-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VKgyUqgdMM1VQI8t72i/cqMROqcUn8txRJUWjifZ4She1u19D1kkotq1XpUFtCJl zijkjfJGi6eUzPUL9ax4nw== 0000950136-04-004354.txt : 20041209 0000950136-04-004354.hdr.sgml : 20041209 20041209171320 ACCESSION NUMBER: 0000950136-04-004354 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20040925 FILED AS OF DATE: 20041209 DATE AS OF CHANGE: 20041209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUBURBAN PROPANE PARTNERS LP CENTRAL INDEX KEY: 0001005210 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 223410353 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14222 FILM NUMBER: 041194046 BUSINESS ADDRESS: STREET 1: P O BOX 206 STREET 2: 240 ROUTE 10 WEST CITY: WIPPANY STATE: NJ ZIP: 07981 BUSINESS PHONE: 9738875300 MAIL ADDRESS: STREET 1: ONE SUBURBAN PLZ STREET 2: 240 RTE 10 WEST CITY: WHIPPANY STATE: NJ ZIP: 07981 10-K 1 file001.htm FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended September 25, 2004

Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Commission File Number: 1-14222

SUBURBAN PROPANE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

240 Route 10 West
Whippany, NJ 07981
(973) 887-5300

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

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

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

Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]

The aggregate market value as of March 26, 2004 of the registrant's Common Units held by non-affiliates of the registrant, based on the reported closing price of such units on the New York Stock Exchange on such date ($33.12 per unit), was approximately $1,002,104,000.

Documents Incorporated by Reference: None

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

INDEX TO ANNUAL REPORT ON FORM 10-K


	PART I	Page

ITEM 1.	BUSINESS	1
ITEM 2.	PROPERTIES	10
ITEM 3.	LEGAL PROCEEDINGS	11
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	11

	PART II
ITEM 5.	MARKET FOR THE REGISTRANT'S UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF UNITS	12
ITEM 6.	SELECTED FINANCIAL DATA	13
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	36
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	39
ITEM 9A.	CONTROLS AND PROCEDURES	39
ITEM 9B.	OTHER INFORMATION	40

	PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	41
ITEM 11.	EXECUTIVE COMPENSATION	44
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	49
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	50
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	50

	PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	51
SIGNATURES		52

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements ("Forward-Looking Statements") as defined in the Private Securities Litigation Reform Act of 1995 relating to the Partnership's future business expectations and predictions and financial condition and results of operations. Some of these statements can be identified by the use of forward-looking terminology such as "prospects," "outlook," "believes," "estimates," "intends," "may," "will," "should," "anticipates," "expects" or "plans" or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategies or risks and uncertainties. These Forward-Looking Statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such Forward-Looking Statements ("Cautionary Statements"). The risks and uncertainties and their impact on the Partnership's operations include, but are not limited to, the following risks:


•	The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;


•	Fluctuations in the unit cost of propane, fuel oil and other refined fuels and natural gas;


•	The ability of the Partnership to compete with other suppliers of propane, fuel oil and other energy sources;


•	The impact on propane, fuel oil and other refined fuel prices and supply from the political, military and economic instability of the oil producing nations, global terrorism and other general economic conditions;


•	The ability of the Partnership to realize fully, or within the expected time frame, the expected cost savings and synergies from the acquisition of Agway Energy;


•	The ability of the Partnership to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels;


•	The ability of the Partnership to retain customers;


•	The impact of energy efficiency and technology advances on the demand for propane and fuel oil;


•	The ability of management to continue to control expenses;


•	The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the environment and global warming and other regulatory developments on the Partnership's business;


•	The impact of legal proceedings on the Partnership's business;


•	The Partnership's ability to implement its expansion strategy into new business lines and sectors; and


•	The Partnership's ability to integrate acquired businesses successfully.

Some of these Forward-Looking Statements are discussed in more detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report. On different occasions, the Partnership or its representatives have made or may make Forward-Looking Statements in other of its filings with the Securities and Exchange Commission (the "SEC"), in press releases or oral statements made by or with the approval of one of the Partnership's authorized executive officers. Readers are cautioned not to place undue reliance on Forward-Looking or Cautionary Statements, which reflect management's opinions only as of the date made. The Partnership undertakes no obligation to update any Forward-Looking or Cautionary Statement. All subsequent written and oral Forward-Looking Statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements in this Annual Report and in future SEC reports.

PART I

ITEM 1. BUSINESS

Development of Business

Suburban Propane Partners, L.P. (the "Partnership"), a publicly traded Delaware limited partnership, is a nationwide marketer and distributor of a diverse array of products to meet the energy needs of our customers, specializing in propane, fuel oil and other refined fuels, as well as the marketing of natural gas and electricity in deregulated markets. To complement our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating, ventilation and air conditioning ("HVAC"). We believe, based on LP/Gas Magazine dated February 2004, that we are the third largest retail marketer of propane in the United States, measured by retail gallons sold in the year 2003. As of September 25, 2004, we were serving the energy needs of more than 1,000,000 active residential, commercial, industrial and agricultural customers through approximately 370 customer service centers in 30 states located primarily in the east and west coast regions of the United States. We sold approximately 537.3 million gallons of propane to retail customers during the fiscal year ended September 25, 2004 and 220.5 million gallons of fuel oil and other refined fuels during this same period. Together with our predecessor companies, we have been continuously engaged in the retail propane business since 1928.

We conduct our business principally through Suburban Propane, L.P., a Delaware limited partnership, which operates our propane business and assets (the "Operating Partnership"), and its direct and indirect subsidiaries. Our general partner is Suburban Energy Services Group LLC (the "General Partner"), a Delaware limited liability company owned by members of our senior management. The General Partner owns a combined 1.54% general partner interest in the Partnership and the Operating Partnership and the Partnership owns all of the limited partnership interests in the Operating Partnership.

Subsidiaries of the Operating Partnership include Suburban Sales and Service, Inc. (the "Service Company"), which conducts the Partnership's service work and appliance and parts businesses. Additionally, on January 5, 2001, Suburban Holdings, Inc., a subsidiary of the Operating Partnership, was formed to hold the stock of Gas Connection, Inc. (d/b/a HomeTown Hearth & Grill), Suburban @ Home, Inc. and Suburban Franchising, Inc. HomeTown Hearth & Grill sells and installs natural gas and propane gas grills, fireplaces and related accessories and supplies through twelve retail stores in the south, northeast and northwest regions as of September 25, 2004. Suburban @ Home sells, installs, services and repairs a full range of HVAC products. Suburban Franchising creates and develops propane related franchising business opportunities.

On December 23, 2003, we acquired substantially all of the assets and operations of Agway Energy Products, LLC, Agway Energy Services, Inc. and Agway Energy Services PA, Inc. (collectively referred to as "Agway Energy") pursuant to an asset purchase agreement dated November 10, 2003 (the "Agway Acquisition"). Agway Energy was a leading regional marketer of propane, fuel oil, gasoline and diesel fuel primarily in New York, Pennsylvania, New Jersey and Vermont, as well as a marketer of natural gas and electricity in New York and Pennsylvania. With the Agway Acquisition, we transformed our business from a marketer of a single fuel into one that provides multiple energy solutions, with expansion into the marketing and distribution of fuel oil and other refined fuels, as well as the marketing of natural gas and electricity. The total cost of the Agway Acquisition, including the purchase price of $205.0 million (net of a working capital adjustment paid to the Partnership of $1.0 million), $2.7 million for non-compete agreements with certain members of the management of Agway Energy and $3.5 million in transaction related costs, was approximately $211.2 million.

On November 21, 2003, Suburban Heating Oil Partners, LLC, a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the fuel oil and other refined fuels and HVAC assets and businesses of Agway Energy. In addition, Agway Energy Services, LLC, also a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the natural gas and electricity marketing business of Agway Energy.

Suburban Energy Finance Corporation, a direct wholly-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as co-issuer, jointly and severally with the Partnership, of the

Partnership's $175.0 million 6.875% senior notes due in 2013, a portion of which was used to finance the Agway Acquisition. Suburban Energy Finance Corporation has nominal assets and conducts no business operations.

In this Annual Report, unless otherwise indicated, the terms "Partnership," "we," "us," and "our" are used to refer to Suburban Propane Partners, L.P. or to Suburban Propane Partners, L.P. and its consolidated subsidiaries, including the Operating Partnership. The Partnership, the Operating Partnership and the Service Company commenced operations in March 1996 in connection with the Partnership's initial public offering of Common Units.

We currently file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K with the Securities and Exchange Commission ("SEC"). The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N. W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Any information filed by us is also available on the SEC's EDGAR database at www.sec.gov.

Upon written request or through a link from our website at www.suburbanpropane.com, we will provide, without charge, copies of our Annual Report on Form 10-K for the fiscal year ended September 25, 2004, each of the Quarterly Reports on Form 10-Q, current reports filed or furnished on Form 8-K and all amendments to such reports as soon as is reasonably practicable after such reports are electronically filed with or furnished to the SEC. Requests should be directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206.

Our Strategy

Our business strategy is to deliver increasing value to our unitholders through initiatives, both internal and external, that are geared toward achieving sustainable profitable growth and increased quarterly distributions. The following are key elements of our strategy:

Internal Focus on Growth, Customer Service and Improving Operating Efficiency. We focus internally on expanding our customer base, increasing customer retention through enhanced customer service and improving the efficiency of existing operations and our cost structure. Although we market and distribute products and services to meet the energy needs of our customers, we believe that customer satisfaction is a critical factor in the growth and success of our operations. "Our Business is Customer Satisfaction" is one of our core operating philosophies. We measure and reward our customer service centers based on a combination of profitability of the individual customer service center, net customer growth, customer satisfaction statistics and asset utilization measures. Through investments in our technology infrastructure, we also seek to improve operating efficiencies, particularly in the areas of routing, forecasting customer usage, inventory control and customer tracking.

Selective Acquisitions of Complementary Businesses or Assets. Externally, we seek to extend our presence or diversify our product offerings through selective acquisitions. Our acquisition strategy is to focus on businesses with a relatively steady cash flow that will either extend our presence in strategically attractive markets, complement our existing business segments or provide an opportunity to diversify our operations with other energy-related assets. While we are active in this area, we are also very patient and deliberate in evaluating acquisition candidates. During the first quarter of fiscal 2004, we completed the Agway Acquisition, which significantly enhanced our position in the northeast propane market, diversified our product offerings to include the marketing and distribution of fuel oil and other refined fuels, as well as the marketing of natural gas and electricity. In addition, the Agway Acquisition brought us many skilled and experienced service personnel for our HVAC segment.

Selective Dispositions of Non-Strategic Assets. We continuously evaluate our existing facilities to identify opportunities to optimize our return on assets by selectively divesting operations in slower growing markets, generating proceeds that can be reinvested in markets that present greater opportunities for growth. Our objective is to fully exploit the growth and profit potential of all of our assets. During fiscal 2004 we sold 24 customer service centers located principally in the central regions of the United States, generating net cash proceeds of $39.4 million.

A Disciplined Approach Toward Capital Spending. We make capital expenditures necessary to properly maintain or replace our existing asset base and to invest in the growth of our operations, including new propane tanks and other equipment to facilitate expansion of our customer base. In addition, we continue to invest in our technology infrastructure to improve operating efficiency and build a platform for growth.

Business Segments

As a result of the Agway Acquisition and since the beginning of the third quarter of fiscal 2004, our principal operations are managed and evaluated in four business segments: Propane, Fuel Oil and Other Refined Fuels, Natural Gas & Electricity and HVAC. These business segments are described below. See Note 18 to the Consolidated Financial Statements included in this Annual Report for financial information about our business segments.

Propane

Propane is a by-product of natural gas processing and petroleum refining. It is a clean burning energy source recognized for its transportability and ease of use relative to alternative forms of stand-alone energy sources. Propane use falls into three broad categories:


•	residential and commercial applications;


•	industrial applications; and


•	agricultural uses.

In the residential and commercial markets, propane is used primarily for space heating, water heating, clothes drying and cooking. Industrial customers use propane generally as a motor fuel to power over-the-road vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas and in other process applications. 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. It 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, propane becomes a flammable gas that is colorless and odorless, although an odorant is added to allow its detection. Propane is clean burning and, when consumed, produces only negligible amounts of pollutants.

Product Distribution and Marketing

We distribute propane through a nationwide retail distribution network consisting of approximately 370 customer service centers in 30 states as of September 25, 2004. Our operations are concentrated in the east and west coast regions of the United States. In fiscal 2004, we serviced more than 840,000 active propane customers. Typically, customer service centers are located in suburban and rural areas where natural gas is not readily available. Generally, these customer service centers consist of an office, appliance showroom, warehouse and service facilities, with one or more 18,000 to 30,000 gallon storage tanks on the premises. Most of our residential customers receive their propane supply through an automatic delivery system that eliminates the customer's need to make an affirmative purchase decision. From our customer service centers, we also sell, install and service equipment related to our propane distribution business, including heating and cooking appliances, hearth products and supplies and, at some locations, propane fuel systems for motor vehicles.

We sell propane primarily to six customer markets: residential, commercial, industrial (including engine fuel), agricultural, other retail users and wholesale. Approximately 89% of the propane gallons sold by us in fiscal 2004 were to retail customers: 42% to residential customers, 31% to commercial customers, 9% to industrial customers, 6% to agricultural customers and 12% to other retail users. The balance of approximately 11% of the propane gallons sold by us in fiscal 2004 was for risk management activities and wholesale customers. Sales to residential customers in fiscal 2004 accounted for approximately 54% of our margins on retail propane sales, reflecting the higher-margin nature of the residential market. No single customer accounted for 10% or more of our propane revenues during fiscal 2004.

Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks. Propane is pumped from the bobtail truck, which have capacities ranging from 2,125 gallons to 2,975 gallons of propane, into a stationary storage tank on the customer's premises. The capacity of these storage tanks ranges from approximately 100 gallons to approximately 1,200 gallons, with a typical tank having a capacity of 300 to 400 gallons. As is common in the propane industry, we own a significant portion of the storage tanks located on our customer's premises. We also deliver propane to retail customers in portable cylinders, which typically have a capacity of 5 to 35 gallons. When these cylinders are delivered to customers, empty cylinders are refilled in place or transported for replenishment at our distribution locations. We also deliver propane to certain other bulk end users of propane in larger trucks known as transports, which have an average capacity of approximately 9,000 gallons. End users receiving transport deliveries include industrial customers, large-scale heating accounts, such as local gas utilities that use propane as a supplemental fuel to meet peak load delivery requirements, and large agricultural accounts that use propane for crop drying.

In our wholesale operations, we principally sell propane to large industrial end users and other propane distributors. The wholesale market includes customers who use propane to fire furnaces, as a cutting gas and in other process applications. Due to the low margin nature of the wholesale market as compared to the retail market, we have selectively reduced our emphasis on wholesale marketing over the last few years.

Supply

Our propane supply is purchased from approximately 70 oil companies and natural gas processors at approximately 140 supply points located in the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual renewal, and also purchase propane on the spot market. 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 prevailing market prices. Some of these agreements provide maximum and minimum seasonal purchase guidelines. Propane is generally transported from refineries, pipeline terminals, storage facilities (including our storage facilities in Elk Grove, California and Tirzah, South Carolina) and coastal terminals to our customer service centers by a combination of common carriers, owner-operators and railroad tank cars. See Item 2 of this Annual Report.

Historically, supplies of propane have been readily available from our supply sources. Although we make no assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies during fiscal 2005. During fiscal 2004, Dynegy Liquids Marketing and Trade ("Dynegy") and Enterprise Products Operating L.P. ("Enterprise") provided approximately 17% and 12%, respectively, of our total domestic propane purchases. Aside from these two suppliers, no single supplier provided more than 10% of our total domestic propane supply during fiscal 2004. The availability of our propane supply is dependent on several factors, including the severity of winter weather and the price and availability of competing fuels, such as natural gas and fuel oil. We believe that if supplies from Dynegy or Enterprise were interrupted, we would be able to secure adequate propane supplies from other sources without a material disruption of our operations. Nevertheless, the cost of acquiring such propane might be higher and, at least on a short-term basis, margins could be affected. Approximately 98% of our total propane purchases were from domestic suppliers in fiscal 2004.

We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane during periods of short supply. We are currently a party to propane futures transactions on the New York Mercantile Exchange ("NYMEX") and to forward and option contracts with various third parties to purchase and sell product at fixed prices in the future. These activities are monitored by our senior management through enforcement of our Hedging and Risk Management Policy. See additional discussion in Item 7A of this Annual Report.

We own and operate large propane storage facilities in California and South Carolina. We also operate smaller storage facilities in other locations and have rights to use storage facilities in additional locations. These storage facilities enable us to buy and store large quantities of propane during periods of low demand and lower prices, which generally occur during the summer months. This practice helps

ensure a more secure supply of propane during periods of intense demand or price instability. As of September 25, 2004, the majority of the storage capacity in California and South Carolina was leased to third parties.

Competition

According to the Energy Information Administration, propane accounts for approximately 4% of household energy consumption in the United States. This level has not changed materially over the previous two decades. As an energy source, propane competes primarily with natural gas, electricity and fuel oil, principally on the basis of price, availability and portability.

Propane is more expensive than natural gas on an equivalent British Thermal Unit basis in locations serviced by natural gas, but it is 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 recent extension of natural gas pipelines to previously unserved geographic areas tends to displace propane distribution in those areas, we believe new opportunities for propane sales have been arising as new neighborhoods are developed in geographically remote areas.

We also have some relative advantages over suppliers of other energy sources. For example, propane is generally less expensive to use than electricity for space heating, water heating, clothes drying and cooking. Fuel oil has not been a significant competitor due to the current geographical diversity of our operations, and propane and fuel oil compete to a lesser extent because of the cost of converting from one to the other.

In addition to competing with suppliers of other energy sources, our propane operations compete with other retail propane distributors. The retail propane industry is highly fragmented and competition generally occurs on a local basis with other large full-service multi-state propane marketers, thousands of smaller local independent marketers and farm cooperatives. Based on industry statistics contained in 2002 Sales of Natural Gas Liquids and Liquified Refinery Gases, as published by the American Petroleum Institute in November 2003, and LP/Gas Magazine dated February 2004, the ten largest retailers, including us, account for approximately 33% of the total retail sales of propane in the United States, and no single marketer has a greater than 10% share of the total retail propane market in the United States. Most of our customer service centers compete with five or more marketers or distributors. However, each of our customer service centers operates in its own competitive environment because retail marketers tend to locate in close proximity to customers in order to lower the cost of providing service. Our typical customer service center has an effective marketing radius of approximately 50 miles, although in certain rural areas the marketing radius may be extended by a satellite office.

Fuel Oil and Other Refined Fuels

We market and distribute fuel oil, diesel fuel, kerosene and gasoline to approximately 190,000 residential and commercial customers in the northeast region. We commenced operations in this business segment as a result of the Agway Acquisition and, accordingly, results for fiscal 2004 are included from the date of the Agway Acquisition (December 23, 2003). Sales of fuel oil and other refined fuels for the period from December 23, 2003 through September 25, 2004 amounted to 220.5 million gallons. During fiscal 2004, sales of fuel oil to residential customers, principally for home heating, represented 43% of total refined fuel gallons sold. Fuel oil has a more limited use, as compared to propane, for space and water heating in residential and commercial buildings.

