. 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, 2000, on a pro forma combined basis, we sold approximately 215    
million gallons of propane on a wholesale basis. Although sales to wholesale    
customers would have accounted for approximately 81% of our total volumes on a  
pro forma basis, such sales would have accounted for only 12% 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.                                             

We purchase a portion of our propane (approximately 50% 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, 2000, we purchased approximately 19% of our propane         
supplies from one supplier, and no other single supplier provided more than ten 
percent of our total propane supply.                                            

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                  

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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.                                                                     

 The preferred interests issued by Inergy Partners, LLC in December 1999 for
$2 million in cash and those issued in January and March of 2001 for $16.5      
million in cash contain conversion terms more advantageous than the terms of    
the other preferred interests issued by our predecessor. The conversion terms   
of these preferred interests were established as of the date of issuance and    
all of these preferred interests automatically convert into senior subordinated 
units in connection with the offering. The December 1999 issuance is            
convertible into senior subordinated units at a multiple of 2.25 to 1 and the   
issuances in January and March of 2001 are convertible at a multiple of 1.4 to  
1. These terms allow the holders to receive more senior subordinated units than 
if their conversion terms were on a 1 for 1 basis, similar to other preferred   
interests. The estimated value of these beneficial conversion features, of      
approximately $8.6 million, will be recognized upon completion of this          
offering.                                                                       

Inergy Partners, LLC                                                            

The results of operations discussed below are those of our predecessor,   
Inergy Partners, LLC. Audited and unaudited financial statements for 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, and the results of operations of the Hoosier 
Propane Group beginning on January 1, 2001, the effective date of the           
acquisition. For a more detailed description of our predecessor, please read    
"Guide to Reading this Prospectus."                                             

Six Months Ended March 31, 2001 Compared to Six Months Ended March 31, 2000   

Volume. During the six months ended March 31, 2001, Inergy Partners sold  
34.0 million retail gallons of propane, an increase of 21.8 million gallons, or 
179%, from the 12.2 million retail gallons sold during the same six month       
period in 2000. The increase in retail sales volume was principally due to the  
acquisitions of Country Gas (7.1 million gallons) and the Hoosier Propane Group 
(9.7 million gallons). In addition, internal growth and the fact that the six   
months ended March 31, 2001 were approximately 21% colder than the six months   
ended March 31, 2000 and approximately 2% colder than normal in our retail      
areas of operation resulted in increased sales of approximately 5.0 million     
gallons.                                                                        

Wholesale gallon sales increased 79.7 million gallons, or 97%, to 161.8   
million gallons in the six months ended March 31, 2001 from 82.1 million        
gallons in the same six month period in 2000. Approximately 61.5 million        
gallons of this increase was attributable to the growth of our wholesale        
operations which were initiated in April 1999 and colder weather in our         
wholesale areas of operation, with the balance of the increase (approximately   
18.2 million gallons) attributable to the acquisition of the Hoosier Propane    
Group.                                                                          

Revenues. Revenues in the six months ended March 31, 2001 were $170.4     
million, an increase of $119.9 million, or 238%, from $50.5 million of revenues 
in the same six month period in 2000.                                           

Revenues from retail propane sales were $48.2 million in the six months   
ended March 31, 2001, an increase of $35.8 million, or 290%, from $12.4 million 
for the same six month period in 2000. This increase was attributable to the    
acquisitions of Country Gas ($9.5 million) and the Hoosier Propane Group ($13.6 
million), higher sales prices ($6.0 million) with the remaining increase ($6.7  
million) due to volume increases due to growth and colder weather in our retail 
areas of operations. Other retail revenues increased approximately $2.6         

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million, or 100%, from $2.6 million in the same six month period in 2000 to     
$5.2 million in the six months ended March 31, 2001. These revenues consist of  
tank rentals, heating oil sales, appliance sales and service with the increase  
attributable to the acquisitions of Country Gas and the Hoosier Propane Group.  

Revenues from wholesale sales were $117.0 million (after elimination of   
sales to our retail operations) in the six months ended March 31, 2001, an      
increase of $81.5 million, or 230%, from $35.5 million for the same six month   
period in 2000. Approximately $15.6 million of this increase was attributable   
to the acquisition of the Hoosier Propane Group, approximately $39.3 million    
resulted from increased selling prices and the remaining $26.6 million increase 
was attributable to the growth of our wholesale operations as described above   
and colder weather in our wholesale areas of operations.                        

  Cost of Product Sold. Cost of product sold in the six months ended March 31,
2001 was $141.4 million, an increase of $99.3 million, or 236%, over cost of    
product sold of $42.1 million in the same six month period in 2000. This        
increase was primarily attributable to both a significant increase in retail    
and wholesale propane volumes (approximately $45.5 million) and a significant   
increase in the average cost of propane (approximately $53.8 million).          

 Gross Profit. Retail gross profit was $24.3 million in the six months ended
March 31, 2001 compared to $7.7 million in the six months ended March 31, 2000, 
an increase of $16.6 million, or 216%. Wholesale gross profit was $4.8 million  
(after elimination of gross profit attributable to our retail operations) in    
the six months ended March 31, 2001 compared to $0.7 million in the same six    
month period in 2000, an increase of $4.1 million. These increases were         
attributable to higher retail and wholesale volumes and an increase in margin   
per gallon. The increase in margin per gallon was attributable to our ability   
to increase retail prices during periods of rising market prices while          
effectively controlling product costs. However, as discussed above, gross       
profit as a percentage of sales has decreased despite the increase in margin    
per gallon.                                                                     

  Operating and Administrative Expenses. Operating and administrative expenses
increased $7.4 million, or 180%, to $11.5 million in the six month period ended 
March 31, 2001 as compared to $4.1 million in the same period in 2000.          
Approximately $1.7 million of this increase was attributable to the Country Gas 
acquisition and approximately $3.0 million of the increase resulted from the    
Hoosier Propane Group acquisition. In addition, approximately $1.8 million of   
the increase was related to personnel costs including performance incentives    
accrued as a result of the increased profitability of the six months ended      
March 31, 2001 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 $1.8
million, or 210%, to $2.7 million in the six months ended March 31, 2001 from   
$0.9 million in the same six month period in 2000 primarily as 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.                                                                        

 Net Income. Net income increased $9.8 million, or 416%, to $12.2 million in
the six months ended March 31, 2001 from $2.4 million in the same six month     
period in 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 partially offset by   
an increase in interest expense as a result of higher average outstanding       
borrowings associated with the acquisitions.                                    

  EBITDA. EBITDA increased $13.4 million, or 304%, to $17.8 million in the six
months ended March 31, 2001 from $4.4 million in the same six month period in   
2000. This increase was attributable to increased 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                                                      

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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 our            
significant increase in wholesale volumes.                                      

  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 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.                                                    

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

Volume. During fiscal 1999, Inergy Partners, LLC sold 8.0 million retail  
gallons of propane, an increase of 2.4 million gallons, or 43%, from the 5.6    
million retail gallons sold in fiscal 1998. This increase was primarily         
attributable to the acquisition of six retail propane distributors during       
fiscal 1999, partially offset by weather that was 11% warmer in fiscal 1999     
than in fiscal 1998. Fiscal 1999 was 16% warmer than normal in our primary      
areas of operation.                                                             

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Inergy Partners, LLC initiated wholesale operations in April 1999 and sold
approximately 24.7 million gallons during the remainder of that fiscal year.    

  Revenues. Revenues from retail propane sales increased $2.0 million, or 42%,
from $4.8 million in fiscal 1998 to $6.8 million in fiscal 1999. This increase  
was due to acquisitions and higher propane selling prices partially offset by   
warmer weather. Other retail revenues increased $0.3 million, or 10%, to $3.0   
million in fiscal 1999 from $2.7 million in fiscal 1998. The increase is a      
result of the acquisitions during fiscal 1999.                                  

Wholesale revenues were $9.4 million in fiscal 1999, our initial year of  
wholesale operations.                                                           

  Cost of Product Sold. Cost of product sold in fiscal 1999 was $13.8 million,
an increase of $9.6 million, or 226%, over fiscal 1998 cost of product sold of  
$4.2 million. The increase in cost of product sold was primarily attributable   
to increased retail and wholesale volumes, partially offset by a slight         
decrease in the cost of propane.                                                

Gross Profit. Retail gross profit was $4.9 million in fiscal 1999 compared
to $3.3 million in fiscal 1998, an increase of $1.6 million, or 48%. This       
increase was attributable to increased retail volumes and margins. Wholesale    
gross profit was $0.5 million in fiscal 1999, our initial year of wholesale     
operations.                                                                     

  Operating and Administrative Expenses. Operating and administrative expenses
were $4.1 million in fiscal 1999 as compared to $2.4 million in fiscal 1998, an 
increase of $1.7 million, or 70%. This increase was related to acquisitions and 
the initiation of our wholesale operations.                                     

 Depreciation and Amortization. Depreciation and amortization increased $0.3
million, or 75%, to $0.7 million in fiscal 2000 from $0.4 million in fiscal     
1999. This increase was attributable to the depreciation and amortization of    
acquired assets, including intangible assets, and amortization of acquisition   
financing costs.                                                                

Net Loss. Net loss was $0.2 million in fiscal 1999 compared to an         
approximate break-even level in fiscal 1998. This increase in net loss was      
primarily attributable to an increase in acquisition-related interest expense,  
partially offset by an increase in operating income.                            

EBITDA. EBITDA increased $0.6 million, or 64%, to $1.5 million in fiscal  
1999 from $0.9 million in fiscal 1998. The increase in EBITDA was primarily     
attributable to increased retail and wholesale volumes, partially offset by     
higher operating and administrative expenses.                                   

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.                                             

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.                                                              

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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 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.         

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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.                                               

  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.  

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  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.                               

Country Gas Company, Inc.                                                       

We acquired Country Gas on June 1, 2000. Audited financial statements of  
Country Gas are included elsewhere in this prospectus.                          

Fiscal Year Ended May 31, 2000 Compared to Fiscal Year Ended May 31, 1999     

Volume. During fiscal 2000, Country Gas sold 9.9 million retail gallons of
propane, a decrease of 0.5 million gallons, or 5%, from the 10.4 million        
gallons sold in fiscal 1999. This decrease was principally due to warmer        
weather in fiscal 2000 as compared to fiscal 1999. In addition, Country Gas     
sold fewer agricultural gallons in fiscal 2000 than in fiscal 1999 due to a     
decreased focus on agricultural sales.                                          

Revenues. Revenues in fiscal 2000 were $9.6 million, an increase of $1.1  
million, or 14%, over $8.5 million of revenues in fiscal 1999. Revenues from    
propane sales increased $1.3 million, or 16%, from $7.7 million in fiscal 1999  
to $9.0 million in fiscal 2000. This increase was attributable to an increase   
in the average selling price of propane, and was partially offset by a decrease 
in gallons sold in fiscal 2000. Other revenues decreased $0.1 million to $0.7   
million in fiscal 2000 from $0.8 million in fiscal 1999.                        

 Cost of Product Sold. Cost of product sold in fiscal 2000 was $4.7 million,
an increase of $1.5 million, or 47%, over fiscal 1999 cost of product sold of   
$3.2 million. This increase in cost of product sold was attributable to         
increasing propane costs.                                                       

 Gross Profit. Gross profit was $5.0 million in fiscal 2000 compared to $5.3
million in fiscal 1999, a decrease of $0.3 million, or 6%. This decrease was    
attributable to a decrease in gross profit from propane sales of $0.2 million   
and a decrease in other gross profit of $0.1 million. The decrease in gross     
profit from propane sales was due to a 5% decrease in the gallons sold in       
fiscal 2000 and to a lower average gross profit per gallon resulting from the   
lower percentage of residential retail gallons sold. Other gross profit         
decreased $0.1 million in fiscal 2000 as compared to fiscal 1999 as a result of 
warmer weather conditions.                                                      

  Operating and Administrative Expenses. Operating and administrative expenses
were $3.2 million in fiscal 2000 as compared to $3.0 million in fiscal 1999, an 
increase of $0.2 million, or 6%. This increase primarily resulted from          
increased vehicle operating costs in fiscal 2000 as compared to fiscal 1999 due 
to higher vehicle fuel and maintenance costs.                                   

Depreciation and Amortization. Depreciation and amortization remained     
constant at approximately $0.4 million in fiscal 1999 and fiscal 2000.          

Net Income. Net income decreased $0.8 million, or 33%, to $1.6 million in 
fiscal 2000 from $2.4 million in fiscal 1999. This decrease was attributable to 
the $0.5 million decline in operating income and the $0.3 million gain on the   
sale of product line recognized in fiscal 1999.                                 

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Fiscal Year Ended May 31, 1999 Compared to Fiscal Year Ended May 31, 1998     

 Volume. During fiscal 1999, Country Gas sold 10.4 million retail gallons of
propane, an increase of 2.0 million gallons, or 24%, from the 8.4 million       
gallons sold in fiscal 1998. This increase was principally due to an increase   
in lower margin industrial gallons sold in fiscal 1999 over 1998.               

Revenues. Revenues in fiscal 1999 were $8.5 million, an increase of $0.3  
million, or 4%, over $8.2 million of revenues in fiscal 1998. Revenues from     
propane sales increased $0.2 million, or 4%, from $7.5 million in fiscal 1998   
to $7.7 million in fiscal 1999. This increase was attributable to an increase   
in gallons sold in fiscal 1999 largely offset by a decrease in the average      
selling price of propane. Other revenues increased $0.1 million to $0.8 million 
in fiscal 1999 from $0.7 million in fiscal 1998.                                

 Cost of Product Sold. Cost of product sold in fiscal 1999 was $3.2 million,
a decrease of $0.2 million, or 6%, from fiscal 1998 cost of product sold of     
$3.4 million. This decrease in cost of product sold was attributable to         
decreasing propane costs.                                                       

 Gross Profit. Gross profit was $5.3 million in fiscal 1999 compared to $4.8
million in fiscal 1999, an increase of $0.5 million, or 11%. This increase was  
attributable to an increase in gross profit from propane sales of $0.5 million. 
The increase in gross profit from propane sales was due to a 24% increase in    
the gallons sold in fiscal 1999 partially offset by a lower average gross       
profit per gallon resulting from certain lower margin gallons sold.             

  Operating and Administrative Expenses. Operating and administrative expenses
were $3.0 million in fiscal 1999 as compared to $2.8 million in fiscal 1998, an 
increase of $0.2 million, or 9%. This increase primarily resulted from          
increased operating costs in fiscal 1999 as compared to fiscal 1998 as a result 
of the increase in gallons sold.                                                

Depreciation and Amortization. Depreciation and amortization increased    
approximately $0.1 million to $0.4 million in fiscal 1999 from $0.3 million in  
1998.                                                                           

Net Income. Net income increased $0.5 million, or 28%, to $2.4 million in 
fiscal 1999 from $1.9 million in fiscal 1998. This increase was attributable to 
a $0.3 million gain on the sale of a product line recognized in fiscal 1999 and 
an increase in gross profit partially offset by an increase in operating and    
administrative expenses.                                                        

Liquidity and Capital Resources                                                 

Inergy Partners, LLC Cash Flows and Capital Expenditures                      

Cash used in operating activities was $0.3 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. We finance these working capital needs with borrowings  
under our revolving credit facilities as discussed below.                       

During the six months ended March 31, 2001, operating activities provided 
cash of $2.6 million compared to a $0.8 million use of cash in the same fiscal  
2000 period. These six month periods include our winter season in which the     
majority of our sales occur. Net income increased to $12.2 million for the six  
months ended March 31, 2001 from $2.4 million for the same fiscal 2000 period   
due to the effects of the acquisitions completed in fiscal 2000 and 2001 and    
the colder weather in the 2001 period. Depreciation and amortization increased  
to $2.7 million in the six months ended March 31, 2001 from $0.9 million in the 
same fiscal 2000 period due to the effects of acquisitions, particularly the    
Hoosier Propane Group acquisition completed in January 2001. Increases in net   
operating assets, including net liabilities from price risk management          
activities,                                                                     

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required a use of cash amounting to $13.2 million in the six months ended March 
31, 2001 and $4.1 million in the same fiscal 2000 period. The higher use of     
cash in the fiscal 2001 period was principally attributable to the $10.9        
million increase in accounts receivable associated with the growth of our       
business and the colder winter.                                                 

Cash used in investing activities was $12.4 million in 2000 and $13.1     
million in 1999. These amounts included the use of $9.6 million in 2000 and     
$11.4 million in 1999 for acquisitions in those periods. Additionally, we       
expended $2.3 million in 2000 and $1.4 million in 1999, for additions of        
property and equipment to accommodate our growing operations. During the six    
months ended March 31, 2001, we used $60.2 million in investing activities,     
including $56.3 million to acquire the Hoosier Propane Group and one other      
retail propane distributorship. The remaining use of cash in investing          
activities related to $1.9 million for maintenance and growth capital           
expenditures and $2.0 million for deferred financing and acquisition costs      
associated with the refinancing of our credit facilities in January 2001. We    
have budgeted maintenance capital expenditures of approximately $1.3 million    
for the fiscal year ending September 30, 2001. In addition, we expect to incur  
growth capital expenditures of $2.5 million over the same period. We expect to  
fund these capital expenditures through a combination of cash flows from        
operating activities and borrowings under our revolving credit facility.        

Cash provided by financing activities was $13.9 million in fiscal 2000 and
$14.1 million in fiscal 1999. The $13.9 million of cash provided by financing   
activities in fiscal 2000 was comprised of net proceeds from long-term debt     
used to finance increased working capital, acquisitions and capital             
expenditures of approximately $12.6 million and net proceeds from the issuance  
of preferred interests of $1.9 million, partially offset by $0.5 million used   
for the payment of distributions. In fiscal 1999, approximately $14.2 million   
was provided by net proceeds from the issuance of long term debt, partially     
offset by distributions of approximately $0.2 million. Cash provided by         
financing activities of $59.7 million in the six months ended March 31, 2001    
and $3.8 million in the same 1999 period was used to finance acquisitions,      
working capital and capital expenditures during these periods.                  

