As filed with the Securities and Exchange Commission on June 13, 2002

                                       Registration Statement No. 333-89010

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                              Amendment No. 1

                                    to

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

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

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

                            2 Brush Creek Blvd.

                        Kansas City, Missouri 64112

                                 (816) 842-8181
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)

                                ---------------
                                John J. Sherman

                            2 Brush Creek Blvd.

                        Kansas City, Missouri 64112

                                 (816) 842-8181
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

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

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

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

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

                                ---------------
   The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

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

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

                Subject to completion, dated June 13, 2002

PROSPECTUS
                             1,400,000 Common Units

                                 [INERGY LOGO]

                     Representing Limited Partner Interests

                                  -----------

  We are offering 1,060,945 common units, and the selling unitholders are
offering 339,055 common units. We will not receive any proceeds from the sale
of the common units by the selling unitholders. Our common units are traded on
the Nasdaq National Market under the symbol "NRGY." On June 11, 2002, the last
reported sale price of our common units on the Nasdaq was $30.65 per common
unit.

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

                                  -----------

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

                                  -----------

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

                                  -----------

                           PRICE $   PER COMMON UNIT

                                  -----------

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

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

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

                                  -----------

A.G. Edwards & Sons, Inc.

           Raymond James

                         UBS Warburg
                                                        Wachovia Securities

                          Prospectus dated     , 2002

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

                               TABLE OF CONTENTS

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

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

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

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

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

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

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

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

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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
 OPERATIONS...............................................................   49
  General.................................................................   49
  Inergy, L.P. and Inergy Partners, LLC...................................   51
  Independent Propane Company.............................................   55
  Hoosier Propane Group...................................................   56
  Liquidity and Capital Resources.........................................   59
  Description of Indebtedness.............................................   61
  Environmental Matters...................................................   65
  Recent Accounting Pronouncements........................................   66
  Critical Accounting Policies............................................   66
  Quantitative and Qualitative Disclosure About Market Risk...............   67
  Propane Price Risk......................................................   67

BUSINESS..................................................................   70
  General.................................................................   70
  Recent Acquisitions.....................................................   70
  Industry Background and Competition.....................................   71
  Competitive Strengths...................................................   73
  Retail Operations.......................................................   74
  Wholesale Supply, Marketing and Distribution Operations.................   76

                                       i

                                                                            Page
                                                                            ----
                                                                         
  Transportation Assets, Truck Fabrication and Maintenance.................  77
  Supply...................................................................  77
  Pricing Policy...........................................................  77
  Billing and Collection Procedures........................................  78
  Properties...............................................................  78
  Trademark and Tradenames.................................................  78
  Employees................................................................  79
  Government Regulation....................................................  79
  Litigation...............................................................  80

MANAGEMENT.................................................................  81
  Our Managing General Partner Manages Inergy, L.P.........................  81
  Directors and Executive Officers of Inergy GP, LLC.......................  81
  Reimbursement of Expenses of the Managing General Partner................  83
  Compensation of Directors................................................  83
  Executive Compensation...................................................  84
  Employment Agreements....................................................  86
  Long-Term Incentive Plan.................................................  87
  Unit Purchase Plan.......................................................  88

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............  89

SELLING UNITHOLDERS........................................................  92

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................  93
  Related Party Transactions...............................................  93

CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES.......................  96
  Conflicts of Interest....................................................  96

DESCRIPTION OF THE COMMON UNITS............................................ 100
  The Units................................................................ 100
  Transfer Agent and Registrar Duties...................................... 100

DESCRIPTION OF THE SUBORDINATED UNITS...................................... 102
  Limited Voting Rights.................................................... 102
  Distributions Upon Liquidation........................................... 102

THE PARTNERSHIP AGREEMENT.................................................. 103
  Organization............................................................. 103
  Purpose.................................................................. 103
  Power of Attorney........................................................ 103
  Capital Contributions.................................................... 103
  Limited Liability........................................................ 104
  Issuance of Additional Securities........................................ 104
  Amendment of the Partnership Agreement................................... 105
  Action Relating to the Operating Company................................. 107
  Merger, Sale or Other Disposition of Assets.............................. 108
  Termination and Dissolution.............................................. 108
  Liquidation and Distribution of Proceeds................................. 108
  Withdrawal or Removal of the General Partners............................ 109
  Transfer of General Partner Interests.................................... 110
  Transfer of Incentive Distribution Rights................................ 110
  Transfer of Ownership Interests in General Partners...................... 111
  Change of Management Provisions.......................................... 111

                                       ii

                                                                            Page
                                                                            ----
                                                                         
  Limited Call Right....................................................... 111
  Meetings; Voting......................................................... 111
  Status as Limited Partner or Assignee.................................... 112
  Non-Citizen Assignees; Redemption........................................ 112
  Indemnification.......................................................... 113
  Books and Reports........................................................ 113
  Right to Inspect our Books and Records................................... 114
  Registration Rights...................................................... 114

UNITS ELIGIBLE FOR FUTURE SALE............................................. 115

TAX CONSIDERATIONS......................................................... 116
  Partnership Status....................................................... 116
  Limited Partner Status................................................... 118
  Tax Consequences of Unit Ownership....................................... 118
  Tax Treatment of Operations.............................................. 123
  Disposition of Common Units.............................................. 124
  Uniformity of Units...................................................... 125
  Tax-Exempt Organizations and Other Investors............................. 126
  Administrative Matters................................................... 127
  State, Local and Other Tax Considerations................................ 129

INVESTMENT IN INERGY, L.P. BY EMPLOYEE BENEFIT PLANS....................... 130

UNDERWRITING............................................................... 131

VALIDITY OF THE COMMON UNITS............................................... 133

EXPERTS.................................................................... 133

OTHER MATTERS.............................................................. 134

WHERE YOU CAN FIND MORE INFORMATION........................................ 134

FORWARD-LOOKING STATEMENTS................................................. 135

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

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

                                      iii

                       GUIDE TO READING THIS PROSPECTUS

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

  . Throughout this prospectus,

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

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

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

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

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

                                      iv

                               PROSPECTUS SUMMARY

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

                                  INERGY, L.P.

Our Business

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

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

Recent Developments

 Recent Acquisitions

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

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

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

   Secured Notes Offering. On June 7, 2002, our operating company, Inergy
Propane, LLC, issued $85.0 million of senior secured notes with a weighted
average interest rate of 9.07% and a weighted average maturity

                                       1

of 5.9 years. The senior secured notes are guaranteed by IPCH Acquisition
Corp., Inergy Propane's subsidiaries and us. We obtained an investment grade
rating of "BBB-" for the senior secured notes from Fitch Ratings Service. We
used the net proceeds from the senior secured notes offering to repay
indebtedness under our bank credit facility.

Summary of Risk Factors

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

 Risks Inherent in Our Business

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       2

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

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

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

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

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

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

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

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

 Tax Risks to Common Unitholders

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

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

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

Our Competitive Strengths

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

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

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

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

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

                                       3

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

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

  .  Flexible Financial Structure. We have a $75.0 million revolving credit
     facility for acquisitions and a $50.0 million revolving working capital
     facility. Upon completion of this offering, we expect to have available
     capacity of approximately $56.7 million under our acquisition facility
     and approximately $48.0 million under our working capital facility. We
     believe our available capacity under these facilities combined with our
     ability to fund acquisitions through the issuance of additional
     partnership interests will provide us with a flexible financial
     structure that will facilitate our acquisition strategy.

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

Distribution History

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

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

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

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

Industry Background

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

                                       4

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

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

                                       5

        SUMMARY OF CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

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

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

                      PARTNERSHIP STRUCTURE AND MANAGEMENT

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

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

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

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

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

  .  New Inergy Propane, LLC, a wholly-owned subsidiary of our non-managing
     general partner, owns 961,158 senior subordinated units and 507,063
     junior subordinated units, representing an aggregate limited partner
     interest in us of approximately 19.0% after this offering.

   Our principal executive offices are located at 2 Brush Creek Blvd., Kansas
City, Missouri 64112, and our phone number is (816) 842-8181.

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

                                       6

                                            
                                               ----------------------------------------------------
                                                   Ownership of Inergy, L.P. after the offering:
                                                 Common units...........................     47.7%
- ---------------------------                      Senior subordinated units..............     42.9%
     Public Unitholders                          Junior subordinated units..............      7.4%
  3,274,216 Common Units                         General partner interest...............      2.0%
- ---------------------------                                                                 ------
       |                                                                                    100.0%
       |                                                                                    ------
       |                                       -----------------------------------------------------
       |
       |        ----------------------------------------                              ------------------------------
       |                    Owners of Certain                                             Inergy Holdings, LLC
       |                   Acquired Businesses                                             and its affiliates
       |                   and Other Investors                                            404,601 Common Units
       |          2,352,209 Senior Subordinated Units            _________________        Incentive Distribution       __________
       |            65,479 Junior Subordinated Units             |                               Rights                         |
       |        ----------------------------------------         |                    ------------------------------            |
       |                  |                                      |                                    |                         |
       |                  |                                      |                                    |                         |
       |                  |                                      |                                    |                         |
       |                  |                          100% membership interest                         |                         |
       |                  |                                      |                                    |                         |
       |                  |                                      |                         100% membership interest             |
       |                  |                                      |                                    |                         |
       |                  |                          -------------------------               ---------------------              |
       |                  |                            Inergy Partners, LLC                     Inergy GP, LLC                  |
      42.5% limited       |                _______     (The Non-managing                        (The Managing                   |
     partner interest     |                |            General Partner)                        General Partner                 |
       |                  |                |         -------------------------               ---------------------              |
       |                  |                |                     |                                    |                         |
       |                  |                |          100% membership interest                        |                         |
       |                  |                |                     |                                    |                         |
       |                  |                |                     |                                    |                         |
       |                  |                |         ---------------------------                      |                         |
       |                  |                |           New Inergy Propane, LLC                        |                         |
       |                  |        2% non-managing         961,158 Senior                             |                         |
       |                  |            general           Subordinated Units                management rights                    |
       |                  |         partner interest       507,063 Junior                    /                                  |
       |                  |                |             Subordinated Units                 /                                   |
       |                                   |         ---------------------------           /                                    |
       |           31.3% limited           |                     |                        /                                     |
       |         partner interest          |        19.0% limited partner interest       /                                      |
       |                                   |                     |                      /                   5.2% limited        |
       |                  |                |                     |                     /                  partner interest _____|
       |                  |                |                                          /                           |
       |                  |                |               ----------------                                       |
       |                  |                |____________                              ____________________________|
       |                  |                                  Inergy, L.P.
       |                  |_____________________________  (The Partnership)
       |________________________________________________
                                                           ----------------
                                                                 |
                                                                 |
                                                       100% membership interest
                                                                 |
                                                       -------------------------
                                                          Inergy Propane, LLC
                                                             (The Operating
                                                                Company)
                                                       -------------------------

                                       7

                                  The Offering

Common units offered by
Inergy, L.P. .............

                              1,060,945 common units.

                              1,270,945 common units if the underwriters
                              exercise their over-allotment option in full.

Common units offered by
the selling unitholders

............................
                              339,055 common units. For information about
                              the selling unitholders, please read "Selling
                              Unitholders."

Units outstanding after
this offering ............

                              3,678,817 common units, representing a 47.7%
                              limited partner interest in Inergy, L.P.;
                              3,313,367 senior subordinated units,
                              representing a 42.9% limited partner interest
                              in Inergy, L.P.; and 572,542 junior
                              subordinated units, representing a 7.4%
                              limited partner interest in Inergy, L.P.

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

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

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

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

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

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

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

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

                                       8

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

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

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

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

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

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

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

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

                                       9

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

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

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

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

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

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

                                       10

                 SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA

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

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

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

                                       11

                                  Year Ended              Six Months Ended
                              September 30, 2001           March 31, 2002
                          -------------------------- --------------------------
                                        Pro Forma As               Pro Forma As
                          Pro Forma (a) Adjusted (b) Pro Forma (a) Adjusted (b)
                          ------------- ------------ ------------- ------------
                                 (in thousands, except per unit amounts)
                                                       
Statement of Income
 Data:
Revenues................    $350,420      $350,420     $178,823      $178,823
Cost of product sold....     258,510       258,510      119,984       119,984
                            --------      --------     --------      --------
Gross profit............      91,910        91,910       58,839        58,839
Expenses:
 Operating and
  administrative........      52,118        52,118       28,048        28,048
 Depreciation and
  amortization..........      13,066        13,066        6,258         6,258
                            --------      --------     --------      --------
Operating income........      26,726        26,726       24,533        24,533
Other income (expense):
 Interest expense.......     (12,642)      (11,766)      (4,344)       (5,634)
 Interest income........         238           238            6             6
 Gain (loss) on sale of
  property, plant and
  equipment.............          46            46         (119)         (119)
 Finance charges........         302           302           85            85
 Other..................         246           246           39            39
                            --------      --------     --------      --------
Income before income
 taxes..................      14,916        15,792       20,200        18,910
Provision for income
 taxes..................          39            39           52            52
                            --------      --------     --------      --------
Net income..............    $ 14,877      $ 15,753     $ 20,148      $ 18,858
                            ========      ========     ========      ========
Non-managing general
 partner's interest in
 net income.............    $    298      $    315     $    403      $    377
                            ========      ========     ========      ========
Limited partners'
 interest in net
 income.................    $ 14,579      $ 15,438     $ 19,745      $ 18,481
                            ========      ========     ========      ========
Net income per limited
 partner unit:
 Basic..................    $   2.24      $   2.04     $   3.04      $   2.44
                            ========      ========     ========      ========
 Diluted................    $   2.22      $   2.02     $   2.99      $   2.41
                            ========      ========     ========      ========
Weighted average limited
 partners' units
 outstanding:
 Basic..................       6,504         7,565        6,504         7,565
                            ========      ========     ========      ========
 Diluted................       6,569         7,630        6,595         7,656
                            ========      ========     ========      ========
Balance Sheet Data (end
 of period):
Current assets..........                                             $ 53,049(c)
Total assets............                                              272,430(c)
Long-term debt,
 including current
 portion................                                              111,924(c)
Partners' capital.......                                              134,790(c)

Other Financial Data:
EBITDA..................    $ 40,386      $ 40,386     $ 30,796      $ 30,796
Maintenance capital
 expenditures (d).......       3,428         3,428        1,068         1,068
Reconciliation of Net
 Income to EBITDA:
Net income..............    $ 14,877      $ 15,753     $ 20,148      $ 18,858
Plus:
 Income taxes...........          39            39           52            52
 Interest expense.......      12,642        11,766        4,344         5,634
 Depreciation and
  amortization expense..      13,066        13,066        6,258         6,258
                            --------      --------     --------      --------
                              40,624        40,624       30,802        30,802
Less:
 Interest income........         238           238            6             6
                            --------      --------     --------      --------
EBITDA..................    $ 40,386      $ 40,386     $ 30,796      $ 30,796
                            ========      ========     ========      ========

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

                                                   (footnotes on following page)

                                       12

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

                                       13

                                 RISK FACTORS

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

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

Risks Inherent in our Business

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

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

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

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

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

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

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

                                      14

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

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

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

   Moreover, acquisitions involve potential risks, including:

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

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

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

  .  a significant increase in our indebtedness.

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

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

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

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

                                      15

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

   Upon completion of this offering, we expect our total outstanding long-term
indebtedness (excluding borrowings under our working capital facility) to be
approximately $106.9 million, including $85.0 million of senior secured notes,
approximately $18.3 million under our acquisition facility and approximately
$3.6 million of other indebtedness. Our payment of principal and interest on
the indebtedness will reduce the cash available for distribution on our
outstanding units. We will be prohibited by our credit facility and the terms
of our senior secured notes from making cash distributions during an event of
default under any of our indebtedness. Furthermore, our leverage and various
limitations in the credit facility and the note purchase agreement relating to
the senior secured notes may reduce our ability to incur additional
indebtedness, to engage in some transactions and to capitalize on acquisition
or other business opportunities.

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

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

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

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

  .  price,

  .  reliability and quality of service,

  .  responsiveness to customer needs,

  .  safety concerns,

  .  long-standing customer relationships,

  .  the inconvenience of switching tanks and suppliers, and

  .  the lack of growth in the industry.

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

                                       16

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

   During the fiscal year ended September 30, 2001, Louis Dreyfus Energy
Services, L.P. and Dynegy Inc. each accounted for approximately 10% of our
volume of propane purchases on a pro forma combined basis. Most of these
purchases were made under supply contracts that have a term of one year, are
subject to annual renewal and provide various pricing formulas. On May 1, 2002,
we entered into a one-year contract to purchase all of Sunoco Inc. (R&M)'s
propane production at its Toledo, Ohio refinery, which is approximately 62
million gallons per year. In the event that we are unable to purchase propane
from Sunoco or our other significant suppliers, our failure to obtain alternate
sources of supply at competitive prices and on a timely basis would hurt our
ability to satisfy customer demand, reduce our revenues and adversely affect
our results of operations.

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

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

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

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

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

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

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

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

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

                                       17

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

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

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

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

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

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

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

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

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

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

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

                                      18

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

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

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

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

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

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

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

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

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

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

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

  .  the conversion of subordinated units into common units,

                                      19

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

  .  issuances of common units under our employee benefit plans.

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

  .  your proportionate ownership interest in us will decrease,

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

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

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

  .  the market price of the common units may decline.

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

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

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

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

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

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

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

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

                                      20

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

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

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

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

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

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

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

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

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

Tax Risks To Common Unitholders

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

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

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

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

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

                                       21

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

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

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

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

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

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

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

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

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

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

                                       22

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

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

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

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

                                       23

                                USE OF PROCEEDS

   We estimate that we will receive net proceeds of approximately $29.6
million from the sale of the 1,060,945 common units by us, together with a
capital contribution from our non-managing general partner of approximately
$0.6 million to maintain its 2% general partner interest in our partnership,
assuming an offering price of $30.65 per unit and after deducting underwriting
discounts and estimated offering expenses. We intend to use all of the net
proceeds of this offering to repay a portion of our borrowings incurred in
connection with the acquisition of IPC and Pro Gas under our bank credit
facility. We will use the net proceeds from any exercise of the overallotment
option to further repay borrowings under our bank credit facility.

   As of June 11, 2002, total borrowings under our credit facility were
approximately $50.5 million and had a weighted average interest rate of 4.38%.
The credit facility has a maturity date of December 20, 2004. We incurred all
of our debt to fund acquisitions and for working capital purposes.

   We will not receive any proceeds from the sale of the 339,055 common units
by the selling unitholders.

                                      24

                                 CAPITALIZATION

   The following table shows (1) our historical capitalization as of March 31,
2002 on an actual basis, and (2) our pro forma capitalization as of March 31,
2002, as adjusted to reflect the sale of 1,060,945 common units in this
offering at an assumed price of $30.65 per unit and the application of the net
proceeds we receive in the offering as described under "Use of Proceeds" as
well as the issuance of the senior secured notes and the application of the
proceeds therefrom. We derived this table from, and it should be read in
conjunction with and is qualified in its entirety by reference to, the
historical and pro forma financial statements and the accompanying notes
included elsewhere in this prospectus.

                                               As of March 31, 2002
                                   --------------------------------------------
                                            Senior Secured Common Unit
                                            Note Offering   Offering      As
                                    Actual   Adjustments   Adjustments Adjusted
                                   -------- -------------- ----------- --------
                                                  (in thousands)
                                                           
Cash and cash equivalents......... $  2,475    $ (1,000)               $  1,475
                                   ========    ========                ========
Debt:
  Current portion of long-term
   debt........................... $  3,722    $    --      $    --    $  3,722
  Long-term bank debt, less
   current portion................  138,442     (85,000)     (30,240)    23,202
  Senior secured notes............      --       85,000                  85,000
                                   --------    --------     --------   --------
    Total debt....................  142,164         --       (30,240)   111,924
                                   --------    --------     --------   --------
Partners' capital:
  Common unitholders..............   49,514        (306)      29,611     78,819
  Senior subordinated
   unitholders....................   51,421        (276)                 51,145
  Junior subordinated
   unitholders....................    2,358         (48)                  2,310
  Non-managing general partner....    1,900         (13)         629      2,516
                                   --------    --------     --------   --------
  Total partners' capital.........  105,193        (643)      30,240    134,790
                                   --------    --------     --------   --------
    Total capitalization.......... $247,357    $   (643)    $    --    $246,714
                                   ========    ========     ========   ========

                                       25

                 PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS

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

                                                              Cash Distributions
Period Ended                                     Low    High       Per Unit
- ------------                                    ------ ------ ------------------
                                                     
Fiscal 2002:
  June 30, 2002(a)............................. $29.75 $34.24
  March 31, 2002...............................  27.65  30.10       $0.660
  December 31, 2001............................  23.50  28.25        0.625
Fiscal 2001:
  September 30, 2001........................... $22.20 $27.45       $0.400(b)

- --------

(a) Through June 11, 2002.

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

   The last reported sale price of the common units on the Nasdaq on June 11,
2002 was $30.65. As of June 11, 2002, there were approximately 2,500 holders of
record of our common units.

                                       26

                            CASH DISTRIBUTION POLICY

Distributions of Available Cash

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

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

  .  provide for the proper conduct of our business,

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

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

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

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

Operating Surplus and Capital Surplus

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

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

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

  .  plus $8.5 million (as described above),

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

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

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

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

                                       27

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

  .  borrowings other than working capital borrowings,

  .  sales of debt and equity securities, and

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

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

Subordination Period

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

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

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

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

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

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

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

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

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

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

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

                                       28

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

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

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

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

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

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

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

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

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

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

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

  .  operating surplus generated during that period,

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

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

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

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

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

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

                                       29

Distributions of Available Cash from Operating Surplus During the Subordination
Period

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

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

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

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

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

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

Distributions of Available Cash from Operating Surplus After the Subordination
Period

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

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

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

Incentive Distribution Rights

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

   If for any quarter:

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

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

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

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

                                       30

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

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

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

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

Percentage Allocations of Available Cash from Operating Surplus

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

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

Distributions from Capital Surplus

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

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

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

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

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

                                       31

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

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

Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

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

Distributions of Cash Upon Liquidation

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

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

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

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

                                       32

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       33

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

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

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

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

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

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

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

                                       34

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

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

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

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

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

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

                                       35

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

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

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

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

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

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

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

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

   The third set of adjustments reflects this offering, including:

  .  the public offering of 1,060,945 common units of Inergy, L.P. at an
     assumed public offering price of $30.65 per common unit,

  .  the contribution by Inergy Partners, LLC to Inergy L.P. of $0.6 million
     to maintain its 2% general partner interest,

  .  the payment of approximately $2.9 million of underwriting fees and
     commissions and other fees and expenses associated with this offering,
     and

  .  the application of the net proceeds of this offering to repay $30.2
     million of indebtedness under the bank credit facility.

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

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

                                      36

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

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

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

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

                                       37

                                  INERGY, L.P.

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

                                             Inergy, L.P. Adjustments  Pro Forma
                                             ------------ -----------  ---------
                                                              
                   ASSETS
Current assets:
 Cash.......................................   $  2,475    $ 33,147 A  $  1,475
                                                             (2,907)B
                                                            (30,240)C
                                                             85,000 D
                                                            (85,000)D
                                                             (1,000)D
 Accounts receivable, net...................     24,111                  24,111
 Inventories................................     16,591                  16,591
 Prepaid expenses and other current assets..      1,975                   1,975
 Assets from price risk management
  activities................................      8,897                   8,897
                                               --------    --------    --------
Total current assets........................     54,049      (1,000)     53,049
Property, plant and equipment, at cost......    134,853                 134,853
 Less accumulated depreciation..............     (9,378)                 (9,378)
                                               --------    --------    --------
Net property, plant and equipment...........    125,475                 125,475
Intangible assets:
 Covenants not to compete...................      6,124                   6,124
 Deferred financing costs...................      4,977       1,000 D     5,334
                                                               (643)E
 Customer accounts..........................     41,411                  41,411
 Goodwill...................................     47,053                  47,053
                                               --------    --------    --------
                                                 99,565         357      99,922
 Less accumulated amortization..............     (6,489)                 (6,489)
                                               --------    --------    --------
Net intangible assets.......................     93,076         357      93,433
Other.......................................        473                     473
                                               --------    --------    --------
Total assets................................   $273,073    $   (643)   $272,430
                                               ========    ========    ========
     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
 Accounts payable...........................   $  9,041    $           $  9,041
 Accrued expenses...........................      6,743                   6,743
 Customer deposits..........................      5,314                   5,314
 Liabilities from price risk management
  activities................................      4,618                   4,618
 Current portion of long-term debt..........      3,722                   3,722
                                               --------    --------    --------
Total current liabilities...................     29,438                  29,438
Long-term debt, less current portion........    138,442     (30,240)C   108,202
                                                             85,000 D
                                                            (85,000)D
Partners' capital:
 Common unitholders (2,617,872 units issued
  and outstanding, actual, and 3,678,817
  units, pro forma).........................     49,514      32,518 A    78,819
                                                             (2,907)B
                                                               (306)E
 Senior subordinated unitholders (3,313,367
  units issued and outstanding, actual and
  pro forma)................................     51,421        (276)E    51,145
 Junior subordinated unitholders (572,542
  units issued and outstanding, actual and
  pro forma)................................      2,358         (48)E     2,310
 Non-managing general partner (2% interest
  with dilutive effect equivalent to 132,730
  units issued and outstanding, actual, and
  154,382, pro forma).......................      1,900         629 A     2,516
                                                                (13)E
                                               --------    --------    --------
Total partners' capital.....................    105,193      29,597     134,790
                                               --------    --------    --------
Total liabilities and partners' capital.....   $273,073    $   (643)   $272,430
                                               ========    ========    ========

                                       38

                                  INERGY, L.P.

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

                                                           Acquisition             Offering    Pro Forma
                          Inergy, L.P. Pro Gas(F) IPC(G)   Adjustments Pro Forma  Adjustments As Adjusted
                          ------------ ---------- -------  ----------- ---------  ----------- -----------
                                                                         
Revenues................    $164,060     $1,227   $13,536     $ --     $178,823     $   --     $178,823
Cost of product sold....     113,787        793     5,404       --      119,984         --      119,984
                            --------     ------   -------     -----    --------     -------    --------
Gross profit............      50,273        434     8,132       --       58,839         --       58,839
Expenses:
 Operating and
  administrative........      23,326        267     4,455       --       28,048         --       28,048
 Depreciation and
  amortization..........       5,145         53     1,649         4 H     6,258         --        6,258
                                                               (593)I
                            --------     ------   -------     -----    --------     -------    --------
Operating income........      21,802        114     2,028       589      24,533         --       24,533
Other income (expense):
 Interest expense.......      (3,236)        (1)     (842)     (143)J    (4,344)        (85)N    (5,634)
                                                               (122)K                   695 O
                                                                                     (1,900)P
 Interest income........         --           6       --        --            6         --            6
 Gain (loss) on sale of
  property, plant and
  equipment.............        (119)       --        --        --         (119)        --         (119)
 Finance charges........          85        --        --        --           85         --           85
 Other..................          36        --          3       --           39         --           39
                            --------     ------   -------     -----    --------     -------    --------
Income before income
 tax....................      18,568        119     1,189       324      20,200      (1,290)     18,910
Provision for income
 taxes..................          52        --        --        --           52         --           52
                            --------     ------   -------     -----    --------     -------    --------
Net income..............    $ 18,516     $  119   $ 1,189     $ 324    $ 20,148     $(1,290)   $ 18,858
                            ========     ======   =======     =====    ========     =======    ========
Partners' interest
 information:
 Non-managing general
  partner's interest in
  net income............    $    370                                   $    403                $    377
                            ========                                   ========                ========
Limited partners'
 interest in net income:
 Common unit interest...    $  6,702                                   $  7,948                $  8,988
 Senior subordinated
  unit interest.........       9,758                                     10,059                   8,095
 Junior subordinated
  unit interest.........       1,686                                      1,738                   1,398
                            --------                                   --------                --------
 Total limited partners'
  interest in net
  income................    $ 18,146                                   $ 19,745                $ 18,481
                            ========                                   ========                ========
Net income per limited
 partner unit:
 Basic..................    $   2.94                                   $   3.04                $   2.44
                            ========                                   ========                ========
 Diluted................    $   2.90                                   $   2.99                $   2.41
                            ========                                   ========                ========
Weighted average limited
 partners' units
 outstanding:
 Basic..................       6,162                            342 L     6,504       1,061 Q     7,565
                            ========                          =====    ========     =======    ========
 Diluted................       6,249                            346 M     6,595       1,061 Q     7,656
                            ========                          =====    ========     =======    ========

                                       39

                                  INERGY, L.P.

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

                          Inergy, L.P. Hoosier                         IPO and                          Pro Forma
                              and      Propane                       Acquisition             Offering      As
                          Predecessor  Group(R)  Pro Gas(S)   IPC    Adjustments Pro Forma  Adjustments Adjusted
                          ------------ --------  ---------- -------  ----------- ---------  ----------- ---------
                                                                                
Revenues................    $223,139   $31,541    $19,320   $76,420    $   --    $350,420     $   --    $350,420
Cost of product sold....     182,582    25,172     12,995    37,761        --     258,510         --     258,510
                            --------   -------    -------   -------    -------   --------     -------   --------
Gross profit............      40,557     6,369      6,325    38,659        --      91,910         --      91,910
Expenses:
 Operating and
  administrative........      23,501     2,538      3,757    22,322        --      52,118         --      52,118
 Depreciation and
  amortization..........       6,532       373        639     7,019         33 H   13,066                 13,066
                                                                        (2,201)I
                                                                           671 T
                            --------   -------    -------   -------    -------   --------     -------   --------
 Operating income.......      10,524     3,458      1,929     9,318      1,497     26,726         --      26,726
Other income (expense):
 Interest expense.......      (6,670)     (246)       (32)   (6,297)      (652)J  (12,642)       (170)N  (11,766)
                                                                         1,255 K                2,297 O
                                                                                               (1,251)P
 Interest income........         --         57        181       --         --         238         --         238
 Gain (loss) on sale of
  property, plant and
  equipment.............          37        10         (1)      --         --          46         --          46
 Finance charges........         290        12        --        --         --         302         --         302
 Other..................         168        78        --        --         --         246         --         246
                            --------   -------    -------   -------    -------   --------     -------   --------
Income before income
 tax....................       4,349     3,369      2,077     3,021      2,100     14,916         876     15,792
Provision for income
 taxes..................         --        --          39       --         --          39         --          39
                            --------   -------    -------   -------    -------   --------     -------   --------
Net income..............    $  4,349   $ 3,369    $ 2,038   $ 3,021    $ 2,100   $ 14,877     $   876   $ 15,753
                            ========   =======    =======   =======    =======   ========     =======   ========
Net income for the
 period from October 1,
 2000 to July 31, 2001
 attributable to Inergy,
 L.P. predecessor.......    $  6,664
                            ========
Net loss for the period
 from July 31, 2001
 through September 30,
 2001 attributable to
 Inergy, L.P. following
 initial public
 offering...............    $ (2,315)
                            ========
Partners' interest
 information for the
 period from July 31,
 2001 through September
 30, 2001, actual (the
 year ended September
 30, 2001, pro forma):
Non-managing general
 partner's interest in
 net income (loss):.....    $    (46)                                            $    298               $    315
                            ========                                             ========               ========
Limited partners'
 interest in net income
 (loss):
 Common unit interest:
 Allocation of net
  income (loss).........    $   (729)                                            $  5,869               $  7,508
 Less beneficial
  conversion value
  allocated to senior
  subordinated units....      (8,600)                                    8,600 U      --                     --
                            --------                                             --------               --------
 Net common unit
  interest..............      (9,329)                                               5,869                  7,508
 Senior subordinated
  interest:
 Allocation of net
  loss..................      (1,313)                                               7,427                  6,762
 Plus beneficial
  conversion value
  allocated to senior
  subordinated units....       8,600                                    (8,600)U      --                     --
                            --------                                             --------               --------
 Net senior subordinated
  unit interest.........       7,287                                                7,427                  6,762
 Junior subordinated
  unit interest.........        (227)                                               1,283                  1,168
                            --------                                             --------               --------
 Total limited partners'
  interest in net income
  (loss)................    $ (2,269)                                            $ 14,579               $ 15,438
                            ========                                             ========               ========
Net income (loss) per
 limited partner unit
 Basic..................    $  (0.40)                                            $   2.24               $   2.04
                            ========                                             ========               ========
 Diluted................    $  (0.40)                                            $   2.22               $   2.02
                            ========                                             ========               ========
Weighted average limited
 partners' units
 outstanding
 Basic..................       5,726                                       778 L    6,504       1,061 Q    7,565
                            ========                                   =======   ========     =======   ========
 Diluted................       5,726                                       843 M    6,569       1,061 Q    7,630
                            ========                                   =======   ========     =======   ========

                                       40

                                  INERGY, L.P.

                          NOTES TO UNAUDITED PRO FORMA
                       CONSOLIDATED FINANCIAL STATEMENTS

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

(A) Reflects the gross proceeds to Inergy, L.P. of $32.5 million from the
    issuance and sale of 1,060,945 common units at an assumed offering price of
    $30.65 per common unit, together with a capital contribution from the non-
    managing general partner of approximately $0.6 million to maintain its 2%
    general partner interest.

(B) Reflects the payment of the underwriters' discounts and commissions and
    offering expenses, estimated to be $2.9 million.

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

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

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

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

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

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

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

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

                                       41

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

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

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

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

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

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

                                       42

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

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

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

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

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

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

(Q)  Reflects the issuance of 1,060,945 common units offered by Inergy, L.P. in
     this offering.

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

                                       43

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

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

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

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

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

                                       44

                SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

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

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

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

                                       45

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

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

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

                                       46

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

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

                                       47

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

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

                                       48

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

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

General

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

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

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

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

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

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

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

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

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

                                       49

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

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

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

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

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

  . forward contracts involving the physical delivery of propane;

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

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

                                       50

   We purchase a portion of our propane (approximately 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, 2001, two suppliers each provided approximately 10% of our
propane supplies, and no other single supplier provided more than ten percent
of our total propane supply for the year ended September 30, 2001. On May 1,
2002, we entered into a one-year contract with Sunoco Inc. (R&M) to purchase
all of its propane production at its Toledo, Ohio refinery. Current annual
production at this refinery is 62 million gallons.

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

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

Inergy, L.P. and Inergy Partners, LLC

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

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

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

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

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

                                       51

acquisition related volume (approximately $33.4 million), partially offset by
lower selling prices of propane (approximately $11.0 million) and volume
decreases (approximately $4.1 million) primarily due to warmer weather in the
six months ended March 31, 2002. Other retail revenues increased approximately
$2.4 million, or 46%, from $5.2 million in the six months ended March 31, 2001
to $7.6 million in the six months ended March 31, 2002 due to acquisitions.
These revenues consist of transportation revenues, tank rentals, heating oil
sales, appliance sales and service. Revenues from wholesale propane sales were
$89.8 million (after elimination of sales to our retail operations) in the six
months ended March 31, 2002, a decrease of $27.2 million, or 23%, from $117.0
million for the six months ended March 31, 2001. This decrease was attributable
to decreased selling prices as a result of the lower cost of propane.

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

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

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

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

   Interest Expense. Interest expense increased $0.2 million, or 7%, to $3.2
million in the six months ended March 31, 2002 as compared to $3.0 million for
the six months ended March 31, 2001. This increase is the result of additional
debt outstanding during 2002 as compared to 2001, partially offset by lower
interest rates in 2002.

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

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

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

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

                                       52

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

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

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

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

   Gross Profit. Retail gross profit was $34.6 million in fiscal 2001 compared
to $10.7 million in fiscal 2000, an increase of $23.9 million, or 223%. This
increase was primarily attributable to higher retail gallons (approximately
$17.4 million) and an increase in margin per gallon (approximately $3.7
million). Wholesale gross profit was $5.9 million (after elimination of gross
profit attributable to our retail operations) in fiscal 2001 compared to $1.3
million in fiscal 2000, an increase of $4.6 million, or 368%. This increase was
attributable to higher wholesale gallon sales in fiscal 2001, including the
acquisition of the wholesale operations within the Hoosier Propane Group
(approximately $2.3 million), and an increase in gross profit per gallon
(approximately $2.3 million).

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

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

                                       53

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

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

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

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

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

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

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

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

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

                                       54

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

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

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

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

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

Independent Propane Company

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

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

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

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

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

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

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

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

                                       55

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

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

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

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

   Cost of Sales. Cost of sales in fiscal 2000 was $28.3 million, an increase
of $12.3 million, or 77%, over fiscal 1999 cost of sales of $16.0 million. The
increase was attributable to the approximate 71% increase in the average cost
of propane.

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

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

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

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

Hoosier Propane Group

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

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

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

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

                                       56

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

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

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

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

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

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

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

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

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

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

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

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

                                       57

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       58

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

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

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

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

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

Liquidity and Capital Resources

 Cash Flows

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

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

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

                                       59

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

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

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

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

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

 Distributions

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

                                       60

 Total Contractual Cash and Other Obligations

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

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

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

 Liquidity Needs

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

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

Description of Indebtedness

   Upon completion of this offering, we expect our total outstanding long-term
indebtedness (excluding borrowings under our working capital facility) to be
approximately $106.9 million, including approximately $85.0 million of senior
secured notes, approximately $18.3 million under our acquisition facility and
approximately $3.6 million of other indebtedness.

   Bank Credit Facility. In conjunction with the acquisition of IPC, on
December 19, 2001, our operating company, Inergy Propane, entered into a $195
million amended and restated senior secured credit facility with First Union
National Bank and other lenders. The revolving portion of the credit facility
has a term of three years and is guaranteed by us and each subsidiary of Inergy
Propane. The $70 million IPC acquisition term loan portion of the credit
facility had a maturity of April 1, 2003 and was guaranteed by us and each
subsidiary of Inergy Propane. The IPC acquisition term loan was repaid on June
7, 2002 with a portion of the proceeds from the senior secured notes offering.
No amounts may be reborrowed under this term loan. We currently have
approximately $50.5 million outstanding under the credit facility, comprised of
approximately $48.5 million outstanding under the revolving acquisition
facility and approximately $2.0 million under the working capital facility.

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

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

                                       61

aggregate amount of borrowings under the working capital facility, including
outstanding letters of credit, are subject to a borrowing base requirement
relating to accounts receivable and inventory. During the period from July 1
through December 31, Inergy Propane may borrow up to an additional $12 million
not subject to the borrowing base, however, total borrowings under the working
capital facility cannot exceed $50 million. Up to $10 million of the working
capital facility may be used for the issuance of letters of credit. Each of the
working capital facility and the revolving 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 revolving
acquisition facility may be reborrowed.

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

   The obligations under the credit facility are 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.

   Indebtedness under the credit facility bears 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 $1 million. Any such mandatory
prepayments are applied first to reduce borrowings under the acquisition
facility and then under the working capital facility.

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

  .  grant or incur liens;

  .  incur other indebtedness (other than permitted debt, including the
     senior secured notes which are secured on a pari passu basis);

  .  make investments, loans and acquisitions;

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

  .  enter into in any sale-leaseback transaction or enter into any new
     business;

  .  issue or modify the terms of any equity or other securities,

  .  enter into any agreement that conflicts with the credit facility or
     ancillary agreements;

  .  make any change in its principles and methods of accounting as currently
     in effect, except as such changes are permitted by GAAP;

  .  enter into certain affiliate transactions;

  .  pay dividends or make distributions;

  .  permit operating lease obligations to exceed $5 million in any fiscal
     year;

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

                                       62

  .  enter into put agreements granting put rights with respect to equity
     interests of Inergy Propane or its subsidiaries; and

  .  modify their respective organizational documents.

   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 2.5 to 1.0 for any fiscal quarter; and

  .  the ratio of total funded debt (as defined in the credit facility) to
     consolidated EBITDA may not exceed 4.5 to 1.0.

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

  .  default in payment of principal when due;

  .  default in payment of interest, fees or other amounts within three days
     of their due date;

  .  violation of specified affirmative and negative covenants;

  .  default in performance or observance of any term, covenant, condition or
     agreement contained in the credit facility or ancillary agreements;

  .  specified cross-defaults;

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

  .  impairment of the enforceability or the validity of agreements relating
     to the credit facility;

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

  .  certain change of control events; and

  .  a condition or event occurs that could have a material adverse effect in
     the reasonable judgment of two-thirds of the credit facility lenders.

   Senior Secured Notes.  Inergy Propane entered into a note purchase agreement
on June 7, 2002 with a group of institutional lenders pursuant to which it
issued $85.0 million aggregate principal amount of senior secured notes with a
weighted average interest rate of 9.07% and a weighted average maturity of 5.9
years. The senior secured notes consist of the following: $35.0 million
principal amount of 8.85% senior secured notes with a 5-year maturity, $25.0
million principal amount of 9.10% senior secured notes with a 6-year maturity,
and $25.0 million principal amount of 9.34% senior secured notes with a 7-year
maturity.

                                       63

   The following is a summary of the material terms of the senior secured
notes.

   The notes represent senior secured obligations of our operating company and
will rank at least pari passu in right of payment with all other present and
future senior indebtedness of our operating company. The notes are secured, on
an equal and ratable basis with the obligations of the operating company under
the credit facility, by (i) a first priority lien on substantially all of the
existing and future assets of the operating company and its current and future
subsidiaries (as defined in the note purchase agreement), (ii) a lien on all of
our existing and future equity and other interests in the operating company and
(iii) a lien on all of the operating company's existing and future equity and
other interests in each of its current and future subsidiaries.

   The senior secured notes are guaranteed by our operating company's
subsidiaries, IPCH Acquisition Corp. and us. The IPCH Acquisition Corp.
guaranty is limited to $35.0 million.

   The senior secured notes are redeemable, at our operating company's option,
at a purchase price equal to 100% of the principal amount together with accrued
interest, plus a make-whole amount determined in accordance with the note
purchase agreement.

   In addition, so long as any of the notes are outstanding or any amounts are
owed by Inergy Propane to any holder of the notes, the note purchase agreement
relating to the notes limits the ability of Inergy Propane and, in certain
cases, its subsidiaries to (subject to various exceptions), among other things:

  . make restricted payments (as defined in the note purchase agreement);

  . grant or incur liens;

  . in the case of subsidiaries, incur debt;

  . make investments, loans and acquisitions;

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

  . make certain dispositions of assets;

  . sell or discount receivables;

  . enter into certain affiliate transactions;

  . enter into sale-leaseback transactions involving a fair market value
    exceeding $5.0 million;

  . make any change in its principles and methods of accounting as currently
    in effect, except as such changes are permitted by GAAP;

  . enter into or engage in any business which is not substantially similar
    to that which is currently existing;

  . modify their respective organizational documents;

  . enter into any agreement which would cause a default or an event of
    default or conflict with the agreements governing the notes;

  . in the case of subsidiaries, issue any equity interests;

  . in the case of subsidiaries, permit the sale of any equity interests or
    debt;

  . enter into any agreement which contains covenants more restrictive than
    the note purchase agreement;

  . enter into any commodity swap agreement other than in the ordinary course
    of business with a term of less than 24 months; and

  . enter into put agreements granting put rights with respect to the equity
    interests of Inergy Propane or its subsidiaries.

                                       64

   Furthermore, the note purchase agreement contains the following financial
covenants:

  . the ratio of total indebtedness to EBITDA (as defined in the note
    purchase agreement) for the four fiscal quarters most recently ended may
    generally not exceed 4.5 to 1.0; and

  . the ratio of EBITDA to consolidated total interest expense (as defined in
    the note purchase agreement) for the four fiscal quarters most recently
    ended may not be less than 2.5 to 1.0.

   Each of the following is an event of default under the note purchase
agreement:

  . default in payment of principal or make-whole amounts on any senior
    secured note when due;

  . default in payment of any interest on any senior secured note within
    three days of its due date;

  . violation of specified affirmative and negative covenants;

  . a default on any of the terms in the note purchase agreement or ancillary
    agreements that is not timely cured;

  . inaccuracy of representations and warranties made by Inergy Propane and
    affiliated entities;

  . an event that would cause Inergy Propane, its subsidiaries, IPCH
    Acquisition Corp. or Inergy, L.P. to be in default or cause prepayment of
    any of its indebtedness in excess of $1.0 million;

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

  . judgments exceeding $1.0 million against Inergy Propane, its
    subsidiaries, IPCH Acquisition Corp. or Inergy, L.P. are not bonded,
    discharged or stayed within specified time periods;

  . any default and/or violation relating to any of our employee benefit
    plans;

  . the actual or asserted invalidity of a material provision in any of the
    guarantees relating to the notes;

  . the actual or asserted invalidity of a material provision in any of the
    security documents relating to the senior secured notes; and

  . any event of default under any ancillary agreement relating to the senior
    secured notes.

   If an event of default resulting from bankruptcy or other insolvency events
occurs, the senior secured notes will become immediately due and payable. If
any other event of default occurs and is continuing, holders of more than 33
1/3% in principal amount of the outstanding notes may at any time declare all
the notes then outstanding to be immediately due and payable. If an event of
default relating to nonpayment of principal, make-whole amounts or interest
occurs, any holder of outstanding notes affected by such event of default may
declare all the notes held by such holder to be immediately due and payable.

   Intercreditor and Collateral Agency Agreement. In connection with the
execution of the note purchase agreement, Inergy Propane, the lenders under its
credit facility and the initial purchasers of the senior secured notes entered
into an Intercreditor and Collateral Agency Agreement on June 7, 2002. This
agreement appointed Wachovia Bank, N.A. to act as collateral agent and
authorized Wachovia Bank to execute various security documents on behalf of the
lenders under the credit facility and the initial purchasers of the senior
secured notes. This agreement specifies various rights and obligations of
Wachovia Bank and the other parties thereto in respect of the collateral
securing Inergy Propane's obligations under the credit facility and the note
purchase agreement.

Environmental Matters

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

                                       65

Recent Accounting Pronouncements

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

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

Critical Accounting Policies

 Accounting for Price Risk Management

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

 Revenue Recognition

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

                                       66

 Impairment of Long-Lived Assets

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

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

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

Quantitative and Qualitative Disclosure About Market Risk

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

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

Propane Price Risk

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

                                       67

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

 Trading Activities

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

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

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

   We have no negative Enron exposure.

 Notional Amounts and Terms

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

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

 Fair Value

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

 Market and Credit Risk

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

                                       68

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

                                       69

                                    BUSINESS

General

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

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

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

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

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

Recent Acquisitions

 Independent Propane Company Acquisition and Related Transactions

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

                                       70

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

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

 Pro Gas Acquisition

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

Industry Background and Competition

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

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

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

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

                                       71

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

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

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

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

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

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

                                       72

Competitive Strengths

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

 Proven Acquisition Expertise

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

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

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

  .  high concentration of propane sales to residential customers, and

  .  the retention of key employees in acquired businesses.

 Internal Growth

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

 Operations in High Growth Markets

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

 Regional Branding

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

 High Percentage of Retail Sales to Residential Customers

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

                                       73

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

 Strong Wholesale Supply, Marketing and Distribution Business

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

 Flexible Financial Structure

   We have a $75.0 million revolving credit facility for acquisitions and a
$50.0 million revolving working capital facility. Upon completion of this
offering, we expect to have available capacity of approximately $56.7 million
under our acquisition facility and approximately $48.0 million under our
working capital facility. We believe our available capacity under these
facilities combined with our ability to fund acquisitions through the issuance
of additional partnership interests will provide us with a flexible financial
structure that will facilitate our acquisition strategy.

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

Retail Operations

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

                                       74

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

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

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

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

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

  .  72% to residential customers;

  .  20% to industrial and commercial customers; and

  .  8% to agricultural customers.

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

                                       75

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

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

Wholesale Supply, Marketing and Distribution Operations

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

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

                                       76

Transportation Assets, Truck Fabrication and Maintenance

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

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

Supply

   We obtain propane from over 80 vendors at approximately 80 locations. During
the fiscal year ended September 30, 2001 on a pro forma basis, Louis Dreyfus
Energy Services, L.P. and Dynegy Inc. each accounted for approximately 10% of
our volume of propane purchases. Most of these purchases were made under supply
contracts that have a term of one year, are subject to annual renewal and
provide various pricing formulas. No other single supplier accounted for more
than 10% of our pro forma volume propane purchases for the fiscal year ended
September 30, 2001. On May 1, 2002, we entered into a one-year contract with
Sunoco, Inc. (R&M) to purchase all of its propane production at its Toledo,
Ohio refinery, which is currently 62 million gallons. We believe that our
diversification of suppliers will enable us to purchase all of our supply needs
at market prices if supplies are interrupted from any of the sources without a
material disruption of our operations.

   Approximately 95% of our propane suppliers were domestic suppliers during
the fiscal year ended September 30, 2001 on a pro forma basis. Our remaining
suppliers were in Canada. During the fiscal year ended September 30, 2001 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 generally provide for
pricing in accordance with posted prices at the time of delivery or the current
prices established at major storage points, and some contracts include a
pricing formula that typically is based on such market prices. Some of these
agreements provide maximum and minimum seasonal purchase guidelines.

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

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

Pricing Policy

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

                                       77

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

Billing and Collection Procedures

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

  .  customers are billed on a timely basis;

  .  customers are more apt to pay a local business;

  .  cash payments are received faster; and

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

Properties

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

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

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

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

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

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

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

Trademark and Tradenames

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

                                       78

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

Employees

   As of June 12, 2002, we had 679 full-time employees of which 22 were general
and administrative and 657 were operational employees. We employed 27 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. We have not received any notices of any
material violations or otherwise incurred any material liability under any of
the above laws and regulations.

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

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

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

                                       79

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.

                                       80

                                   MANAGEMENT

Our Managing General Partner Manages Inergy, L.P.

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

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

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

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

Directors and Executive Officers of Inergy GP, LLC

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

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

                                       81

 Executive Officers and Directors

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

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

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

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

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

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

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

                                       82

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

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

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

Reimbursement of Expenses of the Managing General Partner

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

Compensation of Directors

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

                                       83

Executive Compensation

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

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

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

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

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

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

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

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

                                       84

 Option Grants in Last Fiscal Year

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

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

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

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

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

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

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

                                       85

Employment Agreements

   The following executive officers have entered into employment agreements
with the managing general partner, which were transferred to our operating
company effective January 1, 2002:

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       86

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

   With respect to Mr. John Sherman, Mr. Elbert, Mr. Brooks Sherman, Mr.
Hughes, Mr. Fox and Mr. Gautreaux, in the event that the operating company
terminates such person's employment without cause, the operating company 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 7.7%, subject to adjustment.

Long-Term Incentive Plan

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

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

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

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

                                       87

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

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

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

Unit Purchase Plan

   Inergy Holdings established a unit purchase plan for employees of the
managing general partner and its affiliates. The unit purchase plan permits
participants to purchase common units in market transactions, from us, our
general partners or any other person. We currently expect such purchases to
occur primarily in market transactions, although our plan allows us to issue
additional units. We have reserved 50,000 units for purchase under the unit
purchase plan. As determined by the compensation committee, the managing
general partner may match each participant's cash base pay or salary deferrals
by an amount up to 10% of such deferrals and have such amount applied toward
the purchase of additional units. The managing general partner has also agreed
to pay the brokerage commissions, transfer taxes and other transaction fees
associated with a participant's purchase of common units. The maximum amount
that a participant may elect to have withheld from his or her salary or cash
base pay with respect to unit purchases in any calendar year may not exceed 10%
of his or her base salary or wages for the year. Units purchased on behalf of a
participant under the unit purchase plan generally are to be held by the
participant for at least one year. To the extent a participant desires to sell
or dispose of such units prior to the end of this one year holding period, the
participant will be ineligible to participate in the unit purchase plan again
until the one year anniversary of the date of such sale. The unit purchase plan
is intended to serve as a means for encouraging participants to invest in our
common units.

                                       88

                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                AND MANAGEMENT

   The following table shows the beneficial ownership of units of Inergy, L.P.
as of June 12, 2002 held by:

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

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

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

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

                                                                  Percentage of              Percentage of
                                                        Senior       Senior        Junior       Junior
                                       Percentage of Subordinated Subordinated  Subordinated Subordinated  Percentage of
                          Common Units Common Units     Units         Units        Units         Units      Total Units
Name of Beneficial        Beneficially Beneficially  Beneficially Beneficially  Beneficially Beneficially  Beneficially
Owner(1)                     Owned         Owned        Owned         Owned        Owned         Owned         Owned
- ------------------        ------------ ------------- ------------ ------------- ------------ ------------- -------------
                                                                                      
Inergy Holdings, LLC
 (2)....................    404,601        15.5%        961,158       29.0%       507,063        88.6%         28.8%

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

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

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

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

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

John J. Sherman (7).....    404,601        15.5%        961,158       29.0%       507,063        88.6%         28.8%

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

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

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

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

William C. Gautreaux ...     13,500           *             --         --             --          --              *

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

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

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

All directors and
 executive officers as a
 group (9 persons)......    428,976        16.4%      1,394,794       42.1%       507,063        88.6%         35.8%

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

                                      89

 (1) Unless otherwise indicated, the address of each person listed above is: 2
     Brush Creek Blvd., Kansas City, Missouri 64112. All persons listed have
     sole voting power and investment power with respect to their units unless
     otherwise indicated.

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

                                       90

   The following table shows the beneficial ownership as of June 12, 2002 of
Inergy Holdings, LLC of the directors and executive officers of the managing
general partner. As reflected above, Inergy Holdings owns our managing general
partner, non-managing general partner, the incentive distribution rights and,
through a subsidiary, approximately 24% of our outstanding units.

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

- --------

(1) The address of each person listed above is 2 Brush Creek Blvd., Kansas
    City, Missouri 64112.

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

                                       91

                              SELLING UNITHOLDERS

   The following table shows the beneficial ownership of common units held by
the selling unitholders as of June 12, 2002 and to be held following the
offering. Each of the selling unitholders acquired its common units in
connection with the IPC acquisition. Please read "Business--Recent
Acquisitions."

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

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

Triad Ventures Limited II, L.P. ..   12,587     *        6,031   6,556     *
 4600 Post Oak Place
 No. 100
 Houston, TX 77027

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

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

Daniel C. Arnold .................      352     *          352      --    0.0%
 1001 Fannin Street
 Suite 720
 Houston, TX 77002

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

John L. Long, Jr. ................      126     *           60      66     *
 2600 Via Fortuna
 Suite 150
 Austin, TX 78746
                                    -------   -----    -------  ------    ----
  Total...........................  351,085   13.4%    339,055  12,030     *
                                    =======   =====    =======  ======    ====

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

                                       92

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions

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

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

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

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

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

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

                                       93

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

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

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

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

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

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

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

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

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

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

                                       94

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

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

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

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

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

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

                                       95

              CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

Conflicts of Interest

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

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

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

  .  on terms no less favorable to us than those generally being provided to
     or available from unrelated third parties, or

  .  fair to us, taking into account the totality of the relationships
     between the parties involved, including other transactions that may be
     particularly favorable or advantageous to us.

   In resolving a conflict, our managing general partner may, unless the
resolution is specifically provided for in the partnership agreement, consider:

  .  the relative interests of the parties involved in the conflict or
     affected by the action,

  .  any customary or accepted industry practices or historical dealings with
     a particular person or entity, and

  .  generally accepted accounting practices or principles and other factors
     it considers relevant, if applicable.

   Conflicts of interest could arise in the situations described below, among
others:

 Actions taken by our managing general partner may affect the amount of cash
 available for distribution to unitholders or accelerate the right to convert
 subordinated units.

   The amount of cash that is available for distribution to unitholders is
affected by decisions of our managing general partner regarding matters,
including:

  .  amount and timing of asset purchases and sales,

  .  cash expenditures,

  .  borrowings,

                                       96

  .  issuance of additional units, and

  .  the creation, reduction or increase of reserves in any quarter.

   In addition, borrowings by Inergy, L.P. and its affiliates do not
constitute a breach of any duty owed by the managing general partner to the
unitholders, including borrowings that have the purpose or effect of:

  .  enabling an affiliate of our managing general partner to receive
     distributions on any subordinated units held by it or the incentive
     distribution rights; or

  .  hastening the expiration of the subordination period.

   The partnership agreement provides that Inergy and our subsidiaries may
borrow funds from our managing general partner and its affiliates. Our
managing general partner and its affiliates may not borrow funds from us, our
operating company or its subsidiaries.

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

   We reimburse the managing general partner and its affiliates for costs
incurred in managing and operating Inergy, L.P., including costs incurred in
rendering corporate staff and support services to Inergy, L.P. The partnership
agreement provides that the managing general partner will determine the
expenses that are allocable to Inergy, L.P. in any reasonable manner
determined by the managing general partner in its sole discretion.

 The managing general partner intends to limit the liability of the general
 partners regarding Inergy, L.P.'s obligations.

   The managing general partner intends to limit the liability of the general
partners under contractual arrangements so that the other party has recourse
only to Inergy, L.P.'s assets and not against the general partners or their
assets. The partnership agreement provides that any action taken by the
managing general partner to limit its liability or the liability of the non-
managing general partner is not a breach of the managing general partner's
fiduciary duties, even if we could have obtained more favorable terms without
the limitation on liability.

 Common unitholders have no right to enforce obligations of the managing
 general partner and its affiliates under agreements with us.

   Any agreements between Inergy, L.P. on the one hand, and the managing
general partner and its affiliates, on the other, will not grant to the
unitholders, separate and apart from Inergy, L.P., the right to enforce the
obligations of the managing general partner and its affiliates in our favor.

 Contracts between us, on the one hand, and the managing general partner and
 its affiliates, on the other, will not be the result of arm's-length
 negotiations.

   The partnership agreement allows the managing general partner to pay itself
or its affiliates for any services rendered, provided these services are
rendered on terms that are fair and reasonable to us. The managing general
partner may also enter into additional contractual arrangements with any of
its affiliates on our behalf. Neither the partnership agreement nor any of the
other agreements, contracts and arrangements between us and the managing
general partner and its affiliates are or will be the result of arm's-length
negotiations. All of these transactions are to be on terms that are fair and
reasonable to Inergy, L.P., however.

   The managing general partner and its affiliates have no obligation to
permit us to use any facilities or assets of the managing general partner and
its affiliates, except as may be provided in contracts entered into
specifically dealing with that use. There is no obligation of the managing
general partner and its affiliates to enter into any contracts of this kind.

                                      97

 Common units are subject to the managing general partner's limited call right.

   The managing general partner may exercise its limited right to call and
purchase common units as provided in the partnership agreement or assign this
right to one of its affiliates or to us. The managing general partner may use
its own discretion, free of fiduciary duty restrictions, in determining whether
to exercise this right. As a result, a common unitholder may have his common
units purchased from him at an undesirable time or price. Please read "The
Partnership Agreement--Limited Call Right."

 We may not choose to retain separate counsel for ourselves or for the holders
 of common units.

   The attorneys, independent accountants and others who perform services for
us have been retained by the managing general partner. Attorneys, independent
accountants and others who perform services for us are selected by the managing
general partner or the conflicts committee and also may perform services for
the managing general partner and its affiliates. We may retain separate counsel
for ourselves or the holders of common units in the event of a conflict of
interest between the managing general partner and its affiliates, on the one
hand, and us or the holders of common units, on the other, depending on the
nature of the conflict. We do not intend to do so in most cases.

 The general partners' affiliates may compete with us.

   The partnership agreement provides that the managing general partner is
restricted from engaging in any business activities other than those incidental
to its ownership of interests in us. Affiliates of the general partners are not
prohibited from engaging in other businesses or activities, including those
that might be in direct competition with us.

 Fiduciary duties owed to unitholders by the general partners are prescribed by
 law and the partnership agreement

   The general partners are accountable to us and our unitholders as
fiduciaries. The Delaware Act provides that Delaware limited partnerships may,
in their partnership agreements, restrict or expand the fiduciary duties owed
by the managing general partner to limited partners and the partnership.

   Our partnership agreement contains various provisions restricting the
fiduciary duties that might otherwise be owed by the managing general partner.
The following is a summary of the material restrictions of the fiduciary duties
owed by our managing general partner to the limited partners:

State-law fiduciary duty       Fiduciary duties are generally considered to
standards..................    include an obligation to act with due care and
                               loyalty. The duty of care, in the absence of a
                               provision in a partnership agreement providing
                               otherwise, would generally require a general
                               partner to act for the partnership in the same
                               manner as a prudent person would act on his own
                               behalf. The duty of loyalty, in the absence of
                               a provision in a partnership agreement
                               providing otherwise, would generally prohibit a
                               general partner of a Delaware limited
                               partnership from taking any action or engaging
                               in any transaction where a conflict of interest
                               is present.

                               The Delaware Act generally provides that a
                               limited partner may institute legal action on
                               behalf of the partnership to recover damages
                               from a third party where a general partner has
                               refused to institute the action or where an
                               effort to cause a general partner to do so is
                               not likely to succeed. In addition, the
                               statutory or case law of some jurisdictions may
                               permit a limited partner to institute legal
                               action on behalf of himself and all other
                               similarly situated limited

                                       98

                               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."

                                       99

                        DESCRIPTION OF THE COMMON UNITS

The Units

   The common units and the subordinated units represent limited partner
interests in us. The holders of units are entitled to participate in
partnership distributions and exercise the rights or privileges available to
limited partners under our partnership agreement. For a description of the
relative rights and preferences of holders of common units and subordinated
units in and to partnership distributions, please read "Cash Distribution
Policy" and "Description of Subordinated Units." For a description of the
rights and privileges of limited partners under our partnership agreement,
including voting rights, please read "The Partnership Agreement."

Transfer Agent and Registrar Duties

 Duties

   American Stock Transfer & Trust Company serves as registrar and transfer
agent for the common units. We pay all fees charged by the transfer agent for
transfers of common units, except the following that must be paid by
unitholders:

  .  surety bond premiums to replace lost or stolen certificates, taxes and
     other governmental charges,

  .  special charges for services requested by a holder of a common unit, and

  .  other similar fees or charges.

   There is no charge to unitholders for disbursements of our cash
distributions. We will indemnify the transfer agent, its agents and each of
their stockholders, directors, officers and employees against all claims and
losses that may arise out of acts performed or omitted for its activities in
that capacity, except for any liability due to any gross negligence or
intentional misconduct of the indemnified person or entity.

 Resignation or Removal

   The transfer agent may resign, by notice to us, or be removed by us. The
resignation or removal of the transfer agent will become effective upon our
appointment of a successor transfer agent and registrar and its acceptance of
the appointment. If no successor has been appointed and accepted the
appointment within 30 days after notice of the resignation or removal, the
managing general partner may act as the transfer agent and registrar until a
successor is appointed.

 Transfer of Common Units

   The transfer of the common units to persons that purchase directly from the
underwriters will be accomplished through the completion, execution and
delivery of a transfer application by the investor. Any later transfers of a
common unit will not be recorded by the transfer agent or recognized by us
unless the transferee executes and delivers a transfer application. By
executing and delivering a transfer application, the transferee of common
units:

  .  becomes the record holder of the common units and is an assignee until
     admitted into our partnership as a substituted limited partner,

  .  automatically requests admission as a substituted limited partner in our
     partnership,

  .  agrees to be bound by the terms and conditions of, and executes, our
     partnership agreement,

  .  represents that the transferee has the capacity, power and authority to
     enter into the partnership agreement,

                                      100

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

  .  makes the consents and waivers contained in the partnership agreement.

   An assignee will become a substituted limited partner of our partnership
for the transferred common units upon the consent of our managing general
partner and the recording of the name of the assignee on our books and
records. The managing general partner may withhold its consent in its sole
discretion.

   A transferee's broker, agent or nominee may complete, execute and deliver a
transfer application. We are entitled to treat the nominee holder of a common
unit as the absolute owner. In that case, the beneficial holder's rights are
limited solely to those that it has against the nominee holder as a result of
any agreement between the beneficial owner and the nominee holder.

   Common units are securities and are transferable according to the laws
governing transfer of securities. In addition to other rights acquired upon
transfer, the transferor gives the transferee the right to request admission
as a substituted limited partner in our partnership for the transferred common
units. A purchaser or transferee of common units who does not execute and
deliver a transfer application obtains only:

  .  the right to assign the common unit to a purchaser or other transferee,
     and

  .  the right to transfer the right to seek admission as a substituted
     limited partner in our partnership for the transferred common units.

   Thus, a purchaser or transferee of common units who does not execute and
deliver a transfer application:

  .  will not receive cash distributions or federal income tax allocations,
     unless the common units are held in a nominee or "street name" account
     and the nominee or broker has executed and delivered a transfer
     application, and

  .  may not receive some federal income tax information or reports furnished
     to record holders of common units.

   The transferor of common units has a duty to provide the transferee with
all information that may be necessary to transfer the common units. The
transferor does not have a duty to insure the execution of the transfer
application by the transferee and has no liability or responsibility if the
transferee neglects or chooses not to execute and forward the transfer
application to the transfer agent. Please read "The Partnership Agreement--
Status as Limited Partner or Assignee."

   Until a common unit has been transferred on our books, we and the transfer
agent, may treat the record holder of the unit as the absolute owner for all
purposes, except as otherwise required by law or stock exchange regulations.

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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
units sometimes vote together as a class and sometimes vote as separate
classes. Holders of subordinated units, like holders of common units, have very
limited voting rights. During the subordination period, common units and
subordinated units each vote separately as a class on the following matters:

  . a sale or exchange of all or substantially all of our assets,

  . the election of a successor managing general partner in connection with
    the removal of the managing general partner,

  . dissolution or reconstitution of Inergy, L.P.,

  . a merger,

  . issuance of limited partner interests in some circumstances, and

  . some amendments to the partnership agreement, including any amendment
    that would cause us to be treated as an association taxable as a
    corporation.

   The subordinated units are not entitled to vote on approval of the
withdrawal of the managing general partner or the transfer by the managing
general partner of its general partner interest. Removal of the managing
general partner requires:

   .a 66 2/3% vote of all outstanding units voting as a single class, and

  . the election of a successor general partner by the holders of a majority
    of the outstanding common units and subordinated units, voting as
    separate classes.

   Under the partnership agreement, the managing general partner generally will
be permitted to effect amendments to the partnership agreement that do not
materially adversely affect unitholders without the approval of any
unitholders. Please read "The Partnership Agreement--Opinion of Counsel and
Unitholder Approval."

Distributions Upon Liquidation

   If we liquidate during the subordination period, in some circumstances
holders of outstanding common units will be entitled to receive more per unit
in liquidating distributions than holders of outstanding subordinated units.
The per unit difference will be dependent upon the amount of gain or loss that
we recognize in liquidating our assets. Following conversion of the
subordinated units into common units, all units will be treated the same upon
liquidation.

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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 are conducted through our operating
company, Inergy Propane, LLC, and its subsidiaries. We own 100% of the
outstanding membership interest of the operating company. The limited liability
company agreement of the operating company provides that the operating company
may, directly or indirectly, engage in:

     (1) its operations as conducted immediately before our initial public
  offering,

     (2) any other activity approved by the managing general partner but only
  to the extent that the managing general partner reasonably determines that,
  as of the date of the acquisition or commencement of the activity, the
  activity generates "qualifying income" as this term is defined in Section
  7704 of the Internal Revenue Code, or

     (3) any activity that enhances the operations of an activity that is
  described in (1) or (2) above.

   Although the managing general partner has the ability to cause Inergy, L.P.,
the operating company or its subsidiaries to engage in activities other than
the wholesale and retail marketing and transportation of propane, the managing
general partner has no current plans to do so. The managing general partner is
authorized in general to perform all acts deemed necessary to carry out our
purposes and to conduct our business.

Power of Attorney

   Each limited partner, and each person who acquires a unit from a unitholder
and executes and delivers a transfer application, grants to the managing
general partner and, if appointed, a liquidator, a power of attorney to, among
other things, execute and file documents required for our qualification,
continuance or dissolution. The power of attorney also grants the managing
general partner the authority to amend, and to make consents and waivers under,
the partnership agreement.

Capital Contributions

   Unitholders are not obligated to make additional capital contributions,
except as described below under "--Limited Liability."

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Limited Liability

   Assuming that a limited partner does not participate in the control of our
business within the meaning of the Delaware Act and that he otherwise acts in
conformity with the provisions of the partnership agreement, his liability
under the Delaware Act will be limited, subject to possible exceptions, to the
amount of capital he is obligated to contribute to us for his common units plus
his share of any undistributed profits and assets. If it were determined,
however, that the right, or exercise of the right, by the limited partners as a
group:

  . to remove or replace the managing general partner,

  . to approve some amendments to the partnership agreement, or

  . to take other action under the partnership agreement,

constituted "participation in the control" of our business for the purposes of
the Delaware Act, then the limited partners could be held personally liable for
our obligations under the laws of Delaware, to the same extent as the managing
general partner. This liability would extend to persons who transact business
with us who reasonably believe that the limited partner is a general partner.
Neither the partnership agreement nor the Delaware Act specifically provides
for legal recourse against the general partners if a limited partner were to
lose limited liability through any fault of the general partners. While this
does not mean that a limited partner could not seek legal recourse, we know of
no precedent for this type of a claim in Delaware case law.

   Under the Delaware Act, a limited partnership may not make a distribution to
a partner if, after the distribution, all liabilities of the limited
partnership, other than liabilities to partners on account of their partnership
interests and liabilities for which the recourse of creditors is limited to
specific property of the partnership, would exceed the fair value of the assets
of the limited partnership. For the purpose of determining the fair value of
the assets of a limited partnership, the Delaware Act provides that the fair
value of property subject to liability for which recourse of creditors is
limited shall be included in the assets of the limited partnership only to the
extent that the fair value of that property exceeds the nonrecourse liability.
The Delaware Act provides that a limited partner who receives a distribution
and knew at the time of the distribution that the distribution was in violation
of the Delaware Act shall be liable to the limited partnership for the amount
of the distribution for three years. Under the Delaware Act, an assignee who
becomes a substituted limited partner of a limited partnership is liable for
the obligations of his assignor to make contributions to the partnership,
except the assignee is not obligated for liabilities unknown to him at the time
he became a limited partner and that could not be ascertained from the
partnership agreement.

   Our subsidiaries conduct business in 14 states. Maintenance of our limited
liability as a member of the operating company, may require compliance with
legal requirements in the jurisdictions in which the operating company conducts
business, including qualifying our subsidiaries to do business there.
Limitations on the liability of members for the obligations of a limited
liability company have not been clearly established in many jurisdictions. If
it were determined that we were, by virtue of our membership interest in the
operating company or otherwise, conducting business in any state without
compliance with the applicable limited partnership or limited liability company
statute, or that the right or exercise of the right by the limited partners as
a group to remove or replace the managing general partner, to approve some
amendments to the partnership agreement, or to take other action under the
partnership agreement constituted "participation in the control" of our
business for purposes of the statutes of any relevant jurisdiction, then the
limited partners could be held personally liable for our obligations under the
law of that jurisdiction to the same extent as the managing general partner
under the circumstances. We will operate in a manner that the managing general
partner considers reasonable and necessary or appropriate to preserve the
limited liability of the limited partners.

Issuance of Additional Securities

   The partnership agreement authorizes us to issue an unlimited number of
additional limited partner interests and other equity securities for the
consideration and on the terms and conditions established by the

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managing general partner in its sole discretion without the approval of any
limited partners. While any senior subordinated units remain outstanding,
however, except as we discuss in the following paragraph, we may not issue
equity securities ranking senior to the common units or an aggregate of more
than 800,000 additional common units or units on a parity with the common
units, in each case, without the approval of the holders of a majority of the
outstanding common units and subordinated units, voting as separate classes.

   During or after the subordination period, we may issue an unlimited number
of common units as follows:

  . upon exercise of the underwriters' over-allotment option,

  . upon conversion of the subordinated units,

  . under employee benefit plans,

  . upon conversion of the general partner interests and incentive
    distribution rights as a result of a withdrawal of a general partner,

  . in the event of a combination or subdivision of common units, or

  . in connection with an acquisition or a capital improvement that would
    have resulted, on a pro forma basis, in an increase in adjusted operating
    surplus on a per unit basis for the preceding four-quarter period.

   It is possible that we will fund acquisitions through the issuance of
additional common units or other equity securities. Holders of any additional
common units we issue will be entitled to share equally with the then-existing
holders of common units in our distributions of available cash. In addition,
the issuance of additional partnership interests may dilute the value of the
interests of the then-existing holders of common units in our net assets.

   In accordance with Delaware law and the provisions of our partnership
agreement, we may also issue additional partnership interests that, in the
sole discretion of the managing general partner, have special voting rights to
which the common units are not entitled.

   Upon issuance of additional partnership interests, the non-managing general
partner will be required to make additional capital contributions to the
extent necessary to maintain its 2% general partner interest in us and the
operating company. Moreover, the non-managing general partner will have the
right, which it may from time to time assign in whole or in part to any of its
affiliates, to purchase common units, subordinated units or other equity
securities whenever, and on the same terms that, we issue those securities to
persons other than the non-managing general partner and its affiliates, to the
extent necessary to maintain its percentage interest, including its interest
represented by common units and subordinated units, that existed immediately
prior to each issuance. The holders of common units will not have preemptive
rights to acquire additional common units or other partnership interests.

Amendment of the Partnership Agreement

 General

   Amendments to the partnership agreement may be proposed only by or with the
consent of the managing general partner, which consent may be given or
withheld in its sole discretion. In order to adopt a proposed amendment, other
than the amendments discussed below, the managing general partner must seek
written approval of the holders of the number of units required to approve the
amendment or call a meeting of the limited partners to consider and vote upon
the proposed amendment. Except as we describe below, an amendment must be
approved:

  . during the subordination period, by a majority of the common units,
    excluding those common units held by our general partners and their
    affiliates, voting as a class, and a majority of the senior subordinated
    units and the junior subordinated units, voting together as a class, and

                                      105

  . after the subordination period, by a majority of the common units.

   We refer to the voting provisions described above as a "unit majority."

 Prohibited Amendments

   No amendment may be made that would:

     (1) enlarge the obligations of any limited partner without its consent,
  unless approved by at least a majority of the type or class of limited
  partner interests so affected,

     (2) enlarge the obligations of, restrict in any way any action by or
  rights of, or reduce in any way the amounts distributable, reimbursable or
  otherwise payable by us to the general partners or any of their affiliates
  without the consent of the managing general partner, which may be given or
  withheld in its sole discretion,

     (3) change the term of our partnership,

     (4) provide that our partnership is not dissolved upon an election to
  dissolve our partnership by the managing general partner that is approved
  by the holders of a majority of the outstanding common units and
  subordinated units, voting as separate classes, or

     (5) give any person the right to dissolve our partnership other than the
  managing general partner's right to dissolve our partnership with the
  approval of the holders of a majority of the outstanding common units and
  subordinated units, voting as separate classes.

   The provision of the partnership agreement preventing the amendments having
the effects described in clauses (1) through (5) above can be amended upon the
approval of the holders of at least 90% of the outstanding units voting as a
single class.

 No Unitholder Approval

   The managing general partner may generally make amendments to the
partnership agreement without the approval of any limited partner or assignee
to reflect:

     (1) a change in our name, the location of our principal place of
  business, our registered agent or our registered office,

     (2) the admission, substitution, withdrawal or removal of partners in
  accordance with the partnership agreement,

     (3) a change that, in the sole discretion of the managing general
  partner, is necessary or advisable for us to qualify or to continue our
  qualification as a limited partnership or a partnership in which the
  limited partners have limited liability under the laws of any state or to
  ensure that neither we, the operating company nor its subsidiaries will be
  treated as an association taxable as a corporation or otherwise taxed as an
  entity for federal income tax purposes,

     (4) an amendment that is necessary, in the opinion of our counsel, to
  prevent us or our managing general partner or its directors, officers,
  agents or trustees, from in any manner being subjected to the provisions of
  the Investment Company Act of 1940, the Investment Advisors Act of 1940, or
  "plan asset" regulations adopted under the Employee Retirement Income
  Security Act of 1974, whether or not substantially similar to plan asset
  regulations currently applied or proposed,

     (5) subject to the limitations on the issuance of additional common
  units or other limited or general partner interests described above, an
  amendment that in the discretion of the managing general partner is
  necessary or advisable for the authorization of additional limited or
  general partner interests,

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

     (7) an amendment effected, necessitated or contemplated by a merger
  agreement that has been approved under the terms of the partnership
  agreement,

     (8) any amendment that, in the discretion of the managing general
  partner, is necessary or advisable for the formation by us of, or our
  investment in, any corporation, partnership or other entity, as otherwise
  permitted by the partnership agreement,

     (9) a change in our fiscal year or taxable year and related changes, and

     (10) any other amendments substantially similar to any of the matters
  described in (1) through (9) above.