Approximately 75% of our fuel oil customers receive their fuel oil under an automatic delivery system without the customer having to make an affirmative purchase decision. These deliveries are scheduled through computer technology, based upon each customer's historical consumption patterns and prevailing weather conditions. During fiscal 2004, approximately 60% of our fuel oil sales were made to individual customers under agreements pre-establishing a fixed or maximum price per gallon over a twelve-month period. Additionally, as is common practice in the industry, we offer our customers a budget payment plan whereby the customer's estimated annual fuel oil purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period. The fixed or maximum price at which fuel oil is sold to these price plan customers is generally renegotiated based on current market conditions prior to the start of the heating season. We enter into derivative instruments in the form of futures and options traded on the NYMEX covering a substantial majority of the fuel oil we expect to sell to customers under these price protection plans in an effort to protect the margins under these programs. No single customer accounted for 10% or more of our fuel oil revenues during fiscal 2004.

Deliveries of fuel oil are usually made to customers by means of tank wagon trucks, which have capacities ranging from 2,500 gallons to 3,000 gallons of fuel oil. Fuel oil is pumped from the tank wagon truck into a stationary storage tank that is located on the customer's premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to approximately 1,000 gallons.

Supply

We obtain fuel oil and other refined fuels in either pipeline, truckload or tank wagon quantities, and have contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at more than 14 terminal facilities we do not own. We have arrangements with certain suppliers of fuel oil, which provide open access to fuel oil at specific terminals throughout the northeast. Additionally, a portion of our purchases of fuel oil are made at local wholesale terminal racks. In most cases, the supply contracts do not establish the price of fuel oil in advance; rather, prices are typically established based upon market prices at the time of delivery plus or minus a differential to market for transportation and volume discounts. We purchase fuel oil from nearly 45 suppliers at more than 108 supply points. While fuel oil supply is more susceptible to longer periods of constraint than propane, we believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the availability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2005.

Competition

The fuel oil industry is a mature industry with total demand expected to remain relatively flat to moderately declining. The fuel oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local distributors. We compete with other fuel oil distributors offering a broad range of services and prices, from full service distributors to those that solely offer the delivery service. We have developed a wide range of sales programs and service offerings for our fuel oil customer base in an attempt to be viewed as a full service energy provider and to build customer loyalty. For instance, like most companies in the fuel oil business, we provide home heating equipment repair service through our HVAC segment on a 24-hour a day basis. The fuel oil business unit also competes for retail customers with suppliers of alternative energy sources, principally natural gas, propane and electricity.

Natural Gas & Electricity

We market natural gas and electricity through our wholly owned subsidiary Agway Energy Services LLC ("AES") in the deregulated markets of New York and Pennsylvania primarily to residential and small commercial customers. Historically, local utility companies provided their customers with all three aspects of electric and natural gas service: generation, transmission and distribution. However, under deregulation, public utility commissions in several states are licensing energy service companies, such as AES, to act as alternative suppliers of the commodity to end consumers. In essence, we make arrangements for the supply of electricity or natural gas to specific delivery points. The local utility companies continue to distribute electricity and natural gas on their distribution systems. The business strategy of this business segment is to expand its market share by concentrating on growth in the customer base and expansion into other deregulated markets that are considered strategic markets.

As of September 25, 2004, we were serving over 77,000 natural gas and electricity customers in New York and Pennsylvania. Approximately 88% of our customers were residential households and the remainder were small commercial and industrial customers. New accounts are obtained through numerous marketing and advertising programs, including telemarketing and direct mail initiatives. Most local utility companies have established billing service arrangements whereby customers receive a single bill from the local utility company which includes transmission charges from the local utility company, as well as product charges for the amount of natural gas or electricity provided by AES and utilized by the customer. We have arrangements with several local utility companies that provide billing and collection services for a fee. Under these arrangements, we are paid by the local utility company for all or a portion of customer billings after a specified number of days following the customer billing.

Supply of natural gas is arranged through annual supply agreements with major national wholesale suppliers. Pricing under the annual natural gas supply contracts is based on posted market prices at the time of delivery, and some contracts include a pricing formula that typically is based on prevailing market prices. The majority of our electricity requirements are purchased through the New York Independent System Operator ("NYISO") under an annual supply agreement, as well as purchase arrangements through other national wholesale suppliers on the open market. Electricity pricing under the NYISO agreement is based on local market indices at the time of delivery. Competition is primarily with local utility companies, as well as other marketers of natural gas and electricity providing similar alternatives as AES.

HVAC

We sell, install and service all types of whole-house heating and cooling products, air cleaners, humidifiers, de-humidifiers, hearth products and space heaters. We also offer services such as duct cleaning, air balancing and energy audits. As of September 25, 2004, we employed approximately 1,000 service technicians in our HVAC business segment. Our supply needs are filled through supply arrangements with several large regional equipment manufacturers and distribution companies. Competition in this business segment is primarily with small, local HVAC providers and contractors, as well as, to a lesser extent, other regional service providers such as us.

Seasonality

The retail propane and fuel oil distribution businesses are seasonal because of propane and fuel oil's primary use for heating in residential and commercial buildings. Historically, approximately two-thirds of our retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and we expect that approximately three-fourths of our fuel oil volumes will be sold between October and March. Consequently, sales and operating profits are concentrated in our first and second fiscal quarters. Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for products purchased during the winter heating season. We expect lower operating profits and either net losses or lower net income during the period from April through September (our third and fourth fiscal quarters).

Weather conditions have a significant impact on the demand for propane and fuel oil for both heating and agricultural purposes. Many of our customers rely heavily on propane or fuel oil as a heating source.

Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year.

Trademarks and Tradenames

We utilize a variety of trademarks and tradenames owned by us, including "Suburban Propane," "Gas Connection," "HomeTown Hearth & Grill," "Suburban @ Home" and "Suburban Energy Services." Additionally, in connection with the Agway Acquisition, we acquired rights to certain trademarks and tradenames, including "Agway Propane," "Agway" and "Agway Energy Products" in connection with the distribution of petroleum-based fuel and sales and service of HVAC equipment. 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 and services.

Government Regulation; Environmental and Safety Matters

We are subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge of pollutants and establish standards for the handling of solid and hazardous wastes and can require the investigation and cleanup of environmental contamination. These laws 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 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. Propane is not a hazardous substance within the meaning of CERCLA. However, we own real property at locations where such hazardous substances may be present as a result of prior activities.

We expect that we will be required to expend funds to participate in the remediation of certain sites, including sites where we have been designated by the Environmental Protection Agency ("EPA") as a potentially responsible party ("PRP") under CERCLA and at sites with above ground and underground fuel storage tanks. We will also incur other expenses associated with environmental compliance. We continually monitor our operations with respect to potential environmental issues, including changes in legal requirements and remediation technologies.

With the Agway Acquisition, we acquired certain properties and assets, including fuel oil tanks and gasoline stations, that are subject to extensive federal, state and local environmental laws and regulations, including investigation and remediation of contaminated soil and groundwater, transportation of hazardous materials, other environmental protection measures and health and safety matters. Based on a review of certain Phase I Environmental Site Assessments and, at certain sites, groundwater and/or soil sample analysis, we identified that certain of these properties had either known or probable environmental exposure, some of which are currently in varying stages of investigation, remediation or monitoring. Under the agreement for the Agway Acquisition, the seller deposited $15.0 million of the total purchase price into an escrow account to be used to fund our remediation costs at the acquired properties pursuant to claims made during the first three years following the closing date. Subject to amounts withheld with respect to any pending claims made prior to the third anniversary of the closing date of the Agway Acquisition, any remaining escrowed funds will be remitted to the seller at the end of the three-year period.

Based on our current best estimate of future costs for environmental investigations, remediation and ongoing monitoring activities associated with properties acquired in the Agway Acquisition with either known or probable environmental exposures, an environmental reserve in the amount of $13.8 million was established in purchase accounting. We established a corresponding environmental escrow asset in the amount of $13.8 million related to the future reimbursement from escrowed funds for environmental spending. We are unable to predict, however, whether this amount will be sufficient to address the known and any currently unknown contamination at the acquired properties. As of September 25, 2004, the environmental reserve and corresponding environmental escrow asset amounted to approximately $11.5 million. The environmental reserves are recorded on an undiscounted basis.

Estimating the extent of our responsibility at a particular site, and the method and ultimate cost of remediation of that site, requires making numerous assumptions. As a result, the ultimate cost to remediate any site may differ from current estimates. However, we believe that our past experience provides a reasonable basis for estimating these liabilities. As additional information becomes available, estimates are adjusted as necessary. While we do not anticipate that any such adjustment would be material to our financial statements, the result of ongoing or future environmental studies or other factors could alter this expectation and require recording additional liabilities. We currently cannot determine whether we will incur additional liabilities or the extent or amount of any such liabilities.

National Fire Protection Association Pamphlet Nos. 54 and 58, which establish rules and procedures governing the safe handling of propane, or comparable regulations, have been adopted, in whole, in part or with state addenda, as the industry standard for propane storage, distribution and equipment installation and operation 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. Pamphlet No. 58 has adopted storage tank valve retrofit requirements due to be completed by June 2011. We have a program in place to meet this deadline.

National Fire Protection Association Pamphlet Nos. 30, 30A, 31, 385 and 395, which establish rules and procedures governing the safe handling of distillates (fuel oil, kerosene and diesel fuel) and gasoline, or comparable regulations, have been adopted, in whole, in part or with state addenda, as the industry standard for fuel oil, kerosene, diesel fuel and gasoline storage, distribution and equipment installation/operation 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.

With respect to the transportation of propane, distillates and gasoline 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 or similar state agencies. We conduct ongoing training programs to help ensure that our operations are in compliance with applicable safety regulations. We maintain various permits that are necessary to operate some of our facilities, some of which may be material to our operations. We believe that the procedures currently in effect at all of our facilities for the handling, storage and distribution of propane, distillates and gasoline are consistent with industry standards and are in compliance, in all material respects, with applicable laws and regulations.

The Department of Transportation has established regulations addressing emergency discharge control issues for propane tank trucks. We have implemented the required discharge control systems and comply, in all material respects, with current regulatory requirements.

Future developments, such as stricter environmental, health or safety laws and regulations thereunder, could affect our operations. We do not anticipate that the cost of our compliance with environmental, health and safety laws and regulations, including CERCLA, as currently in effect and applicable to known sites will have a material adverse effect on our financial condition or results of operations. To the extent we discover any environmental liabilities presently unknown to us or environmental, health or safety laws or regulations are made more stringent, however, there can be no assurance that our financial condition or results of operations will not be materially and adversely affected.

Employees

As of September 25, 2004, we had approximately 4,271 full time employees, of whom 415 were engaged in general and administrative activities (including fleet maintenance), 25 were engaged in transportation and product supply activities and 3,831 were customer service center employees. As of September 25, 2004, 151 of our employees were represented by 11 different local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. From time to time, we hire temporary workers to meet peak seasonal demands.

ITEM 2. PROPERTIES

As of September 25, 2004, we owned approximately 71% of our customer service center and satellite locations and leased the balance of our retail locations from third parties. We own and operate a 22 million gallon refrigerated, above-ground propane storage facility in Elk Grove, California and a 60 million gallon underground propane storage cavern in Tirzah, South Carolina. Additionally, we own our principal executive offices located in Whippany, New Jersey.

The transportation of propane requires specialized equipment. The trucks and railroad tank cars utilized for this purpose carry specialized steel tanks that maintain the propane in a liquefied state. As of September 25, 2004, we had a fleet of 42 transport truck tractors, of which we owned 20, and 251 railroad tank cars, of which we owned two. In addition, as of September 25, 2004 we had 1,283 bobtail and rack trucks, of which we owned approximately 24%, 269 fuel oil tank wagons, of which we owned approximately 61%, and 2,164 other delivery and service vehicles, of which we owned approximately 32%. We lease the vehicles we do not own. As of September 25, 2004, we also owned approximately 860,098 customer propane storage tanks with typical capacities of 100 to 500 gallons, 184,015 customer propane storage tanks with typical capacities of over 500 gallons and 217,487 portable propane cylinders with typical capacities of five to ten gallons.

ITEM 3. LEGAL PROCEEDINGS

Litigation

Our operations are subject to all operating hazards and risks normally incidental to handling, storing and delivering combustible liquids such as propane. As a result, we have been, and will continue to be, a defendant in various legal proceedings and litigation arising in the ordinary course of business. We are self-insured for general and product, workers' compensation and automobile liabilities up to predetermined amounts above which third party insurance applies. We believe that the self-insured retentions and coverage we maintain are reasonable and prudent. Although any litigation is inherently uncertain, based on past experience, the information currently available to us, and the amount of our self-insurance reserves for known and unasserted self-insurance claims (which was approximately $38.2 million at September 25, 2004), we do not believe that these pending or threatened litigation matters, or known claims or known contingent claims, will have a material adverse effect on our results of operations, financial condition or cash flow. For the portion of our estimated self-insurance liability that exceeds our deductibles, we record a corresponding asset related to the amount of the liability to be covered by insurance (which was approximately $2.9 million at September 25, 2004).

On October 21, 2004 the jury in the trial of Heritage Propane Partners, L.P. v. SCANA et al. (South Carolina Court of Common Pleas, Fifth Judicial Circuit) returned a unanimous verdict in our favor on all claims pending against us by Heritage Propane Partners, L.P. ("Heritage"). Heritage had sued SCANA Corporation ("SCANA") and our Operating Partnership in South Carolina state court following our Operating Partnership's 1999 acquisition of SCANA's propane assets.

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

None.

PART II


ITEM 5.	MARKET FOR THE REGISTRANT'S UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF UNITS

Our Common Units, representing limited partner interests in the Partnership, are listed and traded on the New York Stock Exchange ("NYSE") under the symbol SPH. As of November 26, 2004, there were 985 Common Unitholders of record. The following table presents, for the periods indicated, the high and low sales prices per Common Unit, as reported on the NYSE, and the amount of quarterly cash distributions declared and paid per Common Unit with respect to each quarter.


	Common Unit Price Range
	Common Unit Price Range				Cash Distribution Paid per Common Unit
	High		Low		Cash Distribution Paid per Common Unit
Fiscal 2003
First Quarter	$	28.49	$	24.60	$	0.5750
Second Quarter		29.60		26.90		0.5750
Third Quarter		29.89		27.40		0.5875
Fourth Quarter		30.95		27.91		0.5875

Fiscal 2004
First Quarter	$	32.49	$	28.75	$	0.5875
Second Quarter		34.50		31.05		0.6000
Third Quarter		33.97		27.60		0.6125
Fourth Quarter		35.50		32.00		0.6125

We make quarterly distributions to our partners in an aggregate amount equal to our Available Cash (as defined in our Second Amended and Restated Partnership Agreement) with respect to such quarter. Available Cash generally means all cash on hand at the end of the fiscal quarter plus all additional cash on hand as a result of borrowings subsequent to the end of such quarter less cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements.

We are a publicly traded limited partnership and, other than certain corporate subsidiaries, we are not subject to federal income tax. Instead, Unitholders are required to report their allocable share of our earnings or loss, regardless of whether we make distributions.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents our selected consolidated historical financial data. The selected consolidated historical financial data is derived from our audited consolidated financial statements, certain of which are included elsewhere in this Annual Report. All amounts in the table below, except per unit data, are in thousands.


	Year Ended (a)
	September 25, 2004 (b)			September 27, 2003			September 28, 2002			September 29, 2001			September 30, 2000 (c)
Statement of Operations Data
Revenues	$	1,307,254		$	735,075		$	635,122		$	890,349		$	812,233
Costs and expenses		1,231,356			655,225			552,341			796,507			738,155
Restructuring costs (d)		2,942			—			—			—			—
Impairment of goodwill (e)		3,177			—			—			—			—
Gain on sale of assets		—			—			—			—			(10,328	)
Gain on sale of storage facility		—			—			(6,768	)		—			—
Income before interest expense and provision for income taxes (f)		69,779			79,850			89,549			93,842			84,406
Interest expense, net		40,832			33,629			35,325			39,596			42,534
Provision for income taxes		3			202			703			375			234
Income from continuing operations (f)		28,944			46,019			53,521			53,871			41,638
Discontinued operations:
Gain on sale of customer service centers (g)		26,332			2,483			—			—			—
(Loss) income from discontinued customer service centers		(972	)		167			3			(361	)		(3,106	)
Net income (f)		54,304			48,669			53,524			53,510			38,532
Income from continuing operations per Common Unit – basic		0.96			1.77			2.12			2.15			1.83
Net income per Common Unit – basic (h)		1.79			1.87			2.12			2.14			1.70
Net income per Common Unit – diluted (h)		1.78			1.86			2.12			2.14			1.70
Cash distributions declared per unit	$	2.41		$	2.33		$	2.28		$	2.20		$	2.11

Balance Sheet Data (end of period)
Cash and cash equivalents	$	53,481		$	15,765		$	40,955		$	36,494		$	11,645
Current assets		252,894			98,912			116,789			124,339			122,160
Total assets		992,007			670,559			700,146			723,006			771,116
Current liabilities, excluding current portion of long-term borrowings		202,024			94,802			98,606			119,196			124,585
Total debt		515,915			383,826			472,769			473,177			524,095
Other long-term liabilities		105,950			107,853			109,485			71,684			60,607
Partners' capital – Common Unitholders		238,880			165,950			103,680			105,549			58,474
Partner's capital – General Partner	$	852		$	1,567		$	1,924		$	1,888		$	1,866

Statement of Cash Flows Data
Cash provided by (used in)
Operating activities	$	93,065		$	57,300		$	68,775		$	101,838		$	59,467
Investing activities		(196,557	)		(4,859	)		(6,851	)		(17,907	)		(99,067	)
Financing activities	$	141,208		$	(77,631	)	$	(57,463	)	$	(59,082	)	$	42,853

Other Data
Depreciation and amortization (i)	$	36,743		$	27,520		$	28,355		$	36,496		$	37,032
EBITDA (j)		131,882			110,020			117,907			129,977			118,332
Capital expenditures – maintenance and growth (k)		26,527			14,050			17,464			23,218			21,250
Acquisitions	$	211,181		$	—		$	—		$	—		$	98,012
Retail gallons sold
Propane		537,330			491,451			455,988			524,728			523,975
Fuel oil and refined fuels		220,469			—			—			—			—


(a)	Our 2000 fiscal year contained 53 weeks. All other fiscal years contained 52 weeks.


(b)	Includes the results from our acquisition of substantially all of the assets and operations of Agway Energy from December 23, 2003, the date of acquisition.


(c)	Includes the results from our acquisition of certain subsidiaries of SCANA Corporation from November 8, 1999, the date of acquisition.


(d)	During fiscal 2004, we incurred $2.9 million in restructuring charges to integrate our assets, employees and operations with Agway Energy assets, employees and operations.