At March 31, 2001, Inergy Partners, LLC had goodwill of $32.1 million,    
representing approximately 21% of total assets. This goodwill is primarily      
attributable to our acquisition of the Hoosier Propane Group and Country Gas.   
We expect recovery of the goodwill through future cash flows associated with    
these acquisitions.                                                             

Inergy, L.P. Liquidity                                                        

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. At March 31, 2001, we had outstanding          
commitments for capital expenditures of approximately $1.2 million. 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. Our predecessor has an obligation to pay quarterly             
distributions on its outstanding preferred equity. Unpaid distributions on      
preferred equity at March 31, 2001 amounted to approximately $0.9 million and   
such distributions were declared and paid in April 2001. Distributions for the  
period from April 1, 2001 through closing are expected to be $1.3 million, of   
which approximately $1.0 million will be paid prior to closing, reducing the    
amount of cash being contributed to us, with the balance of $0.3 million to be  
paid after closing by Inergy Partners.                                          

  At the closing of this offering, we will assume $5.0 million of subordinated
debt from Inergy Partners, LLC and all outstanding indebtedness under Inergy    
Partners, LLC's existing bank credit facility. We plan to use the net proceeds  
of this offering to repay all $5.0 million of subordinated indebtedness and     
$25.2 million of indebtedness under the credit facility. We will have           
outstanding borrowings of approximately $49.3 million under our amended and     
restated credit facility.                                                       

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We believe that the proceeds of this offering, 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 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 Credit Facility                                                  

  On July 25, 2001, our operating company, Inergy Propane, LLC, entered into a
$100 million amended and restated senior secured credit facility with First     
Union National Bank and other lenders. The credit facility has a term of three  
years and is guaranteed by us and each subsidiary of Inergy Propane. We expect  
that at closing of the offering, Inergy Propane will borrow approximately $49.3 
million (approximately $43.3 million under the acquisition facility and $6.0    
million under the working capital facility). Inergy Propane will use the net    
proceeds to repay amounts outstanding under our predecessor's credit 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 $30 million and an acquisition facility in the        
aggregate principal amount of up to $70 million. The aggregate amount of        
borrowings under the working capital facility in excess of $10 million,         
including outstanding letters of credit, are subject to a borrowing base        
requirement relating to accounts receivables and inventory. Up to $7 million of 
the working capital facility may be used for the issuance of letters of credit. 
Each of the working capital facility and acquisition facility 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            
acquisition facility may be reborrowed.                                         

Commencing with the 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 $70 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. 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 $250,000. 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 $70      
million of privately placed debt secured on a pari passu basis);    

.   grant or incur liens;                                                   

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

.   permit operating lease obligations to exceed $3,000,000;                

.   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;                                 

.   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 calendar year ending December 31,
2001 and 2.5 to 1.0 thereafter.                                     

.   the ratio of total funded debt (as defined in the credit facility) to   
 consolidated EBITDA may not exceed 5.0 to 1.0 prior to June 30, 2002,
and may not exceed 4.5 to 1.0 thereafter.                           

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;                      

.   John Sherman ceases to actively participate in management and a         
   replacement for John Sherman acceptable to the administrative agent, in
its discretion, is not made within 60 days; and                     

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

Environmental Matters                                                           

Environmental liabilities have not materially impacted our financial      
condition, results of operations or liquidity since our inception. In June      
2001, one of our transportation vehicles was involved in a release of ammonia.  
Following this release, we promptly notified the appropriate regulatory         
authorities and cooperated                                                      

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with such authorities in clean-up and remediation efforts. We expect all of the 
costs associated with these clean-up and remediation efforts to be covered by   
insurance. In July 2001, the Ohio Department of Agriculture filed an            
enforcement action alleging violations of the Director of Agriculture Rules. We 
believe the maximum fines associated with the Department of Agriculture's       
enforcement action are less than $5,000. We have not received notice of any     
other action which might be taken or any penalty or fees which might be         
assessed by other regulatory authorities relating to this spill. In the event   
that any additional fines or penalties are assessed against us in connection    
with this spill, we do not believe that such fines or penalties will have a     
material adverse effect on our financial condition, results of operations or    
liquidity.                                                                      

Recent Accounting Pronouncements                                                

In 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.  
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.   
133 establishes accounting and reporting standards requiring that every         
derivative instrument be recorded on the balance sheet as either an asset or    
liability measured at its fair value. The statement requires that changes in    
the derivative's fair value be recognized currently in earnings unless specific 
hedge accounting criteria are met.                                              

Adoption of SFAS No. 133 is required for fiscal years beginning after June
15, 2000. We have adopted SFAS No. 133 during the first quarter of fiscal 2001. 
We believe that the effect of adopting SFAS 133 is limited to disclosures in    
its financial statements since we currently utilize the mark-to-market method   
of accounting. In July 2001, the FASB issued SFAS No. 141, "Business            
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS    
No. 141 prohibits the use of the pooling of interests method of accounting for  
future business combinations. Under SFAS No. 142, goodwill will no longer be    
amortized, but will be subject to reviews for impairment on a periodic basis.   
We expect to adopt SFAS No. 142 effective October 1, 2001.                      

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, 2001, we had floating rate obligations totaling approximately
$78.3 million for amounts borrowed under our revolving line of credit and long- 
term debt. We have entered into interest rate hedging agreements in the form of 
interest rate swaps that have provided us with a fixed rate of approximately    
8.75% on $25.0 million of these obligations at March 31, 2001. As of June 30,   
2001, the fair value of these fixed rate obligations was approximately $400,000 
greater than the recorded amount. The resulting floating rate obligations of    
$53.3 million 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, 2001 levels, our combined        
interest expense would increase by a total of approximately $44,000 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.                                          

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                                             

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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  
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 balance   
sheet, with the changes in fair value included in earnings.                     

Notional Amounts and Terms                                                    

The notional amounts and terms of these financial instruments at September
30, 1999 and 2000 include fixed price payor for 1 million and 1.5 million       
barrels, respectively and fixed price receiver for 1.2 million and 1.5 million  
barrels, respectively. The notional amounts and terms of these financial        
instruments at March 31, 2001 include fixed price payor for 97,000 barrels and  
fixed price receiver for 269,000 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 September 30, 1999 and 2000 was assets of $582,000 and $3.6    
million, respectively and liabilities of $1.8 million and $2.3 million,         
respectively related to propane. The fair value of the financial instruments    
related to price risk management activities as of March 31, 2001 was assets of  
$433,000 and liabilities of $93,000 related to propane. All intercompany        
transactions have been appropriately eliminated.                                

The income before interest, taxes and certain unallocated expenses arising
from trading and price risk management activities for the years ended September 
30, 1999 and 2000 and for the six months ended March 31, 2001 was immaterial.   

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. 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 and periodic monitoring procedures. The   
counterparties associated with assets from price risk management activities as  
of September 30, 1999 and 2000 and as of March 31, 2001 were energy marketers.  

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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 11 propane companies for an aggregate purchase price of        
approximately $120 million, including 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, 2000, on a 
pro forma combined basis we sold approximately 50 million gallons of propane to 
retail customers and approximately 215 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 four regional brand names: Bradley Propane, Country Gas, 
Hoosier Propane, and McCracken. We serve approximately 71,000 retail customers  
in Georgia, Illinois, Indiana, Michigan, North Carolina, Ohio, Tennessee,       
Virginia and Wisconsin from 30 customer service centers which have an aggregate 
of approximately 1.8 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 ten additional       
acquisitions in North Carolina, Tennessee, Illinois and Indiana. The following  
chart sets forth information about each company we have acquired:               

                                                                [Download Table]

 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                       Kendalville, IN   

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

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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 70-75% 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 11.2 billion gallons annually. This represents     
approximately 5% of household energy consumption in the 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   
37% 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.             

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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.                                                             

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 11 propane companies with an aggregate purchase price of             
approximately $120 million, including five 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                                                                         

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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                                             

 Our Southeastern operations, which represented approximately 33% of our pro
forma retail volumes for the fiscal year ended September 30, 2000, 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, 
2000, sales to residential customers represented approximately 70% of our       
retail propane gallons sold and approximately 77% 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 90% 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, 2000, on a  
pro forma combined basis we sold approximately 215 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 a   
growing income stream 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                       

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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 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                                                  

  At closing, we will have a $70.0 million acquisition facility, approximately
$43.3 million of which will be drawn, and a $30.0 million working capital       
facility, approximately $6.0 million of which will be drawn. 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 71,000 retail customers in
eight states from 30 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.                                                                      

 We market our propane primarily in the Southeast and Midwest regions of the
United States through our customer service centers using four regional brand    
names. The following chart shows our customer service centers by location.      

Bradley Propane                      Hoosier Propane                      
Chattanooga, TN                      Albion, IN                     
Cleveland, TN                        Barryton, MI                   
Etowah, TN                           Blakeslee, OH                  

               Cecil, OH
Country Gas                             Decatur, IN                       
Crystal Lake, IL (Chicago area)      Greenfield, IN                 
Wasco, IL                            Hillman, MI                    

                Marion, IN
McCracken                               Mendon, MI                        
Creedmoor, NC                        Monrovia, IN                   
Fremont, NC                          Pendleton, IN                  
Garner, NC                           Roanoke, IN                    
Louisburg, NC                        Shipshewana, IN                
Oxford, NC                           South Whitley, IN              
Rolesville, NC                       Stanton, MI                    
Spring Hope, NC                      Waterloo, IN                   
Wake Forest, NC                                                     
Wilson's Mills, NC                                                  

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 29 satellite facilities that typically contain only large capacity storage 
tanks. We have approximately 1.8 million gallons of above-ground propane        
storage capacity at our customer service centers and satellite locations.       

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Retail deliveries of propane are usually made to customers by means of our
fleet of bobtail and rack trucks. At March 31, 2001, we operated 121 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 end users in  
larger trucks known as transports, which have an average capacity of            
approximately 10,000 gallons. At March 31, 2001 we operated 74 transports.      
These customers include industrial customers, large-scale heating accounts and  
large agricultural accounts.                                                    

During the fiscal year ended September 30, 2000, on a pro forma basis,    
approximately 18% and 82% of our propane sales by volume of gallons sold were   
to retail and wholesale customers, respectively. Our retail sales were          
comprised of approximately:                                                     

. 70% to residential customers;                                             

. 20% to industrial and commercial customers; and                           

. 10% to agricultural customers.                                            

Sales to residential customers during the fiscal year ended September 30, 
2000, accounted for approximately 77% 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, 2000. No single wholesale customer   
accounted for more than 5% of our pro forma revenue for the same period.        

 Approximately 50% 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.   
More than 90% 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 over 90% 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                                            

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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 81% of total  
volumes and 12% of our pro forma gross profit during the fiscal year ended      
September 30, 2000.                                                             

One of our distinguishing strengths is our procurement and distribution   
expertise and capabilities. For the fiscal year ended September 30, 2000, on a  
pro forma combined basis we sold approximately 215 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.         

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 March 31, 2001, we  
owned a fleet of 27 tractors, 74 transports, 121 bobtail and rack trucks and    
106 other service and pick-up trucks. The average age of our trucks between     
five and six 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 75 locations. During
the fiscal year ended September 30, 2000 on a pro forma basis, BP Amoco p.l.c.  
accounted for approximately 19% of our volume of propane purchases.             
Substantially all 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 volume    
propane purchases during the fiscal year ended September 30, 2000 on a pro      
forma basis. 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, 2000 on a pro forma basis. 
Our remaining purchases were from suppliers in Canada. During the fiscal year   
ended September 30, 2000 on a pro forma basis, we purchased approximately 50%   
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                   

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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 49 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. 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 29 of our 60 customer service centers, satellite storage facilities
and administrative offices and lease the balance. Our headquarters in Kansas    
City, Missouri are leased. We operate bulk storage facilities at 49 locations   
and own 25 of the storage locations. We lease underground storage facilities    
with an aggregate capacity of approximately seven million gallons of propane at 
six 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 March 31, 2001 we owned the        
following:                                                                      

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

. approximately 50,000 stationary customer storage tanks with typical       
capacities of 100 to 1,200 gallons, and                                 

. approximately 30,000 portable propane cylinders with typical capacities   
of up to 35 gallons.                                                    

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  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" and "McCracken." 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 June 1, 2001, we had 316 full-time employees of which 19 were general
and administrative and 297 were operational employees. We employed 18 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.                                                                          

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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 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.                                                     

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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 received its management rights in connection with transactions          
described under "Organization of Inergy, L.P. Prior to and Immediately          
Following the Offering." 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 intends to appoint two or more of its directors
to serve on a conflicts committee to review specific matters which the board of 
directors believes may involve conflicts of interest. The conflicts committee   
will determine if the resolution of the conflict of interest 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 will also serve on a compensation committee, which will      
oversee compensation decisions for the officers of Inergy GP, LLC as well as    
the compensation plans described below. In addition, three members of the board 
of directors will serve on an audit committee which will review our external    
financial reporting, recommend engagement of our independent auditors and       
review 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 initial      
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. All of our personnel are employees   
of our managing general partner or its affiliates.                              

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

Directors, Executive Officers and Other Key Employees 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. We have also set forth in the table   
below information with respect to certain of our key employees who are officers 
of our managing general partner or one of its affiliates.                       

                                                                [Download Table]

Name                     Age    Position with the Managing General Partner    
----                     ---    ------------------------------------------    
                                                                              
Executive Officers and                                                        
 Directors                                                                    
  John J. Sherman.......  46 President, Chief Executive Officer and Director  
  Phillip L. Elbert.....  42 Executive Vice President--Operations and Director
  R. Brooks Sherman                                                           
   Jr...................  35 Vice President and Chief Financial Officer       
  Carl A. Hughes........  47 Vice President--Business Development             
  Michael D. Fox........  43 Vice President--Wholesale Marketing              
  William C. Gautreaux..  37 Vice President--Supply                           
  Richard C. Green,                                                           
   Jr...................  46 Director                                         
  Warren H. Gfeller.....  49 Director                                         
  David J. Schulte......  40 Director                                         

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                                                                [Download Table]

Name                              Age Position with the Managing General Partner
----                              --- ------------------------------------------
                                                                                
Key Employees                                                                   
  Michael L. Hendren.............  45       President--McCracken Propane        
  James Pratt....................  51       President--Bradley Propane          
  Gary Komosa....................  48       President--Country Gas Co.          
  Dan Manson.....................  50       President--Hoosier Propane          
  Joseph Donnell.................  40       President--L&L Transportation       

Executive Officers and Directors                                              

  John J. Sherman. Mr. Sherman has been the President, Chief Executive Officer
and a director of our predecessor since 1997. 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 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)
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 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 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 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.          

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

Key Employees                                                                 

Michael L. Hendren. Mr. Hendren joined our predecessor in connection with 
our acquisition of McCracken Propane in November 1996 and presently serves as   
President of McCracken Propane. From 1988 until joining our predecessor, he had 
overall responsibility for McCracken's retail propane operations.               

James Pratt. Mr. Pratt joined our predecessor in connection with our      
acquisition of Bradley Propane in September 1999. He has over 26 years of       
experience in the propane industry. From 1975 until joining our predecessor, he 
had responsibility for the operations and growth of Bradley Propane and Zero    
Butane, its predecessor company.                                                

Gary Komosa. Mr. Komosa joined our predecessor in connection with our     
acquisition of Country Gas Company, Inc. in May 2000. He has over 22 years      
experience in the propane industry. From 1979 until joining our predecessor, he 
was employed by Country Gas, most recently serving as general manager           
responsible for day-to-day operations since 1991.                               

Dan Manson. Mr. Manson joined our predecessor in connection with our      
acquisition of the Hoosier Propane Group in January 2001. From 1995 until       
joining our predecessor, he served as an area manager of Hoosier's retail       
operations prior to his promotion to general manager of the Hoosier Propane     
Group's retail operations in 1998. Prior to his service with the Hoosier        
Propane Group, Mr. Manson held positions of increasing responsibility in        
operations management with various companies in the manufacturing segment. Mr.  
Manson has over 25 years of management experience.                              

Joseph Donnell. Mr. Donnell joined our predecessor in connection with our 
acquisition of the Hoosier Propane Group in January 2001. From 1998 until       
joining our predecessor, he served as general manager of Hoosier's trucking     
operations, L & L Transportation. Prior to joining the Hoosier Propane Group,   
Mr. Donnell served as general manager and vice president of finance and audit   
for an industrial processing company in Indiana from 1994 to 1998. As a         
certified public accountant, he has four years of public accounting experience  
with Arthur Andersen and Coopers Lybrand.                                       

Reimbursement of Expenses of the Managing General Partner                       

The managing general partner will not receive any management fee or other 
compensation for its management of Inergy, L.P. The managing general partner    
and its affiliates will be reimbursed for expenses incurred on our behalf.      
These expenses include the costs of employee, officer and director compensation 
and                                                                             

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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 this     
offering, each non-employee director will receive 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 will receive cash     
compensation of $18,000 per year for attending our regularly scheduled          
quarterly board meetings. Each non-employee director will receive $1,000 for    
each special meeting of the board of directors attended. Non-employee directors 
will also receive $500 per compensation or audit committee attended and $1,000  
per conflicts committee meeting attended. Each independent director will be     
reimbursed for out-of-pocket expenses in connection with attending meetings of  
the board of directors or committees. Each director will be fully indemnified   
for actions associated with being a director to the extent permitted under      
Delaware law.                                                                   

Employment Agreements                                                           

We have entered into employment agreements with the following individuals 
prior to the consummation of this offering:                                     

.   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 summary of these employment agreements does not purport to be
complete and is qualified in its entirety by reference to the employment        
agreements, as amended, which have been filed as exhibits to the registration   
statement of which this prospectus is a part.                                   