   In addition, the managing general partner may make amendments to the
partnership agreement without the approval of any limited partner or assignee
if those amendments, in the discretion of the managing general partner:

     (1) do not adversely affect the limited partners (or any particular
  class of limited partners) in any material respect,

     (2) are necessary or advisable to satisfy any requirements, conditions
  or guidelines contained in any opinion, directive, order, ruling or
  regulation of any federal or state agency or judicial authority or
  contained in any federal or state statute,

     (3) are necessary or advisable to facilitate the trading of limited
  partner interests or to comply with any rule, regulation, guideline or
  requirement of any securities exchange on which the limited partner
  interests are or will be listed for trading, compliance with any of which
  the managing general partner deems to be in our best interest and the best
  interest of limited partners,

     (4) are necessary or advisable for any action taken by the managing
  general partner relating to splits or combinations of units under the
  provisions of the partnership agreement, or

     (5) are required to effect the intent expressed in this prospectus or
  the intent of the provisions of the partnership agreement or are otherwise
  contemplated by the partnership agreement.

 Opinion of Counsel and Unitholder Approval

   Our managing general partner will not be required to obtain an opinion of
counsel that an amendment will not result in a loss of limited liability to the
limited partners or result in our being taxed as an entity for federal income
tax purposes if one of the amendments described above under "--No Unitholder
Approval" should occur. No other amendments to the partnership agreement will
become effective without the approval of holders of at least 90% of the units
unless we obtain an opinion of counsel to the effect that the amendment will
not affect the limited liability under applicable law of any of our limited
partners or cause us, the operating company or its subsidiaries to be taxable
as a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously taxed as such).

   Any amendment that would have a material adverse effect on the rights or
preferences of any type or class of outstanding units in relation to other
classes of units will require the approval of at least a majority of the type
or class of units so affected. Any amendment that reduces the voting percentage
required to take any action must be approved by the affirmative vote of limited
partners constituting not less than the voting requirement sought to be
reduced.

Action Relating to the Operating Company

   Without the approval of the holders of units representing a unit majority,
our managing general partner is prohibited from consenting on our behalf, as
the sole member of the operating company, to any amendment to

                                      107

the limited liability company agreement of the operating company or taking any
action on our behalf permitted to be taken by a member of the operating
company, in each case that would adversely affect our limited partners (or any
particular class of limited partners) in any material respect.

Merger, Sale or Other Disposition of Assets

   The partnership agreement generally prohibits the managing general partner,
without the prior approval of the holders of units representing a unit
majority, from causing us to, among other things, sell, exchange or otherwise
dispose of all or substantially all of our assets in a single transaction or a
series of related transactions, including by way of merger, consolidation or
other combination, or approving on our behalf the sale, exchange or other
disposition of all or substantially all of the assets of our subsidiaries. The
managing general partner may, however, mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of our assets without that
approval. The managing general partner may also sell all or substantially all
of our assets under a foreclosure or other realization upon those encumbrances
without that approval.

   If conditions specified in the partnership agreement are satisfied, the
managing general partner may merge us or any of our subsidiaries into, or
convey some or all of our assets to, a newly formed entity if the sole purpose
of that merger or conveyance is to effect a mere change in our legal form into
another limited liability entity. The unitholders are not entitled to
dissenters' rights of appraisal under the partnership agreement or applicable
Delaware law in the event of a merger or consolidation, a sale of substantially
all of our assets or any other transaction or event.

Termination and Dissolution

   We will continue as a limited partnership until terminated under the
partnership agreement. We will dissolve upon:

     (1) the election of the managing general partner to dissolve us, if
  approved by the holders of units representing a unit majority,

     (2) the sale, exchange or other disposition of all or substantially all
  of our assets and properties and those of our subsidiaries,

     (3) the entry of a decree of judicial dissolution of Inergy, L.P., or

     (4) the withdrawal or removal of our managing general partner or any
  other event that results in its ceasing to be the managing general partner
  other than by reason of a transfer of its general partner interest in
  accordance with the partnership agreement or withdrawal or removal of the
  managing general partner following approval and admission of a successor.

   Upon a dissolution under clause (4), the holders of a majority of the
outstanding common units and subordinated units, voting as separate classes,
may also elect, within specific time limitations, to reconstitute us and
continue our business on the same terms and conditions described in the
partnership agreement by forming a new limited partnership on terms identical
to those in the partnership agreement and having as managing general partner an
entity approved by the holders of a majority of the outstanding common units
and subordinated units, voting as separate classes, subject to our receipt of
an opinion of counsel to the effect that:

     (1) the action would not result in the loss of limited liability of any
  limited partner, and

     (2) neither us, the reconstituted limited partnership nor the operating
  company would be treated as an association taxable as a corporation or
  otherwise be taxable as an entity for federal income tax purposes upon the
  exercise of that right to continue.

Liquidation and Distribution of Proceeds

   Upon our dissolution, unless we are reconstituted and continued as a new
limited partnership, the liquidator authorized to wind up our affairs will,
acting with all of the powers of the managing general partner

                                      108

that the liquidator deems necessary or desirable in its judgment, liquidate our
assets and apply the proceeds of the liquidation as provided in "Cash
Distribution Policy--Distributions of Cash upon Liquidation." The liquidator
may defer liquidation of our assets for a reasonable period of time or
distribute assets to partners in kind if it determines that a sale would be
impractical or would cause undue loss to the partners.

Withdrawal or Removal of the General Partners

   Except as described below, our managing general partner has agreed not to
withdraw voluntarily as a general partner prior to June 30, 2011 without
obtaining the approval of the holders of at least a majority of the outstanding
common units, excluding common units held by the general partners and their
affiliates, and furnishing an opinion of counsel regarding limited liability
and tax matters. On or after June 30, 2011 our managing general partner may
withdraw as managing general partner without first obtaining approval of any
unitholder by giving 90 days' written notice, and that withdrawal will not
constitute a violation of the partnership agreement. Notwithstanding the
information above, our managing general partner may withdraw without unitholder
approval upon 90 days' notice to the limited partners if at least 50% of the
outstanding common units are held or controlled by one person and its
affiliates other than the general partners and their affiliates. Our non-
managing general partner must withdraw as a general partner at any time after a
transfer of its general partner interest upon obtaining the consent of the
managing general partner. If our non-managing general partner is removed or
withdraws and no successor is appointed, the managing general partner will
continue the business of Inergy, L.P.

   Upon the withdrawal of the managing general partner under any circumstances,
other than as a result of a transfer by the managing general partner of all or
a part of its general partner interest in us, the holders of a majority of the
outstanding common units and subordinated units, voting as separate classes,
may select a successor to that withdrawing managing general partner. If a
successor is not elected, or is elected but an opinion of counsel regarding
limited liability and tax matters cannot be obtained, we will be dissolved,
wound up and liquidated, unless within 180 days after that withdrawal, the
holders of a majority of the outstanding common units and subordinated units,
voting as separate classes, agree in writing to continue our business and to
appoint a successor general partner. Please read "--Termination and
Dissolution."

   The managing general partner may not be removed unless that removal is
approved by the vote of the holders of not less than 66 2/3% of the outstanding
units, including units held by the general partners and their affiliates, and
we receive an opinion of counsel regarding limited liability and tax matters.
Any removal of the managing general partner is also subject to the approval of
a successor managing general partner by the vote of the holders of a majority
of the outstanding common units and subordinated units, voting as separate
classes. The ownership of more than 33 1/3% of the outstanding units by the
general partners and their affiliates give the managing general partner the
practical ability to prevent its removal. At the closing of this offering, our
general partners and their affiliates, including our executive officers and
directors, will control approximately 31% of the outstanding units.

   The partnership agreement also provides that if Inergy GP, LLC is removed as
our managing general partner under circumstances where cause does not exist and
units held by the managing general partner and its affiliates are not voted in
favor of that removal:

     (1) the subordination period will end and all outstanding subordinated
  units will immediately convert into common units on a one-for-one basis,

     (2) any existing arrearages in payment of the minimum quarterly
  distribution on the common units will be extinguished, and

     (3) the non-managing general partner will have the right to convert its
  general partner interest and Inergy Holdings will have the right to convert
  its incentive distribution rights into common units or to receive cash in
  exchange for those interests.

   In the event of removal of the managing general partner under circumstances
where cause exists or withdrawal of the managing general partner where that
withdrawal violates the partnership agreement, a

                                      109

successor general partner will have the option to purchase the general partner
interest of the departing general partner for a cash payment equal to the fair
market value of those interests. Under all other circumstances where a general
partner withdraws or is removed by the limited partners, the departing general
partner will have the option to require the successor general partner to
purchase the general partner interests of the departing general partner and,
in the case of the withdrawal or removal of the managing general partner,
Inergy Holdings will have the option to require the successor managing general
partner to purchase the incentive distribution rights and the general partner
interest held by the nonmanaging general partners for fair market value. In
each case, this fair market value will be determined by agreement between the
departing general partner, and the successor general partner and, in the case
of a purchase of incentive distribution rights and the non-managing partner's
general partner interest, Inergy Holdings. If no agreement is reached, an
independent investment banking firm or other independent expert selected by
the departing general partner, Inergy Holdings and the successor general
partner will determine the fair market value. Or, if the departing general
partner, Inergy Holdings and the successor general partner cannot agree upon
an expert, then an expert chosen by agreement of the experts selected by each
of them will determine the fair market value.

   If the option described above is not exercised by either the departing
managing general partner or the successor managing general partner, the
departing managing general partner's general partner interest and Inergy
Holdings' incentive distribution rights and the non-managing partner's general
partner interest will automatically convert into common units equal to the
fair market value of those interests as determined by an investment banking
firm or other independent expert selected in the manner described in the
preceding paragraph.

   In addition, we will be required to reimburse the departing general partner
for all amounts due the departing general partner, including, without
limitation, all employee-related liabilities, including severance liabilities,
incurred for the termination of any employees employed by the departing
general partner or its affiliates for our benefit.

Transfer of General Partner Interests

   Except for a transfer by either general partner of all, but not less than
all, of its general partner interest to:

     (1) an affiliate of the general partner (other than an individual), or

     (2) another entity as part of the merger or consolidation of the general
  partner with or into another entity or the transfer by the general partner
  of all or substantially all of its assets to another entity,

the managing general partner may not transfer all or any part of its general
partner interest to another person prior to June 30, 2011 without the approval
of the holders of at least a majority of the outstanding common units,
excluding common units held by the general partners and their affiliates. As a
condition of this transfer, the transferee must, among other things, assume
the rights and duties of the managing general partner, agree to be bound by
the provisions of the partnership agreement and furnish an opinion of counsel
regarding limited liability and tax matters.

   The general partners and their affiliates may at any time transfer units to
one or more persons, without unitholder approval, except that they may not
transfer subordinated units to us.

Transfer of Incentive Distribution Rights

   Inergy Holdings or a later holder of the incentive distribution rights may
transfer its incentive distribution rights to an affiliate of the holder
(other than an individual) without the approval of the unitholders, provided,
in each case, the transferee agrees to be bound by the provisions of the
partnership agreement. Prior to June 30, 2011, other transfers of the
incentive distribution rights will require the affirmative vote of holders of
a majority of the outstanding common units, excluding common units held by the
general partners and their affiliates. On or after June 30, 2011 the incentive
distribution rights will be freely transferable.

                                      110

Transfer of Ownership Interests in General Partners

   At any time, the members of either general partner may sell or transfer all
or part of their membership interests in the managing general partner or the
non-managing general partner without the approval of the unitholders.

Change of Management Provisions

   The partnership agreement contains specific provisions that are intended to
discourage a person or group from attempting to remove Inergy GP, LLC as our
managing general partner or otherwise change management.

   If any person or group other than the general partners and their affiliates
acquires beneficial ownership of 20% or more of any class of units, that person
or group loses voting rights on all of its units. This loss of voting rights
does not apply to any person or group that acquires the units concurrently with
this offering from our general partners or their affiliates and any transferees
of that person or group approved by our managing general partner.

   The partnership agreement also provides that if the managing general partner
is removed under circumstances where cause does not exist and units held by the
general partners and their affiliates are not voted in favor of that removal:

     (1) the subordination period will end and all outstanding subordinated
  units will immediately convert into common units on a one-for-one basis,

     (2) any existing arrearages in payment of the minimum quarterly
  distribution on the common units will be extinguished, and

     (3) the non-managing general partner will have the right to convert its
  general partner interest and Inergy Holdings will have the right to convert
  its incentive distribution rights into common units or to receive cash in
  exchange for those interests.

Limited Call Right

   If at any time not more than 20% of the then-issued and outstanding limited
partner interests of any class are held by persons other than the general
partners and their affiliates, the managing general partner will have the
right, which it may assign in whole or in part to any of its affiliates or to
us, to acquire all, but not less than all, of the remaining limited partner
interests of the class held by unaffiliated persons as of a record date to be
selected by the managing general partner, on at least ten but not more than 60
days' notice. The purchase price in the event of this purchase is the greater
of:

     (1) the highest cash price paid by either of the general partners or any
  of their affiliates for any limited partner interests of the class
  purchased within the 90 days preceding the date on which the managing
  general partner first mails notice of its election to purchase those
  limited partner interests, and

     (2) the current market price as of the date three days before the date
  the notice is mailed.

   As a result of the managing general partner's right to purchase outstanding
limited partner interests, a holder of limited partner interests may have his
limited partner interests purchased at an undesirable time or price. The tax
consequences to a unitholder of the exercise of this call right are the same as
a sale by that unitholder of his common units in the market. Please read "Tax
Considerations--Disposition of Common Units."

Meetings; Voting

   Except as described below regarding a person or group owning 20% or more of
any class of units then outstanding, unitholders or assignees who are record
holders of units on the record date will be entitled to

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notice of, and to vote at, meetings of our limited partners and to act upon
matters for which approvals may be solicited. Common units that are owned by an
assignee who is a record holder, but who has not yet been admitted as a limited
partner, will be voted by the managing general partner at the written direction
of the record holder. Absent direction of this kind, the common units will not
be voted, except that, in the case of common units held by the managing general
partner on behalf of non-citizen assignees, the managing general partner will
distribute the votes on those common units in the same ratios as the votes of
limited partners on other units are cast.

   The managing general partner does not anticipate that any meeting of
unitholders will be called in the foreseeable future. Any action that is
required or permitted to be taken by the unitholders may be taken either at a
meeting of the unitholders or without a meeting if consents in writing
describing the action so taken are signed by holders of the number of units as
would be necessary to authorize or take that action at a meeting. Meetings of
the unitholders may be called by the managing general partner or by unitholders
owning at least 20% of the outstanding partnership securities of the class for
which a meeting is proposed. Unitholders may vote either in person or by proxy
at meetings. The holders of a majority of the outstanding partnership
securities of the class or classes for which a meeting has been called,
represented in person or by proxy, will constitute a quorum unless any action
by the unitholders requires approval by holders of a greater percentage, in
which case the quorum will be the greater percentage.

   Each record holder of a unit has a vote according to his percentage interest
in us, although additional limited partner interests having special voting
rights could be issued. Please read "--Issuance of Additional Securities."
However, if at any time any person or group, other than the managing general
partner and its affiliates, or a direct or subsequently approved transferee of
the managing general partner or its affiliates, acquires, in the aggregate,
beneficial ownership of 20% or more of any class of units then outstanding,
that person or group will lose voting rights on all of its units and the units
may not be voted on any matter and will not be considered to be outstanding
when sending notices of a meeting of unitholders, calculating required votes,
determining the presence of a quorum or for other similar purposes. Common
units held in nominee or street name account will be voted by the broker or
other nominee in accordance with the instruction of the beneficial owner unless
the arrangement between the beneficial owner and his nominee provides
otherwise. Except as the partnership agreement otherwise provides, subordinated
units will vote together with common units as a single class.

   Any notice, demand, request, report or proxy material required or permitted
to be given or made to record holders of common units under the partnership
agreement will be delivered to the record holder by us or by the transfer
agent.

Status as Limited Partner or Assignee

   Except as described above under "--Limited Liability," the common units will
be fully paid, and unitholders will not be required to make additional
contributions.

   An assignee of a common unit, after executing and delivering a transfer
application, but pending its admission as a substituted limited partner, is
entitled to an interest equivalent to that of a limited partner for the right
to share in allocations and distributions from us, including liquidating
distributions. The managing general partner will vote and exercise other powers
attributable to common units owned by an assignee that has not become a
substitute limited partner at the written direction of the assignee. See "--
Meetings; Voting." Transferees that do not execute and deliver a transfer
application will be treated neither as assignees nor as record holders of
common units, and will not receive cash distributions, federal income tax
allocations or reports furnished to holders of common units. Please read
"Description of the Common Units--Transfer of Common Units."

Non-Citizen Assignees; Redemption

   If we are or become subject to federal, state or local laws or regulations
that, in the reasonable determination of the managing general partner, create a
substantial risk of cancellation or forfeiture of any

                                      112

property that we have an interest in because of the nationality, citizenship or
other related status of any limited partner or assignee, we may redeem the
units held by the limited partner or assignee at their current market price. In
order to avoid any cancellation or forfeiture, the managing general partner may
require each limited partner or assignee to furnish information about his
nationality, citizenship or related status. If a limited partner or assignee
fails to furnish information about this nationality, citizenship or other
related status within 30 days after a request for the information or the
managing general partner determines after receipt of the information that the
limited partner or assignee is not an eligible citizen, the limited partner or
assignee may be treated as a non-citizen assignee. In addition to other
limitations on the rights of an assignee that is not a substituted limited
partner, a non-citizen assignee does not have the right to direct the voting of
his units and may not receive distributions in kind upon our liquidation.

Indemnification

   Under the partnership agreement, in most circumstances, we will indemnify
the following persons, to the fullest extent permitted by law, from and against
all losses, claims, damages or similar events:

  . the general partners,

  . any departing general partner,

  . any person who is or was an affiliate of a general partner or any
    departing general partner,

  . any person who is or was a member, partner, officer, director, employee,
    agent or trustee of the managing general partner or any departing general
    partner or any affiliate of a managing general partner or any departing
    general partner, or

  . any person who is or was serving at the request of a managing general
    partner or any departing general partner or any affiliate of a managing
    general partner or any departing general partner as an officer, director,
    employee, member, partner, agent or trustee of another person.

   Any indemnification under these provisions will only be out of our assets.
The general partners and their affiliates will not be personally liable for, or
have any obligation to contribute or loan funds or assets to us to enable us to
effectuate, indemnification. We may purchase insurance against liabilities
asserted against and expenses incurred by persons for our activities,
regardless of whether we would have the power to indemnify the person against
liabilities under the partnership agreement.

Books and Reports

   The managing general partner is required to keep appropriate books of our
business at our principal offices. The books will be maintained for both tax
and financial reporting purposes on an accrual basis. For fiscal reporting
purposes, our fiscal year ends September 30 of each calendar year. For tax
reporting purposes, our tax year ends December 31 each year.

   We will furnish or make available to record holders of common units, within
120 days after the close of each fiscal year, an annual report containing
audited financial statements and a report on those financial statements by our
independent public accountants. Except for our fourth quarter, we will also
furnish or make available summary financial information within 90 days after
the close of each quarter.

   We will furnish each record holder of a unit with information reasonably
required for tax reporting purposes within 90 days after the close of each
calendar year. This information is expected to be furnished in summary form so
that some complex calculations normally required of partners can be avoided.
Our ability to furnish this summary information to unitholders will depend on
the cooperation of unitholders in supplying us with specific information. Every
unitholder will receive information to assist him in determining his federal
and state tax liability and filing his federal and state income tax returns,
regardless of whether he supplies us with information.

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Right to Inspect our Books and Records

   The partnership agreement provides that a limited partner can, for a purpose
reasonably related to his interest as a limited partner, upon reasonable demand
and at his own expense, have furnished to him:

  . a current list of the name and last known address of each partner,

  . a copy of our tax returns,

  . information as to the amount of cash, and a description and statement of
    the agreed value of any other property or services, contributed or to be
    contributed by each partner and the date on which each became a partner,

  . copies of the partnership agreement, the certificate of limited
    partnership of the partnership, related amendments and powers of attorney
    under which they have been executed,

  . information regarding the status of our business and financial condition,
    and

  . any other information regarding our affairs as is just and reasonable.

   The managing general partner may, and intends to, keep confidential from the
limited partners trade secrets or other information the disclosure of which the
managing general partner believes in good faith is not in our best interests or
which we are required by law or by agreements with third parties to keep
confidential.

Registration Rights

   Under the partnership agreement, we have agreed to register for resale under
the Securities Act of 1933 and applicable state securities laws any common
units, senior or junior subordinated units or other partnership securities
proposed to be sold by the general partners or any of their affiliates or their
assignees if an exemption from the registration requirements is not otherwise
available. These registration rights continue for two years following any
withdrawal or removal of Inergy GP, LLC as our managing general partner. We are
obligated to pay all expenses incidental to the registration, excluding
underwriting discounts and commissions. Please read "Units Eligible for Future
Sale." We have also granted registration rights to certain investors. For a
summary description of these registration rights, please read "Certain
Relationships and Related Transactions."

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                         UNITS ELIGIBLE FOR FUTURE SALE

   After the sale of the common units offered by this prospectus, affiliates of
the managing general partner, former owners of propane businesses we have
acquired and some of our original investors will hold 404,601 common units,
3,313,367 senior subordinated units and 572,542 junior subordinated units. All
of the subordinated units will convert into common units at the end of the
subordination period and some may convert earlier. The sale of any of these
units could have an adverse impact on the price of the common units or on any
trading market that may develop. These common units, and upon conversion, these
subordinated units will be entitled to registration rights as described under
"Certain Relationships and Related Transactions" or will be freely transferable
without restriction or further registration under the Securities Act of 1933,
subject to the affiliate restrictions described below.

   The common units sold in the offering will generally be freely transferable
without restriction or further registration under the Securities Act of 1933,
except that any resale of common units purchased by an "affiliate" of Inergy,
L.P. will be subject to the volume limitations contained in Rule 144 of the
Securities Act.

   While any senior subordinated units remain outstanding, we may not issue
equity securities of the partnership ranking prior or senior to the common
units or an aggregate of more than 800,000 additional common units or an
equivalent amount of securities ranking on a parity with the common units,
without the approval of the holders of a majority of the outstanding common
units and subordinated units, voting as separate classes, subject to certain
exceptions described under "The Partnership Agreement--Issuance of Additional
Securities."

   The partnership agreement provides that, once no senior subordinated units
remain outstanding, we may issue an unlimited number of limited partner
interests of any type without a vote of the unitholders. The partnership
agreement does not restrict our ability to issue equity securities ranking
junior to the common units at any time. Any issuance of additional common units
or other equity securities would result in a corresponding decrease in the
proportionate ownership interest in us represented by, and could adversely
affect the cash distributions to and market price of, common units then
outstanding. Please read "The Partnership Agreement--Issuance of Additional
Securities."

   Under the partnership agreement, the general partners and their affiliates
have the right to cause us to register under the Securities Act of 1933 and
state laws the offer and sale of any units that they hold.

   Subject to the terms and conditions of the partnership agreement, these
registration rights allow the general partners and their affiliates or their
assignees holding any units to require registration of any of these units and
to include any of these units in a registration by us of other units, including
units offered by us or by any unitholder. Each general partner will continue to
have these registration rights for two years following its withdrawal or
removal as a general partner. In connection with any registration of this kind,
we will indemnify each unitholder participating in the registration and its
officers, directors and controlling persons from and against any liabilities
under the Securities Act of 1933 or any state securities laws arising from the
registration statement or prospectus. We will bear all costs and expenses
incidental to any registration, excluding any underwriting discounts and
commissions. Except as described below, the general partners and their
affiliates may sell their units in private transactions at any time, subject to
compliance with applicable laws.

   In addition, we have granted registration rights to certain investors. For a
description of these registration rights, please read "Certain Relationships
and Related Transactions."

   Inergy, L.P., New Inergy Propane, LLC, the general partners and certain of
their affiliates have agreed not to sell any common units they beneficially own
for a period of 90 days from the date of this prospectus. Please read
"Underwriting" for a description of these lock-up provisions.

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                               TAX CONSIDERATIONS

   This section addresses all of the material tax considerations that may be
relevant to prospective unitholders who are individual citizens or residents of
the United States and, unless otherwise noted in the following discussion, is
the opinion of Vinson & Elkins L.L.P., special counsel to the general partners
and us, insofar as it relates to legal conclusions with respect to United
States federal income tax law. This section is based upon current provisions of
the Internal Revenue Code, existing and proposed regulations and current
administrative rulings and court decisions, all of which are subject to change.
Later changes in these authorities may cause the tax consequences to vary
substantially from the consequences described below. Unless the context
otherwise requires, references in this section to "us" or "we" are references
to Inergy, L.P. and the operating company.

   No attempt has been made in the following discussion to comment on all
federal income tax matters affecting us or the unitholders. Moreover, the
discussion focuses on unitholders who are individual citizens or residents of
the United States and has only limited application to corporations, estates,
trusts, nonresident aliens or other unitholders subject to specialized tax
treatment, such as tax-exempt institutions, non-U.S. persons, individual
retirement accounts (IRAs), real estate investment trusts (REITs) or mutual
funds. Accordingly, each prospective unitholder is urged to consult with, and
is urged to depend on, his own tax advisor in analyzing the federal, state,
local and foreign tax consequences particular to him of the ownership or
disposition of common units.

   All statements as to matters of law and legal conclusions, but not as to
factual matters, contained in this section, unless otherwise noted, are the
opinion of Vinson & Elkins L.L.P., unless otherwise noted, and are based on the
accuracy of the representations made by us.

   No ruling has been or will be requested from the IRS regarding any matter
affecting us or prospective unitholders. Instead, we will rely on opinions and
advice of Vinson & Elkins L.L.P. Unlike a ruling, an opinion of counsel
represents only that counsel's best legal judgment and does not bind the IRS or
the courts. Accordingly, the opinions and statements made here may not be
sustained by a court if contested by the IRS. Any contest of this sort with the
IRS may materially and adversely impact the market value of the common units.
In addition, the costs of any contest with the IRS will be borne indirectly by
the unitholders and our general partners. Furthermore, the tax treatment of
Inergy, L.P., or of an investment in Inergy, L.P., may be significantly
modified by future legislative or administrative changes or court decisions.
Any modifications may or may not be retroactively applied.

   For the reasons described below, Vinson & Elkins L.L.P. has not rendered an
opinion with respect to the following specific federal income tax issues:

     (l) the treatment of a unitholder whose common units are loaned to a
  short seller to cover a short sale of common units (please read "--Tax
  Consequences of Unit Ownership--Treatment of Short Sales"),

     (2) whether our monthly convention for allocating taxable income and
  losses is permitted by existing Treasury regulations (please read "--
  Disposition of Common Units--Allocations Between Transferors and
  Transferees"), and

     (3) whether our method for depreciating Section 743 adjustments is
  sustainable (please read "--Tax Consequences of Unit Ownership--Section 754
  Election").

Partnership Status

   A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner of a partnership is required to take into
account his share of items of income, gain, loss and deduction of the
partnership in computing his federal income tax liability, regardless of
whether cash distributions are made to him by the partnership. Distributions by
a partnership to a partner are generally not taxable unless the amount of cash
distributed is in excess of his adjusted basis in his partnership interest.

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   Section 7704 of the Internal Revenue Code provides that publicly-traded
partnerships will, as a general rule, be taxed as corporations. However, an
exception, referred to as the "Qualifying Income Exception," exists with
respect to publicly-traded partnerships whose gross income for every taxable
year consists of at least 90% "qualifying income." Qualifying income includes
income and gains derived from the wholesale and retail marketing and
transportation of propane. Other types of qualifying income include interest
other than from a financial business, dividends, gains from the sale of real
property and gains from the sale or other disposition of assets held for the
production of income that otherwise constitutes qualifying income. We estimate
that less than 7% of our current income is not qualifying income; however, this
estimate could change from time to time. Based upon and subject to this
estimate, the factual representations made by us and the managing general
partner and a review of the applicable legal authorities, counsel is of the
opinion that at least 90% of our current gross income constitutes qualifying
income.

   No ruling has been or will be sought from the IRS and the IRS has made no
determination as to our status as a partnership for federal income tax
purposes, the status of the operating company for federal income tax purposes
or whether our operations generate "qualifying income" under Section 7704 of
the Code. Instead, we will rely on the opinion of Vinson & Elkins L.L.P. that,
based upon the Internal Revenue Code, its regulations, published revenue
rulings and court decisions and the representations described below, Inergy,
L.P. has been and will be treated as a partnership for federal income tax
purposes and the operating company has been and will be disregarded as an
entity separate from us for federal income tax purposes.

   In rendering its opinion, Vinson & Elkins L.L.P. has relied on factual
representations made by us and the managing general partner. The
representations made by us and our managing general partner upon which counsel
has relied are:

     (a) Neither Inergy, L.P. nor the operating company has elected or will
  elect to be treated as a corporation, and

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

   If we fail to meet the Qualifying Income Exception, other than a failure
which is determined by the IRS to be inadvertent and which is cured within a
reasonable time after discovery, we will be treated as if we had transferred
all of our assets, subject to liabilities, to a newly formed corporation, on
the first day of the year in which we fail to meet the Qualifying Income
Exception, in return for stock in that corporation, and then distributed that
stock to the unitholders in liquidation of their interests in us. This
contribution and liquidation should be tax-free to unitholders and Inergy, L.P.
so long as we, at that time, do not have liabilities in excess of the tax basis
of our assets. Thereafter, we would be treated as a corporation for federal
income tax purposes.

   If we were treated as a corporation in any taxable year, either as a result
of a failure to meet the Qualifying Income Exception or otherwise, our items of
income, gain, loss and deduction would be reflected only on our tax return
rather than being passed through to the unitholders, and our net income would
be taxed to us at corporate rates. In addition, any distribution made to a
unitholder would be treated as either taxable dividend income, to the extent of
our current or accumulated earnings and profits, or, in the absence of earnings
and profits, a nontaxable return of capital, to the extent of a unitholder's
tax basis in his common units, or taxable capital gain, after the unitholder's
tax basis in his common units is reduced to zero. Accordingly, treatment as a
corporation would materially reduce a unitholder's cash flow and after-tax
return and thus would reduce the value of the units.

   The remainder of this section is based on Vinson & Elkins L.L.P.'s opinion
that we will be treated as a partnership for federal income tax purposes.

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Limited Partner Status

   Unitholders who have become limited partners of Inergy, L.P. will be treated
as partners of Inergy, L.P. for federal income tax purposes. Also:

     (a) assignees who have executed and delivered transfer applications, and
  are awaiting admission as limited partners, and

     (b) unitholders whose common units are held in street name or by a
  nominee and who have the right to direct the nominee in the exercise of all
  substantive rights attendant to the ownership of their common units,

will be treated as partners of Inergy, L.P. for federal income tax purposes.

   As there is no direct authority addressing assignees of common units who are
entitled to execute and deliver transfer applications and thereby become
entitled to direct the exercise of attendant rights, but who fail to execute
and deliver transfer applications, the opinion of Vinson & Elkins L.L.P. does
not extend to these persons. Furthermore, a purchaser or other transferee of
common units who does not execute and deliver a transfer application may not
receive some federal income tax information or reports furnished to record
holders of common units unless the common units are held in a nominee or street
name account and the nominee or broker has executed and delivered a transfer
application for those common units.

   A beneficial owner of common units whose units have been transferred to a
short seller to complete a short sale would appear to lose his status as a
partner with respect to those units for federal income tax purposes. Please
read "--Tax Consequences of Unit Ownership--Treatment of Short Sales."

   Income, gain, deductions or losses would not appear to be reportable by a
unitholder who is not a partner for federal income tax purposes, and any cash
distributions received by a unitholder who is not a partner for federal income
tax purposes would therefore be fully taxable as ordinary income. These holders
are urged to consult their own tax advisors with respect to their status as
partners in Inergy, L.P. for federal income tax purposes.

Tax Consequences of Unit Ownership

   Flow-through of Taxable Income. We will not pay any federal income tax.
Instead, each unitholder will be required to report on his income tax return
his share of our income, gains, losses and deductions without regard to whether
we make cash distributions to him. Consequently, we may allocate income to a
unitholder even if he has not received a cash distribution from us. Each
unitholder will be required to include in income his allocable share of our
income, gains, losses and deductions for our taxable year ending with or within
his taxable year.

   Treatment of Distributions. Except as described below with respect to
certain non-pro rata distributions, our distributions to a unitholder will not
be taxable to the unitholder for federal income tax purposes to the extent of
his tax basis in his common units immediately before the distribution. Our cash
distributions in excess of a unitholder's tax basis will be considered to be
gain from the sale or exchange of the common units, taxable in accordance with
the rules described under "--Disposition of Common Units" below. To the extent
our distributions cause a unitholder's "at risk" amount to be less than zero at
the end of any taxable year, he must recapture any losses deducted in previous
years. Please read "--Limitations on Deductibility of Losses."

   Any reduction in a unitholder's share of our liabilities for which no
partner, including our general partners, bears the economic risk of loss, known
as "nonrecourse liabilities," will be treated as a distribution of cash to that
unitholder. We do not currently have any nonrecourse liabilities. A decrease in
a unitholder's percentage interest in us because of our issuance of additional
common units will decrease his share of our nonrecourse liabilities, and thus
will result in a corresponding deemed distribution of cash. A non-pro rata
distribution of cash may result in ordinary income to a unitholder, regardless
of his tax basis in his common units, if the distribution reduces his share of
our "unrealized receivables," including depreciation recapture, and/or
substantially appreciated "inventory items," both as defined in the Internal
Revenue Code, and collectively, "Section 751 Assets."

                                      118

   To that extent, he will be treated as having received his proportionate
share of our Section 751 Assets and having exchanged those assets with us in
return for the non-pro rata portion of the distribution made to him. This
latter deemed exchange will generally result in the unitholder's realization of
ordinary income. That income will equal the excess of (1) the non-pro rata
portion of that distribution over (2) the unitholder's tax basis for the share
of Section 751 Assets deemed relinquished in the exchange.

   Ratio of Taxable Income to Distributions. We estimate that a purchaser of
common units in this offering who owns those common units from the date of
closing of this offering through December 31, 2004, will be allocated an amount
of federal taxable income for that period that will be no more than 20% of the
cash distributed with respect to that period. These estimates are based upon
the assumption that gross income from operations will approximate the amount
required to make the minimum quarterly distribution on all units and other
assumptions with respect to capital expenditures, cash flow and anticipated
cash distributions. These estimates and assumptions are subject to, among other
things, numerous business, economic, regulatory, competitive and political
uncertainties beyond our control. Further, the estimates are based on current
tax law and tax reporting positions that we will adopt and with which the IRS
could disagree. Accordingly, these estimates may prove to be incorrect. The
actual percentage that will constitute taxable income could be higher or lower,
and any differences could be material and could materially affect the value of
the common units.

   Basis of Common Units. A unitholder's initial tax basis for his common units
will be the amount he paid for the common units plus his share of our
nonrecourse liabilities. That basis will be increased by his share of our
income and by any increases in his share of our nonrecourse liabilities. That
basis will be decreased, but not below zero, by our distributions to him, by
his share of our losses, by any decreases in his share of our nonrecourse
liabilities and by his share of our expenditures that are not deductible in
computing taxable income and are not required to be capitalized. A unitholder
will have no share of our debt which is recourse to either general partner, but
will have a share of our nonrecourse liabilities, generally based on his share
of profits. Please read "--Disposition of Common Units--Recognition of Gain or
Loss."

   Limitations on Deductibility of Losses. The deduction by a unitholder of his
share of our losses will be limited to the tax basis in his units and, in the
case of an individual unitholder or a corporate unitholder, if more than 50% of
the value of the corporate unitholder's stock is owned directly or indirectly
by five or fewer individuals or some tax-exempt organizations, to the amount
for which the unitholder is considered to be "at risk" with respect to our
activities, if that is less than his tax basis. A unitholder must recapture
losses deducted in previous years to the extent that distributions cause his at
risk amount to be less than zero at the end of any taxable year. Losses
disallowed to a unitholder or recaptured as a result of these limitations will
carry forward and will be allowable to the extent that his tax basis or at risk
amount, whichever is the limiting factor, is subsequently increased. Upon the
taxable disposition of a unit, any gain recognized by a unitholder can be
offset by losses that were previously suspended by the at risk limitation but
may not be offset by losses suspended by the basis limitation. Any excess loss
above that gain previously suspended by the at risk or basis limitations is no
longer utilizable.

   In general, a unitholder will be at risk to the extent of the tax basis of
his units, excluding any portion of that basis attributable to his share of our
nonrecourse liabilities, reduced by any amount of money he borrows to acquire
or hold his units, if the lender of those borrowed funds owns an interest in
us, is related to the unitholder or can look only to the units for repayment. A
unitholder's at risk amount will increase or decrease as the tax basis of the
unitholder's units increases or decreases, other than tax basis increases or
decreases attributable to increases or decreases in his share of our
nonrecourse liabilities.

   The passive loss limitations generally provide that individuals, estates,
trusts and some closely-held corporations and personal service corporations can
deduct losses from passive activities, which are generally partnership or
corporate activities in which the taxpayer does not materially participate,
only to the extent of the taxpayer's income from those passive activities. The
passive loss limitations are applied separately with

                                      119

respect to each publicly-traded partnership. Consequently, any passive losses
we generate will only be available to offset our passive income generated in
the future and will not be available to offset income from other passive
activities or investments, including any dividend income we derive or from our
investments or investments in other publicly-traded partnerships, or salary or
active business income. Passive losses that are not deductible because they
exceed a unitholder's share of our income may be deducted in full when he
disposes of his entire investment in us in a fully taxable transaction with an
unrelated party. The passive activity loss rules are applied after other
applicable limitations on deductions, including the at risk rules and the basis
limitation.

   A unitholder's share of our net income may be offset by any suspended
passive losses, but it may not be offset by any other current or carryover
losses from other passive activities, including those attributable to other
publicly-traded partnerships.

   Limitations on Interest Deductions. The deductibility of a non-corporate
taxpayer's "investment interest expense" is generally limited to the amount of
that taxpayer's "net investment income." Investment interest expense includes:

  .  interest on indebtedness properly allocable to property held for
     investment;

  .  our interest expense attributed to portfolio income; and

  .  the portion of interest expense incurred to purchase or carry an
     interest in a passive activity to the extent attributable to portfolio
     income.

   The computation of a unitholder's investment interest expense will take into
account interest on any margin account borrowing or other loan incurred to
purchase or carry a unit.

   Net investment income includes gross income from property held for
investment and amounts treated as portfolio income under the passive loss
rules, less deductible expenses, other than interest, directly connected with
the production of investment income, but generally does not include gains
attributable to the disposition of property held for investment.

   The IRS has indicated that the net passive income earned by a publicly
traded partnership will be treated as investment income to its unitholders. In
addition, a unitholder's share of our portfolio income will be treated as
investment income.

   Entity-Level Collections. If we are required or elect under applicable law
to pay any federal, state, foreign or local income tax on behalf of any
unitholder or the non-managing general partner or any former unitholder, we are
authorized to pay those taxes from our funds. That payment, if made, will be
treated as a distribution of cash to the unitholder on whose behalf the payment
was made. If the payment is made on behalf of a person whose identity cannot be
determined, we are authorized to treat the payment as a distribution to all
current unitholders. We are authorized to amend the partnership agreement in
the manner necessary to maintain uniformity of intrinsic tax characteristics of
units and to adjust later distributions, so that after giving effect to these
distributions, the priority and characterization of distributions otherwise
applicable under the partnership agreement is maintained as nearly as is
practicable. Payments by us as described above could give rise to an
overpayment of tax on behalf of an individual unitholder in which event the
unitholder would be required to file a claim in order to obtain a credit or
refund.

   Allocation of Income, Gain, Loss and Deduction. In general, if we have a net
profit, our items of income, gain, loss and deduction will be allocated among
the non-managing general partner and the unitholders in accordance with their
percentage interests in us. At any time that distributions are made to the
common units in excess of distributions to the senior subordinated units or
junior subordinated units, or incentive distributions are made to Inergy
Holdings, gross income will be allocated to the recipients to the extent of
these distributions. If we have a net loss for the entire year, that loss will
be allocated first to the non-managing general partner and the unitholders in
accordance with their percentage interests in us to the extent of their
positive capital accounts and, second, to the non-managing general partner.

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   Specified items of our income, gain, loss and deduction will be allocated to
account for the difference between the tax basis and fair market value of
property contributed to us by the non-managing general partner and its
affiliates, referred to in this discussion as "Contributed Property." The
effect of these allocations to a unitholder purchasing common units will be
essentially the same as if the tax basis of our assets were equal to their fair
market value at the time of contribution. In addition, recapture income will be
allocated to the extent possible to the unitholder who was allocated the
deduction giving rise to the treatment of that gain as recapture income in
order to minimize the recognition of ordinary income by other unitholders.
Finally, although we do not expect that our operations will result in the
creation of negative capital accounts, if negative capital accounts
nevertheless result, our income and gain will be allocated in an amount and
manner to eliminate the negative balance as quickly as possible.

   An allocation of our income, gain, loss or deduction, other than an
allocation required by the Internal Revenue Code to eliminate the difference
between a partner's "book" capital account, credited with the fair market value
of Contributed Property, and "tax" capital account, credited with the tax basis
of Contributed Property, referred to in this discussion as the "Book-Tax
Disparity," will generally be given effect for federal income tax purposes in
determining a unitholder's share of an item of income, gain, loss or deduction
only if the allocation has substantial economic effect. In any other case, a
unitholder's share of an item will be determined on the basis of his interest
in us, which will be determined by taking into account all the facts and
circumstances, including his relative contributions to us, the interests of all
the unitholders in profits and losses, the interest of all the unitholders in
cash flow and other nonliquidating distributions and the rights of all the
unitholders to distributions of capital upon liquidation.

   Vinson & Elkins L.L.P. is of the opinion that, with the exception of the
issues described in "--Tax Consequences of Unit Ownership--Section 754
Election" and "--Disposition of Common Units--Allocations Between Transferors
and Transferees," allocations under our partnership agreement will be given
effect for federal income tax purposes in determining a unitholder's share of
our income, gain, loss or deduction.

   Treatment of Short Sales. A unitholder whose units are loaned to a "short
seller" to cover a short sale of units may be considered as having disposed of
those units. If so, he would no longer be a partner for tax purposes with
respect to those units during the period of the loan and may recognize gain or
loss from the disposition. As a result, during this period:

  .  any of our income, gain, loss or deduction with respect to those units
     would not be reportable by the unitholder,

  .  any cash distributions received by the unitholder as to those units
     would be fully taxable, and

  .  all of these distributions would appear to be ordinary income.

   Vinson & Elkins L.L.P. has not rendered an opinion regarding the treatment
of a unitholder whose common units are loaned to a short seller. Therefore,
unitholders desiring to assure their status as partners and avoid the risk of
gain recognition should modify any applicable brokerage account agreements to
prohibit their brokers from loaning their units. The IRS has announced that it
is studying issues relating to the tax treatment of short sales of partnership
interests. Please also read "--Disposition of Common Units--Recognition of Gain
or Loss."

   Alternative Minimum Tax. Each unitholder will be required to take into
account his share of any items of our income, gain, loss or deduction for
purposes of the alternative minimum tax. The current minimum tax rate for
noncorporate taxpayers is 26% on the first $175,000 of alternative minimum
taxable income in excess of the exemption amount and 28% on any additional
alternative minimum taxable income. Prospective unitholders are urged to
consult with their tax advisors as to the impact of an investment in units on
their liability for the alternative minimum tax.

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   Tax Rates. In general the highest effective United States federal income tax
rate for individuals for 2002 is 38.6% and the maximum United States federal
income tax rate for net capital gains of an individual for 2002 is 20% if the
asset disposed of was held for more than 12 months at the time of disposition.

   Section 754 Election. We have made the election permitted by Section 754 of
the Internal Revenue Code. That election is irrevocable without the consent of
the IRS. The election will generally permit us to adjust a common unit
purchaser's tax basis in our assets ("inside basis") under Section 743(b) of
the Internal Revenue Code to reflect his purchase price. The Section 743(b)
adjustment belongs to the purchaser and not to other unitholders. For purposes
of this discussion, a unitholder's inside basis in our assets will be
considered to have two components: (1) his share of our tax basis in our assets
("common basis") and (2) his Section 743(b) adjustment to that basis.

   Treasury regulations under Section 743 of the Internal Revenue Code require,
if the remedial allocation method is adopted (which we have adopted), a portion
of the Section 743(b) adjustment attributable to recovery property to be
depreciated over the remaining cost recovery period for the Section 704(c)
built-in gain. Under Treasury Regulation Section l.167(c)-l(a)(6), a Section
743(b) adjustment attributable to property subject to depreciation under
Section 167 of the Internal Revenue Code rather than cost recovery deductions
under Section 168 is generally required to be depreciated using either the
straight-line method or the 150% declining balance method. Under our
partnership agreement, the managing general partner is authorized to take a
position to preserve the uniformity of units even if that position is not
consistent with these Treasury Regulations. Please read "--Tax Treatment of
Operations--Uniformity of Units."

   Although Vinson & Elkins L.L.P. is unable to opine as to the validity of
this approach because there is no clear authority on this issue, we intend to
depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of Contributed Property, to the extent of
any unamortized Book-Tax Disparity, using a rate of depreciation or
amortization derived from the depreciation or amortization method and useful
life applied to the common basis of the property, or treat that portion as non-
amortizable to the extent attributable to property the common basis of which is
not amortizable. This method is consistent with the regulations under Section
743 but is arguably inconsistent with Treasury Regulation Section l.167(c)-
l(a)(6) which is not expected to directly apply to a material portion of our
assets. To the extent a Section 743(b) adjustment is attributable to
appreciation in value in excess of the unamortized Book-Tax Disparity, we will
apply the rules described in the Treasury Regulations and legislative history.
If we determine that this position cannot reasonably be taken, we may take a
depreciation or amortization position under which all purchasers acquiring
units in the same month would receive depreciation or amortization, whether
attributable to common basis or a Section 743(b) adjustment, based upon the
same applicable rate as if they had purchased a direct interest in our assets.
This kind of aggregate approach may result in lower annual depreciation or
amortization deductions than would otherwise be allowable to some unitholders.
Please read "--Tax Treatment of Operations--Uniformity of Units."

   A Section 754 election is advantageous if the transferee's tax basis in his
units is higher than the units' share of the aggregate tax basis of our assets
immediately prior to the transfer. In that case, as a result of the election,
the transferee would have, among other items, a greater amount of depreciation
and depletion deductions and his share of any gain or loss on a sale of our
assets would be less. Conversely, a Section 754 election is disadvantageous if
the transferee's tax basis in his units is lower than those units' share of the
aggregate tax basis of our assets immediately prior to the transfer. Thus, the
fair market value of the units may be affected either favorably or unfavorably
by the election.

   The calculations involved in the Section 754 election are complex and will
be made on the basis of assumptions as to the value of our assets and other
matters. For example, the allocation of the Section 743(b) adjustment among our
assets must be made in accordance with the Internal Revenue Code. The IRS could
seek to reallocate some or all of any Section 743(b) adjustment allocated by us
to our tangible assets to goodwill instead. Goodwill, as an intangible asset,
is generally amortizable over a longer period of time or under a less

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accelerated method than tangible assets. We cannot assure you that the
determinations we make will not be successfully challenged by the IRS and that
the deductions resulting from them may not be reduced or disallowed altogether.
Should the IRS require a different basis adjustment to be made, and should, in
our opinion, the expense of compliance exceed the benefit of the election, we
may seek permission from the IRS to revoke our Section 754 election. If
permission is granted, a subsequent purchaser of units may be allocated more
income than he would have been allocated had the election not been revoked.

Tax Treatment of Operations

   Accounting Method and Taxable Year. We use the year ending December 31 as
our taxable year and the accrual method of accounting for federal income tax
purposes. Each unitholder will be required to include in income his share of
our income, gain, loss and deduction for our taxable year ending within or with
his taxable year. In addition, a unitholder who has a taxable year ending on a
date other than December 31 and who disposes of all of his units following the
close of our taxable year but before the close of his taxable year must include
his share of our income, gain, loss and deduction in income for his taxable
year, with the result that he will be required to include in income for his
taxable year his share of more than one year of our income, gain, loss and
deduction. Please read "--Disposition of Common Units--Allocations Between
Transferors and Transferees."

   Initial Tax Basis, Depreciation and Amortization. The tax basis of our
assets is used for purposes of computing depreciation and cost recovery
deductions and, ultimately, gain or loss on the disposition of these assets.
The federal income tax burden associated with the difference between the fair
market value of our assets and their tax basis immediately prior to this
offering will be borne by the non-managing general partner, its affiliates and
the owners of units immediately prior to this offering. Please read "--
Allocation of Income, Gain, Loss and Deduction."

   To the extent allowable, we may elect to use the depreciation and cost
recovery methods that will result in the largest deductions being taken in the
early years after assets are placed in service. We will not take any
amortization deductions with respect to any goodwill conveyed to us on
formation. Property we subsequently acquire or construct may be depreciated
using accelerated methods permitted by the Internal Revenue Code.

   If we dispose of depreciable property by sale, foreclosure, or otherwise,
all or a portion of any gain, determined by reference to the amount of
depreciation previously deducted and the nature of the property, may be subject
to the recapture rules and taxed as ordinary income rather than capital gain.
Similarly, a unitholder who has taken cost recovery or depreciation deductions
with respect to property we own will likely be required to recapture some or
all of those deductions as ordinary income upon a sale of his interest in us.
Please read "--Tax Consequences of Unit Ownership--Allocation of Income, Gain,
Loss and Deduction" and "--Disposition of Common Units--Recognition of Gain or
Loss."

   The costs incurred in selling our units (called "syndication expenses") must
be capitalized and cannot be deducted currently, ratably or upon termination of
Inergy, L.P. There are uncertainties regarding the classification of costs as
organization expenses, which may be amortized by us, and as syndication
expenses, which may not be amortized by us. The underwriting discounts and
commissions we incur will be treated as syndication expenses.

   Valuation and Tax Basis of Our Properties. The federal income tax
consequences of the ownership and disposition of units will depend in part on
our estimates of the relative fair market values, and determination of the
initial tax basis, of our assets. Although we may from time to time consult
with professional appraisers regarding valuation matters, we will make many of
the relative fair market value estimates ourselves. These estimates, and
determination of basis, are subject to challenge and will not be binding on the
IRS or the courts. If the estimates of fair market value are later found to be
incorrect, the character and amount of items of income, gain, loss or
deductions previously reported by unitholders might change, and unitholders
might be required to adjust their tax liability for prior years and incur
interest and penalties with respect to those adjustments.

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Disposition of Common Units

   Recognition of Gain or Loss. Gain or loss will be recognized on a sale of
units equal to the difference between the amount realized and the unitholder's
tax basis for the units sold. A unitholder's amount realized will be measured
by the sum of the cash or the fair market value of other property received
plus his share of our nonrecourse liabilities. Because the amount realized
includes a unitholder's share of our nonrecourse liabilities, the gain
recognized on the sale of units could result in a tax liability in excess of
any cash received from the sale. We do not currently have any nonrecourse
liabilities.

   Prior distributions from us in excess of cumulative net taxable income for
a common unit that decreased a unitholder's tax basis in that common unit
will, in effect, become taxable income if the common unit is sold at a price
greater than the unitholder's tax basis in that common unit, even if the price
is less than his original cost.

   Except as noted below, gain or loss recognized by a unitholder, other than
a "dealer" in units, on the sale or exchange of a unit held for more than one
year will generally be taxable as capital gain or loss. Capital gain
recognized by an individual on the sale of units held more than 12 months will
generally be taxed at a maximum rate of 20%. A portion of this gain or loss,
which will likely be substantial, however, will be separately computed and
taxed as ordinary income or loss under Section 751 of the Internal Revenue
Code to the extent attributable to Section 751 Assets. Ordinary income
attributable to Section 751 Assets may exceed net taxable gain realized upon
the sale of a unit and may be recognized even if there is a net taxable loss
realized on the sale of a unit. Thus, a unitholder may recognize both ordinary
income and a capital loss upon a sale of units. Net capital loss may offset
capital gains and no more than $3,000 of ordinary income, in the case of
individuals, and may only be used to offset capital gain in the case of
corporations.

   The IRS has ruled that a partner who acquires interests in a partnership in
separate transactions must combine those interests and maintain a single
adjusted tax basis for all those interests. Upon a sale or other disposition
of less than all of those interests, a portion of that tax basis must be
allocated to the interests sold using an "equitable apportionment" method.
Treasury regulations under Section 1223 of the Internal Revenue Code allow a
selling unitholder who can identify common units transferred with an
ascertainable holding period to elect to use the actual holding period of the
common units transferred. Thus, according to the ruling, a common unitholder
will be unable to select high or low basis common units to sell as would be
the case with corporate stock, but, under the Treasury regulations, can
designate specific common units sold for purposes of determining the holding
period of the units sold. A unitholder electing to use the actual holding
period of common units transferred must consistently use that identification
method for all subsequent sales or exchanges of common units. A unitholder
considering the purchase of additional units or a sale of common units
purchased in separate transactions is urged to consult his tax advisor as to
the possible consequences of this ruling and application of the regulations.

   Specific provisions of the Internal Revenue Code affect the taxation of
some financial products and securities, including partnership interests such
as our units, by treating a taxpayer as having sold an "appreciated"
partnership interest, one in which gain would be recognized if it were sold,
assigned or terminated at its fair market value, if the taxpayer or related
persons enter(s) into:

  . a short sale,

   .an offsetting notional principal contract, or

   .a futures or forward contract with respect to the partnership interest or
substantially identical property.

   Moreover, if a taxpayer has previously entered into a short sale, an
offsetting notional principal contract or a futures or forward contract with
respect to the partnership interest, the taxpayer will be treated as having
sold that position if the taxpayer or a related person then acquires the
partnership interest or substantially identical property. The Secretary of
Treasury is also authorized to issue regulations that treat a taxpayer that
enters into

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transactions or positions that have substantially the same effect as the
preceding transactions as having constructively sold the financial position.

   Allocations Between Transferors and Transferees. In general, our taxable
income and losses will be determined annually, will be prorated on a monthly
basis and will be subsequently apportioned among the unitholders in proportion
to the number of units owned by each of them as of the opening of the
applicable exchange on the first business day of the month (the "Allocation
Date"). However, gain or loss realized on a sale or other disposition of our
assets other than in the ordinary course of business will be allocated among
the unitholders on the Allocation Date in the month in which that gain or loss
is recognized. As a result, a unitholder transferring units may be allocated
income, gain, loss and deduction realized after the date of transfer.

   The use of this method may not be permitted under existing Treasury
Regulations. Accordingly, Vinson & Elkins L.L.P. is unable to opine on the
validity of this method of allocating income and deductions between the
transferors and transferees of units. If this method is not allowed under the
Treasury Regulations or only applies to transfers of less than all of the
unitholder's interest, our taxable income or losses might be reallocated among
the unitholders. We are authorized to revise our method of allocation between
transferors and transferees, as well as among, unitholders whose interest
otherwise vary during a taxable period, to conform to a method which is
permitted.

   A unitholder who owns units at any time during a quarter and who disposes of
them prior to the record date set for a cash distribution for that quarter will
be allocated a share of our income, gain, loss and deductions attributable to
that quarter but will not be entitled to receive that cash distribution.

   Notification Requirements. A unitholder who sells or exchanges units is
required to notify us in writing of that sale or exchange within 30 days after
the sale or exchange. We are required to notify the IRS of that transaction and
to furnish specified information to the transferor and transferee. However,
these reporting requirements do not apply to a sale by an individual who is a
citizen of the United States and who effects the sale or exchange through a
broker. Failure to notify us of a purchase may lead to the imposition of
substantial penalties.

   Constructive Termination. We will be considered to have been terminated for
tax purposes if there is a sale or exchange of 50% or more of the total
interests in our capital and profits within a 12-month period. A constructive
termination results in the closing of our taxable year for all unitholders. In
the case of a unitholder reporting on a taxable year other than a fiscal year
ending December 31, the closing of our taxable year may result in more than 12
months of our taxable income or loss being includable in his taxable income for
the year of termination. We would be required to make new tax elections after a
termination, including a new election under Section 754 of the Internal Revenue
Code, and a termination would result in a deferral of any deductions for
depreciation. A termination could also result in penalties if we were unable to
determine that the termination had occurred. Moreover, a termination might
either accelerate the application of, or subject us to, any tax legislation
enacted before the termination.

Uniformity of Units

   Because we cannot match transferors and transferees of units, we must
maintain uniformity of the economic and tax characteristics of the units to a
purchaser of these units. In the absence of uniformity, we may be unable to
completely comply with a number of federal income tax requirements, both
statutory and regulatory. A lack of uniformity can result from a literal
application of Treasury Regulation Section l.167(c)-l(a)(6). Any non-uniformity
could have a negative impact on the value of the units. Please read "--Tax
Consequences of Unit Ownership--Section 754 Election."

   We depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of Contributed Property, to the extent of
any unamortized Book-Tax Disparity, using a rate of

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depreciation or amortization derived from the depreciation or amortization
method and useful life applied to the common basis of that property, or treat
that portion as nonamortizable, to the extent attributable to property the
common basis of which is not amortizable. This method is consistent with the
regulations under Section 743, but is arguably inconsistent with Treasury
Regulation Section l.167(c)-l(a)(6) which is not expected to directly apply to
a material portion of our assets. Please read "--Tax Consequences of Unit
Ownership--Section 754 Election." To the extent that the Section 743(b)
adjustment is attributable to appreciation in value in excess of the
unamortized Book-Tax Disparity, we apply the rules described in the Treasury
Regulations and legislative history. If we determine that this position cannot
reasonably be taken, we may adopt a depreciation and amortization position
under which all purchasers acquiring units in the same month would receive
depreciation and amortization deductions, whether attributable to a common
basis or Section 743(b) adjustment, based upon the same applicable rate as if
they had purchased a direct interest in our property. If this position is
adopted, it may result in lower annual depreciation and amortization deductions
than would otherwise be allowable to some unitholders and risk the loss of
depreciation and amortization deductions not taken in the year that these
deductions are otherwise allowable. This position will not be adopted if we
determine that the loss of depreciation and amortization deductions will have a
material adverse effect on the unitholders. If we choose not to utilize this
aggregate method, we may use any other reasonable depreciation and amortization
method to preserve the uniformity of the intrinsic tax characteristics of any
units that would not have a material adverse effect on the unitholders. The IRS
may challenge any method of depreciating the Section 743(b) adjustment
described in this paragraph. If this challenge were sustained, the uniformity
of units might be affected, and the gain from the sale of units might be
increased without the benefit of additional deductions. Please read "--
Disposition of Common Units--Recognition of Gain or Loss."

Tax-Exempt Organizations and Other Investors

   Ownership of units by employee benefit plans, other tax-exempt
organizations, non-resident aliens, foreign corporations, other non-U.S.
persons and regulated investment companies (mutual funds) raises issues unique
to those investors and, as described below, may have substantially adverse tax
consequences to them. Employee benefit plans and most other organizations
exempt from federal income tax, including individual retirement accounts and
other retirement plans, are subject to federal income tax on unrelated business
taxable income. Virtually all of our income allocated to a unitholder which is
a tax-exempt organization will be unrelated business taxable income and will be
taxable to them.

   A regulated investment company or "mutual fund" is required to derive 90% or
more of its gross income from interest, dividends and gains from the sale of
stocks or securities or foreign currency or specified related sources. It is
not anticipated that any significant amount of our gross income will include
that type of income.

   Non-resident aliens and foreign corporations, trusts or estates that own
units will be considered to be engaged in business in the United States because
of the ownership of units. As a consequence they will be required to file
federal tax returns to report their share of our income, gain, loss or
deduction and pay federal income tax at regular rates on their share of our net
income or gain. Under rules applicable to publicly traded partnerships, we will
withhold at the highest marginal tax rate applicable to individuals on cash
distributions made quarterly to foreign unitholders. Each foreign unitholder
must obtain a taxpayer identification number from the IRS and submit that
number to our transfer agent on a Form W-8 BEN or applicable substitute form in
order to obtain credit for these withholding taxes. A change in applicable law
may require us to change these procedures.

   In addition, because a foreign corporation that owns units will be treated
as engaged in a United States trade or business, that corporation may be
subject to the United States branch profits tax at a rate of 30%, in addition
to regular federal income tax, on its share of our income and gain, as adjusted
for changes in the foreign corporation's "U.S. net equity," which are
effectively connected with the conduct of a United States trade or business.
That tax may be reduced or eliminated by an income tax treaty between the
United States and the country in which the foreign corporate unitholder is a
"qualified resident." In addition, this type of

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unitholder is subject to special information reporting requirements under
Section 6038C of the Internal Revenue Code.

   Under a ruling of the IRS, a foreign unitholder who sells or otherwise
disposes of a unit will be subject to federal income tax on gain realized on
the sale or disposition of that unit to the extent that this gain is
effectively connected with a United States trade or business of the foreign
unitholder. Apart from the ruling, a foreign unitholder will not be taxed or
subject to withholding upon the sale or disposition of a unit if he has owned
less than 5% in value of the units during the five-year period ending on the
date of the disposition and if the units are regularly traded on an
established securities market at the time of the sale or disposition.

Administrative Matters

   Information Returns and Audit Procedures. We intend to furnish to each
unitholder, within 90 days after the close of each calendar year, specific tax
information, including a Schedule K-l, which describes his share of our
income, gain, loss and deduction for our preceding taxable year. In preparing
this information, which will not be reviewed by counsel, we will take various
accounting and reporting positions, some of which have been mentioned earlier,
to determine the unitholders share of income, gain, loss and deduction. We
cannot assure you that those positions will yield a result that conforms to
the requirements of the Internal Revenue Code, Treasury Regulations or
administrative interpretations of the IRS. Neither we nor Vinson & Elkins
L.L.P. can assure prospective unitholders that the IRS will not successfully
contend in court that those positions are impermissible. Any challenge by the
IRS could negatively affect the value of the units.

   The IRS may audit our federal income tax information returns. Adjustments
resulting from an IRS audit may require each unitholder to adjust a prior
year's tax liability, and possibly may result in an audit of that unitholder's
own return. Any audit of a unitholder's return could result in adjustments not
related to our returns as well as those related to our returns.

   Partnerships generally are treated as separate entities for purposes of
federal tax audits, judicial review of administrative adjustments by the IRS
and tax settlement proceedings. The tax treatment of partnership items of
income, gain, loss and deduction are determined in a partnership proceeding
rather than in separate proceedings with the partners. The Internal Revenue
Code requires that one partner be designated as the "Tax Matters Partner" for
these purposes. The partnership agreement names Inergy GP, LLC as our Tax
Matters Partner.

   The Tax Matters Partner has made and will make some elections on our behalf
and on behalf of unitholders. In addition, the Tax Matters Partner can extend
the statute of limitations for assessment of tax deficiencies against
unitholders for items in our returns. The Tax Matters Partner may bind a
unitholder with less than a 1% profits interest in us to a settlement with the
IRS unless that unitholder elects, by filing a statement with the IRS, not to
give that authority to the Tax Matters Partner. The Tax Matters Partner may
seek judicial review, by which all the unitholders are bound, of a final
partnership administrative adjustment and, if the Tax Matters Partner fails to
seek judicial review, judicial review may be sought by any unitholder having
at least a 1% interest in profits or by any group of unitholders having in the
aggregate at least a 5% interest in profits. However, only one action for
judicial review will go forward, and each unitholder with an interest in the
outcome may participate.

   A unitholder must file a statement with the IRS identifying the treatment
of any item on his federal income tax return that is not consistent with the
treatment of the item on our return. Intentional or negligent disregard of
this consistency requirement may subject a unitholder to substantial
penalties.

   Nominee Reporting. Persons who hold an interest in us as a nominee for
another person are required to furnish to us:

     (a) the name, address and taxpayer identification number of the
  beneficial owner and the nominee;

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     (b) whether the beneficial owner is:

       (1) a person that is not a United States person,

       (2) a foreign government, an international organization or any wholly
    owned agency or instrumentality of either of the foregoing, or

       (3) a tax-exempt entity;

     (c) the amount and description of units held, acquired or transferred
  for the beneficial owner; and

     (d) specific information including the dates of acquisitions and
  transfers, means of acquisitions and transfers, and acquisition cost for
  purchases, as well as the amount of net proceeds from sales.

   Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and specific
information on units they acquire, hold or transfer for their own account. A
penalty of $50 per failure, up to a maximum of $100,000 per calendar year, is
imposed by the Internal Revenue Code for failure to report that information to
us. The nominee is required to supply the beneficial owner of the units with
the information furnished to us.

   Registration as a Tax Shelter. The Internal Revenue Code requires that "tax
shelters" be registered with the Secretary of the Treasury. The temporary
Treasury Regulations interpreting the tax shelter registration provisions of
the Internal Revenue Code are extremely broad. It is arguable that we are not
subject to the registration requirement on the basis that we will not
constitute a tax shelter. However, we have registered as a tax shelter with
the Secretary of Treasury in the absence of assurance that we will not be
subject to tax shelter registration and in light of the substantial penalties
which might be imposed if registration is required and not undertaken.

   Our tax shelter registration number is 01204000001. A unitholder who sells
or otherwise transfers a unit in a later transaction must furnish the
registration number to the transferee. The penalty for failure of the
transferor of a unit to furnish the registration number to the transferee is
$100 for each failure. The unitholders must disclose our tax shelter
registration number on Form 8271 to be attached to the tax return on which any
deduction, loss or other benefit we generate is claimed or on which any of our
income is included. A unitholder who fails to disclose the tax shelter
registration number on his return, without reasonable cause for that failure,
will be subject to a $250 penalty for that failure. Any penalties discussed
are not deductible for federal income tax purposes.

   Issuance of this registration number does not indicate that investment in
us or the claimed tax benefits have been reviewed, examined or approved by the
IRS.

   Accuracy-related Penalties. An additional tax equal to 20% of the amount of
any portion of an underpayment of tax that is attributable to one or more
specified causes, including negligence or disregard of rules or regulations,
substantial understatements of income tax and substantial valuation
misstatements, is imposed by the Internal Revenue Code. No penalty will be
imposed, however, for any portion of an underpayment if it is shown that there
was a reasonable cause for that portion and that the taxpayer acted in good
faith regarding that portion.

   A substantial understatement of income tax in any taxable year exists if
the amount of the understatement exceeds the greater of 10% of the tax
required to be shown on the return for the taxable year or $5,000 ($10,000 for
most corporations). The amount of any understatement subject to penalty
generally is reduced if any portion is attributable to a position adopted on
the return:

     (1) for which there is, or was, "substantial authority"; or

     (2) as to which there is a reasonable basis and the pertinent facts of
  that position are disclosed on the return.

                                      128

   More stringent rules apply to "tax shelters," a term that in this context
does not appear to include us. If any item of income, gain, loss or deduction
included in the distributive shares of unitholders might result in that kind of
an "understatement" of income for which no "substantial authority" exists, we
must disclose the pertinent facts on our return. In addition, we will make a
reasonable effort to furnish sufficient information for unitholders to make
adequate disclosure on their returns to avoid liability for this penalty.

   A substantial valuation misstatement exists if the value of any property, or
the adjusted basis of any property, claimed on a tax return is 200% or more of
the amount determined to be the correct amount of the valuation or adjusted
basis. No penalty is imposed unless the portion of the underpayment
attributable to a substantial valuation misstatement exceeds $5,000 ($10,000
for most corporations). If the valuation claimed on a return is 400% or more
than the correct valuation, the penalty imposed increases to 40%.

State, Local and Other Tax Considerations

   In addition to federal income taxes, you will be subject to other taxes,
including state and local income taxes, unincorporated business taxes, and
estate, inheritance or intangible taxes that may be imposed by the various
jurisdictions in which we do business or own property. Although an analysis of
those various taxes is not presented here, each prospective unitholder is urged
to consider their potential impact on his investment in us. We presently
anticipate that substantially all of our income will be generated in the
following states: Arkansas, Florida, Georgia, Illinois, Indiana, Michigan,
North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin.
Each of these states, except Florida and Texas, currently imposes a personal
income tax. A unitholder will likely be required to file state income tax
returns and to pay state income taxes in these states and may be subject to
penalties for failure to comply with these requirements. In some states, tax
losses may not produce a tax benefit in the year incurred and also may not be
available to offset income in subsequent taxable years. Some of the states may
require us, or we may elect, to withhold a percentage of income from amounts to
be distributed to a unitholder who is not a resident of the state. Withholding,
the amount of which may be greater or less than a particular unitholder's
income tax liability to the state, generally does not relieve a nonresident
unitholder from the obligation to file an income tax return. Amounts withheld
may be treated as if distributed to unitholders for purposes of determining the
amounts distributed by us. Please read "--Tax Consequences of Unit Ownership--
Entity-Level Collections." Based on current law and our estimate of our future
operations, the managing general partner anticipates that any amounts required
to be withheld will not be material. We may also own property or do business in
other states in the future.

   It is the responsibility of each unitholder to investigate the legal and tax
consequences, under the laws of pertinent states and localities, of his
investment in us. Accordingly, each prospective unitholder should consult, and
must depend upon, his own tax counsel or other advisor with regard to those
matters. Further, it is the responsibility of each unitholder to file all state
and local, as well as federal tax returns, that may be required of him. Vinson
& Elkins L.L.P. has not rendered an opinion on the state or local tax
consequences of an investment in us.

                                      129

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

   An investment in us by an employee benefit plan is subject to additional
considerations because the investments of these plans are subject to the
fiduciary responsibility and prohibited transaction provisions of ERISA, and
restrictions imposed by Section 4975 of the Internal Revenue Code. For these
purposes the term "employee benefit plan" includes, but is not limited to,
qualified pension, profit-sharing and stock bonus plans, Keogh plans,
simplified employee pension plans and tax deferred annuities or IRAs
established or maintained by an employer or employee organization. Among other
things, consideration should be given to:

     (a) whether the investment is prudent under Section 404(a)(1)(B) of
  ERISA,

     (b) whether in making the investment, that plan will satisfy the
  diversification requirements of Section 404(a)(1)(C) of ERISA, and

     (c) whether the investment will result in recognition of unrelated
  business taxable income by the plan and, if so, the potential after-tax
  investment return.

   The person with investment discretion with respect to the assets of an
employee benefit plan, often called a fiduciary, should determine whether an
investment in us is authorized by the appropriate governing instrument and is a
proper investment for the plan.

   Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit
employee benefit plans, and also IRAs that are not considered part of an
employee benefit plan, from engaging in specified transactions involving "plan
assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Internal Revenue Code with respect to the
plan.

   In addition to considering whether the purchase of common units is a
prohibited transaction, a fiduciary of an employee benefit plan should consider
whether the plan will, by investing in us, be deemed to own an undivided
interest in our assets, with the result that the managing general partner also
would be a fiduciary of the plan and our operations would be subject to the
regulatory restrictions of ERISA, including its prohibited transaction rules,
as well as the prohibited transaction rules of the Internal Revenue Code.

   The Department of Labor regulations provide guidance with respect to whether
the assets of an entity in which employee benefit plans acquire equity
interests would be deemed "plan assets" under some circumstances. Under these
regulations, an entity's assets would not be considered to be "plan assets" if,
among other things,

     (a) the equity interests acquired by employee benefit plans are publicly
  offered securities; i.e., the equity interests are widely held by 100 or
  more investors independent of the issuer and each other, freely
  transferable and registered under some provisions of the federal securities
  laws,

     (b) the entity is an "operating company," i.e., it is primarily engaged
  in the production or sale of a product or service other than the investment
  of capital either directly or through a majority owned subsidiary or
  subsidiaries, or

     (c) there is no significant investment by benefit plan investors, which
  is defined to mean that less than 25% of the value of each class of equity
  interest, disregarding some interests held by the managing general partner,
  its affiliates, and some other persons, is held by the employee benefit
  plans referred to above, IRAs and other employee benefit plans not subject
  to ERISA, including governmental plans.

   Our assets should not be considered "plan assets" under these regulations
because it is expected that the investment will satisfy the requirements in (a)
above.

   Plan fiduciaries contemplating a purchase of common units should consult
with their own counsel regarding the consequences under ERISA and the Internal
Revenue Code in light of the serious penalties imposed on persons who engage in
prohibited transactions or other violations.

                                      130

                                  UNDERWRITING

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

                                                                     Number of
Underwriter                                                         Common Units
- -----------                                                         ------------
                                                                 
A.G. Edwards & Sons, Inc. .........................................
Raymond James & Associates, Inc. ..................................
UBS Warburg LLC....................................................
First Union Securities, Inc. ......................................
                                                                     ---------
  Total............................................................  1,400,000
                                                                     =========

   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 $   per unit. The underwriters may allow, and such dealers may re-allow, a
concession not in excess of $   per unit to certain other dealers. After the
offering, the offering price and other selling terms may be changed by the
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 210,000 additional common units at the offering price, less the
underwriting discount set forth on the cover page of this prospectus, solely to
cover over-allotments.

   To the extent the underwriters exercise such option, each underwriter 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 90 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 90-day period in whole or in part at anytime without notice.
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. A.G. Edwards has
informed us that in the event that consent to a waiver of these restrictions is
requested by us or any other person, A.G. Edwards, in deciding whether to grant
its consent, will consider, among other factors, the unitholder's reasons for
requesting the release, the number of units for which the release is being
requested, and market conditions at the time of the request for such release.
However, A.G. Edwards has informed us that as of the date of this prospectus
there

                                      131

are no agreements between A.G. Edwards and any party that would allow such
party to transfer any common units, nor does it have any intention of releasing
any of the common units subject to the lock-up agreements prior to the
expiration of the lock-up period at this time.

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

                                                       No Exercise Full Exercise
                                                       ----------- -------------
                                                             
Per Unit..............................................     $            $
Total.................................................     $            $

   We expect to incur expenses of approximately $1.2 million in connection with
this offering.

   Inergy, L.P., New Inergy Propane, LLC, the general partners and certain
other affiliates and the selling unitholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act.

   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 a naked short
     position. In a covered short position, the number of units over-allotted
     by the underwriters are not greater than the number of units it may
     purchase in the over-allotment option. In a naked short position, the
     number of units involved is greater than the number of units in the
     over-allotment option. The 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 underwriters 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
market price of the common units or preventing or retarding a decline in the
market price of the common units. As a result, the price of the common units
may be higher than the price that might otherwise exist in the open market.

   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.

                                      132

   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.

   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.

   First Union National Bank, an affiliate of First Union Securities, Inc.,
which is one of the underwriters, is administrative agent and one of the
lenders under our credit facility, for which it received customary
compensation. The proceeds of this offering will be used to repay a portion of
this indebtedness. In addition, First Union Securities, Inc. was the placement
agent for the private offering of our senior secured notes. The proceeds of the
notes offering were used to repay borrowings under the credit facility. A.G.
Edwards has performed various financial advisory services for Inergy, L.P. and
Inergy Partners, LLC for which it received customary compensation. AG. Edwards,
First Union Securities, Inc. and Raymond James were underwriters in our initial
public offering that closed on July 31, 2001. The underwriters may, from time
to time, engage in transactions with and perform services for us in the
ordinary course of their business.

   Wachovia Corporation conducts its investment banking, institutional and
capital markets business through its various bank, broker-dealer and non-bank
subsidiaries (including one of the underwriters, First Union Securities, Inc.)
under the trade name of Wachovia Securities. Any references to Wachovia
Securities in this prospectus, however, do not include Wachovia Securities,
Inc., member NASD/SIPC and a separate broker-dealer subsidiary of Wachovia
Corporation and sister affiliate of the underwriter that may or may not be
participating as a selling dealer in the distribution of the units.

                          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, L.P. and Subsidiary (successor to Inergy
Partners, LLC and subsidiaries) at September 30, 2000 and 2001, and for each of
the three years in the period ended September 30, 2001, the combined financial
statements of the Hoosier Propane Group at September 30, 1999 and 2000 and
December 31, 2000, and for each of the three years in the period ended
September 30, 2000 and the three months ended December 31, 2000 and the balance
sheet of Inergy GP, LLC at September 30, 2001, as set forth in their reports.
We have included these financial statements in the prospectus and elsewhere in
the registration statement in reliance on Ernst & Young LLP's reports, given on
their authority as experts in accounting and auditing.

   Arthur Andersen LLP, independent auditors, have audited the consolidated
financial statements of Independent Propane Company Holdings at September 30,
2000 and 2001, and for each of the three years in the period ended September
30, 2001, as set forth in their report. We have included these financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Arthur Andersen LLP's report, given on their authority as experts
in accounting and auditing.

                                      133

                                 OTHER MATTERS

   Arthur Andersen LLP, the independent public accountants for IPC, provided us
with an audit report with respect to IPC's financial statements contained in
this prospectus. Prior to the date of this prospectus, the partners of Arthur
Andersen LLP who reviewed the most recent audited financial statements relating
to IPC have resigned from Arthur Andersen LLP. While we obtained the written
consent of Arthur Andersen LLP with our initial filing of the registration
statement (of which this prospectus forms a part), after reasonable efforts, we
have been unable to obtain Arthur Andersen LLP's updated written consent to the
inclusion in the registration statement of its audit report with respect to
IPC's financial statements. Accordingly, we have dispensed with the requirement
to file their consent in reliance upon Rule 437a of the Securities Act of 1933.
Because Arthur Andersen LLP has not consented to the inclusion of their report
in this prospectus, you will not be able to recover against Arthur Andersen LLP
under Section 11 of the Securities Act for any untrue statements of a material
fact contained in the financial statements audited by Arthur Andersen LLP or
any omissions to state a material fact required to be stated therein.