(e)	During fiscal 2004, we recorded a non-cash charge of $3.2 million related to impairment of goodwill for one of our reporting units acquired in fiscal 1999.


(f)	These amounts include, in addition to the gain on sale of assets and the gain on sale of storage facility, gains from the disposal of property, plant and equipment of $0.7 million for fiscal 2004, $0.6 million for fiscal 2003, $0.5 million for fiscal 2002, $3.8 million for fiscal 2001 and $1.0 million for fiscal 2000.

(g)

Gain on sale of customer service centers for fiscal 2004 of $26.3 million reflects the sale of 24 customer service centers for net cash proceeds of approximately $39.4 million. Gain on sale of customer service centers for fiscal 2003 of $2.5 million reflects the sale of nine customer service centers for net cash proceeds of approximately $7.2 million. The gains on sale have been accounted for within discontinued operations pursuant to Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Prior period results of operations attributable to the customer service centers sold in fiscal 2004 have been reclassified to remove financial results from continuing operations. Prior period results of operations attributable to the customer service centers sold in fiscal 2003 were not significant and, as such, results prior to fiscal 2003 were not reclassified to remove financial results from continuing operations.

(h)

(i)

Depreciation and amortization expense for fiscal 2002 and subsequent fiscal years reflects our adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") as of September 30, 2001 (the beginning of our 2002 fiscal year). SFAS 142 eliminated the requirement to amortize goodwill and certain intangible assets. Amortization expense for fiscal 2002 reflects approximately $7.4 million lower amortization expense compared to fiscal 2001 as a result of the elimination of amortization expense associated with goodwill.

(j)

EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our senior note agreements and our revolving credit agreement require us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies. The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities (amounts in thousands):


	Fiscal 2004			Fiscal 2003			Fiscal 2002			Fiscal 2001			Fiscal 2000
Net income	$	54,304		$	48,669		$	53,524		$	53,510		$	38,532
Add:
Provision for income taxes		3			202			703			375			234
Interest expense, net		40,832			33,629			35,325			39,596			42,534
Depreciation and amortization		36,743			27,520			28,355			36,496			37,032
EBITDA		131,882			110,020			117,907			129,977			118,332
Add (subtract):
Provision for income taxes		(3	)		(202	)		(703	)		(375	)		(234	)
Interest expense, net		(40,832	)		(33,629	)		(35,325	)		(39,596	)		(42,534	)
Gain on disposal of property, plant and equipment, net		(715	)		(636	)		(546	)		(3,843	)		(11,313	)
Gain on sale of customer service centers		(26,332	)		(2,483	)		—			—			—
Gain on sale of storage facility		—			—			(6,768	)		—			—
Changes in working capital and other assets and liabilities		29,065			(15,770	)		(5,790	)		15,675			(4,784	)
Net cash provided by (used in)
Operating activities	$	93,065		$	57,300		$	68,775		$	101,838		$	59,467
Investing activities	$	(196,557	)	$	(4,859	)	$	(6,851	)	$	(17,907	)	$	(99,067	)
Financing activities	$	141,208		$	(77,631	)	$	(57,463	)	$	(59,082	)	$	42,853


(k)	Our capital expenditures fall generally into two categories: (i) maintenance expenditures, which include expenditures for repair and replacement of property, plant and equipment; and (ii) growth capital expenditures which include new propane tanks and other equipment to facilitate expansion of our customer base and operating capacity.


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

The following is a discussion of our financial condition and results of operations, which should be read in conjunction with our historical consolidated financial statements and notes thereto included elsewhere in this Annual Report.

Disclosure Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains Forward-Looking Statements as defined in the Private Securities Litigation Reform Act of 1995 relating to our future business expectations and predictions and financial condition and results of operations. Some of these statements can be identified by the use of forward-looking terminology such as "prospects," "outlook," "believes," "estimates," "intends," "may," "will," "should," "anticipates," "expects" or "plans" or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategies or risks and uncertainties. These Forward-Looking Statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such Cautionary Statements. The risks and uncertainties and their impact on our operations include, but are not limited to, the following risks:


•	The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;


•	Fluctuations in the unit cost of propane, fuel oil and other refined fuels and natural gas;


•	Our ability to compete with other suppliers of propane, fuel oil and other energy sources;


•	The impact on propane, fuel oil and other refined fuel prices and supply from the political, military and economic instability of the oil producing nations, global terrorism and other general economic conditions;


•	Our ability to realize fully, or within the expected time frame, the expected cost savings and synergies from the acquisition of Agway Energy;


•	Our ability to acquire and maintain reliable transportation for our propane, fuel oil and other refined fuels;


•	Our ability to retain customers;


•	The impact of energy efficiency and technology advances on the demand for propane and fuel oil;


•	The ability of management to continue to control expenses;


•	The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the environment and global warming and other regulatory developments on our business;


•	The impact of legal proceedings on our business;


•	Our ability to implement our expansion strategy into new business lines and sectors; and


•	Our ability to integrate acquired businesses successfully.

On different occasions, we or our representatives have made or may make Forward-Looking Statements in other filings that we make with the SEC, in press releases or in oral statements made by or with the approval of one of our authorized executive officers. Readers are cautioned not to place undue reliance on Forward-Looking or Cautionary Statements, which reflect management's opinions only as of the date made. We undertake no obligation to update any Forward-Looking or Cautionary Statement. All subsequent written and oral Forward-Looking Statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements in this Annual Report and in future SEC reports.

The following are factors that regularly affect our operating results and financial condition:

Product Costs

The level of profitability in the retail propane and fuel oil businesses is largely dependent on the difference between retail sales price and product cost. The unit cost of propane and fuel oil is subject to volatile changes as a result of product supply or other market conditions, including, but not limited to, economic and political factors impacting crude oil and natural gas supply or pricing. Propane and fuel oil unit cost changes can occur rapidly over a short period of time and can impact profitability. There is no assurance that we will be able to pass on product cost increases fully or immediately, particularly when product costs increase rapidly. Therefore, average retail sales prices can vary significantly from year to year as product costs fluctuate with propane, fuel oil, crude oil and natural gas commodity market conditions.

Seasonality

The retail propane and fuel oil distribution businesses, as well as the natural gas marketing business, are seasonal because of propane and fuel oil's primary use for heating in residential and commercial buildings. Historically, approximately two-thirds of our retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business (which we recently acquired through the Agway Acquisition) tends to experience greater seasonality given its more limited use for space heating and we expect that approximately three-fourths of our fuel oil volumes will be sold between October and March. Consequently, sales and operating profits are concentrated in our first and second fiscal quarters. Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for propane purchased during the winter heating season. We expect lower operating profits and either net losses or lower net income during the period from April through September (our third and fourth fiscal quarters). To the extent necessary, we will reserve cash from the second and third quarters for distribution to Unitholders in the first and fourth fiscal quarters.

Weather

Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for both heating and agricultural purposes. Many of our customers rely heavily on propane or fuel oil as a heating source. Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year. In any given area, sustained warmer than normal temperatures will tend to result in reduced propane and fuel oil use, while sustained colder than normal temperatures will tend to result in greater use.

Risk Management

Propane product supply contracts are generally one-year agreements subject to annual renewal and generally permit suppliers to charge posted market prices (plus transportation costs) at the time of delivery or the current prices established at major delivery points. Since rapid increases in the cost of propane or fuel oil may not be immediately passed on to retail customers, such increases could reduce profitability. During fiscal 2004, approximately 60% of our fuel oil volumes were made to individual customers under agreements pre-establishing a fixed or maximum price per gallon over a twelve-month period. The fixed or maximum price at which fuel oil is sold to these price plan customers is generally renegotiated based on current market conditions prior to the start of the heating season.

We engage in risk management activities to reduce the effect of price volatility on our product costs and to help ensure the availability of product during periods of short supply. We are currently a party to propane futures contracts traded on the NYMEX and enter into forward and option agreements with third parties to purchase and sell propane at fixed prices in the future. Additionally, we enter into derivative instruments in the form of futures and options traded on the NYMEX covering a substantial majority of the fuel oil we expect to sell to customers under fixed or maximum price protection plans in an effort to protect margins under these programs. Risk management activities are monitored by an

internal Commodity Risk Management Committee, made up of five members of management, through enforcement of our Hedging and Risk Management Policy and reported to our Audit Committee. Risk management transactions may not always result in increased product margins. See additional discussion in Item 7A of this Annual Report.

Critical Accounting Policies and Estimates

Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring management to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We are also subject to risks and uncertainties that may cause actual results to differ from estimated results. Estimates are used when accounting for depreciation and amortization of long-lived assets, employee benefit plans, self-insurance and legal reserves, environmental reserves, allowances for doubtful accounts, asset valuation assessments and valuation of derivative instruments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known to us.

Our significant accounting policies are summarized in Note 2, "Summary of Significant Accounting Policies," included within the Notes to Consolidated Financial Statements section elsewhere in this Annual Report. We believe that the following are our critical accounting policies:

Revenue Recognition. We recognize revenue from the sale of propane, fuel oil and other refined fuels at the time product is delivered to the customer. Revenue from the sale of appliances and equipment is recognized at the time of sale or when installation is complete, as applicable. Revenue from repairs, maintenance and other service activities is recognized upon completion of the service. Revenue from HVAC service contracts is recognized ratably over the service period. Revenue from our natural gas and electricity business is recognized based on customer usage as determined by meter readings.

Allowances for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We estimate our allowances for doubtful accounts using a specific reserve for known or anticipated uncollectible accounts, as well as an estimated reserve for potential future uncollectible accounts taking into consideration our historical write-offs. If the financial condition of one or more of our customers were to deteriorate resulting in an impairment in their ability to make payments, additional allowances could be required.

Pension and Other Postretirement Benefits. We estimate the rate of return on plan assets, the discount rate to estimate the present value of future benefit obligations and the cost of future health care benefits in determining our annual pension and other postretirement benefit costs. In accordance with generally accepted accounting principles, actual results that differ from our assumptions are accumulated and amortized over future periods and therefore, generally affect our recognized expense and recorded obligation in such future periods. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in market conditions may materially affect our pension and other postretirement obligations and our future expense. See "Pension Plan Assets and Obligations" below for additional disclosure regarding pension benefits.

Self-Insurance Reserves. Our accrued insurance reserves represent the estimated costs of known and anticipated or unasserted claims under our general and product, workers' compensation and automobile insurance policies. Accrued insurance provisions for unasserted claims arising from unreported incidents are based on an analysis of historical claims data. For each claim, we record a self-insurance provision up to the estimated amount of the probable claim utilizing actuarially determined loss development factors applied to actual claims data. We maintain insurance coverage wherein our net exposure for insured

claims is limited to the insurance deductible, claims above which are paid by our insurance carriers. For the portion of our estimated self-insurance liability that exceeds our deductibles, we record an asset related to the amount of the liability to be covered by insurance.

Environmental Reserves. We establish reserves for environmental exposures when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based upon our best estimate of costs associated with environmental remediation and ongoing monitoring activities. Accrued environmental reserves are exclusive of claims against third parties, and an asset is established where contribution or reimbursement from such third parties has been agreed and we are reasonably assured of receiving such contribution or reimbursement. Environmental reserves are not discounted.

Goodwill Impairment Assessment. We assess the carrying value of goodwill at a reporting unit level, at least annually, based on an estimate of the fair value of the respective reporting unit. Fair value of the reporting unit is estimated using discounted cash flow analyses taking into consideration estimated cash flows in a ten-year projection period and a terminal value calculation at the end of the projection period.

Derivative Instruments and Hedging Activities. See Item 7A of this Annual Report for information about accounting for derivative instruments and hedging activities.

Executive Summary of Results of Operations and Financial Condition

Fiscal 2004 marked the beginning of our transformation from a marketer of a single fuel into one that provides multiple energy solutions to over a million customers nationwide. Highlighted by the Agway Acquisition at the end of the first fiscal quarter, we reported record operating results for fiscal 2004. The Agway Acquisition, which closed on December 23, 2003, expanded our propane operations and diversified our product and service offerings in the northeast energy market with the addition of fuel oil and other refined products distribution, natural gas and electricity marketing, as well as expansion of our HVAC sales and service activities. The total cost of the Agway Acquisition was approximately $211.2 million, consisting of the $205.0 million purchase price (net of a $1.0 million favorable purchase price adjustment for working capital), plus $2.7 million related to non-compete agreements with certain members of management of Agway Energy and $3.5 million in fees and expenses associated with the Agway Acquisition. We financed the Agway Acquisition through a combination of $87.6 million in net proceeds from the issuance of 2,990,000 Common Units and a portion of the net proceeds from the issuance of $175.0 million in 6.875% senior notes, both during December 2003.

Beginning in the second quarter of fiscal 2004, we took steps to restructure and otherwise integrate the back office functions and certain field management functions of Agway Energy. In addition, in March 2004 we turned our attention to integrating field operations, migrating the systems environment and capitalizing on anticipated synergies in our combined field operations. We identified opportunities to combine operating facilities in over 35 markets in the northeast and by the end of fiscal 2004 had completed a significant portion of the activities to co-locate our employees into one facility, communicate changes to our customer base and merge storage locations. As a result, our operating results for fiscal 2004 reflect restructuring and asset impairment charges, as well as anticipated incremental operating expenses associated with these integration activities and, therefore, our fiscal 2004 operating results do not reflect the full impact of the anticipated benefits from the Agway Acquisition.

The Agway Energy operations were consolidated from the date of the Agway Acquisition (December 23, 2003) and, therefore, did not have a significant impact on our operating results for the first quarter of fiscal 2004 (the first three months of the peak heating season). For fiscal 2004, we reported net income of $54.3 million, or $1.79 per Common Unit, an increase of $5.6 million (11.5%) compared to net income of $48.7 million, or $1.87 per Common Unit, in fiscal 2003. We reported a record level of earnings before interest, taxes, depreciation and amortization ("EBITDA") of $131.9 million for fiscal 2004, an increase of $21.9 million, or 19.9%, compared to $110.0 million in fiscal 2003.

EBITDA and net income for fiscal 2004 were favorably impacted by the net result of certain significant items, mainly relating to: (i) a $26.3 million gain from the sale of 24 customer service centers, considered to be non-strategic, located primarily in the northern and southern central regions of the United States, compared to a $2.5 million gain from the sale of nine customer service centers during fiscal

2003; (ii) a non-cash charge of $6.3 million included within cost of products sold relating to the settlement of futures contracts which were marked-to-market under purchase accounting for the Agway Acquisition; (iii) a non-cash pension charge of $5.3 million related to accelerated recognition of actuarial losses as a result of the level of lump sum benefit payments in fiscal 2004 compared to prior years; (iv) a non-cash charge of $3.2 million attributable to the impairment of goodwill related to a small business acquired in 1999; (v) a $2.9 million restructuring charge related to our efforts to integrate certain management and back office functions of Agway Energy; and, (vi) a non-cash charge of $1.0 million included within depreciation expense attributable to the write-down of assets to be disposed of as a result of the blending of field operations in the northeast. These significant items had a net positive impact of $6.1 million and $5.1 million on the year-over-year comparison of EBITDA and net income, respectively, for fiscal 2004.

Despite warmer than normal nationwide average temperatures during fiscal 2004, retail propane gallons sold increased 45.8 million gallons, or 9.3%, to 537.3 million gallons, compared to 491.5 million gallons in the prior year, as a result of the addition of the Agway Energy operations. Nationwide average temperatures, as reported by the National Oceanic and Atmospheric Administration ("NOAA"), averaged 7% warmer than normal in fiscal 2004, compared to 1% colder than normal in fiscal 2003, or 8% warmer temperatures year-over-year. Sales of fuel oil and other refined fuels from the Agway Energy operations amounted to 220.5 million gallons during fiscal 2004.

With the increased earnings, primarily associated with the addition of the Agway Energy operations, cash flow provided by operating activities for fiscal 2004 increased $35.8 million (62.5%) to $93.1 million, compared to $57.3 million in the prior year. In addition, during the fourth quarter of fiscal 2004, we took further steps to continue to strengthen our financial position. On July 1, 2004, we elected to repay the third annual principal payment of $42.5 million due under our 7.54% senior notes using cash on hand. We also made a voluntary contribution of $15.1 million to improve the funded status of our defined benefit pension plan. This is the second such voluntary contribution in the past two years, as we made a $10.0 million voluntary contribution during the fourth quarter of fiscal 2003. With our strong operating cash flow and despite our use of cash for debt reduction and the voluntary contribution to our pension plan, we ended fiscal 2004 with approximately $53.5 million in cash and cash equivalents and had no amounts outstanding under our Revolving Credit Agreement.

As we look ahead to fiscal 2005, our operating results will reflect a full year of operations from Agway Energy, and we expect to benefit from additional operational efficiencies expected as a result of our integration efforts. However, we expect that our operating results and capital expenditures for fiscal 2005 will continue to reflect increased spending for facility and systems integration efforts to assimilate the combined operations. Our anticipated cash requirements for fiscal 2005 include: (i) maintenance and growth capital expenditures of approximately $34.0 million; (ii) approximately $41.0 million of interest payments; (iii) a principal payment of $42.5 million due on June 30, 2005 under our 1996 Senior Note Agreement; and, (iv) assuming distributions remain at the current level, approximately $76.6 million of distributions to Common Unitholders and the General Partner. The projected level of capital expenditures for fiscal 2005 is approximately $10.0 million higher than our expected annual level of capital spending in subsequent years, primarily as a result of anticipated spending on facility and systems integration. Based on our current estimate of our cash position, availability under the Revolving Credit Agreement (unused borrowing capacity under the working capital facility of $75.0 million at November 29, 2004) and expected cash flow from operating activities, we expect to have sufficient funds to meet our current and future obligations.

Results of Operations

Fiscal Year 2004 Compared to Fiscal Year 2003

Revenues


(Dollars in thousands)
	Fiscal 2004		Fiscal 2003		Increase		Percent Increase
Revenues
Propane	$	856,109	$	680,840	$	175,269		25.7	%
Fuel oil and refined fuels		281,682		—		281,682		100	%
Natural gas and electricity		68,452		—		68,452		100	%
HVAC		92,072		46,938		45,134		96.2	%
All other		8,939		7,297		1,642		22.5	%
Total revenues	$	1,307,254	$	735,075	$	572,179		77.8	%

Total revenues increased $572.2 million, or 77.8%, to $1,307.3 million for the fiscal year ended September 25, 2004 compared to $735.1 million for the fiscal year ended September 27, 2003 driven primarily by the Agway Acquisition. Revenues in our propane segment of $856.1 million for the fiscal year ended September 25, 2004 increased $175.3 million, or 25.7%, compared to $680.8 million in the prior year. This increase is the result of higher retail and wholesale propane sales volumes, coupled with an increase in average selling prices in line with higher commodity prices for propane. Despite nationwide average temperatures, as reported by NOAA, that were 7% warmer than normal and 8% warmer than the prior year, retail propane gallons sold increased 45.8 million gallons, or 9.3%, to 537.3 million gallons for the fiscal year ended September 25, 2004. The increase is primarily attributable to the addition of Agway Energy volumes from December 23, 2003, partially offset by the effect of the warmer temperatures. Average selling prices increased approximately 12.5% as a result of sustained higher commodity prices for propane. The average posted price of propane during fiscal 2004 increased approximately 23% compared to the average posted prices in the prior year. Additionally, included within the propane segment are revenues from wholesale and risk management activities of $43.0 million for the fiscal year ended September 25, 2004 which increased $26.4 million, compared to the prior year.