The employment agreements of Mr. John Sherman, Mr. Elbert, Mr. Brooks     
Sherman, Mr. Hughes, Mr. Fox and Mr. Gautreaux 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:                                                                        

                                                                [Download Table]
                                                                             
.  John J. Sherman................ $250,000                                  
.  Phillip L. Elbert.............. $150,000 (to be increased to $200,000 upon
                                   the closing of this offering)             
.  R. Brooks Sherman Jr........... $125,000 (with an additional $50,000 bonus
                                   upon the closing of this offering)        
.  Carl A. Hughes................. $125,000                                  
.  Michael D. Fox................. $125,000                                  
.  William C. Gautreaux........... $125,000                                  

These employees will be reimbursed for all expenses in accordance with our
policies. They are also eligible for fringe benefits normally provided to other 
members of our executive management and any other benefits agreed to by us.     
Each of these employees will be 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 $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.                                                         

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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.                                                      

 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 Inergy Holdings or one of our affiliates     
from the date of his employment agreement up to the date for determining        
eligibility to receive such amounts.                                            

Each employment agreement contains confidentiality and noncompetition     
provisions. Also, each of the employment agreements 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 us.                                                                          

With respect to Mr. John Sherman, Mr. Elbert, Mr. Brooks Sherman, Mr.     
Hughes, Mr. Fox and Mr. Gautreaux, in the event that Inergy Holdings terminates 
such person's employment without cause, Inergy Holdings 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 Inergy Holdings 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 565,500 common units (589,000 common units if the over-allotment option is   
exercised) 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 approximately 30,000 unit options expected to be    
granted under the plan to non-executive officers in exchange for option grants  
in our predecessor, 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. 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 phantom 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.       

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  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 rights 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 as if the holder owned the   
restricted 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.                                                                          

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 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,      
units options will expire after 10 years.                                       

 At the closing of this offering, Mr. Elbert will receive options under such
plan for 55,500 common units, Mr. Hughes will receive options under such plan   
for 38,850 common units and each of Mr. Brooks Sherman, Mr. Fox and Mr.         
Gautreaux will receive options under such plan for 27,750 common units,         
respectively, at an exercise price equal to the initial public offering price,  
which options are subject to forfeiture in certain cases if such employee       
retires or is terminated for cause prior to the expiration of five years from   
the date of this offering.                                                      

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.                             

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Unit Purchase Plan                                                              

 Our managing general partner has adopted a unit purchase plan for employees
of the managing general partner and its affiliates. We have reserved 50,000     
units for purchase under the unit purchase plan. 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. 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.    

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows the beneficial ownership upon completion of this
offering of units of Inergy held by:                                            

. each person who then will beneficially own 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.                                                     

                                                        [Enlarge/Download Table]

                                                      Percentage                Percentage              
                                           Senior     of Senior      Junior     of Junior    Percentage 
                           Common Units Subordinated Subordinated Subordinated Subordinated   of Total  
                              to be     Units to be  Units to be  Units to be  Units to be  Units to be 
    Name of Beneficial     Beneficially Beneficially Beneficially Beneficially Beneficially Beneficially
         Owner(1)             Owned        Owned        Owned        Owned        Owned        Owned    
    ------------------     ------------ ------------ ------------ ------------ ------------ ------------
                                                                                                        
Inergy Holdings, LLC(2)...      --       1,306,911       39.4%      572,542        100%         34.3%   

Country Partners,                                                                                       
 Inc.(3)..................      --         409,091       12.3%         --           --           7.5%   
 4010 Highway 14 Crystal                                                                                
 Lake, IL 60014                                                                                         

KCEP Ventures II,                                                                                       
 L.P.(4)..................      --         395,454       11.9%         --           --           7.2%   
 253 West 47th Street                                                                                   
 Kansas City, MO 64112                                                                                  

Hoosier Propane Group(5)..      --         336,456       10.2%         --           --           6.1%   
 P. O. Box 9                                                                                            
 Kendallville, IN 46755                                                                                 

Rocky Mountain Mezzanine                                                                                
Fund(6)...................      --         241,818        7.3%         --           --           4.4%   
 1125 17th Street                                                                                       
 Suite 2260                                                                                             
 Denver, CO 80202                                                                                       

John J. Sherman(7)........      --       1,306,911       39.4%      572,542        100%         34.3%   

Phillip L. Elbert(5)......      --           --           --           --           --           --     

R. Brooks Sherman Jr......      --           --           --           --           --           --     

Carl A. Hughes(8).........      --           --           --           --           --           --     

Michael D. Fox(8).........      --           --           --           --           --           --     

William C. Gautreaux(8)...      --           --           --           --           --           --     

Richard C. Green, Jr.(9)..      --          31,818        1.0%         --           --             *    

Warren H. Gfeller(10).....      --           6,364          *          --           --             *    

David J. Schulte(4).......      --         395,454       11.9%         --           --           7.2%   

All directors and                                                                                       
 executive officers as a                                                                                
 group (9 persons)........      --       1,740,547       52.5%      572,542        100%         42.2%   

--------                                                                        
* less than 1%                                                                
(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 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. Owners of certain acquired
propane businesses own a minority interest in Inergy Partners.          
(3) Country Partners, Inc. (formerly Country Gas Company, Inc.) is controlled   
by Leonard Peterson and Arlene 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    

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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 consists of Domex, Inc., Investors, Inc. and L&L  
  Leasing, 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) Messrs. Hughes, Fox and Gautreaux each hold an ownership interest in Inergy 
Holdings, as indicated in the following table.                          
(9) 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.
(10)   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.

The following table shows the beneficial ownership upon completion of this
offering 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, substantially all of our non-managing general partner, the     
incentive distribution rights and, through a subsidiary, approximately 34% of   
our outstanding units.                                                          

                                                                [Download Table]

                                                       Inergy Holdings, LLC
Name of Beneficial Owner(1)                             Percent of Class(2)
---------------------------                            --------------------
                                                                           
John J. Sherman.......................................         61.4%       
Phillip L. Elbert(3)..................................          --         
R. Brooks Sherman Jr..................................          --         
Carl A. Hughes........................................          7.7        
Michael D. Fox........................................          7.7        
William C. Gautreaux..................................          7.7        
Richard C. Green, Jr..................................          --         
Warren H. Gfeller.....................................          --         
David J. Schulte......................................          --         
All directors and executive officers as a group (9                         
 persons)(3)..........................................         84.3%       

--------                                                                    
(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 7.1% 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.                                        

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ORGANIZATION OF INERGY, L.P. PRIOR TO AND 
IMMEDIATELY FOLLOWING THE OFFERING

Following this offering, our propane operations will be conducted through 
our operating company, Inergy Propane, LLC, and its subsidiaries. The following 
discussion summarizes the material transactions that will occur in connection   
with this offering. These and other transactions are described in the           
contribution agreement which is filed as an exhibit to the registration         
statement of which this prospectus forms a part.                                

Formative Transactions                                                        

.  In March 2001, Inergy Holdings formed a Delaware limited liability       
company, Inergy GP, LLC, to serve as our managing general partner.    

.  We were formed in March 2001 by our predecessor and non-managing general 
 partner, Inergy Partners, LLC, which contributed cash in exchange for a
98% limited partner interest and a 2% general partner interest in us, 
and by Inergy GP, which received management rights pursuant to the    
partnership agreement, but did not make any capital contribution in   
connection with our formation.                                        

.  In May 2001, Inergy Partners, LLC formed a Delaware limited liability    
company, New Inergy Propane, LLC. Inergy Partners contributed cash in 
exchange for all of the interests in New Inergy Propane.              

Transactions to Occur at the Closing of this Offering                         

.  Inergy Partners, LLC will transfer substantially all of its wholesale    
assets to our operating company as a capital contribution.            

.  Inergy Partners, LLC will contribute its interest in our operating       
  company to us in exchange for a 2% non-managing general partner interest
 in us, 3,143,143 senior subordinated units, 497,839 junior subordinated
  units, the incentive distribution rights and the assumption by us of all
liability for funded debt of Inergy Partners, LLC.                    

.  Inergy Partners, LLC will contribute 1,136,687 senior subordinated units 
and 497,839 junior subordinated units to New Inergy Propane as an     
additional capital contribution.                                      

.   The former owners of two propane companies acquired by Inergy Partners, 
LLC will contribute their respective preferred interest in our      
operating company to New Inergy Propane in exchange for a similar   
preferred interest in New Inergy Propane.                           

.  New Inergy Propane will contribute its preferred interest in our         
operating company to us in exchange for 170,224 senior subordinated   
units and 74,703 junior subordinated units.                           

.  The public will contribute cash to us in exchange for 1,600,000 common   
units.                                                                

.  We will contribute cash from the public and other sources to our         
operating company as a capital contribution.                          

.   Our operating company will use cash contributed by us to pay            
transaction costs associated with this offering and will use the    
balance to repay indebtedness.                                      

.  Inergy Partners, LLC will distribute its incentive distribution rights   
to Inergy Holdings in redemption of a partial interest in Inergy      
Partners, LLC.                                                        

.  Inergy Partners, LLC will distribute 2,006,456 senior subordinated units 
  in connection with the mandatory exchange of preferred interests held by
owners of certain acquired businesses and other investors pursuant to 
existing contractual commitments.                                     

 The first chart below illustrates the current organization and ownership of
Inergy, L.P., Inergy Propane, LLC, Inergy Partners, LLC and Inergy GP, LLC. The 
second chart illustrates the organization and ownership of Inergy, L.P. and     
related entities immediately following this offering.                           

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[INERGY, L.P. CURRENT ORGANIZATION CHART APPEARS HERE]

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[INERGY, L.P. ORGANIZATION IMMEDIATELY FOLLOWING THE OFFERING CHART APPEARS 
HERE] 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions                                                      

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 will automatically convert into 204,545 senior subordinated  
units. As a result of favorable conversion terms, there is a beneficial         
conversion feature associated with the KCEP II 1999 Investment. Please read     
"Notes to Unaudited Pro Forma Consolidated Financial Statements." Further,      
pursuant to the terms of the KCEP II 1999 Investment, KCEP II will have the     
right to elect one member of the board of directors of our 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.              

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 will concurrently with the closing of    
this offering exchange its preferred interest for 409,091 senior subordinated   
units.                                                                          

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 Leonard and Arlene Peterson, the           
controlling shareholders of Country Partners (formerly Country Gas). The leases 
provide for aggregate monthly payments of $16,000, which are subject to         
adjustment based on the consumer price index. During the fiscal year ended      
September 30, 2000, we paid Country Enterprises an aggregate of $64,000 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.                                    

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. After  
giving effect to the exercise of options that expire on March 31, 2001, KCEP II 
will have 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 this offering, the     
preferred interests held by these investors will automatically convert into     
190,909, 31,818 and 6,364 senior subordinated units. As a result of favorable   
conversion terms, there is a beneficial conversion feature associated with the  
investment of the 2001 Investor Group. Please read "Notes to Unaudited Pro      
Forma Consolidated Financial Statements."                                       

As a group, all members of the 2001 Investor Group have the right to elect
one director to our board of directors 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.                                        

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. 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.          

. All costs of any registration exclusive of any underwriting discounts or  
commissions will be borne by Company.                                   

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 will         
concurrently with the closing of this offering be exchanged for 336,456 senior  
subordinated units.                                                             

Distributions and Payments to the Managing General Partner and the Non-managing 
General Partner                                                                 

 The following table summarizes the distributions and payments to be made by
us to our managing general partner and its affiliates in connection with the    
formation, ongoing operation and the liquidation of Inergy. These distributions 
and payments were determined by and among affiliated entities and are not the   
result of arm's length negotiations.                                            

Formation Stage                                                                 

The consideration received                                                      
by Inergy Holdings and its                                                      
affiliates for the                                                              
transfer of the                                                                 
affiliates' interests in                                                        
the subsidiaries and a                                                          
capital contribution.......                                                     
                         1,306,911 senior subordinated units and 572,542
                         junior subordinated units; a 2% general partner
               interest in Inergy; and the incentive
distribution rights.  

Operational Stage                                                               

Distributions of available                                                      
cash to our managing                                                            
general partner and its                                                         
affiliates.................  Cash distributions will generally be made 98% to   
                      the unitholders, including affiliates of the
                       managing general partner as holders of common
                         units and senior and junior subordinated units,
                        and 2% to the non-managing general partner. In
                      addition, if distributions exceed the target
                   levels in excess of the minimum quarterly
                           distribution, Inergy Holdings will be entitled to
               receive increasing percentages of the
                       distributions, up to 48% of the distributions
         above the highest target level.

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                           Assuming we have sufficient available cash to pay
                           the full minimum quarterly distribution on all of
                           our outstanding units for four quarters, our non-
                           managing general partner and its affiliates would
                          receive a distribution of approximately $268,697
                  on the 2% general partner interest and a
                           distribution of approximately $4,510,687 on their
               senior and junior subordinated units.

Payments to our managing                                                        
general partner and its      Our managing general partner and its affiliates    
affiliates.................  will not receive any management fee or other       
                        compensation for the management of Inergy. Our
                          managing general partner and its affiliates will
                         be reimbursed, however, for direct and indirect
                         expenses incurred on our behalf. On a pro forma
                       basis for the fiscal year ended September 30,
                         2000, the expense reimbursement to the managing
                       general partner and its affiliates would have
been $20.1 million.   

Withdrawal or removal of                                                        
our managing general         If our managing general partner withdraws in       
partner....................  violation of the partnership agreement or is       
                        removed for cause, a successor general partner
                   has the option to buy the general partner
                          interests and incentive distribution rights from
                           our non-managing general partner for a cash price
                     equal to fair market value. If our managing
                           general partner withdraws or is removed under any
                       other circumstances, our non-managing general
                         partner has the option to require the successor
                    general partner to buy its general partner
                           interests and incentive distribution rights for a
                cash price equal to fair market value.

                          If either of these options is not exercised, the
                 general partner interests and incentive
                        distribution rights will automatically convert
                          into common units equal to the fair market value
                     of those interests. In addition, we will be
                           required to pay the departing general partner for
 expense reimbursements.

Liquidation Stage                                                               

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

Rights of our Managing General Partner and our Non-managing General Partner     

Following this offering, a subsidiary of our non-managing general partner 
will own an approximate 34% limited partner interest in us. Inergy Holdings     
owns substantially all of our non-managing general partner and all of our       
managing general partner. The managing general partner's ability to manage and  
operate Inergy, L.P. coupled with Inergy Holdings' ownership of an aggregate    
34% limited partner interest in us effectively gives Inergy Holding the right   
to veto some actions of Inergy, L.P. and to control the management of Inergy.   

Contribution Agreement                                                          

  Inergy, L.P., the managing general partner, the non-managing general partner
and some other parties will enter into a contribution agreement that will       
effect the vesting of assets in, and the assumption of liabilities by, the      
subsidiaries, and the application of the proceeds of this offering. This        
agreement will not be the result of arm's-length negotiations, and we cannot    
assure you that it, or that any of the transactions which it provides for, will 
be effected on terms at least as favorable to the parties to this agreement as  
they could have been obtained from unaffiliated third parties. All of the       
transaction expenses incurred in connection with these transactions, including  
the expenses associated with vesting assets into our subsidiaries, will be paid 
from the proceeds of this offering.                                             

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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. A conflicts committee of   
the board of directors of the managing general partner will, at the request of  
the managing general partner, review 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,                                                               

. issuance of additional units, and                                         

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. 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 will reimburse the managing general partner and its affiliates for         
expenses.                                                                     

 We will 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 will 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 entered into after the sale of the common units 
offered in this offering are to be on terms that are fair and reasonable to     
Inergy, L.P.                                                                    

The managing general partner and its affiliates will 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             

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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.    

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 will be
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               

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                       jurisdictions may permit a limited partner to
                         institute legal action on behalf of himself and
                          all other similarly situated limited 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."                              

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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                                                                        

  American Stock Transfer & Trust Company will serve 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,                                   

. grants powers of attorney to officers of our managing general partner and 
any liquidator of us as specified in the partnership agreement, and     

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. 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.    

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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      
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.                                                                    

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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 will be 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 nine 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 managing       
general partner in its sole discretion without the approval of any limited      
partners. While any senior                                                      

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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 excluding any interests 
issued in connection with the exercise of the underwriters' over-allotment      
option, 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,                                                  

  (6) any amendment expressly permitted in the partnership agreement to be
made by the managing general partner acting alone,                          

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(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.                                                                        

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                               

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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 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             

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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, a    
subsidiary of our non-managing general partner will own approximately 34% 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 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 non- 
managing general partners for fair market                                       

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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.                                

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.                        

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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 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                                              

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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 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.                             

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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.                          

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,

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. 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."                                                                          

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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 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 these units      
could have an adverse impact on the price of the common units or on any trading 
market that may develop. Upon conversion, these units will be entitled to       
registration rights as described under "Certain Relationships and Related       
Transactions" or 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 180 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 is a summary of all 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,      
expresses the opinion of Vinson & Elkins L.L.P., special counsel to the general 
partners and us, insofar as it relates to matters of United States federal      
income tax law and legal conclusions with respect to those matters. 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, we recommend that each prospective unitholder consult, and  
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 counsel 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. 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 reduce the market value of the common units. In addition, the costs  
of any contest with the IRS will be borne directly or indirectly by the         
unitholders and our general partners. Furthermore, the tax treatment of us, or  
of an investment in us, 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, counsel has not rendered an opinion with 
respect to the following federal income tax issues:                             

(1) 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 to him is in excess of his adjusted basis in his partnership        
interest.                                                                       

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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 counsel that, based upon the  
Internal Revenue Code, its regulations, published revenue rulings and court     
decisions and the representations described below, we will be treated as a      
partnership for federal income tax purposes and the operating company will be   
disregarded as an entity separate from us for federal income tax purposes.      

  In rendering its opinion, counsel 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 we nor the operating company will elect to be treated as a
corporation, and                                                            

(b) For each taxable year, more than 90% of our gross income will be  
income from sources that our counsel has opined, or will opine, is          
"qualifying income" within the meaning of Section 7704(d) of the Internal   
Revenue Code.                                                               

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 of which 90% or more of the gross       
income for every taxable year consists of "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.                                                  

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 us 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 of the value of the units.                         