                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 regarding the common units. This prospectus does not
contain all of the information found in the registration statement. For further
information regarding Inergy and the common units offer by this prospectus, you
may desire to review the full registration statement, including its exhibits
and schedules, filed under the Securities Act of 1933. The registration
statement of which this prospectus forms a part, including its exhibits and
schedules, may be inspected and copied at the public reference room maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
of the materials may also be obtained from the SEC at prescribed rates by
writing to the public reference room maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the public reference room by calling the SEC at
l-800-SEC-0330.

   The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov. Our registration statement, of which this prospectus
constitutes a part, can be downloaded from the SEC's web site.

   We furnish our unitholders with annual reports containing our audited
financial statements and furnish or make available quarterly reports containing
our unaudited interim financial information for the first three fiscal quarters
of each fiscal year.

                                      134

                           FORWARD-LOOKING STATEMENTS

   Some of the information in this prospectus may contain forward-looking
statements. All statements other than statements of historical fact are
forward-looking statements. These statements can be identified by the use of
forward-looking terminology including "may," "believe," "will," "expect,"
"anticipate," "estimate," "continue" or other similar words. These statements
discuss future expectations, contain projections of results of operations or of
financial condition or state other "forward-looking" information. These
forward-looking statements involve risks and uncertainties. When considering
these forward-looking statements, you should keep in mind the risk factors and
other cautionary statements in this prospectus. Specific factors could cause
our actual results to differ materially from those contained in any forward-
looking statement. These factors include, but are not limited to:

  . the effect of weather conditions on demand for propane;

  . the price volatility and availability of propane;

  . the availability of capacity to transport propane to market areas and our
    customers;

  . competition from other energy sources and within the propane industry;

  . improvements in energy efficiency and technology trends resulting in
    reduced demand for propane;

  . our ability to achieve expected operating cost savings, synergies and
    productivity improvements from the integration of the propane
    distribution businesses we acquire, including Independent Propane Company
    Holdings;

  . our inability to make business acquisitions on economically acceptable
    terms;

  . our ability to obtain new customers and retain existing customers;

  . operating hazards and risks incidental to transporting, storing and
    distributing propane and related products, including the risk of
    explosions and fires resulting in personal injury and property damage;

  . liability for environmental claims;

  . adverse labor relations;

  . governmental legislation and regulation;

  . the condition of the capital markets in the United States; and

  . the political and economic stability of oil producing nations of the
    world.

   When considering our forward-looking statements, you should keep in mind the
risk factors described in the "Risk Factors" section of this prospectus. These
risk factors could cause our actual results to differ materially from those
contained in any forward-looking statement. We will not update our forward-
looking statements unless applicable securities laws require us to do so.

                                      135

                         INDEX TO FINANCIAL STATEMENTS

                                                                        
Inergy, L.P. and Subsidiary (Successor to Inergy Partners, LLC and
 Subsidiaries) Consolidated Financial Statements:
  Report of Independent Auditors..........................................  F-2
  Consolidated Balance Sheets as of September 30, 2000 and 2001 and March
   31, 2002 (unaudited)...................................................  F-3
  Consolidated Statements of Operations for the years ended September 30,
   1999, 2000 and 2001 and the six months ended March 31, 2001 and 2002
   (unaudited)............................................................  F-4
  Consolidated Statements of Redeemable Preferred Members' Interest and
   Members' Equity/Partners' Capital for the years ended September 30,
   1999, 2000 and 2001 and the six months ended March 31, 2002
   (unaudited)............................................................  F-6
  Consolidated Statements of Cash Flows for the years ended September 30,
   1999, 2000 and 2001 and the six months ended March 31, 2001 and 2002
   (unaudited)............................................................  F-9
  Notes to Consolidated Financial Statements.............................. F-11

Independent Propane Company Holdings and Subsidiaries Consolidated
 Financial Statements:
  Report of Independent Public Accountants................................ F-28
  Consolidated Balance Sheets as of September 30, 2000 and 2001........... F-29
  Consolidated Statements of Operations for the years ended September 30,
   1999, 2000 and 2001.................................................... F-30
  Consolidated Statements of Changes in Shareholders' Deficit for the
   years ended September 30, 1999, 2000 and 2001.......................... F-31
  Consolidated Statements of Cash Flows for the years ended September 30,
   1999, 2000 and 2001.................................................... F-32
  Notes to Consolidated Financial Statements.............................. F-33

Hoosier Propane Group Combined Financial Statements:
  Report of Independent Auditors.......................................... F-41
  Combined Balance Sheets as of September 30, 1999 and 2000 and December
   31, 2000............................................................... F-42
  Combined Statements of Income for the years ended September 30, 1998,
   1999 and 2000 and the three months ended December 31, 1999 (unaudited)
   and 2000............................................................... F-43
  Combined Statements of Stockholders' Equity for the years ended
   September 30, 1998, 1999 and 2000 and the three months ended December
   31, 2000............................................................... F-44
  Combined Statements of Cash Flows for the years ended September 30,
   1998, 1999 and 2000 and the three months ended December 31, 1999
   (unaudited) and 2000................................................... F-45
  Notes to Combined Financial Statements.................................. F-46

Inergy GP, LLC Financial Statements:
  Report of Independent Auditors.......................................... F-53
  Balance Sheet as of September 30, 2001.................................. F-54
  Notes to Balance Sheet.................................................. F-55

                                      F-1

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Members
Inergy, L.P. and Subsidiary
(Successor to Inergy Partners, LLC and Subsidiaries)

   We have audited the accompanying consolidated balance sheets of Inergy, L.P.
and Subsidiary (Successor to Inergy Partners, LLC and Subsidiaries) (the
"Partnership") as of September 30, 2000 and 2001, and the related consolidated
statements of operations, redeemable preferred members' interest and members'
equity/partners' capital and cash flows for each of the three years in the
period ended September 30, 2001. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Inergy, L.P.
and Subsidiary (Successor to Inergy Partners, LLC and Subsidiaries) at
September 30, 2000 and 2001, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended September
30, 2001 in conformity with accounting principles generally accepted in the
United States.

                                          /s/ Ernst & Young LLP

Kansas City, Missouri
December 10, 2001, except for
 Notes 4 and 12, as to which
 the date is December 20, 2001

                                      F-2

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                          CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Unit Data)

                                                   September 30,
                                                  -----------------   March 31,
                                                   2000      2001       2002
                                                  -------  --------  -----------
                                                                     (Unaudited)
                ASSETS (Note 4)
                                                            
Current assets:
  Cash..........................................  $ 1,373  $  2,171   $  2,475
  Accounts receivable, less allowance for
   doubtful accounts of $225 and $186 at
   September 30, 2000 and 2001, respectively and
   $1,537 at March 31, 2002.....................   12,602    11,457     24,111
  Inventories...................................    3,630    12,694     16,591
  Prepaid expenses and other current assets.....    1,014     1,411      1,975
  Assets from price risk management activities..    3,580     9,187      8,897
                                                  -------  --------   --------
Total current assets............................   22,199    36,920     54,049
Property, plant and equipment, at cost:
  Land and buildings............................      740     4,511     11,205
  Office furniture and equipment................      808     1,172      5,857
  Vehicles......................................    4,138    11,435     17,644
  Tanks and plant equipment.....................   30,283    58,737    100,147
                                                  -------  --------   --------
                                                   35,969    75,855    134,853
  Less accumulated depreciation.................   (2,533)   (5,812)    (9,378)
                                                  -------  --------   --------
Net property, plant and equipment...............   33,436    70,043    125,475
Intangible assets (Note 2):
  Covenants not to compete......................    3,228     3,771      6,124
  Deferred financing costs......................      333     2,985      4,977
  Deferred acquisition costs....................      460       115         --
  Customer accounts.............................    3,500    14,000     41,411
  Goodwill......................................    6,880    32,121     47,053
                                                  -------  --------   --------
                                                   14,401    52,992     99,565
  Less accumulated amortization.................   (1,246)   (4,431)    (6,489)
                                                  -------  --------   --------
Net intangible assets...........................   13,155    48,561     93,076
Other...........................................      134       129        473
                                                  -------  --------   --------
Total assets....................................  $68,924  $155,653   $273,073
                                                  =======  ========   ========

   LIABILITIES AND MEMBERS' EQUITY/PARTNERS'
                    CAPITAL
                                                            
Current liabilities:
  Accounts payable..............................  $11,502  $  8,416   $  9,041
  Accrued expenses..............................    3,715     5,679      6,743
  Customer deposits.............................    1,676    10,060      5,314
  Liabilities from price risk management
   activities...................................    2,294     4,612      4,618
  Current portion of long-term debt (Note 4)....      605    10,469      3,722
                                                  -------  --------   --------
Total current liabilities.......................   19,792    39,236     29,438
Deferred income taxes (Note 6)..................      942        --         --
Long-term debt, less current portion (Note 4)...   34,322    43,663    138,442
Redeemable preferred members' interest (Notes 2
 and 7).........................................   10,896        --         --
Members' equity/partners' capital (Notes 2, 4, 7
 and 8):
  Class A preferred interest....................    4,892        --         --
  Common interest...............................   (1,686)       --         --
  Deferred compensation.........................     (234)       --         --
  Common unitholders (1,840,000 and 2,617,872
   units issued and outstanding as of September
   30, 2001 and March 31, 2002, respectively)...       --    24,981     49,514
  Senior subordinated unitholders (3,313,367
   units issued and outstanding as of September
   30, 2001 and March 31, 2002).................       --    45,060     51,421
  Junior subordinated unitholders (572,542 units
   issued and outstanding as of September 30,
   2001 and March 31, 2002).....................       --     1,258      2,358
  Non-managing general partner (2% interest with
   dilutive effect equivalent to 116,855 and
   132,730 units issued and outstanding as of
   September 30, 2001 and March 31, 2002,
   respectively)................................       --     1,455      1,900
                                                  -------  --------   --------
Total members' equity/partners' capital.........    2,972    72,754    105,193
                                                  -------  --------   --------
Total liabilities and members' equity/partners'
 capital........................................  $68,924  $155,653   $273,073
                                                  =======  ========   ========

                            See accompanying notes.

                                      F-3

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands, Except Per Unit Data)

                                                             Six Months Ended
                                 Year Ended September 30,        March 31,
                                 --------------------------  ------------------
                                  1999     2000      2001      2001      2002
                                 -------  -------  --------  --------  --------
                                                                (unaudited)
                                                        
Revenue:
  Propane......................  $16,227  $89,042  $212,441  $165,209  $156,442
  Other........................    2,984    4,553    10,698     5,230     7,618
                                 -------  -------  --------  --------  --------
                                  19,211   93,595   223,139   170,439   164,060
Cost of product sold...........   13,754   81,636   182,582   141,425   113,787
                                 -------  -------  --------  --------  --------
Gross profit...................    5,457   11,959    40,557    29,014    50,273
Expenses:
  Operating and
   administrative..............    4,119    8,990    23,501    11,464    23,326
  Depreciation and
   amortization................      690    2,286     6,532     2,588     5,145
                                 -------  -------  --------  --------  --------
Operating income...............      648      683    10,524    14,962    21,802
Other income (expense):
  Interest expense (Note 4)....     (962)  (2,740)   (6,670)   (3,020)   (3,236)
  Gain (loss) on sale of
   property, plant and
   equipment...................      101       --        37        --      (119)
  Finance charges..............       79      176       290       158        85
  Other........................        5       59       168        87        36
                                 -------  -------  --------  --------  --------
Income (loss) before income
 taxes.........................     (129)  (1,822)    4,349    12,187    18,568
Provision for income taxes.....       56        7        --        --        52
                                 -------  -------  --------  --------  --------
Net income (loss)..............  $  (185) $(1,829) $  4,349  $ 12,187  $ 18,516
                                 =======  =======  ========  ========  ========
Predecessor net income for the
 period from October 1, 2000 to
 July 31, 2001.................                    $  6,664
                                                   ========
Inergy, L.P. net loss for the
 period from July 31, 2001
 through September 30, 2001....                    $ (2,315)
                                                   ========
Partners' interest information
 for the period from July 31,
 2001 through September 30,
 2001 and six months ended
 March 31, 2002:
  Non-managing general
   partner's interest in net
   income (loss)...............                    $    (46)           $    370
                                                   ========            ========

                                      F-4

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

               CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
                      (In Thousands, Except Per Unit Data)

                                             Year Ended           Six Months
                                            September 30,       Ended March 31,
                                       -----------------------  ---------------
                                        1999    2000    2001     2001    2002
                                       ------- ------- -------  ------- -------
                                                                  (Unaudited)
                                                         
Limited partners' interest in net
 loss:
  Common unit interest:
    Allocation of net income (loss)...                 $  (729)         $ 6,702
    Less beneficial conversion value
     allocated to senior subordinated
     units (Notes 1 and 7)............                  (8,600)              --
                                                       -------          -------
    Net common unit interest..........                  (9,329)           6,702
  Senior subordinated interest:
    Allocation of net income (loss)...                  (1,313)           9,758
    Plus beneficial conversion value
     allocated to senior subordinated
     units (Notes 1 and 7)............                   8,600               --
                                                       -------          -------
    Net senior subordinated unit
     interest.........................                   7,287            9,758
  Junior subordinated unit interest...                    (227)           1,686
                                                       -------          -------
Total limited partners' interest in
 net income (loss)....................                 $(2,269)         $18,146
                                                       =======          =======
Net income (loss) per limited partner
 unit:
  Basic...............................                 $ (0.40)         $  2.94
                                                       =======          =======
  Diluted.............................                 $ (0.40)         $  2.90
                                                       =======          =======
Weighted average limited partners'
 units outstanding:
  Basic...............................                   5,726            6,162
                                                       =======          =======
  Diluted.............................                   5,726            6,249
                                                       =======          =======

                            See accompanying notes.

                                      F-5

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

     CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED MEMBERS' INTEREST AND
                       MEMBERS' EQUITY/PARTNERS' CAPITAL
                                (In Thousands)

                                      Members' Equity                      Partners' Capital
                              -------------------------------- ------------------------------------------
                   Redeemable                                                                      Non-
                   Preferred   Class A                         Common     Senior       Junior    Managing  Total Members'
                    Members'  Preferred  Common     Deferred    Unit   Subordinated Subordinated General  Equity/Partners'
                    Interest  Interest  Interest  Compensation Capital Unit Capital Unit Capital Partner      Capital
                   ---------- --------- --------  ------------ ------- ------------ ------------ -------- ----------------
                                                                               
Balance at
September 30,
1998..............  $     --   $ 2,345  $   658     $  (392)   $    --   $    --       $   --     $   --      $  2,611
  Common and
  preferred
  interests issued
  in acquisitions
  (Note 2)........        --     2,548      397          --         --        --           --         --         2,945
  Amortization of
  deferred
  compensation....        --        --       --          78         --        --           --         --            78
  Members'
  distributions...        --        --     (180)         --         --        --           --         --          (180)
  Net loss........        --        --     (185)         --         --        --           --         --          (185)
                    --------   -------  -------     -------    -------   -------       ------     ------      --------
Balance at
September 30,
1999..............        --     4,893      690        (314)        --        --           --         --         5,269
  Redeemable
  preferred
  interests issued
  in acquisitions
  (Note 2)........     9,000        --       --          --         --        --           --         --            --
  Redeemable
  preferred
  interests issued
  for cash, net of
  offering costs
  of $104.........     1,896        --       --          --         --        --           --         --            --
  Redemption of
  preferred
  interest........        --        (1)      --           1         --        --           --         --            --
  Amortization of
  deferred
  compensation....        --        --       --          79         --        --           --         --            79
  Members'
  distributions...        --        --     (547)         --         --        --           --         --          (547)
  Net loss........        --        --   (1,829)         --         --        --           --         --        (1,829)
                    --------   -------  -------     -------    -------   -------       ------     ------      --------
Balance at
September 30,
2000..............    10,896     4,892   (1,686)       (234)        --        --           --         --         2,972

                                      F-6

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

     CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED MEMBERS' INTEREST AND
                 MEMBERS' EQUITY/PARTNERS' CAPITAL (Continued)
                                (In Thousands)

                                      Members' Equity                      Partners' Capital
                              -------------------------------- -------------------------------------------
                   Redeemable                                                                       Non-
                   Preferred   Class A                         Common      Senior       Junior    Managing  Total Members'
                    Members'  Preferred  Common     Deferred    Unit    Subordinated Subordinated General  Equity/Partners'
                    Interest  Interest  Interest  Compensation Capital  Unit Capital Unit Capital Partner      Capital
                   ---------- --------- --------  ------------ -------  ------------ ------------ -------- ----------------
                                                                                
Balance at
September 30,
2000..............  $ 10,896   $ 4,892  $(1,686)    $  (234)   $    --    $    --       $   --     $   --      $  2,972
  Net income
  October 1, 2000
  to July 31,
  2001............        --        --    6,664          --         --         --           --         --         6,664
  Redeemable
  preferred
  interests issued
  for cash, net of
  offering costs
  of $513.........    16,087        --       --          --         --         --           --         --            --
  Redeemable
  preferred
  interests issued
  in acquisition
  (Note 2)........     7,402        --       --          --         --         --           --         --            --
  Inergy Partners,
  LLC members'
  distributions...        --        --   (2,554)         --         --         --           --         --        (2,554)
  Redemption of
  preferred
  interest........        --       (41)       8          --         --         --           --         --           (33)
  Amortization of
  deferred
  compensation....        --        --       --          65         --         --           --         --            65
  Assets
  (liabilities)
  retained by
  Inergy Partners
  LLC.............        --        --     (909)         --         --         --           --         --          (909)
  Accelerated
  vesting of
  deferred
  compensation due
  to initial
  public
  offering........        --        --       --         169         --         --           --         --           169
  Net proceeds
  from initial
  public
  offering........        --        --       --          --     34,310         --           --         --        34,310
  Transfers of
  capital in
  accordance with
  initial public
  offering........   (34,385)   (4,851)  (1,523)         --         --     37,773        1,485      1,501        34,385
  Net loss July
  31, 2001 through
  September 30,
  2001............        --        --       --          --       (729)    (1,313)        (227)       (46)       (2,315)
  Beneficial
  conversion
  feature of the
  conversion of
  certain
  Redeemable
  Preferred
  Members'
  Interests to
  Senior
  Subordinated
  Units...........        --        --       --          --     (8,600)     8,600           --         --            --
                    --------   -------  -------     -------    -------    -------       ------     ------      --------
Balance at
September 30,
2001..............        --        --       --          --     24,981     45,060        1,258      1,455        72,754

                                      F-7

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

     CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED MEMBERS' INTEREST AND
                 MEMBERS' EQUITY/PARTNERS' CAPITAL (Continued)
                                (In Thousands)

                                      Members' Equity                     Partners' Capital
                              ------------------------------- -------------------------------------------
                   Redeemable                                                                      Non-
                   Preferred   Class A                        Common      Senior       Junior    Managing  Total Members'
                    Members'  Preferred  Common    Deferred    Unit    Subordinated Subordinated General  Equity/Partners'
                    Interest  Interest  Interest Compensation Capital  Unit Capital Unit Capital Partner      Capital
                   ---------- --------- -------- ------------ -------  ------------ ------------ -------- ----------------
                                                                               
Balance at
September 30,
2001..............  $     --   $    --  $    --     $  --     $24,981    $45,060       $1,258     $1,455      $ 72,754
  Proceeds from
  issuance of
  common units
  (unaudited).....        --        --       --        --         480         --           --         --           480
  Issuance of
  common units in
  connection with
  acquisition of
  retail propane
  company
  (unaudited).....        --        --       --        --      19,723         --           --         --        19,723
  Contribution
  from non-
  managing general
  partner
  (unaudited).....        --        --       --        --          --         --           --        205           205
  Partners'
  distributions
  (unaudited).....        --        --       --        --      (2,372)    (3,396)        (587)      (130)       (6,485)
  Net income
  (unaudited).....        --        --       --        --       6,702      9,757        1,687        370        18,516
                    --------   -------  -------     -----     -------    -------       ------     ------      --------
Balance at March
31, 2002
(unaudited).......  $     --   $    --  $    --     $  --     $49,514    $51,421       $2,358     $1,900      $105,193
                    ========   =======  =======     =====     =======    =======       ======     ======      ========

                            See accompanying notes.

                                      F-8

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

                                                            Six Months Ended
                               Year Ended September 30          March 31
                              ----------------------------  ------------------
                                1999      2000      2001      2001      2002
                              --------  --------  --------  --------  --------
                                                               (Unaudited)
                                                       
Operating activities
Net income (loss)...........  $   (185) $ (1,829) $  4,349  $ 12,187  $ 18,516
Adjustments to reconcile net
 income (loss) to net cash
 provided by (used in)
 operating activities:
  Provision for doubtful
   accounts.................        77       139       912       812       680
  Depreciation..............       440     1,427     3,438     1,368     3,634
  Amortization..............       250       859     3,094     1,220     1,511
  Amortization of deferred
   financing costs..........        73        87       424       160       547
  Loss (gain) on disposal of
   property, plant and
   equipment................      (101)       --       (37)       --       119
  Net assets (liabilities)
   from price risk
   management activities....     1,206    (2,492)   (3,289)      946       296
  Deferred income taxes.....         8        --        --        39        --
  Deferred compensation.....        78        79       234        --        --
  Changes in operating
   assets and liabilities,
   net of effects from
   acquisition of retail
   propane companies:
    Accounts receivable.....    (3,451)   (5,842)   13,370   (10,869)   (6,532)
    Inventories.............    (3,812)    1,660    (6,154)    2,922       (65)
    Prepaid expenses and
     other current assets...       (86)     (388)     (321)       22       (36)
    Other assets............       (13)     (121)        5        (3)      (93)
    Accounts payable........     2,642     3,836   (19,115)   (3,596)   (1,410)
    Accrued expenses........       913     2,049     1,871       807      (911)
    Customer deposits.......     1,187       314     5,878    (3,421)   (5,623)
                              --------  --------  --------  --------  --------
Net cash provided by (used
 in) operating activities...      (774)     (222)    4,659     2,594    10,633
Investing activities
Acquisition of retail
 propane companies, net of
 cash acquired..............   (11,430)   (9,600)  (56,263)  (56,263)  (84,553)
Purchases of property, plant
 and equipment..............    (1,354)   (2,275)   (4,758)   (1,861)   (2,525)
Deferred financing and
 acquisition costs
 incurred...................      (473)     (573)   (3,114)   (1,989)   (1,979)
Proceeds from sale of
 property, plant and
 equipment..................       127        --       118        --        91
Other.......................        --       (16)       (8)      (66)       --
                              --------  --------  --------  --------  --------
Net cash used in investing
 activities.................   (13,130)  (12,464)  (64,025)  (60,179)  (88,966)

                                      F-9

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

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

                                                            Six Months Ended
                              Year Ended September 30           March 31
                            -----------------------------  -------------------
                              1999      2000      2001       2001      2002
                            --------  --------  ---------  --------  ---------
                                                              (Unaudited)
                                                      
Financing activities
Proceeds from issuance of
 long-term debt...........  $ 25,373  $ 35,787  $ 178,054  $106,675  $ 220,621
Principal payments on
 long-term debt and
 noncompete obligations...   (11,137)  (23,229)  (163,849)  (62,205)  (136,184)
Contribution from non-
 managing general
 partner..................        --        --         --        --        205
Net proceeds from issuance
 of redeemable preferred
 members' interest........        --     1,896     16,087    16,015         --
Net proceeds from issuance
 of common units in
 initial public offering..        --        --     34,310        --         --
Proceeds from issuance of
 common units.............        --        --         --        --        480
Cash retained by Inergy
 Partners LLC.............        --        --     (1,851)       --         --
Redemption of preferred
 stock....................        --        --        (33)       --         --
Distributions to members..      (180)     (547)    (2,554)     (745)    (6,485)
                            --------  --------  ---------  --------  ---------
Net cash provided by
 financing activities.....    14,056    13,907     60,164    59,740     78,637
                            --------  --------  ---------  --------  ---------
Net increase in cash......       152     1,221        798     2,155        304
Cash at beginning of
 period...................        --       152      1,373     1,373      2,171
                            --------  --------  ---------  --------  ---------
Cash at end of period.....  $    152  $  1,373  $   2,171  $  3,528  $   2,475
                            ========  ========  =========  ========  =========
Supplemental disclosure of
 cash flow information
Cash paid during the year
 for interest.............  $    823  $  2,538  $   6,171  $  1,929  $   3,025
                            ========  ========  =========  ========  =========
Supplemental schedule of
 noncash investing and
 financing activities
Additions to covenants not
 to compete through the
 issuance of noncompete
 obligations..............  $  2,052  $     32  $      --  $     --  $      --
                            ========  ========  =========  ========  =========
Acquisitions of retail
 propane companies through
 the issuances of common
 units....................  $  2,945  $  9,000  $   7,402  $  7,402  $  19,723
                            ========  ========  =========  ========  =========
Acquisition of retail
 propane company through
 the issuance of
 subordinated debt, which
 was subsequently retired
 in 2001..................  $     --  $     --  $   5,000  $  5,000  $      --
                            ========  ========  =========  ========  =========

                            See accompanying notes.

                                      F-10

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (In Thousands Except Unit and Per Unit Data)

                          September 30, 2000 and 2001
   (Information Pertaining to the Six Months Ended March 31, 2001 and 2002 is
                                   Unaudited)

1. Accounting Policies

 Organization

   Inergy, L.P. (the Partnership) was formed on March 7, 2001 as a Delaware
limited partnership. The Partnership and its subsidiary Inergy Propane, LLC
(the Operating Company), were formed to acquire, own and operate the propane
business and substantially all the assets and liabilities (other than a portion
of the cash and deferred income tax liabilities) of Inergy Partners, LLC and
subsidiaries (Inergy Partners and referred to subsequent to the initial public
offering described below as the Non-managing General Partner). In addition,
Inergy Sales and Service, Inc. (Services), a subsidiary of the Operating
Company, was formed to acquire and operate the service, work and appliance
parts and sales business of Inergy Partners. The Partnership, the Operating
Company, and Services are collectively referred to hereinafter as the
Partnership Entities. In order to simplify the Partnership's obligations under
the laws of several jurisdictions in which the Partnership will conduct
business, the Partnership's activities are conducted through the Operating
Company.

   The Partnership Entities consummated in July 2001, an initial public
offering (the Offering) of 1,840,000 common units representing limited partner
interests in the Partnership (the Common Units) for an offering price of $22.00
per Common Unit aggregating $40,480 before approximately $6,170 of underwriting
discounts and commissions and other expenses related to the Offering. The
Operating Company assumed the Non-managing General Partner's obligation under
its funded debt in connection with the conveyance in July 2001 (the Partnership
Conveyance) by Inergy GP, LLC (the Managing General Partner) and the Non-
managing General Partner (together referred to as the General Partners), of
substantially all of their assets and liabilities (excluding $1,851 of cash and
the deferred tax liabilities associated with the subsidiaries of Wilson Oil
Company of Johnston County, Inc. (Wilson) and Rolesville Gas & Oil Company,
Inc. (Rolesville)). The net proceeds from the Offering were used to repay the
subordinated debt issued in connection with the acquisition of the Hoosier
Propane Group (Note 2) and a portion of the outstanding credit agreement
borrowings.

   Pursuant to the terms of certain of the redeemable Class A preferred
interest agreements issued by Inergy Partners prior to the Offering, in the
event of an initial public offering, these interests would automatically
convert into senior subordinated units of a master limited partnership. As
such, in conjunction with the Offering, an additional 2,006,456 Senior
Subordinated Units were issued to holders of the remaining redeemable Class A
preferred interests of Inergy Partners, representing a 34.3% limited partner
interest in the Partnership Entities.

   Certain of the redeemable Class A preferred interests of Inergy Partners
contained conversion terms that were more advantageous than the terms of the
other preferred interests issued by Inergy Partners as further described in
Note 7. These beneficial conversion terms resulted in Inergy, L.P. recognizing
a decrease in common unit capital of $8.6 million with a corresponding increase
in senior subordinated unit capital in the fourth quarter of fiscal 2001
following the Offering. Net income available to common unitholders for the
fourth quarter and year ended September 30, 2001 is decreased by $8.6 million
while net income attributable to senior subordinated unitholders is increased
by the same amount.

   Inergy, L.P. has no employees and is managed by Inergy GP, LLC. Pursuant to
the Partnership Agreement, Inergy GP, LLC or any of its affiliates is entitled
to reimbursement for all direct and indirect expenses incurred or payments it
makes on behalf of Inergy, L.P., and all other necessary or appropriate
expenses allocable to Inergy, L.P. or otherwise reasonably incurred by the
Inergy GP, LLC in connection with

                                      F-11

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

operating Inergy, L.P. business. These costs, which totaled approximately
$2,435 and $4,556 for the period from August 1, 2001 through September 30, 2001
and the six months ended March 31, 2002, respectively, include compensation and
benefits paid to officers and employees of Inergy GP, LLC.

   The Non-Managing General Partner owns a 2% general partner interest in the
Partnership. In addition, the Non-managing General Partner owns Senior
Subordinated Units and Junior Subordinated Units through its ownership of New
Inergy Propane, LLC, approximating a 19% limited partner interest.

 Basis of Presentation

   The accompanying consolidated financial statements presented herein reflect
the effects of the Partnership Conveyance, in which the Partnership Entities
became the successor to the businesses of Inergy Partners. As such, the
consolidated financial statements represent Inergy Partners prior to the
Partnership Conveyance and the Partnership Entities subsequent to the
Partnership Conveyance. Because the Partnership Conveyance was a transfer of
assets and liabilities in exchange for partnership interests among a controlled
group of companies, it has been accounted for in a manner similar to a pooling
of interests, resulting in the presentation of the Partnership Entities as the
successor to the continuing businesses of Inergy Partners. The entity
representative of both the operations of (i) Inergy Partners prior to the
Partnership Conveyance; and (ii) the Partnership Entities subsequent to the
Partnership Conveyance, is referred to herein as "Inergy'. The Non-Managing
General Partner retained those assets and liabilities not conveyed to the
Partnership. All significant intercompany balances and transactions have been
eliminated in consolidation.

 Nature of Operations

   Inergy is engaged primarily in the sale, distribution, marketing and trading
of propane and other natural gas liquids. The retail market is seasonal because
propane is used primarily for heating in residential and commercial buildings,
as well as for agricultural purposes. Inergy's operations are concentrated in
the Midwest and Southeast regions of the United States.

 Accounting for Price Risk Management

   Inergy, through its wholesale operations, offers price risk management
services to its customers and, in addition, trades for its own account (see
Note 3). Financial instruments utilized in connection with trading activities
are accounted for using the mark-to-market method. Under the mark-to-market
method of accounting, forwards, swaps, options and storage contracts are
reflected at fair value, inclusive of reserves, and are shown in the
consolidated balance sheet as assets and liabilities from price risk management
activities. Unrealized gains and losses from newly originated contracts,
contract restructuring and the impact of price movements are recognized in cost
of products sold. Changes in the assets and liabilities from trading and price
risk management activities result primarily from changes in the market prices,
newly originated transactions and the timing of settlement relative to the
receipt of cash for certain contracts. The market prices used to value these
transactions reflect management's best estimate considering various factors
including closing exchange and over-the-counter quotations, time value and
volatility factors underlying the commitments. The values are adjusted to
reflect the potential impact of liquidating Inergy's position in an orderly
manner over a reasonable period of time under present market conditions.

   The cash flow impact of financial instruments is reflected as cash flows
from operating activities in the consolidated statements of cash flows. See
Note 3 for further discussion of Inergy's price risk management activities.

                                      F-12

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

 Revenue Recognition

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

 Credit Concentrations

   Inergy is both a retail and wholesale supplier of propane gas. Inergy
generally extends unsecured credit to its wholesale customers throughout the
Midwestern and Eastern portions of the United States. Credit is generally
extended to retail customers through delivery into company and customer owned
propane gas storage tanks. Provisions for doubtful accounts receivable are
reflected in Inergy's consolidated financial statements and have generally been
within management's expectations.

 Unaudited Financial Information

   The financial information as of March 31, 2002 and for the six-month periods
ended March 31, 2001 and 2002 contained herein is unaudited. The Partnership
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 Partnership also believes
this information includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods then ended. The results of operations
for the six-month period ended March 31, 2002 are not necessarily indicative of
the results of operations that may be expected for the entire year.

 Use of Estimates

   The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.

 Inventories

   Inventories for retail operations, which mainly consist of liquid propane,
are stated at the lower of cost, determined using the average cost method or
market. Inventories for wholesale operations, which consist mainly of liquid
propane commodities, are stated at market, as discussed in Note 3. The market
adjustment was an unrealized gain (loss) of $39 and $(396) at September 30,
2000 and 2001, respectively, and $(68) and $1,824 at March 31, 2001 and 2002,
respectively.

 Shipping and Handling Costs

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

                                      F-13

                          INERGY, L.P. AND SUBSIDIARY
             (Successor to Inergy Partners, LLC and Subsidiaries)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 (In Thousands Except Unit and Per Unit Data)

 Property, Plant, and Equipment

   Property, plant, and equipment are stated at cost. Depreciation is computed
by the straight-line method over the assets' estimated useful lives, as
follows:

                                                                           Years
                                                                           -----
                                                                        
   Buildings and improvements.............................................    25
   Office furniture and equipment.........................................  5-10
   Vehicles...............................................................  5-10
   Tanks and plant equipment.............................................. 10-30

 Intangible Assets

   Intangible assets are amortized on a straight-line basis over their
estimated economic lives, as follows:

                                                                         Years
                                                                         -----
                                                                      
   Covenants not to compete............................................. 5-10
   Deferred financing costs.............................................  1-3
   Customer accounts....................................................   15
   Goodwill (prior to adoption of SFAS No. 142 effective October 1,
    2001)...............................................................   15

   Deferred financing costs represent financing costs incurred in obtaining
financing and are being amortized over the term of the debt. Covenants not to
compete, customer accounts and goodwill arose from the various acquisitions by
Inergy and are discussed in Notes 2 and 12.

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

   Inergy reviews its long-lived assets in accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-lived Assets to be Disposed of," for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If such events or changes in circumstances
are present, a loss is recognized if the carrying value of the asset is in
excess of the sum of the undiscounted cash flows expected to result from the
use of the asset and its eventual disposition. An impairment loss is measured
as the amount by which the carrying amount of the asset exceeds the fair value
of the asset. See Recently Issued Accounting Pronouncements discussion below.

 Income Taxes

   The earnings of the Partnership and Operating Company are included in the
Federal and state income tax returns of the individual partners. As a result,
no income tax expense has been reflected in Inergy's consolidated financial
statements relating to the earnings of the Partnership and Operating Company.
Federal and state income taxes are, however, provided on the earnings of
Services. The Partnership entities provide deferred income taxes to recognize
the effect of temporary differences between Services' basis of assets and
liabilities for income tax and financial statement purposes. No income tax
provision was necessary at September 30, 2001. Net earnings for financial
statement purposes may differ significantly from taxable income reportable to
unitholders as a result of differences between the tax basis and the financial
reporting basis of assets and liabilities and the taxable income allocation
requirements under the partnership agreement. Federal and state income tax
expense for periods prior to the Partnership Conveyance relate to Wilson and
Rolesville,

                                     F-14

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

wholly owned subsidiaries of Inergy Partners, which were C Corporations and
accounted for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes. In connection with the Partnership Conveyance, all income tax
liabilities of Inergy Partners were retained by the Non-managing General
Partner.

 Customer Deposits

   Customer deposits primarily represent cash received by Inergy from wholesale
and retail customers for propane purchased that will be delivered at a future
date.

 Fair Value

   The carrying amounts of cash, accounts receivable and accounts payable
approximate their fair value. Based on the estimated borrowing rates currently
available to Inergy for long-term debt with similar terms and maturities, the
aggregate fair value of Inergy's floating rate long-term debt approximates the
aggregate carrying amount as of September 30, 2000 and 2001 and March 31, 2002.

 Income (Loss) per Limited Partner Unit

   Basic net income (loss) per limited partner unit is computed by dividing net
income (loss), after considering the General Partner's interest, by the
weighted average number of Common and Subordinated Units outstanding. Diluted
net income (loss) per limited partner unit is computed by dividing net income
(loss), after considering the General Partner's interest, by the weighted
average number of Common and Subordinated Units outstanding and the dilutive
effect of unit options granted under the long-term incentive plan. Unit options
were antidilutive in 2001 due to the loss incurred for the period from July 31,
2001 through September 30, 2001. As such, basic and diluted net income (loss)
per limited partner unit are identical in 2001.

 Segment Information

   In fiscal 1999, the Company adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes standards
for reporting information about operating segments, as well as related
disclosures about products and services, geographic areas, and major customers.
Further, SFAS No. 131 defines operating segment as components of an enterprise
for which separate financial information is available that is evaluated
regularly by the chief operating decision-maker in deciding how to allocate
resources and assessing performance. In determining the Company's reportable
segments under the provisions of SFAS No. 131, the Company examined the way it
organizes its business internally for making operating decisions and assessing
business performance. See Note 11 for disclosures related to the Company's
retail and wholesale segments. No single customer represents 10% or more of
consolidated revenues. In addition, nearly all of the Company's revenues are
derived from sources within the United States, and all of its long-lived assets
are located in the United States.

 Recently Issued Accounting Pronouncements

   In June 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 141
requires all business combinations initiated after June 30, 2001, to be
accounted for using the purchase method of accounting. Under Statement No. 142,
goodwill is no longer subject to amortization over its estimated useful life.
Rather, goodwill will be subject to at least an annual assessment for
impairment by applying a fair-value-based test. Additionally, an acquired
intangible asset

                                      F-15

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

should be separately recognized if the benefit of the intangible asset is
obtained through contractual or other legal rights, or if the intangible asset
can be sold, transferred, licensed, rented or exchanged, regardless of the
acquirer's intent to do so. Those assets will be amortized over their useful
lives, other than assets what have an indefinite life. Statement No. 142 is
required to be applied starting with fiscal years beginning after December 15,
2001.

   Inergy adopted Statement No. 142 on October 1, 2001 and accordingly has
discontinued the amortization of goodwill existing at the time of adoption.
Under the provisions of Statement No. 142, Inergy has six months from the time
of adoption to have completed the valuation of each of Inergy's operating
segments to determine whether any impairment exists on the date of adoption.
However, management does not believe that any impairment existed at adoption.
The adoption of Statement No. 142 will eliminate goodwill amortization that
would have totaled approximately $2,079 in fiscal 2002, based on the balances
of September 30, 2001, and totaled approximately $1,720 in fiscal 2001.

   In August 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement supersedes FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations--
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. This
statement retains the fundamental provisions of Statement No. 121 for
recognition and measurement of the impairment of long-lived assets to be held
and used, and measurement of long-lived assets to be disposed of by sale. This
statement is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and interim periods within those fiscal
years, with early application encouraged. Management has not determined the
method, timing, or impact of adopting Statement No. 144.

 Reclassifications

   Certain reclassifications have been made to the 1999 and 2000 consolidated
financial statements to conform to the 2001 presentation.

2. Acquisitions

   During fiscal 1999, Inergy acquired substantially all of the assets of Ernie
Lee Oil & LP Gas, LLC (December 1998), Longston Gas & Oil Company, Inc. (May
1999), Castleberry's, Inc. (July 1999), and Bradley Propane, Inc. (September
1999). In addition, Inergy acquired 100% of the oustanding stock of Wilson Oil
Company of Johnston County, Inc. (December 1998) and Rolesville Gas & Oil
Company, Inc. (August 1999) through a stock exchange and a purchase agreement.
These acquired retail companies are involved in the sale and distribution of
propane to local customer bases throughout the United States. The acquisitions
have been accounted for using the purchase method of accounting. The acquired
companies were purchased in separate transactions for an aggregate purchase
price of $19,659 including acquisition costs and $3,232 in liabilities assumed.
The consideration utilized in the fiscal 1999 acquisitions consisted of cash
payments of $11,430 funded by the issuance of long-term debt, common and Class
A preferred interests issued to certain former owners of these companies
totaling $2,945, and the issuance of noncompete obligations in the amount of
$2,052. Of the aggregate purchase price, $2,810 (including cash paid at
closing) was allocated to covenants not to compete. The excess of aggregate
purchase price over the fair market values of the net tangible and

                                      F-16

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

identifiable intangible assets acquired amounted to $942 and has been recorded
as an increase in goodwill. The operating results of all acquisitions are
included in Inergy's consolidated results of operations from the dates of
acquisition.

   During fiscal year 2000, Inergy acquired substantially all of the assets of
Butane-Propane Gas Company of Tenn., Inc. (November 1999) and substantially all
of the assets of Country Gas Company, Inc. (June 2000). These acquired retail
companies are involved in the sale of propane to local customer bases
throughout the United States. The acquisitions have been accounted for using
the purchase method of accounting. The acquired companies were purchased in
separate transactions for an aggregate purchase price of $19,787, including
acquisition costs, and $1,155 in liabilities assumed. The consideration
utilized in the 2000 acquisitions consisted of cash payments of $9,600 funded
by the issuance of long-term debt, redeemable Class A preferred interests
issued to certain former owners of these companies totaling $9,000 (see Note 7)
and the issuance of noncompete obligations in the amount of $32. Of the
aggregate purchase price, $102 (including cash paid at closing) was allocated
to covenants not to compete. The excess of aggregate purchase prices over the
fair market values of the net tangible and identifiable intangible assets
acquired, including $3,500 allocated to customer accounts, amounted to $5,594
and has been recorded as an increase in goodwill. The operating results of all
acquisitions are included in Inergy's consolidated results of operations from
the dates of acquisition.

   On January 12, 2001, Inergy acquired substantially all of the assets and
assumed certain liabilities of Investors 300, Inc., Domex, Inc. and L&L
Leasing, Inc., three companies owned by a common group of shareholders
(referred to as the Hoosier Propane Group). The acquisition has been accounted
for using the purchase method of accounting. The Hoosier Propane Group is
involved in the sale and transportation of propane to local customer bases
throughout the United States. The purchase price of approximately $74.0 million
consisted of cash payments of approximately $55.4 million funded by the
issuance of long-term debt and redeemable Class A preferred interests,
acquisition costs of $0.6 million, a redeemable Class A preferred interest
issued to certain former owners of the Hoosier Propane Group totaling $7.4
million, subordinated debentures issued to the Hoosier Propane Group
shareholders totaling $5.0 million, and $5.6 million of liabilities assumed.
The excess of purchase price over the fair market value of the net tangible and
identifiable intangible assets acquired, including $10,500 allocated to
customer accounts, amounted to $25,241 and has been recorded as an increase in
goodwill. The acquisition was effective January 1, 2001 and Inergy's
consolidated results of operations for the year ended September 30, 2001
include the Hoosier Propane Group operating results from the effective date.

   During November 2000, Inergy also acquired substantially all the assets of
Bear-Man Propane for $520 in cash. Inergy's consolidated results of operations
for the year ended September 30, 2001 include Bear-Man Propane from the date of
acquisition.

                                      F-17

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

   The following unaudited pro forma data summarize the results of operations
for the periods indicated as if these acquisitions had been completed October
1, 1999 and 2000, the beginning of the 2000 and 2001 fiscal years. The pro
forma data give effect to actual operating results prior to the acquisitions
and adjustments to interest expense, goodwill and customer accounts
amortization, and income taxes. These pro forma amounts do not purport to be
indicative of the results that would have actually been obtained if the
acquisitions had occurred on October 1, 1999 and 2000 or that will be obtained
in the future. The pro forma data does not give effect to acquisitions
completed subsequent to September 30, 2001.

                                                                 Year Ended
                                                                September 30,
                                                              ------------------
                                                                2000      2001
                                                              --------  --------
                                                                  
   Sales..................................................... $167,031  $254,680
   Net income (loss).........................................   (3,522)    6,012

3. Price Risk Management and Financial Instruments

   Inergy has recorded its trading activities at fair value in accordance with
Emerging Issues Task Force Issue (EITF) No. 98-10, "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities." EITF No. 98-10
requires energy trading contracts to be recorded at fair value on the
consolidated balance sheet, with the changes in fair value included in
earnings.

 Trading Activities

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

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

   Instruments used for trading purposes include forwards, swaps and options,
as defined above, as well as futures contracts.

 Notional Amounts and Terms

   The notional amounts and terms of these financial instruments at September
30, 2000 and 2001 include fixed price payor for 1,526 and 2,505 barrels,
respectively, and fixed price receiver for 1,479 and 2,862 barrels,
respectively. The notional amounts and terms of these financial instruments at
March 31, 2002 include fixed price payor 3,578 barrels and fixed price receiver
for 4,160 barrels.

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

                                      F-18

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

 Fair Value

   The fair value of the financial instruments related to price risk management
activities as of September 30, 2000 and 2001 was assets of $3,580 and $9,187,
respectively, and liabilities of $2,294 and $4,612, respectively, related to
propane. The fair value of the financial instruments related to price risk
management activities as of March 31, 2002 was assets of $8,897 and liabilities
of $4,618 related to propane. The effects of all intercompany transactions have
been appropriately eliminated.

   The net change in unrealized gains and losses related to trading and price
risk management activities for the years ended September 30, 1999, 2000, and
2001 of $(154), $1,479, and $2,214, respectively, and $(1,055) and $1,925 for
the six months ended March 31, 2001 and 2002, respectively, are included in
cost of product sold in the accompanying consolidated statements of operations.

 Market and Credit Risk

   Inherent in the resulting contractual portfolio are certain business risks,
including market risk and credit risk. Market risk is the risk that the value
of the portfolio will change, either favorably or unfavorably, in response to
changing market conditions. Credit risk is the risk of loss from nonperformance
by suppliers, customers, or financial counterparties to a contract. Inergy
takes an active role in managing and controlling market and credit risk and has
established control procedures, which are reviewed on an ongoing basis. Inergy
monitors market risk through a variety of techniques, including daily reporting
of the portfolio's value to senior management. Inergy provides for such risks
at the time trading activities are adjusted to fair value and when specific
risks become known. Inergy attempts to minimize credit risk exposure through
credit policies and periodic monitoring procedures and obtaining customer
deposits on sales contracts. The counterparties associated with assets from
price risk management activities as of September 30, 2000 and 2001 and March
31, 2002 are energy marketers.

4. Long-Term Debt

   Long-term debt consisted of the following:

                                                       September 30,
                                                      ---------------  March
                                                       2000    2001   31, 2002
                                                      ------- ------- --------
                                                             
   Credit agreement.................................. $33,250 $53,000 $138,215
   Obligations under noncompetition agreements and
    notes to former owners of businesses acquired....   1,625   1,101    3,929
   Other.............................................      52      31       20
                                                      ------- ------- --------
                                                       34,927  54,132  142,164
   Less current portion..............................     605  10,469    3,722
                                                      ------- ------- --------
                                                      $34,322 $43,663 $138,422
                                                      ======= ======= ========

   During fiscal 2000, Inergy had a credit agreement with a financial
institution providing Inergy with the capacity to borrow up to $41,000 ($9,000
under working capital lines of credit and $32,000 under a long-term acquisition
line of credit). At September 30, 2000, borrowings under the working capital
lines of credit and the acquisition line of credit were $4,900 and $28,350,
respectively. The prime rate and LIBOR plus the applicable spreads were 9.5%
and 9.37% to 9.93%, respectively, at September 30, 2000.

   Inergy's credit agreement was amended in January 2001 in connection with the
Hoosier Propane Group acquisition and resulted in a $96 million facility
consisting of a $25 million revolving working capital line of

                                      F-19

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

credit and an acquisition term note of $71 million, with a maturity date of
January 10, 2004. On July 25, 2001, in conjunction with the Offering (July 2001
amendment), the credit facility was again amended such that Inergy Propane, LLC
was made the sole borrower and resulted in a $30 million revolving working
capital line of credit and a $70 million revolving acquisition facility for
acquisition and growth capital borrowings. The credit facility has a term of
three years expiring July 2004 and is guaranteed by Inergy, L.P. and each
subsidiary of Inergy Propane, LLC. Inergy is required to reduce the principal
outstanding on the revolving working capital line of credit to $4,000 or less
for a minimum of 30 consecutive days during the period commencing March 1 and
ending September 30. As such $4,000 of the outstanding balance at September 30,
2001 has been classified as a long-term liability in the accompanying 2001
consolidated balance sheet. At September 30, 2001, the balance outstanding
under this amended credit facility was $53,000, including $14,000 under the
working capital facility. The prime rate and LIBOR plus the applicable spreads
were between 5.10% and 6.00% for all outstanding debt.

   Inergy's credit agreement was again amended in December 2001 in connection
with the IPC Acquisition (December 2001 amendment), as discussed in Note 12.
This December 2001 amendment resulted in a $195 million facility comprised of a
$50 million revolving working capital facility, a $75 million revolving
acquisition facility and a $70 million term note. The December 2001 amendment
has a term of three years, expiring December 2004 except for the term note
which is due in April 2003, and has similar interest terms to the July 2001
amendment.

   During fiscal 2001, Inergy entered into interest rate hedging agreements in
the form of interest rate swaps. Immediately prior to the closing of the
Offering in July 2001, the interest rate hedging agreements were terminated in
connection with the repayment of the long-term debt with offering proceeds. The
termination of the interest rate swaps resulted in an interest expense charge
of $507 in the fourth quarter of fiscal 2001.

   The credit agreement, including the December 2001 amendment, contains
several covenants which, among other things, require the maintenance of various
financial performance ratios, restrict the payment of dividends to unitholders,
and require financial reports to be submitted periodically to the financial
institutions. Unused borrowings under the credit agreement amounted to $47
million at September 30, 2001.

   Noninterest-bearing obligations due under noncompetition agreements consist
of agreements between Inergy and the sellers of retail propane companies
acquired from fiscal years 1999 through 2001 with payments due through 2009
with imputed interest at 8.5% to 9.0%. Noninterest-bearing obligations consist
of $2,130 and $1,448 in total payments due under noncompetition agreements,
less unamortized discount based on imputed interest of $505 and $347 at
September 30, 2000 and 2001, respectively.

   The aggregate amounts of principal to be paid on the outstanding long-term
debt during the next five years ending September 30 and thereafter, considering
the terms of the credit facilities amended in December 2001 as discussed above,
are as follows:

   Year Ending September 30,
   -------------------------
                                                                     
   2002................................................................ $10,469
   2003................................................................      75
   2004................................................................  43,081
   2005................................................................      86
   2006................................................................      92
   Thereafter..........................................................     329
                                                                        -------
                                                                        $54,132
                                                                        =======

                                      F-20

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

5. Leases

   Inergy has several noncancelable operating leases mainly for office space,
which expire at various times over the next nine years.

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

   Year Ending September 30,
   -------------------------
                                                                      
   2002................................................................. $  513
   2003.................................................................    406
   2004.................................................................    359
   2005.................................................................    222
   2006.................................................................     50
   Thereafter...........................................................     68
                                                                         ------
   Total minimum lease payments......................................... $1,618
                                                                         ======

   Rent expense for all operating leases during 1999, 2000, and 2001 amounted
to $196, $424 and $581, respectively, and $265 and $760 for the six months
ended March 31, 2001 and 2002, respectively.

6. Income Taxes

   Deferred income taxes related to Wilson and Rolesville reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes. Components of the deferred taxes at September 30, 2000 are a
noncurrent deferred tax liability of $942 related to book/tax basis
differences. This liability was excluded from the Partnership Conveyance as
discussed in Note 1.

   The provision for income taxes for the years ended September 30, 1999 and
2000 and the six months ended March 31, 2002 consists of the following:

                                                         September 30,
                                                         --------------  March 31,
                                                          1999    2000     2002
                                                         ------  ------  ---------
                                                                
   Current:
     Federal............................................ $   41  $   --     $45
     State..............................................      7       7       7
                                                         ------  ------     ---
   Total current........................................     48       7      52
   Deferred:
     Federal............................................      7      --      --
     State..............................................      1      --      --
                                                         ------  ------     ---
   Total deferred.......................................      8      --      --
                                                         ------  ------     ---
                                                            $56  $    7     $52
                                                         ======  ======     ===

   For the years ended September 30, 1999 and 2000, the Wilson and Rolesville
effective tax rate differed from the statutory rate primarily due to the effect
of graduated rates and state taxes. There was no provision for income taxes in
fiscal 2001 or for the six months ended March 31, 2001.

                                      F-21

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

7. Redeemable Preferred Members' Interests and Members' Equity

   During December 1999, Inergy issued redeemable Class A preferred interests
to a new member for total proceeds of $2,000 less offering costs of $104.
During June 2000, Inergy issued redeemable Class A preferred interests to
certain former owners of Country Gas Company, Inc. totaling $9,000 in
connection with the acquisition of Country Gas Company, Inc. These preferred
interests were automatically converted into Senior Subordinated Units of
Inergy, L.P. in connection with the Offering. The conversion rates were
determined as of the issuance date based on negotiations between Inergy and the
unrelated third parties and were derived by multiplying the recorded value of
each party's preferred interest by a multiple of 2.25 for the December 1999
transaction and 1.0 for the June 2000 transaction and dividing the resulting
total by the $22.00 unit price in the Offering. The beneficial conversion
feature present in the December 1999 issuance, valued at $2 million, has been
recognized upon completion of the Offering as discussed in Note 1.

   During January 2001, Inergy issued redeemable Class A preferred interests to
new and existing members for total proceeds of $15,000, less offering costs of
$485. The preferred interests were issued to facilitate the refinancing of
Inergy's credit facilities described in Note 4 on a long-term basis and
complete the Hoosier Propane Group acquisition in January 2001. In March and
May 2001, additional redeemable preferred interests were issued at the same
valuation for total proceeds of $1,600 less offering costs of $28.

   These preferred interests were automatically converted into Senior
Subordinated Units of Inergy, L.P. in connection with the Offering. The
conversion rates were determined as of the issuance date based on negotiations
between Inergy and the third party investors and were derived by multiplying
the recorded value of each party's preferred interest by a multiple of 1.4 and
dividing the resulting total by the $22.00 unit price in the Offering. The
beneficial conversion feature present in these preferred interest issuances
valued at $6.6 million has been recognized upon completion of the Offering as
described in Note 1.

   The redeemable preferred interests issued in December 1999, June 2000, and
January 2001 provided the holders the option to require Inergy to redeem the
preferred interests, as provided in the agreements, but no earlier than the
fifth anniversary of the issuance. The preferred interest issued to members for
cash in December 1999 and January 2001 were redeemable in an amount between one
and two times face value at issuance, depending on Inergy's operating
performance, as defined in the agreement. The preferred interests issued to
certain former owners of Country Gas Company, Inc. and the Hoosier Propane
Group were redeemable in an amount equal to face value at issuance plus any
unpaid dividends. No amounts were required to be redeemed during the next five
years following issuance, except in certain circumstances, as provided for in
the agreements. All preferred interests were converted into Senior Subordinated
Units as described above.

   The Class A preferred interest earned cumulative dividends of 8% to 10% per
annum, depending on the date and amount of the preferred interest issued. Class
A preferred members were not entitled to any voting rights. In the event of a
public offering, Inergy was to use its best efforts to permit the holders of
Class A preferred interest units to exchange their Class A preferred interest
units for Common Units, notwithstanding the conversion terms discussed above.
Upon liquidation, Class A preferred members were entitled to an aggregate
preference distribution of the unpaid dividends prior to any liabilities.
Additionally, Class A preferred members were also entitled to preference over
common interests subsequent to the payment of the Company's liabilities.
Distributions totaling $180, $547, and $2,554 were paid to Class A preferred
members in 1999, 2000, and 2001, respectively. Unpaid distributions on
preferred interests as of September 30, 2001 amounted to $0.4 million and were
declared and paid in October 2001.

                                      F-22

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

8. Partners' Capital

   Partners' capital at September 30, 2001 consists of 1,840,000 Common Units
representing a 31.5% limited partner interest, 3,313,367 Senior Subordinated
Units representing a 56.7% limited partner interest, 572,542 Junior
Subordinated Units representing a 9.8% limited partner interest and a 2%
general partner interest.

   The amended and restated Agreement of Limited Partnership of Inergy, L.P.
(Partnership Agreement) contains specific provisions for the allocation of net
earnings and losses to each of the partners for purposes of maintaining the
partner capital accounts.

   During the Subordination Period (as defined below), the Partnership may
issue up to 800,000 additional Common Units (excluding Common Units issued in
connection with conversion of Subordinated Units into Common Units) or an
equivalent number of securities ranking on a parity with the Common Units and
an unlimited number of partnership interests junior to the Common Units without
a Unitholder vote. The Partnership may also issue additional Common Units
during the Subordination Period in connection with certain acquisitions or the
repayment of certain indebtedness. After the Subordination Period, the
Partnership Agreement authorizes the General Partner to cause the Partnership
to issue an unlimited number of limited partner interests of any type without
the approval of any Unitholders.

 Quarterly Distributions of Available Cash

   The Partnership is expected to make quarterly cash distributions of all of
its Available Cash, generally defined as income (loss) before income taxes plus
depreciation and amortization, maintenance capital expenditures and net changes
in reserves established by the General Partner for future requirements. These
reserves are retained to provide for the proper conduct of the Partnership
business, or to provide funds for distributions with respect to any one or more
of the next four fiscal quarters.

   Distributions by the Partnership in an amount equal to 100% of its Available
Cash will generally be made 98% to the Common and Subordinated Unitholders and
2% to the General Partner, subject to the payment of incentive distributions to
the holders of Incentive Distribution Rights to the extent that certain target
levels of cash distributions are achieved. To the extent there is sufficient
Available Cash, the holders of Common Units have the right to receive the
Minimum Quarterly Distribution ($0.60 per Unit), plus any arrearages, prior to
any distribution of Available Cash to the holders of Subordinated Units. Common
Units will not accrue arrearages for any quarter after the Subordination Period
(as defined below) and Subordinated Units will not accrue any arrearages with
respect to distributions for any quarter.

   In general, the Subordination Period will continue indefinitely until the
first day of any quarter beginning after June 30, 2006 for the Senior
Subordinated Units and June 30, 2008 for the Junior Subordinated Units in which
distributions of Available Cash equal or exceed the Minimum Quarterly
Distribution on the Common Units and the Subordinated Units for each of the
three consecutive four-quarter periods immediately preceding such data. Prior
to the end of the Subordination Period, 828,342 Senior Subordinated Units will
convert to Common Units after June 30, 2004 and 143,136 Junior Subordinated
Units will convert to Common Units after June 30, 2006 and another 828,342
Senior Subordinated Units will convert to Common Units after June 30, 2005 and
143,136 Junior Subordinated Units will convert to Common Units after June 30,
2007, if distributions of Available Cash on the Common Units and Subordinated
Units equal or exceed the Minimum Quarterly Distribution for each of the three
consecutive four-quarter periods preceding such date. Upon expiration of the
Subordination Period, all remaining Subordinated Units will convert to Common
Units.

                                      F-23

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

   The Partnership is expected to make distributions of its Available Cash
within 45 days after the end of each fiscal quarter ending December, March,
June, and September to holders of record on the applicable record date. The
Partnership made distributions to unitholders amounting to $6,485 during the
six months ended March 31, 2002.

 Long-Term Incentive Plan

   An affiliate of Inergy's managing general partners adopted the Inergy Long-
Term Incentive Plan for employees, consultants, and directors of the managing
general partner and employees of its affiliates that perform services for
Inergy. The long-term incentive plan currently permits the grant of awards
covering an aggregate of 589,000 common units, which can be granted in the form
of unit options and/or restricted units; however, not more than 192,000
restricted units may be granted under the plan. With the exception of 28,038
unit options (exercise prices from $3.83 to $10.67) granted to non-executive
employees in exchange for option grants made by the predecessor in fiscal 1999,
all unit options and restricted units granted under the plan will vest no
sooner than, and in the same proportion as, Senior Subordinated Units convert
into Common Units as described above. The compensation committee of the
managing general partner's board of directors administers the plan.

 Restricted Units

   A restricted unit is a "phantom" unit that entitles the grantee to receive a
common unit upon the vesting of the phantom unit, or in the discretion of the
compensation committee, cash equivalent to the value of a common unit. In
general, restricted units granted to employees will vest three years from the
date of grant and are subject to the vesting provisions described above in
connection with the subordination period. In addition, the restricted units
will become exercisable upon a change of control of the managing general
partner or Inergy.

   The restricted units are intended to serve as a means of incentive
compensation for performance and not primarily as an opportunity to participate
in the equity appreciation of the common units. Therefore, plan participants
will not pay any consideration for the common units they receive, and Inergy
will receive no remuneration for the units.

   As of September 30, 2001 and March 31, 2002, there were no restricted units
issued under the long-term incentive plan.

 Unit Options

   Unit options issued under the long-term incentive plan will generally have
an exercise price equal to the fair market value of the units on the date of
grant. In general, unit options will expire after 10 years and are subject to
the vesting provisions described above in connection with the subordination
period. In addition, the unit options will become exercisable upon a change of
control of the managing general partner or Inergy. Subsequent to the Offering,
292,782 unit options were granted to various Inergy employees with exercise
prices ranging from $16.37 to $22.00 per unit. Total unit options outstanding
at September 30, 2001 were 321,820 with exercise prices ranging from $3.83 to
$22.00. During the six months ended March 31, 2002, 77,500 unit options were
granted with exercise prices ranging from $22.49 to $27.65. None of the
outstanding unit options were exercisable at September 30, 2001 or March 31,
2002.

   Inergy applies APB Opinion No. 25, Accounting for Stock Issued to Employees.
Inergy follows the disclosure only provision of SFAS No. 123, Accounting for
Stock-based Compensation. Pro forma net income (loss) and net income (loss) per
limited partner unit under the fair value method of accounting for equity
instruments under SFAS No. 123 would not be materially different from reported
net income (loss) and net income (loss) per limited partner unit.

                                      F-24

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

9. Employee Benefit Plans

   Inergy's subsidiaries have a 401(k) profit-sharing plan for those employees
who have completed one year of service and have attained the age of 21. The
plan permits employees to make contributions up to 15% of their salary and
provides for matching contributions by Inergy. Matching contributions made by
Inergy were $21, $52, and $101 as of September 30, 1999, 2000, and 2001,
respectively.

10. Commitments

   Inergy periodically enters into agreements to purchase fixed quantities of
liquid propane at fixed prices with suppliers. At September 30, 2001, the total
of these firm purchase commitments was approximately $40,244.

   At September 30, 2001, Inergy is contingently liable for letters of credit
outstanding totaling $900, which guarantees various trade activities.

11. Segments

   Inergy's financial statements reflect two reportable segments: retail sales
operations and wholesale sales operations. Inergy's retail sales operations
include propane sales to end users, the sale of propane-related appliances and
service work for propane-related equipment. The wholesale sales operations,
which originated in April 1999, provide marketing and distribution services to
other resellers of propane, including Inergy's retail operations. Inergy's
President and Chief Executive Officer has been identified as the Chief
Operating Decision Maker (CODM). The CODM evaluates performance and allocates
resources based on revenues and gross profit of each segment. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. All intersegment revenues and profits
associated with propane sales and other services between the wholesale and
retail segments have been eliminated.

   The identifiable assets associated with each reportable segment reviewed by
the CODM include accounts receivable and inventories. The net asset/liability
from price risk management, as reported in the accompanying consolidated
balance sheet, is related to the wholesale trading activities and is
specifically reviewed by the CODM. Capital expenditures, reported as purchases
of property, plant and equipment in the accompanying consolidated statements of
cash flows, substantially all relate to the retail sales segment. Inergy does
not report property, plant and equipment, intangible assets, and depreciation
and amortization by segment to the CODM.

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

                                           Six Months Ended March 31, 2002
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $77,229    $104,405    $(17,574)  $164,060
   Gross profit.....................   46,901       3,822        (450)    50,273
   Identifiable assets..............   19,292      21,410          --     40,702

                                      F-25

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

                                           Six Months Ended March 31, 2001
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $53,488    $143,623    $(26,672)  $170,439
   Gross profit.....................   24,251       6,802      (2,039)    29,014
   Identifiable assets..............   12,919      14,835      (1,477)    26,277

                                            Year Ended September 30, 2001
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $71,340    $187,521    $(35,722)  $223,139
   Gross profit.....................   34,633       8,747      (2,823)    40,557
   Identifiable assets..............    5,704      18,447          --     24,151

                                            Year Ended September 30, 2000
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $23,461    $ 78,517    $ (8,383)  $ 93,595
   Gross profit.....................   10,693       2,179        (913)    11,959
   Identifiable assets..............    5,006      11,623        (397)    16,232

                                            Year Ended September 30, 1999
                                     -------------------------------------------
                                       Retail   Wholesale
                                       Sales      Sales    Intersegment
                                     Operations Operations Eliminations  Total
                                     ---------- ---------- ------------ --------
                                                            
   Revenues.........................  $ 9,860    $ 10,276    $   (925)  $ 19,211
   Gross profit.....................    4,946         511          --      5,457
   Identifiable assets..............    2,993       8,032        (925)    10,100

12. Subsequent Events

   Effective November 1, 2001, Inergy acquired substantially all of the assets
and assumed certain liabilities of Pro Gas Sales & Service, Spe-D Gas Company,
Great Lakes Propane Company and Ottawa LP Gas Company, four companies under
common control (collectively Pro Gas) $12.5 million in total consideration. Pro
Gas is a retail propane distributor located in central Michigan. Inergy
purchased Pro Gas with cash funded through its credit facility.

   Effective December 20, 2001, IPC Acquisition Corporation, a newly formed and
wholly-owned subsidiary of Inergy Holdings, LLC, purchased all of the
outstanding stock and assumed the outstanding debt of Independent Propane
Company, Inc. for total consideration of $84.8 million including working
capital acquired. Immediately thereafter, Inergy purchased from Inergy
Holdings, LLC substantially all of the assets and assumed certain liabilities
of IPC Acquisition Corporation for $74.6 million in cash, funded through its
credit facility, and the issuance of 759,620 common units with a fair value of
$19.7 million, and $2.5 million of assumed liabilities, for total consideration
of $96.8 million, including $7.5 million paid for working capital acquired (the
IPC Acquisition). The $10.3 million greater consideration paid by Inergy over
that paid by IPC Acquisition Corp. relates to the tax liability generated by
the sale of the assets by IPC Acquisition Corp. to Inergy. Independent Propane
Company, Inc. operates as a retail distributor of propane in seven states, with
its primary operations in Texas.

                                      F-26

                          INERGY, L.P. AND SUBSIDIARY
              (Successor to Inergy Partners, LLC and Subsidiaries)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  (In Thousands Except Unit and Per Unit Data)

   The following unaudited pro forma data summarize the results of operations
for the periods indicated as if the Pro Gas and IPC acquisitions had been
completed October 1, 2000 and 2001, the beginning of the 2001 and 2002 fiscal
years and as if the Hoosier Propane Group acquisition effective January 1, 2001
(see Note 2) had been completed October 1, 2000. The pro forma data give effect
to actual operating results prior to the acquisitions and adjustments to
interest expense, goodwill (amortization prior to the October 1, 2001 adoption
of SFAS No. 142) and customer accounts amortization, among other things. These
pro forma amounts do not purport to be indicative of the results that would
have actually been obtained if the acquisitions had occurred on October 1, 2000
and 2001 or that will be obtained in the future.

                                                               Six-Month Period
                                                  Year ended    Ended March 31,
                                                 September 30, -----------------
                                                     2001        2001     2002
                                                 ------------- -------- --------
                                                               
   Revenue......................................   $350,420    $242,327 $178,823
   Net income ..................................   $ 14,877      23,051   20,148

   As discussed in Note 4, Inergy's credit facility was amended in December
2001 in conjunction with the IPC Acquisition.

   On November 14, 2001, Inergy paid a distribution of $0.40 per Common and
Subordinated Unit with a proportionate amount to the 2% nonmanaging general
partner, or an aggregate of $2,337, including $47 to the nonmanaging general
partner.

13. Quarterly Financial Data (Unaudited)

   Summarized unaudited quarterly financial data is presented below. Inergy's
business is seasonal due to weather conditions in its service areas. Propane
sales to residential and commercial customers are affected by winter heating
season requirements, which generally results in higher operating revenues and
net income during the period from October through March of each year and lower
operating revenues and either net losses or lower net income during the period
from April through September of each year. Sales to industrial and agricultural
customers are much less weather sensitive.

                                                   Quarter Ended
                                     ------------------------------------------
                                     December 31 March 31 June 30  September 30
                                     ----------- -------- -------  ------------
                                                       
Fiscal 2001
  Revenues..........................   $72,411   $98,028  $21,803    $30,897
  Operating income (loss)...........     4,076    10,726   (2,200)    (2,078)
  Net income (loss).................     3,209     8,978   (4,162)    (3,676)
  Basic and diluted net income
   (loss) per limited partner unit
   for the period from July 31, 2001
   through September 30, 2001.......                                   (0.40)

Fiscal 2000
  Revenues..........................   $20,563   $29,894  $13,208    $29,930
  Operating income (loss)...........     1,198     2,225   (1,298)    (1,442)
  Net income (loss).................       698     1,663   (1,953)    (2,237)

                                      F-27

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Independent Propane Company Holdings:

   We have audited the accompanying consolidated balance sheets of Independent
Propane Company Holdings (a Delaware corporation) and subsidiaries (the
"Company") as of September 30, 2000 and 2001, and the related consolidated
statements of operations, changes in shareholders' deficit, and cash flows for
each of the three years in the period ended September 30, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Independent Propane Company
Holdings and subsidiaries as of September 30, 2000 and 2001, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2001, in conformity with accounting principles generally
accepted in the United States.

                                          /s/ ARTHUR ANDERSEN LLP

Dallas, Texas,
November 16, 2001

                                      F-28

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          September 30, 2000 and 2001

                                                        2000          2001
                                                    ------------  ------------
                      ASSETS
                                                            
CURRENT ASSETS:
  Cash............................................  $    809,997  $  1,003,667
  Accounts receivable, net of allowance for
   doubtful accounts of approximately $707,000 and
   $867,000, respectively.........................     5,831,190     5,772,793
  Inventories, net................................     3,601,690     3,324,495
  Other current assets............................       396,306       586,764
                                                    ------------  ------------
    Total current assets..........................    10,639,183    10,687,719
                                                    ------------  ------------
PROPERTY, PLANT, AND EQUIPMENT:
  Land............................................     1,663,412     1,515,322
  Buildings.......................................     2,666,662     2,747,273
  Office furniture and equipment..................     3,276,085     3,169,399
  Shop equipment..................................       950,540     1,232,236
  Tanks...........................................    37,083,629    38,166,897
  Vehicles........................................     9,122,812    10,028,647
                                                    ------------  ------------
                                                      54,763,140    56,859,774
  Less--Accumulated depreciation..................   (14,158,003)  (18,201,121)
                                                    ------------  ------------
    Net property, plant, and equipment............    40,605,137    38,658,653
                                                    ------------  ------------
GOODWILL, net of accumulated amortization of
 $5,175,632 and $6,840,356, respectively..........    20,702,730    19,216,266
NONCOMPETITION AGREEMENTS, net of accumulated
 amortization of $1,993,740 and $2,696,431,
 respectively.....................................     2,031,873     1,341,582
DEBT ISSUANCE COSTS, net of accumulated
 amortization of $1,373,892 and $1,730,298,
 respectively.....................................     1,039,870       683,464
OTHER NONCURRENT ASSETS, net......................       389,017       490,517
                                                    ------------  ------------
    Total assets..................................  $ 75,407,810  $ 71,078,201
                                                    ============  ============
      LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
  Accounts payable................................  $  5,322,396  $  4,879,937
  Accrued liabilities.............................     1,399,882     1,466,905
  Short-term notes payable........................       466,000            --
  Current maturities of long-term debt............     4,721,242     6,408,576
                                                    ------------  ------------
    Total current liabilities.....................    11,909,520    12,755,418
                                                    ------------  ------------
CUSTOMER DEPOSITS.................................       241,495       174,823
DEFERRED TAXES, net...............................       100,000       100,000
DIVIDENDS PAYABLE ON SERIES E SENIOR REDEEMABLE
 PREFERRED STOCK..................................     9,466,691    15,143,381
LONG-TERM DEBT, net of current maturities.........    56,687,136    48,557,593
SERIES E SENIOR REDEEMABLE PREFERRED STOCK, 35,000
 shares authorized, 29,000 issued and outstanding,
 $1,000 redemption and carrying value.............    29,000,000    29,000,000
COMMITMENTS AND CONTINGENCIES (Notes 9 and 12)
SHAREHOLDERS' DEFICIT:
  Common stock--par value $.01 per share, 170,613
   and 168,113 shares issued, respectively........         1,706         1,681
  Additional paid-in capital......................     1,221,127     1,221,152
  Retained deficit................................   (24,361,528)  (27,017,510)
                                                    ------------  ------------
                                                     (23,138,695)  (25,794,677)
  Treasury stock--86,033 shares, at cost..........    (8,858,337)   (8,858,337)
                                                    ------------  ------------
    Total shareholders' deficit...................   (31,997,032)  (34,653,014)
                                                    ------------  ------------
    Total liabilities and shareholders' deficit...  $ 75,407,810  $ 71,078,201
                                                    ============  ============

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                      F-29

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
             For the Years Ended September 30, 1999, 2000, and 2001

                                          1999          2000         2001
                                       -----------  ------------  -----------
                                                         
SALES:
  Propane............................. $37,685,218  $ 49,372,705  $67,358,523
  Other...............................   7,304,299     9,600,372    9,061,668
                                       -----------  ------------  -----------
    Total sales.......................  44,989,517    58,973,077   76,420,191
                                       -----------  ------------  -----------
COST OF SALES:
  Propane.............................  12,405,337    24,078,875   34,130,449
  Other...............................   3,631,276     4,249,833    3,630,779
                                       -----------  ------------  -----------
    Total cost of sales...............  16,036,613    28,328,708   37,761,228
                                       -----------  ------------  -----------
GROSS PROFIT..........................  28,952,904    30,644,369   38,658,963

OPERATING EXPENSES:
  Selling, general, and
   administrative.....................  21,305,182    21,922,915   22,321,832
  Depreciation and amortization.......   5,544,293     6,883,411    7,018,730
                                       -----------  ------------  -----------
    Total operating expenses..........  26,849,475    28,806,326   29,340,562
                                       -----------  ------------  -----------
OPERATING PROFIT......................   2,103,429     1,838,043    9,318,401
INTEREST EXPENSE, net.................   5,094,672     7,393,941    6,297,693
                                       -----------  ------------  -----------
NET INCOME (LOSS) BEFORE INCOME
 TAXES................................  (2,991,243)   (5,555,898)   3,020,708
INCOME TAXES..........................          --            --           --
                                       -----------  ------------  -----------
NET INCOME (LOSS).....................  (2,991,243)   (5,555,898)   3,020,708
LESS: DIVIDENDS ON PREFERRED STOCK....  (4,309,777)   (4,945,571)  (5,676,690)
                                       -----------  ------------  -----------
NET LOSS AVAILABLE TO COMMON
 SHAREHOLDERS......................... $(7,301,020) $(10,501,469) $(2,655,982)
                                       ===========  ============  ===========

NET LOSS PER COMMON SHARE:
  Basic and diluted................... $    (42.13) $     (61.07) $    (15.68)

WEIGHTED AVERAGE NUMBER OF COMMON
 SHARES AND COMMON SHARE EQUIVALENTS
 OUTSTANDING:
  Basic and diluted...................     173,304       171,959      169,363

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

                                      F-30

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
             For the Years Ended September 30, 1999, 2000, and 2001

                                 Additional                                Total
                         Common   Paid-in     Retained     Treasury    Shareholders'
                         Stock    Capital     Deficit        Stock        Equity
                         ------  ---------- ------------  -----------  -------------
                                                        
BALANCE, September 30,
 1998................... $1,733  $1,221,100 $ (6,559,039) $(8,858,337) $(14,194,543)
  Preferred stock
   dividends............     --          --   (4,309,777)          --    (4,309,777)
  Net loss..............     --          --   (2,991,243)          --    (2,991,243)
                         ------  ---------- ------------  -----------  ------------
BALANCE, September 30,
 1999...................  1,733   1,221,100  (13,860,059)  (8,858,337)  (21,495,563)
  Cancellation of
   subscription
   receivable...........    (27)         27           --           --            --
  Preferred stock
   dividends............     --          --   (4,945,571)          --    (4,945,571)
  Net loss..............     --          --   (5,555,898)          --    (5,555,898)
                         ------  ---------- ------------  -----------  ------------
BALANCE, September 30,
 2000...................  1,706   1,221,127  (24,361,528)  (8,858,337)  (31,997,032)
  Cancellation of
   subscription
   receivable...........    (25)         25           --           --            --
  Preferred stock
   dividends............     --          --   (5,676,690)          --    (5,676,690)
  Net income............     --          --    3,020,708           --     3,020,708
                         ------  ---------- ------------  -----------  ------------
BALANCE, September 30,
 2001................... $1,681  $1,221,152 $(27,017,510) $(8,858,337) $(34,653,014)
                         ======  ========== ============  ===========  ============

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                      F-31

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
            For the Years Ended September 30, 1999 , 2000, and 2001

                                            1999         2000         2001
                                        ------------  -----------  -----------
                                                          
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss).................... $ (2,991,243) $(5,555,898) $ 3,020,708
  Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities--
    Depreciation and amortization......    5,544,293    6,883,411    7,018,730
    Amortization of debt issuance
     costs.............................      707,265      389,508      356,406
    Changes in, (net of effects from
     acquisitions)--
      Accounts receivable, net.........   (1,019,744)  (2,090,924)      58,397
      Inventories, net.................     (398,640)    (308,756)     277,195
      Other current assets.............     (103,580)      (5,883)    (190,458)
      Accounts payable and accrued
       liabilities.....................    1,174,654    1,517,475     (375,436)
      Customer deposits................       14,150      (45,224)     (66,672)
                                        ------------  -----------  -----------
        Net cash provided by operating
         activities....................    2,927,155      783,709   10,098,870
                                        ------------  -----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures, net............   (3,739,147)  (2,799,446)  (2,736,547)
  Net cash paid in acquisitions........  (18,675,845)  (5,273,317)          --
  (Increase) decrease in other
   noncurrent assets...................      580,909       18,588     (260,444)
                                        ------------  -----------  -----------
        Net cash used in investing
         activities....................  (21,834,083)  (8,054,175)  (2,996,991)
                                        ------------  -----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on short-term notes
   payable.............................     (160,000)  (1,212,000)    (466,000)
  Net (payments) proceeds from credit
   agreement...........................   19,490,330   10,200,878   (4,382,528)
  Proceeds from long-term debt.........      959,873           --           --
  Payments on long-term debt...........   (1,393,486)  (1,601,984)  (2,059,681)
  Debt issuance costs..................     (134,148)      (8,445)          --
                                        ------------  -----------  -----------
        Net cash (used in) provided by
         financing activities..........   18,762,569    7,378,449   (6,908,209)
                                        ------------  -----------  -----------
NET INCREASE (DECREASE) IN CASH........     (144,359)     107,983      193,670
CASH, beginning of period..............      846,373      702,014      809,997
                                        ------------  -----------  -----------
CASH, end of period.................... $    702,014  $   809,997  $ 1,003,667
                                        ============  ===========  ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
  Cash paid during the year for
   interest............................ $  4,340,771  $ 6,904,101  $ 5,864,832
  Noncash activities--
    Debt issued in acquisitions........ $  1,919,000  $   696,500  $        --
    Preferred stock dividends.......... $  4,309,777  $ 4,945,571  $ 5,676,690

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                      F-32

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 2000 and 2001

1. The Company:

   Independent Propane Company Holdings, a Delaware corporation, and
subsidiaries (the "Company"), is a distributor of propane gas and related
merchandise with operations primarily in the Southern and Southeastern United
States. At September 30, 2001, the Company had 44 branch locations and 24
satellite locations. The Company's business expansion to date has occurred
mainly through the acquisitions of other propane outlets. Acquisitions which
occurred during the periods presented in the accompanying consolidated
financial statements are discussed in Note 6.