Revenue contribution from our fuel oil and other refined fuels and our natural gas and electricity segments amounted to $281.7 million and $68.5 million, respectively, for the fiscal year ended September 25, 2004 from the addition of Agway Energy since December 23, 2003. Total fuel oil and other refined fuel gallons sold in fiscal 2004 amounted to 220.5 million gallons. Revenues from our HVAC service and installation activities, as well as from sales of HVAC equipment and related parts, of $92.1 million for the fiscal year ended September 25, 2004 increased $45.1 million compared to the prior year, primarily due to the addition of Agway Energy.

Cost of Products Sold


(Dollars in thousands)
	Fiscal 2004		Fiscal 2003		Increase		Percent Increase
Cost of products sold
Propane	$	453,869	$	332,132	$	121,737		36.7	%
Fuel oil and refined fuels		223,362		—		223,362		100	%
Natural gas and electricity		59,950		—		59,950		100	%
HVAC		36,267		22,035		14,232		64.6	%
All other		5,581		4,415		1,166		26.4	%
Total cost of products sold	$	779,029	$	358,582	$	420,447		117.3	%
As a percent of total revenues	59.6%		48.8%

The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane and fuel oil sold, as well as the cost of natural gas and electricity, including transportation costs to deliver product from our supply points to storage or to our customer service centers. Cost of products sold also includes the cost of appliances and related parts sold or installed by our customer service centers computed on a basis that approximates the average cost of the products. Cost of products sold is reported exclusive of any depreciation and amortization; these amounts are reported separately within the consolidated statements of operations.

Cost of products sold increased $420.4 million to $779.0 million for the fiscal year ended September 25, 2004 compared to $358.6 million in the prior year. The increase results primarily from the increase in retail propane volumes sold, as well as the addition of fuel oil and other refined fuel sales volumes, which had a combined impact of $246.2 million on the year-over-year comparison of cost of products sold. Higher commodity prices for propane during fiscal 2004 also increased cost of products sold by $65.9 million compared to the prior year. Increased wholesale and risk management activities, noted above, increased cost of products sold by $26.7 million compared to the prior year.

Cost of products sold for fiscal year ended September 25, 2004 also included a $6.3 million non-cash charge associated with the settlement of futures contracts that were acquired in the Agway Acquisition. As the underlying futures and option contracts were settled, the derivative assets were charged to cost of products sold as an offset to the realized gains from contract settlement. The impact on cost of products sold represents a non-cash charge resulting from the application of purchase accounting on derivative instruments acquired. In addition, the increase in revenues attributable to our natural gas and electricity and HVAC business segments had a $60.0 million and $14.2 million impact, respectively, on cost of products sold in the fiscal year ended September 25, 2004 compared to the prior year.

For the fiscal year ended September 25, 2004, cost of products sold represented 59.6% of revenues compared to 48.8% in the prior year. This increase results primarily from the different mix of products sold during fiscal 2004 as a result of the additional product offerings from the Agway Energy operations. Generally, the prices for fuel oil and other refined fuels as a percentage of product revenues tend to be between 20% and 30% higher than propane costs are as a percentage of propane revenues.

Operating Expenses


(Dollars in thousands)
	Fiscal 2004		Fiscal 2003		Increase		Percent Increase
Operating expenses	$	361,696	$	232,462	$	129,234		55.6	%
As a percent of total revenues	27.7%		31.6%

All costs of operating our retail distribution and appliance sales and service operations are reported within operating expenses in the consolidated statements of operations. These operating expenses include the compensation and benefits of field and direct operating support personnel, costs of operating and maintaining our vehicle fleet, overhead and other costs of our purchasing, training and safety departments

and other direct and indirect costs of our customer service centers. Changes in the fair value of derivative instruments that are not designated as hedges are recorded in current period earnings within operating expenses.

Operating expenses of $361.7 million for the fiscal year ended September 25, 2004 increased $129.2 million, or 55.6%, compared to $232.5 million in the prior year. Operating expenses for fiscal 2004 include a $4.5 million unrealized (non-cash) loss representing the net change in fair values of derivative instruments during the period, compared to a $1.5 million unrealized loss in the prior year (see Item 7A in this Annual Report for information on our policies regarding the accounting for derivative instruments). In addition to the non-cash impact of changes in the fair value of derivative instruments, the most significant impact on operating expenses was the impact on employee, vehicle and facility costs from the addition of the Agway Energy operations. Additionally, fiscal 2004 operating expenses include a $5.3 million non-cash pension charge in order to accelerate the recognition of a portion of unrecognized actuarial losses in our defined benefit pension plan. The accelerated recognition of these losses was recorded in accordance with SFAS No. 88 "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" ("SFAS 88") as a result of an increase in the level of lump sum benefit payments made to retirees or terminated individuals during fiscal 2004 compared to prior years.

Operating expenses in fiscal 2004 increased primarily in the following areas: (i) employee compensation and benefit costs increased $51.6 million related to an increase in field personnel and increased earnings; (ii) costs to operate our fleet increased $9.2 million; (iii) operating costs at our customer service centers increased $42.0 million as a result of the addition of the Agway Energy operations; (iv) pension costs increased $7.4 million primarily as a result of the $5.3 million non-cash charge described above; (iv) insurance costs increased $13.2 million; and, (v) medical costs increased $2.9 million.

General and Administrative Expenses


(Dollars in thousands)
	Fiscal 2004		Fiscal 2003		Increase		Percent Increase
General and administrative expenses	$	53,888	$	36,661	$	17,227		47.0	%
As a percent of total revenues	4.1%		5.0%

All costs of our back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.

General and administrative expenses of $53.9 million for the fiscal year ended September 25, 2004 were $17.2 million, or 47.0%, higher compared to $36.7 million in fiscal 2003. The increase was primarily attributable to the impact of $10.4 million higher employee compensation and benefit costs as a result of higher earnings and increased overall headcount, as well as $4.2 million related to transition services fees paid to Agway, Inc. for back office support provided subsequent to the Agway Acquisition. In addition, we incurred anticipated increases in marketing, professional services and travel expenses during fiscal 2004 associated with our efforts to acquire Agway Energy during the first quarter and in connection with our integration efforts during the remainder of fiscal 2004.

Restructuring Costs and Impairment of Goodwill. During fiscal 2004, we recorded a $2.9 million restructuring charge for severance and other exit costs associated with vacating duplicative facilities and contract terminations in connection with the integration of Agway Energy operations and management. While the majority of restructuring and integration activities were completed by the end of fiscal 2004, there may be additional charges in fiscal 2005 as we continue to finalize our operating footprint in the northeast. Additionally, during the third quarter of fiscal 2004, as a result of continued losses in one of our reporting units acquired in fiscal 1999, we recorded a non-cash charge of $3.2 million related to goodwill impairment.

Depreciation and Amortization


(Dollars in thousands)
	Fiscal 2004		Fiscal 2003		Increase		Percent Increase
Depreciation and amortization	$	36,743	$	27,520	$	9,223		33.5	%
As a percent of total revenues	2.8%		3.7%

Depreciation and amortization expense increased 33.5% to $36.7 million for the fiscal year ended September 25, 2004 compared to $27.5 million for the prior year, primarily as a result of the additional depreciation and amortization associated with the acquired tangible and intangible assets from the Agway Acquisition. In addition, depreciation expense for fiscal 2004 included a $1.0 million non-cash charge related to assets abandoned as a result of our facility integration efforts in the northeast.

Interest Expense


(Dollars in thousands)
	Fiscal 2004		Fiscal 2003		Increase		Percent Increase
Interest expense, net	$	40,832	$	33,629	$	7,203		21.4	%
As a percent of total revenues	3.1%		4.6%

Net interest expense increased $7.2 million, or 21.4%, to $40.8 million for the fiscal year ended September 25, 2004, compared to $33.6 million in the prior year. The increase results primarily from the net impact of the addition of $175.0 million of 6.875% senior notes associated with financing for the Agway Acquisition, offset by a reduction in amounts outstanding under our 7.54% senior notes due to repayment of the second annual principal payment of $42.5 million during the fourth quarter of fiscal 2003 and of the third annual principal payment of $42.5 million during the fourth quarter of fiscal 2004, in both cases using cash on hand. In addition, we incurred a one-time fee of $1.9 million related to financing commitments for the Agway Acquisition during the first quarter of fiscal 2004 which is included within fiscal 2004 interest expense.

Discontinued Operations. As part of our overall business strategy, we continually monitor and evaluate our existing operations to identify opportunities to optimize return on assets employed by selectively consolidating or divesting operations in slower growing or non-strategic markets. In line with that strategy, during fiscal 2004, we sold 24 customer service centers for net cash proceeds of $39.4 million. We recorded a gain on sale of $26.3 million during fiscal 2004. During fiscal 2003, we sold nine customer service centers for net cash proceeds of $7.2 million and recorded a gain on sale of $2.5 million. Gains on sale have been accounted for within discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").

Net Income and EBITDA. Net income of $54.3 million for the fiscal year ended September 25, 2004 increased $5.6 million, or 11.5%, compared to $48.7 million in the prior year. We reported record EBITDA of $131.9 million for the fiscal year ended September 25, 2004, compared to $110.0 million for the prior year, an increase of $21.9 million, or 19.9%. Net income and EBITDA for fiscal 2004 were favorably impacted by the net result of certain significant items, mainly relating to: (i) the $26.3 million gain from the sale of 24 customer service centers considered to be non-strategic, primarily located in the northern and southern central regions of the United States, compared to a $2.5 million gain from the sale of nine customer service centers during fiscal 2003; (ii) the non-cash charge of $6.3 million included within cost of products sold relating to the settlement of futures contracts which were marked-to-market under purchase accounting for the Agway Acquisition; (iii) the non-cash pension charge of $5.3 million related to accelerated recognition of actuarial losses as a result of the level of lump sum benefit payments in fiscal 2004; (iv) the non-cash charge of $3.2 million attributable to the impairment of goodwill related to a small business acquired in 1999; (v) the $2.9 million restructuring charge related to our efforts to integrate certain management and back office functions of Agway Energy; and, (vi) the non-cash charge of $1.0 million included within depreciation expense attributable to the write-down of assets to be disposed of as a result of the blending of field operations in the northeast. These significant items had a net positive

impact of $6.1 million and $5.1 million on the year-over-year comparison of EBITDA and net income, respectively, for the fiscal year ended September 25, 2004.

EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our senior note agreements and our Revolving Credit Agreement require us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under GAAP and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies. The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities:


(Dollars in thousands)	Year Ended
	September 25, 2004			September 27, 2003
Net income	$	54,304		$	48,669
Add:
Provision for income taxes		3			202
Interest expense, net		40,832			33,629
Depreciation and amortization		36,743			27,520
EBITDA		131,882			110,020
Add (subtract):
Provision for income taxes		(3	)		(202	)
Interest expense, net		(40,832	)		(33,629	)
Gain on disposal of property, plant and equipment, net		(715	)		(636	)
Gain on sale of customer service centers		(26,332	)		(2,483	)
Changes in working capital and other assets and liabilities		29,065			(15,770	)
Net cash provided by (used in)
Operating activities	$	93,065		$	57,300
Investing activities	$	(196,557	)	$	(4,859	)
Financing activities	$	141,208		$	(77,631	)

Fiscal Year 2003 Compared to Fiscal Year 2002

Revenues


(Dollars in thousands)
	Fiscal 2003		Fiscal 2002		Increase (Decrease)			Percent Increase (Decrease)
Revenues
Propane	$	680,840	$	578,439	$	102,401			17.7	%
HVAC		46,938		47,926		(988	)		(2.1	%)
All other		7,297		8,757		(1,460	)		(16.7	%)
Total revenues	$	735,075	$	635,122	$	99,953			15.7	%

Total revenues increased 15.7%, or $100.0 million, to $735.1 million in fiscal 2003 compared to $635.1 million in fiscal 2002. Revenues from retail propane activities increased $130.0 million, or 24.3%, to $664.2 million in fiscal 2003 compared to $534.2 million in the prior year. This increase was the result of an increase in average propane selling prices, coupled with an increase in retail gallons sold. Propane selling

prices averaged 15.9% higher in fiscal 2003 compared to the prior year as a result of steadily increasing costs of propane throughout the first half of fiscal 2003 which remained higher during the second half of the year. Retail gallons sold increased 35.5 million gallons, or 7.8%, to 491.5 million gallons in fiscal 2003 compared to 456.0 million gallons in fiscal 2002 due primarily to colder average temperatures experienced in parts of our service area, particularly during the six month peak heating season from October 2002 through March 2003.

Temperatures nationwide, as reported by NOAA, averaged 1% colder than normal in fiscal 2003 compared to 13% warmer than normal temperatures in the prior year, or 14% colder conditions year-over-year. The coldest weather conditions, however, were experienced in the eastern and central regions of the United States. In the west, average temperatures were 10% warmer than normal during fiscal 2003, compared to 7% warmer than normal during the prior year. In addition, our volumes continued to be affected by the impact of a continued economic recession on customer buying habits.

Revenues from wholesale and risk management activities reported within the propane segment of $16.6 million in fiscal 2003 decreased $19.5 million, or 54.0%, compared to revenues of $36.1 million in the prior year primarily as a result of lower volumes sold in the wholesale market. Revenue from HVAC sales and service activities and other revenue sources of $54.2 million in fiscal 2003 decreased $2.4 million, or 4.3%, compared to the prior year. The decrease was primarily attributable to lower revenues from service and installations.

Cost of Products Sold


(Dollars in thousands)
	Fiscal 2003		Fiscal 2002		Increase (Decrease)			Percent Increase (Decrease)
Cost of products sold
Propane	$	332,132	$	247,183	$	84,949			34.4	%
HVAC		22,035		24,121		(2,086	)		(8.6	%)
All other		4,415		5,270		(855	)		(16.2	%)
Total cost of products sold	$	358,582	$	276,574	$	82,008			29.7	%
As a percent of total revenues	48.8%		43.5%

Cost of products sold increased $82.0 million, or 29.7%, to $358.6 million in fiscal 2003 compared to $276.6 million in the prior year. Of the increase, $93.0 million reflects the increase in the commodity price of propane (which resulted in a 39.4% increase in the average unit cost of propane in fiscal 2003 compared to the prior year), and $17.0 million reflects the increase in retail volumes sold; offset by a $21.2 million decrease from the decline in wholesale and risk management activities. In fiscal 2003, cost of products sold represented 48.8% of revenues compared to 43.5% in the prior year. The increase in the cost of products sold as a percentage of revenues relates primarily to steadily increasing costs of propane during the first half of fiscal 2003 which remained higher during the second half of fiscal 2003 compared to steadily declining product costs in the prior year.

Operating Expenses


(Dollars in thousands)
	Fiscal 2003		Fiscal 2002		Increase		Percent Increase
Operating expenses	$	232,462	$	216,641	$	15,821		7.3	%
As a percent of total revenues	31.6%		34.1%

Operating expenses increased 7.3%, or $15.8 million, to $232.5 million in fiscal 2003 compared to $216.6 million in fiscal 2002. Operating expenses in fiscal 2003 include a $1.5 million unrealized (non-cash) loss representing the net change in fair values of derivative instruments, compared to a $5.4 million unrealized (non-cash) gain in the prior year (see Item 7A in this Annual Report for information on our policies regarding the accounting for derivative instruments). In addition to the $6.9 million non-cash

impact of changes in the fair value of derivative instruments year-over-year, operating expenses increased $8.9 million primarily resulting from: (i) $2.3 million increased pension costs; (ii) $2.2 million higher insurance costs; (iii) $1.8 million higher costs to operate our fleet primarily from increased fuel costs; and, (iv) $0.3 million higher employee compensation and benefits to support the increased sales volume. In addition, we experienced $2.1 million higher bad debt expense as a result of the significant increase in the commodity price of propane resulting in higher prices to our customers, higher sales volumes and general economic conditions.

General and Administrative Expenses


(Dollars in thousands)
	Fiscal 2003		Fiscal 2002		Increase		Percent Increase
General and administrative expenses	$	36,661	$	30,771	$	5,890		19.1	%
As a percent of total revenues	5.0%		4.8%

General and administrative expenses of $36.7 million for fiscal 2003 were $5.9 million, or 19.1%, higher than fiscal 2002 expenses of $30.8 million. The increase was primarily attributable to the impact of $2.8 million higher employee compensation and benefit related costs, as well as $1.2 million higher fees for professional services in fiscal 2003.

Depreciation and Amortization


(Dollars in thousands)
	Fiscal 2003		Fiscal 2002		(Decrease)			Percent (Decrease)
Depreciation and amortization	$	27,520	$	28,355	$	(835	)		(2.9	%)
As a percent of total revenues	3.7%		4.5%

Depreciation and amortization expense decreased $0.8 million, or 2.9%, to $27.5 million in fiscal 2003, compared to $28.4 in fiscal 2002.

Gain on Sale of Storage Facility. On January 31, 2002 (the second quarter of fiscal 2002), we sold our 170 million gallon propane storage facility in Hattiesburg, Mississippi, which was considered a non-strategic asset, for net cash proceeds of $8.0 million, resulting in a gain on sale of approximately $6.8 million.

Interest Expense


(Dollars in thousands)
	Fiscal 2003		Fiscal 2002		(Decrease)			Percent (Decrease)
Interest expense, net	$	33,629	$	35,325	$	(1,696	)		(4.8	%)
As a percent of total revenues	4.6%		5.6%

Net interest expense decreased $1.7 million, or 4.8%, to $33.6 million in fiscal 2003 compared to $35.3 million in fiscal 2002. The decrease in interest expense reflects the positive steps taken by us during the third quarter of fiscal 2003 to lower our overall leverage, which resulted in an $88.9 million reduction in debt, coupled with lower average interest rates on outstanding borrowings under our Revolving Credit Agreement during the first and second quarters of fiscal 2003.

Discontinued Operations. As part of our overall business strategy, we continually monitor and evaluate our existing operations to identify opportunities that will allow us to optimize our return on assets employed by selectively consolidating or divesting operations in slower growing or non-strategic markets. In line with that strategy, we sold nine customer service centers during fiscal 2003 for net cash proceeds of $7.2 million. We recorded a gain on sale of $2.5 million, which has been accounted for within discontinued operations pursuant to SFAS 144.

Net Income and EBITDA. Net income decreased $4.8 million, or 9.0%, to $48.7 million in fiscal 2003 compared to $53.5 million in the prior year. EBITDA amounted to $110.0 million for fiscal 2003 compared

to $117.9 million for the prior year, a decline of $7.9 million, or 6.7%. The decline in net income and in EBITDA over the prior year reflects the impact of 7.8% higher retail volumes sold, offset by the $6.9 million unfavorable impact of mark-to-market activity on derivative instruments year-over-year included within operating expenses, the $6.8 million gain on sale of our Hattiesburg, Mississippi storage facility impacting fiscal 2002 results and the higher combined operating and general and administrative expenses (described above) in support of higher business activity. Additionally, the $2.5 million gain reported from the sale of nine customer service centers during fiscal 2003, reported within discontinued operations, had a favorable impact on fiscal 2003 EBITDA.

EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our senior note agreements and our Revolving Credit Agreement require us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under GAAP and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies. The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities:


(Dollars in thousands)	Year Ended
	September 27, 2003			September 28, 2002
Net income	$	48,669		$	53,524
Add:
Provision for income taxes		202			703
Interest expense, net		33,629			35,325
Depreciation and amortization		27,520			28,355
EBITDA		110,020			117,907
Add (subtract):
Provision for income taxes		(202	)		(703	)
Interest expense, net		(33,629	)		(35,325	)
Gain on disposal of property, plant and equipment, net		(636	)		(546	)
Gain on sale of customer service centers		(2,483	)		—
Gain on sale of storage facility		—			(6,768	)
Changes in working capital and other assets and liabilities		(15,770	)		(5,790	)
Net cash provided by (used in)
Operating activities	$	57,300		$	68,775
Investing activities	$	(4,859	)	$	(6,851	)
Financing activities	$	(77,631	)	$	(57,463	)

Liquidity and Capital Resources

Analysis of Cash Flows

Operating Activities. Due to the seasonal nature of the propane and fuel oil businesses, cash flows from operating activities are greater during the winter and spring seasons, our second and third fiscal quarters, as customers pay for propane purchased during the heating season. Net cash provided by operating activities for the fiscal year ended September 25, 2004 amounted to $93.1 million, an increase of $35.8 million, or 62.5%, compared to $57.3 million in the prior year. The increase was attributable to

the improvement in net income, as well as a decrease in net working capital investment compared to the prior year. Net working capital decreased primarily as a result of an increase in customer prepayments and deposits under our budget payment programs, particularly in our fuel oil and other refined fuels segment. Under these budget payment programs, customers pay equal monthly installments beginning in the June or July timeframe for the upcoming heating season based on each customer's historical usage patterns.

In fiscal 2003, net cash provided by operating activities decreased $11.5 million, or 16.7%, to $57.3 million, compared to $68.8 million in fiscal 2002. The decrease is primarily due to lower net income, including lower non-cash items (principally depreciation, amortization and gains on asset disposals), as well as the impact of increased investment in accounts receivable and inventories resulting from higher commodity prices and increased business activity during fiscal 2003 compared to fiscal 2002 due to generally colder average temperatures.

Investing Activities. Net cash used in investing activities of $196.6 million for the fiscal year ended September 25, 2004 consists of the net impact of the $211.2 million total cost of the Agway Acquisition partially offset by net proceeds of $39.4 million from the sale of customer service centers during fiscal 2004 and net proceeds of $1.8 million from the sale of property, plant and equipment. Additionally, capital expenditures were $26.5 million (including $7.4 million for maintenance expenditures and $19.1 million to support the growth of operations) for fiscal 2004. Capital spending in fiscal 2004 increased $12.4 million, or 87.9%, compared to fiscal 2003 primarily as a result of our facility integration efforts in the northeast, as well as additional spending on information technology in connection with the integration of Agway Energy.

Net cash used in investing activities was $4.9 million in fiscal 2003, reflecting $14.1 million in capital expenditures (including $4.7 million for maintenance expenditures and $9.4 million to support the growth of operations) offset by net proceeds of $9.2 million from the sale of assets (including net proceeds of $7.2 million from the sale of nine customer service centers). Net cash used in investing activities was $6.9 million in fiscal 2002, reflecting $17.5 million in capital expenditures (including $13.0 million for maintenance expenditures and $4.5 million to support the growth of operations) offset by net proceeds of $10.6 million from the sale of assets (including net proceeds of $8.0 million resulting from the sale of our propane storage facility in Hattiesburg, Mississippi).

Financing Activities. Net cash provided by financing activities for the fiscal year ended September 25, 2004 was $141.2 million as a result of: (i) net proceeds of $169.1 million from the issuance of $175.0 million aggregate principal amount of 6.875% senior notes due 2013, a portion of which was used to fund a portion of the Agway Acquisition; and, (ii) net proceeds of $87.6 million from a public offering of approximately 3.0 million Common Units (including full exercise of the underwriters' over-allotment option) during December 2003 to fund a portion of the Agway Acquisition; offset by: (i) the payment of a total of $72.5 million for our quarterly distributions of $0.5875 per Common Unit during each of the first two quarters of fiscal 2004, $0.60 per Common Unit during the third quarter of fiscal 2004 and $0.6125 per Common Unit during the fourth quarter of fiscal 2004; and, (ii) the repayment of the third annual principal installment of $42.5 million due under the 1996 Senior Note Agreement.

Net cash used in financing activities for fiscal 2003 was $77.6 million, reflecting: (i) the payment of $60.1 million for our quarterly distributions; (ii) the repayment of $46.0 million constituting all outstanding borrowings under our Revolving Credit Agreement; (iii) the repayment of the second annual principal payment of $42.5 million due under the 1996 Senior Note Agreement; and, (iv) the payment of $0.8 million in fees associated with the renewal and extension of our Revolving Credit Agreement in May 2003. The $88.9 million reduction in debt during fiscal 2003 was funded through a combination of cash provided by operations and the net proceeds of $72.2 million from a public offering of approximately 2.6 million Common Units (including full exercise of the underwriters' over-allotment option) during the third quarter of fiscal 2003. Net cash used in financing activities for fiscal 2002 was $57.5 million, primarily reflecting the payment of quarterly distributions.

Summary of Long-Term Debt Obligations and Revolving Credit Lines

On December 23, 2003, we issued $175.0 million aggregate principal amount of senior notes with an annual interest rate of 6.875% pursuant to Rule 144A and Regulation S of the Securities Act of 1933. On

May 13, 2004, pursuant to a registration rights agreement, we exchanged these unregistered senior notes for $175.0 million aggregate principal amount of registered senior notes, which have substantially the same terms (the "2003 Senior Notes"). We used approximately $122.4 million from the issuance of the 6.875% senior notes to fund a portion of the cost of the Agway Acquisition and the remaining net proceeds were held for general partnership purposes, including working capital needs, capital expenditures and debt reduction. Our obligations under the 2003 Senior Notes are unsecured and will rank senior in right of payment to any future subordinated indebtedness and equally in right of payment with any future senior indebtedness. The 2003 Senior Notes are structurally subordinated to, which means they rank effectively behind, the senior notes and other liabilities of the Operating Partnership. The 2003 Senior Notes will mature on December 15, 2013, and require semi-annual interest payments that began on June 15, 2004. We are permitted to redeem some or all of the 2003 Senior Notes at any time on or after December 15, 2008, at redemption prices specified in the indenture governing the 2003 Senior Notes (the "2003 Senior Note Agreement"). The 2003 Senior Note Agreement contains certain restrictions applicable to us and certain of our subsidiaries with respect to (i) the incurrence of additional indebtedness; and, (ii) liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions.

On March 5, 1996, pursuant to a Senior Note Agreement (the "1996 Senior Note Agreement"), our Operating Partnership issued $425.0 million of senior notes (the "1996 Senior Notes") with an annual interest rate of 7.54%. Our Operating Partnership's obligations under the 1996 Senior Note Agreement are unsecured and rank on an equal and ratable basis with its obligations under the 2002 Senior Note Agreement and the Revolving Credit Agreement discussed below. Under the terms of the 1996 Senior Note Agreement, our Operating Partnership became obligated to pay the principal on the 1996 Senior Notes in equal annual payments of $42.5 million starting July 1, 2002, with the last such payment due June 30, 2011. On July 1, 2002, we received net proceeds of $42.5 million from the issuance by our Operating Partnership of 7.37% Senior Notes due June 2012 (the "2002 Senior Notes") and used the funds to pay the first annual principal payment of $42.5 million due under the 1996 Senior Note Agreement. Our Operating Partnership's obligations under the agreement governing the 2002 Senior Notes (the "2002 Senior Note Agreement") are unsecured and rank on an equal and ratable basis with its obligations under the 1996 Senior Note Agreement and the Revolving Credit Agreement. During the fourth quarter of fiscal 2003, we elected to repay the second annual principal payment of $42.5 million and during the fourth quarter of fiscal 2004 we repaid the third annual principal payment of $42.5 million due under the 1996 Senior Note Agreement, in each case using cash on hand.

On October 20, 2004, our Operating Partnership entered into the Third Amended and Restated Credit Agreement (the "Revolving Credit Agreement"), which replaced the Second Amended and Restated Credit Agreement, which would have expired in May 2006. The Revolving Credit Agreement expires on October 20, 2008 and provides available credit of $150.0 million in the form of a $75.0 million revolving working capital facility, of which $15.0 million may be used to issue letters of credit, and a separate $75 million letter of credit facility. Borrowings under the Revolving Credit Agreement bear interest at a rate based upon either LIBOR or Wachovia National Bank's prime rate, plus, in each case, the applicable margin; or the Federal Funds rate plus 1/2 of 1%. An annual facility fee ranging from 0.375% to 0.50%, based upon certain financial tests, is payable quarterly whether or not borrowings occur. These fees and the other terms of the Revolving Credit Agreement are substantially the same as the terms under the Second Amended and Restated Credit Agreement, which provided a $75 million working capital facility and a $25 million acquisition facility. In connection with the Third Amended and Restated Credit Agreement our leverage ratio was reduced from 5.0 to 1 to a requirement to maintain a ratio of less than 4.5 to 1. As a result of the change in the leverage ratio applicable to the Revolving Credit Agreement, the leverage ratio required under the 1996 Senior Note Agreement and the 2002 Senior Note Agreement were also reduced to 4.5 to 1. In addition, in connection with this amendment, our Operating Partnership added additional financial institutions to the bank group supporting the Revolving Credit Agreement. As of September 25, 2004 and September 27, 2003, there were no borrowings outstanding under the Revolving Credit Agreement.

The 1996 Senior Note Agreement, the 2002 Senior Note Agreement and the Revolving Credit Agreement contain various restrictive and affirmative covenants applicable to the Operating Partnership,

including (a) maintenance of certain financial tests, including, but not limited to, a leverage ratio of less than 4.5 to 1, an interest coverage ratio in excess of 2.5 to 1 and a leverage ratio of less than 5.25 to 1 when the underfunded portion of our pension obligations is used in the computation of the ratio, (b) restrictions on the incurrence of additional indebtedness, and (c) restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions. We were in compliance with all covenants and terms of all of our debt agreements as of September 25, 2004 and as of the end of each fiscal quarter for all periods presented.

Partnership Distributions

We will make distributions in an amount equal to all of our Available Cash, as defined in our Second Amended and Restated Partnership Agreement (the "Partnership Agreement"), approximately 45 days after the end of each fiscal quarter to holders of record on the applicable record dates. Our Board of Supervisors reviews the level of Available Cash on a quarterly basis based upon information provided by management. During the first and second quarters of fiscal 2004, we paid distributions to our Common Unitholders of $0.5875 per Common Unit. On April 22, 2004, our Board of Supervisors declared a $0.05 annualized increase in the quarterly distribution from $0.5875 per Common Unit to $0.60 per Common Unit, or $2.40 on an annualized basis, in respect of the second quarter of fiscal 2004, which was paid on May 11, 2004. On July 22, 2004, our Board of Supervisors declared a $0.05 annualized increase in the quarterly distribution from $0.60 per Common Unit to $0.6125 per Common Unit, or $2.45 on an annualized basis, in respect of the third quarter of fiscal 2004, which was paid on August 10, 2004. On October 21, 2004, our Board of Supervisors declared a quarterly distribution of $0.6125 per Common Unit in respect of the fourth quarter of fiscal 2004, which was paid on November 9, 2004 to holders of record on November 2, 2004.

Quarterly distributions include Incentive Distribution Rights ("IDRs") payable to the General Partner to the extent the quarterly distribution exceeds $0.55 per Common Unit. The IDRs represent an incentive for the General Partner (which is owned by the management of the Partnership) to increase the distributions to Common Unitholders in excess of $0.55 per Common Unit. With regard to the first $0.55 of the Common Unit distribution, 98.46% of the Available Cash is distributed to the Common Unitholders and 1.54% is distributed to the General Partner (98.29% and 1.71%, respectively, prior to our December 2003 public offering). With regard to the balance of the Common Unit distributions paid, 85% of the Available Cash is distributed to the Common Unitholders and 15% is distributed to the General Partner.

Pension Plan Assets and Obligations

While our pension asset portfolio experienced significantly improved asset returns in fiscal 2004 and fiscal 2003, the funded status of our defined benefit pension plan continues to be affected by the impact of the low interest rate environment on the actuarial value of the projected benefit obligations, as well as the cumulative impact of prior losses particularly during fiscal 2002 and fiscal 2001. The projected benefit obligation as of September 25, 2004 exceeded the market value of pension plan assets by $35.0 million, which represented an improvement of $7.1 million compared to the $42.1 million underfunded position at the end of the prior year.

Our defined benefit pension plan was frozen to new participants effective January 1, 2000 and, in furtherance of our effort to minimize future increases in our benefit obligations, effective January 1, 2003, all future service credits were eliminated. Therefore, eligible participants will receive interest credits only toward their ultimate defined benefit under the defined benefit pension plan. During fiscal 2004, lump sum benefit payments to either terminated or retired individuals of $12.3 million exceeded the interest cost component of the net periodic pension cost. As a result, pursuant to SFAS 88 we recorded a non-cash settlement charge of $5.3 million in order to accelerate recognition of a portion of cumulative unrecognized losses in the defined benefit pension plan. These unrecognized losses were previously accumulated as a reduction to partners' capital (cumulative reduction of $80.1 million as of the end of the prior fiscal year) and were being amortized to expense as part of our net periodic pension cost in accordance with SFAS No. 87 "Employers' Accounting for Pensions" ("SFAS 87"). After recognition of the non-cash settlement charge and as a result of the improvement in the funded status of the plan described above, the cumulative reduction to partners' capital decreased to $76.9 million on the consolidated balance sheet at September 25, 2004. The cumulative reduction to partners' capital is

attributable to the level of unrealized losses experienced on our pension assets over the past three years and represents non-cash charges to our partners' capital with no impact on the results of operations for the fiscal year ended September 25, 2004. Additional pension settlement charges may be required in future periods depending on the level of lump sum benefit payments.

There were no minimum funding requirements for the defined benefit pension plan during fiscal 2004, 2003 or 2002. However, in an effort to proactively address our funded status, we elected to make voluntary contributions to our defined benefit pension plan of $15.1 million and $10.0 million during the fourth quarter of fiscal 2004 and fiscal 2003, respectively, thus improving our funded status. These voluntary contributions, coupled with improved asset returns in our pension asset portfolio during fiscal 2004 and fiscal 2003, offset the negative effects on the funded status of further declines in the interest rate environment. There can be no assurances that future declines in capital markets, or interest rates, will not have an adverse impact on our results of operations or cash flow. For purposes of computing the actuarial valuation of projected benefit obligations, we reduced the discount rate assumption from 6.0% as of September 27, 2003 to 5.50% as of September 25, 2004 to reflect an estimate of current market expectations related to long term interest rates and the projected duration of our pension obligations. Additionally, we reduced the expected long-term rate of return on plan assets assumption from 7.75% as of September 27, 2003 to 7.5% as of September 25, 2004 based on the current investment mix of our pension asset portfolio and historical asset performance.

Long-Term Debt Obligations and Operating Lease Obligations

Contractual Obligations

Long-term debt obligations and future minimum rental commitments under noncancelable operating lease agreements as of September 25, 2004 are due as follows:


(Dollars in thousands)
	Fiscal 2005		Fiscal 2006		Fiscal 2007		Fiscal 2008		2009 and thereafter		Total
Long-term debt	$	42,940	$	42,975	$	42,500	$	42,500	$	345,000	$	515,915
Operating leases		22,139		15,667		11,140		6,812		6,201		61,959
Total long-term debt obligations and lease commitments	$	65,079	$	58,642	$	53,640	$	49,312	$	351,201	$	577,874

Additionally, we have standby letters of credit in the aggregate amount of $48.4 million, in support of retention levels under our casualty insurance programs and certain lease obligations, which expire periodically through April 15, 2005.

Off-Balance Sheet Arrangements

Operating Leases

We lease certain property, plant and equipment for various periods under noncancelable operating leases, including the majority of our railroad tank cars, approximately 68% of our vehicle fleet, approximately 29% of our customer service centers and portions of our information systems equipment. Rental expense under operating leases was $27.3 million, $24.3 million and $24.0 million for the years ended September 25, 2004, September 27, 2003 and September 28, 2002, respectively. Future minimum rental commitments under noncancelable operating lease agreements as of September 25, 2004 are presented in the immediately preceding table.

Guarantees

We have residual value guarantees associated with certain of our operating leases, related primarily to transportation equipment, with remaining lease periods scheduled to expire periodically through fiscal 2011. Upon completion of the lease period, we guarantee that the fair value of the equipment will equal or exceed the guaranteed amount, or we will pay the lessor the difference. Although the fair value of

equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, is approximately $18.2 million. Of this amount, the fair value of residual value guarantees for operating leases entered into after December 31, 2002 is reflected in other liabilities, with a corresponding amount included within other assets, in the accompanying consolidated balance sheet totaling $3.7 million and $2.1 million as of September 25, 2004 and September 27, 2003, respectively.

Recently Issued Accounting Standards

In November 2004, the Financial Accounting Standards Board issued SFAS No. 151, "Inventory Costs" ("SFAS 151"). SFAS 151 amends the guidance in Chapter 4 of Accounting Research Bulletin No. 43, "Inventory Pricing" to clarify the accounting for amounts of idle facility expense, freight, handling costs and wasted material. SFAS 151 requires that these types of items be recognized as current period charges as they occur. The provisions of SFAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of this standard is not expected to have an impact on our consolidated financial position, results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 25, 2004, we were a party to exchange-traded futures and option contracts, forward contracts and in certain instances, over-the-counter options (collectively "derivative instruments") to manage the price risk associated with future purchases of the commodities used in our operations, principally propane and fuel oil. Futures and forward contracts require that we sell or acquire propane or fuel oil at a fixed price at fixed future dates. An option contract allows, but does not require, its holder to buy or sell propane or fuel oil at a specified price during a specified time period; the writer of an option contract must fulfill the obligation of the option contract, should the holder choose to exercise the option. At expiration, the contracts are settled by the delivery of the product to the respective party or are settled by the payment of a net amount equal to the difference between the then current price and the fixed contract price. The contracts are entered into in anticipation of market movements and to manage and hedge exposure to fluctuating prices of propane and fuel oil, as well as to help ensure the availability of product during periods of high demand.

Market risks associated with the trading of futures, options and forward contracts are monitored daily for compliance with our Hedging and Risk Management Policy which includes volume limits for open positions. Open inventory positions are reviewed and managed daily as to exposures to changing market prices.