  The discussion below is based on the conclusion that we will be treated as a
partnership for federal income tax purposes.                                    

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:              

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  (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 become entitled to    
direct the exercise of attendant rights, but who fail to execute and deliver    
transfer applications, counsel's opinion 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 
should 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, distributions by us 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   
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. 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. 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."                  

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 to him. 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."                                                                        

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.            

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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 June 30, 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. We anticipate that after the      
taxable year ending June 30, 2004, the ratio of allocable taxable income to     
cash distributions to the unitholders will increase. 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, we cannot assure you that these estimates  
will prove to be correct. 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, generally based on his share of profits, of our nonrecourse  
liabilities. 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 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                                           

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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." The IRS has announced that Treasury    
Regulations will be issued that characterize net passive income from a          
publicly-traded partnership as investment income for purposes of the            
limitations on the deductibility of investment interest. In addition, the       
unitholder's share of our portfolio income will be treated as 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.  

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.     

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                   

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affiliates, referred to in this discussion as "Contributed Property." The       
effect of these allocations to a unitholder purchasing common units in this     
offering will be essentially the same as if the tax basis of our assets were    
equal to their fair market value at the time of this offering. In addition,     
recapture income will be allocated to the extent possible to the unitholder who 
was allocated the deduction giving rise to that 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 rights of all the          
unitholders to distributions of capital upon liquidation.                       

Counsel 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 in us 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.            

 Counsel has not rendered an opinion regarding the treatment of a unitholder
where he loans common units to a short seller to cover a short sale of common   
units; therefore, unitholders who want to assure their status as partners in us 
for tax purposes and avoid the risk of gain recognition from a loan to a short  
seller 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 should consult with 
their tax advisors as to the impact of an investment in units on their          
liability for the alternative minimum tax.                                      

  Tax Rates. In general the highest effective United States federal income tax
rate for individuals after July 1, 2001 is 38.6% and the maximum United States  
federal income tax rate for net capital gains of an individual for 2001 is 20%  
if the asset disposed of was held for more than 12 months at the time of        
disposition.                                                                    

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 Section 754 Election. We will make 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 when he buys units in   
the market. 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 will adopt), 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 1.167(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 counsel 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 1.167(c)-1(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           
accelerated method than our 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 will 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                                

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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 will be 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 and its affiliates.  
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 our            
termination. 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 a syndication cost.                     

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 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 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.                       

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 by   
him plus his                                                                    

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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.            

Our distributions 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 received 
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 based upon relative fair market values. Although the      
ruling is unclear as to how the holding period of these interests is determined 
once they are combined, recently finalized regulations 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, according to the regulations, may designate specific      
common units sold for purposes of determining the holding period of units       
transferred. 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 should consult his tax advisor as to the possible consequences of  
this ruling and application of the final 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 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                            

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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, counsel is unable to opine on the validity of this    
method of allocating income and deductions between unitholders. If this method  
is not allowed, our taxable income or losses might be reallocated among the     
unitholders. We are authorized to revise our method of allocation between       
unitholders to conform to a permitted method.                                   

  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. Additionally, a transferor and a transferee of a unit will be required  
to furnish statements to the IRS, filed with their income tax returns for the   
taxable year in which the sale or exchange occurred, that describe the amount   
of the consideration received for the unit that is allocated to our goodwill or 
going concern value. Failure to satisfy these reporting obligations 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 our 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 1.167(c)-1(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 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 that property, or treat   
that portion as nonamortizable, to the extent attributable to property the      
common basis of which is not amortizable, consistent with the regulations under 
Section 743, even though that position may be inconsistent with Treasury        
Regulation Section 1.167(c)-1(a)(6) which is not expected to directly apply to  
a material portion of our assets. Please read "--Tax Consequences of Unit       
Ownership--                                                                     

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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 will 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 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. And, 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 or applicable substitute form   
in order to obtain credit for these withholding taxes.                          

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 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                                            

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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-1, 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 his 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, regulations or administrative interpretations of  
the IRS. Neither we nor counsel 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 his 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 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,                                           

(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,                                          

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(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 will register 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.                

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.                                                                            

 We will supply our tax shelter registration number to you when one has been
assigned to us. 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 each failure.     
Any penalties discussed are not deductible for federal income tax purposes.     

 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.                                  

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.       

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  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 or in which you are a     
resident. Although an analysis of those various taxes is not presented here,    
each prospective unitholder should 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: Georgia, Illinois, Indiana,          
Michigan, Missouri, North Carolina, Ohio, Tennessee and Wisconsin. Each of      
these states currently imposes a personal income tax. Although you may not be   
required to file a return and pay taxes in some of those states because your    
income from that state falls below the filing and payment requirement, you will 
be required to file state income tax returns and to pay state income taxes in   
many of these states in which we do business or own property and may be subject 
to penalties for failure to comply with those 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 United States federal tax returns, that may be required   
of him. Counsel has not rendered an opinion on the state or local tax           
consequences of an investment in us.                                            

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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 prohibits
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 fiduciaries 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.                                    

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UNDERWRITING

  Subject to the terms and conditions of the underwriting agreement between us
and the underwriters, the underwriters have agreed severally to purchase from   
us the following number of common units at the offering price less the          
underwriting discount set forth on the cover page of this prospectus.           

                                                                [Download Table]

                                                                Number of  
Underwriter                                                    Common Units
-----------                                                    ------------
                                                                           
A.G. Edwards & Sons, Inc......................................    560,000  
First Union Securities, Inc...................................    560,000  
Raymond James & Associates, Inc...............................    480,000  
                                                                ---------  
  Total.......................................................  1,600,000  
                                                                =========  

  The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions and that the underwriters will purchase all   
such common units if any of the units are purchased. The underwriters are       
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 underwriters have advised us that they propose 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 $0.89 per unit. The underwriters may allow, and such dealers may re-allow, a 
concession not in excess of $0.10 per unit to certain other dealers. After the  
offering, the offering price and other selling terms may be changed by the      
underwriters.                                                                   

 Pursuant to the underwriting agreement, we have granted to the underwriters
an option, exercisable for 30 days after the date of this prospectus, to        
purchase up to 240,000 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 underwriters exercise such option, the underwriters will
become obligated, subject to certain conditions, to purchase approximately the  
same percentage of such additional units as the number set forth next to such   
underwriter's name in the preceding table bears to the total number of units in 
the table, and we will be obligated, pursuant to the option, to sell such units 
to the underwriters.                                                            

Inergy, L.P., New Inergy Propane, LLC, the general partners and certain   
other affiliates have agreed that during the 180 days after the date of this    
prospectus, they will not, 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 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. A.G. Edwards 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 180-day     
period. There are, however, no agreements between A.G. Edwards and these        
parties that would allow them to do so as of the date of this prospectus.       

Prior to this offering, there has been no public market for the common    
units. The initial public offering price was determined by negotiation between  
us and the underwriters. The principal factors considered in determining the    
public offering price include the following:                                    

. the information set forth in this prospectus and otherwise available to   
the underwriters,                                                       

. market conditions for initial public offerings,                           

. the history and the prospects for the industry in which we compete,       

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. the ability of our management,                                            

. our prospects for future earnings,                                        

. the present state of our development and our current financial condition, 

. the general condition of the securities markets at the time of this       
offering, and                                                           

. the recent market prices of, and the demand for, publicly traded common   
units of generally comparable entities.                                 

The following table summarizes the discounts that Inergy, L.P. will pay to
the underwriters in the offering. These amounts assume both no exercise and     
full exercise of the underwriters' option to purchase additional common units.  

                                                                [Download Table]

                                                    No Exercise Full Exercise
                                                    ----------- -------------
                                                                             
Per Unit........................................... $     1.54   $     1.54  
Total.............................................. $2,464,000   $2,833,600  

We expect to incur expenses of approximately $2,500,000 in connection with
this offering.                                                                  

We have agreed to indemnify the underwriters against certain liabilities, 
including liabilities under the Securities Act.                                 

Until the distribution of the common units is completed, rules of the SEC 
may limit the ability of the underwriters and certain selling group members to  
bid for and purchase the common units. As an exception to these rules, the      
underwriters are permitted to engage in certain transactions that stabilize,    
maintain or otherwise affect the price of the common units.                     

  In connection with this offering, the underwriters 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 underwriters of the      
common units in excess of the number of units the underwriters are      
obligated to purchase, which creates a syndicate short position. The    
short position may be either a covered short position or an naked short 
position. In a covered short position, the number of units over-alloted 
by the underwriters is not greater than the number of units they 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 underwriters may close out any short position by  
either exercising their 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 underwriters will consider,  
among other things, the price of common units available for purchase in 
the open market as compared to the price at which they may purchase     
common units through the over-allotment option. If the underwriters sell
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 underwriters are 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 representatives 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 underwriters' purchases to cover
the syndicate short sales may have the effect of raising or maintaining the     
markert price of the common units or preventing or retarding a                  

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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.                                                                    

  The underwriters 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 underwriters are not obligated to engage in any of the transactions   
described above. If they do engage in any of these transactions, they may       
discontinue them at any time.                                                   

 At the request of Inergy, L.P., the underwriters are reserving up to 80,000
common units for sale at the initial public offering price to directors,        
officers, employees and friends through a directed share program. The number of 
common units available for sale to the general public in the public offering    
will be reduced to the extent these persons purchase these reserved units. Any  
common units not so purchased will be offered by the underwriters to the        
general public on the same basis as the other common units offered by this      
prospectus.                                                                     

Neither Inergy, L.P. nor the underwriters 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 underwriters make any representation that the underwriters 
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.                                  

No sales to accounts of which the underwriter exercises discretionary     
authority may be made without the prior written approval of the customer.       

  A.G. Edwards & Sons, Inc. has provided financial advisory services to Inergy
Partners, L.L.C. for which it will receive customary compensation.              

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 underwriters by Baker   
Botts L.L.P., Houston, Texas.                                                   

EXPERTS 

Ernst & Young LLP, independent auditors, have audited the consolidated    
financial statements of Inergy Partners, LLC at September 30, 1999 and 2000,    
and for each of the two years in the period ended September 30, 2000, 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,   
the financial statements of Country Gas Company, Inc. at May 31, 1999 and 2000, 
and for each of the three years in the period ended May 31, 2000, the balance   
sheet of Inergy, L.P. at March 7, 2001 and the balance sheet of Inergy GP, LLC  
at March 2, 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.                                          

Batchelor, Tillery & Roberts, LLP, independent auditors, have audited our 
consolidated financial statements for the year ended September 30, 1998, as set 
forth in their report. We have included these financial statements in the       
prospectus and elsewhere in the registration statement in reliance on           
Batchelor, Tillery & Roberts, LLP's report, given on their authority as experts 
in accounting and auditing.                                                     

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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, and at 
the SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago,     
Illinois 60661 and at Seven World Trade Center, Suite 1300, New York, New York  
10048. 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 1-800-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 intend to furnish our unitholders 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 of our fiscal years.                                                    

FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus may contain 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. The risk factors and other factors    
noted throughout this prospectus could cause our actual results to differ       
materially from those contained in any forward-looking statement.               

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INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                                           Page
                                                                           ----
                                                                               
Inergy Partners, LLC Consolidated Financial Statements:                        
  Report of Independent Auditors..........................................  F-2
  Report of Independent Auditors..........................................  F-3
  Consolidated Balance Sheets as of September 30, 1999 and 2000 and March      
   31, 2001 (unaudited)...................................................  F-4
  Consolidated Statements of Operations for the years ended September 30,      
   1998, 1999 and 2000 and the six months ended March 31, 2000 and 2001        
   (unaudited)............................................................  F-5
  Consolidated Statements of Redeemable Preferred Members' Interest and        
   Members' Equity for the years ended September 30, 1998, 1999 and 2000       
   and the six months ended March 31, 2001 (unaudited)....................  F-6
  Consolidated Statements of Cash Flows for the years ended September 30,      
   1998, 1999 and 2000 and the six months ended March 31, 2000 and 2001        
   (unaudited)............................................................  F-7
  Notes to Consolidated Financial Statements..............................  F-9

Hoosier Propane Group Combined Financial Statements:                           
  Report of Independent Auditors.......................................... F-22
  Combined Balance Sheets as of September 30, 1999 and 2000 and December       
   31, 2000............................................................... F-23
  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-24
  Combined Statements of Stockholders' Equity for the years ended              
   September 30, 1998, 1999 and 2000 and the three months ended December       
   31, 2000............................................................... F-25
  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-26
  Notes to Combined Financial Statements.................................. F-27

Country Gas Company, Inc. Financial Statements:                                
  Report of Independent Auditors.......................................... F-34
  Balance Sheets as of May 31, 1999 and 2000.............................. F-35
  Statements of Income for the years ended May 31, 1998, 1999 and 2000.... F-36
  Statements of Stockholders' Equity for the years ended May 31, 1998,         
   1999 and 2000.......................................................... F-37
  Statements of Cash Flows for the years ended May 31, 1998, 1999 and          
   2000................................................................... F-38
  Notes to Financial Statements........................................... F-39

Inergy, L.P. Financial Statements:                                             
  Report of Independent Auditors.......................................... F-42
  Balance Sheet as of March 7, 2001....................................... F-43
  Note to Balance Sheet................................................... F-44

Inergy GP, LLC Financial Statements:                                           
  Report of Independent Auditors.......................................... F-45
  Balance Sheet as of March 2, 2001....................................... F-46
  Note to Balance Sheet................................................... F-47

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Members                                              
Inergy Partners, LLC and Subsidiaries                                           

We have audited the accompanying consolidated balance sheets of Inergy    
Partners, LLC (a subsidiary of Inergy Holdings, LLC) and subsidiaries (the      
"Company") as of September 30, 1999 and 2000, and the related consolidated      
statements of operations, redeemable preferred members' interest and members'   
equity, and cash flows for the years then ended. 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 consolidated financial position of Inergy         
Partners, LLC and subsidiaries at September 30, 1999 and 2000, and the          
consolidated results of their operations and their cash flows for the years     
then ended in conformity with accounting principles generally accepted in the   
United States.                                                                  

                         /s/ ERNST & YOUNG LLP

Kansas City, Missouri                                                           
December 6, 2000, except for                                                    
Notes 4 and 12, as to which                                                   
the date is January 12, 2001,                                                 
and Note 13, as to which the                                                  
date is March 7, 2001                                                         

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Members                                              
Inergy Partners, LLC and Subsidiary                                             

We have audited the accompanying consolidated statements of operations,   
redeemable preferred members' interest and members' equity and cash flows of    
Inergy Partners, LLC and subsidiary (the "Company") for the year ended          
September 30, 1998. 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 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 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 audit provides a          
reasonable basis for our opinion.                                               

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of its operations, changes   
in its members' equity and its cash flows for the year ended September 30, 1998 
in conformity with accounting principles generally accepted in the United       
States.                                                                         

                                     /s/ Batchelor, Tillery & Roberts,
         LLP

Raleigh, North Carolina                                                         
November 20, 1998                                                               

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

CONSOLIDATED BALANCE SHEETS 
(In thousands)

                                                                [Download Table]

                                                   September 30,               
                                                  ----------------   March 31, 
                                                   1999     2000       2001    
                                                  -------  -------  -----------
                                                                    (Unaudited)
                                                                               
                 ASSETS (Note 4)                                               
Current assets:                                                                
  Cash........................................... $   152  $ 1,373   $  3,528  
  Accounts receivable, less allowance for                                      
   doubtful accounts of $86 and $225 at September                              
   30, 1999 and 2000, respectively and $988 at                                 
   March 31, 2001................................   5,075   12,602     22,660  
  Inventories....................................   5,025    3,630      3,617  
  Prepaid expenses and other current assets......     556    1,014      1,068  
  Assets from price risk management activities...     582    3,580        433  
                                                  -------  -------   --------  
Total current assets.............................  11,390   22,199     31,306  
Property, plant and equipment, at cost:                                        
  Land and buildings.............................     562      740      4,487  
  Office furniture and equipment.................     546      808        938  
  Vehicles.......................................   2,131    4,138     10,086  
  Tanks and plant equipment......................  20,959   30,283     57,616  
                                                  -------  -------   --------  
                                                   24,198   35,969     73,127  
  Less accumulated depreciation..................  (1,092)  (2,533)    (3,829) 
                                                  -------  -------   --------  
Net property, plant and equipment................  23,106   33,436     69,298  
Intangible assets (Note 2):                                                    
  Organization costs.............................      70      --         --   
  Covenants not to compete.......................   3,110    3,228      3,763  
  Deferred financing costs.......................     308      333      1,989  
  Deferred acquisition costs.....................     --       460        111  
  Customer accounts..............................     --     3,500     14,000  
  Goodwill.......................................   1,286    6,880     32,063  
                                                  -------  -------   --------  
                                                    4,774   14,401     51,926  
  Less accumulated amortization..................    (387)  (1,246)    (2,294) 
                                                  -------  -------   --------  
Net intangible assets............................   4,387   13,155     49,632  
Other............................................      13      134        137  
                                                  -------  -------   --------  
Total assets..................................... $38,896  $68,924   $150,373  
                                                  =======  =======   ========  

         LIABILITIES AND MEMBERS' EQUITY                                       
Current liabilities:                                                           
  Accounts payable............................... $ 5,562  $11,502   $ 10,797  
  Accrued expenses...............................   1,666    3,715      4,616  
  Customer deposits..............................   1,332    1,676        761  
  Liabilities from price risk management                                       
   activities....................................   1,788    2,294         93  
  Current portion of long-term debt (Note 4).....     732      605      5,631  
                                                  -------  -------   --------  
Total current liabilities........................  11,080   19,792     21,898  
Deferred income taxes (Note 6)...................     942      942        942  
Long-term debt, less current portion (Note 4)....  21,605   34,322     78,767  
Redeemable preferred members' interest (Notes 2                                
 and 7)..........................................     --    10,896     34,313  
Members' equity (Notes 2, 4 and 7):                                            
  Class A preferred interest.....................   4,893    4,892      4,851  
  Common interest................................     690   (1,686)     9,797  
  Deferred compensation..........................    (314)    (234)      (195) 
                                                  -------  -------   --------  
Total members' equity............................   5,269    2,972     14,453  
                                                  -------  -------   --------  
Total liabilities and members' equity............ $38,896  $68,924   $150,373  
                                                  =======  =======   ========  

See accompanying notes. 