2. Summary of Significant Accounting Policies:

 Consolidation

   All significant intercompany accounts and transactions have been eliminated
in the accompanying consolidated financial statements.

 Inventories

   Inventories are stated at the lower of cost (weighted average for propane
and first-in, first-out for merchandise) or market.

 Property, Plant, and Equipment

   Property, plant, and equipment are stated at cost. Depreciation on property,
plant, and equipment is calculated using the straight-line method over the
estimated useful lives of the assets. Original cost and related accumulated
depreciation are removed from the accounts in the year assets are retired.
Maintenance and repairs are charged to expense as incurred.

 Intangibles

   Intangible assets include the cost of noncompetition agreements and purchase
price in excess of the estimated fair value of net assets acquired
("goodwill"). The cost of noncompetition agreements is being amortized over
periods of 2 to 7 years, while goodwill is being amortized over 15 years, using
the straight-line method.

 Accounting for the Impairment of Long-Lived Assets

   In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," the Company records impairment for losses on its
long-lived assets and goodwill when events or circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of the assets. No
such impairment losses have been recognized to date.

 Debt Issuance Costs

   Debt issuance costs incurred in connection with obtaining and amending the
debt are being amortized over the life of the related loan and are included in
interest expense in the accompanying consolidated statements of operations.

                                      F-33

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 Income Taxes

   Deferred income taxes are recorded, where appropriate, to reflect the
estimated future tax effects of differences between financial statement bases
and tax bases of assets and liabilities.

 Revenue Recognition

   Propane sales are recognized when the product is delivered to the customer.
Other revenue, which primarily includes other fuel sales, merchandise sales,
and tank rental income, is recognized when products are delivered and as
services are rendered.

 Use of Estimates

   The preparation of these consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.

 Credit Concentration

   The Company generally extends credit to its retail customers through
delivery into company and customer owned propane tanks. No individual customer
comprises more than 5% of the Company's business thus reducing the risk as a
result of the large volume of customers. Provisions for doubtful accounts
receivable are reflected in the consolidated financial statements and have
generally been within management's expectations.

 Fair Value of Financial Instruments

   The Company enters into various financial instruments in the normal course
of business. The carrying values of the Company's short-term financial
instruments, including cash, receivables, and short-term notes payable
approximate their fair value because of the short maturity of the instruments.
The carrying value of the long-term debt approximates fair value because of its
variable interest rate.

 New Accounting Standard

   In July 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was
issued. The Company is required to adopt this new standard at the beginning of
fiscal 2003, although early adoption is permitted at the beginning of fiscal
2002. Subsequent to the adoption of SFAS No. 142, recorded goodwill is not
amortized. Adoption of the standard also includes transitional impairment
testing of previously recorded goodwill. The Company has not early adopted this
new standard and has not determined if impairment of goodwill will be required
at the date of adoption.

3. Inventories:

   As of September 30, 2000 and 2001, inventories consisted of:

                                                            2000        2001
                                                         ----------  ----------
                                                               
   Propane.............................................. $2,080,454  $1,845,677
   Merchandise..........................................  1,616,826   1,585,827
   Other fuels..........................................    164,410     152,991
   Reserves.............................................   (260,000)   (260,000)
                                                         ----------  ----------
                                                         $3,601,690  $3,324,495
                                                         ==========  ==========

                                      F-34

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Property, Plant, and Equipment:

   A summary of the estimated useful lives utilized for depreciation purposes
is as follows:

                                                                       Estimated
                                                                         Lives
                                                                        (Years)
                                                                       ---------
                                                                    
   Buildings..........................................................       40
   Office furniture and equipment.....................................  5 to 10
   Shop equipment.....................................................       10
   Tanks..............................................................       20
   Vehicles...........................................................        5

   Depreciation expense related to property, plant, and equipment in 1999,
2000, and 2001 was approximately $3,759,000, $4,658,000, and $4,363,000,
respectively. Certain of the Company's property, plant, and equipment has been
pledged as security under certain long-term debt agreements and the Amended and
Restated Credit Agreement (see Note 8).

5. Intangibles:

   As of September 30, 2000 and 2001, intangibles consisted primarily of
goodwill and noncompetition agreements (see Note 2). Amortization expense
related to intangible assets for 1999, 2000, and 2001 totaled approximately
$1,785,000, $2,225,000, and $2,656,000, respectively.

6. Acquisitions:

   In fiscal 2000, the Company acquired assets of nine Texas propane companies.
The total purchase price for those acquisitions included approximately
$6,044,000 in cash and $697,000 in promissory notes with terms ranging from 1
to 7 years. In fiscal 2001, the Company did not complete any acquisitions.

   In connection with one acquisition, the Company also entered into a certain
noncompetition agreement with the previous owner for approximately $235,000 for
7 years. Purchase price in excess of the fair value of assets acquired of
approximately $3,067,000 was allocated to intangible assets.

7. Short-Term Notes Payable:

   As of September 30, 2000 and 2001, short-term notes payable consisted of
notes payable, at varying interest rates, to previous owners of acquired
companies totaling $466,000 and $0, respectively, payable within one year of
the related acquisition date.

                                      F-35

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Long-Term Debt:

   As of September 30, 2000 and 2001 long-term debt consisted of the following:

                                                            2000        2001
                                                         ----------- -----------
                                                               
Revolving line of credit up to a maximum of $21,000,000
 at September 30, 2000 and 2001, matures on September
 30, 2003, requires monthly payments of interest at
 either the Bank Prime Loan Rate or LIBOR, plus an
 incremental interest rate of up to 4% (10.6% and 7.1%
 at September 30, 2000 and 2001, respectively).........  $17,724,262 $16,541,734
Term A Loan, matures on September 30, 2003, requires
 quarterly payments of principal and interest at either
 the Bank Prime Loan Rate or LIBOR, plus an incremental
 interest rate of up to 4% (10.6% and 7.1% at September
 30, 2000 and 2001, respectively), quarterly
 installments range from $50,000 beginning after June
 30, 2000, to $2,500,000 beginning after December 31,
 2002..................................................   19,000,000  16,000,000
Term B Loan, matures on September 30, 2003, requires
 quarterly payments of principal and interest at either
 the Bank Prime Loan Rate or LIBOR, plus an incremental
 interest rate of up to 4% (10.6% and 7.1% at September
 30, 2000 and 2001, respectively), payable quarterly in
 installments of 0.25% of Term B loan outstanding......   19,650,000  19,450,000
Notes payable to sellers for acquisitions, mature on
 various dates from February 2001 through June 2010,
 principal and interest varying from 8% to 12% payable
 in monthly installments...............................    4,143,209   2,611,987
Other..................................................      890,907     362,448
                                                         ----------- -----------
                                                          61,408,378  54,966,169
Less--Current maturities...............................    4,721,242   6,408,576
                                                         ----------- -----------
Total long-term debt, net of current maturities........  $56,687,136 $48,557,593
                                                         =========== ===========

   The Company has a credit agreement which consists of a revolving line of
credit, Term A loan, and Term B loan (collectively, the "Credit Agreement").
The Credit Agreement matures on September 30, 2003, and is collateralized by
the assets of the Company.

   The Credit Agreement contains various financial covenants under which the
Company is obligated. These financial covenants, among others, include
requirements for debt to cash flow, interest coverage, and fixed charge
coverage. As of September 30, 2001, the Company is in compliance with these
covenants.

   At September 30, 2000 and 2001, the weighted average interest rate for
outstanding balances under this agreement equaled 10.6% and 7.2%, respectively.

   As part of the Credit Agreement, the lender received a warrant to purchase
100 shares of Series D Convertible Preferred Stock (see Note 12). The lender
also invested $1,000,000 in exchange for Series E Preferred Stock and a related
warrant.

                                      F-36

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   Principal maturities of long-term debt outstanding at September 30, 2001,
over the next five fiscal years and thereafter are as follows:

                                                                  
   2002............................................................. $ 6,408,576
   2003.............................................................  47,836,207
   2004.............................................................     263,561
   2005.............................................................     189,356
   2006.............................................................     116,607
   Thereafter.......................................................     151,862
                                                                     -----------
                                                                     $54,966,169
                                                                     ===========

9. Leases:

   The Company rents most of its office and branch location space under leases
which range from 1 to 15 years. The Company also leases vehicles, equipment,
and land under leases ranging from 6 months to 15 years. At September 30, 2001,
the Company was committed to make future rental payments under several long-
term operating lease agreements. The future minimum payments required over the
next five fiscal years and thereafter are summarized below:

                                                                  
   2002............................................................. $  909,784
   2003.............................................................    833,316
   2004.............................................................    688,668
   2005.............................................................    571,441
   2006.............................................................    229,369
   Thereafter.......................................................    290,675
                                                                     ----------
   Total minimum lease payments..................................... $3,523,253
                                                                     ==========

   Total rent expense for the years ended September 30, 1999, 2000, and 2001,
was approximately $820,000, $848,000, and $797,000, respectively, and is
included in selling, general, and administrative expenses.

10. Income Taxes:

   The Company recorded no income tax benefit for the years ended September 30,
1999 and 2000, due to an offsetting amount increasing the valuation allowance.
The Company made no provision for income taxes for the year ended September 30,
2001, due to the utilization of the net operating loss carryforward and a
corresponding reduction in the valuation allowance.

   As of September 30, 2000 and 2001, the tax effects of temporary differences
which gave rise to the net deferred income tax liability were as follows:

                                                         2000         2001
                                                      -----------  -----------
                                                             
   Allowance for doubtful accounts................... $   240,380  $   294,780
   Property, plant, and equipment....................  (2,007,482)  (2,331,079)
   Net operating loss carryforwards..................   4,458,587    3,464,470
   Other.............................................     (58,380)      35,567
   Valuation allowance...............................  (2,733,105)  (1,563,738)
                                                      -----------  -----------
     Net noncurrent deferred tax liability........... $  (100,000) $  (100,000)
                                                      ===========  ===========

                                      F-37

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   As of September 30, 2001, the Company had net operating loss carryforwards
of approximately $10,190,000 for federal income tax purposes. The Company's
income tax provision differed from the federal statutory rate of 34% due to the
establishment of a valuation allowance for the net operating loss
carryforwards, the realization of which cannot be assured at this time.
Substantially all of the net operating loss carryforwards at September 30,
2001, are subject to certain limitations under Internal Revenue Code Section
382.

11. Other Related-Party Transactions:

   For the years ended September 30, 1999, 2000, and 2001, the Company had
purchased legal services totaling approximately $102,000, $86,000, and $32,000,
respectively, from certain shareholders. These legal costs were primarily
associated with the various acquisitions, and the amendments to the Credit
Agreement.

   As of September 30, 1999, 2000, and 2001, in connection with the sale of
stock, the Company had a note receivable from officers of the Company totaling
$653,650, $250,000, and $0, respectively, which are included as a reduction in
additional paid-in capital. The notes bore interest at 8%.

12. Put Warrants:

   In connection with the Credit Agreement, the lender received a warrant to
purchase 100 shares of the Series D Convertible Preferred Stock, $.01 par
value, at an exercise price of $1.00 per share. The warrant is exercisable from
September 11, 1998, through September 11, 2008. The holder of the warrant has
the right to put its warrant to the Company at a price as defined in the Credit
Agreement. The put exercise period is anytime after September 11, 2003. The
warrant is adjusted annually to its fair market value through earnings.

   Series E Senior Redeemable Preferred Stock (Note 13) includes warrants to
purchase 82,492 shares of common stock at an exercise price of $.01 per share.
The warrants may be exercised at any time up to the expiration date of
September 11, 2008. These warrants have a put feature that allows the holder to
put the warrants to the Company after September 11, 2003, at current market
price as defined in the stock purchase agreement. The warrants are adjusted
annually to their fair market value through earnings.

   The fair market value assigned to the warrants upon issuance was $0 and
there has been no change in market value since their issuance.

13. Series E Redeemable Preferred Stock:

   Series E Senior Redeemable Preferred Stock ("Series E") consist of 35,000
designated shares of which 29,000 were issued and outstanding as of September
30, 2000 and 2001. Each share of Series E stock has a liquidation value of
$1,000 plus accrued and unpaid dividends. Dividends accrue at a rate of 14% per
year and are compounded on a quarterly basis and totaled approximately
$15,144,000 at September 30, 2001. Series E stock has an optional redemption
feature that allows the Company to redeem shares at a percentage of liquidation
value. These percentages range from 112% in 1998, to 100% in 2004 and
thereafter, and the percentage reduces 2% per year for all years between 1998
and 2004. The Series E stock is mandatorily redeemed beginning August 31, 2003,
in 6.25% increments of original shares outstanding at the issuance date,
payable quarterly. Any remaining shares outstanding as of August 31, 2005, must
be redeemed in full as of that date.

                                      F-38

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Shareholders' Deficit:

   As of September 30, 2000 and 2001, the Company's authorized capital
structure consisted of 500,000 shares of common stock and 50,000 shares of
preferred stock, all of which have a par value of $.01 per share. Following is
a summary of each class of stock:

  . Common stock--500,000 authorized shares of which 170,613 and 168,113
    shares were issued as of September 30, 2000 and 2001, respectively,
    including 86,033 treasury shares.

  . Series D Convertible Preferred Stock ("Series D")--100 shares designated
    of which no shares are issued. Each share of Series D stock has no
    dividends, unless declared by the Board of Directors of the Company. The
    Series D stock can also be converted into a total of 7,228 shares of
    common stock.

   Certain current and former employees of the Company and other individuals
have stock options exercisable beginning at a date subject to the grant date
and vesting period. The remaining 1,250 unvested stock options vest in March
2002. These options are to purchase shares of common stock of the Company at
values from $5 to $165 per share. At September 30, 2001, the Company had
allocated 28,044 shares of common stock for issuance under the plan. During
2001, 5,000 options were granted that qualify for variable accounting
treatment, which requires the recognition of compensation expense based on
changes in the fair value of the common stock. During 2001, no compensation
expense was recognized. A summary of stock option activity for the years ended
September 30, 1999, 2000, and 2001, is presented in the table below:

                                September 30,   September 30,   September 30,
                                    1999            2000            2001
                               --------------- --------------- ---------------
                                      Weighted        Weighted        Weighted
                                      Average         Average         Average
                                      Exercise        Exercise        Exercise
                               Shares  Price   Shares  Price   Shares  Price
                               ------ -------- ------ -------- ------ --------
                                                    
Outstanding, beginning of
 year......................... 8,299  $121.58  8,299  $121.58  6,210  $106.97
  Granted.....................    --       --     --       --  5,000     5.00
  Exercised...................    --       --     --       --     --       --
  Expired.....................    --       --     --       --  3,044   100.00
  Cancelled...................    --       --  2,089   165.00  2,500   100.00
                               -----  -------  -----  -------  -----  -------
Outstanding, end of year...... 8,299  $121.58  6,210  $106.97  5,666  $ 23.81
                               =====  =======  =====  =======  =====  =======
Exercisable at end of year.... 4,335  $109.99  4,960  $108.73  4,416  $ 29.13
                               =====  =======  =====  =======  =====  =======

   The Company has elected to account for stock-based compensation programs
using the intrinsic value method under Accounting Principles Board Opinion No.
25. The following pro forma disclosures are presented to reflect amounts as if
the fair value method defined in SFAS No. 123 were applied:

                                                  September 30,
                                       --------------------------------------
                                          1999          2000         2001
                                       -----------  ------------  -----------
                                                         
Net loss available to common
 shareholders......................... $(7,792,528) $(10,764,686) $(2,718,513)
Net loss per common share--basic and
 diluted.............................. $    (44.96) $     (62.60) $    (16.05)

   The Company used the minimum value method to estimate the fair values of
options for the above pro forma information. For purposes of the minimum value
method, the Company used risk-free interest rates of 6.7%, 5.1% and 6.3%,
respectively, assumed no volatility or future dividends, and assumed the
expected life of the options to be through the applicable expiration dates.

                                      F-39

             INDEPENDENT PROPANE COMPANY HOLDINGS AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   The following table summarized information about stock options outstanding
at September 30, 2001:

                                                                                Remaining
         Exercise            Number                    Number                  Contractual
          Price            Outstanding               Exercisable                  Life
         --------          -----------               -----------               -----------
                                                                      
          $5.00               5,000                     3,750                      9.1
         $165.00               666                       666                       1.9

15. Subsequent Events (Unaudited):

   On December 19, 2001, IPCH Acquisition Corp., a newly formed and wholly
owned subsidiary of Inergy Holdings, LLC purchased all of the outstanding stock
and assumed the outstanding debt of the Company.

                                      F-40

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Domex, Inc., Investors 300, Inc., L & L Leasing, Inc.

   We have audited the accompanying combined balance sheets as of September 30,
1999 and 2000 and December 31, 2000, of Domex, Inc., Investors 300, Inc. and
L & L Leasing, Inc. (the "Hoosier Propane Group"), and the related combined
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 2000 and the three months ended
December 31, 2000. These financial statements are the responsibility of the
Hoosier Propane Group's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position at September 30, 1999
and 2000 and December 31, 2000, of the Hoosier Propane Group, and the combined
results of their operations and their cash flows for each of the three years in
the period ended September 30, 2000 and the three months ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States.

                                          /s/ ERNST & YOUNG LLP

Kansas City, Missouri
May 2, 2001

                                      F-41

                             HOOSIER PROPANE GROUP

                            COMBINED BALANCE SHEETS
                       (In thousands, except share data)

                                                 September 30,
                                               ------------------  December 31,
                                                 1999      2000        2000
                                               --------  --------  ------------
                                                          
               ASSETS (Note 3)
Current assets:
 Cash and cash equivalents...................  $    777  $    702    $  1,711
 Marketable securities.......................       424       460         453
 Accounts receivable.........................     2,482     4,423      13,134
 Inventories.................................     7,537     2,301       3,172
 Prepaid expenses and other current assets...       211       491         207
                                               --------  --------    --------
Total current assets.........................    11,431     8,377      18,677
Property, plant and equipment:
 Land and buildings..........................     2,283     2,310       2,310
 Office furniture and equipment..............       698       704         704
 Vehicles....................................    11,894    12,296      12,363
 Tanks and plant equipment...................    17,523    18,215      18,401
                                               --------  --------    --------
                                                 32,398    33,525      33,778
 Less accumulated depreciation...............   (10,291)  (11,299)    (11,643)
                                               --------  --------    --------
                                                 22,107    22,226      22,135
Intangible assets (Note 2)...................     1,566     1,566       1,566
 Less accumulated amortization...............      (119)     (223)       (249)
                                               --------  --------    --------
                                                  1,447     1,343       1,317
Notes receivable from stockholders (Note 6)..       352       292         285
Other assets.................................       742       879         884
                                               --------  --------    --------
Total assets.................................  $ 36,079  $ 33,117    $ 43,298
                                               ========  ========    ========
    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Notes payable to bank (Note 3)..............  $  3,000  $  1,575    $  5,575
 Accounts payable............................     2,204     1,552       7,576
 Customer deposits...........................     3,678     3,927       2,626
 Accrued expenses............................       689       933       1,460
 Notes payable to stockholders (Note 6)......       --        --          995
 Current portion of long-term debt (Note 3)..       803     4,950       4,668
                                               --------  --------    --------
Total current liabilities....................    10,374    12,937      22,900

Long-term debt, less current portion (Note
 3)..........................................     8,740     2,609       1,600

Notes payable to stockholders (Note 6).......     1,265     1,065         --

Stockholders' equity:
 Common stock, no par value (Note 4).........     1,218     1,218       1,218
 Retained earnings...........................    15,735    16,506      18,805
 Accumulated other comprehensive income......       359       394         387
 Less 520 shares of treasury stock, at cost..    (1,612)   (1,612)     (1,612)
                                               --------  --------    --------
Total stockholders' equity...................    15,700    16,506      18,798
                                               --------  --------    --------
Total liabilities and stockholders' equity...  $ 36,079  $ 33,117    $ 43,298
                                               ========  ========    ========

                            See accompanying notes.

                                      F-42

                             HOOSIER PROPANE GROUP

                         COMBINED STATEMENTS OF INCOME
                                 (In thousands)

                                  Year Ended September      Three Months Ended
                                           30,                 December 31,
                                 -------------------------  -------------------
                                  1998     1999     2000       1999      2000
                                 -------  -------  -------  ----------- -------
                                                            (Unaudited)
                                                         
Revenue:
 Propane.......................  $50,646  $38,792  $58,712    $19,050   $29,174
 Freight.......................    4,806    4,530    5,669      1,367     2,037
 Other.........................      288      356    1,214        363       330
                                 -------  -------  -------    -------   -------
                                  55,740   43,678   65,595     20,780    31,541

Cost of product sold...........   42,823   28,889   49,049     15,604    25,172
                                 -------  -------  -------    -------   -------
Gross profit...................   12,917   14,789   16,546      5,176     6,369

Operating and administrative
 expenses......................    7,617    8,274    9,375      2,493     2,538
Depreciation and amortization..    1,529    1,690    1,623        389       373
                                 -------  -------  -------    -------   -------
Operating income...............    3,771    4,825    5,548      2,294     3,458

Other income (expense):
 Interest expense..............     (594)    (941)  (1,029)      (287)     (246)
 Interest and dividend income..      239      205      230         32        57
 Gain (loss) on sale of
  property, plant and
  equipment....................      (43)     (63)      51         17        10
 Other income, net.............      158      130      184         81        90
                                 -------  -------  -------    -------   -------
                                    (240)    (669)    (564)      (157)      (89)
                                 -------  -------  -------    -------   -------
Net income.....................  $ 3,531  $ 4,156  $ 4,984    $ 2,137   $ 3,369
                                 =======  =======  =======    =======   =======

                            See accompanying notes.

                                      F-43

                             HOOSIER PROPANE GROUP

                  COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (In thousands)

                                            Accumulated
                                               Other                   Total
                          Common Retained  Comprehensive Treasury  Stockholders'
                          Stock  Earnings     Income      Stock       Equity
                          ------ --------  ------------- --------  -------------
                                                    
Balance at September 30,
 1997...................  $1,218 $13,477       $510      $(1,612)     $13,593
Net income..............     --    3,531        --           --         3,531
Net unrealized loss on
 available-for-sale
 securities.............     --      --         (77)         --           (77)
                                                                      -------
Comprehensive income....                                                3,454
Distributions to
 stockholders...........     --   (3,137)       --           --        (3,137)
                          ------ -------       ----      -------      -------
Balance at September 30,
 1998...................   1,218  13,871        433       (1,612)      13,910
Net income..............     --    4,156        --           --         4,156
Net unrealized loss on
 available-for-sale
 securities.............     --      --         (74)         --           (74)
                                                                      -------
Comprehensive income....                                                4,082
Distributions to
 stockholders...........     --   (2,292)       --           --        (2,292)
                          ------ -------       ----      -------      -------
Balance at September 30,
 1999...................   1,218  15,735        359       (1,612)      15,700
Net income..............     --    4,984        --           --         4,984
Net unrealized gain on
 available-for-sale
 securities.............     --      --          35          --            35
                                                                      -------
Comprehensive income....                                                5,019
Distributions to
 stockholders...........     --   (4,213)       --           --        (4,213)
                          ------ -------       ----      -------      -------
Balance at September 30,
 2000...................   1,218  16,506        394       (1,612)      16,506
Net income..............     --    3,369        --           --         3,369
Net unrealized loss on
 available-for-sale
 securities.............     --      --          (7)         --            (7)
                                                                      -------
Comprehensive income....                                                3,362
Distributions to
 stockholders...........     --   (1,070)       --           --        (1,070)
                          ------ -------       ----      -------      -------
Balance at December 31,
 2000...................  $1,218 $18,805       $387      $(1,612)     $18,798
                          ====== =======       ====      =======      =======

                            See accompanying notes.

                                      F-44

                             HOOSIER PROPANE GROUP

                       COMBINED STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                 Year Ended September      Three Months Ended
                                          30,                 December 31,
                                -------------------------  -------------------
                                 1998     1999     2000       1999      2000
                                -------  -------  -------  ----------- -------
                                                           (Unaudited)
                                                        
Operating activities
Net income....................  $ 3,531  $ 4,156  $ 4,984    $ 2,137   $ 3,369
Adjustments to reconcile net
 income to net cash provided
 by (used in) operating
 activities:
  Depreciation................    1,515    1,586    1,519        363       347
  Amortization................       14      104      104         26        26
  (Gain) loss on sale of
   property, plant and
   equipment..................       43       63      (51)       (17)      (10)
  Changes in operating assets
   and liabilities:
   Accounts receivable........     (244)     397   (1,941)    (3,698)   (8,711)
   Inventories................    3,909   (2,557)   5,236      4,214      (871)
   Prepaid expenses and other
    current assets............     (277)     232     (280)       197       284
   Other assets...............      545      (50)    (137)       (12)       (5)
   Accounts payable...........    1,240   (1,157)    (652)     1,069     6,024
   Customer deposits..........   (1,617)  (1,605)     249       (986)   (1,301)
   Accrued expenses...........      186      (17)     243        441       527
                                -------  -------  -------    -------   -------
Net cash provided by (used in)
 operating activities.........    8,845    1,152    9,274      3,734      (321)
Investing activities
Acquisitions..................   (1,266)  (3,850)     --         --        --
Purchases of property, plant
 and equipment................   (2,697)  (2,361)  (1,935)      (709)     (278)
Proceeds from sale of
 property, plant and
 equipment....................      172      385      348         89        32
Purchases of short-term
 investments..................     (901)     --       --         --        --
Proceeds from sale of short-
 term investments.............      --       901      --         --        --
Collections on note receivable
 from stockholder.............       44       32       60          5         7
                                -------  -------  -------    -------   -------
Net cash used in investing
 activities...................   (4,648)  (4,893)  (1,527)      (615)     (239)
Financing activities
Proceeds from issuance of
 notes payable................      --     3,000    2,575      1,000     4,000
Principal payments on notes
 payable......................      --       --    (4,000)    (2,000)      --
Proceeds from issuance of
 long-term debt...............    2,000    5,000      500        500       --
Principal payments on long-
 term debt....................   (1,503)  (3,168)  (2,484)      (176)   (1,291)
Principal payments on notes
 payable to stockholders......      --       --      (200)       --        (70)
Distributions to
 stockholders.................   (3,137)  (2,292)  (4,213)      (331)   (1,070)
                                -------  -------  -------    -------   -------
Net cash provided by (used in)
 financing activities.........   (2,640)   2,540   (7,822)    (1,007)    1,569
                                -------  -------  -------    -------   -------
Net increase (decrease) in
 cash and cash equivalents....    1,557   (1,201)     (75)     2,112     1,009
Cash and cash equivalent at
 beginning of period..........      421    1,978      777        777       702
                                -------  -------  -------    -------   -------
Cash and cash equivalents at
 end of period................  $ 1,978  $   777  $   702    $ 2,889   $ 1,711
                                =======  =======  =======    =======   =======
Supplemental disclosure of
 cash flow information
Cash paid for interest during
 the period...................  $   596  $   937  $ 1,042    $   224   $   245
                                =======  =======  =======    =======   =======
Supplemental schedule of
 noncash financing activity
Acquisition of covenants not
 to compete through the
 issuance of noncompete
 obligations..................  $   949  $   --   $   --     $   --    $   --
                                =======  =======  =======    =======   =======
Note payable issued to seller
 of acquired company..........  $   200  $   --   $   --     $   --    $   --
                                =======  =======  =======    =======   =======

                            See accompanying notes.

                                      F-45

                             HOOSIER PROPANE GROUP

                     NOTES TO COMBINED FINANCIAL STATEMENTS
               (Information pertaining to the three months ended
                        December 31, 1999 is unaudited)
                        (In thousands except share data)

1. Significant Accounting Policies

 Principles of Combination

   The combined financial statements of the Hoosier Propane Group include the
accounts of three companies under common ownership: Domex, Inc., Investors 300,
Inc. and L & L Leasing, Inc. (collectively referred to as the Hoosier Propane
Group). All significant intercompany accounts and transactions have been
eliminated in the combination. Although Domex, Inc.'s year end has historically
been October 31, Investors 300, Inc.'s year end has historically been September
30, and L & L Leasing, Inc.'s year end has historically been December 31, all
accounts have been presented in these combined financial statements as of
September 30, 1999 and 2000 and December 31, 2000 and for each of the three
years in the period ended September 30, 2000 and the three months ended
December 31, 1999 and 2000.

 Business Activities and Credit Concentrations

   The Hoosier Propane Group is involved in the transportation and wholesale
and retail distribution of propane gas. The Hoosier Propane Group also builds
and services trucks used to transport propane gas. The Hoosier Propane Group
generally extends unsecured credit to their wholesale customers in the
midwestern United States. Credit is generally extended to retail customers
through delivery into company and customer owned propane gas storage tanks.

 Unaudited Financial Information

   The financial information for the three-month period ended December 31, 1999
contained herein is unaudited. The Hoosier Propane Group believes this
information has been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
Article 10 of Regulation S-X. The Hoosier Propane Group also believes this
information includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods then ended.

 Use of Estimates

   The preparation of combined financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in the combined financial statements and accompanying notes. Actual results
could differ from those estimates.

 Cash and Cash Equivalents

   All highly liquid debt instruments purchased with a maturity of three months
or less are deemed to be cash and cash equivalents. Cash and cash equivalents
are carried at cost, which approximates fair value.

                                      F-46

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

 Inventories

   Propane inventories are stated at the lower of cost or market. Cost is
determined using a weighted average method for propane and an actual cost basis
for parts and materials. The major components of inventory consist of the
following:

                                                      September 30,
                                                      ------------- December 31,
                                                       1999   2000      2000
                                                      ------ ------ ------------
                                                           
   Propane........................................... $6,769 $1,647    $2,606
   Parts and materials...............................    653    623       561
   Other.............................................    115     31         5
                                                      ------ ------    ------
                                                      $7,537 $2,301    $3,172
                                                      ====== ======    ======

 Property, Plant and Equipment

   Property, plant and equipment are stated at cost. Depreciation of the cost
of the related asset, less estimated salvage value on certain vehicles, is
determined using straight-line and accelerated depreciation methods over the
estimated useful lives of the assets, as follows:

                                                                         Years
                                                                        --------
                                                                     
Buildings.............................................................. 30 to 40
Office furniture and equipment.........................................  5 to 7
Vehicles...............................................................  5 to 7
Tanks and plant equipment..............................................  7 to 50

 Marketable Securities

   Investments in marketable equity securities are classified as available for
sale and are carried at their fair market value. Unrealized gains and losses
are recorded as a separate component of stockholders' equity. The aggregate
cost of the marketable equity securities was $65 at September 30, 1999 and 2000
and at December 31, 2000.

 Intangible Assets

   Intangible assets consist of goodwill and covenants not to compete which
were acquired primarily in the 1998 and 1999 acquisitions described in Note 2
and are amortized on a straight-line basis over their estimated useful lives,
not to exceed 15 years.

   The Hoosier Propane Group reviews its long-lived assets in accordance with
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and Long-lived Assets to be Disposed of," for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If such events or changes
in circumstances are present, a loss is recognized if the carrying value of the
asset is in excess of the sum of the undiscounted cash flows expected to result
from the use of the asset and its eventual disposition. An impairment loss is
measured as the amount by which the carrying amount of the asset exceeds the
fair value of the asset.

 Customer Deposits

   Customer deposits primarily represent cash received by the Hoosier Propane
Group from wholesale and retail customers for propane purchased that will be
delivered at a future date.

                                      F-47

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

 Income Taxes

   The stockholders of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. have elected under Subchapter S of the Internal Revenue Code to
include the income of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. in the stockholders' income for income tax reporting purposes.
Accordingly, Domex, Inc., Investors 300, Inc. and L & L Leasing, Inc. are not
subject to income taxes.

 Revenue Recognition

   The sales and related cost of products and services sold are recognized upon
delivery.

 Fair Value

   The carrying amounts of cash and cash equivalents, short-term investments,
accounts receivable, investments and accounts payable approximate their fair
value. Based on the estimated borrowing rates currently available to the
Hoosier Propane Group for notes payable and long-term debt with similar terms
and maturities, the aggregate fair value of the Hoosier Propane Group's long-
term debt approximates the aggregate carrying amount as of September 30, 1999
and 2000 and December 31, 2000.

 Segment Information

   The Hoosier Propane Group adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," in fiscal 1999. SFAS No. 131
established standards for reporting information about operating segments as
well as related disclosures about products and services, geographic areas and
major customers. In determining the Hoosier Propane Group's reportable segments
under the provisions of SFAS No. 131, the Hoosier Propane Group examined the
way they organize their business internally for making operating decisions and
assessing business performance. Based on this examination, the Hoosier Propane
Group has determined that it has a single reportable segment which engages in
the distribution of propane and related equipment and supplies. No single
customer represents 10% or more of combined revenues. In addition, all of the
Hoosier Propane Group's revenues are derived from sources within the United
States, and all of its long-lived assets are located in the United States.

 Pending Accounting Pronouncement

   In June 1988, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 requires that an entity recognize all derivative instruments as either
assets or liabilities and measure them at fair value. The accounting for
changes in fair value depends on the purpose of the derivative instrument and
whether it is designated and qualifies for hedge accounting. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133 (an
amendment of FASB Statement No. 133)," which deferred the effective date of
SFAS No. 133. The Hoosier Propane Group will be required to adopt SFAS No. 133
in fiscal 2001. As of September 30, 2000, the Hoosier Propane Group's only
derivatives consist of contracts to purchase and sell fixed quantities of
propane at fixed prices over specified periods, aggregating approximately
$5,200 and $5,700, respectively. As of December 31, 2000, the Hoosier Propane
Group had contracts to purchase and sell fixed quantities of propane
aggregating approximately $2,000 and $2,400, respectively. As these commitments
are generally settled by the physical delivery of propane in the normal course
of the Hoosier Propane Group's business, they are excluded from scope of SFAS
No. 133. As such, the fair value of the contracts will not be required to be
reflected in the Hoosier Propane Group's financial position or results of
operations, and the method of accounting for these contracts will be unaffected
by SFAS No. 133.

                                      F-48

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

2. Acquisitions

   In October 1998, the Hoosier Propane Group acquired certain assets of Dekalb
Agra, Inc. (Dekalb) for a cash purchase price of $3,850 which was financed
through the issuance of long-term debt.

   During August 1998, the Hoosier Propane Group acquired certain assets of
Tri-State Propane, Inc. and Wolverine Propane, Inc. for an aggregate purchase
price of $2,416. The acquisitions were financed through cash in the amount of
$1,266, a note payable to the sellers of one of the companies in the amount of
$200 and the issuance of noncompete obligations in the amount of $950.

   Each of the acquired companies is involved in the retail sale of propane to
local customer bases in northern Indiana. The acquisitions have been accounted
for using the purchase method of accounting. Accordingly, the purchase price of
each acquisition has been allocated to assets acquired based on the fair market
values at the date of acquisition. The excess of the purchase price over the
fair market values of the tangible and identifiable intangible assets acquired
has been recorded as goodwill. The Hoosier Propane Group recorded goodwill of
$400 in connection with the Dekalb acquisition and $209 in connection with the
1998 acquisitions. In addition, $950 of the aggregate purchase price in the
1998 acquisitions was allocated to covenants not to compete.

   The operating results of all acquisitions are included in the Hoosier
Propane Group's combined results of operations from the dates of acquisitions.
The following unaudited pro forma data summarize the results of operations for
the year indicated as if this acquisition had been completed October 1, 1997,
the beginning of fiscal 1998. The pro forma data give effect to actual
operating results prior to the acquisitions and adjustments to interest
expense, depreciation expense and amortization of intangible assets. These pro
forma amounts do not purport to be indicative of the results that would have
actually been obtained if the acquisitions had occurred on October 1, 1997 or
that the Hoosier Propane Group will obtain in the future. Reported operating
results for 1999 and 2000 include the results of the acquired companies due to
the dates of acquisition.

                                                                      Pro Forma
                                                                     Fiscal 1998
                                                                     -----------
                                                                     (Unaudited)
                                                                  
   Revenue..........................................................   $60,235
   Net income.......................................................     3,475

3. Notes Payable and Long-Term Debt

   In May 2000, L & L Leasing, Inc. entered into a revolving credit agreement
with a bank which provides available borrowings up to $2,000 collateralized by
L & L Leasing, Inc.'s accounts receivable, inventory and machinery and
equipment balances, under which $1,575 was outstanding at September 30, 2000.
Interest is payable monthly at the bank's prime rate less 0.5% or at the London
Interbank Offered Rate (LIBOR) plus 2%, with principal payable on June 1, 2001.
The effective interest rate was 9% at September 30, 2000 and December 31, 2000.
At December 31, 2000, the outstanding balance under this revolving credit
agreement was $1,575.

   During 1999, Domex, Inc. entered into a revolving credit agreement with a
bank which provided available borrowings up to $6,000, subject to specified
percentages of Domex, Inc.'s accounts receivable, inventory and machinery and
equipment balances, under which $2,500 and $0 was outstanding at September 30,
1999 and 2000, respectively. Interest was payable monthly at the bank's prime
rate less 0.25% or a formula based on eurocurrency funding plus 2%, with
principal payable on May 1, 2000. The effective interest rate was 7.44% at
September 30, 1999. Effective May 1, 2000, Domex, Inc. entered into a new
revolving credit agreement with the bank which provides available borrowings up
to $5,000, collateralized by Domex, Inc.'s accounts receivable and inventory

                                      F-49

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

balances, under which no borrowings were outstanding at September 30, 2000.
Interest is payable monthly at the bank's prime rate less 0.5% or at LIBOR plus
2%, with principal payable on May 1, 2001. At December 31, 2000, the
outstanding balance under this revolving credit agreement was $4,000. The
effective interest rate was 7.51% at December 31, 2000.

   Investors 300, Inc. entered into a revolving credit agreement with a bank
which provides available borrowings up to $500, subject to a specified
percentage of Investors 300, Inc.'s accounts receivable balance, under which
$500 and $-0- was outstanding at September 30, 1999 and 2000, respectively.
Interest on this credit agreement was payable monthly at 8.25%, with principal
payable on May 1, 2000.

   Long-term debt consists of the following:

                                                  September 30,    December 31,
                                                  ---------------  ------------
                                                   1999    2000        2000
                                                  ------  -------  ------------
                                                          
Revolving credit agreement with a bank with
 interest payable monthly at the bank's prime
 rate or a formula based on eurocurrency funding
 plus 2.25% (effective interest rate of 7.63%
 and 8.88% at September 30, 1999 and 2000,
 respectively and 9.5% at December 31, 2000) and
 principal payable on May 1, 2002...............  $2,281  $ 1,000    $ 1,000
Term loan with a bank with monthly payments of
 $50 plus interest at the bank's prime rate or a
 formula based on eurocurrency funding plus
 2.25% (effective interest rate of 7.75% and 9%
 at September 30, 1999 and 2000, respectively
 and 9% at December 31, 2000) with the remaining
 principal balance payable on June 1, 2003, as
 discussed further below........................   6,000    5,400      5,250
Term loan with a bank with monthly payments of
 $4, including interest at the bank's prime rate
 (effective interest rate of 8.25% and 9.5% at
 September 30, 1999 and 2000, respectively),
 with the remaining principal balance payable on
 December 15, 2000..............................     109       76        --
Term loan with a bank with monthly payments of
 $2 plus interest at the bank's prime rate
 (effective interest rate of 8.25% and 9.5% at
 September 30, 1999 and 2000, respectively and
 8.25% at December 31, 2000) with the remaining
 principal balance payable on March 30, 2001....      47       24         18
Noncompete obligations with monthly payments of
 $9, including interest at 7.5%, repaid in
 December 2000..................................     913      875        --
Note payable to sellers of retail propane
 companies acquired in 1998 with monthly
 payments of $2, including interest at 7.5%,
 repaid in December 2000........................     193      184        --
                                                  ------  -------    -------
                                                   9,543    7,559      6,268
Less current portion............................    (803)  (4,950)    (4,668)
                                                  ------  -------    -------
                                                  $8,740  $ 2,609    $ 1,600
                                                  ======  =======    =======

   In July 1999, Investors 300, Inc. entered into an amended and restated
credit agreement with its bank to increase the level of financing and to
refinance most of Investors 300, Inc.'s outstanding long-term debt. This credit
agreement consisted of a $6,000 term loan and a revolving loan of up to $6,000,
subject to specified percentages of the company's accounts receivable,
inventory, and machinery and equipment balances. Investors 300, Inc. must pay
sufficient principal to reduce the outstanding revolving loan balance to an
amount not greater than $5,400 on May 1, 2000 and $600 on May 1, 2001, with the
remaining principal due on June 1, 2003. All of the credit agreements with the
Hoosier Propane Group's bank are collateralized by substantially all of the
assets of

                                      F-50

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

the Hoosier Propane Group and contain covenants which, among other things,
require the maintenance of various financial performance ratios. Repayment of
borrowings pursuant to the credit agreements of each of Domex, Inc., Investors
300, Inc. and L & L Leasing, Inc. is guaranteed by the other companies and, to
a lesser extent, by the stockholders of each of Domex, Inc., Investors 300,
Inc. and L & L Leasing, Inc.

   Due to the sale of the Hoosier Propane Group, as discussed in Note 7,
management elected not to renew or negotiate extensions of its revolving credit
and term loan agreements. As such, much of the Hoosier Propane Group's
outstanding long-term debt is classified as a current liability in the
accompanying fiscal year 2000 combined balance sheet.

   The noncompete obligations and notes payable to sellers of retail propane
companies acquired in 1998 are collateralized by the assets purchased in the
acquisition. These obligations and notes payable are subordinate to the
obligations owed by the Hoosier Propane Group to its bank.

   Principal payments of long-term debt for each of the next five years ended
September 30 and thereafter are as follows:

   Year Ending September 30,
   -------------------------
                                                                      
   2001................................................................. $4,950
   2002.................................................................  1,054
   2003.................................................................    658
   2004.................................................................     63
   2005.................................................................     67
   Thereafter...........................................................    767
                                                                         ------
                                                                         $7,559
                                                                         ======

4. Common Stock

   Shares of common stock of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. are as follows:

                                                         Investors     L & L
                                             Domex, Inc. 300, Inc. Leasing, Inc.
                                             ----------- --------- -------------
                                                          
   Authorized shares........................    1,000      1,000       1,000
   Issued shares............................      666        315         515
   Outstanding shares.......................      346        315         315

5. Employee Benefit Plan

   The Hoosier Propane Group sponsors a multiemployer 401(k) profit-sharing
plan for employees who have completed one year of service and have attained the
age of 21. The Hoosier Propane Group's discretionary contributions charged to
expense were $56, $54 and $55 in 1998, 1999 and 2000, respectively, and $14 for
the three months ended December 31, 2000.

6. Related-Party Transactions

   The Hoosier Propane Group has notes receivable from and notes payable to
various stockholders of each of Domex, Inc., Investors 300, Inc. and L & L
Leasing, Inc. The notes receivable bear interest of 7% and are due October 31,
2004. The Hoosier Propane Group received interest income from these notes of
$31, $28 and

                                      F-51

                             HOOSIER PROPANE GROUP

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

$25 in 1998, 1999 and 2000, respectively, and $5 for the three months ended
December 31, 2000. The unsecured notes payable bear interest of 7% and mature
on October 1, 2001. The Hoosier Propane Group recorded interest expense related
to these notes of $89, $89 and $88 in 1998, 1999 and 2000, respectively, and
$18 for the three months ended December 31, 2000.

7. Subsequent Event

   On January 12, 2001, the Hoosier Propane Group sold substantially all of
their assets to Inergy Partners, LLC for an aggregate purchase price of
approximately $74,000 including assumed liabilities. A portion of these
proceeds was used to repay in full the Hoosier Propane Group's notes payable to
bank, notes payable to stockholders and long-term debt.

                                      F-52

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Inergy Partners, LLC

   We have audited the accompanying balance sheet of Inergy GP, LLC as of
September 30, 2001. This balance sheet is the responsibility of Inergy
Partners, LLC's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.

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

   In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Inergy GP, LLC at September 30,
2001, in conformity with accounting principles generally accepted in the United
States.

                                          /s/ ERNST & YOUNG LLP

Kansas City, Missouri
May 22, 2002

                                      F-53

                                 INERGY GP, LLC

                                 BALANCE SHEET

                                                                
                                                                   September 30,
                              ASSETS                                   2001
                                                                   -------------

Current assets:
  Cash............................................................ $       1,000
                                                                   -------------
    Total assets.................................................. $       1,000
                                                                   =============

                          OWNER'S EQUITY

Owner's equity.................................................... $       1,000
                                                                   -------------
    Total owner's equity.......................................... $       1,000
                                                                   =============

                             See accompanying note.

                                      F-54

                                 INERGY GP, LLC

                             NOTE TO BALANCE SHEET

1. Nature of Operations

   Inergy GP, LLC is a Delaware limited liability company formed on March 2,
2001 to become the managing general partner of Inergy Partners, L.P. Inergy GP,
LLC is a wholly-owned subsidiary of Inergy Holdings, LLC. Inergy GP, LLC owns a
non-economic managing general partner interest in Inergy, L.P.

   On March 2, 2001, Inergy Holdings, LLC contributed $1,000 to Inergy GP, LLC
in exchange for a 100% ownership interest.

   On March 7, 2001, Inergy GP, LLC received a managing general partner
interest in Inergy, L.P. There have been no other transactions involving Inergy
GP, LLC as of September 30, 2001.

                                      F-55

                                                                     APPENDIX A

                               GLOSSARY OF TERMS

   adjusted operating surplus: For any period, operating surplus generated
during that period is adjusted to:

     (a) decrease operating surplus by:

       (1) any net increase in working capital borrowings during that
    period; and

       (2) any net reduction in cash reserves for operating expenditures
    during that period not relating to an operating expenditure made during
    that period; and

     (b) increase operating surplus by:

       (1) any net decrease in working capital borrowings during that
    period; and

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

   Adjusted operating surplus does not include that portion of operating
surplus included in clause (a)(1) of the definition of operating surplus.

   available cash: For any quarter ending prior to liquidation:

     (a) the sum of:

       (1) all cash and cash equivalents of Inergy, L.P. and its
    subsidiaries on hand at the end of that quarter; and

       (2) all additional cash and cash equivalents of Inergy, L.P. and its
    subsidiaries on hand on the date of determination of available cash for
    that quarter resulting from working capital borrowings made after the
    end of that quarter;

     (b) less the amount of any cash reserves that is necessary or
  appropriate in the reasonable discretion of the managing general partner
  to:

       (1) provide for the proper conduct of the business of Inergy, L.P.
    and its subsidiaries (including reserves for future capital expenditures
    and for future credit needs of Inergy, L.P. and its subsidiaries) after
    that quarter;

       (2) comply with applicable law or any debt instrument or other
    agreement or obligation to which Inergy, L.P. or any of its subsidiaries
    is a party or its assets are subject; and

       (3) provide funds for minimum quarterly distributions and cumulative
    common unit arrearages for any one or more of the next four quarters;

provided, however, that the managing general partner may not establish cash
reserves for distributions to the subordinated units unless the managing
general partner has determined that in its judgment the establishment of
reserves will not prevent Inergy, L.P. from distributing the minimum quarterly
distribution on all common units and any cumulative common unit arrearages
thereon for the next four quarters; and

provided, further, that disbursements made by Inergy, L.P. or any of its
subsidiaries or cash reserves established, increased or reduced after the end
of that quarter but on or before the date of determination of available cash
for that quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining available cash, within that quarter if
the managing partner so determines.

   capital account: The capital account maintained for a partner under the
partnership agreement. The capital account of a partner for a common unit, a
senior subordinated unit, a junior subordinated unit, an

                                      A-1

incentive distribution right or any other partnership interest will be the
amount which that capital account would be if that common unit, senior
subordinated unit, junior subordinated unit, incentive distribution right or
other partnership interest were the only interest in Inergy, L.P. held by a
partner.

   capital surplus: All available cash distributed by us from any source will
be treated as distributed from operating surplus until the sum of all available
cash distributed since the closing of the initial public offering equals the
operating surplus as of the end of the quarter before that distribution. Any
excess available cash will be deemed to be capital surplus.

   closing price: The last sale price on a day, regular way, or in case no sale
takes place on that day, the average of the closing bid and asked prices on
that day, regular way, in either case, as reported in the principal
consolidated transaction reporting system for securities listed or admitted to
trading on the principal national securities exchange on which the units of
that class are listed or admitted to trading. If the units of that class are
not listed or admitted to trading on any national securities exchange, the last
quoted price on that day. If no quoted price exists, the average of the high
bid and low asked prices on that day in the over-the-counter market, as
reported by the Nasdaq Stock Market or any other system then in use. If on any
day the units of that class are not quoted by any organization of that type,
the average of the closing bid and asked prices on that day as furnished by a
professional market maker making a market in the units of the class selected by
the managing general partner. If on that day no market maker is making a market
in the units of that class, the fair value of the units on that day as
determined reasonably and in good faith by the managing general partner.

   common unit arrearage: The amount by which the minimum quarterly
distribution for a quarter during the subordination period exceeds the
distribution of available cash from operating surplus actually made for that
quarter on a common unit, cumulative for that quarter and all prior quarters
during the subordination period.

   current market price: For any class of units listed or admitted to trading
on any national securities exchange as of any date, the average of the daily
closing prices for the 20 consecutive trading days immediately prior to that
date.

   incentive distribution right: A non-voting limited partner partnership
interest issued to Inergy Holdings, LLC in connection with the transfer of
substantially all of its member interest in Inergy Propane, LLC to Inergy, L.P.
under the partnership agreement. The partnership interest will confer upon its
holder only the rights and obligations specifically provided in the partnership
agreement for incentive distribution rights.

   incentive distributions: The distributions of available cash from operating
surplus initially made to Inergy Holdings, LLC that are in excess of the non-
managing general partner's 2% general partner interest.

   interim capital transactions: The following transactions if they occur prior
to liquidation:

     borrowings, refinancings or refundings of indebtedness and sales of debt
  securities (other than for working capital borrowings and other than for
  items purchased on open account in the ordinary course of business) by
  Inergy, L.P. or any of its subsidiaries;

     sales of equity interests by Inergy, L.P. or any of its subsidiaries;

     sales or other voluntary or involuntary dispositions of any assets of
  Inergy, L.P. or any of its subsidiaries (other than sales or other
  dispositions of inventory, accounts receivable and other assets in the
  ordinary course of business, and sales or other dispositions of assets as a
  part of normal retirements or replacements).

   operating expenditures: All expenditures of Inergy, L.P. and its
subsidiaries, including, but not limited to, taxes, reimbursements of the
general partners, repayment of working capital borrowings, debt service
payments and capital expenditures, subject to the following:

                                      A-2

     (a) Payments (including prepayments) of principal of and premium on
  indebtedness other than working capital borrowings will not constitute
  operating expenditures.

     (b) Operating expenditures will not include:

       (1) capital expenditures made for acquisitions or for capital
    improvements;

       (2) payment of transaction expenses relating to interim capital
    transactions; or

       (3) distributions to partners.

   operating surplus: For any period prior to liquidation, on a cumulative
basis and without duplication:

     (a) the sum of

       (1) $8.5 million plus all the cash of Inergy, L.P. and its
    subsidiaries on hand as of the closing date of our initial public
    offering;

       (2) all cash receipts of Inergy, L.P. and its subsidiaries for the
    period beginning on the closing date of our initial public offering and
    ending with the last day of that period, other than cash receipts from
    interim capital transactions; and

       (3) all cash receipts of Inergy, L.P. and its subsidiaries after the
    end of that period but on or before the date of determination of
    operating surplus for the period resulting from working capital
    borrowings; less

     (b) the sum of:

       (1) operating expenditures for the period beginning on the closing
    date of our initial public offering and ending with the last day of that
    period; and

       (2) the amount of cash reserves that is necessary or advisable in the
    reasonable discretion of the managing general partner to provide funds
    for future operating expenditures; provided however, that disbursements
    made (including contributions to Inergy, L.P. or its subsidiaries or
    disbursements on behalf of Inergy, L.P. or its subsidiaries) or cash
    reserves established, increased or reduced after the end of that period
    but on or before the date of determination of available cash for that
    period shall be deemed to have been made, established, increased or
    reduced for purposes of determining operating surplus, within that
    period if the managing general partner so determines.

   subordination period: The subordination period will generally extend from
the closing of the initial public offering until the first to occur of:

     (a) the first day of any quarter beginning after June 30, 2006, in the
  case of the senior subordinated units, or June 30, 2008, in the case of the
  junior subordinated units, for which:

       (1) distributions of available cash from operating surplus on each of
    the outstanding common units, senior subordinated units and junior
    subordinated units equaled or exceeded the sum of the minimum quarterly
    distribution on all of the outstanding common units, senior subordinated
    units and junior subordinated units for each of the three consecutive
    non-overlapping four-quarter periods immediately preceding that date;

       (2) the adjusted operating surplus generated during each of the three
    immediately preceding, non-overlapping four-quarter periods equaled or
    exceeded the sum of the minimum quarterly distribution on all of the
    common units, senior subordinated units and junior subordinated units
    that were outstanding during those periods on a fully-diluted basis, and
    the related distribution on the general partner interest in Inergy,
    L.P.; and

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

                                      A-3

     (b) the date on which the managing general partner is removed as general
  partner of Inergy, L.P. upon the requisite vote by the limited partners
  under circumstances where cause does not exist and units held by the
  general partners and their affiliates are not voted in favor of the
  removal.

   working capital borrowings: Borrowings exclusively for working capital
purposes made pursuant to a credit facility or other arrangement requiring all
borrowings thereunder to be reduced to a relatively small amount each year for
an economically meaningful period of time.

                                      A-4

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

   You may rely on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common
units means that information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these common units in any circumstances under
which the offer or solicitation is unlawful.

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

                               TABLE OF CONTENTS

                                                                          Page
                                                                          ----
                                                                       
Guide to Reading This Prospectus.........................................  iv
Prospectus Summary.......................................................   1
Risk Factors.............................................................  14
Use of Proceeds..........................................................  24
Capitalization...........................................................  25
Price Range of Common Units and Distributions............................  26
Cash Distribution Policy.................................................  27
Unaudited Pro Forma Consolidated Financial Statements....................  35
Selected Historical Financial and Operating Data.........................  45
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  49
Business.................................................................  70
Management...............................................................  81
Security Ownership of Certain Beneficial Owners and Management...........  89
Selling Unitholders......................................................  92
Certain Relationships and Related Transactions...........................  93
Conflicts of Interest and Fiduciary Responsibilities.....................  96
Description of the Common Units.......................................... 100
Description of the Subordinated Units.................................... 102
The Partnership Agreement................................................ 103
Units Eligible for Future Sale........................................... 115
Tax Considerations....................................................... 116
Investment in Inergy, L.P. by Employee Benefit Plans..................... 130
Underwriting............................................................. 131
Validity of the Common Units............................................. 133
Experts.................................................................. 133
Other Matters............................................................ 134
Where You Can Find More Information...................................... 134
Forward-Looking Statements............................................... 135
Index to Financial Statements............................................ F-1
Appendix A--Glossary of Terms............................................ A-1

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

                             1,400,000 Common Units

                                 [INERGY LOGO]

                                  Representing
                           Limited Partner Interests

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

                                   PROSPECTUS

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

                           A.G. Edwards & Sons, Inc.

                               Raymond James

                                UBS Warburg

                            Wachovia Securities

                               June   , 2002

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

                                    PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 13. Other Expenses of Issuance and Distribution.

   Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee and the NASD filing fee,
the amounts set forth below are estimates.

                                                                  
   Registration fee................................................. $    4,925
   NASD filing fee..................................................      5,854
   Nasdaq Stock Market listing fee..................................     16,100
   Printing and engraving expenses..................................    300,000
   Fees and expenses of legal counsel...............................    400,000
   Accounting fees and expenses.....................................    250,000
   Transfer agent and registrar fees................................      5,000
   Miscellaneous....................................................    218,121
                                                                     ----------
     Total.......................................................... $1,200,000
                                                                     ==========

Item 14. Indemnification of Directors and Officers.

   The section of the Prospectus entitled "The Partnership Agreement--
Indemnification" is incorporated herein by this reference. Reference is made to
the Underwriting Agreement filed as Exhibit 1.1 to the Registration Statement.
Subject to any terms, conditions or restrictions set forth in the Partnership
Agreement, Section 17-108 of the Delaware Revised Uniform Limited Partnership
Act empowers a Delaware limited partnership to indemnify and hold harmless any
partner or other person from and against all claims and demands whatsoever.

Item 15. Recent Sales of Unregistered Securities

   No securities of Inergy, L.P. which were not registered under the Securities
Act have been sold by Inergy, L.P. within the past three years, except as
follows:

     1. In connection with the closing of our initial public offering on July
  31, 2001, we issued (i) 3,143,143 senior subordinated units and 497,839
  junior subordinated units to our non-managing general partner and (ii)
  170,224 senior subordinated units and 74,703 junior subordinated units to a
  subsidiary of our non-managing general partner.

     2. On December 19, 2001, Inergy, L.P. sold 365,019 common units to IPCH
  Acquisition Corp. in exchange for approximately $9.6 million in cash.

     3. On December 19, 2001, Inergy, L.P. issued 394,601 common units to
  IPCH Acquisition Corp. as partial consideration for the transfer of its
  interest in IPC.

     4. On December 19, 2001, Inergy, L.P. sold 9,126 common units to David
  L. Scott in exchange for approximately $240,000 in cash.

     5. On December 19, 2001, Inergy, L.P. sold 9,126 common units to Robert
  R. Galvin in exchange for approximately $240,000 in cash.

     6. On June 7, 2002, Inergy Propane, LLC issued $85.0 million of senior
  secured notes. The senior secured notes are guaranteed by Inergy, L.P.

   Each common unit issued in connection with the IPC transaction was valued at
$26.30, the 30-day average trading price of the common units on Nasdaq
immediately prior to December 19, 2001. The issuances of the securities
described above were made in reliance upon the exemption from the registration
requirements provided by Section 4(2) of the Securities Act for transactions by
an issuer not involving a public offering.

                                      II-1

Item 16. Exhibits

   (a) The following documents are filed as exhibits to this registration
statement:

 Exhibit
 Number  Description
 ------- -----------
      
 *1.1    Form of Underwriting Agreement

  3.1    Certificate of Limited Partnership of Inergy, L.P. (incorporated by
         reference to Exhibit 3.1 to Inergy, L.P.'s Registration Statement on
         Form S-1 (Registration No. 333-56976) filed on March 14, 2001)

 *3.2    Amended and Restated Agreement of Limited Partnership of Inergy, L.P.

 +3.2A   Amendment No. 1 to Amended and Restated Agreement of Limited
         Partnership of Inergy, L.P.

  3.3    Certificate of Formation as relating to Inergy Propane, LLC, as
         amended (incorporated by reference to Exhibit 3.3 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

 *3.4    Third Amended and Restated Limited Liability Company Agreement of
         Inergy Propane, LLC, dated as of July 31, 2001

  3.5    Certificate of Formation of Inergy GP, LLC (incorporated by reference
         to Exhibit 3.5 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  3.6    Limited Liability Company Agreement of Inergy GP, LLC (incorporated by
         reference to Exhibit 3.6 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  3.7    Certificate of Formation as relating to Inergy Partners, LLC, as
         amended (incorporated by reference to Exhibit 3.7 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

 *3.8    Second Amended and Restated Limited Liability Company Agreement of
         Inergy Partners, LLC, dated as of July 31, 2001

  4.1    Specimen Unit Certificate for Senior Subordinated Units (incorporated
         by reference to Exhibit 4.1 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  4.2    Specimen Unit Certificate for Junior Subordinated Units (incorporated
         by reference to Exhibit 4.2 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  4.3    Specimen Unit Certificate for Common Units (incorporated by reference
         to Exhibit 4.3 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

 +4.4    Note Purchase Agreement entered into as of June 7, 2002, by Inergy
         Propane, LLC and the purchasers named therein

 +4.5    Parent Guaranty dated as of June 7, 2002, by Inergy, L.P. in favor of
         the noteholders named therein

 +4.6    Limited Guaranty dated as of June 7, 2002, by IPCH Acquisition Corp.
         in favor of the noteholders named therein

 +4.7    Subsidiary Guaranty dated as of June 7, 2002, by the guarantors named
         therein in favor of the noteholders named therein

 +5.1    Opinion of Vinson & Elkins L.L.P. as to the legality of the securities
         being registered

 *8.1    Opinion of Vinson & Elkins L.L.P. relating to tax matters

 10.1    Fourth Amended and Restated Credit Agreement by and among Inergy
         Propane, LLC and the lenders named therein, dated as of December 20,
         2001 (incorporated by reference to Exhibit 10.1 to Inergy, L.P.'s
         Annual Report on Form 10-K filed on December 28, 2001)

                                      II-2

      
 *10.1A  Amendment No. 1 to Fourth Amended and Restated Credit Agreement

 +10.1B  Amendment No. 2 to Fourth Amended and Restated Credit Agreement

  10.2   Asset Purchase Agreement by and between Inergy Partners, LLC and
         Country Gas Company, Inc., dated as of May 20, 2000 (incorporated by
         reference to Exhibit 10.2 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.3   Securities Purchase Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.3 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.4   Investor Rights Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.4 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.5   Asset Purchase Agreement by and among Inergy Partners, LLC and the
         Hoosier Group, dated as of September 8, 2000 (incorporated by
         reference to Exhibit 10.5 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.6   Inergy Employee Long-Term Incentive Plan (incorporated by reference to
         Exhibit 10.6 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.7   Inergy Unit Purchase Plan (incorporated by reference to Exhibit 10.1
         to Inergy, L.P.'s Registration Statement on Form S-8 filed on March 6,
         2002)

  10.8   Employment Agreement--John J. Sherman (incorporated by reference to
         Exhibit 10.8 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.9   Employment Agreement--Phillip L. Elbert (incorporated by reference to
         Exhibit 10.9 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  10.9A  First Amendment to Employment Agreement--Phillip L. Elbert
         (incorporated by reference to Exhibit 10.9A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.10  Employment Agreement--R Brooks Sherman, Jr. (incorporated by reference
         to Exhibit 10.10 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.10A First Amendment to Employment Agreement--R. Brooks Sherman, Jr.
         (incorporated by reference to Exhibit 10.10A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.11  Employment Agreement--Carl A. Hughes (incorporated by reference to
         Exhibit 10.11 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.12  Employment Agreement--Michael D. Fox (incorporated by reference to
         Exhibit 10.12 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001

  10.13  Employment Agreement--William C. Gautreaux (incorporated by reference
         to Exhibit 10.13 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on July 2, 2001

 *10.14  Contribution, Conveyance, Assignment and Assumption Agreement by and
         among Inergy, L.P., Inergy Partners, LLC and the other parties named
         therein, dated as of July 31, 2001

                                      II-3

     
  10.15 Agreement and Plan of Merger, dated as of December 19, 2001 by and
        among Inergy Holders, LLC, IPCH Acquisition Corp., IPCH Merger Corp.,
        Inergy, L.P., Independent Propane Company Holdings, certain holders of
        Series E Preferred Stock of Independent Propane Company Holdings and
        joined in by David L. Scott, Robert R. Galvin and Inergy Propane, LLC.
        (incorporated by reference to Exhibit 2.1 of Inergy, L.P.'s Current
        Report on Form 8-K filed on January 4, 2002)

  10.16 Transaction Agreement dated as of December 19, 2001 by and among
        Inergy, L.P., Inergy GP, LLC, Inergy Propane, LLC, Inergy Sales and
        Service, Inc., Inergy Holdings, LLC, IPCH Acquisition Corp., and IPCH
        Merger Corp. (incorporated by reference to Exhibit 2.2 of Inergy,
        L.P.'s Current Report on Form 8-K filed on January 4, 2002)

  10.17 Registration Rights Agreement entered into as of December 19, 2001 by
        and among Inergy, L.P. and certain investors (incorporated by reference
        to Exhibit 4.1 of Inergy, L.P.'s Current Report on Form 8-K filed on
        January 4, 2002)

  10.18 Registration Rights Agreement entered into as of December 19, 2001 by
        and between Inergy, L.P. and IPCH Acquisition Corp. (incorporated by
        reference to Exhibit 4.2 of Inergy, L.P.'s Current Report on Form 8-K
        filed on January 4, 2002)

 +10.19 Intercreditor and Collateral Agency Agreement entered into as of June
        7, 2002, by and among Wachovia Bank, National Association, the lenders
        named therein and the noteholders named therein

 *21.1  List of subsidiaries of Inergy, L.P.

 +23.1  Consent of Ernst & Young LLP

 *23.2  Consent of Arthur Andersen LLP

 +23.3  Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)

  23.4  Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1)

 *24.1  Powers of Attorney

- --------

* Previously Filed

+ Filed herewith

Item 17. Undertakings.

   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

   The undersigned Registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act,
  the information omitted from the form of prospectus filed as part of this
  Registration Statement in reliance upon Rule 430A and contained in a form
  of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
  497(h) under the Securities Act shall be deemed to be part of this
  Registration Statement as of the time it was declared effective.

     (2) For the purposes of determining any liability under the Securities
  Act, each post-effective amendment that contains a form of prospectus shall
  be deemed to be a new registration statement relating to the securities
  offered therein, and the offering of such securities at that time shall be
  deemed to be the initial bona fide offering thereof.

                                      II-4

                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to Registration Statement (333-
89010) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Kansas City, State of Missouri, on June 13, 2002.

                                          Inergy, L.P.
                                          By: Inergy GP, LLC
                                             its Managing General Partner

                                               /s/ R. Brooks Sherman, Jr.
                                          By: _________________________________
                                          Name: R. Brooks Sherman Jr.
                                          Title: Vice President and Chief
                                          Financial Officer

   Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement (333-89010) on Form S-1 has been
signed below by the officers and directors of Inergy GP, LLC, as managing
general partner of Inergy, L.P., the registrant, in the capacities and on the
dates indicated.

              Signature                          Title                   Date
              ---------                          -----                   ----

         /s/ John J. Sherman           President and Chief           June 13, 2002
______________________________________  Executive Officer and
           John J. Sherman              Chairman of the Board
                                        (principal executive
                                        officer)

                  *                    Senior Vice President--       June 13, 2002
______________________________________  Operations and Director
           Philip L. Elbert

      /s/ R. Brooks Sherman, Jr.       Chief Financial Officer       June 13, 2002
______________________________________  (principal accounting and
        R. Brooks Sherman Jr.           financial officer)

                                       Director
______________________________________
        Richard C. Green, Jr.

                  *                    Director                      June 13, 2002
______________________________________
          Warren H. Gfeller

                  *                    Director                      June 13, 2002
______________________________________
           David J. Schulte

                                                            
     /s/ R. Brooks Sherman, Jr.
*By: _________________________________
        R. Brooks Sherman, Jr.
           Attorney-in-Fact

                                      II-5

                                 EXHIBIT INDEX

 Exhibit
 Number  Description
 ------- -----------
      
 *1.1    Form of Underwriting Agreement

  3.1    Certificate of Limited Partnership of Inergy, L.P. (incorporated by
         reference to Exhibit 3.1 to Inergy, L.P.'s Registration Statement on
         Form S-1 (Registration No. 333-56976) filed on March 14, 2001)

 *3.2    Amended and Restated Agreement of Limited Partnership of Inergy, L.P.

 +3.2A   Amendment No. 1 to Amended and Restated Agreement of Limited
         Partnership of Inergy, L.P.

  3.3    Certificate of Formation as relating to Inergy Propane, LLC, as
         amended (incorporated by reference to Exhibit 3.3 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

 *3.4    Third Amended and Restated Limited Liability Company Agreement of
         Inergy Propane, LLC, dated as of July 31, 2001

  3.5    Certificate of Formation of Inergy GP, LLC (incorporated by reference
         to Exhibit 3.5 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  3.6    Limited Liability Company Agreement of Inergy GP, LLC (incorporated by
         reference to Exhibit 3.6 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  3.7    Certificate of Formation as relating to Inergy Partners, LLC, as
         amended (incorporated by reference to Exhibit 3.7 to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on May 7, 2001)

 *3.8    Second Amended and Restated Limited Liability Company Agreement of
         Inergy Partners, LLC, dated as of July 31, 2001

  4.1    Specimen Unit Certificate for Senior Subordinated Units (incorporated
         by reference to Exhibit 4.1 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  4.2    Specimen Unit Certificate for Junior Subordinated Units (incorporated
         by reference to Exhibit 4.2 to Inergy, L.P.'s Registration Statement
         on Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  4.3    Specimen Unit Certificate for Common Units (incorporated by reference
         to Exhibit 4.3 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

 +4.4    Note Purchase Agreement entered into as of June 7, 2002, by Inergy
         Propane, LLC and the purchasers named therein

 +4.5    Parent Guaranty dated as of June 7, 2002, by Inergy, L.P. in favor of
         the noteholders named therein

 +4.6    Limited Guaranty dated as of June 7, 2002, by IPCH Acquisition Corp.
         in favor of the noteholders named therein

 +4.7    Subsidiary Guaranty dated as of June 7, 2002, by the guarantors named
         therein in favor of the noteholders named therein

 +5.1    Opinion of Vinson & Elkins L.L.P. as to the legality of the securities
         being registered

 *8.1    Opinion of Vinson & Elkins L.L.P. relating to tax matters

      
  10.1   Fourth Amended and Restated Credit Agreement by and among Inergy
         Propane, LLC and the lenders named therein, dated as of December 20,
         2001 (incorporated by reference to Exhibit 10.1 to Inergy, L.P.'s
         Annual Report on Form 10-K filed on December 28, 2001)

 *10.1A  Amendment No. 1 to Fourth Amended and Restated Credit Agreement

 +10.1B  Amendment No. 2 to Fourth Amended and Restated Credit Agreement

  10.2   Asset Purchase Agreement by and between Inergy Partners, LLC and
         Country Gas Company, Inc., dated as of May 20, 2000 (incorporated by
         reference to Exhibit 10.2 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.3   Securities Purchase Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.3 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.4   Investor Rights Agreement by and among Inergy Partners, LLC and
         various investors, dated as of January 12, 2001 (incorporated by
         reference to Exhibit 10.4 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.5   Asset Purchase Agreement by and among Inergy Partners, LLC and the
         Hoosier Group, dated as of September 8, 2000 (incorporated by
         reference to Exhibit 10.5 to Inergy, L.P.'s Registration Statement on
         Form S-1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.6   Inergy Employee Long-Term Incentive Plan (incorporated by reference to
         Exhibit 10.6 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.7   Inergy Unit Purchase Plan (incorporated by reference to Exhibit 10.1
         to Inergy, L.P.'s Registration Statement on Form S-8 filed on March 6,
         2002)

  10.8   Employment Agreement--John J. Sherman (incorporated by reference to
         Exhibit 10.8 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.9   Employment Agreement--Phillip L. Elbert (incorporated by reference to
         Exhibit 10.9 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on May 7, 2001)

  10.9A  First Amendment to Employment Agreement--Phillip L. Elbert
         (incorporated by reference to Exhibit 10.9A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.10  Employment Agreement--R Brooks Sherman, Jr. (incorporated by reference
         to Exhibit 10.10 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on May 7, 2001)

  10.10A First Amendment to Employment Agreement--R. Brooks Sherman, Jr.
         (incorporated by reference to Exhibit 10.10A to Inergy, L.P.'s
         Registration Statement on Form S-1/A (Registration No. 333-56976)
         filed on July 20, 2001)

  10.11  Employment Agreement--Carl A. Hughes (incorporated by reference to
         Exhibit 10.11 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001)

  10.12  Employment Agreement--Michael D. Fox (incorporated by reference to
         Exhibit 10.12 to Inergy, L.P.'s Registration Statement on Form S-1/A
         (Registration No. 333-56976) filed on July 2, 2001

  10.13  Employment Agreement--William C. Gautreaux (incorporated by reference
         to Exhibit 10.13 to Inergy, L.P.'s Registration Statement on Form S-
         1/A (Registration No. 333-56976) filed on July 2, 2001

     
 *10.14 Contribution, Conveyance, Assignment and Assumption Agreement by and
        among Inergy, L.P., Inergy Partners, LLC and the other parties named
        therein, dated as of July 31, 2001

  10.15 Agreement and Plan of Merger, dated as of December 19, 2001 by and
        among Inergy Holders, LLC, IPCH Acquisition Corp., IPCH Merger Corp.,
        Inergy, L.P., Independent Propane Company Holdings, certain holders of
        Series E Preferred Stock of Independent Propane Company Holdings and
        joined in by David L. Scott, Robert R. Galvin and Inergy Propane, LLC.
        (incorporated by reference to Exhibit 2.1 of Inergy, L.P.'s Current
        Report on Form 8-K filed on January 4, 2002)

  10.16 Transaction Agreement dated as of December 19, 2001 by and among
        Inergy, L.P., Inergy GP, LLC, Inergy Propane, LLC, Inergy Sales and
        Service, Inc., Inergy Holdings, LLC, IPCH Acquisition Corp., and IPCH
        Merger Corp. (incorporated by reference to Exhibit 2.2 of Inergy,
        L.P.'s Current Report on Form 8-K filed on January 4, 2002)

  10.17 Registration Rights Agreement entered into as of December 19, 2001 by
        and among Inergy, L.P. and certain investors (incorporated by reference
        to Exhibit 4.1 of Inergy, L.P.'s Current Report on Form 8-K filed on
        January 4, 2002)

  10.18 Registration Rights Agreement entered into as of December 19, 2001 by
        and between Inergy, L.P. and IPCH Acquisition Corp. (incorporated by
        reference to Exhibit 4.2 of Inergy, L.P.'s Current Report on Form 8-K
        filed on January 4, 2002)

 +10.19 Intercreditor and Collateral Agency Agreement entered into as of June
        7, 2002, by and among Wachovia Bank, National Association, the lenders
        named therein and the noteholders named therein

 *21.1  List of subsidiaries of Inergy, L.P.