Market Risk

We are subject to commodity price risk to the extent that propane or fuel oil market prices deviate from fixed contract settlement amounts. Futures traded with brokers of the NYMEX require daily cash settlements in margin accounts. Forward and option contracts are generally settled at the expiration of the contract term either by physical delivery or through a net settlement mechanism.

Credit Risk

Futures and fuel oil options are guaranteed by the NYMEX and, as a result, have minimal credit risk. We are subject to credit risk with forward and option contracts to the extent the counterparties do not perform. We evaluate the financial condition of each counterparty with which we conduct business and establish credit limits to reduce exposure to credit risk of non-performance.

Derivative Instruments and Hedging Activities

We account for derivative instruments in accordance with the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, SFAS No. 138 and SFAS No. 149 ("SFAS 133"). All derivative instruments are reported on the balance sheet, within other current assets or other current liabilities, at their fair values. Fair values for forward contracts and futures are derived from quoted market prices for similar instruments traded on the NYMEX. On the date that futures, forward and option contracts are entered into, we make a determination as to whether the derivative instrument qualifies for designation as a hedge. Changes in the fair value of derivative instruments are recorded each period in current period earnings or other comprehensive income/(loss) ("OCI"), depending on whether a derivative instrument is designated as a hedge and, if it is, the type of hedge. For derivative instruments designated as cash flow hedges, we formally assess, both at the hedge contract's inception and on an ongoing basis, whether the hedge contract is highly effective in offsetting changes in cash flows of hedged items. Changes in the fair value of derivative instruments designated as cash flow hedges are reported in OCI to the extent effective and reclassified into cost of products sold during the same period in which the hedged item affects earnings. The mark-to-market gains or losses on ineffective portions of hedges are recognized in cost of products sold immediately.

Changes in the fair value of derivative instruments that are not designated as hedges are recorded in current period earnings within operating expenses. A portion of our option contracts are not classified as hedges and, as such, changes in the fair value of these derivative instruments are recognized within operating expenses as they occur. The value of certain option contracts that do qualify as hedges and are designated as cash flow hedges under SFAS 133 have two components of value: time value and intrinsic

value. The intrinsic value is the value by which the option is in the money (i.e., the amount by which the value of the commodity exceeds the exercise or "strike" price of the option). The remaining amount of option value is attributable to time value. We do not include the time value of option contracts in our assessment of hedge effectiveness and, therefore, record changes in the time value component of the options currently in earnings.

At September 25, 2004, the fair value of derivative instruments described above resulted in derivative assets of $18.4 million included within prepaid expenses and other current assets and derivative liabilities of $11.1 million included within other current liabilities. For the year ended September 25, 2004 operating expenses include unrealized (non-cash) losses of $4.5 million compared to unrealized (non-cash) losses of $1.5 million for the year ended September 27, 2003, attributable to the change in the fair value of derivative instruments not designated as hedges. At September 25, 2004, unrealized gains on derivative instruments designated as cash flow hedges in the amount of $9.1 million were included in OCI and are expected to be recognized in earnings during the next 12 months as the hedged transactions occur. However, due to the volatility of the commodities market, the corresponding value in OCI is subject to change prior to its impact on earnings.

Sensitivity Analysis

In an effort to estimate our exposure to unfavorable market price changes in propane or fuel oil related to our open positions under derivative instruments, we developed a model that incorporates the following data and assumptions:


A.	The actual fixed contract price of open positions as of September 25, 2004 for each of the future periods.


B.	The estimated future market prices for futures and forward contracts as of September 25, 2004 as derived from the NYMEX for traded propane or fuel oil futures for each of the future periods.


C.	The market prices determined in B. above were adjusted adversely by a hypothetical 10% change in the future periods and compared to the fixed contract settlement amounts in A. above to project the potential negative impact on earnings that would be recognized for the respective scenario.

Based on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for each of the future months for which a future, forward and/or option contract exists indicate a reduction in potential future gains of $5.3 million as of September 25, 2004. The above hypothetical change does not reflect the worst case scenario. Actual results may be significantly different depending on market conditions and the composition of the open position portfolio.

As of September 25, 2004, our open position portfolio reflected a net long position (purchase) aggregating $9.4 million.

The average posted price of propane on November 26, 2004 at Mont Belvieu, Texas (a major storage point) was 86.44 cents per gallon as compared to 82.25 cents per gallon on September 25, 2004, representing a 5.1% increase. The average posted price of fuel oil on November 26, 2004 at Linden, New Jersey was $1.43 per gallon as compared to $1.36 per gallon on September 25, 2004, representing a 5.1% increase.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm thereon and the Supplemental Financial Information listed on the accompanying Index to Financial Statement Schedule are included herein.

Selected Quarterly Financial Data

Due to the seasonality of the retail propane business, our first and second quarter revenues and earnings are consistently greater than third and fourth quarter results. The following presents our selected quarterly financial data for the last two fiscal years (unaudited; in thousands, except per unit amounts).


	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
Fiscal 2004 (a)
Revenues	$	215,572		$	567,324		$	279,694		$	244,664		$	1,307,254
Income (loss) before interest expense and income taxes (b)		29,972			88,518			(14,057	)		(34,654	)		69,779
Income (loss) from continuing operations (b)		20,178			77,665			(24,321	)		(44,578	)		28,944
Discontinued operations:
Gain on sale of customer service centers (c)		—			14,205			619			11,508			26,332
(Loss) income from discontinued customer service centers		(87	)		690			(635	)		(940	)		(972	)
Net income (loss) (b)		20,091			92,560			(24,337	)		(34,010	)		54,304
Income (loss) from continuing operations per
common unit – basic		0.70			2.26			(0.78	)		(1.43	)		0.96
Net income (loss) per common unit – basic (d)		0.70			2.68			(0.78	)		(1.09	)		1.79
Net income (loss) per common unit – diluted (d)		0.70			2.67			(0.78	)		(1.09	)		1.78
Cash provided by (used in)
Operating activities		11,561			11,773			77,902			(8,171	)		93,065
Investing activities		(214,995	)		15,355			(4,464	)		7,547			(196,557	)
Financing activities		240,315			(18,348	)		(19,093	)		(61,666	)		141,208
EBITDA (e)	$	37,114		$	112,636		$	(4,896	)	$	(12,972	)	$	131,882
Retail gallons sold
Propane		131,917			219,945			99,492			85,976			537,330
Fuel oil and refined fuels		8,058			104,157			60,298			47,956			220,469
Fiscal 2003
Revenues	$	194,317		$	280,812		$	140,094		$	119,852		$	735,075
Income (loss) before interest expense and income taxes (b)		31,797			62,701			(2,459	)		(12,189	)		79,850
Income (loss) from continuing operations (b)		22,811			53,788			(10,875	)		(19,705	)		46,019
Discontinued operations:
Gain on sale of customer service centers (c)		—			2,404			79			—			2,483
Income (loss) from discontinued customer service centers		443			2,114			(1,139	)		(1,251	)		167
Net income (loss) (b)		23,254			58,306			(11,935	)		(20,956	)		48,669
Income (loss) from continuing operations per
common unit – basic		0.86			1.93			(0.42	)		(0.70	)		1.77
Net income (loss) per common unit – basic (d)		0.88			2.09			(0.47	)		(0.75	)		1.87
Net income (loss) per common unit – diluted (d)		0.87			2.08			(0.47	)		(0.75	)		1.86
Cash provided by (used in)
Operating activities		8,378			14,988			45,557			(11,623	)		57,300
Investing activities		(2,561	)		3,235			(1,205	)		(4,328	)		(4,859	)
Financing activities		(14,591	)		(14,533	)		10,655			(59,162	)		(77,631	)
EBITDA (e)	$	39,213		$	74,019		$	3,198		$	(6,410	)	$	110,020
Retail propane gallons sold		139,934			182,956			89,600			78,961			491,451


(a)	Includes the results from our acquisition of substantially all of the assets and liabilities of Agway Energy from December 23, 2003, the date of acquisition.


(b)	These amounts include, in addition to the gain on sale of customer service centers, gains from the disposal of property, plant and equipment of $0.7 million for fiscal 2004 and $0.6 million for fiscal 2003.

(c)

Gain on sale of customer service centers for fiscal 2004 reflects the sale of ten customer service centers during the second quarter for net cash proceeds of approximately $22.9 million, one customer service center we sold during the third quarter for net cash proceeds of approximately $0.9 million and 13 customer service centers we sold during the fourth quarter for net cash proceeds of approximately $15.6 million. We recorded a gain on sale in the second, third and fourth quarters of fiscal 2004 of approximately $14.1 million, $0.6 million and $11.6 million, respectively. Gain on sale of customer service centers for fiscal 2003 consists of five customer service centers we sold during the second quarter for net cash proceeds of approximately $5.6 million and four customer service centers we sold during the third quarter for net cash proceeds of approximately $1.6 million. We recorded a gain on sale in the second and third quarters of fiscal 2003 of approximately $2.4 million and $0.1 million, respectively. Gains on sale of assets have been accounted for within discontinued operations pursuant to SFAS 144.

(d)

Basic net income per Common Unit is computed by dividing net income, after deducting our general partner's interest, by the weighted average number of outstanding Common Units. Diluted net income per Common Unit is computed by dividing net income, after deducting our general partner's approximate 3.1% interest, by the weighted average number of outstanding Common Units and time vested restricted units granted under our 2000 Restricted Unit Plan. On March 31, 2004, the Emerging Issues Task Force ("EITF") reached a consensus under EITF 03-6 "Participating Securities and the Two-Class Method Under FAS 128" ("EITF 03-6") which requires, among other things, the use of the two-class method of computing earnings per unit when participating securities exist. The two-class method is an earnings allocation formula that computes earnings per unit for each class of common unit and participating security according to distributions declared and participation rights in undistributed earnings, as if all of the earnings were distributed to the limited partners and the general partner. We adopted EITF 03-6 at the end of fiscal 2004, however, the application of its consensus on the computation of our net income per Common Unit for the fiscal year ended September 25, 2004 did not have any impact on annual net income per Common Unit. The requirements of EITF 03-6 do not apply to the computation of net income per Common Unit in periods in which a net loss is reported. Net income and income from continuing operations per Common Unit presented in this table for the first and second quarters of fiscal 2003 and 2004 reflect the adoption of EITF 03-6.

(e)

EBITDA represents net income/(loss) before deducting interest expense, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our senior note agreements and our revolving credit agreement require us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under GAAP and should not be considered as an alternative to net income/(loss) or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income/(loss), it may not be comparable to EBITDA or similarly titled measures used by other companies. The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities (amounts in thousands):


Fiscal 2004	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
Net income (loss)	$	20,091		$	92,560		$	(24,337	)	$	(34,010	)	$	54,304
Add:
Provision (benefit) for income taxes		83			83			(283	)		120			3
Interest expense, net		9,711			10,770			10,547			9,804			40,832
Depreciation and amortization		7,229			9,223			9,177			11,114			36,743
EBITDA		37,114			112,636			(4,896	)		(12,972	)		131,882
Add (subtract):
(Provision) benefit for income taxes		(83	)		(83	)		283			(120	)		(3	)
Interest expense, net		(9,711	)		(10,770	)		(10,547	)		(9,804	)		(40,832	)
(Gain) loss on disposal of property, plant and equipment, net		(82	)		(79	)		8			(562	)		(715	)
Gain on sale of customer service centers		—			(14,205	)		(619	)		(11,508	)		(26,332	)
Changes in working capital and other assets and liabilities		(15,677	)		(75,726	)		93,673			26,795			29,065
Net cash provided by (used in)
Operating activities	$	11,561		$	11,773		$	77,902		$	(8,171	)	$	93,065
Investing activities	$	(214,995	)	$	15,355		$	(4,464	)	$	7,547		$	(196,557	)
Financing activities	$	240,315		$	(18,348	)	$	(19,093	)	$	(61,666	)	$	141,208


Fiscal 2003	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
Net income (loss)	$	23,254		$	58,306		$	(11,935	)	$	(20,956	)	$	48,669
Add:
Provision (benefit) for income taxes		130			37			(64	)		99			202
Interest expense, net		8,856			8,876			8,480			7,417			33,629
Depreciation and amortization		6,973			6,800			6,717			7,030			27,520
EBITDA		39,213			74,019			3,198			(6,410	)		110,020
Add (subtract):
(Provision) benefit for income taxes		(130	)		(37	)		64			(99	)		(202	)
Interest expense, net		(8,856	)		(8,876	)		(8,480	)		(7,417	)		(33,629	)
(Gain) loss on disposal of property, plant and equipment, net		(346	)		26			(166	)		(150	)		(636	)
Gain on sale of customer service centers		—			(2,404	)		(79	)		—			(2,483	)
Changes in working capital and other assets and liabilities		(21,503	)		(47,740	)		51,020			2,453			(15,770	)
Net cash provided by (used in)
Operating activities	$	8,378		$	14,988		$	45,557		$	(11,623	)	$	57,300
Investing activities	$	(2,561	)	$	3,235		$	(1,205	)	$	(4,328	)	$	(4,859	)
Financing activities	$	(14,591	)	$	(14,533	)	$	10,655		$	(59,162	)	$	(77,631	)


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

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) The Partnership maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in the Partnership's filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Partnership's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

The Partnership utilizes the work of a specialist, its principal actuarial firm, in the computation of its periodic pension expense and the related accrued pension liability. On December 1, 2004, the Partnership issued a press release announcing an adjustment to its fourth quarter and full year results for fiscal 2004, which the Partnership had announced on October 21, 2004, in order to correct an error made by the principal actuarial firm in the computation of the Partnership's fiscal 2004 pension expense. The error was discovered in the process of completing the footnote disclosures for the Partnership's annual financial statements for fiscal 2004. The adjustment did not affect any previously published financial statements of the Partnership. Under SFAS No. 88, the Partnership was required to recognize a $5.3 million non-cash pension settlement charge in the fourth quarter of fiscal 2004 as a result of the level of lump sum benefit payments to retired or terminated individuals eligible to receive benefits under the Partnership's defined benefit pension plan compared to the total of the service cost and interest cost component of the net periodic pension cost for fiscal 2004. Recognition of the non-cash pension settlement charge represents an acceleration of the expense associated with a portion of cumulative unrecognized losses in the defined benefit pension plan, which are being amortized as part of the Partnership's net periodic pension cost in accordance with SFAS 87.

The adjustment reduced previously-announced net income for fiscal 2004 from $59.6 million, or $1.97 per Common Unit, to $54.3 million, or $1.79 per Common Unit, and increased the previously-announced net loss for the fourth quarter of fiscal 2004 from $28.7 million, or $0.92 per Common Unit, to a net loss of $34.0 million, or $1.09 per Common Unit. The adjustment also decreased previously-announced EBITDA for fiscal 2004 from $137.2 million to $131.9 million and increased the previously-announced EBITDA loss of $7.6 million for the fourth quarter of fiscal 2004 to a loss of $13.0 million. The adjustment did not affect previously-announced cash flow from operating activities of $93.1 million for fiscal 2004.

As a result of the adjustment, the Partnership identified a material weakness in its internal control over financial reporting relating to the procedures management employs to review the specialist's work. In order to remediate this matter, the Partnership has taken steps to enhance management's monitoring and oversight activity over the financial information received from the principal actuarial firm and ensure the appropriate application of generally accepted accounting principles related to pensions. Among other things, the Partnership has instructed its principal actuarial firm to perform on a monthly basis the computations necessary to determine whether a settlement charge should be taken, and to provide management with the computations and supporting schedules.

On December 8, 2004, before filing this Annual Report, the Partnership completed an evaluation under the supervision and with the participation of the Partnership's management, including the Partnership's principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures as of September 25, 2004. Based on this evaluation, the Partnership's principal executive officer and principal financial officer concluded that, solely as a result of the matter referred to above, the Partnership's disclosure controls and procedures were not effective at the reasonable assurance level as of September 25, 2004. However, management believes that the financial statements included in this Annual Report fairly present in all material respects the Partnership's financial condition, results of operations and cash flows for the fiscal periods presented.

(b) There have not been any changes in the Partnership's internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) during the quarter ended September 25, 2004 that have materially affected or are reasonably likely to materially affect its internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Partnership Management

Our Second Amended and Restated Agreement of Limited Partners (the "Partnership Agreement") provides that all management powers over our business and affairs are exclusively vested in our Board of Supervisors and, subject to the direction of the Board of Supervisors, our officers. No Unitholder has any management power over our business and affairs or actual or apparent authority to enter into contracts on behalf of, or to otherwise bind, us. Three independent Elected Supervisors and two Appointed Supervisors serve on the Board of Supervisors pursuant to the terms of the Partnership Agreement. The Elected Supervisors are elected by the Unitholders to serve a term of three years. The Appointed Supervisors are appointed by our General Partner.

The three Elected Supervisors serve on the Audit Committee with the authority to review, at the request of the Board of Supervisors, specific matters as to which the Board of Supervisors believes there may be a conflict of interest in order to determine if the resolution of such conflict proposed by the Board of Supervisors is fair and reasonable to us. Under the Partnership Agreement, any matters approved by the Audit Committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners and not a breach by our General Partner or the Board of Supervisors of any duties they may owe us or the Unitholders. The primary function of the Audit Committee is to assist the Board of Supervisors in fulfilling its oversight responsibilities relating to (a) the integrity of the Partnership's financial statements and internal controls over financial reporting; (b) the Partnership's compliance with applicable laws, regulations and the code of conduct; (c) independence and qualifications of the independent auditor; and, (d) the performance of the internal audit function and the independent auditors.

The Board of Supervisors has determined that all three members of the Audit Committee, John Hoyt Stookey, Harold R. Logan, Jr. and Dudley C. Mecum, are audit committee financial experts and are independent of management within the meaning of the New York Stock Exchange ("NYSE") corporate governance listing standards as of the date of this Annual Report.

Board of Supervisors and Executive Officers of the Partnership

The following table sets forth certain information with respect to the members of the Board of Supervisors and our executive officers as of November 29, 2004. Officers are elected for one-year terms and Supervisors are elected or appointed for three-year terms.


Name	Age		Position With the Partnership
Mark A. Alexander		46	President and Chief Executive Officer; Member of the Board of Supervisors (Appointed Supervisor)
Michael J. Dunn, Jr		55	Senior Vice President – Corporate Development; Member of the Board of Supervisors (Appointed Supervisor)
Robert M. Plante		56	Vice President and Chief Financial Officer
Jeffrey S. Jolly		52	Vice President and Chief Information Officer
Michael M. Keating		51	Vice President – Human Resources and Administration
Janice G. Sokol		38	Vice President, General Counsel and Secretary
A. Davin D'Ambrosio		40	Treasurer
Michael A. Stivala		35	Controller
John Hoyt Stookey		74	Member of the Board of Supervisors (Chairman and Elected Supervisor)
Harold R. Logan, Jr.		60	Member of the Board of Supervisors (Elected Supervisor)
Dudley C. Mecum		69	Member of the Board of Supervisors (Elected Supervisor)
Mark J. Anton		78	Supervisor Emeritus

Mr. Alexander has served as President and Chief Executive Officer since October 1996 and as an Appointed Supervisor since March 1996. He was Executive Vice Chairman and Chief Executive Officer from March through October 1996. From 1989 until joining the Partnership, Mr. Alexander was an officer of Hanson Industries (the United States management division of Hanson plc), most recently Senior Vice President – Corporate Development. Mr. Alexander serves as Chairman of the Board of Managers of the General Partner.