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

CONSOLIDATED STATEMENTS OF OPERATIONS 
(In thousands)

                                                                [Download Table]

                                    Year Ended September     Six Months Ended  
                                            30,                 March 31,      
                                   ------------------------  ----------------- 
                                    1998    1999     2000     2000      2001   
                                   ------  -------  -------  -------  -------- 
                                                               (Unaudited)     
                                                                               
Revenue:                                                                       
  Propane......................... $4,794  $16,227  $89,042  $47,857  $165,209 
  Other...........................  2,713    2,984    4,553    2,600     5,230 
                                   ------  -------  -------  -------  -------- 
                                    7,507   19,211   93,595   50,457   170,439 
Cost of product sold..............  4,215   13,754   81,636   42,054   141,425 
                                   ------  -------  -------  -------  -------- 
Gross profit......................  3,292    5,457   11,959    8,403    29,014 
Operating and administrative                                                   
 expenses.........................  2,424    4,119    8,990    4,093    11,464 
Depreciation and amortization.....    394      690    2,286      887     2,748 
                                   ------  -------  -------  -------  -------- 
Operating income..................    474      648      683    3,423    14,802 
Other income (expense):                                                        
  Interest expense................   (569)    (962)  (2,740)  (1,157)   (2,860)
  Gain on sale of property, plant                                              
   and equipment..................    --       101      --       --        --  
  Finance charges.................     59       79      176       70       158 
  Other...........................      1        5       59       25        87 
                                   ------  -------  -------  -------  -------- 
Income (loss) before income                                                    
 taxes............................    (35)    (129)  (1,822)   2,361    12,187 
Provision for income taxes........    --        56        7      --        --  
                                   ------  -------  -------  -------  -------- 
Net income (loss)................. $  (35) $  (185) $(1,829) $ 2,361  $ 12,187 
                                   ======  =======  =======  =======  ======== 

See accompanying notes. 

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED MEMBERS'
INTEREST AND MEMBERS' EQUITY
(In thousands)

                                                                [Download Table]

                                                   Members' Equity              
                                       -----------------------------------------
                            Redeemable                                          
                            Preferred   Class A                          Total  
                             Members'  Preferred  Common     Deferred   Members'
                             Interest  Interest  Interest  Compensation  Equity 
                            ---------- --------- --------  ------------ --------
                                                                                
Balance at September 30,                                                        
 1997......................      --     $  --    $ 1,209      $ --      $ 1,209 
  Members' contributions...      --        --        220        --          220 
  Members' distributions...      --        --       (196)       --         (196)
  Capital restructuring....      --      2,345      (540)      (392)      1,413 
  Net loss.................      --        --        (35)       --          (35)
                             -------    ------   -------      -----     ------- 
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 (Note 7)..    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 
  Redeemable preferred                                                          
   interests issued in                                                          
   acquisition                                                                  
   (unaudited).............    7,402       --        --         --          --  
  Redeemable preferred                                                          
   interests issued for                                                         
   cash, net of offering                                                        
   costs of $485                                                                
   (unaudited).............   16,015       --        --         --          --  
  Redemption of preferred                                                       
   interest (unaudited)....      --        (41)        8        --          (33)
  Amortization of deferred                                                      
   compensation                                                                 
   (unaudited).............      --        --        --          39          39 
  Members' distributions                                                        
   (unaudited).............      --        --       (712)       --         (712)
  Net income (unaudited)...      --        --     12,187        --       12,187 
                             -------    ------   -------      -----     ------- 
Balance at March 31, 2001..  $34,313    $4,851   $ 9,797      $(195)    $14,453 
                             =======    ======   =======      =====     ======= 

See accompanying notes. 

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands)

                                                                [Download Table]

                                   Year Ended September        Six months     
                                            30,              ended March 31,  
                                  -------------------------  ---------------- 
                                  1998     1999      2000     2000     2001   
                                  -----  --------  --------  -------  ------- 
                                                               (Unaudited)    
                                                                              
Operating activities                                                          
Net income (loss)................ $ (35) $   (185) $ (1,829) $ 2,361  $12,187 
Adjustments to reconcile net                                                  
 income (loss) to net cash                                                    
 provided by (used in) operating                                              
 activities:                                                                  
  Provision for doubtful                                                      
   accounts......................    28        77       139      --       812 
  Depreciation...................   322       440     1,427      585    1,368 
  Amortization...................    72       250       859      302    1,380 
  Gain on disposal of property,                                               
   plant and equipment...........   --       (101)      --       --       --  
  Deferred income taxes..........   --          8       --       --       --  
  Net liabilities from price risk                                             
   management activities.........   --      1,206    (2,492)  (1,549)     946 
  Deferred compensation..........   --         78        79       39       39 
  Changes in operating assets and                                             
   liabilities, net of effects                                                
   from acquisition of retail                                                 
   propane companies:                                                         
    Accounts receivable..........    40    (3,451)   (5,842)  (2,434) (10,869)
    Inventories..................  (166)   (3,812)    1,660    2,064    2,922 
    Prepaid expenses and other                                                
     current assets..............    43       (86)     (388)      30       22 
    Other assets.................   --        (13)     (121)      (1)      (3)
    Accounts payable.............  (246)    2,642     3,836     (436)  (3,596)
    Accrued expenses.............   194       913     2,049     (856)     807 
    Customer deposits............   110     1,187       314     (944)  (3,421)
                                  -----  --------  --------  -------  ------- 
Net cash provided by (used in)                                                
 operating activities............   362      (847)     (309)    (839)   2,594 

Investing activities                                                          
Acquisition of retail propane                                                 
 companies.......................   --    (11,430)   (9,600)  (1,170) (56,263)
Purchases of property, plant and                                              
 equipment.......................  (750)   (1,354)   (2,275)  (1,517)  (1,861)
Deferred financing and                                                        
 acquisition costs incurred......   (21)     (400)     (486)     (69)  (1,989)
Proceeds from the sale of                                                     
 property, plant and equipment...    44       127       --       --       --  
Other............................   --        --        (16)     --       (66)
                                  -----  --------  --------  -------  ------- 
Net cash used in investing                                                    
 activities......................  (727)  (13,057)  (12,377)  (2,756) (60,179)

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) 
(In thousands)

                                                                [Download Table]

                                                             Six Months Ended   
                                Year Ended September 30,         March 31,      
                                ---------------------------  ------------------ 
                                 1998      1999      2000      2000      2001   
                                -------  --------  --------  --------  -------- 
                                                                (Unaudited)     
                                                                                
Financing activities                                                            
Proceeds from issuance of                                                       
 long-term debt...............  $ 1,374  $ 25,373  $ 35,787  $ 16,161  $106,675 
Principal payments on long-                                                     
 term debt and noncompete                                                       
 obligations..................   (1,062)  (11,137)  (23,229)  (14,086)  (62,205)
Net proceeds from issuance of                                                   
 redeemable preferred members'                                                  
 interest.....................      --        --      1,896     1,896    16,015 
Net proceeds from issuance of                                                   
 common interest..............      220       --        --        --        --  
Distributions to members......     (196)     (180)     (547)     (175)     (745)
                                -------  --------  --------  --------  -------- 
Net cash provided by financing                                                  
 activities...................      336    14,056    13,907     3,796    59,740 
                                -------  --------  --------  --------  -------- 
Net increase (decrease) in                                                      
 cash.........................      (29)      152     1,221       201     2,155 
Cash at beginning of period...       29       --        152       152     1,373 
                                -------  --------  --------  --------  -------- 
Cash at end of period.........  $   --   $    152  $  1,373  $    353  $  3,528 
                                =======  ========  ========  ========  ======== 
Supplemental disclosure of                                                      
 cash flow information                                                          
Cash paid during the period                                                     
 for interest.................  $   584  $    823  $  2,538  $  1,029  $  1,929 
                                =======  ========  ========  ========  ======== 
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 and                                                        
 preferred interests..........  $   --   $  2,945  $  9,000  $    --   $  7,402 
                                =======  ========  ========  ========  ======== 
Acquisitions of retail propane                                                  
 companies through the                                                          
 issuance of subordinated                                                       
 debt.........................  $   --   $    --   $    --   $    --   $  5,000 
                                =======  ========  ========  ========  ======== 

See accompanying notes. 

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information pertaining to the six months ended 
March 31, 2000 and 2001 is unaudited) 
(In thousands)

1. Accounting Policies                                                          

Principles of Consolidation                                                   

The consolidated financial statements include the accounts of Inergy      
Partners, LLC (the "Company") and its wholly-owned subsidiaries, Inergy Propane 
Company, LLC ("Inergy Propane"), Wilson Oil Company of Johnston County, Inc.    
("Wilson") and Rolesville Gas & Oil Company, Inc. ("Rolesville"). All           
significant intercompany accounts and transactions have been eliminated. The    
Company is a 98.5%-owned subsidiary of Inergy Holdings, LLC (Holdings), and all 
operations of Holdings are conducted through the Company and its subsidiaries.  

Nature of Operations                                                          

The Company was organized as a Delaware limited liability company on      
November 8, 1996. The Company terminates December 31, 2026 unless extended by   
agreement of its members. The Company 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.     

 The business and affairs of the Company are conducted by the voting members
of the Company holding the majority of the common member interests. Under the   
terms of the operating agreement, neither the members nor the managers of the   
Company are liable for any debt, obligations or liabilities of the Company,     
other than certain guarantees described in Note 4. In addition, the liability   
of each member to third parties is limited to the amount of the member's        
capital contribution. The Company has two classes of members' interests--common 
and Class A preferred.                                                          

Capital Restructuring                                                         

  Effective September 30, 1998, the Company, Holdings and Inergy Propane (then
known as McCracken Oil & Propane Company) completed a capital restructuring.    
This transaction involved the simultaneous purchase of the employee-owned       
minority nonvoting interest in McCracken and the purchase of the controlling    
member's voting interest in the Company (then known as Mid-Atlantic Energy,     
LLC) through an issuance of predominantly Class A 9% preferred member           
interests, and to a lesser extent, common interests in the Company and          
Holdings.                                                                       

The purchase of the non-voting, employee-owned minority interest in       
McCracken through the issuance of a 1.5% non-voting common interest in Mid-     
Atlantic Energy, LLC (Mid-Atlantic) and a $784,000 (33.37%) preferred interest  
(paying a 9% dividend) in Mid-Atlantic, was accounted for using the purchase    
method of accounting. Pursuant to the terms this portion of the restructuring,  
50% of the preferred interests issued in this purchase of minority interest     
vested over the employees' next five years of employment. As such, $392,000 was 
recorded as deferred compensation in the accompanying consolidated balance      
sheet and is being amortized to compensation expense over the five-year vesting 
period.                                                                         

The purchase of the controlling member's voting interest in Mid-Atlantic  
occurred in two immediately consecutive transactions. First, the controlling    
member exchanged approximately 80% of his voting interest in Mid-Atlantic for a 
$1,565,000 (66.63%) preferred interest (paying a 9% dividend) and an 8% common  
interest in Mid-Atlantic. This purchase by Mid-Atlantic of a member's interest  
was accounted for similar to a treasury stock purchase.                         

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon completion of the above transactions, Holdings, then known as        
Integrated Energy Holdings, immediately purchased the remaining 8% common       
interest in Mid-Atlantic discussed above through the issuance of an 8% common   
interest in Holdings. This transaction was accounted for as a purchase of a     
minority interest in Mid-Atlantic by Holdings, whereby purchase accounting was  
applied.                                                                        

 These transactions resulted in Holdings owning 98.5% of the common interest
(and 100% of the voting interest) of the Company, which owned 100% of           
McCracken. The basis of Holding's investment in Mid-Atlantic was then pushed    
down to its 98.5% owned subsidiary, Mid-Atlantic. The result of the above       
transactions was an excess of the fair value of consideration issued over       
historical cost of Mid-Atlantic's net assets, amounting to $1,413. This amount, 
which is reflected as a capital restructuring line in the consolidated          
statements of members' equity for the year ended September 30, 1998, was        
principally allocated to tanks and plant equipment, the primary operating       
assets of the Company.                                                          

Credit Concentrations                                                         

The Company is both a retail and wholesale supplier of propane gas. The   
Company 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 the Company's consolidated financial statements and 
have consistently been within management's expectations.                        

Unaudited Financial Information                                               

  The financial information as of March 31, 2001 and for the six-month periods
ended March 31, 2000 and 2001 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, 2001 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 $1,052 and $39 at September 30,     
1999 and 2000, respectively, and $(73) and $(68) at March 31, 2000 and 2001,    
respectively.                                                                   

Accounting for Price Risk Management                                          

 The Company, through its wholesale operations, offers price risk management
services to its customers and, in addition, trades for its own account.         
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,                                                        

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)  

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 as cost of sales. 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 the Company'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 statement of cash flows. See      
Note 3 for further discussion of the Company's price risk management            
activities.                                                                     

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.                       

Shipping and Handling Costs                                                   

 Shipping and handling costs are recorded as part of cost of product sold at
the time product is shipped or delivered to the customer.                       

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:                                                                        

                                                                [Download Table]

                                                                     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:                                           

                                                                [Download Table]

                                                                     Years
                                                                     -----
                                                                          
Covenants not to compete............................................  5-10
Deferred financing costs............................................   1-3
Customer accounts................................................... 15-18
Goodwill............................................................    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                  

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

acquisitions by the Company and are discussed in Note 2. In accordance with     
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"    
the Company expensed $58 of unamortized organization costs during the year      
ended September 30, 2000.                                                       

 Deferred acquisition costs represent costs incurred to date on acquisitions
that the Company is actively pursuing, most of which relate to the acquisition  
completed subsequent to year end, as discussed in Note 12.                      

The Company 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.                                                                   

Income Taxes                                                                  

The members of the Company report their respective member interest in the 
Company's income and deductions on their personal income tax returns;           
therefore, federal and state income taxes have not been provided for in the     
Company's consolidated financial statements.                                    

  Two of the Company's subsidiaries, Wilson and Rolesville, are C corporations
and account for income taxes in accordance with SFAS No. 109, "Accounting for   
Income Taxes." The liability method provides that deferred tax assets and       
liabilities are recorded based on the differences between financial reporting   
and tax bases of assets and liabilities as measured by the enacted tax rates    
and laws that will be in effect when the differences are expected to reverse.   

Customer Deposits                                                             

Customer deposits primarily represent cash received by the Company 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 the Company for long-term debt with similar terms and maturities,  
as evidenced by the refinancing completed in January 2001, as discussed in Note 
4, the aggregate fair value of the Company's long-term debt approximates the    
aggregate carrying amount as of September 30, 1999 and 2000 and March 31, 2001. 

Recently Issued Accounting Pronouncements                                     

In 1998, the Financial Accounting Standards Board issued SFAS No. 133,    
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133    
establishes accounting and reporting standards requiring that every derivative  
instrument be recorded on the balance sheet as either an asset or liability     
measured at its fair value. The statement requires that changes in the          
derivative's fair value be recognized currently in earnings unless specific     
hedge accounting criteria are met.                                              

Adoption of SFAS No. 133 is required for fiscal years beginning after June
15, 2000. The Company will be required to adopt SFAS No. 133 during the first   
quarter of fiscal 2001. The Company believes that the effect of adopting SFAS   
133 will be limited to disclosures in its financial statements since the        
Company utilizes the mark-to-market method of accounting.                       

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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     
resource 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.                                               

2. Acquisitions                                                                 

 During fiscal 1999, Inergy Propane acquired substantially all of the assets
of Ernie Lee Oil & LP Gas, LLC (December 1998), Langston Gas & Oil Company,     
Inc. (May 1999), Castleberry's, Inc. (July 1999) and Bradley Propane, Inc.      
(September 1999). In addition, the Company acquired 100% of the outstanding     
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. The preferred interests issued in these    
acquisitions represent 16.03% of the Company's total preferred members'         
interest as of September 30, 2000. 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 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 the Company's consolidated results of operations   
from the dates of acquisition.                                                  

 During fiscal 2000, Inergy Propane acquired substantially all of the assets
of Butane-Propane Gas Company of Tenn., Inc. of Tennessee (November 1999), and  
the Company acquired 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 fiscal 2000 acquisitions consisted of cash    
payments of $9,600 funded by the issuance of long-term debt, redeemable Class A 
preferred interest 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 the Company's consolidated results of       
operations from the dates of acquisition.                                       

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During November 2000, the Company acquired substantially all the assets of
Bear-Man Propane for $520 in cash.                                              

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 1998, the beginning of the 2000 and 1999 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 1998 or that will be obtained  
in the future. The pro forma data do not give effect to acquisitions completed  
subsequent to September 30, 2000.                                               

                                                                [Download Table]

                                                            Year Ended    
                                                          September 30,   
                                                         ---------------- 
                                                          1999     2000   
                                                         ------- -------- 
                                                                          
Sales................................................... $39,906 $101,436 
Net income (loss).......................................   1,727     (935)

3. Price Risk Management and Financial Instruments                              

 The Company 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     
balance sheet, with the changes in fair value included in earnings.             