 +23.1  Consent of Ernst & Young LLP

 *23.2  Consent of Arthur Andersen LLP

 +23.3  Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)

  23.4  Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1)

 *24.1  Powers of Attorney

- --------

* Previously filed

+ Filed herewith

                                                                    EXHIBIT 3.2A

                              AMENDMENT NO. 1 TO

             AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

                                      OF

                                 INERGY, L.P.

     This Amendment No. 1 (this "Amendment No. 1") to the Amended and Restated
Agreement of Limited Partnership of Inergy, L.P. (the "Partnership") is entered
into effective as of June 12, 2002, by Inergy GP LLC, a Delaware limited
liability company (the "Managing General Partner"), as managing general partner
of the Partnership.  Capitalized terms used but not defined herein are used as
defined in the Partnership Agreement.

     WHEREAS, the Managing General Partner, the Non-Managing General Partner and
the Limited Partners of the Partnership entered into that certain Amended and
Restated Agreement of Limited Partnership of the Partnership dated as of July
31, 2001 (the "Partnership Agreement");

     WHEREAS, Section 13.1(d)(i) of the Partnership Agreement provides that the
Managing General Partner may amend any provision of the Partnership Agreement
without the approval of any Partner or Assignee to reflect a change that, in the
discretion of the Managing General Partner, does not adversely affect the
Limited Partners (including any particular class of Partnership Interests) in
any material respect;

     WHEREAS, acting pursuant to the power and authority granted to it under
Section 13.1(d)(i) of the Partnership Agreement, the Managing General Partner
has determined that the following amendment to the Partnership Agreement does
not adversely affect the Limited Partners (including any particular class of
Partnership Interests) in any material respect.

     NOW THEREFORE, the Managing General Partner does hereby amend the
Partnership Agreement as follows:

     Section 1.  Amendment.

     Section 5.7(b) is hereby amended to add the following sentence to the end
of the first paragraph:

     For purposes of this Section 5.7(b), the term "debt" shall be deemed to
include indebtedness used to extend, refinance, renew, replace or defease debt
originally incurred in connection with an Acquisition or Capital Improvement;
provided, that the amount of such extended, refinanced, renewed, replaced or
defeased debt does not exceed the principal amount of, plus accrued interest on,
the original debt.

     Section 2.  Ratification of Partnership Agreement.  Except as expressly
modified and amended herein, all of the terms and conditions of the Partnership
Agreement shall remain in full force and effect.

     Section 3.  Governing Law.  This Amendment No. 1 will be governed by and
construed in accordance with the laws of the State of Delaware.

     IN WITNESS WHEREOF, the Managing General Partner has executed this
Amendment No. 1 as of the date first set forth above.

                              MANAGING GENERAL PARTNER:

                              INERGY GP LLC

                              By:  /s/  John J. Sherman
                                 --------------------------------------------
                              Name:     John J. Sherman
                              Title:    President and Chief Executive Officer

                                       2

                                                                     EXHIBIT 4.4

================================================================================

                               Inergy Propane, LLC

                                   $85,000,000

       $35,000,000 8.85% Senior Secured Notes, Series A, due June 7, 2007
       $25,000,000 9.10% Senior Secured Notes, Series B, due June 6, 2008
       $25,000,000 9.34% Senior Secured Notes, Series C, due June 5, 2009

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

                             Note Purchase Agreement

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

                            Dated as of June 7, 2002

================================================================================

                                Table of Contents
                                -----------------
                          (Not a Part of the Agreement)

                                                                                                      Page
                                                                                                   
SECTION 1.  Authorization of Notes.....................................................................  1

SECTION 2.  Sale and Purchase of Notes.................................................................  2

SECTION 3.  Closing....................................................................................  2

SECTION 4.  Conditions to Closing......................................................................  2

   Section 4.1.   Representations and Warranties.......................................................  2
   Section 4.2.   Performance; No Default..............................................................  3
   Section 4.3.   Compliance Certificates..............................................................  3
   Section 4.4.   Opinions of Counsel..................................................................  4
   Section 4.5.   Guaranties...........................................................................  5
   Section 4.6.   Purchase Permitted by Applicable Law, Etc............................................  5
   Section 4.7.   Sale of Other Notes..................................................................  5
   Section 4.8.   Payment of Special Counsel Fees......................................................  5
   Section 4.9.   Private Placement Numbers............................................................  5
   Section 4.10.  Changes in Legal Structure...........................................................  5
   Section 4.11.  Execution of Intercreditor Agreement and Security Documents..........................  6
   Section 4.12.  Filing and Recording.................................................................  6
   Section 4.13.  Evidence of Insurance................................................................  6
   Section 4.14.  Collateral Due Diligence.............................................................  6
   Section 4.15.  Payment of Recording Fees, Charges and Taxes.........................................  6
   Section 4.16.  Consent of Other Lenders.............................................................  6
   Section 4.17.  Proceedings and Documents............................................................  6
   Section 4.18.  Instruction Letter...................................................................  7
   Section 4.19.  Placement Letter.....................................................................  7
   Section 4.20.  Bank Credit Agreement................................................................  7
   Section 4.21.  Other Matters........................................................................  7

SECTION 5.        Representations and Warranties of the Company........................................  7

   Section 5.1.   Organization; Power and Authority....................................................  7
   Section 5.2.   Authorization, Etc...................................................................  7
   Section 5.3.   Disclosure...........................................................................  8
   Section 5.4.   Organization and Ownership of Shares; Affiliates.....................................  8
   Section 5.5.   Financial Statements.................................................................  9
   Section 5.6.   Compliance with Laws, Other Instruments, Etc.........................................  9
   Section 5.7.   Governmental Authorizations, Etc.....................................................  9
   Section 5.8.   Litigation; Observance of Agreements, Statutes and Orders............................ 10
   Section 5.9.   Taxes................................................................................ 10
   Section 5.10.  Title to Property; Leases............................................................ 10

                                      -i-

                                                                                                     
   Section 5.11.  Licenses, Permits, Etc..............................................................  10
   Section 5.12.  Compliance with Erisa...............................................................  11
   Section 5.13.  Private Offering by the Company.....................................................  12
   Section 5.14.  Use of Proceeds; Margin Regulations.................................................  12
   Section 5.15.  Existing Indebtedness; Future Liens.................................................  12
   Section 5.16.  Foreign Assets Control Regulations, Etc.............................................  13
   Section 5.17.  Status Under Certain Statutes.......................................................  13
   Section 5.18.  Environmental Matters...............................................................  13
   Section 5.19.  Collateral Matters..................................................................  13
   Section 5.20.  Notes to Rank Pari Passu............................................................  14

SECTION 6.  Representations of the Purchaser..........................................................  14

   Section 6.1.   Purchase for Investment.............................................................  14
   Section 6.2.   Source of Funds.....................................................................  14

SECTION 7.  Information as to the Company.............................................................  15

   Section 7.1.   Financial and Business Information..................................................  15
   Section 7.2.   Officer's Certificate...............................................................  18
   Section 7.3.   Inspection..........................................................................  19

SECTION 8.  Prepayment of the Notes...................................................................  19

   Section 8.1.   Required Prepayments................................................................  19
   Section 8.2.   Optional Prepayments with Make-whole Amount.........................................  19
   Section 8.3.   Offer to Prepay Notes as the Result of Certain Asset Dispositions...................  20
   Section 8.4.   Allocation of Partial Prepayments...................................................  21
   Section 8.5.   Maturity; Surrender, Etc............................................................  21
   Section 8.6.   Purchase of Notes...................................................................  21
   Section 8.7.   Make-whole Amount...................................................................  22

SECTION 9.  Affirmative Covenants.....................................................................  23

   Section 9.1.   Compliance with Law.................................................................  23
   Section 9.2.   Insurance...........................................................................  23
   Section 9.3.   Maintenance of Properties...........................................................  24
   Section 9.4.   Payment of Taxes and Claims.........................................................  24
   Section 9.5.   Limited Liability Existence, Etc....................................................  25
   Section 9.6.   Notes to Rank Pari Passu............................................................  25
   Section 9.7.   Covenant to Secure Notes Equally....................................................  25
   Section 9.8.   Collateral; Subsequently Acquired Subsidiaries......................................  25
   Section 9.9.   Environmental Reports...............................................................  27
   Section 9.10.  Environmental Indemnities...........................................................  27
   Section 9.11.  Appointment of Corporate Trustee and Modification of Security Documents.............  28
   Section 9.12.  Maintenance of Committed Revolving Facility.........................................  28
   Section 9.13.  Employee Benefits...................................................................  28
   Section 9.14.  Location of Collateral..............................................................  29
   Section 9.15.  Risk Management Plan................................................................  29

                                      -ii-

                                                                                                       
SECTION 10.  Negative Covenants.........................................................................  30

   Section 10.1.  Financial Covenants...................................................................  30
   Section 10.2.  Limitation on Restricted Payments.....................................................  31
   Section 10.3.  Liens, Indebtedness, and Other Restrictions...........................................  31
   Section 10.4.  Changes in Accounting Principles; Fiscal Year.........................................  35
   Section 10.5.  Subsidiaries; Change of Business......................................................  35
   Section 10.6.  Modification of Organizational Documents..............................................  35
   Section 10.7.  Conflicting Agreements................................................................  36
   Section 10.8.  Limitation on Certain Restrictive Agreements..........................................  36
   Section 10.9.  Limitation on Issuance of Capital Stock by Subsidiaries...............................  36
   Section 10.10. Limitation on Sale of Capital Stock or Indebtedness of Subsidiaries...................  36
   Section 10.11. Financial Covenants and Collateral Provisions of Credit Agreement and Other
                  Restricted Agreements.................................................................  36
   Section 10.12. Limitations on Swaps..................................................................  37
   Section 10.13. Limitation on Put Agreements..........................................................  38

SECTION 11.  Events of Default..........................................................................  38

SECTION 12.  Remedies on Default, Etc...................................................................  40

   Section 12.1.  Acceleration..........................................................................  40
   Section 12.2.  Other Remedies........................................................................  41
   Section 12.3.  Rescission............................................................................  41
   Section 12.4.  No Waivers or Election of Remedies, Expenses, Etc.....................................  41
   Section 12.5.  Notice of Acceleration or Rescission..................................................  42

SECTION 13.  Registration; Exchange; Substitution of Notes..............................................  42

   Section 13.1.  Registration of Notes.................................................................  42
   Section 13.2.  Transfer and Exchange of Notes........................................................  42
   Section 13.3.  Replacement of Notes..................................................................  43

SECTION 14.  Payments on Notes..........................................................................  43

   Section 14.1.  Place of Payment......................................................................  43
   Section 14.2.  Home Office Payment...................................................................  43

SECTION 15.  Expenses, Etc..............................................................................  44

   Section 15.1.  Transaction Expenses..................................................................  44
   Section 15.2.  Survival..............................................................................  44

SECTION 16.  Survival of Representations and Warranties; Entire Agreement...............................  44

SECTION 17.  Amendment and Waiver.......................................................................  45

   Section 17.1.  Requirements..........................................................................  45
   Section 17.2.  Solicitation of Holders of Notes......................................................  45
   Section 17.3.  Binding Effect, Etc...................................................................  45
   Section 17.4.  Notes Held by Company, Etc............................................................  46

SECTION 18.  Notices....................................................................................  46

                                      -iii-

                                                                                                     
SECTION 19.  Reproduction of Documents................................................................  46

SECTION 20.  Confidential Information.................................................................  47

SECTION 21.  Substitution of Purchaser................................................................  48

SECTION 22.  Miscellaneous............................................................................  48

   Section 22.1.  Successors and Assigns..............................................................  48
   Section 22.2.  Payments Due on Non-business Days...................................................  48
   Section 22.3.  Severability........................................................................  48
   Section 22.4.  Construction; GAAP..................................................................  48
   Section 22.5.  Counterparts........................................................................  49
   Section 22.6.  Governing Law.......................................................................  49
   Section 22.7.  Submission to Jurisdiction; Waiver of Jury Trial....................................  49

                                      -iv-

Schedule A          --    Information Relating To Purchasers

Schedule B          --    Defined Terms

Schedule 4.10       --    Changes in Structure

Schedule 5.3        --    Disclosure Materials

Schedule 5.4        --    Organization; Ownership of Capital Stock, etc.

Schedule 5.5        --    Financial Statements

Schedule 5.8        --    Certain Litigation

Schedule 5.10       --    Title to Properties

Schedule 5.11       --    Patents, etc.

Schedule 5.14       --    Use of Proceeds

Schedule 5.15       --    Existing Indebtedness

Schedule 9.14       --    Location of Collateral

Schedule 10.11      --    Existing Investments

Exhibit A-1         --    Form of 8.85% Senior Secured Note, Series A, due
                          June 7, 2007

Exhibit A-2         --    Form of 9.10% Senior Secured Note, Series B, due
                          June 6, 2008

Exhibit A-3         --    Form of 9.34% Senior Secured Note, Series C, due
                          June 5, 2009

Exhibit B           --    Form of Opinion of Counsel for the Company

Exhibit C-1         --    Form of Parent Guaranty Agreement

Exhibit C-2         --    Form of Subsidiary Guaranty Agreement

Exhibit C-3         --    Form of Limited Guaranty Agreement

Exhibit D           --    Form of Funds Delivery Instruction Letter

                                      -v-

                               Inergy Propane, LLC

                         1101 Walnut Street, Suite 1500

                           Kansas City, Missouri 64106

       $35,000,000 8.85% Senior Secured Notes, Series A, due June 7, 2007
       $25,000,000 9.10% Senior Secured Notes, Series B, due June 6, 2008
       $25,000,000 9.34% Senior Secured Notes, Series C, due June 5, 2009

                                                        Dated as of June 7, 2002

To the Purchasers listed in the attached Schedule A:

Ladies and Gentlemen:

         Inergy Propane, LLC, a Delaware limited liability company (the
"Company") agrees with you as follows:

SECTION 1.   Authorization of Notes.

         The Company will authorize the issue and sale of (a) $35,000,000
aggregate principal amount of its 8.85% Senior Secured Notes, Series A, due June
7, 2007 (the "Series A Notes", such term to include any notes of such series
issued in substitution therefor pursuant to Section 13 of this Agreement), (b)
$25,000,000 aggregate principal amount of its 9.10% Senior Secured Notes, Series
B, due June 6, 2008 (the "Series B Notes", such term to include any notes of
such series issued in substitution therefor pursuant to Section 13 of this
Agreement), and (c) $25,000,000 aggregate principal amount of its 9.34% Senior
Secured Notes, Series C, due June 5, 2009 (the "Series C Notes", such term to
include any notes of such series issued in substitution therefor pursuant to
Section 13 of this Agreement; the Series A Notes, the Series B Notes and the
Series C Notes being hereinafter collectively referred to as the "Notes"). The
Notes shall be substantially in the forms set out in Exhibits A-1, Exhibit A-2
and Exhibit A-3, respectively, with such changes therefrom, if any, as may be
approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.

SECTION 2.   Sale and Purchase of Notes.

         Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount and of the series
specified opposite your name in Schedule A at the purchase price of 100% of the
principal amount thereof. Your obligations are several and not joint
obligations, and you shall have no obligation or liability to any Person for the
performance or non-performance by any other Purchaser of Notes hereunder.

SECTION 3.   Closing.

         The sale and purchase of the Notes to be purchased by you shall occur
at the offices of Baker Botts L.L.P., 2001 Ross Avenue, Dallas, Texas, at 10:00
A.M. Dallas, Texas local time, at a closing (the "Closing") on June 7, 2002 or
on such other Business Day thereafter on or prior to June 30, 2002 as may be
agreed upon by the Company, you and the other Purchasers of the Notes. At the
Closing the Company will deliver to you the Notes of the series to be purchased
by you in the form of a single Note (or such greater number of Notes in
denominations of at least $250,000 as you may request) dated the date of the
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to account number 2000010968431
at First Union National Bank, Charlotte, North Carolina, ABA number 053000219.
If at the Closing the Company shall fail to tender such Notes to you as provided
above in this Section 3, or any of the conditions specified in Section 4 shall
not have been fulfilled to your satisfaction, you shall, at your election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.

SECTION 4.   Conditions to Closing.

         Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:

         Section 4.1. Representations and Warranties.

         (a) The representations and warranties of the Company in this Agreement
and the Note Documents to which it is a party shall be correct when made and at
the time of the Closing.

         (b) The representations and warranties of each Subsidiary Guarantor in
the Subsidiary Guaranty Agreement and the Note Documents to which it is a party
shall be correct when made and at the time of Closing.

         (c) The representations and warranties of the MLP in the Parent
Guaranty Agreement and the Note Documents to which it is a party shall be
correct when made and at the time of a Closing.

                                      -2-

         (d) The representations and warranties of IPCH Acquisition Corp in the
Limited Guaranty Agreement and the Note Documents to which it is a party shall
be correct when made at the time of Closing.

         Section 4.2. Performance; No Default.

         (a) The Company shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement and the
other Note Documents to which it is a party required to be performed or complied
with by it prior to or at the Closing, and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Schedule 5.14), no Default or Event of Default shall have occurred and be
continuing.

         (b) Each Subsidiary Guarantor shall have performed and complied in all
material respects with all agreements and conditions contained in the Subsidiary
Guaranty Agreement and the other Note Documents to which it is a party required
to be performed and complied with by it prior to or at the Closing, and after
giving effect to the issue and sale of Notes (and the application of the
proceeds thereof as contemplated by Schedule 5.14), no Default or Event of
Default shall have occurred and be continuing.

         (c) The MLP shall have performed and complied in all material respects
with all agreements and conditions contained in this Agreement, the Parent
Guaranty Agreement and the other Note Documents to which it is a party required
to be performed and complied with by it prior to or at the Closing, and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Section 5.14), no Default or Event of
Default shall have occurred and be continuing.

         (d) IPCH Acquisition Corp shall have performed and complied in all
material respects with all agreements and conditions contained in the Limited
Guaranty Agreement and the other Note Documents to which it is a party required
to be performed and complied with by it prior to or at the Closing, and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds as contemplated by Section 5.14) no Default or Event of Default shall
have occurred and be continuing.

         (e) Neither the Company nor any Subsidiary nor the MLP shall have
entered into any transaction since the date of the Memorandum that would have
been prohibited by Section 10 hereof had such Section applied since such date.

         Section 4.3. Compliance Certificates.

         (a) Officer's Certificate of the Company. The Company shall have
delivered to you an Officer's Certificate of the Company, dated the date of the
Closing, certifying that (i) the conditions specified in Sections 4.1(a), 4.2(a)
and 4.10 have been fulfilled, and (ii) all of the representations and warranties
in Section 5 are true and correct both as of the date made and as of the date of
Closing.

         (b) Officers' Certificates of the Subsidiary Guarantors. Each
Subsidiary Guarantor shall have delivered to you a certificate of an authorized
officer of such Person, dated the date of

                                      -3-

the Closing, certifying that (i) the conditions set forth in Sections 4.1(b),
4.2(b) and 4.10 have been fulfilled, and (ii) all of the representations and
warranties in Section 5 that pertain to such Person are true and correct both as
of the date made and as of the date of Closing.

         (c) Officers' Certificate of the MLP. The MLP shall have delivered to
you a certificate of an authorized officer of such Person, dated the date of the
Closing, certifying that (i) the conditions set forth in Sections 4.1(c), 4.2(c)
and 4.10 have been fulfilled, and (ii) all of the representations and warranties
in Section 5 that pertain to the MLP are true and correct both as of the date
made and as of the date of Closing.

         (d) Officers' Certificate of IPCH Acquisition Corp. IPCH Acquisition
Corp shall have delivered to you a certificate of an authorized officer of such
Person, dated the date of Closing, certifying that (i) the conditions set forth
in Sections 4.1(d), 4.2(d) and 4.10 have been fulfilled, and (ii) all of the
representations and warranties in Section 5 that pertain to IPCH Acquisition
Corp are true and correct both as of the date made and as of the date of
Closing.

         (e) Secretary's Certificate of the Company. The Company shall have
delivered to you a certificate certifying as to the resolutions attached thereto
and other limited liability company proceedings relating to the authorization,
execution and delivery of the Notes, the Agreements and the other Note Documents
to which it is a party.

         (f) Secretary's Certificates of the Subsidiary Guarantors. Each
Subsidiary Guarantor shall have delivered to you a certificate certifying as to
the resolutions attached thereto and other limited liability company or
corporate proceedings, as applicable, relating to the authorization, execution
and delivery of the Subsidiary Guaranty Agreement and the other Note Documents
to which it is a party.

         (g) Secretary's Certificate of the MLP. The MLP shall have delivered to
you a certificate certifying as to the resolutions attached thereto and other
partnership proceedings relating to the authorization, execution and delivery of
the Parent Guaranty Agreement and the other Note Documents to which the MLP is a
party.

         (h) Secretary's Certificate of IPCH Acquisition Corp. IPCH Acquisition
Corp shall have delivered to you a certificate certifying as to the resolutions
attached thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Limited Guaranty Agreement and the other Note
Documents to which IPCH Acquisition Corp is a party.

         Section 4.4. Opinions of Counsel. You shall have received opinions in
form and substance satisfactory to you, dated the date of the Closing (i) from
Stinson Morrison Hecker LLP, counsel for the Company, the Subsidiary Guarantors,
the MLP and IPCH Acquisition Corp, covering the matters set forth in Exhibit B
and covering such other matters incident to the transactions contemplated hereby
as you or your counsel may reasonably request (and the Company hereby instructs
its counsel to deliver such opinion to you), (ii) from Baker Botts L.L.P., your
special counsel in connection with such transactions, and (iii) from such local
counsel to the Company, the Subsidiary Guarantors and the MLP as you and your
special counsel may reasonably deem necessary or appropriate with respect to the
Note Documents and such other matters incident to such transactions contemplated
hereby as you may reasonably request.

                                      -4-

         Section 4.5.  Guaranties. You shall have received counterpart originals
of (i) a Parent Guaranty Agreement, duly executed and delivered by the MLP,
substantially in the form of Exhibit C-1 attached hereto and made a part hereof
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Parent Guaranty"), (ii) a Subsidiary Guaranty Agreement, duly
executed and delivered by each of Inergy Sales, Inergy Transportation and L&L
Transportation (together with any additional Subsidiary who delivers a guaranty
pursuant to Section 9.8, the "Subsidiary Guarantors"), substantially in the form
of Exhibit C-2 attached hereto and made a part hereof (as the same may be
amended, restated, supplemented or otherwise modified from time to time,
collectively, the "Subsidiary Guaranty Agreements"), and (iii) a Limited
Guaranty Agreement, duly executed and delivered of IPCH Acquisition Corp,
substantially in the form of Exhibit C-3 attached hereto and made a part hereof
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Limited Guaranty Agreement") in each case together with such
other documents as to IPCH Acquisition Corp, the MLP and the Subsidiary
Guarantors as are sufficient to comply with Section 9.8, and each of the Limited
Guaranty Agreement, the Parent Guaranty Agreement and the Subsidiary Guaranty
Agreements shall be in full force and effect.

         Section 4.6.  Purchase Permitted By Applicable Law, Etc. On the date of
the Closing your purchase of Notes shall (i) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (ii) not violate any applicable law or
regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System) and (iii) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.

         Section 4.7.  Sale of Other Notes. Contemporaneously with the Closing,
the Company shall sell to the other Purchasers of Notes listed in Schedule A,
and the other Purchasers of Notes shall purchase, the Notes to be purchased by
them at the Closing as specified in Schedule A.

         Section 4.8.  Payment of Special Counsel Fees Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the Closing
the fees, charges and disbursements of your special counsel referred to in
Section 4.4 to the extent reflected in a statement of such counsel rendered to
the Company at least one Business Day prior to the Closing.

         Section 4.9.  Private Placement Numbers. A Private Placement number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for each series of the Notes.

         Section 4.10. Changes in Legal Structure. Except as specified in
Schedule 4.10, none of the Company, the Subsidiary Guarantors, the MLP or IPCH
Acquisition Corp shall have changed its jurisdiction of organization or
incorporation, as applicable, or been a party to any merger or

                                      -5-

consolidation or shall have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.

         Section 4.11. Execution of Intercreditor Agreement and Security
Documents. The Security Documents and the Intercreditor Agreement shall be in
form and substance satisfactory to you and your special counsel, shall have been
duly executed and delivered by the parties thereto and shall be in full force
and effect and you shall have received true, correct and complete copies of each
thereof.

         Section 4.12. Filing and Recording. Other than the Mortgages to be
delivered pursuant to Section 9.16, the Security Documents (and/or financing
statements or similar notices thereof if and to the extent permitted by
applicable law) shall have been recorded or filed for record in such public
offices as may be deemed necessary or appropriate by you or your special counsel
in order to perfect the Liens and security interests granted or conveyed
thereby.

         Section 4.13. Evidence of Insurance. You shall have received a
certificate executed by the independent insurance broker of the Company
certifying to the existence of the insurance required by the Note Documents and
the payment of all premiums thereon. The original of the policies or
certificates thereof evidencing such insurance issued by the insurers shall be
delivered to the Collateral Agent for safekeeping on your behalf immediately
upon receipt thereof by the Company.

         Section 4.14. Collateral Due Diligence. You shall have received all due
diligence documentation and other information you may reasonably request with
respect to the Collateral, including, without limitation, all appraisals,
surveys, environmental reports, title insurance policies, UCC filing reports,
etc. Original copies of all third party reports and other due diligence
documentation shall be delivered to the Collateral Agent for safekeeping on your
behalf.

         Section 4.15. Payment of Recording Fees, Charges and Taxes. Except with
respect to the Mortgages to be recorded pursuant to Section 9.16, all fees,
charges and taxes in connection with the recordation or filing and
re-recordation or re-filing of the Security Documents and any other agreement or
instrument, financing statement or publication of notice required to be filed or
recorded to protect the validity of the Liens securing the obligations under
Note Documents shall have been paid in full.

         Section 4.16. Consent of Other Lenders. Any consents or approvals
required to be obtained from any lender or holder of any outstanding debt of
IPCH Acquisition Corp, the MLP, the Company or any Subsidiary, and any
amendments of agreements pursuant to which any debt may have been incurred by
the MLP, the Company or any Subsidiary, that are necessary in order to permit
the consummation of the transactions contemplated hereby shall have been
obtained, and all such consents, approvals or amendments shall be satisfactory
in form and substance to you and your special counsel.

         Section 4.17. Proceedings and Documents. All limited liability company,
partnership, corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such

                                      -6-

counterpart originals or certified or other copies of such documents as you or
they may reasonably request.

         Section 4.18. Instruction Letter. You shall have received written
instructions from a Responsible Officer of the Company, substantially in the
form of Exhibit D attached hereto and made a part hereof, set forth on the
Company's letterhead, authorizing and directing you to pay the purchase price of
the Notes to be purchased by you by transfer of immediately available funds for
credit to the Company's bank account identified in Section 3.

         Section 4.19. Placement Letter. You shall have received a copy of a
letter addressed to the Company, Baker Botts L.L.P. and Stinson Morrison Hecker
LLP from First Union Securities, Inc., placement agent for the Notes, as to the
private nature of the offering of the Notes, in form and substance satisfactory
to you and your special counsel.

         Section 4.20. Bank Credit Agreement. The Bank Credit Agreement and
related documents shall be satisfactory in substance and form to you and shall
be in full force and effect, and you shall have received true, correct and
complete copies of each thereof as you may reasonably request. In addition, you
shall have received evidence satisfactory to you that, effective on the date of
the Closing, the Bank Credit Agreement (i) shall have been amended to permit, or
a consent shall have been executed that permits, the issuance of the Notes and
the execution, delivery and performance by the Company of its obligations
hereunder, which amendment or consent is in form and substance reasonably
satisfactory to you, and (ii) satisfies the requirements of Section 9.12 of this
Agreement.

         Section 4.21. Other Matters. You shall have received such other
documents, opinions, and certificates as you or any other Purchaser may
reasonably request.

SECTION 5.   Representations and Warranties of the Company.

         The Company represents and warrants to you that:

         Section 5.1.  Organization; Power and Authority. The Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware, and is duly qualified as a foreign
limited liability company and is in good standing in each jurisdiction in which
such qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
The Company has the limited liability company power and authority to own or hold
under lease the properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement, the Notes and the other Note Documents to which it is a party to
perform the provisions hereof and thereof.

         Section 5.2.  Authorization, Etc. This Agreement, the Notes and the
Note Documents to which the Company is a party have been duly authorized by all
necessary limited liability company action on the part of the Company, and this
Agreement constitutes, and upon execution and delivery thereof each Note and
each other Note Document to which the Company is a party will constitute, a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by

                                      -7-

(i) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and (ii)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

         Section 5.3. Disclosure. The Company, through its agent, First Union
Securities, Inc., has delivered to you and each other Purchaser a copy of a
Private Placement Memorandum, dated March 2002 (the "Memorandum"), relating to
the transactions contemplated hereby. The Memorandum (including all documents
incorporated therein by reference listed on Schedule 5.3) fairly describes, in
all material respects, the general nature of the business and principal
properties of the MLP, the Company and its Subsidiaries. This Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by or
on behalf of IPCH Acquisition Corp, the MLP, the Company or any Subsidiary in
connection with the transactions contemplated hereby and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Since September 30, 2001, there has been no change in the
financial condition, operations, business, properties or prospects of IPCH
Acquisition Corp, the MLP, the Company or any Subsidiary except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Memorandum (including all documents incorporated therein
by reference listed on Schedule 5.3) or in the other documents, certificates and
other writings delivered to you by or on behalf of the Company specifically for
use in connection with the transactions contemplated hereby.

         Section 5.4. Organization and Ownership of Shares; Affiliates.

         (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists, with respect to each of IPCH Acquisition Corp, the MLP, the
Company and each of the Company's Subsidiaries, of (i) the correct name of such
Person, the jurisdiction of its organization, the jurisdictions in which such
Person is qualified to do business, the percentage of shares of each class of
its Capital Stock owned by any of IPCH Acquisition Corp, the MLP, the Company or
any of the Company's Subsidiaries, (ii) such Person's Affiliates, other than
IPCH Acquisition Corp, the MLP, the Company or a Subsidiary of the Company, and
(iii) such Person's directors and senior officers.

         (b) All of the outstanding Capital Stock of each of IPCH Acquisition
Corp, the MLP, the Company and each of the Company's Subsidiaries shown in
Schedule 5.4 as being owned by IPCH Acquisition Corp, the MLP, the Company or a
Subsidiary of the Company have been validly issued, are fully paid and
nonassessable and are owned by such Person free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4) and, unless shown in Schedule 5.4, (i)
there are no outstanding warrants, subscriptions, options, securities, or other
rights of any type or nature whatsoever which are convertible into, exchangeable
for or otherwise provide for or permit the issuance of Capital Stock of such
Person or are otherwise exercisable by any Person, and (ii) in the case of any
such Capital Stock consisting of membership or partnership interests, all
contributions required to be made in respect of such interests by the owner
thereof under any applicable partnership or limited liability agreement (or
similar governing document) have been made.

                                      -8-

         (c) Each of IPCH Acquisition Corp, the MLP and each of the Company's
Subsidiaries identified in Schedule 5.4 is a corporation, limited liability
company, partnership or other legal entity (as reflected on such Schedule) duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign corporation,
limited liability company, partnership or other legal entity and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Person has the corporate,
limited liability company, partnership or other power and authority to own or
hold under lease the properties it purports to own or hold under lease and to
transact the business it transacts and proposes to transact.

         (d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate, limited
liability company or partnership law statutes) restricting the ability of such
Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries that owns
outstanding shares of capital stock or similar equity interests of such
Subsidiary.

         Section 5.5. Financial Statements. The Company has delivered to you and
each other Purchaser copies of the financial statements of the MLP and its
Subsidiaries and the Company and its Subsidiaries listed on Schedule 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the MLP and its Subsidiaries and the Company and its Subsidiaries,
respectively, as of the respective dates specified in such financial statements
and the consolidated results of their respective operations and cash flows for
the respective periods so specified and have been prepared in accordance with
GAAP consistently applied throughout the periods involved except as set forth in
the notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).

         Section 5.6. Compliance with Laws, Other Instruments, Etc. The
execution, delivery and performance by the Company of this Agreement, the Notes
and the other Note Documents to which the Company is a party will not (i)
contravene, result in any breach of, or constitute a default under, or result in
the creation of any Lien in respect of any property of the Company or any
Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, limited liability company agreement, corporate charter
or by-laws, partnership agreement or any other agreement or instrument to which
the Company or any Subsidiary is bound or by which the Company or any Subsidiary
or any of their respective properties may be bound or affected, (ii) conflict
with or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.

         Section 5.7. Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement, the Notes or the other Note Documents to which
it is a party.

                                      -9-

         Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.

         (a) There are no actions, suits, investigations or proceedings pending
or, to the knowledge of the Company, threatened against or affecting the Company
or any Subsidiary or any property of the Company or any Subsidiary in any court
or before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

         (b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

         Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are adequate. The Federal
income tax liabilities of the Company and its Subsidiaries have been paid or
adequate reserves therefor have been established for all fiscal years up to and
including the fiscal years ended prior to December 31, 2002.

         Section 5.10. Title to Property; Leases. The Company and its
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Subsidiary after said date
(except as sold or otherwise disposed of in the ordinary course of business), in
each case free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects. Set forth on Part 1 of
Schedule 5.10 hereto is a complete list of each parcel of real property, by
street address and owner or lessee, as applicable, of all real property owned or
leased by the Company or any Subsidiary, and set forth on Part 2 of Schedule
5.10 hereto is a complete list as of December 19, 2001, by owner, vehicle
identification number, make and model, of all motor vehicles owned by the
Company or any Subsidiary. Since December 19, 2001, no "transfers" (as such term
is defined in the definition of Asset Disposition) have been made of any
vehicles listed on Schedule 5.10 except for transfers of vehicles with an
aggregate fair market value not exceeding $300,000.

         Section 5.11. Licenses, Permits, Etc. Except as disclosed in Schedule
5.11,

                                      -10-

         (a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;

         (b) to the best knowledge of the Company, no product of the Company or
any Subsidiary infringes in any Material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or other
right owned by any other Person; and

         (c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by the Company or any of its Subsidiaries.

         Section 5.12. Compliance with ERISA.

         (a) The Company and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.

         (b) The present value of the aggregate benefit liabilities under each
of the Plans, determined as of the end of such Plan's most recently ended plan
year on the basis of the actuarial assumptions specified for funding purposes in
such Plan's most recent actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to such benefit liabilities.
The term "benefit liabilities" has the meaning specified in Section 4001 of
ERISA and the terms "current value" and "present value" have the meaning
specified in section 3 of ERISA.

         (c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

         (d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is not Material.

         (e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406

                                      -11-

of ERISA and will not involve any transaction in connection with which a penalty
could be imposed pursuant to Section 502(i) of ERISA or a tax could be imposed
pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation by the
Company in the first sentence of this Section 5.12(e) is made in reliance upon
and subject to (i) the accuracy of your representation in Section 6.2 as to the
sources of the funds used to pay the purchase price of the Notes to be purchased
by you and (ii) the assumption, made solely for the purpose of making such
representation, that Department of Labor Interpretive Bulletin 75-2 with respect
to prohibited transactions remains valid in the circumstances of the
transactions contemplated herein.

         Section 5.13. Private Offering by the Company. Neither the Company nor
anyone acting on its behalf has offered the Notes or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any Person other than you, the
other Purchasers of the Notes and not more than 50 other Institutional
Investors, each of which has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of Section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable jurisdiction.

         Section 5.14. Use of Proceeds; Margin Regulations. The Company will
apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 1% of the value of the consolidated assets of the Company
and its Subsidiaries and the Company does not have any present intention that
margin stock will constitute more than 1% of the value of such assets. As used
in this Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in said Regulation U.

         Section 5.15. Existing Indebtedness; Future Liens.

         (a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Indebtedness of the MLP, the Company and its Subsidiaries as of June
6, 2002 and, as of the Closing, no additional Indebtedness has been incurred
that is not reflected on such Schedule other than the accrual of per diem
interest and per diem fees. Neither the Company nor any Subsidiary is in default
and no waiver of default is currently in effect, in the payment of any principal
or interest on any Indebtedness of the Company or such Subsidiary and no event
or condition exists with respect to any Indebtedness of the Company or any
Subsidiary that would permit (or that with notice or the lapse of time, or both,
would permit) one or more Persons to cause such Indebtedness to become due and
payable before its stated maturity or before its regularly scheduled dates of
payment.

         (b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or

                                      -12-

otherwise) any of its property, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by Section 10.3(a).

         Section 5.16. Foreign Assets Control Regulations, Etc. Neither the sale
of the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto. Without limiting the foregoing, neither the Company nor any of
its Subsidiaries (a) is or will become a blocked person described in Section 1
of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49049 (2001)) or (b) engages or will engage in any dealings or
transactions, or be otherwise associated, with any such blocked person.

         Section 5.17. Status under Certain Statutes. Neither the MLP nor the
Company nor any Subsidiary is an "investment company" registered or required to
be registered or subject to regulation under the Investment Company Act of 1940,
as amended, or is subject to regulation under the Public Utility Holding Company
Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the
Federal Power Act, as amended.

         Section 5.18. Environmental Matters.

         (a) Neither the Company nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.

         (b) Neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not reasonably be expected to result in a Material Adverse Effect.

         (c) Neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them or has disposed of any Hazardous Materials in a manner contrary
to any Environmental Laws in each case in any manner that could reasonably be
expected to result in a Material Adverse Effect.

         (d) All buildings on all real properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.

         Section 5.19. Collateral Matters.

                                      -13-

         (a) The provisions of each of the Security Documents are effective to
create in favor of the Collateral Agent for the benefit of you, the other
Purchasers and the other creditors described therein, a legal, valid and
enforceable security interest (with the priorities provided for therein and
limited to the extent the Collateral described therein is within the scope of
the UCC) in all right, title and interest of the Company and its Subsidiaries in
the Collateral described therein; and executed financing statements have been,
or on or before the Closing will be, filed in all public offices wherein such
filing is necessary to perfect such security interests in the Collateral therein
described as against creditors of and purchasers from the Company.

         (b) All representations and warranties of the Company and any of its
Subsidiaries party thereto contained in the Security Documents are true and
correct.

         (c) All fees, charges and taxes in connection with the recordation or
filing and re-recordation or re-filing of the Security Documents and any other
agreement or instrument, financing statement or any publication of notice
required to be filed or recorded, to protect the validity of the Liens securing
the obligations of the Notes have been paid in full.

         Section 5.20. Notes to Rank Pari Passu. The Notes and all other
obligations under this Agreement of the Company rank at least pari passu in
right of payment with all other present and future Senior Indebtedness (actual
or contingent) of the Company which is not expressed to be subordinate or junior
in rank to any other Senior Indebtedness of the Company.

SECTION 6. Representations of the Purchaser.

         Section 6.1.  Purchase for Investment. You represent that you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof; provided that the disposition of
your or their property shall at all times be within your or their control. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.

         Section 6.2.  Source of Funds. You represent that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:

         (a) if you are an insurance company, the Source (i) is your "insurance
company general account" (as such term is defined under Section V of the United
States Department of Labor's Prohibited Transaction Class Exemption ("PTE")
95-60), and as of the date of the purchase of the Notes you satisfy all of the
applicable requirements for relief under Sections I and IV of PTE 95-60, or (ii)
does not include assets allocated to any separate account maintained by you in
which any employee benefit plan (or its related trust) has any interest, other
than a separate account that is maintained solely in connection with your fixed
contractual obligations under which the amounts payable, or credited, to such
plan and to any participant or beneficiary of such plan (including any
annuitant) are not affected in any manner by the investment performance of the
separate account; or

                                      -14-

         (b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or

         (c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified professional
asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption),
no employee benefit plan's assets that are included in such investment fund,
when combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (c); or

         (d) the Source is a governmental plan; or

         (e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Company in writing pursuant to this paragraph
(e); or

         (f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.

         As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.

SECTION 7. Information as to the Company.

         Section 7.1. Financial and Business Information. The Company shall
deliver or cause to be delivered to each holder of Notes that is an
Institutional Investor:

             (a) Quarterly Statements -- within 45 days after the end of each
         quarterly fiscal period in each fiscal year of the Company (other than
         the last quarterly fiscal period of each such fiscal year) or, if
         earlier, such date as MLP is required to file a Quarterly Report with
         the Securities and Exchange Commission, duplicate copies of:

                 (i) consolidating and consolidated balance sheets of each of
             the MLP and its Subsidiaries and the Company and its Subsidiaries
             as at the end of such quarter, and

                                      -15-

                 (ii) consolidating and consolidated statements of income and
             cash flows of each of the MLP and its Subsidiaries and the Company
             and its Subsidiaries, together with consolidated statements of
             changes in shareholders' equity for such Persons, for such quarter
             and (in the case of the second and third quarters) for the portion
             of the fiscal year ending with such quarter,

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments; provided that delivery within the time period specified above of
copies of the MLP's Quarterly Report on Form 10-Q prepared in compliance with
the requirements therefor and filed with the Securities and Exchange Commission
shall be deemed to satisfy the requirements of this Section 7.1(a) with respect
to consolidated statements of the MLP and its Subsidiaries;

              (b) Annual Statements -- within 90 days after the end of each
         fiscal year of the Company or, if earlier, such date as MLP is required
         to file an Annual Report with the Securities and Exchange Commission,
         duplicate copies of,

                 (i) consolidating and consolidated balance sheets of each of
             the MLP and its Subsidiaries and the Company and its Subsidiaries,
             as at the end of such year, and

                 (ii) consolidating and consolidated statements of income and
             cash flows of each of the MLP and its Subsidiaries and the Company
             and its Subsidiaries, together with consolidated statements of
             changes in shareholders' equity for such Persons, for such year,

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
such consolidated statements shall be accompanied by:

                      (A) an opinion thereon of independent certified public
                 accountants of recognized national standing, which opinion
                 shall state that such consolidated financial statements present
                 fairly, in all material respects, the financial position of the
                 companies being reported upon and their results of operations
                 and cash flows and have been prepared in conformity with GAAP,
                 and that the examination of such accountants in connection with
                 such consolidated financial statements has been made in
                 accordance with generally accepted auditing standards, and that
                 such audit provides a reasonable basis for such opinion in the
                 circumstances, and

                      (B) a certificate of such accountants stating that they
                 have reviewed this Agreement and stating further whether, in
                 making their audit, they have become aware of any condition or
                 event that then constitutes a Default or an Event of Default,
                 and, if they are aware that any

                                      -16-

                 such condition or event then exists, specifying the nature and
                 period of the existence thereof (it being understood that such
                 accountants shall not be liable, directly or indirectly, for
                 any failure to obtain knowledge of any Default or Event of
                 Default unless such accountants should have obtained knowledge
                 thereof in making an audit in accordance with generally
                 accepted auditing standards or did not make such an audit),

provided that the delivery within the time period specified above of the MLP's
Annual Report on Form 10-K for such fiscal year (together with the MLP's annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and filed
with the Securities and Exchange Commission, together with the accountant's
certificate described in clause (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b) with respect to consolidated statements of
the MLP and its Subsidiaries;

              (c) Audit Reports -- promptly upon receipt thereof, one copy of
         each interim or special audit made by the independent accountants of
         the books of the MLP, the Company or its Subsidiaries and any
         management letter received from such accountants;

              (d) SEC and Other Reports -- promptly upon their becoming
         available, one copy of (i) each financial statement, report, notice or
         proxy statement sent by the MLP, the Company or any Subsidiary of the
         Company to public securities holders generally, and (ii) each regular
         or periodic report, each registration statement (without exhibits
         except as expressly requested by such holder), and each prospectus and
         all amendments thereto filed by the MLP, the Company or any Subsidiary
         with the Securities and Exchange Commission and of all press releases
         and other statements made available generally by the MLP, the Company
         or any Subsidiary to the public concerning developments that are
         Material;

              (e) Notice of Default or Event of Default -- promptly, and in any
         event within five Business Days after a Responsible Officer becoming
         aware of the existence of any Default or Event of Default or that any
         Person has given any notice or taken any action with respect to a
         claimed default hereunder or that any Person has given any notice or
         taken any action with respect to a claimed default of the type referred
         to in Section 11(f), a written notice specifying the nature and period
         of existence thereof and what action the Company is taking or proposes
         to take with respect thereto;

              (f) ERISA Matters -- promptly, and in any event within five
         Business Days after a Responsible Officer becoming aware of any of the
         following, a written notice setting forth the nature thereof and the
         action, if any, that the Company or an ERISA Affiliate proposes to take
         with respect thereto:

                  (i) with respect to any Plan, any reportable event, as defined
              in Section 4043(b) of ERISA and the regulations thereunder, for
              which notice thereof has not been waived pursuant to such
              regulations as in effect on the date hereof; or

                                      -17-

                  (ii) the taking by the PBGC of steps to institute, or the
              threatening by the PBGC of the institution of, proceedings under
              Section 4042 of ERISA for the termination of, or the appointment
              of a trustee to administer, any Plan, or the receipt by the
              Company or any ERISA Affiliate of a notice from a Multiemployer
              Plan that such action has been taken by the PBGC with respect to
              such Multiemployer Plan; or

                  (iii) any event, transaction or condition that could result in
              the incurrence of any liability by the Company or any ERISA
              Affiliate pursuant to Title I or IV of ERISA or the penalty or
              excise tax provisions of the Code relating to employee benefit
              plans, or in the imposition of any Lien on any of the rights,
              properties or assets of the Company or any ERISA Affiliate
              pursuant to Title I or IV of ERISA or such penalty or excise tax
              provisions, if such liability or Lien, taken together with any
              other such liabilities or Liens then existing, could reasonably be
              expected to have a Material Adverse Effect;

              (g) Notices from Governmental Authority -- promptly, and in any
         event within 30 days of receipt thereof, copies of any notice to the
         Company or any Subsidiary from any Federal or state Governmental
         Authority relating to any order, ruling, statute or other law or
         regulation that could reasonably be expected to have a Material Adverse
         Effect;

              (h) Information Required by Rule 144A -- promptly upon the request
         of the holder of any Note, such financial and other information as such
         holder may reasonably determine to be necessary in order to permit
         compliance with the information requirements of Rule 144A under the
         Securities Act in connection with a resale of Notes, except at such
         times as the Company is subject to the reporting requirements of
         Section 13 or 15(d) of the Exchange Act; and

              (i) Requested Information -- with reasonable promptness, such
         other data and information relating to the business, operations,
         affairs, financial condition, assets or properties of IPCH Acquisition
         Corp, the MLP, the Company or any of its Subsidiaries or relating to
         the ability of any of such Persons to perform under the Note Documents
         as from time to time may be reasonably requested by any such holder of
         Notes.

         Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:

              (a) Covenant Compliance -- the information (including detailed
         calculations) required in order to establish whether the Company was in
         compliance with the requirements of Sections 10.1, 10.2, 10.3(a),
         10.3(e) and 10.12 hereof, during the quarterly or annual period covered
         by the statements then being furnished (including with respect to such
         Section, where applicable, the calculations of the maximum or minimum
         amount, ratio or percentage, as the case may be, permissible under the
         terms of such Section, and the calculation of the amount, ratio or
         percentage then in existence); and

                                      -18-

              (b) Event of Default -- a statement that such officer has reviewed
         the relevant terms hereof and has made, or caused to be made, under his
         or her supervision, a review of the transactions and conditions of IPCH
         Acquisition Corp, the MLP, the Company and its Subsidiaries from the
         beginning of the quarterly or annual period covered by the statements
         then being furnished to the date of the certificate and that such
         review shall not have disclosed the existence during such period of any
         condition or event that constitutes a Default or an Event of Default
         or, if any such condition or event existed or exists (including,
         without limitation, any such event or condition resulting from the
         failure of the Company or any Subsidiary to comply with any
         Environmental Law), specifying the nature and period of existence
         thereof and what action the Company shall have taken or proposes to
         take with respect thereto.

         Section 7.3. Inspection. The Company shall permit the representatives
of each holder of Notes that is an Institutional Investor:

              (a) No Default -- if no Default or Event of Default then exists,
         at the expense of such holder and upon reasonable prior notice to the
         Company, to visit the principal executive office of the Company, to
         discuss the affairs, finances and accounts of the Company and its
         Subsidiaries with the Company's officers, and (with the consent of the
         Company, which consent will not be unreasonably withheld) its
         independent public accountants, and (with the consent of the Company,
         which consent will not be unreasonably withheld) to visit the other
         offices and properties of the Company and each Subsidiary, all at such
         reasonable times and as often as may be reasonably requested in
         writing; and

              (b) Default -- if a Default or Event of Default then exists, at
         the expense of the Company, to visit and inspect any of the offices or
         properties of the Company or any Subsidiary, to examine all their
         respective books of account, records, reports and other papers, to make
         copies and extracts therefrom, and to discuss their respective affairs,
         finances and accounts with their respective officers and independent
         public accountants (and by this provision the Company authorizes said
         accountants to discuss the affairs, finances and accounts of the
         Company and its Subsidiaries), all at such times and as often as may be
         requested.

SECTION 8. Prepayment of the Notes.

         Section 8.1. Required Prepayments. No regularly scheduled prepayment of
the principal of any series of the Notes is required prior to the final maturity
date thereof.

         Section 8.2. Optional Prepayments with Make-Whole Amount. The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes (in an amount not less than $1,000,000
and increments of $100,000 in excess thereof in the case of any partial
prepayment), at 100% of the principal amount so prepaid, together with interest
accrued thereon to the date of such prepayment, plus the Make-Whole Amount
determined for the prepayment date with respect to such principal amount. The
Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date, the aggregate principal amount of each

                                      -19-

series of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with Section
8.4), and the interest to be paid on the prepayment date with respect to such
principal amount being prepaid, and shall be accompanied by a certificate of a
Senior Financial Officer as to the estimated Make-Whole Amount due in connection
with such prepayment (calculated as if the date of such notice were the date of
the prepayment), setting forth the details of such computation. Two Business
Days prior to such prepayment, the Company shall deliver to each holder of Notes
a certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.

         Section 8.3. Offer to Prepay Notes as the Result of Certain Asset
Dispositions.

         (a) Notice of Debt Prepayment Application. In the event that the
Company elects to make a Debt Prepayment Application at any time pursuant to the
provisions of Section 10.3(e) in respect of any Asset Disposition, the Company
shall give written notice of such Debt Prepayment Application to each holder of
Notes, which notice shall contain and constitute an offer to prepay the Notes as
described in Section 8.3(b) and shall be accompanied by the certificate
described in Section 8.3(e). Notwithstanding the foregoing, if the Company fails
to provide such notice, or any holder of Notes is made aware that a Debt
Prepayment Application is required in respect of any Asset Disposition prior to
receiving such notice from the Company, such holder of Notes may notify the
Company in writing thereof, whereupon the Company shall make forthwith the offer
described in the preceding sentence.

         (b) Offer to Prepay Notes. The offer to prepay Notes contemplated by
the foregoing clause (a) shall be an offer by the Company to each holder of
Notes to prepay, in accordance with and subject to this Section 8.3, on the date
specified in such offer (the "Proposed Asset Disposition Prepayment Date"), the
portion of the outstanding principal amount of Notes held by such holder (as
used in this Section 8.3(b) only, "holder" in respect of any Note registered in
the name of a nominee for a disclosed beneficial owner shall mean such
beneficial owner) which, when added to the Make-Whole Amount with respect
thereto, equals the Ratable Portion with respect to the Notes held by such
holder. Such Proposed Asset Disposition Prepayment Date shall be not less than
15 days and not more than 30 days after the date of such offer (if the Proposed
Asset Disposition Prepayment Date shall not be specified in such offer, the
Proposed Asset Disposition Prepayment Date shall be the 20th day after the date
of such offer).

         (c) Acceptance; Rejection. A holder of Notes may accept or reject the
offer to prepay made pursuant to this Section 8.3 by causing a notice of such
acceptance or rejection, as the case may be, to be delivered to the Company at
least 5 days prior to the Proposed Asset Disposition Prepayment Date. A failure
by a holder of Notes to respond, by the date specified in the preceding
sentence, to an offer to prepay made pursuant to this Section 8.3 shall be
deemed to constitute an acceptance of such offer by such holder. If all holders
of Notes reject an offer of prepayment made pursuant to this Section 8.3 with
respect to an Asset Disposition, no Debt Prepayment Application shall be
required hereunder with respect to such Asset Disposition; provided, that, such
rejection shall not waive any requirements hereunder to apply the Net Proceeds
of subsequent Asset Dispositions to Debt Prepayment Applications.

                                      -20-

         (d) Prepayment. Prepayment of the Notes to be prepaid pursuant to this
Section 8.3 shall be at 100% of the principal amount (determined as provided in
Section 8.3(b) above) so prepaid plus interest thereon to the prepayment date
and the Make-Whole Amount, if any, with respect to each such Note. On the
Business Day preceding the date of prepayment under this Section 8.3, the
Company shall deliver to each holder of Notes to be prepaid a statement showing
(i) the aggregate principal amount of the Notes to be prepaid in connection with
such prepayment and the Make-Whole Amount due in connection with such prepayment
and (ii) setting forth the details of the computation of such amounts (which
amounts, together, shall equal the Ratable Portion as to the Notes being
prepaid). Such prepayment shall be made on the Proposed Asset Disposition
Prepayment Date.

         (e) Officer's Certificate. Each offer to prepay the Notes pursuant to
this Section 8.3 shall be accompanied by a certificate, executed by a
Responsible Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Asset Disposition Prepayment Date; (ii) that such offer is made
pursuant to this Section 8.3; (iii) the respective Ratable Portions and
principal amounts of all Notes to be prepaid; (iv) the estimated Make-Whole
Amount due in connection with such prepayment (calculated as if the date of such
certificate were the date of the prepayment) with respect to each Note to be
prepaid and the details of such calculation; (v) the interest that would be due
on each Note offered to be prepaid, accrued to the Proposed Asset Disposition
Prepayment Date; (vi) that the conditions of this Section 8.3 have been
fulfilled; and (vii) in reasonable detail, the nature, date and Net Proceeds of
the Asset Disposition giving rise to such offer.

         Section 8.4. Allocation of Partial Prepayments. In the case of any
partial prepayment of the Notes pursuant to Section 8.2, the principal amount of
the Notes to be prepaid shall be (i) allocated among all series of Notes then
outstanding on a pro rata basis, to each series in the proportion that the
aggregate unpaid principal amount of such series of Notes bears to the aggregate
unpaid principal amount of all series of Notes then outstanding, and (ii)
allocated pro rata among each series of the Notes receiving such prepayment in
proportion, as nearly as practicable, to the respective unpaid principal amounts
thereof not theretofore called for prepayment. All partial prepayments made
pursuant to Section 8.3 shall be applied only to the Notes of the holders who
have accepted (or have been deemed pursuant to Section 8.3(c) to have accepted)
such prepayment, in proportion to the respective outstanding principal amounts
thereof.

         Section 8.5. Maturity; Surrender, Etc. In the case of each prepayment
of Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.

         Section 8.6. Purchase of Notes. The Company will not and will not
permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the

                                      -21-

outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.

         Section 8.7. Make-Whole Amount. The term "Make-Whole Amount" means,
with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal, provided that
the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:

         "Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or Section 8.3 or has
become or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires.

         "Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

         "Reinvestment Yield" means, with respect to the Called Principal of any
Note, 1.00% over the yield to maturity implied by (i) the yields reported, as of
10:00 A.M. (New York City local time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date on the Treasury Yield Monitor
Page of Standard & Poor's MMS- Treasury Market Insight (or, if Standard & Poor's
shall cease to report such yields in MMS - Treasury Market Insight or shall
cease to be the customary source of information for calculating
yield-maintenance amounts on privately placed notes, then such source as is then
the customary source of such information), or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15(519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and greater
than the Remaining Average Life and (2) the actively traded U.S. Treasury
security with the duration closest to and less than the Remaining Average Life.
The Reinvestment Yield shall be rounded to that number of decimal places as
appears in the coupon of the applicable Note.

                                      -22-

         "Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years (calculated to the
nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.

         "Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date, provided that if such Settlement Date is not a date on which
interest payments are due to be made under the terms of the Notes, then the
amount of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2, Section 8.3 or Section 12.1.

         "Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or Section 8.3 or has become or is declared to be immediately due
and payable pursuant to Section 12.1, as the context requires.

SECTION 9. Affirmative Covenants.

         The Company covenants that so long as any of the Notes are outstanding
or any amounts are owed by the Company to any holder hereunder or under any of
the other Note Documents:

         Section 9.1. Compliance with Law. The Company will, and will cause each
of its Subsidiaries to, comply with all laws, ordinances or governmental rules
or regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

         Section 9.2. Insurance.

         (a) The Company will, and will cause each of its Subsidiaries to,
maintain, with financially sound and reputable insurers reasonably satisfactory
to the Collateral Agent and the Required Holders, insurance with respect to
their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.

                                      -23-

         (b) Without limitation of the foregoing, such insurance shall insure
(i) all of the property of an insurable nature of the Company and its
Subsidiaries (other than residential tanks and racks and cylinders on a cylinder
exchange program), including, without limitation, all real estate, equipment,
fixtures and inventories, against fire and other casualties in such a manner and
to the extent that like properties are usually insured by others owning
properties of a similar character in a similar locality or as otherwise required
by the Collateral Agent or requested by Required Holders, with the proceeds of
such casualty insurance payable to the Collateral Agent for the benefit of the
holders of the Notes (and for the benefit of other Secured Creditors under the
Intercreditor Agreement), and (ii) the Company and its Subsidiaries against
liability on account of damage to persons or property (including product
liability insurance and all insurance required under all applicable worker's
compensation laws) caused by it or its officers, members, employees, agents or
contractors in such a manner and to the extent that like risks are usually
insured by others conducting similar businesses in the places where it conducts
its business or as otherwise required by the Collateral Agent or requested by
Required Holders, including, without limitation, pollution liability coverage on
its automobile/motor carrier/truckers liability insurance substantially similar
to the coverage in effect on the date hereof and covering the Company and its
Subsidiaries against liability on account of damage to persons or property
arising from the transportation of Hazardous Materials with limits not less than
those limits in effect on the date hereof and deductibles not more than
$500,000.

         (c) The Company shall cause the insurers under all of its and its
Subsidiaries' insurance policies to (i) provide the Collateral Agent at least 30
days prior written notice of the termination or cancellation of or any material
change by endorsement to any such policy before such termination, cancellation
or change shall be effective and (ii) agree to such other matters in respect of
any such casualty insurance as provided in the Collateral Agent's loss payee
endorsement. The Collateral Agent and all holders of the Notes shall be named as
additional insured on all liability insurance policies, and the Collateral Agent
shall be named as loss payee on all property policies obtained or maintained by
the Company and its Subsidiaries with respect to their properties and
businesses. In addition, the Company will, upon request of the Collateral Agent
or any holder of any Note at any time, furnish a written summary of the amount
and type of insurance carried by the Company and its Subsidiaries, the names of
the insurers and the policy numbers, and deliver to the Collateral Agent
certificates with respect thereto.

         Section 9.3. Maintenance of Properties. The Company will, and will
cause each of its Subsidiaries to, maintain and keep, or cause to be maintained
and kept, their respective properties in good repair, working order and
condition (other than ordinary wear and tear) and their respective real and
personal property leases in effect and free from any defaults by such Person, in
each case so that the business carried on in connection therewith may be
properly conducted at all times; provided that this Section shall not prevent
the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties or from terminating or not renewing any
real or personal property leases if such discontinuance, termination or
non-renewal is desirable in the conduct of its business and the Company has
concluded that such discontinuance, termination or non-renewal could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

         Section 9.4. Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, file all tax returns required to be filed in
any jurisdiction and to pay and

                                      -24-

discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.

         Section 9.5. Limited Liability Existence, Etc. The Company will at all
times preserve and keep in full force and effect its existence as a limited
liability company. Subject to Section 10.3(d) and Section 10.3(e), the Company
will at all times preserve and keep in full force and effect the existence of
each of its Subsidiaries (unless merged into the Company or a Subsidiary) and
all rights and franchises of the Company and its Subsidiaries unless, in the
good faith judgment of the Company, the termination of or failure to preserve
and keep in full force and effect such existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.

         Section 9.6. Notes to Rank Pari Passu. The Notes and all other
obligations under this Agreement of the Company are and at all times shall rank
at least pari passu in right of payment with all other present and future Senior
Indebtedness (actual or contingent) of the Company which is not expressed to be
subordinate or junior in rank to any other Senior Indebtedness of the Company.

         Section 9.7. Covenant to Secure Notes Equally. The Company will, if it
or any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of Section 10.3(a) (unless prior written consent to the creation
or assumption thereof shall have been obtained pursuant to Section 17.1), make
or cause to be made effective provision whereby the Notes will be secured by
such Lien equally and ratably with any and all other Indebtedness thereby
secured so long as any such other Indebtedness shall be so secured; provided
that the creation and maintenance of such equal and ratable Lien shall not in
any way limit or modify the right of the holders of the Notes to enforce the
provisions of Section 10.3(a).

         Section 9.8. Collateral; Subsequently Acquired Subsidiaries.

         (a) It is the intent of the parties that the obligations under the Note
Documents shall at all times be secured on an equal and ratable basis with the
obligations under the Bank Documents. If IPCH Acquisition Corp, the MLP, the
Company, any Subsidiary or any other Person at any time grants additional
security of any kind or provides an additional Guaranty or other credit support
of any kind pursuant to the requirements of, or in order to secure the
obligations with respect to any Bank Document, then the Company shall, or shall
cause such other Person to grant to the holders of the Notes such additional
security, Guaranty or credit support so that the holders of the Notes are
secured on an equal and ratable basis. With respect to

                                      -25-

any Subsidiary of the Company that executes a Guaranty with respect to any
obligations under any Bank Document, the Company shall cause such Subsidiary
concurrently to enter into a Guarantor Supplement (in the form attached as
Exhibit A to the Subsidiary Guaranty Agreement), and within 3 Business Days
thereafter will deliver to each of the holders of the Notes the following items
at the Company's cost and expense:

               (i)   an executed counterpart of such Guarantor Supplement;

               (ii)  such documents and evidence with respect to such Subsidiary
         as any holder of the Notes may reasonably request in order to establish
         the existence and good standing of such Subsidiary and the
         authorization of the transactions contemplated by such Guarantor
         Supplement;

               (iii) an opinion of counsel satisfactory to the Required Holders
         to the effect that such Subsidiary Guaranty Agreement has been duly
         authorized, executed and delivered and constitutes the legal, valid and
         binding contract and agreement of such Subsidiary enforceable in
         accordance with its terms, except as an enforcement of such terms may
         be limited by bankruptcy, insolvency, reorganization, moratorium and
         similar laws affecting the enforcement of creditors' rights generally
         and by general equitable principles, and such other matters as
         reasonably requested by the Required Holders; and

               (iv)  any joinder agreement required to be executed pursuant to
         the provisions of the Intercreditor Agreement.

         (b) At the cost and expense of the Company, the Company shall execute,
and shall cause its Subsidiaries to execute, any and all documents, financing
statements, agreements and instruments, and take all action (including, without
limitation, filing Uniform Commercial Code and other financing statements,
mortgages and deeds of trust and any notices or other documents customarily
filed with the United States Patent and Trademark Office or the United States
Copyright Office), that may be required under applicable law, or which the
Required Holders or the Collateral Agent may reasonably request, in order to
effectuate the transactions contemplated by the Note Documents and in order to
grant, preserve, protect and perfect the validity and first priority of the
security interests and Liens created or purported to be created by the Security
Documents or in order to effectuate the intent of the parties set forth in
Section 9.8(a).

         (c) Any security interests and Liens granted by the Company and its
Subsidiaries pursuant to this Section 9.8 will be created under the Security
Documents in form, scope and substance satisfactory to the Required Holders and
the Collateral Agent, and at its expense the Company will deliver or cause to be
delivered to the Collateral Agent, all such instruments and documents
(including, without limitation, legal opinions, title searches, environmental
site assessments, surveys, lien searches and searches for liens on encumbrances
upon intellectual property) as the Required Holders or the Collateral Agent
shall reasonably request to evidence compliance with this Section 9.8. The
Company agrees to provide from time to time such evidence as the Required
Holders or the Collateral Agent shall reasonably request as to the perfection
and priority status of each such security interest and Lien.

         (d) The holders of the Notes acknowledge and agree that such holders
will discharge and release any Subsidiary Guarantor from the Subsidiary Guaranty
Agreement to which it is a

                                      -26-

party pursuant to the written request of the Company, provided that (i) such
Subsidiary Guarantor has been released and discharged as an obligor and
guarantor under and in respect of all Indebtedness of the Company and its
Affiliates under the Bank Documents, (ii) any such release and discharge shall
be expressly conditioned upon receipt by the holders of the Notes of a written
agreement executed by the Subsidiary Guarantor to be released pursuant to which
such Subsidiary Guarantor agrees that if, for any reason whatsoever, it
thereafter becomes an obligor or guarantor under and in respect of any
Indebtedness of the Company outstanding under or pursuant to any Bank Document,
then such Subsidiary Guarantor shall contemporaneously provide written notice
thereof to the holders of the Notes accompanied by an executed Subsidiary
Guaranty Agreement of such Subsidiary Guarantor and such other documentation as
is required by Section 9.8(a) and (iii) at the time of such release and
discharge, no Default or Event of Default has occurred and is continuing or
would result from such release and the Company has delivered a certificate of a
Responsible Officer to the holders of the Notes certifying to such effect.

         (e) The holders of the Notes acknowledge and agree that the Liens of
the Collateral Documents in respect of all or any part of the Collateral therein
described may be released in the manner and upon the terms and conditions
provided in the Intercreditor Agreement, provided, that in the event the Liens
of the Security Documents for any reason whatsoever re-attach pursuant to the
terms and provisions of the Security Documents or any other Bank Document, then
the Lien and security interest of the Security Documents shall ipso facto again
secure the holders of the Notes on an equal and pro rata basis.

         (f) The Company agrees that it will not, nor will it permit any
Subsidiary or Affiliate to, directly or indirectly, pay or cause to be paid any
consideration or remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any creditor of the Company, of any Subsidiary
Guarantor or any Affiliate as consideration for or as an inducement to the
entering into by any such creditor of any release or discharge of any Subsidiary
Guarantor with respect to any liability of such Subsidiary Guarantor as an
obligor or guarantor under or in respect of Indebtedness of the Company, unless
such consideration or remuneration is concurrently paid, on the same terms,
ratably to the holders of all of the Notes then outstanding.

         Section 9.9.  Environmental Reports. If a Default or Event of Default
caused by reason of a breach of Section 9.1 (as such Section relates to
Environmental Laws) shall have occurred and be continuing, at the request of the
Required Holders through the Collateral Agent, the Company, at its sole cost and
expense, shall provide to each of the holders of the Notes within 45 days after
such request an environmental site assessment report for the properties which
are the subject of such Default or Event of Default prepared by an environmental
consulting firm acceptable to the Collateral Agent and consented to by the
Company (which consent shall not be unreasonably withheld or delayed),
indicating the presence or absence of any Hazardous Materials and the estimated
cost of any compliance or remedial action in connection with such properties.

         Section 9.10. Environmental Indemnities. The Company hereby agrees to
indemnify, defend and hold harmless each holder of Notes, the Collateral Agent
and each of their respective officers, directors, employees, agents,
consultants, attorneys, contractors, affiliates, successors, assigns or
transferees (each an "Indemnified Party") from and against, and reimburse said

                                      -27-

Persons in full with respect to, any and all loss, liability, damage, fines,
penalties, costs and expenses, of every kind and character, including reasonable
attorneys' fees and court costs, known or unknown, fixed or contingent,
occasioned by or associated with any claims, demands, causes of action, suits
and/or enforcement actions, including any administrative or judicial
proceedings, and any remedial, removal or response actions ever asserted,
threatened or instituted against any Indemnified Party by any Persons, including
any Governmental Authority, arising out of or related to: (i) the breach of any
representation or warranty of the Company contained in Section 5.18 set forth
herein; (ii) the failure of the Company to perform, or to cause its Subsidiaries
to perform, any of the covenants contained in Section 9.1 or 9.2; or (iii) the
ownership, construction, occupancy, operation, or use of any property of the
Company or any Subsidiary or any property on which the Company or any Subsidiary
may conduct any operations. THE FOREGOING INDEMNITY OBLIGATIONS OF THE COMPANY
FOR THE BENEFIT OF ANY INDEMNIFIED PARTY SHALL EXTEND TO ALL INDEMNIFIED
LIABILITIES, INCLUDING, WITHOUT LIMITATION, ANY INDEMNIFIED LIABILITIES ARISING
FROM OR ATTRIBUTED TO THE NEGLIGENCE OF ANY INDEMNIFIED PARTY BUT SHALL NOT
EXTEND TO ANY INDEMNIFIED LIABILITIES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PARTY.

         Section 9.11. Appointment of Corporate Trustee and Modification of
Security Documents. In the event that First Union National Bank resigns as
Collateral Agent and subject to the rights of the other Secured Creditors
pursuant to the Intercreditor Agreement, the Company will, at any time upon the
request of the Required Holders, join in modifications to the Security Documents
in order to provide for a substitute or successor Collateral Agent thereunder or
for any trustee, assignee, mortgagee or secured party thereunder to be a
corporate fiduciary selected by the Required Holders and to incorporate such
provisions relating thereto as the corporate fiduciary or the Required Holders
may reasonably request.

         Section 9.12. Maintenance of Committed Revolving Facility. The Company
will at all times maintain a Committed Revolving Facility.

         Section 9.13. Employee Benefits. The Company will, and will cause each
of its Subsidiaries to,

         (a) (i) notify the holders of the Notes promptly of the establishment
or joinder of any Plan, and, (ii) prior to (x) the establishment of any "welfare
plan" (as defined in Section 3(1) of ERISA) covering any employee of such Person
for any period after such employee's termination of employment other than such
period required by the Consolidated Omnibus Budget Reconciliation Act of 1986 or
"defined benefit plan" (as defined in Section 3(35) of ERISA) or (y) joinder of,
or contribution to, any multiemployer plan as defined under Section 3(37) of
ERISA, to obtain the Required Holders' prior written approval of such
establishment, joinder or contribution;

         (b) at all times make prompt payments or contributions to meet the
minimum funding standards of Section 412 of the Internal Revenue Code of 1986,
as amended, with respect to each Plan;

                                      -28-

         (c) promptly after the filing thereof, furnish to the holders of the
Notes a copy of any report required to be filed pursuant to Section 103 of ERISA
in connection with each Plan for each Plan year, including but not limited to
the Schedule B attached thereto, if applicable; and

         (d) promptly furnish such additional information concerning any Plan as
the holder of any Note may from time to time request.

         Section 9.14. Location of Collateral. The Company will, and will cause
each of its Subsidiaries to, keep all Collateral, other than inventory in
transit, motor vehicles, residential tanks and bulk storage tanks, at one or
more of the locations set forth on Schedule 9.14 hereto and not remove any such
Collateral therefrom except for, for so long as there exists no Event of
Default, (i) inventory sold in the ordinary course of business; (ii)
dispositions of obsolete equipment to the extent permitted under this Agreement
and the other Note Documents; and (iii) the storage of inventory or equipment at
locations within the continental United States other than those described on
Schedule 9.14 hereto provided that (x) the Company shall take all necessary
actions necessary for the Collateral Agent's Lien on such inventory and
equipment to continue to be a perfected first priority Lien subject to no other
Lien other than Liens permitted by Section 10.3(a) and (y) the Collateral Agent
shall have received, prior to the relocation of any such equipment or inventory,
a landlord's waiver, acceptable in form and content to the Collateral Agent, if
the premises are leased, and mortgagee's waivers, in each case acceptable in
form and content to the Collateral Agent, from all those who hold a mortgage or
like Lien on such premises.

         Section 9.15. Risk Management Plan. The Company will comply, and
require its Subsidiaries to comply, with (i) the retail and wholesale inventory
distribution and trading procedures, (ii) the dollar and volume limits, and
(iii) all other material provisions of the Risk Management Plan.

         Section 9.16. Delivery of Recorded Mortgages, etc. As soon as
reasonably practicable and in any event on or before August 6, 2002, the Company
will cause to be delivered to the Collateral Agent (i) such evidence as may be
reasonably requested by the Required Holders that (x) the Mortgages shall have
been recorded or filed for record in such public offices as may be necessary in
order to perfect or provide third parties with constructive notice of the Liens
granted or conveyed thereby, and (y) all fees, charges and taxes in connection
with the recordation or filing and re-recordation or re-filing of such Mortgages
shall have been paid in full, and (ii) title policy endorsements in form and
substance reasonably satisfactory to your special counsel concerning all such
Mortgages encumbering real property with a fair market value in excess of
$200,000 (other than the Mortgage encumbering the real property located in
Center, Texas for which no title policy or title policy endorsement shall be
required), which endorsements shall amend the existing title policies on the
existing mortgages, security deeds and deeds of trust in favor of First Union
National Bank, as Administrative Agent, to secure the Mortgages as first
priority Liens on the property encumbered thereby, subject to no Liens except
for Liens permitted under this Agreement.

                                      -29-

SECTION 10. Negative Covenants.

         The Company covenants that so long as any of the Notes are outstanding
or any amounts are owed by the Company to any holder hereunder or under any of
the other Note Documents:

         Section 10.1. Financial Covenants. The Company will not permit:

         (a) Total Indebtedness to EBITDA Ratio. At any time, the ratio of (i)
Total Indebtedness to (ii) EBITDA for the four fiscal quarters most recently
ended to be greater than 4.50 to 1.00; provided, that if (x) the Bank Credit
Agreement is hereafter amended to allow the Company to have a Consolidated
Leverage Ratio (as defined therein as of the date of Closing) as of the last day
of any fiscal quarter to be more than 4.50 to 1.00, (y) no Default or Event of
Default has occurred and is continuing on the date that such amendment to the
Bank Credit Agreement is effective, and (z) any remuneration (whether by way of
supplemental or additional interest, fee or otherwise) paid to any holder of
Indebtedness under the Bank Credit Agreement as consideration for or as an
inducement to the entering into any such amendment to the Bank Credit Agreement,
is concurrently paid on the same terms, ratably to each holder of Notes then
outstanding, then the holders agree to amend the foregoing ratio (but not the
definitions used in calculating such ratio) to permit a correspondingly greater
ratio of Total Indebtedness to EBITDA (but in any event not to exceed 5.00 to
1.00) for the same period as such increased Consolidated Leverage Ratio is
permitted by the Bank Credit Agreement pursuant to an amendment in form and
substance reasonably satisfactory to the Required Holders. Such amendment shall
be executed and delivered by each holder of the Notes to the Company within 30
days of the request by the Company for same and shall, subject to the
satisfaction of clauses (x), (y) and (z) of the proviso to the immediately
preceding sentence, be effective as of the effective date of the corresponding
amendment to the Bank Credit Agreement. If such amendment is not executed and
delivered by Required Holders within 30 days of the Company's request hereunder,
the ratio of Total Indebtedness to EBITDA permitted by the first sentence of
this Section 10.1(a) (but not the definitions used in calculating such ratio)
shall be deemed automatically amended, subject to the satisfaction of clauses
(x), (y) and (z) of the proviso to such sentence, effective as of the effective
date of the corresponding amendment to the Bank Credit Agreement to permit a
correspondingly greater ratio of Total Indebtedness to EBITDA (but in any event
not to exceed 5.00 to 1.00) for the same period as such increased Consolidated
Leverage Ratio is permitted by the Bank Credit Agreement. In the event any such
amendment is deemed automatically effective as aforesaid, the Company will
promptly execute and deliver at its expense (including, without limitation, the
fees and expenses of counsel for the holders of the Notes) an amendment to this
Agreement in form and substance satisfactory to the Required Holders evidencing
the amendment of this Agreement to include such revised ratio, provided that the
execution and delivery of an amendment by the Company and Required Holders shall
not be a precondition to the effectiveness of any such deemed amendment, but
shall merely be for the convenience of the parties hereto.

         (b) Total Interest Coverage Ratio. At any time, the ratio of (i) EBITDA
to (ii) Consolidated Total Interest Expense for the four fiscal quarters most
recently ended, to be less than 2.50 to 1.00.

                                      -30-

         Section 10.2. Limitation on Restricted Payments. The Company will not
and will not permit any Subsidiary to directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Payment; provided that, if no
Default or Event of Default shall have occurred and be continuing, both before
and after giving effect to such Restricted Payment, the Company may from time to
time pay cash distributions, free and clear of any Liens, to the MLP in an
amount not to exceed the Available Cash at such time.