Mr. Dunn has served as Senior Vice President since June 1998 and became Senior Vice President – Corporate Development in November 2002. Mr. Dunn has served as an Appointed Supervisor since July 1998. He was Vice President – Procurement and Logistics from March 1997 until June 1998. From 1983 until joining the Partnership, Mr. Dunn was Vice President of Commodity Trading for the investment banking firm of Goldman Sachs & Company. Mr. Dunn serves on the Board of Managers of the General Partner.

Mr. Plante has served as a Vice President since October 1999 and became Vice President and Chief Financial Officer in November 2003. He was Vice President – Finance from March 2001 until November 2003 and Treasurer from March 1996 through October 2002. Mr. Plante held various financial and managerial positions with predecessors of the Partnership from 1977 until 1996. Mr. Plante serves on the Board of Managers of the General Partner.

Mr. Jolly has served as Vice President and Chief Information Officer since May 1999. He was Vice President – Information Services from July 1997 until May 1999. From May 1993 until joining the Partnership, Mr. Jolly was Vice President – Information Systems at The Wood Company, a food services company.

Mr. Keating has served as Vice President – Human Resources and Administration since July 1996. He previously held senior human resource positions at Hanson Industries and Quantum Chemical Corporation ("Quantum"), a predecessor of the Partnership.

Mr. D'Ambrosio became Treasurer in November 2002. He served as Assistant Treasurer from October 2000 to November 2002 and as Director of Treasury Services from January 1998 to October 2000. Mr. D'Ambrosio joined the Partnership in May 1996 after ten years in the commercial banking industry.

Ms. Sokol has served as Vice President, General Counsel and Secretary since November 2003. From May 1999 until November 2003, Ms. Sokol served as General Counsel and Secretary. She was Counsel from July 1998 to May 1999 and Associate Counsel from September 1996, when she joined the Partnership, until July 1998.

Mr. Stivala has served as Controller since December 2001. From 1991 until joining the Partnership, he held several positions with PricewaterhouseCoopers LLP, most recently as Senior Manager in the Assurance practice. Mr. Stivala is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.

Mr. Stookey has served as an Elected Supervisor and Chairman of the Board of Supervisors since March 1996. From 1986 until September 1993, he was the Chairman, President and Chief Executive Officer of Quantum and served as non-executive Chairman and a director of Quantum from its acquisition by Hanson plc in September 1993 until October 1995. Mr. Stookey is a non-executive Chairman of Per Scholas Inc.

Mr. Logan has served as an Elected Supervisor since March 1996. He is a Director and Chairman of the Finance Committee of the Board of Directors of TransMontaigne Inc., which provides logistical services (i.e. pipeline, terminaling and marketing) to producers and end-users of refined petroleum products. From 1995 to 2002, Mr. Logan was Executive Vice President/Finance, Treasurer and a Director of TransMontaigne Inc. From 1987 to 1995, Mr. Logan served as Senior Vice President of Finance and a Director of Associated Natural Gas Corporation, an independent gatherer and marketer of natural gas, natural gas liquids and crude oil. Mr. Logan is also a Director of The Houston Exploration Company, Graphic Packaging, Inc., Hart Energy Publishing, LLP and Rivington Capital Advisors, LLC.

Mr. Mecum has served as an Elected Supervisor since June 1996. He has been a managing director of Capricorn Holdings, LLC (a sponsor of and investor in leveraged buyouts) since June 1997. Mr. Mecum was a partner of G.L. Ohrstrom & Co. (a sponsor of and investor in leveraged buyouts) from 1989 to June 1996. Mr. Mecum is a director of Lyondell, CitiGroup and Mrs. Fields Famous Brands, Inc.

Mr. Anton has served as Supervisor Emeritus of the Board of Supervisors since January 1999. He is a former President, Chief Executive Officer and Chairman of the Board of Directors of Suburban Propane Gas Corporation, a predecessor of the Partnership, and a former Executive Vice President of Quantum.

Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and holders of ten percent or more of our Common Units to file initial reports of ownership and reports of changes in ownership of our Common Units with the Securities and Exchange Commission. Directors, executive officers and ten percent Unitholders are required to furnish the Partnership with copies of all Section 16(a) forms that they file. Based on a review of these filings, we believe that all such filings were made timely during fiscal 2004. In the course of this review, however, it was determined that grants of 1,200 restricted units in each of 2002 and 2003 to our Controller, none of which have vested, pay any distribution or have voting rights, were not previously reported.

Code of Ethics

We have adopted a code of ethics that applies to our senior executive team, including our principal executive officer, principal financial officer and principal accounting officer, and filed a copy of the code as Exhibit 14 to this Annual Report. Copies of our code of ethics are available without charge from our

website at www.suburbanpropane.com or upon written request directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206. Any amendments to, or waivers from, provisions of this code of ethics that apply to our principal executive officer, principal financial officer and principal accounting officer will be posted on our website.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines and Policy in accordance with the NYSE corporate governance listing standards in effect as of the date of this Annual Report. Copies of our corporate governance guidelines are available without charge from our website at www.suburbanpropane.com or upon written request directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth a summary of all compensation awarded or paid to or earned by our chief executive officer and our four other most highly compensated executive officers for services rendered to us during each of the last three fiscal years.


			Annual Compensation				LTIP Payout		All Other Compensation²
Name and Principal Position	Year		Salary		Bonus¹		LTIP Payout		All Other Compensation²
Mark A. Alexander		2004	$	450,000	$	201,150		—	$	170,625
President and Chief Executive Officer		2003		450,000		192,150		—		167,037
		2002		450,000		157,500		25,382		158,513
Michael J. Dunn, Jr.		2004		280,000		280,000		44,104		112,738
Sr. Vice President – Corporate Development		2003		280,000		101,626		27,403		95,695
		2002		275,000		81,813		12,135		85,956
Robert M. Plante		2004		200,000		150,000		—		68,392
Vice President and Chief Financial Officer		2003		180,000		46,116		—		39,038
		2002		175,000		45,625		3,807		32,938
Jeffrey S. Jolly		2004		185,000		120,250		16,716		63,786
Vice President and Chief Information Officer		2003		182,500		38,964		10,366		50,443
		2002		177,500		31,063		4,600		41,414
Michael M. Keating		2004		180,000		117,000		—		62,459
Vice President Human Resources and		2003		180,000		38,430		—		50,756
Administration		2002		175,000		30,625		4,400		43,700


¹	Bonuses are reported for the year earned, regardless of the year paid.

Other Compensation includes the following for fiscal year 2004 for Mr. Alexander: $3,250 under the Retirement Savings and Investment Plan; $1,200 in administrative fees under the Cash Balance Pension Plan; $135,000 awarded under the Long-Term Incentive Plan; $9,518 related to a vehicle; and $21,658 for insurance. For Mr. Dunn, this amount includes the following: $3,250 under the Retirement Savings and Investment Plan; $1,200 in administrative fees under the Cash Balance Pension Plan; $84,000 under the Long-Term Incentive Plan; $8,842 related to a vehicle; and $15,447 for insurance. For Mr. Plante, this amount includes the following: $3,000 under the Retirement Savings and Investment Plan; $1,200 in administrative fees under the Cash Balance Pension Plan; $45,000 awarded under the Long-Term Incentive Plan; $8,581 related to a vehicle; and $10,611 for insurance. For Mr. Jolly, this amount includes the following: $2,775 under the Retirement Savings and Investment Plan; $1,200 in administrative fees under the Cash Balance Pension Plan; $36,075 awarded under the Long-Term Incentive Plan; $9,230 related to a vehicle; and $14,507 for insurance. For Mr. Keating,


	this amount includes the following: $2,700 under the Retirement Savings and Investment Plan; $1,200 in administrative fees under the Cash Balance Pension Plan; $35,100 awarded under the Long-Term Incentive Plan; $9,003 related to a vehicle; and $14,457 for insurance.

Retirement Benefits

The following table sets forth the annual benefits upon retirement at age 65 in 2004, without regard to statutory maximums for various combinations of final average earnings and lengths of service which may be payable to Messrs. Alexander, Dunn, Plante, Jolly and Keating under the Pension Plan for Eligible Employees of the Operating Partnership and its Subsidiaries and/or the Suburban Propane Company Supplemental Executive Retirement Plan. Each such plan has been assumed by the Partnership and each such person will be credited for service earned under such plan to date. Messrs. Alexander and Dunn have 7 years and 6 years, respectively, under both plans. For vesting purposes, however, Mr. Alexander has 19 years combined service with the Partnership and his prior service with Hanson Industries. Messrs. Plante, Jolly and Keating have 26 years, 6 years and 19 years, respectively, under the Pension Plan. Benefits under the Pension Plan are limted to IRS statutory maximums for defined benefit plans. Currently, the statutory maximum for defined benefit plan is $200,000.

Pension Plan
Annual Benefit for Years of Credited Service Shown^1,2,3,4,5


Average Earnings	5 Yrs.		10 Yrs.		15 Yrs.		20 Yrs.		25 Yrs.		30 Yrs.		35 Yrs.
$100,000		7,888		15,775		23,663		31,551		39,438		47,326		55,214
$200,000		16,638		33,275		49,913		66,551		83,188		99,826		116,464
$300,000		25,388		50,775		76,163		101,551		126,938		152,326		177,714
$400,000		34,138		68,275		102,413		136,551		170,688		204,826		238,964
$500,000		42,888		85,775		128,663		171,551		214,438		257,326		300,214


¹	The Plans' definition of earnings consists of base pay only.

Annual Benefits are computed on the basis of straight life annuity amounts. The pension benefit is calculated as the sum of (a) plus (b) multiplied by (c) where (a) is that portion of final average earnings up to 125% of social security Covered Compensation times 1.4% and (b) is that portion of final average earnings in excess of 125% of social security Covered Compensation times 1.75% and (c) is credited service up to a maximum of 35 years.

Effective January 1, 1998, the Plan was amended to a cash balance benefit formula for current and future plan participants. Initial account balances were established based upon the actuarial equivalent value of the accrued benefit under the prior plan as of December 31, 1997. Annual interest credits and service based credits were credited to the accounts until December 31, 2002. The Plan was frozen to new participants effective January 1, 2000, and effective January 1, 2003 all future service based credits were discontinued. Interest credits continue to be applied based upon the five-year U.S. Treasury bond rate in effect during the preceding November, plus one percent. Plan participants as of December 31, 1997 are entitled to receive the greater of the cash balance benefit and the prior plan benefit through the year 2002.

⁴

In addition, a supplemental cash balance account was established equal to the value of certain benefits related to retiree medical and vacation benefits. An initial account value was determined for those active employees who were eligible for retiree medical coverage as of April 1, 1998 equal to $415 multipled by years of benefit service (maximum of 35 years). Future pay-based credits and interest are credited to this account. The 2002 pay-based credits for Messrs. Alexander, Dunn, Plante, Jolly and Keating are 2.0%, 0.0%, 2.0%, 0.0%, and 2.0%, respectively.


⁵	Effective January 1, 2003 the annual benefits accrued by Messrs. Alexander and Dunn pursuant to the Supplemental Executive Retirement Plan (in excess of the statutory limitations governing the Pension Plan) were, in the aggregate, approximately $100,000.

Supplemental Executive Retirement Plan

We have adopted a non-qualified, unfunded supplemental retirement plan known as the Supplemental Executive Retirement Plan (the "SERP"). The purpose of the SERP is to provide certain executive officers with a level of retirement income from us, without regard to statutory maximums, including the IRS limitation for defined benefit plans. Effective January 1, 1998, the Pension Plan for Eligible Employees of Suburban Propane, L.P. (the "Qualified Plan") was amended and restated to reflect the change into a cash balance plan. In light of the conversion of the Qualified Plan to a cash balance formula, the SERP was amended and restated effective January 1, 1998. The annual Retirement Benefit under the SERP represents the amount of Annual Benefits that the participants in the SERP would otherwise be eligible to receive, calculated using the same pay-based credits described under the Retirement Benefits section above, applied to the amount of Annual Compensation that exceeds the IRS statutory maximums for defined benefit plans which is currently $200,000. Messrs. Alexander and Dunn currently participate in the SERP.

Effective January 1, 2003, the SERP was discontinued with a frozen benefit determined for Messrs. Alexander and Dunn. Provided that the SERP requirements are met, Mr. Alexander will receive a monthly benefit of $6,031 and Mr. Dunn will receive a monthly benefit of $347.30. In the event of a change in control involving the Partnership, the SERP will terminate effective on the close of business 30 days following the change in control. Each participant will be deemed retired and will have his benefit determined as of the date the plan is terminated with payment of the benefit no later than 90 days after the change in control. Each participant will receive a lump sum payment equivalent to the present value of each participant's benefit payable under the plan utilizing the lesser of the prime rate of interest as published in the Wall Street Journal as of the date of the change of control or one percent as the discount rate to determine the present value of the accrued benefit.

Long-Term Incentive Plan

Effective October 1, 1997, we adopted a non-qualified, unfunded long-term incentive plan for officers and key employees ("LTIP-1"). LTIP-1 awards are based on a percentage of base pay and are subject to the achievement of certain performance criteria, including our ability to earn sufficient funds and make cash distributions on our Common Units with respect to each fiscal year. Awards vest over a five-year period with one-third vesting at the beginning of each of years three, four, and five following the award date. Effective September 30, 2004, LTIP-1 has been discontinued with the effect that no new awards will be made after that date, but all award grants prior thereto will continue to vest and be payable in accordance with their terms. As a result, payouts, if any, of awards made prior to September 30, 2004 under LTIP-1 will be made annually through the end of fiscal year 2011. Awards granted under LTIP-1 during fiscal year 2004 are as follows:


Name	Award FY 2004		Performance or Other Period Until Maturation or Payout	Potential Awards Under Plan
Name	Award FY 2004		Performance or Other Period Until Maturation or Payout	Threshold		Target		Maximum
Mark A. Alexander	$	135,000	3-5 Years	$	0	$	135,000	$	135,000
Michael J. Dunn, Jr.		84,000	3-5 Years		0		84,000		84,000
Robert M. Plante		45,000	3-5 Years		0		45,000		45,000
Jeffrey S. Jolly		36,075	3-5 Years		0		36,075		36,075
Michael M. Keating		35,100	3-5 Years		0		35,100		35,100

Effective October 1, 2002 we adopted a new non-qualified, unfunded long-term incentive plan for officers and key employees ("LTIP-2"). The new plan measures our performance on the basis of total return to unitholders ("TRU") and compares that to a predetermined peer group, primarily composed of other Master Limited Partnerships, approved by our Compensation Committee. Awards are granted in respect of and payouts, if any, are earned at the end of a three year performance period. The first performance period for which awards under LTIP-2 may be earned is the period from October 1, 2002 through September 30, 2005.

Depending on which quartile ranking our performance falls within for the applicable performance period relative to the peer group, LTIP-2 participants will receive a payout equal to the product of (a) a

factor based on the participant's salary and bonus at the beginning of the performance period, and (b) an amount determined pursuant to the formula used to measure TRU, multiplied by: zero if our performance falls within the lowest quartile of the peer group; .50 if our performance falls within the second lowest quartile; 1.0 if our performance falls within the second highest quartile and 1.25 if our performance falls within the top quartile. Because the formula used to determine TRU incorporates market value at the end of the performance period and the sum of distributions paid to unitholders during the performance period, both of which are variables that cannot be predicted prior to the end of the performance period, target award amounts are not determinable in advance. However, the table below sets forth the amount of payout that would be made if LTIP-2 had been in effect for a three year performance period ending at the conclusion of our 2004 fiscal year.


Name	Hypothetical Performance Period		Hypothetical Award Earned ¹
Name
Mark A. Alexander		2002 - 2004	$	188,688
Michael J. Dunn, Jr.		2002 - 2004	$	203,524
Robert M. Plante		2002 - 2004	$	109,035
Jeffrey S. Jolly		2002 - 2004	$	87,402
Michael M. Keating		2002 - 2004	$	85,040


¹	The Partnership's performance was in the second highest quartile at the end of the hypothetical performance period noted above.

Employment Agreement with the Chief Executive Officer

We entered into an employment agreement (the "Employment Agreement") with Mr. Alexander, which became effective March 5, 1996 and was amended October 23, 1997 and April 14, 1999.

Mr. Alexander's Employment Agreement had an initial term of three years, and automatically renews for successive one-year periods, unless earlier terminated by us or by Mr. Alexander or otherwise terminated in accordance with the Employment Agreement. The Employment Agreement for Mr. Alexander provides for an annual base salary of $450,000 as of September 25, 2004 and provides for Mr. Alexander to earn a bonus up to 100% of annual base salary (the "Maximum Annual Bonus") for services rendered based upon certain performance criteria. The Employment Agreement also provides for the opportunity to participate in benefit plans made available to our other senior executives and senior managers. We also provide Mr. Alexander with term life insurance with a face amount equal to three times his annual base salary.

If a "change of control" (as defined in the next paragraph) of the Partnership occurs and within six months prior thereto or at any time subsequent to such change of control we terminate Mr. Alexander's employment without "cause" (as defined in the Employment Agreement) or Mr. Alexander resigns with "good reason" (as defined in the Employment Agreement) or terminates his employment during the six month period commencing on the six month anniversary and ending on the twelve month anniversary of such change of control, then Mr. Alexander will be entitled to (i) a lump sum severance payment equal to three times the sum of his annual base salary in effect as of the date of termination plus the Maximum Annual Bonus, and (ii) medical benefits for three years from the date of such termination. The Employment Agreement provides that if any payment received by Mr. Alexander is subject to the 20% federal excise tax under Section 4999 of the Internal Revenue Code, the payment will be grossed up to permit Mr. Alexander to retain a net amount on an after-tax basis equal to what he would have received had the excise tax not been payable.

For the purposes of the Employment Agreement, "change of control" means the occurrence during the employment term of: (i) an acquisition of our Common Units or voting equity interests by any person other than the Partnership, the General Partner or any of our affiliates immediately after which such person beneficially owns more than 25% of the combined voting power of our then outstanding units, unless such acquisition was made by (a) us or our subsidiaries, or any employee benefit plan maintained

by us, our Operating Partnership or any of our subsidiaries, or (b) by any person in a transaction where (A) the existing holders prior to the transaction own at least 60% of the voting power of the entity surviving the transaction and (B) none of the Unitholders other than the Partnership, our subsidiaries, any employee benefit plan maintained by us, our Operating Partnership, or the surviving entity, or the existing beneficial owner of more than 25% of the outstanding units owns more than 25% of the combined voting power of the surviving entity (such transaction, Non-Control Transaction); or (ii) approval by our partners of (a) merger, consolidation or reorganization involving the Partnership other than a Non-Control Transaction; (b) a complete liquidation or dissolution of the Partnership; or (c) the sale or other disposition of 50% or more of our net assets to any person (other than a transfer to a subsidiary).

Mr. Alexander also participates in the SERP, which provides retirement income which could not be provided under our qualified plans by reason of limitations contained in the Internal Revenue Code.