Trading Activities                                                            

 The Company, 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, the Company manages its own trading portfolio using forward        
physical and futures contracts. The Company 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, 1999 and 2000 include fixed price payor for 1,032 and 1,526 barrels,        
respectively and fixed price receiver for 1,185 and 1,479 barrels,              
respectively. The notional amounts and terms of these financial instruments at  
March 31, 2001 include fixed price payor for 97 barrels and fixed price         
receiver for 269 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 the Company's exposure  
to market or credit risks.                                                      

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value                                                                    

  The fair value of the financial instruments related to price risk management
activities as of September 30, 1999 and 2000 was assets of $582 and $3,580,     
respectively and liabilities of $1,788 and $2,294, respectively related to      
propane. The fair value of the financial instruments related to price risk      
management activities as of March 31, 2001 was assets of $433 and liabilities   
of $93 related to propane. All intercompany transactions have been              
appropriately eliminated.                                                       

The income before interest, taxes and certain unallocated expenses arising
from trading and price risk management activities for the years ended September 
30, 1999 and 2000 was immaterial.                                               

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. The Company  
takes an active role in managing and controlling market and credit risk and has 
established control procedures, which are reviewed on an ongoing basis. The     
Company monitors market risk through a variety of techniques, including daily   
reporting of the portfolio's value to senior management. The Company attempts   
to minimize credit risk exposure through credit policies and periodic           
monitoring procedures. The counterparties associated with assets from price     
risk management activities as of September 30, 1999 and 2000 are energy         
marketers.                                                                      

4. Long-Term Debt                                                               

Long-term debt consisted of the following:                                

                                                                [Download Table]

                                                  September 30,             
                                                 ---------------  March 31, 
                                                  1999    2000      2001    
                                                 ------- ------- -----------
                                                                 (Unaudited)
                                                                            
Credit agreement...............................  $20,099 $33,250   $78,250  
Obligations under noncompetition agreements....    2,238   1,625     1,148  
Subordinated debt issued to sellers of acquired                             
 business......................................      --      --      5,000  
Other..........................................      --       52       --   
                                                 ------- -------   -------  
                                                  22,337  34,927    84,398  
Less current portion...........................      732     605     5,631  
                                                 ------- -------   -------  
                                                 $21,605 $34,322   $78,767  
                                                 ======= =======   =======  

During fiscal 1999, the Company entered into and later amended a credit   
agreement with a financial institution providing the Company with the capacity  
to borrow up to $27,000 ($5,000 under long-term working capital lines of credit 
and $22,000 under a long-term acquisition line of credit). At September 30,     
1999, borrowings under the long-term working capital lines of credit and the    
long-term acquisition line of credit, due June 22, 2001, were $2,160 and        
$17,939, respectively. Interest only payments during the term of the agreement  
were based on "prime rate" and/or LIBOR plus the applicable spread. The         
applicable spread for each rate is based on the Company's ratio of total        
liabilities to tangible net worth. The prime rate and LIBOR plus the applicable 
spreads were 8.75% and 6.75% to 7.75%, respectively, at September 30, 1999.     

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During fiscal 2000, the Company amended the credit agreement with the     
financial institution providing the Company 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.              

 The agreement contains several covenants which, among other things, require
the maintenance of various financial performance ratios, restrict the payment   
of dividends and require financial reports to be submitted periodically to the  
financial institution. Unused borrowings under the credit agreement amounted to 
$7,750 at September 30, 2000.                                                   

 Noninterest-bearing obligations due under noncompetition agreements consist
of agreements between the Company and the sellers of retail propane companies   
acquired during fiscal 1999 and 2000 with payments due through 2009 with        
imputed interest at 8.5% to 9.0%. Noninterest-bearing obligations consist of    
$2,808 and $2,130 in total payments due under noncompetition agreements, less   
unamortized discount based on imputed interest of $570 and $505 at September    
30, 1999 and 2000, respectively.                                                

On January 12, 2001, the Company and its lenders again amended the credit 
agreement under which $33,250 was outstanding as of September 30, 2000. The     
amended credit agreement extended the maturity date of borrowings under the     
facilities from June 22, 2001 to January 10, 2004. In addition, the credit      
agreement provides for total available borrowings of $96,000 under three        
separate credit facilities. Borrowings under the revolving credit facility are  
ultimately due on January 10, 2004 with interest payments thereon due quarterly 
beginning March 31, 2001. The other two credit facilities, which were           
principally used to finance the Hoosier Propane Group acquisition discussed in  
Note 12 require quarterly principal and interest payments beginning March 31,   
2001. As the terms of the facility in place at September 30, 2000 have been     
modified subsequent to year end, the balance sheet presentation and footnote    
disclosure herein reflect the revised terms. The Company also issued a $5,000   
subordinated note payable to the former owners of the Hoosier Propane Group in  
connection with this acquisition. See Note 12.                                  

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 amended credit facilities discussed above, are as follows:     

                                                                [Download Table]

Year Ending September 30,                                                   
-------------------------                                                   
                                                                            
2001................................................................ $   605
2002................................................................     409
2003................................................................      75
2004................................................................  33,330
2005................................................................      87
Thereafter..........................................................     421
                                                                     -------
                                                                     $34,927
                                                                     =======

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Leases                                                                       

The Company has several noncancelable operating leases mainly for office  
space which expire at various times over the next nine years. The Company       
leases certain office space from the former owners of Country Gas Company, Inc. 
Total payments under these leases amounted to $64 during 2000.                  

Future minimum lease payments under noncancelable operating leases for the
next five years ending September 30 and thereafter consist of the following:    

                                                                [Download Table]

Year Ending September 30,                                                   
-------------------------                                                   
                                                                            
2001................................................................. $  513
2002.................................................................    501
2003.................................................................    407
2004.................................................................    369
2005.................................................................    277
Thereafter...........................................................    110
                                                                      ------
Total minimum lease payments......................................... $2,177
                                                                      ======

  Rent expense for all operating leases during 1998, 1999 and 2000 amounted to
$117, $196 and $424, respectively, and $158 and $265 for the six months ended   
March 31, 2000 and 2001, 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, 1999 and 2000   
and March 31, 2001 are a noncurrent deferred tax liability of $942 related to   
book/tax basis differences.                                                     

 The provision for income taxes for the years ended September 30, 1998, 1999
and 2000 consists of the following:                                             

                                                                [Download Table]

                                                              September 30,  
                                                             ----------------
                                                             1998  1999 2000 
                                                             ----- ---- -----
                                                                             
Current:                                                                     
  Federal..................................................  $ --  $41  $ -- 
  State....................................................    --    7      7
                                                             ----- ---  -----
Total current..............................................    --   48      7
Deferred:                                                                    
  Federal..................................................    --    7    -- 
  State....................................................    --    1    -- 
                                                             ----- ---  -----
Total deferred.............................................    --    8    -- 
                                                             ----- ---  -----
                                                             $ --  $56  $   7
                                                             ===== ===  =====

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.                                             

Wilson and Rolesville have federal net operating loss carryforwards of    
approximately $50 at September 30, 2000. Wilson has net operating loss          
carryforwards in the state of North Carolina of $220 at September 30, 2000.     

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Redeemable Preferred Interests and Members' Equity                           

On September 30, 1998, the Company's members approved an amendment to its 
limited liability company agreement authorizing a Class A preferred interest.   
In connection with this amendment, certain investors contributed their interest 
in McCracken to the Company in exchange for Class A preferred interest.         

During December 1999, the Company issued redeemable Class A preferred     
interests to a new member for total proceeds of $2,000 less offering costs of   
$104. During June 2000, the Company 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. The December    
1999 and June 2000 issuances represent 12.58% and 56.63%, respectively, of the  
Company's total preferred members' interest as of September 30, 2000. These     
preferred interests are automatically convertible into senior subordinated      
units of a master limited partnership (MLP) in the event of an initial public   
offering of the MLP (MLP Offering). The conversion rates were determined as of  
the issuance date based on negotiations between the Company and the unrelated   
third parties and are 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       
ultimate unit price in any MLP Offering. The beneficial conversion feature      
present in the December 1999 issuance, valued at $2 million, will be recognized 
upon completion of the MLP Offering. At such time, the Company would decrease   
common unit capital of the MLP by $2 million with a corresponding increase in   
senior subordinated unit capital. In addition, net income available to the      
common unit holders would be decreased by the $2 million while net income       
attributable to senior subordinated unitholders would be increased by the same  
amount.                                                                         

The Class A preferred interest earns cumulative dividends of 8% to 10% per
annum, depending on the date and amount of the preferred interest issued. Class 
A preferred members are not entitled to any voting rights. In the event of a    
public offering, the Company will 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 are entitled to an aggregate        
preference distribution of the unpaid dividends prior to any liabilities.       
Additionally, Class A preferred members are also entitled to preference over    
common interests subsequent to the payment of the Company's liabilities.        
Distributions totaling $180 and $547 were paid to Class A preferred members in  
1999 and 2000, respectively. Unpaid distributions on preferred interests as of  
September 30, 2000 amounted to $0.4 million and were declared and paid in       
October 2000. See Note 13.                                                      

The redeemable preferred interests issued in December 1999 and June 2000  
provide the holders the option to require the Company to redeem the preferred   
interests, as provided in the agreement, but generally no earlier than the      
fifth anniversary of the issuance. The preferred interest issued in December    
1999 is redeemable in an amount between one and two times face value at         
issuance, depending on the Company's operating performance, as defined in the   
agreement. The preferred interest issued in June 2000 is redeemable in amount   
equal to face value at issuance plus any unpaid dividends. No amounts are       
required to be redeemed during the next five years. In certain situations, as   
provided for in the agreement, 25% of the June 2000 issuance may be redeemed by 
the holder on or after the third anniversary of the issuance and another 25%    
may be redeemed on or after the fourth anniversary of the issuance. In          
accordance with the terms of the agreements, the Company also has the right to  
repurchase the redeemable preferred interests at any time prior to an MLP       
Offering.                                                                       

During fiscal 1999, the Company granted to four employees options to      
purchase an aggregate of 1.7025% of the common interest of the Company for an   
aggregate exercise price of $150,000. The exercise price of the options         
approximated the fair market value of the common interests at the date of       
grant. The options become exercisable five years from the date of grant except  
upon a change of control, as defined in the option agreement, and expire on the 
earlier of the employee's termination of service or ten years from the date of  

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

grant. Pro forma net income (loss), assuming the Company had applied the fair-  
value method of SFAS No. 123, "Accounting for Stock Based Compensation" in      
measuring the compensation costs associated with these options would not be     
materially different from reported net income (loss).                           

8. Employee Benefit Plans                                                       

The Company'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 the Company. Matching company        
contributions were $21, $21 and $52 in 1998, 1999 and 2000, respectively.       

9. Commitments                                                                  

  The Company periodically enters into agreements to purchase fixed quantities
of liquid propane at fixed prices with suppliers. At September 30, 2000, the    
total of these firm purchase commitments was approximately $26,149.             

10. Joint Venture                                                               

  On October 29, 1999, the Company entered into a joint venture with Volunteer
First Services, Inc. to form Volunteer Energy, LLC to provide propane and       
related services to private residences, businesses and governmental entities in 
certain geographic areas of Tennessee. The Company accounts for its 50%         
investment in Volunteer Energy, LLC under the equity method as it does not have 
the ability to control the joint venture operations. As of September 30, 2000,  
the investment in Volunteer Energy, LLC was $109 and is included in other       
assets in the accompanying consolidated balance sheet. As part of the           
transaction, the Company contributed certain fixed assets to Volunteer Energy,  
LLC. Bradley earns a management fee of $2 per month and is reimbursed for other 
operating services based on rates stated in the agreement. The impact of this   
joint venture on the Company's operations is immaterial.                        

11. Segments                                                                    

The Company's financial statements reflect two reportable segments: retail
sales operations and wholesale sales operations. The Company'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 the Company's retail          
operations. The Company'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 from the wholesale segment   
to the retail segment 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 statements of cash flows,  
substantially all relate to the retail sales segment. The Company does not      
report property, plant and equipment, intangible assets, and depreciation and   
amortization by segment to the CODM.                                            

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenues, gross profit and identifiable assets for each of the Company's  
reportable segments are presented below.                                        

                                                                [Download Table]

                                        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

                                                                [Download Table]

                                        Six Months Ended March 31, 2000      
                                   ------------------------------------------
                                     Retail   Wholesale                      
                                     Sales      Sales    Intersegment        
                                   Operations Operations Eliminations  Total 
                                   ---------- ---------- ------------ -------
                                                                             
Revenues..........................  $14,986    $40,841     $(5,370)   $50,457
Gross profit......................    7,663      1,309        (569)     8,403
Identifiable assets...............    4,926     11,642      (6,043)    10,525

                                                                [Download Table]

                                         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

                                                                [Download Table]

                                         Year Ended September 30, 1999       
                                   ------------------------------------------
                                     Retail   Wholesale                      
                                     Sales      Sales    Intersegment        
                                   Operations Operations Eliminations  Total 
                                   ---------- ---------- ------------ -------
                                                                             
Revenues..........................   $9,784    $10,276      $(925)    $19,135
Gross profit......................    4,870        511        --        5,381
Identifiable assets...............    2,993      8,032       (925)     10,100

12. Subsequent Events                                                           

During January 2001, the Company 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 the Company's credit facilities described in Note 4 on a long-   
term basis and complete the acquisition discussed below. Further, as discussed  
in Note 4, the Company negotiated an amended credit facility in January 2001.   

 In connection with this issuance of redeemable Class A preferred interests,
the Company issued a warrant to one of the investors (a current member) to      
acquire an additional $2,000 of Class A preferred interests at the same         
valuation used in the related January 2001 issuance of Class A preferred        
interests discussed above. The warrant is exercisable immediately and expires   
on March 31, 2001 if unexercised. The Company must approve the exercise of      
greater than $1,500 of the warrant and has the ability to require the exercise  
of the warrant. In March 2001, the investor exercised the warrant for $1,500    
(unaudited).                                                                    

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INERGY PARTNERS, LLC AND SUBSIDIARIES 
(a subsidiary of Inergy Holdings, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

These preferred interests are automatically convertible into senior       
subordinated units of an MLP in the event of an MLP Offering. The conversion    
rates were determined as of the issuance date based on negotiations between the 
Company and the third party investors and are 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 ultimate unit price in any MLP Offering.    
The beneficial conversion feature present in these preferred interest issuances 
in January and March of 2001, valued at $6.6 million, will be recognized upon   
completion of the MLP Offering in a manner consistent with that described in    
Note 7.                                                                         

On January 12, 2001, the Company 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 was effective       
January 1, 2001 and the Company's results of operations for the six month       
period ended March 31, 2001 include the Hoosier Propane Group operating results 
from the effective date. 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 the    
redeemable Class A preferred interests discussed above, 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. This acquisition will be      
accounted for using the purchase method of accounting.                          

The redeemable preferred interests discussed above provide the holders the
option to require the Company 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 is redeemable in an amount        
between one and two times face value at issuance, depending on the Company's    
operating performance, as defined in the agreement. The preferred interest      
issued to certain former owners of the Hoosier Propane Group is redeemable in   
amount equal to face value at issuance plus any unpaid dividends. No amounts    
are required to be redeemed during the next five years. As provided for in the  
agreement, 25% of the issuance to certain former owners of the Hoosier Propane  
Group may be redeemed by the holders on or after the fifth anniversary of the   
issuance and another 25% may be redeemed on or after the sixth anniversary of   
the issuance, with the balance being redeemable on or after the seventh         
anniversary of the issuance. The Company also has the right to repurchase the   
redeemable preferred interests at any time prior to an MLP Offering.            

13. Initial Public Offering of Common Units                                     

Inergy, L.P. (the "Partnership") was formed March 7, 2001, as a Delaware  
limited partnership. The Partnership was formed to acquire, own and operate the 
propane business and substantially all of the assets of the Company. 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 will be conducted through a subsidiary operating company, Inergy     
Propane, LLC (the "Operating Company").                                         

The Partnership intends to offer 1,600,000 common units, representing     
limited partner interests in the Partnership, to the public and to concurrently 
issue subordinated units representing additional limited partner interests in   
the Partnership to an affiliate of Holdings and to Class A preferred interest   
holders of the Company, and a 2% general partner interest in the Partnership    
and the Operating Company, on a combined basis, to an affiliate of Holdings.    

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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                                                                     

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HOOSIER PROPANE GROUP 

COMBINED BALANCE SHEETS 
(In thousands, except share data) 

                                                                [Download Table]

                                                 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. 

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HOOSIER PROPANE GROUP 

COMBINED STATEMENTS OF INCOME 
(In thousands)

                                                                [Download Table]

                                  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. 

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HOOSIER PROPANE GROUP 

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY 
(In thousands)

                                                                [Download Table]

                                            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. 

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HOOSIER PROPANE GROUP 

COMBINED STATEMENTS OF CASH FLOWS 
(In thousands)

                                                                [Download Table]

                                 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. 

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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.                             

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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:                                                                      

                                                                [Download Table]

                                                   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:                               

                                                                [Download Table]

                                                                         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.                                                     

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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.                                                                

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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.                                                       

                                                                [Download Table]

                                                                   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    

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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:                                 

                                                                [Download Table]

                                                  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                                                                       

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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:                                     

                                                                [Download Table]

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:                                                   

                                                                [Download Table]

                                                      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                                                                    

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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.                         

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders                                         
Country Gas Company, Inc.                                                       

  We have audited the accompanying balance sheets of Country Gas Company, Inc.
("Country Gas") as of May 31, 1999 and 2000, and the related statements of      
income, stockholders' equity and cash flows for each of the three years in the  
period ended May 31, 2000. These financial statements are the responsibility of 
Country Gas'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 Country Gas Company, Inc.   
at May 31, 1999 and 2000, and the results of its operations and its cash flows  
for each of the three years in the period ended May 31, 2000, in conformity     
with accounting principles generally accepted in the United States.             

                         /s/ ERNST & YOUNG LLP

Kansas City, Missouri                                                           
January 26, 2001                                                                

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COUNTRY GAS COMPANY, INC. 