         Section 10.3. Liens, Indebtedness, and Other Restrictions. The Company
will not and will not permit any Subsidiary to:

         (a) Liens. Create, assume or suffer to exist any Lien upon any of its
properties or assets, whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of the Notes in accordance
with the provisions of Section 9.7), except:

                  (i)     Liens for taxes, assessments or governmental charges
             not delinquent or being contested in good faith and by appropriate
             proceedings and for which adequate reserves in accordance with GAAP
             are maintained on the Company's books;

                  (ii)    Liens arising out of deposits in connection with
             workers' compensation, unemployment insurance, old age pensions or
             other social security or retirement benefits legislation (other
             than ERISA);

                  (iii)   deposits or pledges to secure bids, tenders, contracts
             (other than contracts for the payment of money), leases, statutory
             obligations, surety aid, appeal bonds, and other obligations of
             like nature arising in the ordinary course of the Company's
             business;

                  (iv)    Liens imposed by law, such as mechanics', workers',
             materialmen's, carriers or other like liens (excluding, however,
             any statutory or other Lien in favor of a landlord under a written
             or oral lease) arising in the ordinary course of the Company's
             business which secure the payment of obligations which are not past
             due or which are being diligently contested in good faith by
             appropriate proceedings and for which adequate reserves in
             accordance with GAAP are maintained on the Company's books;

                  (v)     rights of way, zoning restrictions, easements and
             similar encumbrances affecting the Company's real property which do
             not materially interfere with the use of such property;

                  (vi)    Liens securing the Notes and the payment, performance
             and observance of the other obligations under this Agreement and
             the other Note Documents;

                  (vii)   Liens in favor of the Collateral Agent securing the
             payment, performance and observance of obligations under the Bank
             Documents and Hedging Agreements with Bank Lenders or Affiliates
             thereof, (x) which are pari passu with the Liens in favor of the
             Collateral Agent securing the Notes and the

                                      -31-

             payment, performance and observance of the other obligations under
             this Agreement and the other Note Documents, and (y) which are
             subject to the Intercreditor Agreement;

                   (viii)  Liens in favor of the Collateral Agent securing the
             payment, performance and observance of obligations with respect to
             Permitted Additional Private Placement Debt, (x) which are pari
             passu with the Liens in favor of the Collateral Agent securing the
             Notes and Indebtedness under the Bank Documents and Hedging
             Agreements and the payment, performance and observance of the other
             obligations under this Agreement, the other Note Documents and the
             Bank Documents, and (y) which are subject to the provisions of the
             Intercreditor Agreement, as amended to provide for the Permitted
             Additional Private Placement Debt pursuant to an amendment in form
             and substance satisfactory to the Required Holders;

                   (ix)    purchase money security interests for the purchase of
             equipment to be used in the Company's business, encumbering only
             the equipment so purchased, and which secures only the
             purchase-money Indebtedness incurred to acquire the equipment so
             purchased and the aggregate outstanding principal amount of which
             Indebtedness (with respect to the Company and all Subsidiaries)
             does not exceed $5,000,000 at any time; and

                   (x)     Liens securing the Mortgage Note Payable and
             Automobile Note Payable referred to in Schedule 5.15.

         (b) Subsidiary Indebtedness. Permit any Subsidiary to directly or
indirectly create, incur, assume, suffer to exist or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:

             (i)   Indebtedness represented by a Subsidiary Guaranty Agreement;

             (ii)  Indebtedness represented by any other Guaranty of
         Indebtedness of the Company under the Bank Documents, so long as each
         beneficiary of such Guaranty is a party to the Intercreditor Agreement
         and the Subsidiary providing such Guaranty is also a party to a
         Subsidiary Guaranty Agreement;

             (iii) Indebtedness represented by any other Guaranty of
         Indebtedness of Permitted Additional Private Placement Debt, so long as
         each beneficiary of such Guaranty is a party to the Intercreditor
         Agreement, as amended to provide for the Permitted Additional Private
         Placement Debt pursuant to an amendment in form and substance
         satisfactory to the Required Holders, and the Subsidiary providing such
         Guaranty is also a party to a Subsidiary Guaranty Agreement;

             (iv)  Indebtedness owed to the Company or to a Wholly-Owned
         Subsidiary of the Company; and

             (iv)  Indebtedness secured by Liens permitted by clause (x) of
         Section 10.3(a) above.

                                      -32-

         (c) Loans, Advances, Investments and Contingent Liabilities. Make or
permit to remain outstanding any loan or advance to, or extend credit (other
than trade credit extended in the normal course of business to any Person that
is not a Subsidiary of the Company) to, or make or permit to remain outstanding
any Guaranty in connection with the obligations, stock or dividends of, or own,
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person (any of the
foregoing, an "Investment"), except that the Company or any Subsidiary may:

                (i)   endorse negotiable instruments for collection in the
             ordinary course of business;

                (ii)  provide Guaranties with respect to the Indebtedness and
             other obligations of the Company and its Subsidiaries under the
             Note Documents and, so long as all beneficiaries of such Guaranties
             are parties to the Intercreditor Agreement and the Subsidiaries
             providing such Guaranties are also parties to Subsidiary Guaranty
             Agreements, Guaranties with respect to Indebtedness and other
             obligations of the Company under the Bank Documents;

                (iii) own, purchase or acquire stock or other equity interests
             of, or make capital contributions to, a Subsidiary or of a Person
             which immediately after such purchase, acquisition or contribution
             will be a Subsidiary of the Company;

                (iv)  own, purchase or acquire (x) certificates of deposit of
             commercial banks organized under the laws of the United States or
             any state thereof (having capital resources in excess of
             $25,000,000) and commercial paper rated A-1 by Standard & Poor's
             Ratings Group or P-1 by Moody's Investors Service, Inc., in each
             case due within one year from the date of purchase and payable in
             the United States in United States dollars, (y) obligations of the
             United States Government or any agency thereof, and obligations
             guaranteed by the United States Government, in any case maturing
             within one year after the acquisition thereof, and (z) money market
             mutual funds that are classified as current assets in accordance
             with GAAP, that are rated "AAA" by Standard & Poor's Ratings Group
             and that invest solely in investments described in clauses (x) and
             (y) maturing not more than one year after the acquisition thereof,
             which funds are managed by Persons having capital and surplus in
             excess of $100,000,000;

                (v)   Investments (including debt obligations and Capital Stock)
             received in connection with the bankruptcy or reorganization of
             suppliers and customers and in settlement of delinquent obligations
             of, and other disputes with, customers and suppliers arising in the
             ordinary course of business;

                (vi)  deposits made in the ordinary course of business in
             connection with the purchase price of goods and services; and

                (vii) other Investments not to exceed $1,000,000 in aggregate
             amount at any one time outstanding.

                                      -33-

         (d) Consolidation, Merger, Transfer of Assets, Acquisition, etc. (i)
Merge or consolidate with or into any Person, (ii) convey, transfer, lease or
otherwise dispose of all or substantially all of its assets in any transaction
or series of transactions to any Person(s), (iii) except for Permitted
Acquisitions, acquire all or substantially all of the assets or Capital Stock of
any other Person, (iv) adopt or effect any plan of reorganization,
recapitalization, liquidation or dissolution or (v) except for Permitted
Acquisitions, acquire any properties or assets other than in the ordinary course
of business; provided that (x) any Subsidiary may merge with the Company
(provided that the Company shall be the sole continuing or surviving Person) or
with any one or more other Subsidiaries (provided that each surviving Person
shall be a Wholly-Owned Subsidiary) and (y) any Subsidiary may convey, transfer,
lease or otherwise dispose of all or substantially all of its assets to the
Company or to another Subsidiary (and may liquidate or dissolve thereafter).

         (e) Limitation on Asset Dispositions. Except as permitted by Section
10.3(d), make or permit to be made any Asset Disposition unless: (i) in the good
faith opinion of the Company, the Asset Disposition is in exchange for
consideration having a Fair Market Value at least equal to that of the property
exchanged and is in the best interest of such Company or such Subsidiary; (ii)
immediately after giving effect to the Asset Disposition, no Default or Event of
Default would exist; and (iii) immediately after giving effect to the Asset
Disposition, the aggregate value (valued, for purposes of determining compliance
with the percentage limitations set forth below, at the greater of net book
value or the Net Proceeds received by the Company and its Subsidiaries in
connection with such Asset Disposition) of all property that was the subject of
any Asset Disposition occurring (x) during the period of four consecutive fiscal
quarters of the Company ending with and including the fiscal quarter in which
such Asset Disposition is made does not exceed 10% of Consolidated Tangible
Assets, and (y) on or after the date of Closing does not exceed 25% of
Consolidated Tangible Assets, in each case with Consolidated Tangible Assets
being determined as of the end of the most recently ended fiscal year of the
Company; provided, that if all or any portion of the Net Proceeds of any such
Asset Disposition, to the extent that such amount exceeds the amount permitted
under clause (x) or clause (y) above, as the case may be, is delivered, within
two Business Days after such Asset Disposition, to the Collateral Agent to be
held by it as security under the Security Documents and invested in Investments
selected by the Company and described in clause (iv) of Section 10.3(c), and are
subsequently applied to a Property Reinvestment Application or to a Debt
Prepayment Application within 180 days after such Asset Disposition, then such
Asset Disposition, solely for purposes of determining compliance with this
clause (iii) as of a date on or after the date of such Asset Disposition, shall
be deemed not to constitute an Asset Disposition to the extent of the Net
Proceeds so delivered. If the Company or any of its Subsidiaries shall deliver
all or any portion of the Net Proceeds of an Asset Disposition to the Collateral
Agent as provided in the preceding sentence and either such Net Proceeds have
not been applied in their entirety to a Property Reinvestment Application, or
the Company has not given notice of a Debt Prepayment Application with respect
thereto pursuant to Section 8.3(a), within 150 days after such Asset
Disposition, the Company shall notify the Collateral Agent and the holder of
each Note of whether the Company or one of its Subsidiaries intends to make a
Property Reinvestment Application or whether the Company intends to make a Debt
Prepayment Application (or any combination thereof) with such Net Proceeds and
the approximate date (which shall occur within 180 days after such Asset
Disposition) on which the same is to be consummated. To the extent that the Net
Proceeds from any Asset Disposition are required to be applied to a Property

                                      -34-

Reinvestment Application or a Debt Prepayment Application in order to avoid an
Event of Default under the first sentence of this Section 10.3(e) but have not
been so applied within 180 days after such Asset Disposition, the Company hereby
irrevocably authorizes and instructs the Collateral Agent to apply such Net
Proceeds on behalf of the Company to a Debt Prepayment Application on the
180/th/ day after such Asset Disposition.

         In the event that the Company or any of its Subsidiaries shall desire a
release of the Liens in favor of the Collateral Agent insofar as they encumber
the property that is the subject of an Asset Disposition permitted by this
Section 10.3(e), the Company shall deliver to the Collateral Agent (and shall
simultaneously send copies to the holders of the Notes) an Officer's Certificate
containing a request for release of such Liens and stating that such Asset
Disposition and Lien release are permitted by the terms of this Agreement.

         (f) Sale or Discount of Receivables. Sell, discount (other than to the
extent of finance and interest charges included therein) or otherwise sell for
less than face value thereof, any of its notes or accounts receivable, except
notes or accounts receivable the collection of which is doubtful in accordance
with GAAP.

         (g) Transactions With Affiliates. Enter into or be a party to any
transaction or arrangement, including without limitation, the purchase, sale or
exchange of property of any kind or the rendering of any service, with any
Affiliate, except in the ordinary course of business (other than Permitted
Acquisitions that are structured in substantially the same manner as the IPC
Acquisition) and pursuant to the reasonable requirements of such Person's
business and upon fair and reasonable terms substantially as favorable to such
Person as those which would be obtained in a comparable arms-length transaction
with a non-Affiliate.

         (h) Prohibition Against Sale-Leaseback Transactions. Enter into any
arrangement with any lender or investor or to which such lender or investor is a
party providing for the leasing by the Company or any Subsidiary of real or
personal property which has been or is to be sold or transferred by the Company
or any Subsidiary to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or rental obligations of the Company or any Subsidiary except for such
transactions which, together with all other such transactions entered into by
the Company and its Subsidiaries after the date hereof, involve real and
personal property having a fair market value not exceeding $5,000,000 in the
aggregate.

         Section 10.4. Changes in Accounting Principles; Fiscal Year. The
Company will not and will not permit any Subsidiary to make any change in its
principles or methods of accounting as currently in effect, except such changes
as are permitted by GAAP, or change its fiscal year from its present fiscal year
(fiscal year end of September 30).

         Section 10.5. Subsidiaries; Change of Business. The Company will not,
and will not permit any Subsidiary to, create any Subsidiary, or manufacture any
goods, render any services or otherwise enter into any business which is not
substantially similar to that existing on the date of Closing.

         Section 10.6. Modification of Organizational Documents. The Company
will not and will not permit any Subsidiary to amend, supplement, alter,
restate, terminate or otherwise

                                      -35-

modify its certificate or articles of incorporation, bylaws, certificate of
formation, limited liability company agreement or other organizational
documents, as applicable, in any way which would in any manner adversely affect
the rights of the holders of Notes or the Collateral Agent or the obligations or
covenants of the Company and its Subsidiaries hereunder or under any of the
other Note Documents. Without limitation of the foregoing, the Company will not
and will not permit any Subsidiary to change its legal name or jurisdiction of
incorporation or organization, as applicable, unless (a) such Person shall have
given to the Collateral Agent not less than 60 days' prior written notice of its
commencing to do so (or such prior notice as is otherwise acceptable to the
Collateral Agent), clearly describing such new name or jurisdiction, as
applicable, and such other information in connection therewith as the Collateral
Agent may reasonably request and (b) with respect to such new name or
jurisdiction, such Person shall have taken all reasonable action, reasonably
satisfactory to the Collateral Agent, to maintain the security interest of the
Collateral Agent in the Collateral at all times fully perfected and in full
force and effect.

         Section 10.7.  Conflicting Agreements. The Company will not and will
not permit any of its Subsidiaries to enter into or permit to exist any
agreement to which any such entity is a party or by which any such entity is
bound (i) which would cause a Default or Event of Default hereunder or (ii)
which contains any provision which would be violated or breached by the
performance of the obligations of the Company and its Subsidiaries hereunder or
under any of the other Note Documents.

         Section 10.8.  Limitation on Certain Restrictive Agreements. The
Company will not and will not permit any of its Subsidiaries to enter into or
suffer to exist any contractual obligation, other than the Note Documents and
the Bank Documents, which in any way restricts the ability of the Company or any
of its Subsidiaries to (i) create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues (provided that any Capital Lease or
instrument or agreement relating to purchase money indebtedness otherwise
permitted hereunder may contain provisions prohibiting the creation or existence
of Liens on the specific property or assets subject to such Capital Lease or in
respect of which such purchase money indebtedness was incurred), (ii) make any
prepayments or purchases of the Notes required under this Agreement, (iii) make
any dividends or distributions, or any payments required under this Agreement or
any other Note Document or (iv) transfer any of its property or assets to the
Company or a Subsidiary.

         Section 10.9.  Limitation on Issuance of Capital Stock by Subsidiaries.
The Company will not permit any Subsidiary to issue any Capital Stock of such
Subsidiary except to the Company or another Subsidiary.

         Section 10.10. Limitation on Sale of Capital Stock or Indebtedness of
Subsidiaries. The Company will not and will not permit any Subsidiary to sell or
otherwise dispose of, or part with control of, any Capital Stock or any
Indebtedness of any Subsidiary except to the Company or another Subsidiary.

         Section 10.11. Financial Covenants and Collateral Provisions of Credit
Agreement and other Restricted Agreements. The Company will not, and will not
permit any of its Subsidiaries to enter into any indenture, agreement or other
instrument under which the Company or its Subsidiaries could issue or permit to
remain outstanding Indebtedness in an aggregate principal amount greater than
$500,000 (a "Restricted Agreement"), or agree to any amendment, waiver,

                                      -36-

consent, modification, refunding, refinancing or replacement of the Bank Credit
Agreement or any other Restricted Agreement, in either case with terms the
effect of which is to (x) include a Financial Covenant which is not contained in
this Agreement, (y) revise or alter any Financial Covenant contained therein the
effect of which is to increase or expand the restriction on the Company or any
Subsidiary, or (z) except for Liens permitted under the terms of this Agreement,
grant collateral for the obligations of the Company or any Subsidiary
thereunder, in each case unless the Company concurrently incorporates herein
such additional, altered or revised Financial Covenant or grant of collateral
(as the case may be). The incorporation of each such additional Financial
Covenant, restriction or grant of collateral (as the case may be) is hereby
deemed to occur automatically and concurrently by reason of the execution of
this Agreement without any further action or the execution of any additional
document by any of the parties to this Agreement, and each such covenant or
restriction so incorporated shall include the same terms, conditions and
limitations (temporal or otherwise) as the covenant or restriction contained in
the Bank Credit Agreement or other applicable Restricted Agreement (in each case
as such agreement is in effect on the date such incorporation occurs). Upon the
request of the Required Holders, the Company will promptly execute and deliver
at its expense (including, without limitation, the fees and expenses of counsel
for the holders of the Notes) an amendment to this Agreement in form and
substance satisfactory to the Required Holders evidencing the amendment of this
Agreement to include such additional, altered or revised Financial Covenants,
provided that the execution and delivery of such amendment shall not be a
precondition to the effectiveness of such amendment as provided for in this
Section 10.2, but shall merely be for the convenience of the parties hereto.
Without limiting the foregoing, neither the Company nor any Subsidiary nor any
Affiliate, directly or indirectly, will offer any economic inducement (including
without limitation any collateral) to any Bank Lender or to any other Person who
is a party to any other Restricted Agreement for the purpose of inducing such
Bank Lender or such other Person to enter into any waiver of any event of
default under the Bank Credit Agreement or such other Restricted Agreement or
event which with the lapse of time or the giving of notice, or both, would
constitute such an event of default, unless the same such economic inducement
has been concurrently offered on a pro-rata basis to all of the holders of the
Notes and, if a waiver of the corresponding Default of Event of Default is made
by Required Holders hereunder, such economic inducement has been paid on a
pro-rata basis to all of the holders of the Notes (it being understood and
agreed that the offering of such economic inducement to the holders of the Notes
shall not be deemed or construed to obligate any such holder to enter into any
waiver of any Default or Event of Default hereunder).

         Section 10.12. Limitations on Swaps. The Company will not and will not
permit any Subsidiary to enter into any Swap other than Swaps entered into in
the ordinary course of business with a term of less than 24 months if, after
entering into such Swap, the difference between the aggregate amount of (i)
Swaps of the Company and its Subsidiaries for the purchase of volumes of propane
and (ii) Swaps of the Company and its Subsidiaries for the delivery of propane
would exceed 5% of the gallons of propane delivered in the prior 12-month
period; provided that for the purposes of determining compliance with the
foregoing restrictions for any period after a Permitted Acquisition is
consummated, the total gallons of propane delivered in the prior 12-month period
shall be calculated after giving effect on a pro forma basis to any such
Permitted Acquisition occurring during the period commencing on the first day of
such 12-month period to and including the date of such transaction (as used in
this Section 10.12, the

                                      -37-

"Reference Period"), as if such Permitted Acquisition occurred on the first day
of the Reference Period.

         Section 10.13. Limitation on Put Agreements. The Company will not and
will not permit any Subsidiary to enter into any put agreement or similar
agreement with any Person granting such Person put rights or similar
arrangements with respect to the Capital Stock of the Company or any of its
Subsidiaries.

SECTION 11. Events of Default.

         An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:

             (a) the Company defaults in the payment of any principal or
         Make-Whole Amount, if any, on any Note when the same becomes due and
         payable, whether at maturity or at a date fixed for prepayment or by
         declaration or otherwise; or

             (b) the Company defaults in the payment of any interest on any Note
         for more than three days after the same becomes due and payable; or

             (c) the Company defaults in the performance of or compliance with
         any term contained in paragraph (e) of Section 7.1, any term contained
         in Sections 9.1, 9.5 or 9.6 through 9.10, or any term contained in
         Sections 10.1 through 10.13; or

             (d) IPCH Acquisition Corp, the MLP, the Company or any Subsidiary
         defaults in the performance of or compliance with any term contained
         herein (other than those referred to in paragraphs (a), (b) and (c) of
         this Section 11) or in any of the other Note Documents and such default
         is not remedied within 30 days after the earlier of (i) a Responsible
         Officer obtaining actual knowledge of such default and (ii) the Company
         receiving written notice of such default from the Collateral Agent or
         any holder of a Note (any such written notice to be identified as a
         "notice of default" and to refer specifically to this clause (d) of
         this Section 11); or

             (e) any representation or warranty made in writing by or on behalf
         of IPCH Acquisition Corp, the MLP, the Company or any Subsidiary, or by
         any officer of IPCH Acquisition Corp, the MLP, the Company or any
         Subsidiary in this Agreement or any other Note Document or writing
         furnished in connection with the transactions contemplated hereby or
         thereby proves to have been false or incorrect in any material respect
         on the date as of which made; or

             (f) (i) IPCH Acquisition Corp, the MLP, the Company or any
         Subsidiary is in default (as principal or as guarantor or other surety)
         in the payment of any principal of or premium or make-whole amount or
         interest on any Indebtedness that is outstanding in an aggregate
         principal amount of at least $1,000,000 beyond any period of grace
         provided with respect thereto, or (ii) IPCH Acquisition Corp, the MLP,
         the Company or any Subsidiary is in default in the performance of or
         compliance with any term of any evidence of any Indebtedness in an
         aggregate outstanding principal amount of at least $1,000,000 or of any
         mortgage, indenture or other agreement relating thereto or any other

                                      -38-

         condition exists, and as a consequence of such default or condition
         such Indebtedness has become, or has been declared (or one or more
         Persons are entitled to declare such Indebtedness to be), due and
         payable before its stated maturity or before its regularly scheduled
         dates of payment, or (iii) as a consequence of the occurrence or
         continuation of any event or condition (other than the passage of time
         or the right of the holder of Indebtedness to convert such Indebtedness
         into equity interests), (x) the Company or any Subsidiary has become
         obligated to purchase or repay Indebtedness before its regular maturity
         or before its regularly scheduled dates of payment in an aggregate
         outstanding principal amount of at least $1,000,000, or (y) one or more
         Persons have the right to require the Company or any Subsidiary so to
         purchase or repay such Indebtedness; or

             (g) IPCH Acquisition Corp, the MLP, the Company or any Subsidiary
         (i) is generally not paying, or admits in writing its inability to pay,
         its debts as they become due, (ii) files, or consents by answer or
         otherwise to the filing against it of, a petition for relief or
         reorganization or arrangement or any other petition in bankruptcy, for
         liquidation or to take advantage of any bankruptcy, insolvency,
         reorganization, moratorium or other similar law of any jurisdiction,
         (iii) makes an assignment for the benefit of its creditors, (iv)
         consents to the appointment of a custodian, receiver, trustee or other
         officer with similar powers with respect to it or with respect to any
         substantial part of its property, (v) is adjudicated as insolvent or to
         be liquidated, or (vi) takes limited liability company, corporate or
         partnership or other like action for the purpose of any of the
         foregoing; or

             (h) a court or governmental authority of competent jurisdiction
         enters an order appointing, without consent by IPCH Acquisition Corp,
         the MLP, the Company or any of its Subsidiaries, a custodian, receiver,
         trustee or other officer with similar powers with respect to it or with
         respect to any substantial part of its property, or constituting an
         order for relief or approving a petition for relief or reorganization
         or any other petition in bankruptcy or for liquidation or to take
         advantage of any bankruptcy or insolvency law of any jurisdiction, or
         ordering the dissolution, winding-up or liquidation of IPCH Acquisition
         Corp, the MLP, the Company or any Subsidiary, or any such petition
         shall be filed against IPCH Acquisition Corp, the MLP, the Company or
         any of its Subsidiaries and such petition shall not be dismissed within
         60 days; or

             (i) a final judgment or judgments for the payment of money
         aggregating in excess of $1,000,000 are rendered against one or more of
         IPCH Acquisition Corp, the MLP, the Company or any Subsidiary and which
         judgments are not, within 30 days after entry thereof, bonded,
         discharged or stayed pending appeal, or are not discharged within 30
         days after the expiration of such stay; or

             (j) if (i) any Plan shall fail to satisfy the minimum funding
         standards of ERISA or the Code for any plan year or part thereof or a
         waiver of such standards or extension of any amortization period is
         sought or granted under section 412 of the Code, (ii) a notice of
         intent to terminate any Plan shall have been or is reasonably expected
         to be filed with the PBGC or the PBGC shall have instituted proceedings
         under ERISA Section 4042 to terminate or appoint a trustee to
         administer any Plan or the PBGC shall have notified the Company or any
         ERISA Affiliate that a Plan may become a subject of any such
         proceedings, (iii) the aggregate "amount of unfunded benefit
         liabilities" (within

                                      -39-

         the meaning of Section 4001(a)(18) of ERISA) under all Plans,
         determined in accordance with Title IV of ERISA, shall exceed
         $1,000,000, (iv) the Company or any ERISA Affiliate shall have
         incurred or is reasonably expected to incur any liability pursuant
         to Title I or IV of ERISA or the penalty or excise tax provisions of
         the Code relating to employee benefit plans, (v) the Company or any
         ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the
         Company or any Subsidiary establishes or amends any employee welfare
         benefit plan that provides post-employment welfare benefits in a
         manner that would increase the liability of the Company or any
         Subsidiary thereunder; and any such event or events described in
         clauses (i) through (vi) above, either individually or together with
         any other such event or events, could reasonably be expected to have
         a Material Adverse Effect; or

             (k) any material provision of the Limited Guaranty Agreement, the
         Parent Guaranty Agreement, any Subsidiary Guaranty Agreement or any
         guaranty agreement executed and delivered pursuant to Section 9.8 of
         this Agreement shall for any reason cease to be valid and binding on
         the applicable guarantor or any guarantor shall so assert in writing;
         or

             (l) any material provision of any Security Document shall for any
         reason cease to be valid and binding on IPCH Acquisition Corp, the MLP,
         the Company or any Subsidiary that is a party thereto, or the MLP, the
         Company or any Subsidiary shall so assert in writing, or any Security
         Document shall for any reason cease to create a valid, first perfected
         Lien in all or any portion of the Collateral purported to be covered
         thereby; or

             (m) any "Event of Default" shall have occurred and be continuing
         under any Note Document (including, without limitation the Parent
         Guaranty Agreement and each Security Document).

As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

SECTION 12. Remedies on Default, Etc.

         Section 12.1. Acceleration.

         (a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.

         (b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 33-1/3% in principal amount of the Notes at the
time outstanding may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.

                                      -40-

         (c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.

         Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for), and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

         Section 12.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, (a) the
holder of any Note at the time outstanding may proceed to protect and enforce
the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise and (b) both the Collateral Agent and
the holders of the Notes may exercise any rights or remedies in their respective
capacities under the Security Documents in accordance with the provisions
thereof.

         Section 12.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 12.1, the
holders of not less than 66-2/3% in principal amount of the Notes then
outstanding, by written notice to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of and Make-Whole Amount, if any, on any
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and Make-Whole Amount,
if any, and (to the extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) neither the Company nor any
guarantor or other Person shall have paid any amounts which have become due
solely by reason of such declaration, (c) all Events of Default and Defaults,
other than non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (d)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.

         Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No

                                      -41-

right, power or remedy conferred by this Agreement, any Note, any Security
Document or the Intercreditor Agreement upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise. Without
limiting the obligations of the Company under Section 15, the Company will pay
to the holder of each Note on demand such further amount as shall be sufficient
to cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.

         Section 12.5. Notice of Acceleration or Rescission. Whenever any Note
shall be declared immediately due and payable pursuant to Section 12.1 or any
such declaration shall be rescinded and annulled pursuant to Section 12.3, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.

SECTION 13. Registration; Exchange; Substitution of Notes.

         Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.

         Section 13.2. Transfer and Exchange of Notes. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or its attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, of the same series and in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form of Exhibit A-1, Exhibit A-2 or Exhibit
A-3, as the case may be. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such transfer of Notes.
Notes shall not be transferred in denominations of less than $100,000; provided
that if necessary to enable the registration of transfer by a holder of its
entire holding of Notes, one Note may be in a denomination of less than
$100,000. Any transferee, by its acceptance of a Note registered in its name (or
the name of its nominee), shall be deemed to have made the representation set
forth in Section 6.2.

                                      -42-

         Section 13.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and

             (a) in the case of loss, theft or destruction, of indemnity
         reasonably satisfactory to it (provided that if the holder of such Note
         is, or is a nominee for, an original purchaser or another holder of a
         Note with a minimum net worth of at least $25,000,000, such Person's
         own unsecured agreement of indemnity shall be deemed to be
         satisfactory), or

             (b) in the case of mutilation, upon surrender and cancellation
         thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.

SECTION 14. Payments on Notes.

         Section 14.1. Place of Payment. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York, New York at the principal office of The
Bank of New York in such jurisdiction. The Company may at any time, by notice to
each holder of a Note, change the place of payment of the Notes so long as such
place of payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.

         Section 14.2. Home Office Payment. So long as you or your nominee shall
be the holder of any Note, and notwithstanding anything contained in Section
14.1 or in such Note to the contrary, the Company will pay all sums becoming due
on such Note for principal, Make-Whole Amount, if any, and interest by the
method and at the address specified for such purpose below your name in Schedule
A, or by such other method or at such other address as you shall have from time
to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes of the same series
pursuant to Section 13.2. The Company will afford the benefits of this Section
14.2 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this Section 14.2.

                                      -43-

SECTION 15. Expenses, Etc.

         Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by you and each other Purchaser or
holder of a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement, the
Notes, the Security Documents, the Intercreditor Agreement or any other Note
Documents (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement, the Notes, the Security Documents, the Intercreditor
Agreement or any other Note Documents or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement, the Notes, the Security Documents, the Intercreditor Agreement or any
other Note Documents, or by reason of being a holder of any Note, (b) the costs
and expenses, including financial advisors' fees, incurred in connection with
the insolvency or bankruptcy of IPCH Acquisition Corp, the MLP, the Company or
any Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby, by the Notes, any Security Document, the
Intercreditor Agreement or any other Note Document, and (c) the fees and
expenses of the Collateral Agent under and in respect of the Security Documents
and the Intercreditor Agreement. The Company will pay, and will save you and
each other holder of a Note harmless from, all claims in respect of any fees,
costs or expenses, if any, of brokers and finders (other than those retained by
you).

         Section 15.2. Survival. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, the Notes, any Security
Document, the Intercreditor Agreement or any other Note Document, and the
termination of this Agreement, the Security Documents, the Intercreditor
Agreement and the other Note Documents.

SECTION 16. Survival of Representations and Warranties; Entire Agreement.

         All representations and warranties contained herein or in any of the
Security Documents shall survive the execution and delivery of this Agreement,
the Notes, the Security Documents, the Intercreditor Agreement and the other
Note Documents, the purchase or transfer by you of any Note or portion thereof
or interest therein and the payment of any Note, and may be relied upon by any
subsequent holder of a Note, regardless of any investigation made at any time by
or on behalf of you or any other holder of a Note. All statements contained in
any certificate or other instrument delivered by or on behalf of IPCH
Acquisition Corp, the MLP, the Company or any Subsidiary Guarantor pursuant to
this Agreement, any Security Document or any other Note Document shall be deemed
representations and warranties of IPCH Acquisition Corp, the MLP, the Company
and such Subsidiary Guarantor under this Agreement. Subject to the preceding
sentence, this Agreement, the Notes, the Security Documents, the Intercreditor
Agreement and the other Note Documents embody the entire agreement and
understanding between you and

                                      -44-

IPCH Acquisition Corp, the MLP, the Company, the Subsidiary Guarantors, and
supersede all prior agreements and understandings relating to the subject matter
hereof.

SECTION 17. Amendment and Waiver.

         Section 17.1. Requirements. This Agreement, the Notes and the other
Note Documents may be amended, and the observance of any term hereof or of the
Notes may be waived (either retroactively or prospectively), with (and only
with) the written consent of the Company and the Required Holders, except that
(a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6
or 21 hereof, or any defined term (as it is used therein), will be effective as
to you unless consented to by you in writing, (b) no such amendment or waiver
may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20, and (c) the Security
Documents and the Intercreditor Agreement may be amended in accordance with the
terms thereof.

         Section 17.2. Solicitation of Holders of Notes.

         (a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.

         (b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof or of
any Security Document, the Intercreditor Agreement or any Note Document unless
such remuneration is concurrently paid, or security is concurrently granted, on
the same terms, ratably to each holder of Notes then outstanding even if such
holder did not consent to such waiver or amendment.

         Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to
as provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this

                                      -45-

Agreement" and references thereto shall mean this Agreement as it may from time
to time be amended, restated, supplemented or otherwise modified.

         Section 17.4. Notes Held by Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement, the Notes, any
Security Document, the Intercreditor Agreement or any other Note Document, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.

SECTION 18. Notices.

         All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

             (i)   if to you or your nominee, to you or it at the address
         specified for such communications in Schedule A, or at such other
         address as you or it shall have specified to the Company in writing,

             (ii)  if to any other holder of any Note, to such holder at such
         address as such other holder shall have specified to the Company in
         writing, or

             (iii) if to the Company, to the Company at its address set forth at
         the beginning hereof to the attention of the President, or at such
         other address as the Company shall have specified to the holder of each
         Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19. Reproduction of Documents.

         This Agreement, the Security Documents, the Intercreditor Agreement,
the other Note Documents and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could

                                      -46-

contest the original, or from introducing evidence to demonstrate the inaccuracy
of any such reproduction.

SECTION 20. Confidential Information.

         For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you; provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal
or state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.

                                      -47-

SECTION 21. Substitution of Purchaser.

         You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.

SECTION 22. Miscellaneous.

         Section 22.1. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.

         Section 22.2. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or Make-Whole Amount or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.

         Section 22.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

         Section 22.4. Construction; GAAP. Each covenant contained herein shall
be construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.

         Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made by the Company for the purposes of
this Agreement, the same shall be done by the

                                      -48-

Company in accordance with GAAP, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.

         Section 22.5. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.

         Section 22.6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW
OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.

         Section 22.7. Submission to Jurisdiction; Waiver of Jury Trial.

         (a) The Company hereby irrevocably submits and consents to the
jurisdiction of the federal court located within the County of New York, State
of New York (or if such court lacks jurisdiction, the State courts located
therein), and irrevocably agrees that all actions or proceedings relating to
this Agreement and the Notes may be litigated in such courts, and the Company
waives any objection which it may have based on improper venue or forum non
conveniens to the conduct of any proceeding in any such court and waives
personal service of any and all process upon it, and consents that all such
service of process be made by delivery to it at the address of such Person set
forth in Section 18 above or to its agent referred to below at such agent's
address set forth below (with a courtesy copy to the Company at the address set
forth in Section 18) and that service so made shall be deemed to be completed
upon actual receipt. The Company hereby irrevocably appoints on Corporation
Service Company, located at 80 State Street, Albany, NY 12207, as its agent for
the purpose of accepting service of any process within the State of New York.
Nothing contained in this section shall affect the right of any holder of Notes
to serve legal process in any other manner permitted by law or to bring any
action or proceeding in the courts of any jurisdiction against the Company or to
enforce a judgment obtained in the courts of any other jurisdiction.

         (b) THE PARTIES HERETO WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN
THEM ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT AND THE
NOTES, ANY FINANCING AGREEMENT, ANY LOAN PARTY DOCUMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED HERETO. THE PARTIES HERETO HEREBY AGREE AND CONSENT THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS

                                      -49-

AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

                               *   *   *   *   *

                                      -50-

         If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.

                                     Very truly yours,

                                     Inergy Propane, LLC

                                     By ________________________________________
                                           John J. Sherman
                                           President and Chief Executive Officer

Accepted as of June ___, 2002.

                                     THE CANADA LIFE ASSURANCE COMPANY

                                     By
                                        ----------------------------------------
                                           Name:
                                           Title:

Accepted as of June ___, 2002

                                    JOHN HANCOCK LIFE INSURANCE COMPANY

                                    By
                                       ----------------------------------------
                                          Name:
                                          Title:

                                    INVESTORS PARTNER LIFE INSURANCE COMPANY

                                    By
                                       ----------------------------------------
                                          Name:
                                          Title:

                                    JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

                                    By
                                        ---------------------------------------
                                          Name:
                                          Title:

                                    JOHN HANCOCK INSURANCE COMPANY OF VERMONT

                                    By
                                         --------------------------------------
                                          Name:
                                          Title:

Accepted as of June ___, 2002.

                                     THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

                                     By
                                        ----------------------------------------
                                           Name:
                                           Title:

                      Information Relating to Purchasers

                                                                                  Aggregate
                                                                               Principal Amount         Note Denomination(s)
                                                                                                        --------------------
                                                                                   of Notes
                                                                                   --------
                                                                                                  
          THE PRUDENTIAL INSURANCE                                            $50,000,000.00                $20,550,000.00
          COMPANY OF AMERICA                                                                               (Series A Notes)

(1)       All payments on account of Notes held by such purchaser                                           $14,725,000.00
          shall be made by wire transfer of immediately available                                          (Series B Notes)
          funds for credit to:

          Account No. 890-0304-391                                                                          $14,725,000.00
                                                                                                           (Series C Notes)
          The Bank of New York
          New York, New York
          (ABA No.: 021-000-018)

          Each such wire transfer shall set forth the name of the
          Company, a reference to:

          (a) "8.85% Senior Secured Notes, Series A, due June 7,
          2007, Security No. !INV 7933!, PPN 45661#AA9" in the case
          of payments on account of the Series A Notes;

          (b) "9.10% Senior Secured Notes, Series B, due June 6,
          2008, Security No. !INV 7934!, PPN 45661#AB7" in the case
          of payments on account of the Series B Notes; and

          (c) "9.34% Senior Secured Notes, Series C, due June 5,
          2009, Security No. !INV 7936!, PPN 45661#AC5" in the case
          of payments on account of the Series C Notes,

          and the due date and application (as among principal,
          interest and Make-Whole Amount) of the payment being made.

(2)       Address for all notices relating to payments:

          The Prudential Insurance Company of America
          c/o Investment Operations Group
          Gateway Center Two, 10/th/ Floor
          100 Mulberry Street
          Newark, New Jersey 07102-4077

          Attention:  Manager

(3)       Address for all other communications and notices:

          The Prudential Insurance Company of America
          c/o Prudential Capital Group
          2200 Ross Avenue, Suite 4200E
          Dallas, TX 75201

          Attention:  Managing Director

                                  Schedule A
                         (to Note Purchase Agreement)

                                                                                  Aggregate
                                                                               Principal Amount         Note Denomination(s)
                                                                                                        --------------------
                                                                                   of Notes
                                                                                   --------
                                                                                                  
(4)       Recipient of telephonic prepayment notices:

          Manager, Trade Management Group
          Telephone:      (973) 367-3141
          Facsimile:      (973) 802-4925

(5)       Tax Identification No.:  22-1211670

                                  Schedule A
                         (to Note Purchase Agreement)

                                                                                   Aggregate
                                                                               Principal Amount      Note Denomination(s)
                                                                                                     --------------------
                                                                                   of Notes
                                                                                   --------
                                                                                               
          THE CANADA LIFE ASSURANCE COMPANY                                  $10,000,000.00             $4,150,000.00
                                                                                                       (Series A Notes)

                                                                                                        $2,925,000.00
                                                                                                       (Series B Notes)

                                                                                                        $2,925,000.00
                                                                                                       (Series C Notes)
(1)       Domestic Physical Delivery:

          (a)  By Messenger (sent within the State of New York):
               -------------------------------------------------
          Chase Manhattan Bank
          4 New York Plaza
          Ground Floor Window
          New York, NY 10004-2477
          Reference:  The Canada Life Assurance Company
                      Trust Account Number G52708

          (b)  By Courier (sent from outside the State of New York):
               -----------------------------------------------------
          Chase Manhattan Bank
          4 New York Plaza - 1/st/ Floor
          New York, NY 10004-2477
          Attention:  Mike Jones - Outsourcing Dept.
                      (212) 623-1023
          Reference:  The Canada Life Assurance Company
                      Trust Account Number:  G52708

(2)       All payments on account of Notes held by such purchaser shall be
          made by wire transfer of immediately available funds for credit to:

          Chase Manhattan Bank
          ABA 021-000-021
          A/c #900-9-000200
          Trust Account No. G52708

          Reference: CUSIP, Name of Issuer & description, and
          Principal and Interest payment

          For Call or Maturity Payment:

          Chase Manhattan Bank
          ABA 021-000-021
          A/C #900-9-000192
          Trust Account G52708
          Reference:  CUSIP, Name of Issuer & description, and call
          or maturity date

(3)       Tax ID#  38-0397420

                                  Schedule A
                         (to Note Purchase Agreement)

(4)       Please send notices of payment and written confirmations
          of wire transfers to:

          Chase Manhattan Bank
          North American Insurance
          3 Chase MetroTech Centre-6/th/ Floor
          Brooklyn, N.Y. 11245
          Attn:  Doll Balbadar

          Copy to:

          The Canada Life Assurance Company
          330 University Avenue, SP-12
          Securities Accounting
          Toronto, ON M5G 1R8

(5)       Please send financial statements & correspondence to:

          Canada Life Assurance Company
          330 University Ave. (SP-11)
          Toronto, ON M5G 1R8
          Attn: Paul English, US Investments Division

                                  Schedule A
                         (to Note Purchase Agreement)

                                                                                   Aggregate
                                                                               Principal Amount      Note Denomination(s)
                                                                                                     --------------------
                                                                                   of Notes
                                                                                   --------
                                                                                               
          JOHN HANCOCK LIFE INSURANCE COMPANY                                 $21,750,000.00               $7,300,000.00
                                                                                                          (Series A Notes)
                                                                                                           $5,600,000.00
                                                                                                           $1,750,000.00
                                                                                                          (Series B Notes)

                                                                                                           $6,350,000.00
                                                                                                            $750,000.00
                                                                                                          (Series C Notes)
(1)       All payments on account of Notes held by such purchaser shall be
          made by wire transfer of immediately available funds for credit to:

          Fleet Boston
          ABA No. 011000390
          Boston, Massachusetts 02110
          Account  of:  John Hancock Life Insurance Co. Private
          Placement Collection Account
          Account No. 541-55417
          On Order of:  Name of Issuer and CUSIP/PPN, Full name,
          interest rate and maturity date of Notes or other
          obligations

(2)       Registered Name of Securities:

          John Hancock Life Insurance Company

(3)       Tax Identification Number: 04-1414660

(4)       Notices:  All notices shall be sent via fax and mail
          according to the instructions below:

          (a)  Scheduled Payments, Unscheduled Prepayments and
          Notice of Maturity:

          John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Investment Accounting Division, B-3
          Fax:  (617) 572-0628

          Include:
          1.  full name, interest rate and maturity date of the
          Notes or other obligations;
          2.  allocation of payment between principal and interest
          and any special payment;
          3.  name and address of Bank (or Trustee) from which the
          wire transfer was sent

                                  Schedule A
                         (to Note Purchase Agreement)

                                                                                   Aggregate
                                                                               Principal Amount      Note Denomination(s)
                                                                                                     --------------------
                                                                                   of Notes
                                                                                   --------
                                                                                               
          (b) Financial Statements and Certificates of Compliance
          with financial covenants :

          John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Bond and Corporate Finance Group, T-57
          Fax:  (617) 572-1605

          (c) Change in Issuer's Name, address or principal place of business;
          Change in location of collateral; Copy of legal opinions:

          John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Investment Law Division, T-30
          Fax:  (617) 572-9269

          (d)  Delivery of Securities; All securities are to be
           sent for receipt the day after the closing to:

          John Hancock Life Insurance Company
          200 Clarendon St., T-30
          Boston, MA 02117
          Attn:  Christine M. Miller

                                  Schedule A
                         (to Note Purchase Agreement)

                                                                                   Aggregate
                                                                               Principal Amount      Note Denomination(s)
                                                                                                     --------------------
                                                                                   of Notes
                                                                                   --------
                                                                                               
          INVESTORS PARTNER LIFE INSURANCE                                       $250,000.00               $250,000.00
          COMPANY (F/K/A JOHN HANCOCK                                                                     (Series A Note)
          LIFE INSURANCE COMPANY OF AMERICA)

(1)       All payments on account of Notes held by such purchaser shall
          be made by wire transfer of immediately available funds for
          credit to:

          Fleet Boston
          ABA No. 011000390
          Boston, Massachusetts 02110
          Account of John Hancock Life Insurance Co. Private
          Placement Collection Acct.
          Account Number:  541-55417
          On Order of:  Name of Issuer and CUSIP/PPN, Full name,
          interest rate and maturity date of Notes or other
          obligations

(2)       Registered Name of Securities:
          Investors Partner Life Insurance Company

(3)       Tax Identification Number: 13-3072894

(4)       Notices:  All notices shall be sent via fax and mail
          according to the instructions below:

          (a)  Scheduled Payments; Unscheduled Prepayments; Notice
          of Maturity:

          Investors Partner Life Insurance Company
          200 Clarendon St.
          Boston, MA 02117
          Attn:  Investment Accounting Division, B-3
          Fax:  (617) 572-0628

          Include:

          1.  full name, interest rate and maturity date of the
          Notes or other obligations;
          2.  allocation of payment between principal and interest
          and any special payment;
          3.  name and address of Bank ( or Trustee) from which the
          wire transfer was sent

                                  Schedule A
                         (to Note Purchase Agreement)

          (b)  Financial Statements; Certificates of Compliance
          with financial covenants:

          John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Bond and Corporate Finance Group, T-57
          Fax (617) 572-1605

          (c)  Change in Issuer's name, address or principal place
          of business; Change in location of collateral; Copy of
          legal opinions

          John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Investment Law Division, T-30
          Fax (617) 572-9269

          (d)  Delivery of Securities:  All securities are to be
          sent for receipt the day after the closing to:

          John Hancock Life Insurance Company
          200 Clarendon Street, T-30
          Boston, MA 02117
          Attn:  Christine M. Miller

                                  Schedule A
                         (to Note Purchase Agreement)

                                                                                   Aggregate
                                                                               Principal Amount      Note Denomination(s)
                                                                                                     --------------------
                                                                                   of Notes
                                                                                   --------
                                                                                               
          JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY                           $2,500,000.00           $2,250,000.00
                                                                                                        (Series A Notes)
                                                                                                         $250,000.00
                                                                                                        (Series C Notes)
(1)       All payments on account of Notes held by such purchaser shall
          be made by wire transfer of immediately available funds for
          credit to:

          Fleet Boston
          ABA No. 011000390
          Boston, Massachusetts 02110
          Account of: John Hancock Life Insurance Co. Private
          Placement Collection Acct.
          Account Number:  541-55417
          On Order of:  Name of Issuer and  CUSIP/PPN, Full name,
          interest rate and maturity date of Notes or other
          obligations

(2)       Registered Name of Securities:
          John Hancock Variable Life Insurance Company

(3)       Tax Identification No.: 04-2664016

(4)       Notices:  All notices shall be sent via fax and mail
          according to the instructions below:

          (a)  Scheduled Payments; Unscheduled Prepayments; Notice
          of Maturity:

          John Hancock Variable Life Insurance Company
          200 Clarendon St.
          Boston, MA 02117
          Attn:  Investment Accounting Division, B-3
          Fax:  (617) 572-0628

          Include:

          1.  full name, interest rate and maturity date of the
          Notes or other obligations;
          2.  allocation of payment between principal and interest
          and any special payment;
          3.  name and address of Bank ( or Trustee) from which the
          wire transfer was sent

                                  Schedule A
                         (to Note Purchase Agreement)

          (b)  Financial Statements; Certificates of Compliance
          with financial covenants:

          John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Bond and Corporate Finance Group, T-57
          Fax (617) 572-1605

          (c)  Change in Issuer's name, address or principal place
          of business; Change in location of collateral; Copy of
          legal opinions

          John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Investment Law Division, T-30
          Fax (617) 572-9269

          d)  Delivery of Securities: All securities are to be
          sent for receipt the day after the closing to:

          John Hancock Life Insurance Company
          200 Clarendon Street, T-30
          Boston, MA 02117
          Attn: Christine M. Miller

                                  Schedule A
                         (to Note Purchase Agreement)

                                                                                       Aggregate
                                                                                   Principal Amount       Note Denomination(s)
                                                                                                          --------------------
                                                                                       of Notes
                                                                                       --------
                                                                                                    
          JOHN HANCOCK INSURANCE COMPANY OF VERMONT                                    $500,000                 $500,000
                                                                                                             (Series A Notes)
(1)       All payments on account of Notes held by such purchaser shall be made
          by wire transfer of immediately available funds for credit to:

          Deutsche Bank Trust Company Americas
          New York, NY
          ABA No. 021001033
          Account No.  50270500
          Account of:  John Hancock Insurance Company of Vermont
          On Order of:  Name of Issuer and CUSIP/PPN, Full name,
          interest rate and maturity date of Notes or other
          obligations

(2)       Registered Name of Securities:
          John Hancock Insurance Company of Vermont

(3)       Tax Identification No.: 03-0367897

(4)       Notices: All notices shall be sent via fax and mail
          according to the instructions below:

          (a)  Scheduled Payments; Unscheduled Prepayments; Notice
          of Maturity:

          John Hancock Insurance Company of Vermont
          c/o John Hancock Life Insurance Company
          200 Clarendon St.
          Boston, MA 02117
          Attn:  Investment Accounting Division, B-3
          Fax:  (617) 572-0628

          Include:

          1.  full name, interest rate and maturity date of the
          Notes or other obligations;
          2.  allocation of payment between principal and interest
          and any special payment;
          3.  name and address of Bank ( or Trustee) from which the
          wire transfer was sent

                                  Schedule A
                         (to Note Purchase Agreement)

          (b)  Financial Statements; Certificates of Compliance
          with financial covenants:

          John Hancock Insurance Company of Vermont
          c/o John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn:  Bond and Corporate Finance Group, T-57
          Fax (617) 572-1605

          (c) Change in Issuer's name, address or principal place
          of business; Change in location of collateral; Copy of
          legal opinions

          John Hancock Insurance Company of Vermont
          c/o John Hancock Life Insurance Company
          200 Clarendon Street
          Boston, MA 02117
          Attn: Investment Law Division, T-30
          Fax (617) 572-9269

          d)  Delivery of Securities:  All securities are to be
          sent for receipt the day after the closing to:

          John Hancock Insurance Company of Vermont
          c/o John Hancock Life Insurance Company
          200 Clarendon Street, T-30
          Boston, MA 02117
          Attn:  Christine M. Miller

                                  Schedule A
                         (to Note Purchase Agreement)

                                 Defined Terms

         As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:

         "Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any Person of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.

         "Asset Disposition" means, with respect to the Company or any
Subsidiary, any one or more transactions in which such Person sells, conveys,
transfers or leases (as lessor) or parts with control of (any of the foregoing,
for purposes of this definition, a "transfer"), directly or indirectly, any of
its property or assets, including, without limitation, any Indebtedness of any
Subsidiary or capital stock of or other equity interests in any Subsidiary
(including the issuance of such stock or other equity interests by such
Subsidiary), other than transfers of cash or cash equivalents, sales of
inventory in the ordinary course of business, sales of obsolete equipment, the
sale or discount of accounts receivable or notes permitted by Section 10.3(f)
and transfers resulting from any casualty or condemnation of property or assets,
intercompany sales or transfers of assets among Subsidiaries and/or the Company
made in the ordinary course of business.

         "Available Cash" means for any period and without duplication: (a) the
sum of: (i) all cash and cash equivalents of the Company and its Subsidiaries on
hand at the end of such period; and (ii) all additional cash and cash
equivalents of the Company and its Subsidiaries on hand on the date of
determination of Available Cash for such period resulting from Working Capital
Loans (as defined in the Bank Credit Agreement) made after the end of such
period; less (b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the Company to: (i) provide for the
proper conduct of the business of the Company and its Subsidiaries (including
reserves for future capital expenditures and for future capital expenditures and
for future credit needs of the Company and its Subsidiaries) after such period;
and (ii) comply with applicable law or any debt instrument or other agreement
obligation to which the Company or any of its Subsidiaries is a party or its
assets are subject; provided that disbursements made by the Company or any of
its Subsidiaries of cash reserves established, increased or reduced after the
end of such period but on or before the date of determination of Available Cash
for such period shall be deemed to have been made, established, increased or
reduced, for purposes of determining Available Cash, within such period if the
board of directors of the Company so determines.

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 1

         "Bank Credit Agreement" means that certain Fourth Amended and Restated
Credit Agreement dated as of December 20, 2001 by and among the Company, the
Lenders referred to therein, Wachovia Bank, National Association (f/k/a First
Union National Bank), as administrative agent, Bank of Oklahoma, N.A., as
documentation agent, and Fleet National Bank, as syndication agent, as the same
may be amended, modified, supplemented, extended, renewed, refinanced or
replaced from time to time (including, without limitation, any increases in the
principal amount outstanding, commitments or availability thereunder).

         "Bank Documents" means the Bank Credit Agreement, the Security
Documents, the guaranty agreement or guaranty agreements executed by IPCH
Acquisition Corp, the MLP, the Company and its Subsidiaries in respect of the
obligations of the Company under the Bank Credit Agreement, and all other
"Credit Documents" as defined in the Bank Credit Agreement.

         "Bank Lenders" means any lender from time to time party to the Bank
Credit Agreement.

         "Business Day" means (a) for the purposes of Section 8.7 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Kansas City, Missouri or New York, New York,
are required or authorized to be closed.

         "Capital Lease" means, at any time and without duplication, a lease
with respect to which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in accordance with
GAAP.

         "Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any preferred interest, any limited or general partnership interest
and any limited liability company membership interest.

         "Closing" is defined in Section 3.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

         "Collateral" means all personal and real property with respect to which
a Lien is granted pursuant to the Security Documents or any other Note Document
or which secures the payment, performance or observance of the obligations of
IPCH Acquisition Corp, the MLP, the Company or any Subsidiary under this
Agreement and the other Note Documents.

         "Collateral Agent" means First Union National Bank, in its capacity as
collateral agent for the Secured Parties pursuant to the Intercreditor
Agreement, together with its successors and assigns in such capacity.

         "Committed Revolving Facility" means a committed revolving credit
facility (a) with aggregate commitments thereunder of not less than $35,000,000,
(b) under which the Company has the ability to satisfy all conditions precedent
to its ability to obtain advances thereunder (but

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 2

subject to (i) customary conditions to borrowings, (ii) customary clean-down
provisions, and (iii) customary borrowing base requirements, if any), and (c)
the remaining commitment period with respect thereto is at least 12 months.

          "Company" means Inergy Propane, LLC, a Delaware limited liability
company.

          "Confidential Information" is defined in Section 20.

          "Consolidated Net Income" for any period means, without duplication,
the net income (or loss) of the Company and its Subsidiaries for such period, as
determined in accordance with GAAP, after eliminating all offsetting debits and
credits between the Company and its Subsidiaries and all other items required to
be eliminated between the course of the preparation of consolidated financial
statements of the Company and its Subsidiaries in accordance with GAAP.

          "Consolidated Tangible Assets" means the consolidated or combined
total assets of the Company and its Subsidiaries less, without duplication, (a)
intangible assets including, without limitation, goodwill, research and
development costs, trademarks, trade names, patents, franchises, copyrights,
licenses, experimental or organizational expense, unamortized debt discount and
expense carried as an asset, all reserves and any write-up in the book value of
assets made after the closing date, net of accumulated amortization and (b) all
reserves for depreciation and other asset valuation reserves (but excluding
reserves for federal, state and other income taxes).

          "Consolidated Total Interest Expense" means, with respect to any
period, the sum (without duplication) of the following (in each case,
eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP): (a) all interest in respect of
Indebtedness of the Company and its Subsidiaries excluding amortization of up-
front fees paid in connection with the Notes accrued during such period (whether
or not actually paid during such period), plus (b) the net amount payable by the
Company and its Subsidiaries (or minus the net amount receivable) under Hedging
Agreements accrued during such period (whether or not actually paid or received
during such period); provided that for the purposes of determining Consolidated
Total Interest Expense for any period during which any Permitted Acquisition is
consummated, Consolidated Total Interest Expense shall be calculated after
giving effect on a pro forma basis, to any such Permitted Acquisition occurring
during the period commencing on the first day of such period to and including
the date of such transaction, as if such Permitted Acquisition occurred on the
first day of such period (including any interest expense of any Target giving
effect to any refinancing, repayment or incurrence of Indebtedness in connection
with such acquisition).

          "Debt Prepayment Application" means, with respect to any Asset
Disposition, the application by the Company or its Subsidiaries of cash to
prepay Senior Secured Indebtedness; provided that, in the course of making such
application the Company shall offer to prepay each outstanding Note in
accordance with Section 8.3 in a principal amount which, when added to the Make-
Whole Amount applicable thereto, equals the Ratable Portion for such Note. If
any holder of a Note rejects such offer of prepayment, the Ratable Portion for
such Note shall be reallocated

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 3

ratably among those Notes the holders of which have accepted the Company's offer
of prepayment.

         "Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.

         "Default Rate" means, for any series of the Notes, the lesser of (a)
the maximum rate permitted by applicable law and (b) the greater of (i) 2.00%
over the rate on such series of Notes prior to the Event of Default and (ii)
2.00% over the rate of interest publicly announced from time to time by The Bank
of New York in New York, New York as its "base" or "prime" rate.

         "Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.

         "EBITDA" means, for the Company and its Subsidiaries for any period, an
amount equal to: (a) Consolidated Net Income, plus (b) to the extent deducted in
the determination of Consolidated Net Income, (i) Consolidated Total Interest
Expense, (ii) all provisions for federal, state and other income taxes (iii)
depreciation and amortization, plus or minus, as the case may be (c) gains or
losses from the sale of assets in the ordinary course of business and (d)
extraordinary non-cash gains or losses for such period; provided that for the
purposes of determining EBITDA for any period during which any Permitted
Acquisition is consummated, EBITDA shall be calculated after giving effect on a
pro forma basis and to any such Permitted Acquisition occurring during the
period commencing on the first day of such period to and including the date of
such transaction (the "Reference Period"), as if such Permitted Acquisition
occurred on the first day of the Reference Period; provided, however, that
EBITDA generated by an acquired business or asset shall be determined by the
actual gross profit (revenues minus cost of goods sold) of such acquired
business or asset during the immediately preceding four full fiscal quarters in
the Reference Period minus the pro forma expenses that would have been incurred
by the Company and its Subsidiaries in the operation of such acquired business
or asset during such period computed on the basis of personnel expenses for
employees retained or to be retained by the Company and its Subsidiaries in the
operation of such acquired business or asset and non-personnel costs and
expenses incurred by the Company and its Subsidiaries in the operation of the
Company's business at similarly situated facilities of the Company or any of its
Subsidiaries (as determined in good faith by the Board of Directors of the
Company based on reasonable assumptions).

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

         "ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 4

         "Event of Default" is defined in Section 11.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Fair Market Value" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).

         "Financial Covenant" means, with respect to any agreement or instrument
representing or governing Indebtedness, any covenant (whether expressed as a
covenant or an event of default) contained therein expressed in terms of (a) a
minimum or maximum amount in or derived from any Company's or any Subsidiary's
financial statements, (b) a minimum or maximum ratio between any such amounts
described in clause (a) above or (c) any other financial or finance related test
as the same may relate to the assets, liabilities, revenues or expenses of the
Company or any Subsidiary of the Company; provided that the above shall not
include a negative pledge covenant.

         "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.

         "Governmental Authority" means

                  (a)   the government of

                        (i)   the United States of America or any State or other
                  political subdivision thereof, or

                        (ii)  any jurisdiction in which the Company or any
                  Subsidiary conducts all or any part of its business, or which
                  asserts jurisdiction over any properties of the Company or any
                  Subsidiary, or

                  (b)   any entity exercising executive, legislative, judicial,
         regulatory or administrative functions of, or pertaining to, any such
         government.

         "Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:

                  (a)   to purchase such indebtedness or obligation or any
         property constituting security therefor;

                  (b)   to advance or supply funds (i) for the purchase or
         payment of such indebtedness or obligation, or (ii) to maintain any
         working capital or other balance sheet condition or any income
         statement condition of any other Person or otherwise to advance or make
         available funds for the purchase or payment of such indebtedness or
         obligation;

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 5

                  (c)   to lease properties or to purchase properties or
         services primarily for the purpose of assuring the owner of such
         indebtedness or obligation of the ability of any other Person to make
         payment of the indebtedness or obligation; or

                  (d)   otherwise to assure the owner of such indebtedness or
         obligation against loss in respect thereof.

         In any computation of the indebtedness or other liabilities of the
obligor under any Guaranty, the indebtedness or other obligations that are the
subject of such Guaranty shall be assumed to be direct obligations of such
obligor.

         "Hazardous Materials" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

         "Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Company, and any confirming letter
executed pursuant to such hedging agreement, all as amended, restated or
otherwise modified.

         "holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.

         "Indebtedness" means, with respect to any Person (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind (including repurchase obligations, but not including customer deposits),
(b) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments or letters of credit in support of bonds, notes, debentures
or similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under any
conditional sale or other title retention agreement relating to property
purchased by such Person, (e) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (including, without
duplication, obligations under a non-compete or similar agreement) to the extent
such obligations are reportable under GAAP, (f) all obligations of such Person
as lessee under Capital Leases of such Person or leases of such Person for which
such Person retains tax ownership of the property subject to a lease, (g) all
obligations of others secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any Lien on property
or assets owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (h) all Guaranties of such Person, (i) all
obligations of such Person with respect to Hedging Agreements or foreign
currency exchange agreements (valued at the termination value thereof computed
in accordance with a method approved by the International Swap Dealers
Association and agreed to by such Person in the applicable swap agreement, if
any), (j) all obligations of such Person as an account party in respect of
letters of credit (1) securing Debt

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 6

(other than letters of credit obtained in the ordinary course of business and
consistent with past practices) or (2) obtained for any purpose not in the
ordinary course of business or not consistent with past practices, (k) all
obligations of such Person in respect of bankers' acceptances and (1) all
current liability in respect of unfunded vested benefits under a Plan; provided
that accrued expenses and accounts payable incurred in the ordinary course of
business shall not constitute Indebtedness.

         "Inergy GP" means Inergy GP, LLC, a Delaware limited liability company.

         "Inergy Holdings" means Inergy Holdings, LLC, a Delaware limited
liability company.

         "Inergy Sales" means Inergy Sales & Service, Inc., a Delaware
corporation.

         "Inergy Transportation" means Inergy Transportation, LLC, a Delaware
limited liability company.

         "Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate principal amount
of any series of Notes then outstanding, and (c) any bank, trust company,
savings and loan association or other financial institution, any pension plan,
any investment company, any insurance company, any broker or dealer, or any
other similar financial institution or entity, regardless of legal form.

         "Intercreditor Agreement" means the Intercreditor and Collateral Agency
Agreement, dated as of the date hereof, by and among you and the other Secured
Creditors listed therein and the Collateral Agent, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

         "IPC Acquisition" means the acquisition by the Company of all of the
outstanding Capital Stock of Independent Propane Company pursuant to the series
of transactions described in Schedule 1.01C of the Bank Credit Agreement, as in
effect on the date hereof.

         "IPCH Acquisition Corp" means IPCH Acquisition Corp., a Delaware
corporation.

         "L&L Transportation" means L&L Transportation, LLC, a Delaware limited
liability company.

         "Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
any Capital Stock, stockholder agreement, voting trust agreements and all
similar arrangements).

         "Limited Guaranty Agreement" is defined in Section 4.5.

         "Make-Whole Amount" is defined in Section 8.7.

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 7

         "Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.

         "Material Adverse Effect" means a material adverse effect on (a) the
business, operations, prospects, affairs, financial condition, assets or
properties of the Company and its Subsidiaries taken as a whole, or (b) the
ability of IPCH Acquisition Corp., the MLP, the Company or any Subsidiary to
perform its obligations under any Note Document, or (c) the validity or
enforceability of this Agreement, the Notes, the Limited Guaranty, the Parent
Guaranty Agreement, any Subsidiary Guaranty Agreement, any of the Security
Documents or any other Note Document.

         "Memorandum" is defined in Section 5.3.

         "MLP" means Inergy, L.P., a Delaware limited partnership.

         "Mortgages"" means the Mortgages referred to in the Bank Credit
Agreement, as amended on the date hereof, and all Mortgages hereafter executed
and delivered pursuant to Section 9.8 hereof, as each may be amended,
supplemented or otherwise modified from time to time.

         "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).

         "Net Proceeds" means, with respect to any Asset Disposition, the
excess, if any, of (a) the aggregate amount received by the Company or any
Subsidiary in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such Asset
Disposition over (b) the sum of (i) the principal amount of and premium, if any,
on any Indebtedness that is secured by the asset or assets that are the subject
of the Asset Disposition (other than Indebtedness assumed by the purchaser of
such asset or assets) and that is required to be, and is, repaid in connection
with such Asset Disposition, other than the Notes and other Senior Secured
Indebtedness, (ii) the out-of-pocket expenses incurred by the Company or any
Subsidiary in connection with such Asset Disposition, and (iii) all taxes
payable by the Company and its Subsidiaries in connection with such Asset
Disposition, including without limitation the additional income taxes incurred
by the Company and its Subsidiaries as a result of such Asset Disposition, in
each case as reasonably determined by the Company and set forth in the Officer's
Certificate delivered in connection with each set of financial statements
delivered pursuant to clause (a) or (b) of Section 7.1.

         "New Inergy Propane" means New Inergy Propane, LLC, a Delaware limited
liability company.

         "Notes" is defined in Section 1.

         "Note Documents" means this Agreement, the Notes, the Limited Guaranty
Agreement, the Parent Guaranty Agreement, each Subsidiary Guaranty Agreement,
the Intercreditor Agreement, the Security Documents, and all other instruments,
certificates, documents and other writings now or hereafter executed and
delivered by IPCH Acquisition Corp, the MLP, the

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 8

Company, any Subsidiary or any other Person pursuant to or in connection with
any of the foregoing or any of the transactions contemplated thereby, and any
and all amendments, supplements and other modifications to any of the foregoing.

         "Officer" or of any other officer of the Company whose responsibilities
extend to the subject matter of such certificate.

         "Parent Guaranty Agreement" is defined in Section 4.5.

         "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

         "Permitted Acquisition" means an acquisition (or series of related
acquisitions) by the Company or any Subsidiary Guarantor of all or any part of
the assets of another Person (such assets being referred to herein as the
"Target Assets") or of at least 51% of the Voting Stock of another Person (such
Person, together with any and all Subsidiaries of such Person, being referred to
herein as the "Target") in each case made in compliance with all of the
following terms and conditions:

               (a)  the Target is an entity Person organized and existing
         under the laws of, or the Target Assets are located in, the United
         States of America, any State thereof or the District of Columbia;

               (b)  the Target is in, or the Target Assets are employed in, the
         same line of business as the Company ;

               (c)  in the case of an acquisition by merger, the Target is
         merged with and into the Company or a Subsidiary of the Company, with
         the Company or a Subsidiary of the Company, as the case may be, being
         the surviving entity;

               (d)  no Default or Event of Default exists at the time of the
         acquisition or would result therefrom; and

               (e)  the Company shall have paid all reasonable costs and
         expenses incurred by the Collateral Agent, the holders of the Notes and
         their respective counsel in connection with such acquisition,
         including, without limitation, all such costs and expenses incurred to
         satisfy the conditions set forth in Section 9.8.

         "Permitted Additional Private Placement Debt" means privately-placed
Indebtedness of the Company issued subsequent to the date hereof having the
following terms and conditions: (i) no Default or Event of Default shall have
occurred and be continuing on the date of the incurrence of such Indebtedness or
exist immediately after the incurrence thereof; (ii) such Indebtedness may not
be secured by any assets (real or personal) of any Person not securing the
Indebtedness and other obligations under the Note Documents and Bank Documents
on a pari passu basis; (iii) all purchasers and other holders from time to time
of such Indebtedness shall be parties to the Intercreditor Agreement, as amended
to provide for such additional Indebtedness pursuant to an amendment in form and
substance satisfactory to the Required Holders; (iv) such Indebtedness may not
be guaranteed by any Person other than Persons that are parties to either

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 9

the Limited Guaranty Agreement, the Parent Guaranty Agreement, a Subsidiary
Guaranty Agreement (or a Guarantor Supplement with respect thereto) or a
guaranty agreement in form and substance satisfactory to the Required Holders;
(v) such Indebtedness shall have a maturity date after the maturity date of the
Series A Notes; and (vi) the documents, instruments and other agreements
pursuant to which such Indebtedness is issued may not contain (x) any provisions
limiting amendments to, or consents, waivers or other modifications with respect
to this Agreement or any other Note Documents, (y) any covenants, defaults or
events of default more restrictive than those contained in this Agreement or the
other Note Documents, or (z) any provisions that conflict with or violate the
covenants, Defaults or Events of Default contained in this Agreement or the
other Note Documents.

         "Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

         "Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

         "Pledge Agreements" means the Pledge Agreements referred to in the Bank
Credit Agreement, as amended on the date hereof, and all Pledge Agreements
hereafter executed and delivered pursuant to Section 9.8 hereof, as each may be
amended, supplemented or otherwise modified from time to time.

         "property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

         "Property Reinvestment Application" means, with respect to any Asset
Disposition, the application of all or a portion of the Net Proceeds thereof to
the acquisition by the Company or any Subsidiary of assets useful and intended
to be used in the operation of the business of the Company and its Subsidiaries
and having a Fair Market Value no less than the amount of such Net Proceeds so
applied.

         "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.

         "Ratable Portion" means, with respect to any Note, the amount equal to
the product of (a) the Net Proceeds of any applicable Asset Disposition being
offered by the Company as a prepayment of the Notes and any other Senior Secured
Indebtedness multiplied by (b) a fraction, the numerator of which is the
outstanding principal amount of such Note and the denominator of which is the
aggregate outstanding principal amount of all Notes and all other Senior Secured
Indebtedness.

         "Required Holders" means, at any time, the holders of at least 66-2/3%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 10

         "Responsible Officer" means, with respect to any Person, any Senior
Financial Officer and any other officer of such Person with responsibility for
the administration of the relevant portion of this Agreement or the applicable
Note Document.

         "Restricted Payment" means (a) the declaration of any dividend on, or
the incurrence of any liability to make any other payment or distribution in
respect of any Capital Stock (except, in the case of a Subsidiary, dividends or
other payments or distributions in respect of its Capital Stock to the Company),
(b) the distribution on account of the purchase, redemption or other retirement
of any such Capital Stock (except, in the case of a Subsidiary, purchases,
redemptions or other retirements of its Capital Stock from the Company), or.

         "Risk Management Policy" means that certain trading and risk management
policy of the Company and its Subsidiaries dated as of April 1, 2001, as the
same may be amended from time to time and adopted by the Board of Directors of
the Company; provided that copies of each such amended policy shall be delivered
to the holders of the Notes prior to the effective date thereof.

         "Secured Creditors" means the "Creditors" as defined in the
Intercreditor Agreement.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time.

         "Security" shall have the same meaning as in Section 2(1) of the
Securities Act.

         "Security Agreements" means the Security Agreements referred to in the
Bank Credit Agreement, as amended on the date hereof, and all Security
Agreements hereafter executed and delivered pursuant to Section 9.8 hereof, as
each may be amended, supplemented or otherwise modified from time to time.

         "Security Documents" means the Security Agreements, the Pledge
Agreements, the Mortgages, and all mortgages, deeds of trust, assignments,
pledges, financing statements, lien entry forms, notices, documents and other
writings executed and delivered from time to time in favor of the Collateral
Agent for the benefit of the holders of the Notes in order to secure the
obligations of the MLP, the Company and their Subsidiaries under and in respect
of the Note Documents, as the same may be amended, restated, supplemented or
otherwise modified from time to time.

         "Senior Financial Officer" means, with respect to any Person, the chief
financial officer, principal accounting officer, treasurer or comptroller of
such Person.

         "Senior Indebtedness" means, with regard to any Person, all
Indebtedness of such Person which is not expressed to be subordinate or junior
in rank to any other Indebtedness of such Person.

         "Senior Secured Indebtedness" means the Indebtedness of the Company (a)
evidenced by the Notes and (b) evidenced by the notes under the Bank Credit
Agreement.

         "Subsidiary" means, as to any Person, any corporation, limited
liability company partnership, association or other business entity in which
such Person or one or more of its

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 11

Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily, in the
absence of contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership or joint
venture if more than a 50% interest in the profits or capital thereof is owned
by such Person or one or more of its Subsidiaries or such Person and one or more
of its Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.

         "Subsidiary Guarantor" is defined in Section 4.5 and shall include any
Subsidiary Guarantor which is required to comply with the requirements of
Section 9.8.

         "Subsidiary Guaranty Agreement" is defined in Section 4.5 and shall
include any Subsidiary Guaranty Agreement delivered pursuant to Section 9.8.

         "Swap" means any commodity swap, commodity option or forward commodity
contract.

         "Target" is defined in the definition of Permitted Acquisition.

         "Target Assets" is defined in the definition of Permitted Acquisition.

         "Total Indebtedness" means, at the time of determination, the then
outstanding aggregate principal amount of all Indebtedness of the Company and
its Subsidiaries on a consolidated basis. For the purpose of calculating the
ratio of Total Indebtedness to EBITDA in Section 10.1(a), Total Indebtedness
shall not include any outstanding Working Capital Loans or Swingline Loans (each
as currently defined in the Bank Credit Agreement) to the extent such Working
Capital Loans and Swingline Loans are excluded in calculating the "Consolidated
Leverage Ratio" under the Bank Credit Agreement.

         "Voting Stock" means, with respect to any Person, any Capital Stock of
such Person whose holders are entitled under ordinary circumstances to vote for
the election or appointment of directors or similar Persons elected or appointed
to manage and direct the affairs of such Person (irrespective of whether at the
time Capital Stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).

         "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.

                                  Schedule B
                         (to Note Purchase Agreement)
                                    Page 12

                             [Form of Series A Note]

                              Inergy Propane, LLC

             8.85% Senior Secured Note, Series A, due June 7, 2007

No. [_________]                                                           [Date]
$[____________]                                                  PPN 45661# AA 9

         For Value Received, the undersigned, Inergy Propane, LLC (herein called
the "Company"), a limited liability company organized and existing under the
laws of the State of Delaware, hereby promises to pay to [________________], or
registered assigns, the principal sum of [________________] Dollars on June 7,
2007, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 8.85% per annum from
the date hereof, payable quarterly on the 7th day of March, June, September and
December in each year, commencing with the September, December, March and June
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on the occurrence and during the continuance of an
Event of Default, at the Default Rate (as defined in the Note Purchase Agreement
referred to below) with respect to any outstanding principal hereof, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable quarterly as
aforesaid (or, at the option of the registered holder hereof, on demand).

         Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of The Bank of New York in New York, New York or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreement referred to
below shall designate to the Company in writing, in lawful money of the United
States of America.

         This Note is one of a series of Senior Secured Notes (herein called the
"Notes") issued pursuant to a Note Purchase Agreement, dated as of June 7, 2002
(as from time to time amended, the "Note Purchase Agreement"), among the Company
and the Purchasers named therein and is entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed
to the confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representation set forth in Section 6.2 of
the Note Purchase Agreement.

         This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount and of like tenor will be issued
to, and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

                                  Exhibit A-1
                         (to Note Purchase Agreement)
                                    Page 1

         This Note and the holder hereof are entitled equally and ratably with
the holders of all other Notes to the rights and benefits provided pursuant to
the terms and provisions of the Security Documents and the Intercreditor
Agreement (as each such term is defined in the Note Purchase Agreement).
Reference is hereby made to each of the foregoing for statement of the nature
and extent of the benefits and security for the Notes afforded thereby and the
rights of the holders of the Notes and the Company in respect thereof.

         This Note is subject to optional and mandatory prepayment, in whole or
from time to time in part, at the times and on the terms specified in the Note
Purchase Agreement, but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         Should any indebtedness represented by this Note be collected at law or
in equity, or in bankruptcy or other proceedings, or should this Note be placed
in the hands of attorneys for collection, the Company agrees to pay, in addition
to the principal, premium, if any, and interest due and payable hereon, all
costs of collecting or attempting to collect this Note, including reasonable
attorneys' fees and expenses (including those incurred in connection with any
appeal).

         THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAW OF SUCH
STATE, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE WHICH WOULD
REQUIRE APPLICATION OF THE LAWS OF THE JURISDICTION OTHER THAN SUCH STATE.

                                        Inergy Propane, LLC

                                        By ___________________________
                                             Name:
                                             Title:

                                  Exhibit A-1
                         (to Note Purchase Agreement)
                                    Page 2

                             [Form of Series B Note]

                               Inergy Propane, LLC

              9.10% Senior Secured Note, Series B, due June 6, 2008

No. [_________]                                                           [Date]
$[____________]                                                  PPN 45661# AB 7

         For Value Received, the undersigned, Inergy Propane, LLC (herein called
the "Company"), a limited liability company organized and existing under the
laws of the State of Delaware, hereby promises to pay to [________________], or
registered assigns, the principal sum of [________________] Dollars on June 6,
2008, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 9.10% per annum from
the date hereof, payable quarterly on the 7th day of March, June, September and
December in each year, commencing with the September, December, March and June
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on the occurrence and during the continuance of an
Event of Default, at the Default Rate (as defined in the Note Purchase Agreement
referred to below) with respect to any outstanding principal hereof, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable quarterly as
aforesaid (or, at the option of the registered holder hereof, on demand).

         Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States at the
principal office of The Bank of New York in New York, New York or at such other
place as the Company shall have designated by written notice to the holder of
this Note as provided in the Note Purchase Agreement referred to below.

         This Note is one of a series of Senior Secured Notes (herein called the
"Notes") issued pursuant to a Note Purchase Agreement, dated as of June 7, 2002
(as from time to time amended, the "Note Purchase Agreement"), among the Company
and Purchasers named therein and is entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed
to the confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representation set forth in Section 6.2 of
the Note Purchase Agreement.

         This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount and of like tenor will be issued
to, and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

                                  Exhibit A-2
                         (to Note Purchase Agreement)
                                    Page 1

         This Note and a holder hereof are entitled equally and ratably with the
holders of all other Notes to the rights and benefits provided pursuant to the
terms and provisions of the Security Documents and the Intercreditor Agreement
(as each such term is defined in the Note Purchase Agreement). Reference is
hereby made to each of the foregoing for statement of the nature and extent of
the benefits and security for the Notes afforded thereby and the rights of the
holders of the Notes and the Company in respect thereof.

         This Note is subject to optional and mandatory prepayment, in whole or
from time to time in part, at the times and on the terms specified in the Note
Purchase Agreement, but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         Should any indebtedness represented by this Note be collected at law or
in equity, or in bankruptcy or other proceedings, or should this Note be placed
in the hands of attorneys for collection, the Company agrees to pay, in addition
to the principal, premium, if any, and interest due and payable hereon, all
costs of collecting or attempting to collect this Note, including reasonable
attorneys' fees and expenses (including those incurred in connection with any
appeal).

         THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAW OF SUCH
STATE, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE WHICH WOULD
REQUIRE APPLICATION OF THE LAWS OF THE JURISDICTION OTHER THAN SUCH STATE.

                                        Inergy Propane, LLC

                                        By ___________________________
                                            Name:
                                            Title:

                                  Exhibit A-2
                         (to Note Purchase Agreement)
                                    Page 2

                             [Form of Series C Note]

                               Inergy Propane, LLC

              9.34% Senior Secured Note, Series C, due June 5, 2009

No. [_________]                                                           [Date]
$[____________]                                                  PPN 45661# AC 5

         For Value Received, the undersigned, Inergy Propane, LLC (herein called
the "Company"), a limited liability company organized and existing under the
laws of the State of Delaware, hereby promises to pay to [________________], or
registered assigns, the principal sum of [________________] Dollars on June 5,
2009, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 9.34% per annum from
the date hereof, payable quarterly on the 7th day of March, June, September and
December in each year, commencing with the September, December, March and June
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on the occurrence and during the continuance of an
Event of Default, at the Default Rate (as defined in the Note Purchase Agreement
referred to below) with respect to any outstanding principal hereof, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable quarterly as
aforesaid (or, at the option of the registered holder hereof, on demand).

         Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of The Bank of New York in New York, New York or
at such other place as the Company shall have designated by written notice to
the Holder of this Note as provided in the Note Purchase Agreement.

         This Note is one of a series of Senior Secured Notes (herein called the
"Notes") issued pursuant to a Note Purchase Agreement, dated as of June 7, 2002
(as from time to time amended, the "Note Purchase Agreement"), among the Company
and the Purchasers named therein and is entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed
to the confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representation set forth in Section 6.2 of
the Note Purchase Agreement.

         This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount and of like tenor will be issued
to, and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

                                  Exhibit A-3
                         (to Note Purchase Agreement)
                                    Page 1

         This Note and a holder hereof are entitled equally and ratably with the
holders of all other Notes to the rights and benefits provided pursuant to the
terms and provisions of the Security Documents and the Intercreditor Agreement
(as each such term is defined in the Note Purchase Agreement). Reference is
hereby made to each of the foregoing for statement of the nature and extent of
the benefits and security for the Notes afforded thereby and the rights of the
holders of the Notes and the Company in respect thereof.

         This Note is subject to optional and mandatory prepayment, in whole or
from time to time in part, at the times and on the terms specified in the Note
Purchase Agreement, but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         Should any indebtedness represented by this Note be collected at law or
in equity, or in bankruptcy or other proceedings, or should this Note be placed
in the hands of attorneys for collection, the Company agrees to pay, in addition
to the principal, premium, if any, and interest due and payable hereon, all
costs of collecting or attempting to collect this Note, including reasonable
attorneys' fees and expenses (including those incurred in connection with any
appeal).

         THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAW OF SUCH
STATE, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE WHICH WOULD
REQUIRE APPLICATION OF THE LAWS OF THE JURISDICTION OTHER THAN SUCH STATE.

                                             Inergy Propane, LLC

                                             By _________________________
                                                  Name:
                                                  Title:

                                  Exhibit A-3
                         (to Note Purchase Agreement)
                                    Page 2

                     [Form of Opinion of Company's Counsel]

                                [To be attached]

                                   Exhibit B
                         (to Note Purchase Agreement)
                                    Page 1

                           [Form of Parent Guaranty]

                                  Exhibit C-1
                         (to Note Purchase Agreement)

                          [Form of Subsidiary Guaranty]

                                  Exhibit C-2
                         (to Note Purchase Agreement)

                   [Form of Funds Delivery Instruction Letter]

                             [Company's Letterhead]

The Canada Life Assurance Company
Floor SP-11
330 University Avenue
Toronto, Ontario

John Hancock Life Insurance Company
200 Clarendon Street, T-30
Boston, MA 02117

The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, TX 75201
                         Re: Funds Delivery Instruction

Ladies and Gentlemen:

         As contemplated by Section 3 of the Note Purchase Agreement dated as of
June 7, 2002, between us, the undersigned hereby instructs you to deliver, on
the date of closing, the proceeds of the Notes in the manner required by
paragraph 3 to the undersigned's account identified below:

                  Account Name:        _____________________
                  Account No:          2000010968431
                  Bank:____            First Union National Bank
                  Bank City & State:   Charlotte, North Carolina
                  Bank ABA No:         053000219
                  Reference:           _____________________

         This instruction has been executed and delivered by an authorized
representative of the undersigned.

                                          Very truly yours,

                                          Inergy Propane, LLC

                                          By _______________________________
                                              Name:

                                   Exhibit D
                         (to Note Purchase Agreement)

                                                                    EXHIBIT 4.5

                           PARENT GUARANTY AGREEMENT

     THIS GUARANTY AGREEMENT, dated as of June 7, 2002 (the "Guaranty
Agreement"), is made by INERGY, L.P., a Delaware limited partnership (the
"Guarantor"), in favor of the holders from time to time of the Notes described
below (the "Noteholders").

     WHEREAS, Inergy Propane, LLC, a Delaware limited liability company (the
"Company"), and the Purchasers named on the Purchaser Schedule thereto
(collectively, the "Purchasers") have entered into a Note Purchase Agreement
dated as of even date herewith (as the same may be amended, restated,
supplemented, or otherwise modified from time to time, the "Note Agreement";
capitalized terms used and otherwise not defined herein have the definitions set
forth in the Note Agreement) pursuant to which the Company has issued and sold
to the Purchasers (i) $35,000,000 aggregate principal amount of its 8.85% Senior
Secured Notes, Series A, due June 7, 2007 (the "Series A Notes"), (ii)
$25,000,000 aggregate principal amount of its 9.10% Senior Secured Notes, Series
B, due June 6, 2008 (the "Series B Notes"), and (iii) $25,000,000 aggregate
principal amount of its 9.34% Senior Secured Notes, Series C, due June 5, 2009
(the "Series C Notes" and, together with the Series A Notes and the Series B
Notes, collectively, the "Notes"; which term shall include any notes issued in
substitution or exchange for any of the foregoing pursuant to the terms of the
Note Agreement);

     WHEREAS, the Company is a Wholly-Owned Subsidiary of the Guarantor; and

     WHEREAS, it is a condition to the agreement of the Purchasers to purchase
the Notes that this Guaranty Agreement shall have been executed and delivered by
the Guarantor and shall be in full force and effect;

     NOW THEREFORE, in order to induce, and in consideration of, the execution
and delivery of the Note Agreement and the purchase of the Notes by the
Purchasers, the Guarantor hereby covenants and agrees with, and represents and
warrants to the Noteholders as follows:

1.   THE GUARANTY.  The Guarantor hereby irrevocably and unconditionally
     guarantees to each Noteholder the due and punctual payment in full of (i)
     the principal of, Make-Whole Amount, if any, and interest on (including
     interest accruing after the filing of any petition in bankruptcy, or the
     commencement of any insolvency, reorganization or like proceeding, relating
     to the Company, whether or not a claim for post-filing or post-petition
     interest is allowed in such proceeding), and any other amounts due under,
     the Notes when and as the same shall become due and payable (whether at
     stated maturity or by required or optional prepayment or by acceleration or
     otherwise) and (ii) any other sums which may become due under the terms and
     provisions of the Note Agreement, the Notes or any other Note Document (all
     such obligations described in clauses (i) and (ii) above are herein called
     the "Guaranteed Obligations").  The guaranty in the preceding sentence is
     an absolute, present and continuing guaranty of payment and not of

     collectibility and is in no way conditional or contingent upon any attempt
     to collect from the Company or any other guarantor of the Notes or upon any
     other action, occurrence or circumstance whatsoever.  In the event that the
     Company shall fail so to pay any of such Guaranteed Obligations, the
     Guarantor agrees to pay the same when due to the Noteholders entitled
     thereto, without demand, presentment, protest or notice of any kind, in
     lawful money of the United States of America, at the place for payment
     specified in the Notes and the Note Agreement.  Each default in payment of
     principal of, Make-Whole Amount, if any, or interest on any Note shall give
     rise to a separate cause of action hereunder and separate suits may be
     brought hereunder as each cause of action arises.  The Guarantor hereby
     agrees that the Notes issued in connection with the Note Agreement may make
     reference to this Guaranty Agreement.

     The Guarantor hereby agrees to pay and to indemnify and save each
     Noteholder harmless from and against any damage, loss, cost or expense
     (including attorneys' fees) which such Noteholder may incur or be subject
     to as a consequence, direct or indirect, of (i) any breach by the Guarantor
     or by the Company of any warranty, covenant, term or condition in, or the
     occurrence of any default under, this Guaranty Agreement, the Notes, the
     Note Agreement or any other Note Document, together with all expenses
     resulting from the compromise or defense of any claims or liabilities
     arising as a result of any such breach or default, and (ii) any legal
     action commenced to challenge the validity or enforceability of this
     Guaranty Agreement, the Notes, the Note Agreement or any other Note
     Document.

2.   OBLIGATIONS ABSOLUTE.  The obligations of the Guarantor hereunder shall be
     primary, absolute, irrevocable and unconditional, irrespective of the
     validity, regularity or enforceability of the Notes, of the Note Agreement
     or of the other Note Documents, shall not be subject to any counterclaim,
     setoff, deduction or defense based upon any claim the Guarantor may have
     against the Company or any Noteholder or otherwise, and shall remain in
     full force and effect without regard to, and shall not be released,
     discharged or in any way affected by, any circumstance or condition
     whatsoever (whether or not the Guarantor shall have any knowledge or notice
     thereof), including, without limitation: (a) any amendment, modification of
     or supplement to the Note Agreement, the Notes, or any other Note Document
     (except that the obligations of the Guarantor hereunder shall apply to the
     Note Agreement, the Notes or such other Note Document as so amended,
     modified or supplemented) or any assignment or transfer of any thereof or
     of any interest therein, or any furnishing, acceptance or release of any
     security for the Notes; (b) any waiver, consent, extension, indulgence or
     other action or inaction under or in respect of the Notes or in respect of
     the Note Agreement or any other Note Document; (c) any bankruptcy,
     insolvency, readjustment, composition, liquidation or similar proceeding
     with respect to the Company or its property; (d) any merger, amalgamation
     or consolidation of the Guarantor or of the Company into or with any other
     entity or any sale, lease or transfer of any or all of the assets of the
     Guarantor or of the Company to any person; (e) any failure on the part of
     the Company for any reason to comply with or perform any of the terms of
     any other agreement with the Guarantor; or (f) any other circumstance which
     might otherwise constitute a legal or equitable discharge or defense of a
     guarantor.  The Guarantor covenants that its obligations hereunder will not
     be discharged except by

                                       2

     payment and performance in full of all of the Guaranteed Obligations.

3.   WAIVER.  The Guarantor unconditionally waives to the fullest extent
     permitted by law, (a) notice of acceptance hereof, of any action taken or
     omitted in reliance hereon and of any defaults by the Company in the
     payment of any amounts due under the Notes, the Note Agreement or the other
     Note Documents, and of any of the matters referred to in paragraph 2
     hereof; (b) all notices which may be required by statute, rule of law or
     otherwise to preserve any of the rights of each Noteholder against the
     Guarantor, including, without limitation, presentment to or demand for
     payment from the Company or the Guarantor with respect to any Note, notice
     to the Company or to the Guarantor of default or protest for nonpayment or
     dishonor and the filing of claims with a court in the event of the
     bankruptcy of the Company; (c) any right to the enforcement, assertion or
     exercise by any Noteholder of any right, power or remedy conferred in this
     Guaranty Agreement, the Note Agreement, the Notes or the other Note
     Documents; (d) any requirement or diligence on the part of any Noteholder;
     and (e) any other act or omission or thing or delay to do any other act or
     thing which might in any manner or to any extent vary the risk of the
     Guarantor or which might otherwise operate as a discharge of the Guarantor.

4.   OBLIGATIONS UNIMPAIRED.  The Guarantor authorizes the Noteholders, without
     notice or demand to the Guarantor and without affecting its obligations
     hereunder, from time to time (a) to renew, compromise, extend, accelerate
     or otherwise change the time for payment of, or otherwise change the terms
     of, all or any part of the Notes, the Note Agreement, any other Note
     Document or any other instrument referred to therein; (b) to take and hold
     security for the payment of the Notes, for the performance of this Guaranty
     Agreement or otherwise for the Indebtedness guaranteed hereby and to
     exchange, enforce, waive and release any such security; (c) to apply any
     such security and to direct the order or manner of sale thereof as the
     Noteholders in their sole discretion may determine; (d) to obtain
     additional or substitute endorsers or guarantors; (e) to exercise or
     refrain from exercising any rights against the Company and others; and (f)
     to apply any sums, by whomsoever paid or however realized, to the payment
     of the principal of, Make-Whole Amount, if any, and interest on the Notes
     and any other Guaranteed Obligations hereunder.  The Guarantor waives any
     right to require the Noteholders to proceed against any additional or
     substitute endorsers or guarantors or to pursue or exhaust any security
     provided by the Company, the Guarantor or any other person or to pursue any
     other remedy available to such Noteholders.

5.   SUBROGATION.  The Guarantor will not (a) exercise, and hereby subordinates
     to the rights of the Noteholders, any rights which it may have acquired by
     way of subrogation under this Guaranty Agreement, by any payment made
     hereunder or otherwise, or (b) accept any payment on account of such
     subrogation rights, or any rights of reimbursement, indemnity, exoneration
     or contribution, any right to participate in any claim or any rights or
     recourse to any security for the Notes or this Guaranty Agreement unless
     and until all of the obligations, undertakings or conditions to be
     performed or observed by the Company pursuant to the Notes, the Note
     Agreement and the other Note

                                       3

     Documents at the time of the Guarantor's exercise of any such right shall
     have been performed, observed or paid in full.

     For a period of one year after the payment in full of the Guaranteed
     Obligations, the Guarantor hereby waives (x) all rights of subrogation
     which it may at any time otherwise have as a result of this Guaranty
     Agreement (whether statutory or otherwise) to the claims of the Noteholders
     against the Company or any other guarantor of the Guaranteed Obligations
     (each referred to herein as the "Other Party") and all contractual,
     statutory or common law rights of reimbursement, contribution or indemnity
     from any Other Party which it may at any time otherwise have as a result of
     this Guaranty Agreement; (y) any right to enforce any other remedy which
     the Noteholders now have or may hereafter have against any Other Party, any
     endorser or any other guarantor of all or any part of the Guaranteed
     Obligations; and (z) all claims (as such term is defined in the Bankruptcy
     Code) it may at any time otherwise have against any Other Party arising
     from any transaction whatsoever, including without limitation its right to
     assert or enforce any such claims.

6.   REINSTATEMENT OF GUARANTY.  This Guaranty Agreement shall continue to be
     effective, or be reinstated, as the case may be, if and to the extent at
     any time payment, in whole or in part, of any of the sums due to any
     Noteholder for principal, Make-Whole Amount, if any, or interest on the
     Notes or any of the other Guaranteed Obligations is rescinded or must
     otherwise be restored or returned by such Noteholder upon the insolvency,
     bankruptcy, dissolution, liquidation or reorganization of the Company, or
     upon or as a result of the appointment of a custodian, receiver, trustee or
     other officer with similar powers with respect to the Company or any
     substantial part of its property, or otherwise, all as though such payments
     had not been made.  If an event permitting the acceleration of the maturity
     of the principal amount of the Notes shall at any time have occurred and be
     continuing and such acceleration shall at such time be prevented or the
     right of any Noteholder to receive any payment under any Note shall at such
     time be delayed or otherwise affected by reason of the pendency against the
     Company of a case or proceeding under a bankruptcy or insolvency law, the
     Guarantor agrees that, for purposes of this Guaranty Agreement and its
     obligations hereunder, the maturity of such principal amount shall be
     deemed to have been accelerated with the same effect as if the Noteholders
     had accelerated the same in accordance with the terms of the Note
     Agreement, and the Guarantor shall forthwith pay such accelerated principal
     amount, accrued interest and Make-Whole Amount, if any, thereon and any
     other amounts guaranteed hereunder.

7.   RANK OF GUARANTY.  The Guarantor agrees that its obligations under this
     Guaranty Agreement shall rank at least pari passu with all other senior
     obligations of the Guarantor now or hereafter existing and senior to all
     obligations owed by the Guarantor to any Affiliate of the Guarantor.

8.  ADDITIONAL COVENANTS OF THE GUARANTOR.

                                       4

          (a)    Affirmative Covenants. So long as any Note is outstanding or
     the Note Agreement shall remain in effect, the Guarantor agrees that it
     will:

          (i)    Existence; Businesses and Properties. (A) Carry on and conduct
                 its principal business substantially as it is now being
                 conducted, (B) maintain in good standing its existence and its
                 right to transact business in those states in which it is now
                 or may be doing business after the date hereof; and (C)
                 maintain all licenses, permits and registrations necessary to
                 the conduct of its business, except where the failure to so
                 maintain its right to transact business or to maintain such
                 licenses, permits or registrations would not have a Material
                 Adverse Effect.

          (ii)   Payment of Taxes; Etc. Pay and discharge, before they become
                 delinquent, all taxes, assessments and other governmental
                 charges imposed upon it, its properties, or any part thereof,
                 or upon the income or profits therefrom and all claims for
                 labor, materials or supplies which if unpaid might be or become
                 a Lien or charge upon any of its property and other material
                 obligations, except such items as it is in good faith
                 appropriately contesting and as to which adequate reserves have
                 been provided to the satisfaction of the Required Holders.

          (iii)  Employee Benefits.  Not maintain or establish any Plan.

          (iv)   Books and Records; Inspection; Audits. (A) Maintain complete
                 and accurate books and financial records in accordance with
                 GAAP; and (B) during normal working hours permit the Collateral
                 Agent and the Noteholders to visit and inspect its properties
                 and to conduct any environmental tests or audits thereon, to
                 inspect its books and financial records (including its
                 journals, orders, receipts and correspondence which relates to
                 its accounts receivable), and to discuss its affairs, finances
                 and accounts receivable and operations with its members,
                 officers, employees and its independent public accountants at
                 the expense of the Guarantor.

          (v)    Compliance with Law. Comply with all laws, ordinances or
                 governmental rules or regulations to which it is subject,
                 including, without limitation, Environmental Laws, except to
                 the extent that non-compliance could not, individually or in
                 the aggregate, reasonably be expected to have a Material
                 Adverse Effect.

          (vi)   Financial Statements, Etc. Furnish, or cause the Company to
                 furnish, to each Noteholder, the consolidated and consolidating
                 balance sheets, statements of cash flow, financial statements,
                 certificates, opinions, reports and other information required
                 to be furnished by Section 7 of the Note Agreement, in each
                 case within the time frames required

                                       5

                 therein, and shall furnish with reasonable promptness such
                 other information relating to the Guarantor or any of its
                 subsidiaries as any Noteholder may from time to time reasonably
                 request.

          (b)    Negative Covenants. So long as any Note is outstanding or the
     Note Agreement shall remain in effect, the Guarantor agrees that it will
     not:

          (i)    Liens. Create or suffer to exist any Lien upon or with respect
                 to any of its assets or properties (other than (A) Liens
                 securing the Notes and the payment, performance and observance
                 of the other obligations under this Guaranty Agreement and the
                 other Note Documents, (B) a Lien on the Capital Stock of the
                 Company in favor of Collateral Agent securing the payment,
                 performance and observance of obligations under the Bank
                 Documents and Hedging Agreements with Bank Lenders or
                 Affiliates thereof (x) which is pari passu with the Liens in
                 favor of the Collateral Agent securing the securing the Notes
                 and the payment, performance and observance of the other
                 obligations under this Guaranty Agreement and the other Note
                 Documents and (y) which is subject to the Intercreditor
                 Agreement, and (C) a Lien on the Capital Stock of the Company
                 in favor of Collateral Agent securing the payment, performance
                 and observance of obligations with respect to Permitted
                 Additional Private Placement Debt, (x) which are pari passu
                 with the Liens in favor of the Collateral Agent securing the
                 Notes and Indebtedness under the Bank Documents and Hedging
                 Agreements and the payment, performance and observance of the
                 other obligations under this Agreement, the other Note
                 Documents and the Bank Documents, and (y) which are subject to
                 the provisions of the Intercreditor Agreement, as amended to
                 provide for the Permitted Additional Private Placement Debt
                 pursuant to an amendment in form and substance satisfactory to
                 the Required Holders), whether such Person owns or has an
                 interest in such properties on the date hereof or at any time
                 thereafter.

          (ii)   Indebtedness. Create or suffer to exist any Indebtedness other
                 than (A) Indebtedness under this Guaranty Agreement, (B)
                 Indebtedness represented by any other Guaranty of Indebtedness
                 of the Company under the Bank Documents and Hedging Agreements
                 with Bank Lenders or Affiliates thereof, so long as each
                 beneficiary of such Guaranty Agreement is a party to the
                 Intercreditor Agreement, and (C) Indebtedness represented by
                 any other Guaranty of Indebtedness of the Company with respect
                 to Permitted Additional Private Placement Debt, so long as each
                 beneficiary of such Guaranty Agreement is a party to the
                 Intercreditor Agreement, as amended to provide for the
                 Permitted Additional Private Placement Debt pursuant to an
                 amendment in form and substance satisfactory to the Required
                 Holders.

                                       6

          (iii)   Loans, Advances, Investments and Contingent Liabilities. Make
                  or permit to remain outstanding any loan or advance to, or
                  extend credit to, or make or permit to remain outstanding any
                  Guaranty in connection with the obligations, stock or
                  dividends of, or own, purchase or acquire any stock,
                  obligations or securities of, or any other interest in, or
                  make any capital contribution to, any Person, except that the
                  Guarantor may: (A) provide this Guaranty Agreement and the
                  Guaranties permitted by clauses (B) and (C) of paragraph
                  8(b)(ii) above; and (B) own, purchase or acquire stock or
                  other equity interests of the Company that are pledged
                  pursuant to the Pledge Agreement to which the Guarantor is a
                  party.

          (iv)    Mergers; Disposition of Assets and Properties. (A) Merge or
                  consolidate with or otherwise acquire, or be acquired by, any
                  other Person; or (B) sell, lease or otherwise transfer all or
                  any part of its assets or properties.

          (v)     Acquisition of Assets. Own, acquire or lease any assets or
                  property other than ownership of the Capital Stock of the
                  Company.

          (vi)    New Businesses. Enter into any business which is not
                  substantially similar to that existing on the date hereof.

          (vii)   Conflicting Agreements. Enter into any agreement any term or
                  condition of which conflicts with any provision of this
                  Guaranty Agreement or any other Note Document.

          (viii)  Changes in Accounting Principles; Fiscal Year. Make any change
                  in its principles or methods of accounting as currently in
                  effect, except such changes as are required by GAAP, nor,
                  without first obtaining the written consent of the Required
                  Holders, change its fiscal year.

          (ix)    Transactions with Affiliates. Enter into or be a party to any
                  transaction or arrangement, including without limitation, the
                  purchase, sale or exchange of property of any kind or the
                  rendering of any service, with any Affiliate, except in the
                  ordinary course of (other than Permitted Acquisitions that are
                  structured in substantially the same manner as the IPC
                  Acquisition) and pursuant to the reasonable requirements of
                  such Person's business and upon fair and reasonable terms
                  substantially as favorable to such Person as those which would
                  be obtained in a comparable arms-length transaction with a
                  non-Affiliate.

                                       7

9.   REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.

     The Guarantor represents and warrants as follows:

          (a) Organization, Good Standing and Location.  The Guarantor is (i)
     duly organized, validly existing and in good standing under the laws of the
     jurisdiction of its organization, (ii) duly qualified and authorized to do
     business and in good standing in every other jurisdiction where the nature
     of its business requires such qualification and (iii) has all requisite
     organizational power and authority, and all governmental licenses and
     permits, to own and operate its properties and to carry on its businesses
     as presently conducted.  The Guarantor has the requisite organizational
     power to enter into and perform its obligations under this Guaranty
     Agreement.

          (b) Approval and Enforceability of Guaranty Agreement.  The execution,
     delivery and performance of this Guaranty Agreement have been duly
     authorized by all necessary organizational action on the part of the
     Guarantor.  The Guaranty Agreement has been duly and validly executed and
     delivered and constitutes the legal, valid and binding obligation of the
     Guarantor, enforceable against it in accordance with its terms, subject to
     (i) applicable bankruptcy, insolvency, moratorium, reorganization,
     receivership and similar laws affecting the rights and remedies of
     creditors generally, and (ii) general principles of equity (regardless of
     whether such enforceability is considered in a proceeding in equity or at
     law).

          (c) Compliance of Agreement with Laws, Etc.  The execution, delivery
     and performance by the Guarantor of this Guaranty will not, by the passage
     of time, the giving of notice or otherwise, (i) require any consent,
     approvals or authorization from any Governmental Authority or violate any
     provision of any statute or other rule or regulation of any Governmental
     Authority relating to the Guarantor, (ii) conflict with, result in a breach
     of or constitute a default under the articles of formation, partnership
     agreement or other organizational documents of the Guarantor or any
     indenture, agreement or instrument to which the Guarantor is a party or by
     which any of its properties may be bound or affected or any order,
     judgment, decree or ruling of any court, arbitrator or Governmental
     Authority applicable to the Guarantor, or (iii) result in or require the
     creation or imposition of any Lien upon or with respect to any property now
     owned or hereafter acquired by the Guarantor.

          (d) Applicability of Note Agreement Representations. The Noteholders
     shall be entitled to rely on any representation or warranty contained in
     Section 5 of the Note Agreement and applicable to the Guarantor as if such
     representation or warranty was made by the Guarantor herein.

10.  EVENTS OF DEFAULT.    Each of the following shall constitute an Event of
     Default, whatever the reason for such event and whether it shall be
     voluntary or involuntary or be effected by operation of law or pursuant to
     any judgment or order of any court or any order, rule or regulation of any
     Governmental Authority or otherwise:

                                       8

     (a)  Misrepresentation. Any representation or warranty made or deemed to be
     made by the Guarantor under this Guaranty or any amendment hereto, shall
     prove to have been incorrect or misleading in any material respect when
     made or deemed made.

     (b)  Default in Performance of Certain Covenants. A default in the
     performance or observance of any covenant or agreement contained in
     paragraphs 8(a)(i), 8(a)(iii), 8(a)(iv) or 8(a)(vi), or paragraphs
     8(b)(i),(ii), (iii), (iv), (v), (vi), or (ix) of this Guaranty Agreement.

     (c)  Default in Performance of Other Covenants and Conditions. A default in
     the performance or observance of any term, covenant, condition or agreement
     contained in this Guaranty Agreement (other than as specifically provided
     for otherwise in this paragraph 10) and such default shall continue for a
     period of thirty (30) days.

11.  NOTICES.  Unless otherwise specifically provided herein, all notices,
     consents, directions, approvals, instructions, requests and other
     communications required or permitted by the terms hereof shall be in
     writing, and any such communication shall become effective when received,
     addressed in the following manner: (a) if to the Guarantor, to the address
     set forth on the signature page hereto or (b) if to any Noteholder, to the
     respective addresses set forth in the Purchaser Schedule to the Note
     Agreement or such other address specified by such Noteholder to the
     Guarantor in writing; provided, however, that any such addressee may change
     its address for communications by notice given as aforesaid to the other
     parties hereto.

12.  CONSTRUCTION.  The paragraph and subparagraph headings in this Guaranty
     Agreement are for convenience of reference only and shall neither be deemed
     to be a part of this Guaranty Agreement nor modify, define, expand or limit
     any of the terms or provisions hereof.  All references herein to numbered
     paragraphs, unless otherwise indicated, are to paragraphs of this Guaranty
     Agreement.  Words and definitions in the singular shall be read and
     construed as though in the plural and vice versa, and words in the
     masculine, neuter or feminine gender shall be read and construed as though
     in either of the other genders where the context so requires.

13.  SEVERABILITY.  If any provision of this Guaranty Agreement, or the
     application thereof to any person or circumstances, shall, for any reason
     or to any extent, be invalid or unenforceable, such invalidity or
     unenforceability shall not in any manner affect or render invalid or
     unenforceable the remainder of this Guaranty Agreement, and the application
     of that provision to other persons or circumstances shall not be affected
     but, rather, shall be enforced to the extent permitted by applicable law.

14.  SUCCESSORS.  The terms and provisions of this Guaranty Agreement shall be
     binding upon and inure to the benefit of the Guarantor and the Noteholders
     from time to time and their respective permitted successors, transferees
     and assigns.

                                       9

15.  ENTIRE AGREEMENT; AMENDMENT.  This Guaranty Agreement expresses the entire
     understanding of the subject matter hereof; and all other understandings,
     written or oral, are hereby merged herein and superseded.  No amendment of
     or supplement to this Guaranty Agreement, or waiver or modification of, or
     consent under, the terms hereof shall be effective unless in writing and
     signed by the party to be bound thereby.

16.  TERM OF GUARANTY AGREEMENT.  The Guaranty Agreement and all guarantees,
     covenants and agreements of the Guarantor contained herein shall continue
     in full force and effect and shall not be discharged until such time as all
     of the Guaranteed Obligations shall be indefeasibly paid or otherwise
     discharged in full.

17.  SURVIVAL.  All warranties, representations and covenants made by the
     Guarantor herein or in any certificate or other instrument delivered by it
     or on its behalf under this Guaranty Agreement shall be considered to have
     been relied upon by the Noteholders and shall survive the execution and
     delivery of this Guaranty Agreement, regardless of any investigation made
     by the Noteholders or on their behalf.

18.  FURTHER ASSURANCES.  The Guarantor hereby agrees to execute and deliver all
     such instruments and take all such action as the Required Holders may from
     time to time reasonably request in order to effectuate fully the purposes
     of this Guaranty Agreement.

19.  GOVERNING LAW.  THIS GUARANTY AGREEMENT HAS BEEN EXECUTED AND DELIVERED IN
     THE STATE OF NEW YORK AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
     ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
     APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT
     REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

20.  WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES.

          (a) THE GUARANTOR AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY
     CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY
     AGREEMENT, THE NOTES, ANY OTHER NOTE DOCUMENT OR ANY DEALINGS RELATING TO
     THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THE NOTE DOCUMENTS,
     AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  THE SCOPE
     OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
     THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THE
     TRANSACTIONS CONTEMPLATED BY THE NOTE DOCUMENTS, INCLUDING WITHOUT
     LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
     OTHER COMMON LAW AND STATUTORY CLAIMS.  THE GUARANTOR ACKNOWLEDGES THAT
     THIS WAIVER IS A MATERIAL

                                       10

     INDUCEMENT TO THE NOTEHOLDERS TO ENTER INTO THE NOTE AGREEMENT AND PURCHASE
     THE NOTES PURCHASED BY IT, THAT EACH NOTEHOLDER HAS ALREADY RELIED ON THIS
     WAIVER IN ENTERING INTO THE NOTE AGREEMENT AND PURCHASING THE NOTES
     PURCHASED BY IT, AND THAT EACH NOTEHOLDER WILL CONTINUE TO RELY ON THE
     WAIVER IN ITS RELATED FUTURE DEALINGS WITH THE COMPANY AND THE GUARANTOR.
     THE GUARANTOR FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS
     WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES
     ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
     EVENT OF LITIGATION, THIS GUARANTY AGREEMENT MAY BE FILED AS A WRITTEN
     CONSENT TO A TRIAL BY THE COURT.

          (b) The Guarantor hereby irrevocably submits itself to the
     jurisdiction of the Supreme Court of the State of New York, New York
     County, of the United States of America and to the jurisdiction of the
     United States District Court for the Southern District of New York, for the
     purpose of any suit, action or other proceeding arising out of, or relating
     to, this Guaranty Agreement, any other Note Document, or the subject matter
     hereof or thereof, and the Guarantor hereby waives, and agrees not to
     assert, by way of motion, as a defense or otherwise, in any such suit,
     action or proceedings, any claim that it is not personally subject to the
     jurisdiction of the above-named courts for any reason whatsoever, that such
     suit, action or proceeding is brought in an inconvenient forum or that the
     venue of such suit, action or proceeding is improper.  The Guarantor hereby
     agrees that process may be served on Corporation Service Company, located
     at 80 State Street, Albany, NY  12207.  Any and all service of process and
     any other notice in any such action, suit or proceeding shall be effective
     against such parties if given by registered or certified mail, return
     receipt requested, or by any other means or mail which requires a signed
     receipt, postage prepaid, mailed to such parties has herein provided in
     paragraph 11.  During the term of this Guaranty Agreement, in the event
     Corporation Service Company shall not be able to accept service of process
     as aforesaid and if the Guarantor shall not maintain an office in New York
     City, the Guarantor shall, promptly appoint and maintain an agent qualified
     to act as an agent for service of process with respect to all courts in and
     of New York City, and acceptable to the holders of the Notes, as the
     Guarantor's authorized agent to accept and acknowledge on the Guarantor's
     behalf service of any and all process which may be served in any such
     action, suit or proceeding.  The Guarantor agrees that a final judgment in
     any such action or proceeding shall be conclusive and may be enforced in
     other jurisdictions by suit on the judgment or in any other manner provided
     by law.  Nothing in this paragraph 20 shall affect the right of any
     Noteholder to serve legal process in any other manner permitted by law or
     affect the right of any Noteholder to bring any action or proceeding
     against the Guarantor or its respective property in the courts of any other
     jurisdiction.

          The Guarantor hereby agrees that the submission to jurisdiction
     referred to in this paragraph 20 shall not limit in any manner the rights
     of any of the Noteholders to take

                                       11

     proceedings against the Guarantor in some other court of competent
     jurisdiction whether within or outside the United States.

            [Remainder of this page blank; signature page follows]

                                      12

          IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement
to be duly executed and delivered as of the date and year first above written.

                                    INERGY, LP

                                    By:  INERGY GP, LLC,
                                         its Managing General Partner

                                         By:___________________________
                                                 John J. Sherman
                                                 President

Notice address for
above Guarantor:

c/o Inergy Propane, LLC
1101 Walnut, Suite 1500
Kansas City, Missouri 64106

                     Signature Page to Guaranty Agreement

                                                                     EXHIBIT 4.6

                          LIMITED GUARANTY AGREEMENT

     THIS GUARANTY AGREEMENT, dated as of June 7, 2002 (the "Guaranty
Agreement"), is made by IPCH ACQUISITION CORP., a Delaware corporation (the
"Guarantor"), in favor of the holders from time to time of the Notes described
below (the "Noteholders").

     WHEREAS, Inergy Propane, LLC, a Delaware limited liability company (the
"Company"), and the Purchasers named on the Purchaser Schedule thereto
(collectively, the "Purchasers") have entered into a Note Purchase Agreement
dated as of even date herewith (as the same may be amended, restated,
supplemented, or otherwise modified from time to time, the "Note Agreement";
capitalized terms used and otherwise not defined herein have the definitions set
forth in the Note Agreement) pursuant to which the Company has issued and sold
to the Purchasers (i) $35,000,000 aggregate principal amount of its 8.85% Senior
Secured Notes, Series A, due June 7, 2007 (the "Series A Notes"), (ii)
$25,000,000 aggregate principal amount of its 9.10% Senior Secured Notes, Series
B, due June 6, 2008 (the "Series B Notes"), and (iii) $25,000,000 aggregate
principal amount of its 9.34% Senior Secured Notes, Series C, due June 5, 2009
(the "Series C Notes" and, together with the Series A Notes and the Series B
Notes, collectively, the "Notes"; which term shall include any notes issued in
substitution or exchange for any of the foregoing pursuant to the terms of the
Note Agreement);

     WHEREAS, the Guarantor is the owner of certain equity interests in Inergy,
L.P., a Delaware limited partnership of which the Company is a Wholly-Owned
Subsidiary; and

     WHEREAS, it is a condition to the agreement of the Purchasers to purchase
the Notes that this Guaranty Agreement shall have been executed and delivered by
the Guarantor and shall be in full force and effect;

     NOW THEREFORE, in order to induce, and in consideration of, the execution
and delivery of the Note Agreement and the purchase of the Notes by the
Purchasers, the Guarantor hereby covenants and agrees with, and represents and
warrants to the Noteholders as follows:

1.   THE GUARANTY.  The Guarantor hereby irrevocably and unconditionally
     guarantees to each Noteholder the due and punctual payment in full of (i)
     the principal of, Make-Whole Amount, if any, and interest on (including
     interest accruing after the filing of any petition in bankruptcy, or the
     commencement of any insolvency, reorganization or like proceeding, relating
     to the Company, whether or not a claim for post-filing or post-petition
     interest is allowed in such proceeding), and any other amounts due under,
     the Notes when and as the same shall become due and payable (whether at
     stated maturity or by required or optional prepayment or by acceleration or
     otherwise) and (ii) any other

     sums which may become due under the terms and provisions of the Note
     Agreement, the Notes or any other Note Document (all such obligations
     described in clauses (i) and (ii) above are herein called the "Guaranteed
     Obligations"). The guaranty in the preceding sentence is an absolute,
     present and continuing guaranty of payment and not of collectibility and is
     in no way conditional or contingent upon any attempt to collect from the
     Company or any other guarantor of the Notes or upon any other action,
     occurrence or circumstance whatsoever. In the event that the Company shall
     fail so to pay any of such Guaranteed Obligations, the Guarantor agrees to
     pay the same when due to the Noteholders entitled thereto, without demand,
     presentment, protest or notice of any kind, in lawful money of the United
     States of America, at the place for payment specified in the Notes and the
     Note Agreement. Each default in payment of principal of, Make-Whole Amount,
     if any, or interest on any Note shall give rise to a separate cause of
     action hereunder and separate suits may be brought hereunder as each cause
     of action arises. The Guarantor hereby agrees that the Notes issued in
     connection with the Note Agreement may make reference to this Guaranty
     Agreement.

     The Guarantor hereby agrees to pay and to indemnify and save each
     Noteholder harmless from and against any damage, loss, cost or expense
     (including attorneys' fees) which such Noteholder may incur or be subject
     to as a consequence, direct or indirect, of (i) any breach by the Guarantor
     or by the Company of any warranty, covenant, term or condition in, or the
     occurrence of any default under, this Guaranty Agreement, the Notes, the
     Note Agreement or any other Note Document, together with all expenses
     resulting from the compromise or defense of any claims or liabilities
     arising as a result of any such breach or default, and (ii) any legal
     action commenced to challenge the validity or enforceability of this
     Guaranty Agreement, the Notes, the Note Agreement or any other Note
     Document.

     Notwithstanding the foregoing or any other provisions of this Guaranty
     Agreement, it is agreed and understood that the Guarantor shall not be
     required to pay hereunder at any time more than the Maximum Guaranteed
     Amount determined as of such time.  The Guarantor agrees that the
     Guaranteed Obligations may at any time exceed the sum of the Maximum
     Guaranteed Amount, without affecting or impairing the obligation of the
     Guarantor.  "Maximum Guaranteed Amount" means as of the date of
     determination, the lesser of (a) $35,000,000 and (b) the maximum amount
     that would not render the Guarantor's liability under this Guaranty
     Agreement subject to avoidance under Section 548 of the United States
     Bankruptcy Code (or any successor provision) or any comparable provision of
     applicable state law; provided, however, that (i) the foregoing limitation
     shall not limit or otherwise affect the Guarantor's liability under this
     Guaranty Agreement to pay any expenses (including, without limitation,
     attorney's fees and expenses, whether or not litigation is commenced, and
     during both the trial and any appellate phases of litigation) incurred by
     the Noteholders in enforcing any rights under this Guaranty Agreement, and
     (ii) no payment or prepayment of any Notes or other obligations under the
     Note Agreement or any other Note Document, by the Company or any other
     Person, and no foreclosure or other realization by the Collateral Agent or
     the Noteholders of any Collateral shall reduce the Guaranteed Obligations
     (except to the extent the sum of all obligations of the Company under the
     Notes, the Note Agreement

                                       2

     and the other Note Documents is less than $35,000,000 at the time
     enforcement of this Guaranty Agreement is sought).

2.   OBLIGATIONS ABSOLUTE.  The obligations of the Guarantor hereunder shall be
     primary, absolute, irrevocable and unconditional, irrespective of the
     validity, regularity or enforceability of the Notes, of the Note Agreement
     or of the other Note Documents, shall not be subject to any counterclaim,
     setoff, deduction or defense based upon any claim the Guarantor may have
     against the Company or any Noteholder or otherwise, and shall remain in
     full force and effect without regard to, and shall not be released,
     discharged or in any way affected by, any circumstance or condition
     whatsoever (whether or not the Guarantor shall have any knowledge or notice
     thereof), including, without limitation: (a) any amendment, modification of
     or supplement to the Note Agreement, the Notes, or any other Note Document
     (except that the obligations of the Guarantor hereunder shall apply to the
     Note Agreement, the Notes or such other Note Document as so amended,
     modified or supplemented) or any assignment or transfer of any thereof or
     of any interest therein, or any furnishing, acceptance or release of any
     security for the Notes; (b) any waiver, consent, extension, indulgence or
     other action or inaction under or in respect of the Notes or in respect of
     the Note Agreement or any other Note Document; (c) any bankruptcy,
     insolvency, readjustment, composition, liquidation or similar proceeding
     with respect to the Company or its property; (d) any merger, amalgamation
     or consolidation of the Guarantor or of the Company into or with any other
     entity or any sale, lease or transfer of any or all of the assets of the
     Guarantor or of the Company to any person; (e) any failure on the part of
     the Company for any reason to comply with or perform any of the terms of
     any other agreement with the Guarantor; or (f) any other circumstance which
     might otherwise constitute a legal or equitable discharge or defense of a
     guarantor.  The Guarantor covenants that its obligations hereunder will not
     be discharged except by payment and performance in full of all of the
     Guaranteed Obligations.

3.   WAIVER.  The Guarantor unconditionally waives to the fullest extent
     permitted by law, (a) notice of acceptance hereof, of any action taken or
     omitted in reliance hereon and of any defaults by the Company in the
     payment of any amounts due under the Notes, the Note Agreement or the other
     Note Documents, and of any of the matters referred to in paragraph 2
     hereof; (b) all notices which may be required by statute, rule of law or
     otherwise to preserve any of the rights of each Noteholder against the
     Guarantor, including, without limitation, presentment to or demand for
     payment from the Company or the Guarantor with respect to any Note, notice
     to the Company or to the Guarantor of default or protest for nonpayment or
     dishonor and the filing of claims with a court in the event of the
     bankruptcy of the Company; (c) any right to the enforcement, assertion or
     exercise by any Noteholder of any right, power or remedy conferred in this
     Guaranty Agreement, the Note Agreement, the Notes or the other Note
     Documents; (d) any requirement or diligence on the part of any Noteholder;
     and (e) any other act or omission or thing or delay to do any other act or
     thing which might in any manner or to any extent vary the risk of the
     Guarantor or which might otherwise operate as a discharge of the Guarantor.

                                       3

4.   OBLIGATIONS UNIMPAIRED.  The Guarantor authorizes the Noteholders, without
     notice or demand to the Guarantor and without affecting its obligations
     hereunder, from time to time (a) to renew, compromise, extend, accelerate
     or otherwise change the time for payment of, or otherwise change the terms
     of, all or any part of the Notes, the Note Agreement, any other Note
     Document or any other instrument referred to therein; (b) to take and hold
     security for the payment of the Notes, for the performance of this Guaranty
     Agreement or otherwise for the Indebtedness guaranteed hereby and to
     exchange, enforce, waive and release any such security; (c) to apply any
     such security and to direct the order or manner of sale thereof as the
     Noteholders in their sole discretion may determine; (d) to obtain
     additional or substitute endorsers or guarantors; (e) to exercise or
     refrain from exercising any rights against the Company and others; and (f)
     to apply any sums, by whomsoever paid or however realized, to the payment
     of the principal of, Make-Whole Amount, if any, and interest on the Notes
     and any other Guaranteed Obligations hereunder.  The Guarantor waives any
     right to require the Noteholders to proceed against any additional or
     substitute endorsers or guarantors or to pursue or exhaust any security
     provided by the Company, the Guarantor or any other person or to pursue any
     other remedy available to such Noteholders.

5.   SUBROGATION.  The Guarantor will not (a) exercise, and hereby subordinates
     to the rights of the Noteholders, any rights which it may have acquired by
     way of subrogation under this Guaranty Agreement, by any payment made
     hereunder or otherwise, or (b) accept any payment on account of such
     subrogation rights, or any rights of reimbursement, indemnity, exoneration
     or contribution, any right to participate in any claim or any rights or
     recourse to any security for the Notes or this Guaranty Agreement unless
     and until all of the obligations, undertakings or conditions to be
     performed or observed by the Company pursuant to the Notes, the Note
     Agreement and the other Note Documents at the time of the Guarantor's
     exercise of any such right shall have been performed, observed or paid in
     full.

     For a period of one year after the payment in full of the Guaranteed
     Obligations, the Guarantor hereby waives (x) all rights of subrogation
     which it may at any time otherwise have as a result of this Guaranty
     Agreement (whether statutory or otherwise) to the claims of the Noteholders
     against the Company or any other guarantor of the Guaranteed Obligations
     (each referred to herein as the "Other Party") and all contractual,
     statutory or common law rights of reimbursement, contribution or indemnity
     from any Other Party which it may at any time otherwise have as a result of
     this Guaranty Agreement; (y) any right to enforce any other remedy which
     the Noteholders now have or may hereafter have against any Other Party, any
     endorser or any other guarantor of all or any part of the Guaranteed
     Obligations; and (z) all claims (as such term is defined in the Bankruptcy
     Code) it may at any time otherwise have against any Other Party arising
     from any transaction whatsoever, including without limitation its right to
     assert or enforce any such claims.

6.   REINSTATEMENT OF GUARANTY.  This Guaranty Agreement shall continue to be
     effective, or be reinstated, as the case may be, if and to the extent at
     any time payment, in

                                       4

     whole or in part, of any of the sums due to any Noteholder for principal,
     Make-Whole Amount, if any, or interest on the Notes or any of the other
     Guaranteed Obligations is rescinded or must otherwise be restored or
     returned by such Noteholder upon the insolvency, bankruptcy, dissolution,
     liquidation or reorganization of the Company, or upon or as a result of the
     appointment of a custodian, receiver, trustee or other officer with similar
     powers with respect to the Company or any substantial part of its property,
     or otherwise, all as though such payments had not been made. If an event
     permitting the acceleration of the maturity of the principal amount of the
     Notes shall at any time have occurred and be continuing and such
     acceleration shall at such time be prevented or the right of any Noteholder
     to receive any payment under any Note shall at such time be delayed or
     otherwise affected by reason of the pendency against the Company of a case
     or proceeding under a bankruptcy or insolvency law, the Guarantor agrees
     that, for purposes of this Guaranty Agreement and its obligations
     hereunder, the maturity of such principal amount shall be deemed to have
     been accelerated with the same effect as if the Noteholders had accelerated
     the same in accordance with the terms of the Note Agreement, and the
     Guarantor shall forthwith pay such accelerated principal amount, accrued
     interest and Make-Whole Amount, if any, thereon and any other amounts
     guaranteed hereunder.

7.   RANK OF GUARANTY.  The Guarantor agrees that its obligations under this
     Guaranty Agreement shall rank at least pari passu with all other senior
     obligations of the Guarantor now or hereafter existing and senior to all
     obligations owed by the Guarantor to any Affiliate of the Guarantor.

8.   REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.

     The Guarantor represents and warrants as follows:

          (a) Organization, Good Standing and Location.  The Guarantor is (i)
     duly organized, validly existing and in good standing under the laws of the
     jurisdiction of its organization, (ii) duly qualified and authorized to do
     business and in good standing in every other jurisdiction where the nature
     of its business requires such qualification and (iii) has all requisite
     organizational power and authority, and all governmental licenses and
     permits, to own and operate its properties and to carry on its businesses
     as presently conducted.  The Guarantor has the requisite organizational
     power to enter into and perform its obligations under this Guaranty
     Agreement.

          (b) Approval and Enforceability of Guaranty Agreement.  The execution,
     delivery and performance of this Guaranty Agreement have been duly
     authorized by all necessary organizational action on the part of the
     Guarantor.  The Guaranty Agreement has been duly and validly executed and
     delivered and constitutes the legal, valid and binding obligation of the
     Guarantor, enforceable against it in accordance with its terms, subject to
     (i) applicable bankruptcy, insolvency, moratorium, reorganization,
     receivership and similar laws affecting the rights and remedies of
     creditors generally, and (ii) general principles of equity (regardless of
     whether such enforceability is considered in a

                                       5

     proceeding in equity or at law).

          (c) Compliance of Agreement with Laws, Etc.  The execution, delivery
     and performance by the Guarantor of this Guaranty will not, by the passage
     of time, the giving of notice or otherwise, (i) require any consent,
     approvals or authorization from any Governmental Authority or violate any
     provision of any statute or other rule or regulation of any Governmental
     Authority relating to the Guarantor, (ii) conflict with, result in a breach
     of or constitute a default under the articles of formation, partnership
     agreement or other organizational documents of the Guarantor or any
     indenture, agreement or instrument to which the Guarantor is a party or by
     which any of its properties may be bound or affected or any order,
     judgment, decree or ruling of any court, arbitrator or Governmental
     Authority applicable to the Guarantor, or (iii) result in or require the
     creation or imposition of any Lien upon or with respect to any property now
     owned or hereafter acquired by the Guarantor.

          (d)  Applicability of Note Agreement Representations.  The Noteholders
     shall be entitled to rely on any representation or warranty contained in
     Section 5 of the Note Agreement and applicable to the Guarantor as if such
     representation or warranty was made by the Guarantor herein.

9.   NOTICES.  Unless otherwise specifically provided herein, all notices,
     consents, directions, approvals, instructions, requests and other
     communications required or permitted by the terms hereof shall be in
     writing, and any such communication shall become effective when received,
     addressed in the following manner: (a) if to the Guarantor, to the address
     set forth on the signature page hereto or (b) if to any Noteholder, to the
     respective addresses set forth in the Purchaser Schedule to the Note
     Agreement or such other address specified by such Noteholder to the
     Guarantor in writing; provided, however, that any such addressee may change
     its address for communications by notice given as aforesaid to the other
     parties hereto.

10.  CONSTRUCTION.  The paragraph and subparagraph headings in this Guaranty
     Agreement are for convenience of reference only and shall neither be deemed
     to be a part of this Guaranty Agreement nor modify, define, expand or limit
     any of the terms or provisions hereof.  All references herein to numbered
     paragraphs, unless otherwise indicated, are to paragraphs of this Guaranty
     Agreement.  Words and definitions in the singular shall be read and
     construed as though in the plural and vice versa, and words in the
     masculine, neuter or feminine gender shall be read and construed as though
     in either of the other genders where the context so requires.

11.  SEVERABILITY.  If any provision of this Guaranty Agreement, or the
     application thereof to any person or circumstances, shall, for any reason
     or to any extent, be invalid or unenforceable, such invalidity or
     unenforceability shall not in any manner affect or render invalid or
     unenforceable the remainder of this Guaranty Agreement, and the application
     of that provision to other persons or circumstances shall not be affected
     but, rather, shall be enforced to the extent permitted by applicable law.

                                       6

12.  SUCCESSORS.  The terms and provisions of this Guaranty Agreement shall be
     binding upon and inure to the benefit of the Guarantor and the Noteholders
     from time to time and their respective permitted successors, transferees
     and assigns.

13.  ENTIRE AGREEMENT; AMENDMENT.  This Guaranty Agreement expresses the entire
     understanding of the subject matter hereof; and all other understandings,
     written or oral, are hereby merged herein and superseded.  No amendment of
     or supplement to this Guaranty Agreement, or waiver or modification of, or
     consent under, the terms hereof shall be effective unless in writing and
     signed by the party to be bound thereby.

14.  TERM OF GUARANTY AGREEMENT.  The Guaranty Agreement and all guarantees,
     covenants and agreements of the Guarantor contained herein shall continue
     in full force and effect and shall not be discharged until such time as all
     of the Guaranteed Obligations shall be indefeasibly paid or otherwise
     discharged in full.

15.  SURVIVAL.  All warranties, representations and covenants made by the
     Guarantor herein or in any certificate or other instrument delivered by it
     or on its behalf under this Guaranty Agreement shall be considered to have
     been relied upon by the Noteholders and shall survive the execution and
     delivery of this Guaranty Agreement, regardless of any investigation made
     by the Noteholders or on their behalf.

16.  FURTHER ASSURANCES.  The Guarantor hereby agrees to execute and deliver all
     such instruments and take all such action as the Required Holders may from
     time to time reasonably request in order to effectuate fully the purposes
     of this Guaranty Agreement.

17.  GOVERNING LAW.  THIS GUARANTY AGREEMENT HAS BEEN EXECUTED AND DELIVERED IN
     THE STATE OF NEW YORK AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
     ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
     APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT
     REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

18.  WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES.

          (a)  THE GUARANTOR AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY
     CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY
     AGREEMENT, THE NOTES, ANY OTHER NOTE DOCUMENT OR ANY DEALINGS RELATING TO
     THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THE NOTE DOCUMENTS,
     AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  THE SCOPE
     OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
     THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THE
     TRANSACTIONS

                                       7

     CONTEMPLATED BY THE NOTE DOCUMENTS, INCLUDING WITHOUT LIMITATION, CONTRACT
     CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
     STATUTORY CLAIMS. THE GUARANTOR ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
     INDUCEMENT TO THE NOTEHOLDERS TO ENTER INTO THE NOTE AGREEMENT AND PURCHASE
     THE NOTES PURCHASED BY IT, THAT EACH NOTEHOLDER HAS ALREADY RELIED ON THIS
     WAIVER IN ENTERING INTO THE NOTE AGREEMENT AND PURCHASING THE NOTES
     PURCHASED BY IT, AND THAT EACH NOTEHOLDER WILL CONTINUE TO RELY ON THE
     WAIVER IN ITS RELATED FUTURE DEALINGS WITH THE COMPANY AND THE GUARANTOR.
     THE GUARANTOR FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS
     WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES
     ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
     EVENT OF LITIGATION, THIS GUARANTY AGREEMENT MAY BE FILED AS A WRITTEN
     CONSENT TO A TRIAL BY THE COURT.

          (b)  The Guarantor hereby irrevocably submits itself to the
     jurisdiction of the Supreme Court of the State of New York, New York
     County, of the United States of America and to the jurisdiction of the
     United States District Court for the Southern District of New York, for the
     purpose of any suit, action or other proceeding arising out of, or relating
     to, this Guaranty Agreement, any other Note Document, or the subject matter
     hereof or thereof, and the Guarantor hereby waives, and agrees not to
     assert, by way of motion, as a defense or otherwise, in any such suit,
     action or proceedings, any claim that it is not personally subject to the
     jurisdiction of the above-named courts for any reason whatsoever, that such
     suit, action or proceeding is brought in an inconvenient forum or that the
     venue of such suit, action or proceeding is improper.  The Guarantor hereby
     agrees that process may be served on Corporation Service Company, located
     at 80 State Street, Albany, NY  12207.  Any and all service of process and
     any other notice in any such action, suit or proceeding shall be effective
     against such parties if given by registered or certified mail, return
     receipt requested, or by any other means or mail which requires a signed
     receipt, postage prepaid, mailed to such parties has herein provided in
     paragraph 9.  During the term of this Guaranty Agreement, in the event
     Corporation Service Company shall not be able to accept service of process
     as aforesaid and if the Guarantor shall not maintain an office in New York
     City, the Guarantor shall, promptly appoint and maintain an agent qualified
     to act as an agent for service of process with respect to all courts in and
     of New York City, and acceptable to the holders of the Notes, as the
     Guarantor's authorized agent to accept and acknowledge on the Guarantor's
     behalf service of any and all process which may be served in any such
     action, suit or proceeding.  The Guarantor agrees that a final judgment in
     any such action or proceeding shall be conclusive and may be enforced in
     other jurisdictions by suit on the judgment or in any other manner provided
     by law.  Nothing in this paragraph 18 shall affect the right of any
     Noteholder to serve legal process in any other manner permitted by law or
     affect the right of any Noteholder to bring any action or proceeding
     against the Guarantor or its respective property in the courts of any

                                       8

     other jurisdiction.

          The Guarantor hereby agrees that the submission to jurisdiction
     referred to in this paragraph 18 shall not limit in any manner the rights
     of any of the Noteholders to take proceedings against the Guarantor in some
     other court of competent jurisdiction whether within or outside the United
     States.

            [Remainder of this page blank; signature page follows]

                                       9

          IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement
to be duly executed and delivered as of the date and year first above written.

                                    IPCH ACQUISITION CORP.

                                    By:________________________________
                                        John J. Sherman
                                        President and Chief Executive Officer

Notice address for
the above Guarantor:

c/o Inergy Propane, LLC
1101 Walnut, Suite 1500
Kansas City, Missouri 64106

                     Signature Page to Guaranty Agreement

                                                                     EXHIBIT 4.7

                         SUBSIDIARY GUARANTY AGREEMENT

     THIS GUARANTY AGREEMENT, dated as of June 7, 2002 (the "Guaranty
Agreement"), is made by each of the undersigned (each a "Guarantor" and,
together with each of the other signatories hereto and any other entities from
time to time parties hereto pursuant to paragraph 12, the "Guarantors") in favor
of the holders from time to time of the Notes described below (the
"Noteholders").

     WHEREAS, Inergy Propane, LLC, a Delaware limited liability company (the
"Company"), and the Purchasers named on the Purchaser Schedule thereto
(collectively, the "Purchasers") have entered into a Note Purchase Agreement
dated as of even date herewith (as the same may be amended, restated,
supplemented, or otherwise modified from time to time, the "Note Agreement";
capitalized terms used and otherwise not defined herein have the definitions set
forth in the Note Agreement) pursuant to which the Company has issued and sold
to the Purchasers (i) $35,000,000 aggregate principal amount of its 8.85% Senior
Secured Notes, Series A, due June 7, 2007 (the "Series A Notes"), (ii)
$25,000,000 aggregate principal amount of its 9.10% Senior Secured Notes, Series
B, due June 6, 2008 (the "Series B Notes"), and (iii) $25,000,000 aggregate
principal amount of its 9.34% Senior Secured Notes, Series C, due June 5, 2009
(the "Series C Notes" and, together with the Series A Notes and the Series B
Notes, collectively, the "Notes"; which term shall include any notes issued in
substitution or exchange for any of the foregoing pursuant to the terms of the
Note Agreement); and

     WHEREAS, it is a condition to the agreement of the Purchasers to purchase
the Notes that this Guaranty Agreement shall have been executed and delivered by
each Guarantor and shall be in full force and effect;

     NOW THEREFORE, in order to induce, and in consideration of, the execution
and delivery of the Note Agreement and the purchase of the Notes by the
Purchasers, each Guarantor hereby covenants and agrees with, and represents and
warrants to the Noteholders as follows:

1.   THE GUARANTY.  Each Guarantor hereby irrevocably and unconditionally
     guarantees to each Noteholder the due and punctual payment in full of (i)
     the principal of, Make-Whole Amount, if any, and interest on (including
     interest accruing after the filing of any petition in bankruptcy, or the
     commencement of any insolvency, reorganization or like proceeding, relating
     to the Company, whether or not a claim for post-filing or post-petition
     interest is allowed in such proceeding), and any other amounts due under,
     the Notes when and as the same shall become due and payable (whether at
     stated maturity or by required or optional prepayment or by acceleration or
     otherwise) and (ii) any other sums which may become due under the terms and
     provisions of the Note Agreement, the Notes or any other Note Document (all
     such obligations described in clauses (i) and (ii) above are herein called
     the "Guaranteed Obligations").  The guaranty in the preceding sentence is
     an absolute, present and continuing guaranty of payment and not of

     collectibility and is in no way conditional or contingent upon any attempt
     to collect from the Company or any other guarantor of the Notes (including,
     without limitation, any other Guarantor hereunder) or upon any other
     action, occurrence or circumstance whatsoever.  In the event that the
     Company shall fail so to pay any of such Guaranteed Obligations, each
     Guarantor agrees to pay the same when due to the Noteholders entitled
     thereto, without demand, presentment, protest or notice of any kind, in
     lawful money of the United States of America, at the place for payment
     specified in the Notes and the Note Agreement.  Each default in payment of
     principal of, Make-Whole Amount, if any, or interest on any Note shall give
     rise to a separate cause of action hereunder and separate suits may be
     brought hereunder as each cause of action arises.  Each Guarantor hereby
     agrees that the Notes issued in connection with the Note Agreement may make
     reference to this Guaranty Agreement.

     Each Guarantor hereby agrees to pay and to indemnify and save each
     Noteholder harmless from and against any damage, loss, cost or expense
     (including attorneys' fees) which such Noteholder may incur or be subject
     to as a consequence, direct or indirect, of (i) any breach by such
     Guarantor, by any other Guarantor or by the Company of any warranty,
     covenant, term or condition in, or the occurrence of any default under,
     this Guaranty Agreement, the Notes, the Note Agreement or any other Note
     Document, together with all expenses resulting from the compromise or
     defense of any claims or liabilities arising as a result of any such breach
     or default, and (ii) any legal action commenced to challenge the validity
     or enforceability of this Guaranty Agreement, the Notes, the Note Agreement
     or any other Note Document.

     Notwithstanding the foregoing or any other provisions of this Guaranty
     Agreement, it is agreed and understood that no Guarantor shall be required
     to pay hereunder at any time more than the Maximum Guaranteed Amount
     determined as of such time with regard to such Guarantor.  Each Guarantor
     agrees that the Guaranteed Obligations may at any time exceed the sum of
     the Maximum Guaranteed Amount plus the aggregate maximum amount of all
     obligations of all other Guarantors, without affecting or impairing the
     obligation of such Guarantor.  "Maximum Guaranteed Amount" means as of the
     date of determination with respect to a Guarantor, the lesser of (a) the
     amount of the Guaranteed Obligations outstanding on such date and (b) the
     maximum amount that would not render such Guarantor's liability under this
     Guaranty Agreement subject to avoidance under Section 548 of the United
     States Bankruptcy Code (or any successor provision) or any comparable
     provision of applicable state law.

2.   OBLIGATIONS ABSOLUTE.  The obligations of each Guarantor hereunder shall be
     primary, absolute, irrevocable and unconditional, irrespective of the
     validity, regularity or enforceability of the Notes, of the Note Agreement
     or of the other Note Documents, shall not be subject to any counterclaim,
     setoff, deduction or defense based upon any claim such Guarantor may have
     against the Company or any Noteholder or otherwise, and shall remain in
     full force and effect without regard to, and shall not be released,
     discharged or in any way affected by, any circumstance or condition
     whatsoever (whether or not such Guarantor shall have any knowledge or
     notice thereof), including, without limitation: (a)

                                       2

     any amendment, modification of or supplement to the Note Agreement, the
     Notes, or any other Note Document (except that the obligations of each
     Guarantor hereunder shall apply to the Note Agreement, the Notes or such
     other Note Document as so amended, modified or supplemented) or any
     assignment or transfer of any thereof or of any interest therein, or any
     furnishing, acceptance or release of any security for the Notes; (b) any
     waiver, consent, extension, indulgence or other action or inaction under or
     in respect of the Notes or in respect of the Note Agreement or any other
     Note Document; (c) any bankruptcy, insolvency, readjustment, composition,
     liquidation or similar proceeding with respect to the Company or its
     property; (d) any merger, amalgamation or consolidation of any Guarantor or
     of the Company into or with any other entity or any sale, lease or transfer
     of any or all of the assets of any Guarantor or of the Company to any
     person; (e) any failure on the part of the Company for any reason to comply
     with or perform any of the terms of any other agreement with any Guarantor;
     or (f) any other circumstance which might otherwise constitute a legal or
     equitable discharge or defense of a guarantor. Each Guarantor covenants
     that its obligations hereunder will not be discharged except by payment and
     performance in full of all of the Guaranteed Obligations.

3.   WAIVER.  Each Guarantor unconditionally waives to the fullest extent
     permitted by law, (a) notice of acceptance hereof, of any action taken or
     omitted in reliance hereon and of any defaults by the Company in the
     payment of any amounts due under the Notes, the Note Agreement or the other
     Note Documents, and of any of the matters referred to in paragraph 2
     hereof; (b) all notices which may be required by statute, rule of law or
     otherwise to preserve any of the rights of each Noteholder against such
     Guarantor, including, without limitation, presentment to or demand for
     payment from the Company or any Guarantor with respect to any Note, notice
     to the Company or to any Guarantor of default or protest for nonpayment or
     dishonor and the filing of claims with a court in the event of the
     bankruptcy of the Company; (c) any right to the enforcement, assertion or
     exercise by any Noteholder of any right, power or remedy conferred in this
     Guaranty Agreement, the Note Agreement, the Notes or the other Note
     Documents; (d) any requirement or diligence on the part of any Noteholder;
     and (e) any other act or omission or thing or delay to do any other act or
     thing which might in any manner or to any extent vary the risk of such
     Guarantor or which might otherwise operate as a discharge of such
     Guarantor.

4.   OBLIGATIONS UNIMPAIRED.  Each Guarantor authorizes the Noteholders, without
     notice or demand to such Guarantor and without affecting its obligations
     hereunder, from time to time (a) to renew, compromise, extend, accelerate
     or otherwise change the time for payment of, or otherwise change the terms
     of, all or any part of the Notes, the Note Agreement, any other Note
     Document or any other instrument referred to therein; (b) to take and hold
     security for the payment of the Notes, for the performance of this Guaranty
     Agreement or otherwise for the Indebtedness guaranteed hereby and to
     exchange, enforce, waive and release any such security; (c) to apply any
     such security and to direct the order or manner of sale thereof as the
     Noteholders in their sole discretion may determine; (d) to obtain
     additional or substitute endorsers or guarantors; (e) to exercise or
     refrain from exercising any rights against the Company and others; and (f)
     to apply any sums, by

                                       3

     whomsoever paid or however realized, to the payment of the principal of,
     Make-Whole Amount, if any, and interest on the Notes and any other
     Guaranteed Obligations hereunder. Each Guarantor waives any right to
     require the Noteholders to proceed against any additional or substitute
     endorsers or guarantors or to pursue or exhaust any security provided by
     the Company, such Guarantor or any other person or to pursue any other
     remedy available to such Noteholders.

5.   SUBROGATION.  Each Guarantor will not (a) exercise, and hereby subordinates
     to the rights of the Noteholders, any rights which it may have acquired by
     way of subrogation under this Guaranty Agreement, by any payment made
     hereunder or otherwise, or (b) accept any payment on account of such
     subrogation rights, or any rights of reimbursement, indemnity, exoneration
     or contribution, any right to participate in any claim or any rights or
     recourse to any security for the Notes or this Guaranty Agreement unless
     and until all of the obligations, undertakings or conditions to be
     performed or observed by the Company pursuant to the Notes, the Note
     Agreement and the other Note Documents at the time of such Guarantor's
     exercise of any such right shall have been performed, observed or paid in
     full.

     For a period of one year after the payment in full of the Guaranteed
     Obligations, each Guarantor hereby waives (x) all rights of subrogation
     which it may at any time otherwise have as a result of this Guaranty
     Agreement (whether statutory or otherwise) to the claims of the Noteholders
     against the Company or any other guarantor of the Guaranteed Obligations
     (each referred to herein as the "Other Party") and all contractual,
     statutory or common law rights of reimbursement, contribution or indemnity
     from any Other Party which it may at any time otherwise have as a result of
     this Guaranty Agreement; (y) any right to enforce any other remedy which
     the Noteholders now have or may hereafter have against any Other Party, any
     endorser or any other guarantor of all or any part of the Guaranteed
     Obligations; and (z) all claims (as such term is defined in the Bankruptcy
     Code) it may at any time otherwise have against any Other Party arising
     from any transaction whatsoever, including without limitation its right to
     assert or enforce any such claims.

6.   REINSTATEMENT OF GUARANTY.  This Guaranty Agreement shall continue to be
     effective, or be reinstated, as the case may be, if and to the extent at
     any time payment, in whole or in part, of any of the sums due to any
     Noteholder for principal, Make-Whole Amount, if any, or interest on the
     Notes or any of the other Guaranteed Obligations is rescinded or must
     otherwise be restored or returned by such Noteholder upon the insolvency,
     bankruptcy, dissolution, liquidation or reorganization of the Company, or
     upon or as a result of the appointment of a custodian, receiver, trustee or
     other officer with similar powers with respect to the Company or any
     substantial part of its property, or otherwise, all as though such payments
     had not been made.  If an event permitting the acceleration of the maturity
     of the principal amount of the Notes shall at any time have occurred and be
     continuing and such acceleration shall at such time be prevented or the
     right of any Noteholder to receive any payment under any Note shall at such
     time be delayed or otherwise affected by reason of the pendency against the
     Company of a case or

                                       4

     proceeding under a bankruptcy or insolvency law, each Guarantor agrees
     that, for purposes of this Guaranty Agreement and its obligations
     hereunder, the maturity of such principal amount shall be deemed to have
     been accelerated with the same effect as if the Noteholders had accelerated
     the same in accordance with the terms of the Note Agreement, and such
     Guarantor shall forthwith pay such accelerated principal amount, accrued
     interest and Make-Whole Amount, if any, thereon and any other amounts
     guaranteed hereunder.

7.   RANK OF GUARANTY.  Each Guarantor agrees that its obligations under this
     Guaranty Agreement shall rank at least pari passu with all other senior
     obligations of such Guarantor now or hereafter existing and senior to all
     obligations owed by such Guarantor to any Affiliate of such Guarantor.

8.   REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS.

     Each Guarantor represents and warrants as follows:

          (a) Organization, Good Standing and Location.  Such Guarantor is (i)
     duly organized, validly existing and in good standing under the laws of the
     jurisdiction of its organization, (ii) duly qualified and authorized to do
     business and in good standing in every other jurisdiction where the nature
     of its business requires such qualification and (iii) has all requisite
     organizational power and authority, and all governmental licenses and
     permits, to own and operate its properties and to carry on its businesses
     as presently conducted.  Such Guarantor has the requisite organizational
     power to enter into and perform its obligations under this Guaranty
     Agreement.

          (b) Approval and Enforceability of Guaranty Agreement.  The execution,
     delivery and performance of this Guaranty Agreement have been duly
     authorized by all necessary organizational action on the part of such
     Guarantor.  The Guaranty Agreement has been duly and validly executed and
     delivered and constitutes the legal, valid and binding obligation of such
     Guarantor, enforceable against it in accordance with its terms, subject to
     (i) applicable bankruptcy, insolvency, moratorium, reorganization,
     receivership and similar laws affecting the rights and remedies of
     creditors generally, and (ii) general principles of equity (regardless of
     whether such enforceability is considered in a proceeding in equity or at
     law).

          (c)  Applicability of Note Agreement Representations.  The Noteholders
     shall be entitled to rely on any representation or warranty contained in
     Section 5 of the Note Agreement and applicable to such Guarantor as if such
     representation or warranty was made by such Guarantor herein.

9.   NOTICES.  Unless otherwise specifically provided herein, all notices,
     consents, directions, approvals, instructions, requests and other
     communications required or permitted by the terms hereof shall be in
     writing, and any such communication shall become effective when received,
     addressed in the following manner: (a) if to any

                                       5

     Guarantor, to the address set forth on the signature page hereto or (b) if
     to any Noteholder, to the respective addresses set forth in the Purchaser
     Schedule to the Note Agreement or such other address specified by such
     Noteholder to the Guarantors in writing; provided, however, that any such
     addressee may change its address for communications by notice given as
     aforesaid to the other parties hereto.

10.  CONSTRUCTION.  The paragraph and subparagraph headings in this Guaranty
     Agreement are for convenience of reference only and shall neither be deemed
     to be a part of this Guaranty Agreement nor modify, define, expand or limit
     any of the terms or provisions hereof.  All references herein to numbered
     paragraphs, unless otherwise indicated, are to paragraphs of this Guaranty
     Agreement.  Words and definitions in the singular shall be read and
     construed as though in the plural and vice versa, and words in the
     masculine, neuter or feminine gender shall be read and construed as though
     in either of the other genders where the context so requires.

11.  SEVERABILITY.  If any provision of this Guaranty Agreement, or the
     application thereof to any person or circumstances, shall, for any reason
     or to any extent, be invalid or unenforceable, such invalidity or
     unenforceability shall not in any manner affect or render invalid or
     unenforceable the remainder of this Guaranty Agreement, and the application
     of that provision to other persons or circumstances shall not be affected
     but, rather, shall be enforced to the extent permitted by applicable law.

12.  SUCCESSORS; JOINDER.  The terms and provisions of this Guaranty Agreement
     shall be binding upon and inure to the benefit of the Guarantors and the
     Noteholders from time to time and their respective permitted successors,
     transferees and assigns.  It is agreed and understood that any Subsidiary
     of the Company or of any Guarantor may become a Guarantor hereunder by
     executing a Guarantor Supplement substantially in the form of Exhibit A
     attached hereto and delivering the same to the Noteholders.  Any such
     Person shall thereafter be a "Guarantor" for all purposes under this
     Guaranty Agreement.

13.  ENTIRE AGREEMENT; AMENDMENT.  This Guaranty Agreement expresses the entire
     understanding of the subject matter hereof; and all other understandings,
     written or oral, are hereby merged herein and superseded.  No amendment of
     or supplement to this Guaranty Agreement, or waiver or modification of, or
     consent under, the terms hereof shall be effective unless in writing and
     signed by the party to be bound thereby.

14.  TERM OF GUARANTY AGREEMENT.  The Guaranty Agreement and all guarantees,
     covenants and agreements of each Guarantor contained herein shall continue
     in full force and effect and shall not be discharged until such time as all
     of the Guaranteed Obligations shall be indefeasibly paid or otherwise
     discharged in full.

15.  SURVIVAL.  All warranties, representations and covenants made by each
     Guarantor herein or in any certificate or other instrument delivered by it
     or on its behalf under this Guaranty Agreement shall be considered to have
     been relied upon by the Noteholders and shall survive the execution and
     delivery of this Guaranty Agreement, regardless of any

                                       6

     investigation made by the Noteholders or on their behalf.

16.  FURTHER ASSURANCES.  Each Guarantor hereby agrees to execute and deliver
     all such instruments and take all such action as the Required Holders may
     from time to time reasonably request in order to effectuate fully the
     purposes of this Guaranty Agreement.