BALANCE SHEETS
(In thousands, except share data) 

                                                                [Download Table]

                                                                  May 31,      
                                                              ---------------- 
                                                               1999     2000   
                                                              -------  ------- 
                                                                               
                           ASSETS                                              
Current assets:                                                                
  Cash and cash equivalents.................................. $ 2,029  $ 1,797 
  Accounts receivable, less allowance for uncollectible                        
   accounts of $0 in 1999 and $20 in 2000....................     637      972 
  Inventories................................................      28       55 
  Prepaid expenses and other current assets..................      10       38 
  Current portion of note receivable from related party (Note                  
   2)........................................................      80       80 
                                                              -------  ------- 
Total current assets.........................................   2,784    2,942 
Property, plant and equipment, at cost:                                        
  Office furniture and equipment.............................     239      249 
  Vehicles...................................................   1,672    1,758 
  Tanks and plant equipment..................................   3,373    3,486 
  Leasehold improvements.....................................      88      160 
                                                              -------  ------- 
                                                                5,372    5,653 
  Less accumulated depreciation..............................  (2,807)  (3,127)
                                                              -------  ------- 
Net property, plant and equipment............................   2,565    2,526 
Note receivable, less current portion from related party                       
 (Note 2)....................................................     300      220 
Federal tax deposit..........................................     445      490 
                                                              -------  ------- 
Total assets................................................. $ 6,094  $ 6,178 
                                                              =======  ======= 

            LIABILITIES AND STOCKHOLDERS' EQUITY                               

Current liabilities:                                                           
  Accounts payable........................................... $   --   $   108 
  Accrued salaries and wages.................................     217       78 
  State income taxes payable.................................      33       27 
  Other accrued expenses.....................................       8        1 
  Customer deposits..........................................      26       97 
                                                              -------  ------- 
Total current liabilities....................................     284      311 

Stockholders' equity:                                                          
  Common stock, no par value:                                                  
    Authorized shares--100,000                                                 
    Issued shares--2,000.....................................     262      262 
  Retained earnings..........................................   5,564    5,621 
  Less 700 shares of treasury stock, at cost.................     (16)     (16)
                                                              -------  ------- 
Total stockholders' equity...................................   5,810    5,867 
                                                              -------  ------- 
Total liabilities and stockholders' equity................... $ 6,094  $ 6,178 
                                                              =======  ======= 

See accompanying notes. 

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COUNTRY GAS COMPANY, INC. 

STATEMENTS OF INCOME
(In thousands)

                                                                [Download Table]

                                                            Year Ended May 31, 
                                                           --------------------
                                                            1998   1999   2000 
                                                           ------ ------ ------
                                                                               
Revenues:                                                                      
  Propane................................................. $7,458 $7,724 $8,982
  Other...................................................    709    763    659
                                                           ------ ------ ------
                                                            8,167  8,487  9,641
Cost of product sold......................................  3,396  3,181  4,672
                                                           ------ ------ ------
Gross profit..............................................  4,771  5,306  4,969
Operating and administrative expenses.....................  2,755  3,003  3,176
Depreciation..............................................    312    354    342
                                                           ------ ------ ------
Operating income..........................................  1,704  1,949  1,451
Other income (expense):                                                        
  Interest income.........................................    165    176    145
  Gain on sale of product line (Note 5)...................    --     260    -- 
  Gain on sale of property, plant and equipment...........     26     44     21
                                                           ------ ------ ------
Net income................................................ $1,895 $2,429 $1,617
                                                           ====== ====== ======

See accompanying notes. 

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COUNTRY GAS COMPANY, INC. 

STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except per share data) 

                                                                [Download Table]

                                                                       Total    
                                         Common Retained  Treasury Stockholders'
                                         Stock  Earnings   Stock      Equity    
                                         ------ --------  -------- -------------
                                                                                
Balance at May 31, 1997.................  $262  $ 5,790     $(16)     $ 6,036   
  Net income............................   --     1,895      --         1,895   
  Dividends ($1,300 per share)..........   --    (1,690)     --        (1,690)  
                                          ----  -------     ----      -------   
Balance at May 31, 1998.................   262    5,995      (16)       6,241   
  Net income............................   --     2,429      --         2,429   
  Dividends ($1,430 per share)..........   --    (2,860)     --        (2,860)  
                                          ----  -------     ----      -------   
Balance at May 31, 1999.................   262    5,564      (16)       5,810   
  Net income............................   --     1,617      --         1,617   
  Dividends ($780 per share)............   --    (1,560)     --        (1,560)  
                                          ----  -------     ----      -------   
Balance at May 31, 2000.................  $262  $ 5,621     $(16)     $ 5,867   
                                          ====  =======     ====      =======   

See accompanying notes. 

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COUNTRY GAS COMPANY, INC. 

STATEMENTS OF CASH FLOWS
(In thousands)

                                                                [Download Table]

                                                       Year Ended May 31,      
                                                     ------------------------- 
                                                      1998     1999     2000   
                                                     -------  -------  ------- 
                                                                               
Operating activities                                                           
Net income.........................................  $ 1,895  $ 2,429  $ 1,617 
Adjustments to reconcile net income to net cash                                
 provided by operating activities:                                             
  Depreciation.....................................      312      354      342 
  Provision for uncollectible accounts.............       44       46       73 
  Gain on sale of property, plant and equipment....      (26)     (44)     (21)
  Gain on sale of product line.....................      --      (260)     --  
  Changes in operating assets and liabilities:                                 
    Accounts receivable............................      194       13     (409)
    Inventories....................................       17       (9)     (27)
    Prepaid expenses and other current assets......      125      (10)     (28)
    Other noncurrent assets........................      --         6      (45)
    Accounts payable...............................      (22)      (4)     108 
    Accrued expenses...............................       18      131     (146)
    State income taxes payable.....................       (2)       5       (6)
    Customer deposits..............................       (2)     (62)      71 
                                                     -------  -------  ------- 
Net cash provided by operating activities..........    2,553    2,595    1,529 
Investing activities                                                           
Purchases of property, plant and equipment.........     (524)    (498)    (331)
Proceeds from sale of property, plant and                                      
 equipment.........................................       78       44       50 
Proceeds from the sale of product line.............      --       260      --  
Loan to related party..............................      --      (400)     --  
Collections on note receivable from related party..      --        20       80 
                                                     -------  -------  ------- 
Net cash used in investing activities..............     (446)    (574)    (201)
Financing activities                                                           
Dividends paid.....................................   (1,690)  (2,860)  (1,560)
                                                     -------  -------  ------- 
Net increase (decrease) in cash....................      417     (839)    (232)
Cash and cash equivalents at beginning of year.....    2,451    2,868    2,029 
                                                     -------  -------  ------- 
Cash and cash equivalents at end of year...........  $ 2,868  $ 2,029  $ 1,797 
                                                     =======  =======  ======= 

See accompanying notes. 

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COUNTRY GAS COMPANY, INC. 

NOTES TO FINANCIAL STATEMENTS 
May 31, 2000
(In thousands except share data)

1. Summary of Significant Accounting Policies                                   

Nature of Operations                                                          

  Country Gas Company, Inc. ("Country Gas") is an S corporation that sells and
distributes propane gas to industrial and domestic users. Country Gas serves    
the northern part of Illinois, including the Chicago area, and has been in      
business since 1963. Country Gas sells to households that use propane for       
heating, industrial customers that use propane to power machinery and           
commercial customers that use propane as a temporary heating source during      
building construction.                                                          

Concentration of Credit Risk                                                  

Credit is generally extended to retail customers in connection with the   
delivery of propane into customer owned gas storage tanks. Provisions for       
uncollectible accounts are reflected in the financial statements and have       
consistently been within management's expectations.                             

Use of Estimates                                                              

The preparation of 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 financial     
statements and accompanying notes. Actual results could differ from those       
estimates.                                                                      

Revenue Recognition                                                           

Sales of propane are recognized at the time the 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.           

Cash Equivalents                                                              

  Cash equivalents are defined as short-term, highly liquid investments with a
maturity of three months or less when purchased and are stated at cost, which   
approximates market.                                                            

Inventories                                                                   

  Inventories, which mainly consist of liquid propane, are stated at the lower
of cost, determined using the first-in, first-out method, or market.            

Property, Plant and Equipment                                                 

  Property, plant and equipment are recorded at cost. Depreciation is computed
using the straight-line methodover the assets' estimated useful lives, as       
follows:                                                                        

                                                                [Download Table]

                                                                        Years
                                                                        -----
                                                                             
Office furniture and equipment.........................................   4-8
Vehicles...............................................................   5-7
Tanks and plant equipment..............................................  5-30
Leasehold improvements................................................. 10-15

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COUNTRY GAS COMPANY, INC. 

NOTES TO FINANCIAL STATEMENTS (Continued) 

Income Taxes                                                                  

The stockholders have elected to have Country Gas treated as an S         
corporation for federal income tax purposes under the Internal Revenue Code, as 
well as for purposes of state income taxes. Accordingly, Country Gas does not   
pay corporate tax on its income for federal purposes, nor in states in which    
the Company operates as an S corporation. Country Gas's stockholders include    
their pro rata share of Country Gas's taxable income in their individual income 
tax returns for such jurisdictions, and Country Gas pays dividends to its       
stockholders in amounts sufficient to cover the taxes resulting from such       
taxable income being included in the stockholders' individual income tax        
returns. State income taxes are payable, based on a fixed percentage of taxable 
income, to the state of Illinois.                                               

Because Country Gas has elected to maintain a fiscal year end of May 31,  
Country Gas must maintain a tax deposit with the IRS based on prior year        
earnings. The deposit is reported as a noncurrent asset on the accompanying     
balance sheets.                                                                 

Customer Deposits                                                             

Customer deposits primarily represent cash received by Country Gas from   
advance payments from certain propane customers.                                

Advertising Costs                                                             

Country Gas expenses advertising costs as incurred. Advertising expenses  
amounted to $38, $32 and $45 for the years ended May 31, 1998, 1999 and 2000,   
respectively, and are included in selling, general and administrative expenses  
in the accompanying statements of income.                                       

2. Related Party Transactions                                                   

During fiscal year 1999, Country Gas loaned $400 to a partnership owned by
Country Gas's stockholders. The funds were used to purchase land adjacent to    
Country Gas's existing facilities. The unsecured note receivable matures on     
March 15, 2004 and provides for quarterly principal payments, totaling $80 per  
year, plus interest at 7%. For the years ended May 31, 1999 and 2000, Country   
Gas recorded interest income of $7 and $10, respectively, in connection with    
the unsecured note receivable. Leases with a related party are described in     
Note 3.                                                                         

3. Leases                                                                       

  Country Gas has entered into noncancelable operating lease agreements with a
stockholder for the lease of two facilities.                                    

  Future minimum lease payments under these operating leases for the next five
years ending May 31 are as follows:                                             

                                                                [Download Table]

Year Ending May 31,                                                          
-------------------                                                          
                                                                             
2001.................................................................... $192
2002....................................................................  192
2003....................................................................  192
2004....................................................................  176
2005....................................................................  -- 
                                                                         ----
                                                                         $752
                                                                         ====

Total rent expense during the years ended May 31, 1998, 1999 and 2000 was 
$190, $197 and $192, respectively.                                              

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COUNTRY GAS COMPANY, INC. 

NOTES TO FINANCIAL STATEMENTS (Continued) 

4. Employee Benefit Plan                                                        
Country Gas has a discretionary profit-sharing plan covering substantially
all of its employees. During the fiscal years ended May 31, 1998, 1999 and      
2000, Country Gas made contributions to the plan of $115, $140 and $105,        
respectively.                                                                   

5. Sale of Product Line                                                         

In fiscal 1999, Country Gas's "Turftreet" product line, which provided the
application of liquid fertilizers and chemicals to lawns, was sold for          
approximately $260, yielding a gain of the same amount. This product line       
generated annual sales of approximately $260 with a gross margin of             
approximately 82%.                                                              

6. Subsequent Event                                                             

During November 1999, Country Gas signed a letter of intent whereby it    
agreed to sell substantially all of its assets to Inergy Partners, LLC for      
approximately $17,400 plus the value of the accounts receivable and inventory   
at the closing date. The sale closed effective June 1, 2000.                    

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors                                                          
Inergy Partners, LLC                                                            

We have audited the accompanying balance sheet of Inergy, L.P. as of March
7, 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, L.P. at March 7, 2001, in  
conformity with accounting principles generally accepted in the United States.  

                         /s/ ERNST & YOUNG LLP

Kansas City, Missouri                                                           
March 7, 2001                                                                   

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INERGY, L.P.

BALANCE SHEET 

                                                                [Download Table]
                                                                               
                                                                       March 7,
                                ASSETS                                   2001  
                                                                       --------
Current assets:                                                                
  Cash................................................................   $1,000
                                                                       --------
    Total assets......................................................   $1,000
                                                                       ========
                           PARTNERS' EQUITY                                    
Limited partner's equity.............................................. $    990
Non-Managing general partner's equity.................................       10
                                                                       --------
    Total partners' equity............................................ $  1,000
                                                                       ========

See accompanying note.

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INERGY, L.P.

NOTE TO BALANCE SHEET 

1. Nature of Operations                                                         

Inergy, L.P. is a Delaware limited partnership formed on March 7, 2001 to 
ultimately acquire, own and operate the propane business and substantially all  
of the assets of Inergy Partners, LLC. In order to simplify Inergy, L.P.'s      
obligations under the laws of selected jurisdictions in which Inergy, L.P. will 
conduct business, Inergy, L.P.'s activities will be conducted through a 100%-   
owned operating company.                                                        

Inergy, L.P. intends to offer 1,600,000 common units, representing limited
partner interests, pursuant to a public offering and to concurrently issue (i)  
incentive distribution rights to Inergy Holdings, LLC and (ii) a 2% non-        
managing general partner interest in Inergy, L.P. to Inergy Partners, LLC,      
(iii) 1,306,911 senior subordinated units and 572,542 junior subordinated units 
to New Inergy Propane, LLC and (iv) 2,006,456 senior subordinated units to an   
investor group and former owners of acquired businesses.                        

  Inergy Partners, LLC contributed $10 as the non-managing general partner and
$990 as the limited partner on March 7, 2001. There have been no other          
transactions involving Inergy, L.P. as of March 7, 2001.                        

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors                                                          
Inergy Partners, LLC                                                            

  We have audited the accompanying balance sheet of Inergy GP, LLC as of March
2, 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 March 2, 2001,   
in conformity with accounting principles generally accepted in the United       
States.                                                                         

                         /s/ ERNST & YOUNG LLP

Kansas City, Missouri                                                           
March 2, 2001                                                                   

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INERGY GP, LLC

BALANCE SHEET 

                                                                [Download Table]
                                                                                
                                                                        March 2,
                                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.

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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 March 2, 2001.                                                    

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                                                                      APPENDIX A

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

INERGY, L.P.

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                                          Page
                                                                          ----

                                  ARTICLE I                                   
                                 Definitions                                  

                                                                              
Section 1.1.  Definitions..............................................    A-1
Section 1.2.  Construction.............................................   A-16

                                  ARTICLE II                                  
                                 Organization                                 

Section 2.1.  Formation................................................   A-16
Section 2.2.  Name.....................................................   A-16
Section 2.3.  Registered Office; Registered Agent; Principal Office;          
               Other Offices...........................................   A-16
Section 2.4.  Purpose and Business.....................................   A-17
Section 2.5.  Powers...................................................   A-17
Section 2.6.  Power of Attorney........................................   A-17
Section 2.7.  Term.....................................................   A-18
Section 2.8.  Title to Partnership Assets..............................   A-18

                                 ARTICLE III                                  
                          Rights of Limited Partners                          

Section 3.1.  Limitation of Liability..................................   A-19
Section 3.2.  Management of Business...................................   A-19
Section 3.3.  Outside Activities of the Limited Partners...............   A-19
Section 3.4.  Rights of Limited Partners...............................   A-19

                                  ARTICLE IV                                  
       Certificates; Record Holders; Transfer of Partnership Interests;       
                     Redemption of Partnership Interests                      

Section 4.1.  Certificates.............................................   A-20
Section 4.2.  Mutilated, Destroyed, Lost or Stolen Certificates........   A-21
Section 4.3.  Record Holders...........................................   A-21
Section 4.4.  Transfer Generally.......................................   A-21
Section 4.5.  Registration and Transfer of Limited Partner Interests...   A-22
Section 4.6.  Transfer of the Managing General Partner's General              
               Partner Interest........................................   A-23
Section 4.7.  Transfer of Incentive Distribution Rights................   A-23
Section 4.8.  Restrictions on Transfers................................   A-23
Section 4.9.  Citizenship Certificates; Non-citizen Assignees..........   A-24
Section 4.10. Redemption of Partnership Interests of Non-citizen              
               Assignees...............................................   A-25

                                  ARTICLE V                                   
         Capital Contributions and Issuance of Partnership Interests          

Section 5.1.  Organizational Contributions.............................   A-26
Section 5.2.  Contributions by the Non-Managing General Partner and its       
               Affiliates..............................................   A-26
Section 5.3.  Contributions by Initial Limited Partners................   A-26
Section 5.4.  Interest and Withdrawal..................................   A-27
Section 5.5.  Capital Accounts.........................................   A-27
Section 5.6.  Issuances of Additional Partnership Securities...........   A-29

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                                                                           Page
                                                                           ----
                                                                               
Section 5.7.  Limitations on Issuance of Additional Partnership                
               Securities................................................  A-30
Section 5.8.  Conversion of Subordinated Units...........................  A-31
Section 5.9.  Limited Preemptive Right...................................  A-34
Section 5.10. Splits and Combinations....................................  A-34
Section 5.11. Fully Paid and Non-Assessable Nature of Limited Partner          
               Interests.................................................  A-35

                                  ARTICLE VI                                   
                        Allocations and Distributions                          

Section 6.1.  Allocations for Capital Account Purposes...................  A-35
Section 6.2.  Allocations for Tax Purposes...............................  A-41
Section 6.3.  Requirement and Characterization of Distributions;               
               Distributions to Record Holders...........................  A-43
Section 6.4.  Distributions of Available Cash from Operating Surplus.....  A-43
Section 6.5.  Distributions of Available Cash from Capital Surplus.......  A-44
Section 6.6.  Adjustment of Minimum Quarterly Distribution and Target          
               Distribution Levels.......................................  A-45
Section 6.7.  Special Provisions Relating to the Holders of Senior             
               Subordinated Units and Junior Subordinated Units..........  A-45
Section 6.8.  Special Provisions Relating to the Holders of Incentive          
               Distribution Rights.......................................  A-46
Section 6.9.  Entity-Level Taxation......................................  A-46