17.  GOVERNING LAW.  THIS GUARANTY AGREEMENT HAS BEEN EXECUTED AND DELIVERED IN
     THE STATE OF NEW YORK AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
     ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
     APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT
     REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

18.  WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES.

          (a) EACH GUARANTOR AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY
     CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY
     AGREEMENT, THE NOTES, ANY OTHER NOTE DOCUMENT OR ANY DEALINGS RELATING TO
     THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THE NOTE DOCUMENTS,
     AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  THE SCOPE
     OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
     THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THE
     TRANSACTIONS CONTEMPLATED BY THE NOTE DOCUMENTS, INCLUDING WITHOUT
     LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
     OTHER COMMON LAW AND STATUTORY CLAIMS.  EACH GUARANTOR ACKNOWLEDGES THAT
     THIS WAIVER IS A MATERIAL INDUCEMENT TO THE NOTEHOLDERS TO ENTER INTO THE
     NOTE AGREEMENT AND PURCHASE THE NOTES PURCHASED BY IT, THAT EACH NOTEHOLDER
     HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THE NOTE AGREEMENT AND
     PURCHASING THE NOTES PURCHASED BY IT, AND THAT EACH NOTEHOLDER WILL
     CONTINUE TO RELY ON THE WAIVER IN ITS RELATED FUTURE DEALINGS WITH THE
     COMPANY AND THE GUARANTORS.  EACH GUARANTOR FURTHER WARRANTS AND REPRESENTS
     THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT
     KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
     CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, THIS GUARANTY
     AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

          (b) Each Guarantor hereby irrevocably submits itself to the
     jurisdiction of the Supreme Court of the State of New York, New York
     County, of the United States of America and to the jurisdiction of the
     United States District Court for the Southern

                                       7

     District of New York, for the purpose of any suit, action or other
     proceeding arising out of, or relating to, this Guaranty Agreement, any
     other Note Document, or the subject matter hereof or thereof, and each
     Guarantor hereby waives, and agrees not to assert, by way of motion, as a
     defense or otherwise, in any such suit, action or proceedings, any claim
     that it is not personally subject to the jurisdiction of the above-named
     courts for any reason whatsoever, that such suit, action or proceeding is
     brought in an inconvenient forum or that the venue of such suit, action or
     proceeding is improper. Each Guarantor hereby agrees that process may be
     served on Corporation Service Company, located at 80 State Street, Albany,
     NY 12207. Any and all service of process and any other notice in any such
     action, suit or proceeding shall be effective against such parties if given
     by registered or certified mail, return receipt requested, or by any other
     means or mail which requires a signed receipt, postage prepaid, mailed to
     such parties has herein provided in paragraph 9. During the term of this
     Guaranty Agreement, in the event Corporation Service Company shall not be
     able to accept service of process as aforesaid and if such Guarantor shall
     not maintain an office in New York City, such Guarantor shall, promptly
     appoint and maintain an agent qualified to act as an agent for service of
     process with respect to all courts in and of New York City, and acceptable
     to the holders of the Notes, as such Guarantor's authorized agent to accept
     and acknowledge on such Guarantor's behalf service of any and all process
     which may be served in any such action, suit or proceeding. Each Guarantor
     agrees that a final judgment in any such action or proceeding shall be
     conclusive and may be enforced in other jurisdictions by suit on the
     judgment or in any other manner provided by law. Nothing in this paragraph
     18 shall affect the right of any Noteholder to serve legal process in any
     other manner permitted by law or affect the right of any Noteholder to
     bring any action or proceeding against any Guarantor or its respective
     property in the courts of any other jurisdiction.

          Each Guarantor hereby agrees that the submission to jurisdiction
     referred to in this paragraph 18 shall not limit in any manner the rights
     of any of the Noteholders to take proceedings against such Guarantor in
     some other court of competent jurisdiction whether within or outside the
     United States.

            [Remainder of this page blank; signature page follows]

                                       8

          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty Agreement
to be duly executed and delivered as of the date and year first above written.

                                    L & L TRANSPORTATION, LLC

                                    By: _____________________________
                                          John J. Sherman
                                          President

                                    INERGY TRANSPORTATION, LLC

                                    By: _____________________________
                                          John J. Sherman
                                          President

                                    INERGY SALES & SERVICE, INC.

                                    By: _____________________________
                                          John J. Sherman
                                          President and Secretary

Notice address for
all of the above Guarantors:

c/o Inergy Propane, LLC
1101 Walnut, Suite 1500
Kansas City, Missouri  64106

                     Signature Page to Guaranty Agreement

                                                                       EXHIBIT A
                                                                       ---------

                             GUARANTOR SUPPLEMENT

     THIS GUARANTOR SUPPLEMENT (this "Guarantor Supplement"), dated as of
_______, 20__ is made by ________, a __________ (the "Additional Guarantor"), in
favor of the holders from time to time of the Notes issued pursuant to the Note
Agreement described below.

     WHEREAS, Inergy Propane, LLC, a Delaware limited liability company (the
"Company"), and the Purchasers named on the Purchaser Schedule thereto
(collectively, the "Purchasers") have entered into a Note Purchase Agreement
dated as of June 7, 2002 (as the same may be amended, restated, supplemented, or
otherwise modified from time to time, the "Note Agreement"; capitalized terms
used and otherwise not defined herein have the definitions set forth in the Note
Agreement), pursuant to which the Company has issued and sold to the Purchasers
(i) $35,000,000 aggregate principal amount of its 8.85% Senior Secured Notes,
Series A, due June 7, 2007 (the "Series A Notes"), (ii) $25,000,000 aggregate
principal amount of its 9.10% Senior Secured Notes, Series B, due June 6, 2008
(the "Series B Notes") and (iii) $25,000,000 aggregate principal amount of its
9.34% Senior Secured Notes, Series C, due June 5, 2009 (the "Series C Notes"
and, together with the Series A Notes and the Series B Notes, collectively, the
"Notes"; which term shall include any notes issued in substitution or exchange
for any of the foregoing pursuant to the terms of the Note Agreement); and

     WHEREAS, the Company is required pursuant to Section 9.8 of the Note
Agreement to cause the Additional Guarantor to deliver this Guarantor Supplement
in order to cause the Additional Guarantor to become a Guarantor under that
certain Guaranty Agreement dated as of June 7, 2002 executed by certain
Subsidiaries of the Company (together with each entity that from time to time
becomes a party thereto by executing a Guarantor Supplement pursuant to
paragraph 12 thereof, collectively, the "Guarantors") in favor of each holder
from time to time of any of the Notes (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Guaranty Agreement");

     WHEREAS, the Additional Guarantor has received and will receive substantial
direct and indirect benefits from the Company's compliance with the terms and
conditions of the Note Agreement and the Notes issued thereunder;

     NOW THEREFORE, in order to induce, and in consideration of, the maintenance
of the Note Agreement and to enable each Guarantor to comply with Section 9.8
thereof, the Additional Guarantor hereby covenants, represents and warrants to
the holders from time to time of the Notes as follows:

     The Additional Guarantor hereby becomes a Guarantor (as defined in the
Guaranty Agreement) for all purposes of the Guaranty Agreement. Without limiting
the foregoing, the Additional Guarantor hereby (a) jointly and severally with
the other Guarantors under the

                                      A-1

Guaranty Agreement, guarantees to the holders from time to time of the Notes the
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of all Guaranteed Obligations (as defined in paragraph 1 of the
Guaranty Agreement) in the same manner and to the same extent as is provided in
the Guaranty Agreement, (b) makes the representations and warranties set forth
in paragraph 8 of the Guaranty Agreement, (c) accepts and agrees to perform and
observe all of the covenants set forth therein, (d) waives the rights set forth
in paragraph 3 of the Guaranty Agreement, and (e) waives the rights, makes the
representations and warranties, submits to jurisdiction, and waives service of
process as described in paragraph 18 of the Guaranty Agreement.

     Notice of acceptance of this Guarantor Supplement and of the Guaranty
Agreement, as supplemented hereby, is hereby waived by the Additional Guarantor.

     The address for notices and other communications to be delivered to the
Additional Guarantor pursuant to paragraph 9 of the Guaranty Agreement is set
forth below.

     IN WITNESS WHEREOF, the Additional Guarantor has caused this Guarantor
Supplement to be duly executed and delivered as of the day and year first above
written.

                                             __________________________________,
                                             a_________________________________

                                             By: ______________________________
                                                 Name:
                                                 Title:

Address for Notices:

________________________
________________________
________________________
________________________

                                      A-2

                                                                     EXHIBIT 5.1

                     [LETTERHEAD OF VINSON & ELKINS L.L.P.]

June 13, 2002

Inergy, L.P.
1101 Walnut, Suite 1500
Kansas City, Missouri 64106

         Re:   Inergy, L.P.
               Amendment No. 1 to Registration Statement on Form S-1
                (File No. 333-89010) (the "Registration Statement")
               Filed June 13, 2002

Ladies and Gentlemen:

     We have acted as counsel to Inergy, L.P., a Delaware limited partnership
(the "Partnership"), Inergy GP, LLC, a Delaware limited liability company and
the managing general partner of the Partnership (the "Managing General
Partner"), and Inergy Holdings, LLC, a Delaware limited liability company and
the non-managing general partner of the Partnership (the "Non-Managing General
Partner" and collectively with the Managing General Partner, the "General
Partners"), in connection with the registration under the Securities Act of
1933, as amended (the "Securities Act") of the offering and sale of up to an
aggregate of 1,610,000 common units (including 339,055 common units to be sold
by certain selling unitholders and up to 210,000 common units subject to an over
allotment option granted by the Partnership to the underwriters named in the
Registration Statement) (collectively the "Common Units") representing limited
partner interests in the Partnership.

     As the basis for the opinion hereinafter expressed, we examined such
statutes, including the Delaware Uniform Revised Limited Partnership Act,
corporate records and documents, certificates of corporate and public officials,
and other instruments and documents as we deemed necessary or advisable for the
purposes of this opinion. In such examination, we assumed the authenticity of
all documents submitted to us as originals and the conformity with the original
documents of all documents submitted to us as copies.

     Based on the foregoing and on such legal considerations as we deem
relevant, we are of the opinion that:

     1.   The Partnership has been duly formed and is validly existing as a
          limited partnership under the Delaware Revised Uniform Limited
          Partnership Act.

Inergy, L.P.
Page 2
June 13, 2002

     2.   The presently outstanding Common Units owned by the selling
          unitholders to be sold to the underwriters have been duly authorized,
          validly issued, fully paid and are nonassessable.

     3.   The Common Units to be sold by the Partnership to the underwriters,
          when issued and paid for as contemplated by the Registration
          Statement, will be duly authorized, validly issued, fully paid and
          nonassessable.

     We hereby consent to the reference to us under the heading "Validity of the
Common Units" in the prospectus forming a part of the Registration Statement and
to the filing of this opinion as an exhibit to the Registration Statement, but
we do not thereby admit that we are within the class of persons whose consent is
required under the provisions of the Securities Act or the rules and regulations
of the Securities and Exchange Commission issued thereunder.

                                          Very truly yours,

                                          /s/ VINSON & ELKINS L.L.P.

                                          VINSON & ELKINS L.L.P.

                                                                   EXHIBIT 10.1B

                              AMENDMENT NO. 2 TO
                              ------------------

                 FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
                 --------------------------------------------

     This AMENDMENT NO. 2 TO THE FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment"), dated as of June ___, 2002, is by and between INERGY
PROPANE, LLC, a Delaware limited liability company (the "Borrower"); each of the
Lenders that is a signatory hereto (each, individually, a "Lender" and,
collectively, the "Lenders"); and WACHOVIA BANK, NATIONAL ASSOCIATION (f/k/a
FIRST UNION NATIONAL BANK), as Administrative Agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, the
"Administrative Agent").

                                  WITNESSETH:

     WHEREAS, the Borrower, the Administrative Agent and the Lenders are parties
to that certain Fourth Amended and Restated Credit Agreement dated as of
December 20, 2001 (as previously amended, the "Credit Agreement")(Capitalized
terms used herein and not otherwise defined herein shall have the meaning
ascribed thereto in the Credit Agreement);

     WHEREAS, as permitted pursuant to Section 5(b) of the Credit Agreement, the
Borrower intends to incur certain Private Placement Debt, by entering into that
certain Note Purchase Agreement dated as of even date herewith (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
"Note Agreement"), between the Borrower and certain purchasers who are a party
thereto (the "Purchasers"), pursuant to which the Borrower issues and sells to
the Purchasers (i) its 8.85% Senior Secured Notes, Series A, due June 2007, in
the aggregate principal amount of $35,000,000 (the "Series A Notes"), (ii) its
9.10% Senior Secured Notes, Series B, due June 2008, in the aggregate principal
amount of $25,000,000 (the "Series B Notes") and (iii) its 9.34% Senior Secured
Notes, Series C, due June 2009, in the aggregate principal amount of $25,000,000
(the "Series C Notes" and, together with the Series A Notes and the Series B
Notes, collectively, the "Private Notes");

     WHEREAS, the terms of the Private Notes do not satisfy the definition of
"Permitted Private Placement Debt" in the Credit Agreement because the Private
Notes permit certain voluntary prepayments of the Private Notes, and require
certain mandatory prepayments from asset dispositions, on or prior to December
31, 2004;

     WHEREAS, the Administrative Agent and the Lenders have agreed to amend the
definition of Permitted Private Placement Debt in the Credit Agreement to permit
the foregoing prepayments, provided (i) no voluntary prepayments be made on the
Permitted Private Placement Debt without the prior written consent of the
Administrative Agent and the Required Lenders and (ii) the net proceeds of asset
sales be applied to the Lenders and the holders of the Permitted Private
Placement Debt on a pro-rata basis (based on principal amounts outstanding);

     WHEREAS, as a condition to the incurrence of the Permitted Private
Placement Debt, the Administrative Agent, the Lenders and the Noteholders are
required to enter into an Intercreditor

Agreement in substantially the form of Exhibit M to the Credit Agreement (the
"Form Intercreditor Agreement");

     WHEREAS, the holders of the Private Notes required certain modifications to
the Form Intercreditor Agreement and the Borrower has requested that the
Administrative Agent and the Lenders enter into the modified Intercreditor
Agreement; and

     WHEREAS, on the terms and conditions set forth in this Amendment, the
Administrative Agent and the Lenders have agreed to the foregoing;

     NOW THEREFORE, the parties hereto hereby agree as follows:

     Section 1.  Definitions; Incorporation of Recitals.  Except as otherwise
defined in this Amendment, terms defined in the Credit Agreement are used herein
as defined therein.  Each of the above recitals is incorporated herein and made
a part hereof.

     Section 2.  Amendment.  Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date hereof, the
Administrative Agent and the Lenders hereby agree as follows:

          (a)    Section 1.01 of the Credit Agreement is hereby amended by
     amending and restating the definition of "Permitted Private Placement Debt"
     as follows:

          "Permitted Private Placement Debt" means obligations of the Borrower
     to lenders or other Persons pursuant to a private placement; provided, (i)
     the principal amount of such obligations does not exceed $100,000,000; (ii)
     such obligations are not secured by any other assets (real or personal) of
     any Person not securing the Obligations; (iii) such obligations are not
     guaranteed by any Person other than Persons guaranteeing the Obligations;
     (iv) such Obligations shall not require or permit any principal payments to
     be made on or prior to December 31, 2004 other than (a) voluntary
     prepayments subject (pursuant to this Agreement or otherwise) to the prior
     written consent of the Administrative Agent and the Required Lenders and
     (b) mandatory prepayments from the sale or other disposition of assets of
     the Borrower and its Subsidiaries; provided the Lenders (pursuant to this
     Agreement or otherwise) receive no less than their pro-rata share of the
     net proceeds of such sale or other disposition; and (v) such obligations
     are subject to the Intercreditor Agreement.

          (b)    Section 1.01 of the Credit Agreement is hereby modified by
     amending the definition of Intercreditor Agreement by deleting Exhibit M
     attached to the Credit Agreement and replacing it with Exhibit M attached
     hereto.

          (c)    Section 4.02(f) of the Credit Agreement is hereby amended by
     adding the following sentence at the end thereof:

          "Notwithstanding anything to the contrary set forth above and so long
          as any Permitted Private Placement Debt is outstanding, the Borrower
          shall satisfy the requirements for prepayments under this clause (f)
          if the Borrower prepays the Loans in an amount not less than the
          "Lenders' pro-rata share" of such net

                                       2

          proceeds and the balance of the such net proceeds are required to, and
          are used to, prepay Permitted Private Placement Debt. For purposes of
          the foregoing sentence and Section 10.15 of this Agreement, "Lenders'
          pro-rata share" means a fraction (expressed as a decimal) the
          numerator of which is the aggregate outstanding principal balance of
          the Loans as of the date of the prepayment and the denominator of
          which is the aggregate outstanding principal amount of the Loans plus
          the outstanding principal balance of the Permitted Private Placement
          Debt as of the date of prepayment.

          (d)    Article X of the Credit Agreement is hereby amended by adding a
     new Section 10.15 to read as follows:

          "Section 10.15.  Restrictions on Prepayments of Private Placement
                           ------------------------------------------------
          Debt.
          ----

          Permit any Private Placement Debt to be prepaid on or prior to
          December 31, 2004 other than (i) voluntary prepayments with the prior
          written consent of the Administrative Agent and the Required Lenders
          and (ii) mandatory prepayments from the sale or other disposition
          (including condemnation and other governmental taking) of assets of
          the Borrower and its Subsidiaries; provided, the Borrower prepays the
          Loans in an amount not less than the "Lenders' pro-rata share" (as
          defined in Section 4.02(f) of this Agreement) of such net proceeds and
          the balance of the such net proceeds are required to, and are used to,
          prepay Permitted Private Placement Debt.

     Section 3.  Representations and Warranties. The Borrower represents and
warrants to the Lenders and the Administrative Agent that: (a) the
representations and warranties set forth in Article VI of the Credit Agreement
are true and complete on the date hereof as if made on and as of the date
hereof; and (b) no Default or Event of Default has occurred and is continuing on
the date hereof.

     Section 4.  Conditions Precedent. Section 2 shall become effective as of
the date hereof upon the execution, and delivery to the Administrative Agent, of
this Amendment by the Borrower, together with the consent of the Guarantors
attached hereto, and the Administrative Agent and the Lenders.

     Section 5.  Expenses. The Borrower shall pay (i) all out-of-pocket expenses
of the Administrative Agent (including reasonable fees and disbursements of
counsel for the Administrative Agent) in connection with the preparation of this
Amendment and any other instruments or documents to be delivered hereunder, any
waiver or consent hereunder or thereunder or any amendment hereof or thereof or
any Default hereunder or thereunder, and (ii) if an Event of Default occurs, all
out-of-pocket expenses incurred by the Administrative Agent and each of the
Lenders, including fees and disbursements of counsel of the Administrative Agent
and each Lender, in connection with such Event of Default and collection and
other enforcement proceedings resulting therefrom, including out-of-pocket
expenses incurred in enforcing the Credit Agreement and the other Credit
Documents.

                                       3

     Section 6.  Miscellaneous. Except as herein provided, the Credit Agreement
and all other Credit Documents shall remain unchanged and shall continue to be
in full force and effect and are hereby ratified and confirmed in all respects.
This Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Amendment by signing any such counterpart. This
Amendment shall be governed by, and construed in accordance with, the law of the
State of Missouri.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       4

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.

                                            INERGY PROPANE, LLC

                                            By:_________________________________
                                              Name:  John J. Sherman
                                              Title: President

                                        WACHOVIA BANK, NATIONAL ASSOCIATION
                                        (f/k/a First Union National Bank), as
                                        Administrative Agent, as Lender, as
                                        Swingline Lender and as Issuing Lender

                                        By:_____________________________________
                                          Name:  Joe K. Dancy
                                          Title: Vice President

                                        FLEET NATIONAL BANK, as Syndication
                                        Agent and as Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                        BANK OF OKLAHOMA, N.A., as Documentation
                                        Agent and as Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                        U.S. BANK, N.A. (f/k/a FIRSTAR BANK,
                                        N.A. OVERLAND PARK), as Syndication
                                        Agent and as Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                        WELLS FARGO BANK TEXAS, N.A., as Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                        TEAMBANK, N.A., as Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

THIS CONSENT ACKNOWLEDGED THIS
___ DAY OF JUNE, 2002, BY EACH OF
THE BELOW GUARANTORS:

INERGY, L.P.

By:  Inergy GP, LLC, its Managing Partner

     By:________________________________
       Name:  John J. Sherman
       Title: President

INERGY TRANSPORTATION, LLC

By:________________________________
  Name:  John J. Sherman
  Title: President

L & L TRANSPORTATION, LLC

By:________________________________
  Name:  John J. Sherman
  Title: President

INERGY SALES & SERVICE, INC.

By:________________________________
  Name:  John J. Sherman
  Title: President

IPCH ACQUISITION CORP.

By:________________________________
  Name:  John J. Sherman
  Title: President

                                                                   EXHIBIT 10.19

                 Intercreditor and Collateral Agency Agreement

                           Dated as of June 7, 2002

                                 by and among

                     WACHOVIA BANK, NATIONAL ASSOCIATION,
                     Administrative Agent for the Lenders,

                THE LENDERS NAMED ON THE SIGNATURE PAGES HERETO

                                      and

             THE NOTEHOLDERS NAMED ON THE SIGNATURE PAGES HERETO,
                                 as Noteholder

                                      and

                     WACHOVIA BANK, NATIONAL ASSOCIATION,
                              as Collateral Agent

                               Table of Contents

Section                                                  Heading                                              Page
                                                                                                           
Section 1.    Definitions...................................................................................     5
Section 2.    Appointment and Authority of Collateral Agent.................................................     9
Section 3.    Priority of Liens.............................................................................    10
Section 4.    Enforcement Against Collateral; Application of Proceeds from Collateral and Guaranties........    10
     Section 4.1.     Limit on Enforcement..................................................................    10
     Section 4.2.     Enforcement...........................................................................    10
     Section 4.3.     Application of Proceeds...............................................................    11
     Section 4.4.     Sharing of Recoveries.................................................................    12
     Section 4.5.     Return of Amounts.....................................................................    13
     Section 4.6.     Allocation of Payments................................................................    13
     Section 4.7.     Determination of Amounts of Obligations...............................................    13
     Section 4.8.     Acts of Creditors.....................................................................    14
Section 5.    The Collateral Agent..........................................................................    14
     Section 5.1.     Duties of Collateral Agent............................................................    14
     Section 5.2.     Collateral Agent's Liability..........................................................    16
     Section 5.3.     Certain Limitations on Collateral Agent's Rights to Compensation and Indemnification..    17
     Section 5.4.     Status of Moneys Received.............................................................    18
     Section 5.5.     Resignation or Termination of Collateral Agent........................................    18
     Section 5.6.     Succession of Successor Collateral Agent..............................................    18
     Section 5.7.     Eligibility of Collateral Agent.......................................................    19
     Section 5.8.     Successor Collateral Agent by Merger..................................................    19
     Section 5.9.     Compensation and Reimbursement of Collateral Agent....................................    19
     Section 5.10.    Self Dealing..........................................................................    20
Section 6.    Agreements Among the Creditors................................................................    20
     Section 6.1.     Independent Actions by Creditors......................................................    20
     Section 6.2.     Relation of Creditors.................................................................    20
     Section 6.3.     Acknowledgment of Collateral and Guaranties...........................................    21
     Section 6.4.     Additional Creditors..................................................................    21
     Section 6.5.     Additional Guarantors.................................................................    21
     Section 6.6.     Guaranties............................................................................    21
     Section 6.7.     Copies of Modifications...............................................................    21
Section 7.    Miscellaneous.................................................................................    21
     Section 7.1.     Entire Agreement......................................................................    21
     Section 7.2.     Notices...............................................................................    21
     Section 7.3.     Successors and Assigns................................................................    22
     Section 7.4.     Consents, Amendment, Waivers..........................................................    22
     Section 7.5.     Governing Law.........................................................................    22
     Section 7.6.     Counterparts..........................................................................    22
     Section 7.7.     Sale of Interest......................................................................    23

                                       2

                                                                                                           
     Section 7.8.     Severability..........................................................................    23
     Section 7.9.     Purchase of Collateral................................................................    23
     Section 7.10.    Further Assurances, etc...............................................................    23
     Signature Page.........................................................................................    24

                                       3

                 Intercreditor and Collateral Agency Agreement

     This Intercreditor and Collateral Agency Agreement is dated as of June 7,
2002, among (i) WACHOVIA BANK, NATIONAL ASSOCIATION (f/k/a First Union National
Bank), as collateral agent (in such capacity and together with any successors or
assigns in such capacity pursuant to Section 5.5 or Section 5.8, as applicable,
the "Collateral Agent") for the Creditors (as hereinafter defined), (ii)
WACHOVIA BANK, NATIONAL ASSOCIATION (f/k/a First Union National Bank), as
Administrative Agent for and on behalf of the Lenders and Issuing Bank under the
Credit Agreement (as defined below), (iii) the Persons listed as a Lender on the
signature pages hereto and (iv) the Persons listed as an Initial Noteholder on
the signature pages hereto (each such institution is referred to herein as an
"Initial Noteholder" and such institutions are collectively referred to herein
as the "Initial Noteholders").

                               R e c i t a l s:

      A.  Under and pursuant to that certain Fourth Amended and Restated Credit
Agreement dated as of December 20, 2001 (as such agreement may be modified,
amended, supplemented, joined, restated, or replaced in accordance with its
terms, the "Credit Agreement"), by and among Inergy Propane, LLC, a Delaware
limited liability company (the "Company"), as borrower, Wachovia Bank, National
Association (f/k/a First Union National Bank), as administrative agent for the
Lenders and the Lenders, the Lenders and the Issuing Bank (as defined in the
Credit Agreement) have heretofore agreed to make available to the Company
certain credit facilities.

      B.  Under and pursuant to that certain Note Purchase Agreement dated as of
June 7, 2002 (as such agreement may be modified, amended, supplemented, joined,
restated or replaced in accordance with its terms, the "Note Agreement"), by and
among the Company and each of the Initial Noteholders, respectively, the Company
proposes to issue and sell to the Initial Noteholders (i) $35,000,000 aggregate
principal amount of its 8.85% Senior Secured Notes, Series A, due June 7, 2007
(the "Series A Notes", such term to include any notes of such series issued in
substitution therefor pursuant to Section 13 of the Note Purchase Agreement),
(ii) $25,000,000 aggregate principal amount of its 9.10% Senior Secured Notes,
Series B, due June 6, 2008 (the "Series B Notes", such term to include any notes
of such series issued in substitution therefor pursuant to Section 13 of the
Note Agreement), and (iii) $25,000,000 aggregate principal amount of its 9.34%
Senior Secured Notes, Series C, due June 5, 2009 (the "Series C Notes", such
term to include any notes of such series issued in substitution therefor
pursuant to Section 13 of the Note Agreement; the Series A Notes, the Series B
Notes and the Series C Notes being herein after collectively referred to as the
"Private Notes").

      C.  Pursuant to the terms of the Credit Agreement and the Note Agreement,
IPCH Acquisition Corp., Inergy, L.P. and each direct and indirect subsidiary of
the Company (the "Guarantors") have guaranteed or, with respect to after
acquired or subsequently formed subsidiaries, will guarantee, the Credit
Agreement Obligations and the Note Agreement Obligations (each as hereinafter
defined) pursuant to one or more guaranty agreements or

                                       4

joinders thereto (as such guaranties may be modified, amended, renewed or
replaced in accordance with their terms, and including, any Additional
Guaranties, the "Guaranties").

      D.  Pursuant to the terms of the Credit Agreement and the Note Agreement,
the Company and each direct and indirect subsidiary of the Company have
delivered to the Collateral Agent the Security Agreements (as defined in the
Credit Agreement) (the "Security Agreements") to secure the Credit Agreement
Obligations and the Note Agreement Obligations.

      E.  Pursuant to the terms of the Credit Agreement and the Note Agreement,
the Company and L&L Transportation, LLC, as applicable, each has delivered to
the Collateral Agent Mortgages (as defined in the Credit Agreement) (the
"Mortgages") to secure the Credit Agreement Obligations and the Note Agreement
Obligations.

      F.  Pursuant to the terms of the Credit Agreement, Inergy, L.P. and the
Company each has delivered to the Collateral Agent Pledge Agreements (as defined
in the Credit Agreement) (the "Pledge Agreements") to secure the Credit
Agreement Obligations and the Note Agreement Obligations.

      G.  The Lenders and each Initial Noteholder desire that the Collateral
Agent shall be the collateral agent to act on behalf of all Creditors regarding
the Collateral, all as more fully provided herein; and the Creditors have
entered into this Agreement to, among other things, further define the rights,
duties, authority and responsibilities of the Collateral Agent and the
relationship among the Creditors regarding the relative rights and priorities
with respect to the Collateral.

      H.  Pursuant to the Credit Agreement and as a condition precedent to the
purchase of the Private Notes by the Initial Noteholders under the Note
Agreement, and the parties hereto have consented and agreed, that all such other
actions shall be taken as may be necessary to expressly provide or otherwise
effect the agreement of the parties hereto that the Credit Agreement Obligations
and the Note Agreement Obligations shall be secured on an equal and ratable
basis.

      I.  Pursuant to the requirements of the Note Agreement, the Company has
requested and the Lenders and the Initial Noteholders have agreed to enter into
this Agreement.

      Now, Therefore, in consideration of the mutual benefit to be provided
hereby and other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, the parties hereto, including the Credit Parties,
hereby agree as follows:

Section 1.   Definitions.

      The following terms shall have the meanings assigned to them below in this
Section 1 or as otherwise defined in the provisions of this Agreement:

      "Actionable Default" shall mean any "Event of Default" under and as
defined in the Credit Agreement and any "Event of Default" under and as defined
in the Note Agreement.

                                       5

      "Additional Guarantors" shall mean the Persons which are intended to be
subject to this Intercreditor Agreement pursuant to the requirements of Section
6.5 hereof.

      "Administrative Agent" shall have the meaning given such term in Recitals
hereof.

      "Bank Loans" shall mean the extensions of credit and other obligations
under the Credit Agreement as such amounts may be increased or decreased from
time to time.

      "Collateral" shall mean the assets and property described in the granting
clauses of any Security Document outstanding from time to time granting
collateral security to the Collateral Agent for the benefit of the Lenders or
the Noteholders.

      "Collateral Agent" shall have the meaning assigned thereto in the
introductory paragraph hereto.

      "Company" shall have the meaning assigned thereto in the Recitals hereof.

      "Credit Agreement" shall have the meaning assigned thereto in the Recitals
hereof.

      "Credit Agreement Obligations" shall mean "Obligations" as defined in the
Credit Agreement (including, without limitation, Default Interest, interest
accruing at the then applicable rate provided in the Credit Agreement after the
maturity of the Bank Loans and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding,
relating to any of the Credit Parties, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Credit Agreement, any Notes under the Credit Agreement or any other document
made, delivered or given in connection therewith, whether on account of
principal, interest, premium, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Administrative Agent and the Lenders that are required to be paid by the Credit
Parties pursuant to the terms of the Credit Documents or this Agreement).

      "Credit Documents" shall mean the collective reference to the Credit
Documents (as defined in the Credit Agreement) and any Hedging Agreement entered
into with a Person that is a Lender or an affiliate thereof.

      "Credit Party" and "Credit Parties" shall mean the Company, the Guarantors
and the Additional Guarantors.

      "Creditor" shall mean the Administrative Agent, a Lender or a Noteholder,
as the case may be.  The Administrative Agent, the Lenders and the Noteholders
are sometimes collectively referred to herein as the "Creditors".

                                       6

      "Event of Default" shall mean the occurrence of any event or the existence
of any condition which is specified as an "Event of Default" under any Credit
Document or any Note Document.

      "Finance Documents" shall mean a collective reference to the Credit
Documents and the Note Documents.

      "Guarantor" and "Guarantors" shall have the meaning assigned thereto in
the Recitals hereof.

      "Guaranty" and "Guaranties" shall have the meanings assigned thereto in
the Recitals hereof.

      "Hedging Agreement" shall have the meaning assigned thereto in the Credit
Agreement so long as such Hedging Agreement is with a Lender or an affiliate of
a Lender.

      "Initial Noteholders" shall have the meaning given such term in
introductory paragraph above.

      "Lender" shall mean each bank and other financial institution from time to
time party to the Credit Agreement as a Lender and each Lender or affiliate of a
Lender from time to time party to any Hedging Agreement.

      "Majority Creditors" shall mean, at the time of any determination
hereunder, the Required Lenders (for so long as the Credit Agreement is in
effect) and the Required Holders (for so long as any Private Note is
outstanding).

      "Maturity Event" shall mean (a) the maturity of any of the Bank Loans or
the Private Notes by acceleration; (b) the Company shall (1) petition or apply
to any tribunal for the appointment of a trustee, custodian, receiver or
liquidator for all or any substantial part of its business, estate or assets, or
(2) commence any proceeding under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect; or (c) any such petition or
application shall be filed or any such proceeding shall be commenced against the
Company and (1) the Company shall indicate approval thereof, consent thereto or
acquiescence therein, or (2) an order shall be entered appointing a trustee,
custodian, receiver or liquidator of all or any substantial part of the assets
of the Company or granting relief to the Company or approving the petition in
any such proceeding, and such order shall remain in effect for more than sixty
(60) days.

      "Note Agreement" shall have the meaning assigned thereto in the Recitals
hereof.

      "Note Agreement Obligations" shall mean the collective reference to the
unpaid principal of, interest on and premium, if any, on the Private Notes and
all other obligations and liabilities of the Credit Parties to the Noteholders
(including, without limitation, interest accruing at the then applicable rate
provided in the Note Agreement after the maturity of the Private Notes and
interest accruing at the then applicable rate provided in the Note Agreement
after the filing

                                       7

of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any of the Credit Parties,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Note Agreement, any Private Notes or any other
document made, delivered or given in connection therewith, whether on account of
principal, interest, premium, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Noteholders that are required to be paid by the Credit Parties pursuant to the
terms of the Note Agreement, the Private Notes, or this Agreement).

     "Note Documents" shall mean the Note Documents (as defined in the Note
Agreement).

     "Noteholder" shall mean each holder of any Note from time to time,
including, without limitation, the Initial Noteholders.

     "Notice of Actionable Default" shall mean a written notice issued to the
Collateral Agent with a copy to the Credit Parties (a) by any Creditor
certifying that an Actionable Default has occurred and is continuing, or (b) by
the Majority Creditors certifying that an Actionable Default has occurred and is
continuing.

     "Obligations" shall mean the collective reference to the Credit Agreement
Obligations and the Note Agreement Obligations.

     "Person" shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.

     "Pledge Agreement" shall have the meaning assigned thereto in the Recitals
hereof.

     "Private Notes" shall have the meaning assigned thereto in the Recitals
hereof.

     "Required Holders" shall have the meaning assigned thereto in the Note
Agreement, as in effect on the date hereof.

     "Required Lenders" shall have the meaning assigned thereto in the Credit
Agreement, as in effect on the date hereof.

     "Security Documents" shall mean the Guaranties, Security Agreements, Pledge
Agreements and Mortgages and any other guaranty, security agreement, pledge
agreement, mortgage or deed of trust (or similar instrument granting a Creditor
a lien on real property) executed pursuant to the requirements of any Finance
Document and any other instrument or agreement pursuant to which a lien in
collateral security is created or arises to secure any or all of the Obligations
owing to the Lenders or the Noteholders.

     "Specified Payment" shall mean (i) any payment from any Credit Party or any
other source received by a Creditor during the continuance of an Actionable
Default with respect to

                                       8

which a Notice of Actionable Default shall have been delivered to the Collateral
Agent, (ii) any payments made pursuant to the terms of a Guaranty, (iii) any
payment which a Creditor obtains within ninety (90) days before the occurrence
of a Maturity Event and (iv) any amounts received by the exercise of set-off
rights against any deposits, indebtedness or other obligations or amounts at any
time held or owing by such parties to or for the account of any Credit Party,
including, without limitation, amounts recovered or proceeds received pursuant
to Section 6.1 (b) of this Agreement; provided, however, such payments or other
amounts shall not be a Specified Payment if such payments or other amounts
(whether in the form of a payment, debit, cash sweep or otherwise) shall be
directed by or accompanied by clear instructions (including standing
instructions with regard to cash management accounts) from the Company or any
such Guarantor or other person or entity that such payments are to apply to
obligations of, or loans or other extensions of credit made by, such Creditor
other than Credit Agreement Obligations or Note Agreement Obligations, as
applicable.

     "Subsidiary" shall mean each subsidiary of a Credit Party now existing or
from time to time created or formed.

     "Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect from time to time in the State of Delaware or any other applicable
jurisdiction.

Section 2.   Appointment and Authority of Collateral Agent.

     (a)  The Lenders and the Noteholders hereby appoint Wachovia Bank, National
Association to act as Collateral Agent on the terms and conditions set forth in
this Agreement and the Security Documents and authorize the Collateral Agent to
execute the Security Documents in the name of and for the benefit of the
Creditors, and Wachovia Bank, National Association hereby accepts such
appointment and shall have all of the rights and obligations of the Collateral
Agent hereunder and under the Security Documents.

     (b)  The Creditors hereby appoint the Collateral Agent as agent for the
purposes of perfecting the security interest in assets which, in accordance with
Article 9 of the Uniform Commercial Code, can be perfected by possession only,
including without limitation the shares of stock of any Person pledged pursuant
to any Security Document, and the Collateral Agent hereby acknowledges that it
shall hold any such Collateral, including any such shares of stock of any
Subsidiary, for the ratable benefit of all Creditors in accordance with this
Agreement.

     (c)  Subject to the requirements of Section 4.2 hereof relating to the
instructions of the Majority Creditors, each Creditor hereby authorizes, and
each Lender which is or hereafter becomes a party to the Credit Agreement and
each Noteholder by the acceptance of any Private Note, shall be deemed to
authorize, the Collateral Agent to take such action on its behalf hereunder and
under the provisions of the Security Documents and any other instrument and
agreement referred to therein or now or hereafter delivered thereunder and to
exercise such powers thereunder as are specifically delegated to or required of
the Collateral Agent by the terms thereof, subject to the provisions hereof.

                                       9

Section 3.   Priority of Liens.

     Notwithstanding any contrary provision contained in any Finance Document or
in the Uniform Commercial Code, any applicable law or judicial decision, or
whether any Creditor has possession of all or any part of the Collateral, as
among the Creditors the respective rights of each Creditor in respect of liens
and security interests existing under the Security Documents shall at all times
remain on a parity with one another without preference, priority or distinction
and shall be shared as provided herein.

Section 4.   Enforcement Against Collateral; Application of Proceeds from
             Collateral and Guaranties.

     Section 4.1.  Limit on Enforcement. The Creditors agree among themselves
and for their own benefit alone that the liens and security interest granted and
provided for in the Security Documents shall not be enforced as against any of
the Collateral except at the direction of the Majority Creditors upon the
occurrence of one or more Actionable Defaults and in compliance with the
provisions hereof. Each Creditor agrees that, as long as any Obligations exist
or may become outstanding pursuant to the terms of the Finance Documents, the
provisions of this Agreement shall provide the exclusive method by which any
Creditor may exercise rights and remedies under the Security Documents.

     Section 4.2.  Enforcement. Upon the occurrence of any Actionable Default
and the Collateral Agent's receipt or actual knowledge of a Notice of Actionable
Default for the same, the Collateral Agent, at the direction of the Majority
Creditors, shall seek to realize upon the security interests and liens granted
to the Collateral Agent under the Security Documents in such manner as shall be
directed by the Majority Creditors. Whether before or after any Actionable
Default, subject to the terms and conditions hereof, the Collateral Agent shall
follow the instructions of the Majority Creditors with respect to the
preservation, protection, collection or realization upon any Collateral. If the
Collateral Agent has requested instructions from the Majority Creditors at a
time when a Notice of Actionable Default shall be outstanding and the Majority
Creditors have not responded to such request within thirty (30) days thereafter
(excluding a notification by any Creditor that the Majority Creditors have not
agreed upon the actions to be taken by the Collateral Agent, in which case, the
Collateral Agent shall take no action until instructions of the Majority
Creditors are received), the Collateral Agent may take, but shall have no
obligation to take, any and all actions under the Security Documents or any of
them or otherwise, other than foreclosure of any lien, as the Collateral Agent,
in good faith, shall determine to be in the best interests of the Creditors and
to maximize both the value of the Collateral and the present value of the
recovery by each of the Creditors on the Obligations; provided, however, that,
if instructions are thereafter received from the Majority Creditors, then any
subsequent actions of the Collateral Agent shall be subject to such
instructions. In the event the Majority Creditors fail to respond to any such
request referred to above, the Collateral Agent may forward a second request for
instructions to the Majority Creditors. Such second request shall clearly
indicate that it is a "Second Request Under the Intercreditor Agreement" and
shall clearly indicate in capitalized letters or contrasting type that, upon
failure to respond to such second request within thirty (30) days that the
Collateral Agent may take actions under the Security Documents, including
foreclosure of any lien. In the event the Majority Creditors fail to

                                       10

respond to such second request within thirty (30) days thereafter (excluding a
notification by any Creditor that the Majority Creditors have not agreed upon
the actions to be taken by the Collateral Agent, in which case, the Collateral
Agent shall take no action until instructions of the Majority Creditors are
received), the Collateral Agent may take, but shall have no obligation to take,
any and all actions under the Security Documents or any of them or otherwise,
including foreclosure of any lien, as the Collateral Agent, in good faith, shall
determine to be in the best interests of the Creditors and to maximize both the
value of the Collateral and the present value of the recovery by each of the
Creditors on the Obligations; provided, however, that, if instructions are
thereafter received from the Majority Creditors, then any subsequent actions of
the Collateral Agent shall be subject to such instructions. Notwithstanding
anything to the contrary set forth above, no Creditor shall be deemed to have
consented to or directed any action by the Collateral Agent in absence of
affirmative instructions from such Creditor.

     Section 4.3.  Application of Proceeds. The Collateral Agent and each of the
Creditors agree that (a) the proceeds and avails of any sale of the Collateral,
or any part thereof, and the proceeds and avails of any right or remedy under
the Security Documents, and (b) any and all Specified Payments, in all cases,
shall be shared by the Creditors and shall be distributed by the Collateral
Agent to the Obligations in accordance with the priorities as follows, with
application against the Obligations owed each Creditor made in the manner
determined by such Creditor:

             (i)   First, to the payment of amounts owing to the Collateral
                   Agent under Section 5.9 of this Agreement (excluding any such
                   costs, expenses or amounts which have theretofore been
                   reimbursed);

             (ii)  Second, after payment in full of the amounts set forth in
                   clause (i) above, to the payment of all fees, costs and
                   reasonable expenses of the Creditors incurred in connection
                   with the enforcement of their rights and remedies under the
                   Finance Documents (including, without limitation, fees, costs
                   and expenses incurred in connection with evaluating any such
                   rights or remedies) and to all indemnity obligations due and
                   payable under the Finance Documents;

             (iii) Third, after payment in full of the amounts set forth in
                   clause (ii) above, up to $50,000 to the payment of all agency
                   and similar fees of the Administrative Agent due to the
                   Administrative Agent under the Credit Documents (excluding
                   any such fees which have theretofore been reimbursed);

             (iv)  Fourth, after payment in full of the amounts set forth in
                   clause (iii) above, to the Creditors, ratably, in accordance
                   with the respective amounts of (1) the Credit Agreement
                   Obligations constituting the then aggregate unpaid principal
                   amount of the Bank Loans, together with all accrued and
                   unpaid interest thereon at such time, to be applied in
                   accordance with Section 4.10 of the Credit Agreement, (2)
                   amounts due under any Hedging Agreement with any Lender other
                   than termination payments, break-funding costs and fees; and
                   (3) the Note Agreement Obligations

                                       11

                   constituting the then aggregate unpaid principal amount of
                   the Private Notes together with all accrued and unpaid
                   interest thereon at such time, for application to such Credit
                   Agreement Obligations and Note Agreement Obligations, without
                   priority of one over the other;

             (v)   Fifth, after payment in full of the amounts set forth in
                   clause (iv) above, to the Creditors, ratably, in accordance
                   with the respective amounts of (1) the Credit Agreement
                   Obligations constituting the amount of all commitment fees,
                   break-funding costs and other amounts owing under the Credit
                   Agreement, including, without limitation, all amounts under
                   Sections 4.13, 4.14, 4.15 and 4.16 of the Credit Agreement if
                   any, then owing to the Lenders under the Credit Agreement (2)
                   amounts due under any Hedging Agreement with any Lender
                   constituting termination payments, break funding costs and
                   fees and (3) the Note Agreement Obligations constituting
                   break-funding costs, premium or make-whole amount, if any,
                   then owing to the Noteholders under the Note Agreement, for
                   application to such Credit Agreement Obligations and Note
                   Agreement Obligations, without priority of one over the
                   other;

             (vi)  Sixth, after payment in full of all amounts set forth in
                   clause (v) above, to the payment to the Creditors, ratably,
                   in accordance with the respective amounts of (1) all other
                   Credit Agreement Obligations and (2) all other Note Agreement
                   Obligations, without priority of one over the other; and

             (vii) Last, after payment in full of the Obligations, to the
                   payment of the surplus, if any, to any Credit Party, any of
                   their respective successors or to whomsoever may be lawfully
                   entitled to receive the same.

     In determining for any purpose of this Agreement, the ratable share of
Obligations owed to the respective Creditors as of any time (a) the Obligations
owed to each Lender shall be deemed outstanding in an amount equal to the
principal amount and interest then outstanding on the Bank Loans, (b) the
Obligations owed to each Lender that is party to a Hedging Agreement shall be
deemed outstanding in the amount equal to the net amount owed to such Lender or
Lenders under such Hedging Agreements, and (c) the Obligations owed to each
Noteholder shall be deemed outstanding in an amount equal to the aggregate
principal amount and interest then outstanding with respect to the Private
Notes.

     Section 4.4.  Sharing of Recoveries. If any Creditor shall receive any
Specified Payment or any other voluntary or involuntary payment, distribution,
collection or recovery on any Creditor's Obligations out of the proceeds of any
Collateral other than payments thereon received pursuant to Section 4.3 hereof
(any such non-excluded payment being hereinafter referred to as a "Recovery"),
including such a payment by reason of a setoff against deposit balances of any
of the Credit Parties, by exercise of other set-off rights, or by virtue of any
casualty insurance, title insurance or any other recovery with respect to any
Collateral (but excluding proceeds of environmental insurance and credit
derivatives or similar instruments purchased directly by, and entered into by,
such Creditor and not expressly subject to the terms

                                       12

of this Agreement), and as a result thereof such Creditor shall receive an
amount which exceeds the amount to which such Creditor would have been entitled
to receive under Section 4.3 hereof had such Recovery represented the proceeds
of the sale of Collateral (the amount of such excess being herein referred to as
the "Excess Amount"), then such Creditor shall pay to the Collateral Agent the
Excess Amount of such Recovery, and the Collateral Agent shall pay such Excess
Amount to each other Creditor to the extent (if any) such payee would have been
entitled thereto if Section 4.3 had governed the application of such Recovery
and, pending such payment, to the Collateral Agent, which shall hold such amount
in trust for the other Creditors.

     Section 4.5.  Return of Amounts. In the event that any Creditor which shall
receive any amount pursuant to Section 4.4 above (a "Recovering Party") shall be
legally required to return or repay any or all of such amount to a Credit Party,
or the representative or successor in interest of a Credit Party, whether
required pursuant to a settlement approved by such Creditor or required by court
order (the portion required to be so returned or repaid being hereinafter
referred to as a "Recovered Payment"), each other Creditor which shall have
received any portion of such Recovered Payment shall, promptly upon its receipt
of notice thereof from the Collateral Agent or such Recovering Party, pay to the
Collateral Agent such portion (without interest), and the Collateral Agent shall
promptly return such portion to the Recovering Party. If any such Recovered
Payment, or any part thereof, is subsequently re-recovered by the Recovering
Party from a Credit Party or the representative or successor in interest of a
Credit Party, such Recovered Payment, or any part thereof, shall, to the extent
required by Section 4.4 hereof, be paid by the Recovering Party to the
Collateral Agent (without interest), and the Collateral Agent shall redistribute
such Recovered Payment to the other Creditors on the same basis as such amounts
were originally distributed. The obligations of the Creditors and the Collateral
Agent under this paragraph shall survive the repayment of the Obligations and
the termination of the Security Documents.

     Section 4.6.  Allocation of Payments. Each Creditor shall, to the extent
necessary to give full effect to the foregoing provisions, purchase if such
Creditor was overpaid or sell if it was underpaid, as the case may be, for cash
at face value, but without recourse, from each other Creditor such amount of the
Obligations held by such other Creditor (or a participation therein) as shall be
necessary to cause a payment or distribution to be shared with such other
Creditor as hereinabove required.

     Section 4.7.  Determination of Amounts of Obligations. Whenever the
Collateral Agent is required to determine the existence or amount of any of the
Obligations or any portion thereof or the existence of any Actionable Default
for any purposes of this Agreement, it shall be entitled, absent manifest error,
to make such determination on the basis of one or more certificates of any
Creditor (with respect to the Obligations owed to such Creditor); provided,
however, that if, notwithstanding the request of the Collateral Agent, any
Creditor shall fail or refuse within twenty (20) business days of such request
to certify as to the existence or amount of any Obligations or any portion
thereof owed to it or the existence of any Actionable Default, the Collateral
Agent shall be entitled to determine such existence or amount by such method as
the Collateral Agent may, in its sole discretion, determine, including by
reliance upon a certificate of the Company; provided, further, that, promptly
following determination of any such amount, the Collateral Agent shall notify
such Creditor of such determination and thereafter

                                       13

shall correct any error that such Creditor brings to the attention of the
Collateral Agent. The Collateral Agent may rely conclusively, and shall be fully
protected in so relying, on any determination made by it in accordance with the
provisions of the preceding sentence (or as otherwise directed by a court of
competent jurisdiction) and shall have no liability to any of the Credit Parties
or any Subsidiary, any Creditor or any other person as a result of any action
taken by the Collateral Agent based upon such determination prior to receipt of
notice of any error in such determination.

     Section 4.8.  Acts of Creditors. Any request, demand, authorization,
direction, notice, consent, waiver or other action permitted or required by this
Agreement to be given or taken by the Creditors or any portion thereof
(including the Majority Creditors) may be and, at the request of the Collateral
Agent, shall be embodied in and evidenced by one or more instruments
satisfactory in form to the Collateral Agent and signed by or on behalf of such
persons and, except as otherwise expressly provided in any such instrument, any
such action shall become effective when such instrument or instruments shall
have been delivered to the Collateral Agent. The instrument or instruments
evidencing any action (and the action embodied therein and evidenced thereby)
are sometimes referred to herein as an "Act" of the persons signing such
instrument or instruments. In the absence of bad faith on the part of the
Collateral Agent, the Collateral Agent shall be entitled to rely absolutely upon
an Act of any Creditor if such Act purports to be taken by or on behalf of such
Creditor, and nothing in this Section 4.8 or elsewhere in this Agreement shall
be construed to require any Creditor to demonstrate that it has been authorized
to take any action which it purports to be taking, the Collateral Agent being
entitled to rely conclusively, and being fully protected in so relying, on any
Act of such Creditor.

Section 5.   The Collateral Agent.

     The Collateral Agent accepts the duties hereunder and under the Security
Documents and agrees to perform the same, but only upon the terms and conditions
hereof and the Security Documents, including the following, to all of which the
Credit Parties and the respective Creditors by their acceptance hereof agree:

     Section 5.1.  Duties of Collateral Agent. (a) The Collateral Agent upon
receipt of a Notice of Actionable Default furnished to the Collateral Agent
pursuant to the provisions of this Agreement shall promptly furnish copies of
the same to all holders of the Obligations.

     (b)  In the event that the Collateral Agent shall receive any material
notice from any Creditor or from any of the Credit Parties, the Collateral Agent
shall promptly furnish copies of the same to all holders of the Obligations at
the addresses for notices specified in Section 7.2.

     (c)  The Collateral Agent shall not have any duty or obligation to manage,
control, use, sell, dispose of or otherwise deal with the Collateral, or, to
otherwise take or refrain from taking any action under, or in connection with,
this Agreement or the Security Documents, except, subject to Section 5.9, as
expressly provided by the terms and conditions of this Agreement or the Security
Documents, or expressly provided in written instructions received pursuant to
the terms of this Agreement or the Security Documents.  The Collateral Agent may
take, but in absence of written instructions received pursuant to this Agreement
shall have no obligation to

                                       14

take, any and all such actions under the Security Documents or any of them or
otherwise as it shall deem to be in the best interests of the Creditors in order
to maintain the Collateral and protect and preserve the Collateral and the
rights of the Creditors; provided, however, that, in the absence of specific
written instructions from the Majority Creditors or as expressly provided in
Section 4.2, the Collateral Agent shall not foreclose on any lien or security
interest on the Collateral or, except as otherwise provided herein, exercise any
other remedies available to it under any Security Documents with respect to the
Collateral or any part thereof.

      (d) The Collateral Agent shall not be responsible in any manner whatsoever
for the correctness of any recitals, statements, representations or warranties
contained herein or in any other Security Document.  The Collateral Agent makes
no representation as to the value or condition of the Collateral or any part
thereof, as to the title of any of the Credit Parties or any of their
Subsidiaries to the Collateral, as to the security afforded by this Agreement or
any Security Document or, as to the validity, execution, enforceability,
legality or sufficiency of this Agreement or any Finance Document, and the
Collateral Agent shall incur no liability or responsibility in respect of any
such matters.  The Collateral Agent shall not be required to ascertain or
inquire as to the performance by any of the Credit Parties or any of their
Subsidiaries.

      (e) The Collateral Agent shall not be responsible for insuring the
Collateral, for the payment of taxes, charges, assessments or liens upon the
Collateral or otherwise as to the maintenance of the Collateral, except as
provided in the immediately following sentence when the Collateral Agent has
possession of the Collateral.  The Collateral Agent shall have no duty to any of
the Credit Parties or any of their Subsidiaries or to the Creditors as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of the Collateral Agent or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto, except the duty to accord such of the Collateral as may be in its
possession substantially the same care as it accords its own assets and the duty
to account for monies received by it.

      (f) The Collateral Agent may execute any of the powers granted under this
Agreement or any of the Security Documents and perform any duty hereunder or
thereunder either directly or by or through agents or attorneys-in-fact, and
shall not be responsible for the gross negligence or willful misconduct of any
agents or attorneys-in-fact selected by it with reasonable care and without
gross negligence or willful misconduct.

      (g) In the event (i) the Collateral Agent shall have received any written
request from any of the Credit Parties for consent or approval to any matter or
thing relating to any Collateral or the Credit Party's obligations with respect
thereto or (ii) there shall be due from the Collateral Agent under the
provisions of any Security Document any performance or the delivery of any
instrument, then, in each such event, the Collateral Agent shall send to each of
the Creditors a notice setting forth, in reasonable detail, (x) an account of
the matter or thing as to which such consent has been requested or the
performance or instrument required to be so delivered, as the case may be, and
(y) the Collateral Agent's proposed course of action with respect thereto.  In
the event the Collateral Agent shall not have received a response from a
Creditor within thirty (30) days after the giving of such notice, such Creditor
shall be deemed to have rejected the

                                       15

course of action proposed by the Collateral Agent. No such consent of the
Creditor shall be required with respect to any action taken in accordance with
the provisions of Section 4.2 hereof or with respect to any consent,
determination or other matter that is ministerial or administrative in nature.
Also, the Collateral Agent is hereby authorized on behalf of all the Creditors,
without the necessity of further consent from any Creditor, from time to time
prior to an Event of Default, to release portions of the Collateral from the
security interest imposed by the Security Documents in connection with any
disposition of such portions of the Collateral expressly permitted under the
Finance Documents.

      (h) The Collateral Agent shall not be deemed to have actual, constructive,
direct or indirect notice or knowledge of the occurrence of any Actionable
Default unless and until the Collateral Agent shall have received a Notice of
Actionable Default or a notice from any of the Credit Parties to the Collateral
Agent in its capacity as Collateral Agent indicating that an Actionable Default
has occurred.  The Collateral Agent shall have no obligation either prior to or
after receiving such notice to inquire whether an Actionable Default has, in
fact, occurred and shall be entitled to rely conclusively, and shall be fully
protected in so relying, on any notice so furnished to it.  The Collateral Agent
may (but shall not be obligated to) take action hereunder on the basis of an
Actionable Default of the type specified in Section 11.01(h) or (i) of the
Credit Agreement, or clauses (g) or (h) of Section 11 of the Note Agreement
(each as in effect on the date of this Agreement) whether or not the Collateral
Agent has received any Notice of Actionable Default stating that such Actionable
Default has occurred, provided that any such action taken by the Collateral
Agent without direction from the Majority Creditors shall be limited to actions
that the Collateral Agent determines to be necessary to protect and preserve the
Collateral and the rights of the Creditors, provided, further, that the
Collateral Agent shall promptly notify all Creditors in writing of any action
taken without direction from the Majority Creditors.

      (i) Upon receipt of a Notice of Actionable Default pursuant to the
provisions of this Agreement, the Collateral Agent shall, at the request of any
Creditor, schedule a meeting of all Creditors to be held at the offices of the
Collateral Agent, or another mutually convenient place, to discuss the exercise
of rights and remedies under the Security Documents, provided that any Creditor
may participate via telephone.

      Section 5.2. Collateral Agent's Liability. No provision of this Agreement
shall be construed to relieve the Collateral Agent from liability for its own
gross negligence or willful misconduct, except that:

      (a) the Collateral Agent shall not be liable except for the performance of
such duties as are specifically set forth in this Agreement or in the Security
Documents and no implied covenants or obligations shall be read into this
Agreement or into the Security Documents against the Collateral Agent but the
duties and obligations of the Collateral Agent shall be determined solely by the
express provisions of this Agreement and the Security Documents;

      (b) in the absence of bad faith, gross negligence or willful misconduct on
the part of the Collateral Agent, the Collateral Agent may rely upon the
authenticity of, and the truth of the statements and the correctness of the
opinions expressed in, and shall be protected in acting

                                       16

upon, any resolution, officer's certificate, opinion of counsel, note, request,
notice, consent, waiver, order, signature guaranty, notarial seal, stamp,
acknowledgment, verification, appraisal, report, stock certificate, or other
paper or document believed by the Collateral Agent to be genuine and to have
been signed, affixed or presented by the proper party or parties;

      (c) in the absence of bad faith, gross negligence or willful misconduct on
the part of the Collateral Agent, whenever the Collateral Agent, or any of its
agents, representatives, experts or counsel, shall consider it necessary or
desirable that any matter be proved or established, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by an officer's certificate; provided,
however, that the Collateral Agent, or such agent, representative, expert or
counsel, may require such further and additional evidence and make such further
investigation as it or they may consider reasonable;

      (d) the Collateral Agent may consult with counsel and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered hereunder in good faith and in
accordance with such advice or opinion of counsel;

      (e) the Collateral Agent shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with any
direction or request of the Majority Creditors pursuant to the terms of this
Agreement or any of the Security Documents;

      (f) the Collateral Agent shall not be liable for any error of judgment
made in good faith by an officer of the Collateral Agent unless it shall be
proved that the Collateral Agent was grossly negligent in ascertaining the
pertinent facts; and

      (g) whether or not an Event of Default shall have occurred, the Collateral
Agent shall not be under any obligation to take or refrain from taking any
action under this Agreement or any of the Security Documents which may tend to
involve it in any expense or liability, unless and until it is requested in
writing so to do by the Majority Creditors and furnished, from time to time as
it may require, with satisfactory indemnity.

      This Section does not impair or otherwise affect the Creditors'
obligations and liabilities to the Credit Parties (if any) under the terms of
the Credit Agreement and Note Agreement for any act or failure to act by the
Collateral Agent in each case that is in accordance with the provisions of this
Agreement.

      Section 5.3. Certain Limitations on Collateral Agent's Rights to
Compensation. The Collateral Agent shall have no right against a Creditor for
the payment of compensation for its services hereunder or any expenses or
disbursements incurred in connection with the exercise and performance of its
powers and duties hereunder or any indemnification against liabilities which it
may incur in the exercise and performance of such powers and duties, but on the
contrary, shall look solely to the Credit Parties for such payment and
indemnification which the Credit Parties hereby acknowledge, and the Collateral
Agent shall have only such lien on and security interest in the Collateral as
security for such compensation, expenses, disbursements and indemnification as
and to the extent provided for in Section 4.3(a) hereof.

                                       17

      Section 5.4. Status of Moneys Received. (a) Except as otherwise
specifically prescribed in this Agreement, all moneys received by the Collateral
Agent shall, until used or applied as herein provided, be held for the purposes
for which they were received, in segregated accounts, and may be deposited by
the Collateral Agent under such general conditions as may be prescribed by law
in the Collateral Agent's general banking department, and the Collateral Agent
shall be under no liability for interest on any moneys received by it hereunder.
The Collateral Agent and any affiliated corporation may become the owner of any
of the Obligations and be interested in any financial transaction with any of
the Credit Parties or any affiliated corporation, or the Collateral Agent may
act as depository or otherwise in respect to other securities of any of the
Credit Parties or any affiliated corporation, all with the same rights which it
would have if not the Collateral Agent.

      (b) The Collateral Agent may invest and reinvest any funds from time to
time held by the Collateral Agent in direct obligations of the United States of
America or obligations for which the full faith and credit of the United States
is pledged to provide for the payment of principal and interest, maturing not
more than 90 days from the date of such investment.

      Section 5.5. Resignation or Termination of Collateral Agent. The
Collateral Agent may resign as Collateral Agent upon not less than 60 days'
written notice to each of the Creditors (with copies to the Credit Parties),
such resignation to take effect upon the acceptance by a successor Collateral
Agent of its appointment as the Collateral Agent hereunder. In addition, the
Majority Creditors may remove the Collateral Agent at any time by giving written
notice thereof to the Collateral Agent. Upon any such resignation or removal,
the Majority Creditors shall have the right to appoint a successor Collateral
Agent which meets the eligibility requirements of Section 5.7. If no successor
Collateral Agent shall have been so appointed and shall have accepted such
appointment in writing within 30 days after the retiring Collateral Agent's
giving of notice of resignation or its removal, then the retiring Collateral
Agent may, on behalf of the Creditors, appoint a successor Collateral Agent
which meets the eligibility requirements of Section 5.7, and the Credit Parties
agree to pay such reasonable fees and expenses of any such appointee as shall be
necessary to induce such appointee to agree to become a successor Collateral
Agent hereunder. Upon acceptance of appointment as Collateral Agent, such
successor shall thereupon and forthwith succeed to and become vested with all
the rights, powers and privileges, immunities and duties of the retiring
Collateral Agent, and the retiring Collateral Agent, upon the signing,
transferring and setting over to such successor Collateral Agent all rights,
moneys and other collateral held by it in its capacity as Collateral Agent,
shall be discharged from its duties and obligations hereunder. After any
retiring Collateral Agent's resignation or removal as Collateral Agent, the
provisions of this Section 5, shall inure to its benefit as to any actions taken
or omitted to be taken by it while it acted as Collateral Agent.

      Section 5.6. Succession of Successor Collateral Agent. Any successor
Collateral Agent appointed hereunder shall execute, acknowledge and deliver to
the Credit Parties and the predecessor Collateral Agent an instrument accepting
such appointment, and thereupon such successor Collateral Agent, without any
further act, deed, conveyance or transfer, shall become vested with the title to
the Collateral, and with all the rights, powers, duties and obligations of the
predecessor Collateral Agent in the trust hereunder, with like effect as if
originally named as Collateral Agent herein.

                                       18

     Upon the request of any such successor Collateral Agent, however, the
Credit Parties and the predecessor Collateral Agent shall promptly execute and
deliver such instruments of conveyance and further assurance reflecting terms
consistent with the terms of the Finance Documents then in effect and do such
other things as may reasonably be required for more fully and certainly vesting
and confirming in such successor Collateral Agent its interest in the Collateral
and all such rights, powers, duties and obligations of the predecessor
Collateral Agent hereunder, and the predecessor Collateral Agent shall also
promptly assign and deliver to the successor Collateral Agent any Collateral
subject to the lien and security interest of this Agreement which may then be in
its possession.

      Section 5.7. Eligibility of Collateral Agent. Any successor Collateral
Agent shall be a state or national bank or trust company in good standing,
organized under the laws of the United States of America or of any state, having
a capital, surplus and undivided profits aggregating at least $500,000,000, if
there be such a bank or trust company willing and able to accept the duties
hereunder upon reasonable and customary terms.

      Section 5.8. Successor Collateral Agent by Merger. Any corporation into
which the Collateral Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Collateral Agent shall be a party, or any state or national bank or trust
company in any manner succeeding to the corporate trust business of the
Collateral Agent as a whole or substantially as a whole, if eligible as provided
in Section 5.7, shall be the successor of the Collateral Agent hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything to the contrary contained herein notwithstanding.

      Section 5.9. Compensation and Reimbursement of Collateral Agent. The
Credit Parties agree:

      (a) to pay to the Collateral Agent all of its out-of-pocket expenses in
connection with the preparation, execution and delivery of this Agreement and
the transactions contemplated hereby, including but not limited to the
reasonable charges and disbursements of its special counsel;

      (b) to pay to the Collateral Agent from time to time reasonable
compensation for all services rendered by it hereunder;

      (c) to reimburse the Collateral Agent upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Collateral Agent in
accordance with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable solely
to its gross negligence or willful misconduct; and

      (d) to indemnify the Collateral Agent for, and to hold it harmless
against, any loss, liability or expense incurred without gross negligence or
willful misconduct on its part, arising out of or in connection with this
Agreement or any Security Document or any action taken or omitted by it
thereunder or in connection therewith, including, but not limited to, the costs
and

                                       19

expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder, and any
loss, liability, expense or claim arising out of its possession, management,
control, use or operation of the Collateral.

     Notwithstanding any other provision of this Agreement or the Security
Documents, the Collateral Agent shall in all cases be fully justified in failing
or refusing to act hereunder unless it shall be indemnified to its satisfaction
by the Creditors against any and all liability and expense that may be incurred
by it by reason of taking or continuing to take any such action.

     Section 5.10. Self Dealing. In the event that a Creditor serves as the
Collateral Agent, such Creditor acting in its capacity as such shall have the
same rights and powers under the Finance Documents as any other Creditor and may
exercise or refrain from exercising the same as though it were not the
Collateral Agent. Without limiting the generality of the foregoing, the
Collateral Agent or any holding company, trust company or corporation in or with
which the Collateral Agent or the Collateral Agent's stockholders may be
interested or affiliated, or any officer or director of the Collateral Agent, or
of any other such entity, or any agent appointed by the Collateral Agent, may
have commercial relations or otherwise deal with any of the Credit Parties, or
any Creditor, or with any other corporation having relations with any of the
Credit Parties or any Creditor, and with any other entity, whether or not
affiliated with the Collateral Agent.

Section 6.  Agreements Among the Creditors.

     Section 6.1. Independent Actions by Creditors. Nothing contained in this
Agreement shall prohibit any Creditor from (a) accelerating the maturity of, or
demanding payment from any of the Credit Parties on, any Obligation of the
Credit Parties to such Creditor, (b) instituting and pursuing legal action
against any of the Credit Parties to obtain a judgment or other legal process in
respect of such Obligation (including, without limitation, enforcing any such
judgment against the assets of the Company, and Guarantor or any other person or
entity so long as such assets are not subject to a Lien subject to the terms of
this Agreement), (c) imposing a default rate of interest in accordance with the
Credit Agreement or the Note Agreement, as applicable, or (d) raising any
defenses in any action in which it has been made a party defendant or has been
joined as a third party, except that the Collateral Agent may direct and control
any defense to the extent directly relating to the Collateral or any one or more
of the Security Documents, subject to and in accordance with the provisions of
this Agreement.

     Section 6.2. Relation of Creditors. This Agreement is entered into solely
for the purposes set forth herein, and no Creditor assumes any responsibility to
any other party hereto to advise such other party of information known to such
other party regarding the financial condition of the Credit Parties or of any
other circumstances bearing upon the risk of nonpayment of any Obligation. Each
Creditor specifically acknowledges and agrees that nothing contained in this
Agreement is or is intended to be for the benefit of a Credit Party and nothing
contained herein shall limit or in any way modify any of the obligations of the
Credit Parties to the Creditors.

                                       20

     Section 6.3. Acknowledgment of Collateral . Each party hereto hereby
expressly acknowledges the collateral security given under the Credit Agreement
and the collateral security delivered pursuant to the requirements of the Note
Agreement.

     Section 6.4. Additional Creditors. Additional Persons which become parties
as lenders to the Credit Agreement or noteholders under a Note Agreement shall
become "Creditors" hereunder by executing and delivering to the Collateral Agent
and each of the then existing Creditors (a) a supplement to this Agreement
pursuant to which such party shall become a party to this Agreement executed by
such Person and the Collateral Agent and (b) a copy of the agreement or
documents pursuant to which such Person has become a creditor of the Credit
Parties. Accordingly, upon the execution and delivery of such copy of this
Agreement by any such Person, such Person shall thereafter become a Creditor for
all purposes of this Agreement.

     Section 6.5. Additional Guarantors. Each additional Person who from time to
time becomes a guarantor of any obligations under any Financing Document
pursuant to the terms of any of the Financing Documents or otherwise. Upon the
execution and delivery of any such guaranty by any such Person, shall
thereinafter be deemed a "Guarantor" for all purposes of this Agreement and, the
Collateral Agent may (or shall at the request of the Majority Creditors),
require such Guarantor to execute a joinder to this Agreement in form and
substance satisfactory to the Collateral Agent.

     Section 6.6. Guaranties. In the event any Guaranty is invalidated, avoided,
declared fraudulent or set aside, the Collateral Agent, the Administrative Agent
and the Creditors agree that such Guaranty shall nevertheless be considered to
be outstanding for all purposes of this Agreement.

     Section 6.7. Copies of Modifications. Each Creditor agrees to provide to
the Collateral Agent a complete executed copy of any and all amendments, waivers
and other modifications to the Finance Documents to which it is a party promptly
after the execution and delivery thereof. The Collateral Agent shall not be
deemed to have any knowledge of any such amendments, waivers or other
modifications until a complete executed copy of the same is delivered to the
Collateral Agent.

Section 7.  Miscellaneous.

     Section 7.1. Entire Agreement. This Agreement represents the entire
Agreement among the Creditors and, except as otherwise provided, this Agreement
may not be altered, amended or modified except in a writing executed by all the
parties to this Agreement.

     Section 7.2. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof shall be in writing,
and any such communication shall become effective when received, addressed in
the following manner: (a) if to the Collateral Agent or any Lender, to the
respective addresses set forth in the Credit Agreement or (b) if to any
Noteholder, to the respective addresses set forth in the Purchaser Schedule to
the Note Agreement or such other address specified by such Noteholder to the
Collateral Agent in writing provided, however,

                                       21

that any such addressee may change its address for communications by notice
given as aforesaid to the Collateral Agent.

      Section 7.3. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each of the Creditors and their respective
successors and assigns (including, without limitation, any holder of a
participation interest in any Obligation), whether so expressed or not, and, in
particular, shall inure to the benefit of and be enforceable by any future
holder or holders of any Obligations, and the term "Creditor" shall include any
such subsequent holder of Obligations, wherever the context permits. Without
limiting the foregoing, the rights and obligations of any Lender or Noteholder
under this Agreement shall be assigned automatically, without the need for the
execution of any document or any other action, to, and the term "Lender" or
"Noteholder" as used in this Agreement shall include, any assignee, transferee
or successor of such Lender under a Credit Agreement or such Noteholder under
any Note Agreement, as the case may be, and any such assignee, transferee or
successor shall automatically become a party to this Agreement. If required by
any party to this Agreement, such assignee, transferee or successor shall
execute and deliver to the other parties to this Agreement a written
confirmation of its assumption of the obligations of the assignor or transferor
hereunder. Each of the Lenders and the Noteholders agrees that it shall deliver
a complete copy of this Agreement to any assignee, transferee or successor of a
Lender or a Noteholder prior to or substantially concurrently with the execution
of any such assignment or transfer.

     Section 7.4. Consents, Amendment, Waivers. All amendments, waivers or
consents of any provision of this Agreement shall be effective only if the same
shall be in writing and signed by the Required Lenders and Required Holders and
no such modification or amendment shall be binding on the Credit Parties without
the consent of the Credit Parties, provided, however, that (i) no such
modification or amendment shall adversely affect any of the Collateral Agent's
rights, immunities or rights to indemnification hereunder or under any Security
Document or expand its duties hereunder or under any Security Document, without
the prior written consent of the Collateral Agent, (ii) no such modification or
amendment shall modify any provision hereof which is intended to provide for the
equal and ratable security of all outstanding Obligations without the prior
written consent of all Creditors, and (iii) no such modification or amendment
shall change the definition of "Majority Creditors" or this Section 7.4 or
Section 4 without the prior written consent of each Creditor. No waiver of any
provision of this Agreement and no consent to any departure by any party hereto
from the provisions hereof shall be effective unless such waiver or consent
shall be set forth in a written instrument executed by the party against which
it is sought to be enforced, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

     Section 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

     Section 7.6. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one Agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.

                                       22

     Section 7.7.  Sale of Interest. No Creditor will sell, transfer or
otherwise dispose of any interest in the Obligations unless such purchaser or
transferee shall agree, in writing, to be bound by the terms of this Agreement.

     Section 7.8.  Severability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not in any way be affected or impaired thereby.

     Section 7.9.  Purchase of Collateral. Any Creditor may purchase Collateral
at any public sale of such Collateral pursuant to any of the Security Documents
and may make payment on account thereof by using any outstanding Obligation then
due and payable to such Creditor from the person which granted a security
interest in such Collateral as a credit against the purchase price to the
extent, but only to the extent such action (i) has been approved by the Majority
Creditors and (ii) does not contravene any Applicable Law (as defined in the
Credit Agreement).

     Section 7.10. Further Assurances, etc. Each party hereto shall execute and
deliver such other documents and instruments, in form and substance reasonably
satisfactory to the other parties hereto, and shall take such other action, in
each case as any other party hereto may reasonably have requested (at the cost
and expense of the Credit Parties which costs and expenses the Credit Parties,
by countersigning this Agreement, agree to pay), to effectuate and carry out the
provisions of this Agreement, including, by recording or filing in such places
as the requesting party may deem desirable, this Agreement or such other
documents or instruments.

                                       23

     In Witness Whereof, each of the parties hereto has caused this Agreement to
be executed as of the date first above written.

                                 WACHOVIA BANK, NATIONAL
                                    ASSOCIATION, as Collateral Agent, as
                                    Administrative Agent and a Lender

                                 By_____________________________
                                   Name:
                                   Title:

                                       24

                                     FLEET NATIONAL BANK, as a Lender

                                 By:____________________________
                                    Name:
                                    Title:

                                       25

                                        BANK OF OKLAHOMA, N.A., as a Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                       26

                                        U.S. BANK, N.A. (f/k/a FIRSTAR BANK,
                                        N.A. OVERLAND PARK), as a Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                       27

                                        WELLS FARGO BANK TEXAS, N.A., as a
                                        Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                       28

                                        TEAMBANK, N.A., as a Lender

                                        By:_____________________________________
                                          Name:
                                          Title:

                                       29

                                        THE CANADA LIFE
                                        ASSURANCE COMPANY, as a Noteholder

                                        By:_____________________________________
                                          Name:
                                          Title:

                                       30

                                        JOHN HANCOCK LIFE
                                        INSURANCE COMPANY, as a Noteholder

                                        By:_____________________________________
                                          Name:
                                          Title:

                                        INVESTORS PARTNER LIFE
                                        INSURANCE COMPANY, as a Noteholder

                                        By:_____________________________________
                                          Name:
                                          Title:

                                        JOHN HANCOCK VARIABLE LIFE
                                        INSURANCE COMPANY, as a Noteholder

                                        By:_____________________________________
                                          Name:
                                          Title:

                                        JOHN HANCOCK INSURANCE COMPANY OF
                                        VERMONT, as a Noteholder

                                        By:_____________________________________
                                          Name:
                                          Title:

                                       31

                                        THE PRUDENTIAL INSURANCE COMPANY OF
                                        AMERICA, as a Noteholder

                                        By:_____________________________________
                                          Name:
                                          Title:

                                       32

     The undersigned parties hereby acknowledge and agree to the foregoing
Intercreditor Agreement.

                                   INERGY PROPANE, LLC

                                   By: _________________________________________
                                      Name:  John J. Sherman
                                      Title: President

                                   INERGY, L.P.

                                   By:  Inergy GP, LLC, its Managing Partner

                                        By:_____________________________________
                                           Name:  John J. Sherman
                                           Title: President

                                   INERGY TRANSPORTATION, LLC

                                   By: _________________________________________
                                      Name:  John J. Sherman
                                      Title: President

                                   IPCH ACQUISTION CORP.

                                   By: _________________________________________
                                      Name:  John J. Sherman
                                      Title: President

                                   L & L TRANSPORTATION, LLC

                                   By: _________________________________________
                                      Name:  John J. Sherman
                                      Title: President

                                   INERGY SALES & SERVICE, INC.

                                   By: _________________________________________
                                      Name:  John J. Sherman
                                      Title: President

                                       33

                                                                    EXHIBIT 23.1

                        CONSENT OF INDEPENDENT AUDITORS

Board of Directors and Members
Inergy, L.P.

We consent to the references to our firm under the caption "Experts" and to the
use of our report dated December 10, 2001, except for Notes 4 and 12, as to
which the date is December 20, 2001, with respect to Inergy, L.P. and
subsidiary; our report dated May 2, 2001 with respect to the Hoosier Propane
Group; and our report dated May 22, 2002 with respect to Inergy GP, LLC, in
Amendment No. 1 to the Registration Statement (Form S-1 No. 333-89010) and
related Prospectus of Inergy, L.P. for the registration of 1,400,000 common
units.

                                /s/ Ernst & Young LLP

Kansas City, Missouri
July 12, 2002