                                 ARTICLE VII                                   
                     Management and Operation of Business                      

Section 7.1.  Management.................................................  A-46
Section 7.2.  Certificate of Limited Partnership.........................  A-48
Section 7.3.  Restrictions on General Partners' Authority................  A-48
Section 7.4.  Reimbursement of the General Partners......................  A-49
Section 7.5.  Outside Activities.........................................  A-49
Section 7.6.  Loans from the General Partners; Loans or Contributions          
               from the Partnership; Contracts with Affiliates; Certain        
               Restrictions on the General Partners......................  A-50
Section 7.7.  Indemnification............................................  A-51
Section 7.8.  Liability of Indemnitees...................................  A-53
Section 7.9.  Resolution of Conflicts of Interest........................  A-53
Section 7.10. Other Matters Concerning the General Partners..............  A-55
Section 7.11. Purchase or Sale of Partnership Securities.................  A-55
Section 7.12. Registration Rights of the General Partners and their            
               Affiliates................................................  A-55
Section 7.13. Reliance by Third Parties..................................  A-57

                                 ARTICLE VIII                                  
                    Books, Records, Accounting and Reports                     

Section 8.1.  Records and Accounting.....................................  A-57
Section 8.2.  Fiscal Year................................................  A-57
Section 8.3.  Reports....................................................  A-58

                                  ARTICLE IX                                   
                                 Tax Matters                                   

Section 9.1.  Tax Returns and Information................................  A-58
Section 9.2.  Tax Elections..............................................  A-58
Section 9.3.  Tax Controversies..........................................  A-58
Section 9.4.  Withholding................................................  A-59

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                                                                           Page
                                                                           ----

                                  ARTICLE X                                    
                            Admission of Partners                              

                                                                               
Section 10.1.  Admission of Initial Limited Partners.....................  A-59
Section 10.2.  Admission of Substituted Limited Partner..................  A-59
Section 10.3.  Admission of Successor General Partners...................  A-60
Section 10.4.  Admission of Additional Limited Partners..................  A-60
Section 10.5.  Amendment of Agreement and Certificate of Limited               
                Partnership..............................................  A-60

                                  ARTICLE XI                                   
                      Withdrawal or Removal of Partners                        

Section 11.1.  Withdrawal of the Managing General Partner................  A-60
Section 11.2.  Removal of the Managing General Partner...................  A-62
Section 11.3.  Interest of Departing Partner and Successor General             
                Partners.................................................  A-62
Section 11.4.  Withdrawal of Non-Managing General Partner................  A-63
Section 11.5.  Termination of Subordination Period, Conversion of Senior       
                Subordinated Units and Junior Subordinated Units and           
                Extinguishment of Cumulative Common Unit Arrearages......  A-64
Section 11.6.  Withdrawal of Limited Partners............................  A-64

                                 ARTICLE XII                                   
                         Dissolution and Liquidation                           

Section 12.1.  Dissolution...............................................  A-64
Section 12.2.  Continuation of the Business of the Partnership After           
                Dissolution..............................................  A-65
Section 12.3.  Liquidator................................................  A-65
Section 12.4.  Liquidation...............................................  A-66
Section 12.5.  Cancellation of Certificate of Limited Partnership........  A-66
Section 12.6.  Return of Contributions...................................  A-67
Section 12.7.  Waiver of Partition.......................................  A-67
Section 12.8.  Capital Account Restoration...............................  A-67

                                 ARTICLE XIII                                  
          Amendment of Partnership Agreement; Meetings; Record Date            

Section 13.1.  Amendment to be Adopted Solely by the Managing General          
                Partner..................................................  A-67
Section 13.2.  Amendment Procedures......................................  A-68
Section 13.3.  Amendment Requirements....................................  A-68
Section 13.4.  Special Meetings..........................................  A-69
Section 13.5.  Notice of a Meeting.......................................  A-69
Section 13.6.  Record Date...............................................  A-69
Section 13.7.  Adjournment...............................................  A-70
Section 13.8.  Waiver of Notice; Approval of Meeting; Approval of              
                Minutes..................................................  A-70
Section 13.9.  Quorum....................................................  A-70
Section 13.10. Conduct of a Meeting......................................  A-71
Section 13.11. Action Without a Meeting..................................  A-71
Section 13.12. Voting and Other Rights...................................  A-71

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                                                                [Download Table]

                                                                           Page
                                                                           ----

                                 ARTICLE XIV                                   
                                    Merger                                     

                                                                               
Section 14.1.  Authority................................................   A-72
Section 14.2.  Procedure for Merger or Consolidation....................   A-72
Section 14.3.  Approval by Limited Partners of Merger or Consolidation..   A-73
Section 14.4.  Certificate of Merger....................................   A-73
Section 14.5.  Effect of Merger.........................................   A-73

                                  ARTICLE XV                                   
                  Right to Acquire Limited Partner Interests                   

Section 15.1.  Right to Acquire Limited Partner Interests...............   A-74

                                 ARTICLE XVI                                   
                              General Provisions                               

Section 16.1.  Addresses and Notices....................................   A-75
Section 16.2.  Further Action...........................................   A-76
Section 16.3.  Binding Effect...........................................   A-76
Section 16.4.  Integration..............................................   A-76
Section 16.5.  Creditors................................................   A-76
Section 16.6.  Waiver...................................................   A-76
Section 16.7.  Counterparts.............................................   A-76
Section 16.8.  Applicable Law...........................................   A-76
Section 16.9.  Invalidity of Provisions.................................   A-77
Section 16.10. Consent of Partners......................................   A-77

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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  , 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.                                                 

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"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 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.                             

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  "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,                                                               

  (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                                                                         

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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).                    

  "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.                                                                     

  "Certificate of Limited Partnership" means, in connection with the formation
of the Partnership, the Certificate of Limited Partnership of the Partnership   
filed with the Secretary of State of the State of Delaware, as such Certificate 
of Limited Partnership may be amended, supplemented or restated from time to    
time.                                                                           

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"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 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).              

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"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).                                                           

"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" shall mean, 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, if any, 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, if any, 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.     

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  "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.                   

"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.                                                           

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"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 (other than of  
holders of the Incentive Distribution Rights), 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.        

"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.             

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"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 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                      

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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.                                            

 "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.                                                                     

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 "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 (i) to receive 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 amount 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).                                      

 "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.         

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"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.  

  "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                   

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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 Non-       
Managing General Partner's Share of Additional Book Basis Derivative Items with 
respect to its General Partner Interest for each prior taxable period, and      
(iii) with respect to the holders of Incentive Distribution Rights, the excess  
of (a) the Net Positive Adjustments of the holders of Incentive Distribution    
Rights as of the end of such period over (b) the sum of the 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 (other than of  
holders of the Incentive Distribution Rights), 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 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                    

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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.                                                            

"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 and any other Outstanding Units that are senior or equal 
in right of distribution to the Junior Subordinated Units during such       
periods 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, 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.                               

"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.                                           

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  "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 Liquidation Target 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.                                                       

 "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                                      

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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 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                                           

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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, 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                                              

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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 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.                                    

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   

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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.                                                 

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;                                                                   

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    (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).                                                               

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 the 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.                                                       

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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;                                                                  

  (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                   

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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.                      

(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 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.                                 

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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, the
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.                                                        

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 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, 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                                            

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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 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).               

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  (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.                                                          

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.                

  (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.                             

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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,
the 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 Partnership 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 interests 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. 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         

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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 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.                                                                    

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(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 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.    

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(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.                                                           

  (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                                               

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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 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.        

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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   
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 entitled 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 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 Arrearange 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     
Arrearge 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                                                               

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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 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 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-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 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 Interests during such       
periods; and                                                            

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      (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).             

(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   
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                      

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$2.80 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;                                                                

(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.                                                               

  (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.                               

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(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.                                        

 (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             

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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;           

         (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;                    

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            (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 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.                          

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   (d)  Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such       
taxable period:                                                             

(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 1/98th of the sum of the amounts allocated
in clause (1) above.                      

            (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),      

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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 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              

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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 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

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             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 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 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)                                                                             

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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) 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                   

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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 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;                                                                    

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(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;    

(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               

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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.                                             

    (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.                                        

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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.                           

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;                                         

(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;                

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(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;                               

(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   

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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 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)                                    

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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), 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.                                                 

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   (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 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 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).                                   

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(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 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,                                                           

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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 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
Partners 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.             

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(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 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 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                                                                           

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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 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.                                                   

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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 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            

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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) 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                                                

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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.                            

(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 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.                                                                             

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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 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                 

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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.                                                                 

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.                                      

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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 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;                           

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    (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 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 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        

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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 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, 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 the Non-Managing General Partner ((x), (y) and (z) are 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                

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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.                                                            

   (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                  

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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 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:                              

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(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;                                                   

  (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 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         

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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         
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.        

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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.                

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;                                                                  

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 (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;                   

(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, 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                

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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 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                       

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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 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 Limited Partner Interests 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.                              

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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.                                     

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 

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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 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 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                                                   

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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 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;         

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   (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 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                              

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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 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,                                            

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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        
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.                                                                          

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.                                                                            

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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] 

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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: ______________________________

                        INERGY HOLDINGS, LLC

                                         By: _________________________________
                                         Name: _______________________________
                                         Title: ______________________________

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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

as Transfer Agent and Registrar                General Partner                  

By:                                      By:                                    

Authorized Signature                                                
       Name:

     By:
                                   Secretary

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[Reverse of Certificate]

ABBREVIATIONS 

  The following abbreviations, when used in the inscription on the face of the
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       under Uniform Gifts/Transfers        
of survivorship and not as          to CD 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.         

 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.                                                       

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FOR VALUE RECEIVED, hereby assigns, conveys, sells and transfers unto     

(Please print or typewrite name and       (Please insert Social Security or     
address of Assignee)                      other 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 GUARANTEED BY A   (Signature)                              
MEMBER FIRM OF THE NATIONAL                                                     
ASSOCIATION OF SECURITIES DEALERS,                                              
INC. OR BY A COMMERCIAL BANK OR                                                 
TRUST COMPANY SIGNATURE(S)                                                      
GUARANTEED                                                                      

         (Signature)

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.                                                            

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                                                                      APPENDIX B

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                   Signature of Assignee                
identifying number                                                              

Purchase Price including commissions,      Name and Address of Assignee         
if any                                                                          

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 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).                                                                

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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, 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.                          

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                                                                    Appendix C

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 general 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 incentive              
distribution right or any other partnership interest will be the amount which   
that capital account                                                            

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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).                                

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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) 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 interests in Inergy,    
L.P. and the operating company; and                                     

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(3) there are no outstanding cumulative common units arrearages.  

  (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.                                      

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                                                                      Appendix D

PRO FORMA AVAILABLE CASH FROM OPERATING SURPLUS 

The following table shows the calculation of pro forma available cash from
operating surplus for the year ended September 30, 2000 and the twelve months   
ended March 31, 2001, and represents the combined results of operations Inergy  
Partners, LLC, the Hoosier Propane Group and Country Gas Company, Inc., as      
adjusted for the offering. These results should be read in conjunction with     
"Cash Available for Distribution," the Inergy, L.P. Unaudited Pro Forma         
Consolidated Statement of Operations, the Inergy Partners, LLC Financial        
Statements, the Country Gas Company, Inc. Financial Statements, and the Hoosier 
Propane Group Financial Statements.                                             

                                                                [Download Table]

                                                                  Twelve Months 
                                                   Year Ended         Ended     
                                               September 30, 2000 March 31, 2001
                                               ------------------ --------------
                                                          (unaudited)           
                                                        (in thousands)          
                                                                                
Pro forma income (loss) before income taxes..       $  (187)         $ 7,900    
Pro forma depreciation and amortization......         7,806            7,958    
Pro forma net changes in working capital                                        
 accounts including liabilities from price                                      
 risk management activities(a)(b)............         3,364           (3,800)   
                                                    -------          -------    
Pro forma net cash provided by operating                                        
 activities..................................        10,983           12,058    
Pro forma cash interest expense..............         5,486            5,379    
Pro forma cash interest income...............          (239)            (248)   
Pro forma net changes in working capital                                        
 accounts including liabilities from price                                      
 risk management activities(a)(b)............        (3,364)           3,800    
                                                    -------          -------    
Pro forma EBITDA(c)..........................        12,866           20,989    
Less:                                                                           
  Pro forma cash interest expense............        (5,486)          (5,379)   
  Pro forma maintenance capital                                                 
   expenditures(d)...........................        (1,234)          (1,162)   
Plus:                                                                           
  Pro forma cash interest income.............           239              248    
                                                    -------          -------    
Pro forma available cash from operating                                         
 surplus(e)(f)(g)............................       $ 6,385          $14,696    
                                                    =======          =======    

--------                                                                        
(a)   Our working capital is affected by the seasonality of the propane         
business, however, working capital has generally been positive on a 
historical basis. From time to time we utilize our revolving credit 
facility to meet short term working capital needs such as those     
associated with the timing of accounts receivable collections.      
     Substantially all of our remaining investing and financing activities are
    related to the acquisition of retail propane companies and do not affect
operating cash flows.                                               
(b)   Changes in the assets and liabilities from trading and price risk         
   management activities, which are current assets and liabilities, 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.                                              
(c) "EBITDA" shown in the table above is defined as income before income taxes, 
   plus interest, 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 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 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.   
(d) We determined these amounts by combining actual amounts of maintenance      
capital expenditures for Inergy Partners, LLC, Country Gas Company, Inc.
and the Hoosier Propane Group.                                          

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(e) The pro forma adjustments in the pro forma financial statements are based   
   upon currently available information and certain estimates and assumptions.
  The pro forma financial statements do not purport to present the financial
position or results of operations of Inergy, L.P. had the acquisition of
Country Gas Company, Inc. and the Hoosier Propane Group and the         
 transactions to be effected at the closing of this offering actually been
completed as of the date indicated. Furthermore, the pro forma financial
  statements are based on accrual accounting concepts whereas available cash
from operating surplus is defined in the partnership agreement on a cash
  accounting basis. As a consequence, the amount of pro forma cash available
   from operating surplus shown above should be viewed as a general indication
of the amounts of available cash from operating surplus that may in fact
  have been generated by Inergy, L.P. had it been formed in earlier periods.
(f) Upon completion of the offering, we anticipate that we will incur           
   incremental general and administrative expenses (e.g. costs associated with
  reports to unitholders, preparation of tax information for unitholders and
   investor relations) at an annual rate of approximately $500,000, which have
not been included in the pro forma amounts above.                       
(g) The amount of available cash from operating surplus needed to pay the       
minimum quarterly distribution for four quarters on the common units and
   subordinated units to be outstanding immediately after this offering and on
the 2% general partner interest is approximately:                       

                                                                [Download Table]

                                                               Four Quarters 
                                                               --------------
                                                               (in thousands)
                                                                             
Common units..................................................    $ 3,840    
  2% general partner interest.................................         79    
Senior subordinated units.....................................      7,952    
  2% general partner interest.................................        162    
Junior subordinated units.....................................      1,374    
  2% general partner interest.................................         28    
                                                                  -------    
  Total.......................................................    $13,435    
                                                                  =======    

 Our pro forma available cash from operating surplus for the twelve months
ended March 31, 2001 would have been sufficient to allow us to pay the  
minimum quarterly distribution on all of the common units, all of the   
   senior subordinated units and all of the junior subordinated units. Our pro
forma available cash from operating surplus for the fiscal year ended   
September 30, 2000 would have been sufficient to allow us to pay the    
   minimum quarterly distribution on all of our common units and approximately
  30% of the minimum quarterly distribution on the senior subordinated units
and no distribution on the junior subordinated units.                   

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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 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 

                                                                [Download Table]

                                                                          Page
                                                                          ----
                                                                              
Guide to Reading this Prospectus.........................................  iv 
Prospectus Summary.......................................................   1 
Risk Factors.............................................................  11 
Use of Proceeds..........................................................  20 
Capitalization...........................................................  21 
Dilution.................................................................  22 
Cash Distribution Policy.................................................  23 
Cash Available for Distribution..........................................  31 
Unaudited Pro Forma Consolidated Financial Statements....................  33 
Selected Historical Financial and Operating Data.........................  42 
Management's Discussion and Analysis of Financial Condition and Results       
 of Operations...........................................................  46 
Business.................................................................  61 
Management...............................................................  71 
Security Ownership of Certain Beneficial Owners and Management...........  78 
Organization of Inergy, L.P. Prior to and Immediately Following the           
 Offering................................................................  80 
Certain Relationships and Related Transactions...........................  83 
Conflicts of Interest and Fiduciary Responsibilities.....................  86 
Description of the Common Units..........................................  90 
Description of the Subordinated Units....................................  92 
The Partnership Agreement................................................  93 
Units Eligible For Future Sale........................................... 105 
Tax Considerations....................................................... 106 
Investment in Inergy, L.P. By Employee Benefit Plans..................... 120 
Underwriting............................................................. 121 
Validity of the Common Units............................................. 123 
Experts.................................................................. 123 
Where You Can Find More Information...................................... 124 
Forward-Looking Statements............................................... 124 
Index to Financial Statements............................................ F-1 
Appendix A--Form of Amended and Restated Agreement of Limited                 
 Partnership............................................................. A-1 
Appendix B--Application For Transfer of Common Units..................... B-1 
Appendix C--Glossary of Terms............................................ C-1 
Appendix D--Pro Forma Available Cash From Operating Surplus.............. D-1 

 Until August 19, 2001 (the 25th day after the date of this prospectus), all
dealers that buy, sell or trade our common units, whether or not participating  
in this offering, may be required to deliver a prospectus. This is in addition  
to the obligation of dealers to deliver a prospectus when acting as             
underwriters and with respect to their unsold allotments or subscriptions.      

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1,600,000 Common Units

Representing
Limited Partner Interests 

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

PROSPECTUS

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

A.G. Edwards & Sons, Inc. 

First Union Securities, Inc.

Raymond James 

July 25, 2001 

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