Severance Protection Plan for Key Employees

Our officers and key employees are provided with employment protection following a "change of control" (the "Severance Protection Plan"), as defined in the immediately preceding section. The Severance Protection Plan provides for severance payments equal to sixty-five (65) weeks of base pay and target bonuses for such officers and key employees following a "change of control" and termination of employment. This group comprises approximately forty-three (43) individuals. Pursuant to their severance protection agreements, Messrs. Dunn, Plante, Jolly and Keating, as our executive officers, have been granted severance protection payments of seventy-eight (78) weeks of base pay and target bonuses following a "change in control" and termination of employment in lieu of participation in the Severance Protection Plan. Our Compensation Committee has also granted severance protection payments of seventy-eight (78) weeks to three other executive officers who do not participate in the Severance Protection Plan.

Compensation Committee Interlocks and Insider Participation in Compensation Decisions

Compensation of our executive officers is determined by the Compensation Committee of our Board of Supervisors. The Compensation Committee is comprised of Messrs. Stookey, Mecum and Logan, none of whom are our officers or employees.

Compensation of Supervisors

Mr. Stookey, who is the Chairman of the Board of Supervisors, receives annual compensation of $75,000 for his services to us. Mr. Logan and Mr. Mecum, the other two Elected Supervisors, receive $50,000 per year and Mr. Mark J. Anton, who serves as Supervisor Emeritus, receives $15,000 per year. For fiscal 2005, the annual compensation for Mr. Stookey was increased to $100,000, the annual compensation of Mr. Logan and Mr. Mecum was increased to $75,000 and the annual compensation for Mr. Anton was increased to $25,000. All Elected Supervisors and the Supervisor Emeritus receive reimbursement of reasonable out-of-pocket expenses incurred in connection with meetings of the Board of Supervisors. We do not pay any additional remuneration to our employees (or employees of any of our affiliates) or employees of our General Partner or any of its affiliates for serving as members of the Board of Supervisors.

In addition, each of Messrs. Stookey, Logan and Mecum have been granted awards under the Partnership's 2000 Restricted Unit Plan of 8,500 units and Mr. Anton has been granted an award of 2,750 units. These restricted awards will vest and the units will be issued in installments of 25%, 25% and 50% of the total award on the third, fourth and fifth anniversaries, respectively, of November 1, 2004. Prior to vesting, the recipient has no power to dispose of the units, no distributions are payable with respect to the units and the units do not have any voting rights.


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of November 29, 2004 regarding the beneficial ownership of Common Units and Incentive Distribution Rights by each member of the Board of Supervisors, each executive officer named in the Summary Compensation table, all members of the Board of Supervisors and executive officers as a group and each person or group known by us (based upon filings under Section 13(d) or (g) under the Securities Exchange Act of 1934) to own beneficially more than 5% thereof. Except as set forth in the notes to the table, the business address of each individual or entity in the table is c/o Suburban Propane Partners, L.P., 240 Route 10 West, Whippany, New Jersey 07981-0206 and each individual or entity has sole voting and investment power over the Common Units reported.

Suburban Propane, L.P.

Title of Class

Name of Beneficial Owner

Amount and Nature of
Beneficial Ownership

Percent
of Class

Common Units

Mark A. Alexander (a)

29,000

Michael J. Dunn, Jr. (a)

Robert M. Plante

12,262

Jeffrey S. Jolly

1,500

Michael M. Keating

5,000

John Hoyt Stookey

11,519

Harold R. Logan, Jr.

14,104

Dudley C. Mecum

5,634

Mark J. Anton (b)

4,600

All Members of the Board

of Supervisors and Executive

Officers as a Group (12 persons)

87,034

Goldman, Sachs & Co. (c)

2,043,915

6.8

85 Broad Street

Common Units

New York, NY 10004

Incentive Distribution Rights

Suburban Energy Services Group LLC

N/A


*	Less than 1%.

(a)

Excludes the following numbers of Common Units as to which the following individuals deferred receipt as described below; Mr. Alexander - 243,902 and Mr. Dunn - 48,780. These Common Units are held in trust pursuant to a Compensation Deferral Plan, and Mr. Alexander and Mr. Dunn will have no voting or investment power over these Common Units until they are distributed by the trust. Mr. Alexander and Mr. Dunn have elected to receive the quarterly cash distributions on these deferred units. Notwithstanding the foregoing, if a "change of control" of the Partnership occurs (as defined in the Compensation Deferral Plan), all of the deferred Common Units (and related distributions) held in the trust automatically become distributable to the members.


(b)	Mr. Anton shares voting and investment power over 3,600 Common Units with his wife and over 1,000 Common Units with Lizmar Partners, L.P., a family owned limited partnership of which he is its general partner.


(c)	Holder reports having shared voting power with respect to all of the Common Units and shared dispositive power with respect to all of the Common Units.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 2004, two relatives of the Partnership's President and Chief Executive Officer purchased franchise interests in Suburban Cylinder Express for the standard franchise fee of $35,000. Additionally, as part of the franchise arrangement, on an ongoing basis the franchisees will purchase propane from the Partnership for such franchises in the normal course of business. The initial purchase prices for the franchises were paid for through a gift from the Partnership's President and Chief Executive Officer. The President and Chief Executive Officer did not receive any economic interest in the franchises and will recuse himself from any determinations that may be made by the Partnership concerning the franchises. The Partnership's Audit Committee reviewed the terms of the arrangements and determined that these related parties did not receive any preferential treatment.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth the aggregate fees for services related to fiscal years 2004 and 2003 provided by PricewaterhouseCoopers LLP, our principal accountants.


	Fiscal 2004		Fiscal 2003
Audit Fees (a)	$	1,088,480	$	599,000
Audit-Related Fees (b)		509,500		206,000
Tax Fees (c)		660,000		590,000
All Other Fees (d)		3,500		—


(a)	Audit Fees represent fees billed for professional services rendered for the audit of our annual financial statements and review of our quarterly financial statements, and audit services provided in connection with other statutory or regulatory filings, including services related to our December 2003 public offering of Common Units.

(b)

Audit-Related Fees represent fees billed for assurance services related to the audit of our financial statements. These assurance services include fees related to compliance with the provisions of the Sarbanes-Oxley Act of 2002, as well as fees for services related to the audits of the Partnership's defined benefit pension plan and defined contribution plan financial statements, paid by the individual plans.


(c)	Tax Fees represent fees for professional services related to tax reporting, compliance and transaction services assistance.


(d)	All Other Fees represent fees for services provided to us not otherwise included in the categories above.

The Audit Committee of the Board of Supervisors has adopted a formal policy concerning the approval of audit and non-audit services to be provided by the principal accountant, PricewaterhouseCoopers LLP. The policy requires that all services PricewaterhouseCoopers LLP may provide to us, including audit services and permitted audit-related and non-audit services, be pre-approved by the Audit Committee. The Audit Committee pre-approved all audit and non-audit services provided by PricewaterhouseCoopers LLP during fiscal 2004 and fiscal 2003.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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


1.				Financial Statements
				See "Index to Financial Statements" set forth on page F-1.
2.				Financial Statement Schedule
				See "Index to Financial Statement Schedule" set forth on page S-1.
3.				Exhibits
				See "Index to Exhibits" set forth on page E-1.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SUBURBAN PROPANE PARTNERS, L.P.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:


Signature	Title	Date

/s/ MICHAEL J. DUNN, JR	Senior Vice President – Corporate Development Suburban Propane Partners, L.P. Appointed Supervisor	December 9, 2004

(Michael J. Dunn, Jr.)

/s/ JOHN HOYT STOOKEY	Chairman and Elected Supervisor	December 9, 2004

(John Hoyt Stookey)

/s/ HAROLD R. LOGAN, JR.	Elected Supervisor	December 9, 2004

(Harold R. Logan, Jr.)

/s/ DUDLEY C. MECUM	Elected Supervisor	December 9, 2004

(Dudley C. Mecum)

/s/ ROBERT M. PLANTE	Vice President and Chief Financial Officer Suburban Propane Partners, L.P.	December 9, 2004

(Robert M. Plante)

/s/ MICHAEL A. STIVALA	Controller Suburban Propane Partners, L.P.	December 9, 2004

(Michael A. Stivala)

INDEX TO EXHIBITS

The exhibits listed on this Exhibit Index are filed as part of this Annual Report. Exhibits required to be filed by Item 601 of Regulation S-K, which are not listed below, are not applicable.


Exhibit Number				Description
2.1				Recapitalization Agreement dated as of November 27, 1998 by and among the Partnership, the Operating Partnership, the General Partner, Millennium and Suburban Energy Services Group LLC. (Incorporated by reference to Exhibit 2.1 to the Partnership's Current Report on Form 8-K filed December 3, 1998).
3.1				Second Amended and Restated Agreement of Limited Partnership of the Partnership dated as of May 26, 1999. (Incorporated by reference to the Partnership's Proxy Statement filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 on April 22, 1999).
3.2				Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated as of May 26, 1999. (Incorporated by reference to the Partnership's Proxy Statement filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 on April 22, 1999).
4.1				Note Agreement dated as of February 28, 1996 among certain investors and the Operating Partnership relating to $425 million aggregate principal amount of 7.54% Senior Notes due June 30, 2011 (the "1996 Note Agreement"). (Incorporated by reference to Exhibit 10.3 to the Partnership's Current Report on Form 8-K filed December 3, 1998).
4.2				Amendment No. 1 to the 1996 Note Agreement dated May 13, 1998. (Incorporated by reference to Exhibit 10.4 to the Partnership's Current Report on Form 8-K filed December 3, 1998).
4.3				Amendment No. 2 to the 1996 Note Agreement dated March 29, 1999. (Incorporated by reference to Exhibit 10.5 to the Partnership's Current Report on Form 8-K filed December 3, 1998).
4.4				Amendment No. 3 to the 1996 Note Agreement dated December 6, 2000. (Incorporated by reference to Exhibit 10.6 to the Partnership's Current Report on Form 8-K filed December 3, 1998).
4.5				Amendment No. 4 to the 1996 Note Agreement dated March 21, 2002. (Incorporated by reference to Exhibit 10.7 to the Partnership's Current Report on Form 8-K filed December 3, 1998).
4.6				Amendment No. 5 to the 1996 Note Agreement dated November 20, 2002. (Incorporated by reference to Exhibit 10.8 to the Partnership's Current Report on Form 8-K filed December 3, 1998).
4.7				Guaranty Agreement dated as of April 11, 2002 provided by four direct subsidiaries of Suburban Propane, L.P. for the 7.54% Senior Notes due June 30, 2011. (Incorporated by reference to the Partnership's Quarterly Report on Form 10-Q for the period ended March 30, 2002).
4.8				Intercreditor Agreement dated March 21, 2002 between First Union National Bank, the Lenders under the Operating Partnership's Amended and Restated Credit Agreement and the Noteholders of the Operating Partnership's 7.54% Senior Notes due June 30, 2011. (Incorporated by reference to the Partnership's Quarterly Report on Form 10-Q for the period ended March 30, 2002).

E-1


Exhibit Number				Description
4.9				Note Agreement dated as of April 19, 2002 among certain investors and the Operating Partnership relating to $42.5 million aggregate principal amount of 7.37% Senior Notes due June 30, 2012. (Incorporated by reference to the Partnership's Quarterly Report on Form 10-Q for the period ended June 29, 2002).
4.10				Guaranty Agreement dated as of July 1, 2002 provided by certain subsidiaries of Suburban Propane, L.P. for the 7.37% Senior Notes due June 30, 2012. (Incorporated by reference to the Partnership's Quarterly Report on Form 10-Q for the period ended June 29, 2002).
4.11				Indenture, dated as of December 23, 2003, between Suburban Propane Partners, L.P., Suburban Energy Finance Corp. and The Bank of New York, as Trustee (including Form of Senior Global Exchange Note). (Incorporated by reference to Exhibit 10.28 to the Partnership's Quarterly Report on Form 10-Q For the fiscal quarter ended December 27, 2003).
4.12				Exchange and Registration Rights Agreement, dated December 23, 2003 among Suburban Propane Partners, L.P., Suburban Energy Finance Corp., Wachovia Capital Markets, LLC and Goldman, Sachs & Co. (Incorporated by reference to Exhibit 4.1 to the Partnership's registration statement on Form S-4 dated December 19, 2003).
4.13				Purchase Agreement, dated December 18, 2003 among Suburban Propane Partners, L.P., Suburban Energy Finance Corp., Wachovia Capital Markets, LLC and Goldman, Sachs & Co. (Incorporated by reference to Exhibit 4.1 to the Partnership's registration statement on Form S-4 dated December 19, 2003).
10.1				Employment Agreement dated as of March 5, 1996 between the Operating Partnership and Mr. Alexander. (Incorporated by reference to Exhibit 10.13 to the Partnership's Current Report on Form 8-K filed April 29, 1996).
10.2				First Amendment to Employment Agreement dated as of March 5, 1996 between the Operating Partnership and Mr. Alexander entered into as of October 23, 1997. (Incorporated by reference to Exhibit 10.13 to the Partnership's Current Report on Form 8-K filed April 29, 1996).
10.3				Second Amendment to Employment Agreement dated as of March 5, 1996 between the Operating Partnership and Mr. Alexander entered into as of April 14, 1999. (Incorporated by reference to Exhibit 10.15 to the Partnership's Annual Report on Form 10-K for the fiscal year ended September 27, 1997).
10.4				Suburban Propane Partners, L.P. 2000 Restricted Unit Plan. (Incorporated by reference to Exhibit 10.16 to the Partnership's Annual Report on Form 10-K for the fiscal year ended September 30, 2000).
10.5				The Partnership's Severance Protection Plan dated September 1996. (Incorporated by reference to the same numbered Exhibit to the Partnership's Annual Report on Form 10-K for the fiscal year ended September 28, 1996).
10.6				Suburban Propane L.P. Long Term Incentive Plan as amended and restated effective October 1, 1999. (Incorporated by reference to Exhibit 10.19 to the Partnership's Annual Report on Form 10-K for the fiscal year ended September 28, 2002).
10.7				Suburban Propane L.P. 2003 Long Term Incentive Plan. (Filed herewith).

E-2


Exhibit Number				Description
10.8				Benefits Protection Trust dated May 26, 1999 by and between Suburban Propane Partners, L.P. and First Union National Bank. (Incorporated by reference to the Partnership's Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 1999).
10.9				Compensation Deferral Plan of Suburban Propane Partners, L.P. and Suburban Propane, L.P. amended and restated as of January 1, 2004. (Filed herewith).
10.10				Amended and Restated Supplemental Executive Retirement Plan of the Partnership (effective as of January 1, 1998). (Incorporated by reference to Exhibit 10.23 to the Partnership's Annual Report on Form 10-K for the fiscal year ended September 29, 2001).
10.11				Amended and Restated Retirement Savings and Investment Plan of Suburban Propane effective as of January 1, 1998). (Incorporated by reference to Exhibit 10.24 to the Partnership's Annual Report on Form 10-K for the fiscal year ended September 29, 2001).
10.12				Amendment No. 1 to the Retirement Savings and Investment Plan of Suburban Propane (effective January 1, 2002). (Incorporated by reference to Exhibit 10.25 to the Partnership's Annual Report on Form 10-K for the fiscal year ended September 28, 2002).
10.13				Third Amended and Restated Credit Agreement dated October 20, 2004. (Filed herewith).
10.14				Purchase and Non-Competition Agreement dated as of January 1, 2004 between Ferrellgas, L.P. and Suburban Propane, L.P. and Suburban Sales and Service, Inc. (Filed herewith).
10.15				Purchase and Non-Competition Agreement dated September 1, 2004 between Ferrellgas, L.P. and Suburban Propane, L.P. and Suburban Sales and Service, Inc. (Filed herewith).
14.1				Code of Ethics. (Filed herewith).
21.1				Subsidiaries of Surburban Propane Partners, L.P. (Filed herewith).
23.1				Consent of Independent Accountants. (Filed herewith).
31.1				Certification of the President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
31.2				Certification of the Vice President and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
32.1				Certification of the President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
32.2				Certification of the Vice President and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).

E-3

INDEX TO FINANCIAL STATEMENTS

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES


	Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets - As of September 25, 2004 and September 27, 2003		F-3

Consolidated Statements of Operations - Years Ended September 25, 2004, September 27, 2003 and September 28, 2002		F-4

Consolidated Statements of Cash Flows - Years Ended September 25, 2004, September 27, 2003 and September 28, 2002		F-5

Consolidated Statements of Partners' Capital - Years Ended September 25, 2004, September 27, 2003 and September 28, 2002		F-6

Notes to Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Supervisors and Unitholders of
Suburban Propane Partners, L.P.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15.(a)1. present fairly, in all material respects, the financial position of Suburban Propane Partners, L.P. and its subsidiaries (the "Partnership") at September 25, 2004 and September 27, 2003, and the results of their operations and their cash flows for each of the three years in the period ended September 25, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15.(a)2. presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule 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 of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Florham Park, NJ
December 8, 2004

F-2

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands)


	September25, 2004			September 27, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	53,481		$	15,765
Accounts receivable, less allowance for doubtful accounts of $7,896 and $2,519, respectively		91,000			36,437
Inventories		65,119			41,510
Prepaid expenses and other current assets		43,294			5,200
Total current assets		252,894			98,912
Property, plant and equipment, net		406,702			312,790
Goodwill		282,015			243,236
Other intangible assets, net		25,582			1,035
Other assets		24,814			14,586
Total assets	$	992,007		$	670,559
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable	$	60,664		$	26,204
Accrued employment and benefit costs		25,152			20,798
Current portion of long-term borrowings		42,940			42,911
Accrued insurance		12,724			7,810
Customer deposits and advances		61,265			23,958
Accrued interest		10,067			7,457
Other current liabilities		32,152			8,575
Total current liabilities		244,964			137,713
Long-term borrowings		472,975			340,915
Postretirement benefits obligation		31,616			33,435
Accrued insurance		25,517			25,758
Accrued pension liability		35,035			42,136
Other liabilities		13,782			6,524
Total liabilities		823,889			586,481
Commitments and contingencies

Partners' capital:
Common Unitholders (30,257 and 27,256 units issued and outstanding at
September 25, 2004 and September 27, 2003, respectively)		238,880			165,950
General Partner		852			1,567
Deferred compensation		(5,778	)		(5,795	)
Common Units held in trust, at cost		5,778			5,795
Unearned compensation		(3,845	)		(2,171	)
Accumulated other comprehensive loss		(67,769	)		(81,268	)
Total partners' capital		168,118			84,078
Total liabilities and partners' capital	$	992,007		$	670,559

The accompanying notes are an integral part of these consolidated financial statements.

F-3

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)


	Year Ended
	September 25, 2004			September 27, 2003			September 28, 2002
Revenues
Propane	$	856,109		$	680,840		$	578,439
Fuel oil and refined fuels		281,682			—			—
Natural gas and electricity		68,452			—			—
HVAC		92,072			46,938			47,926
Other		8,939			7,297			8,757
		1,307,254			735,075			635,122
Costs and expenses
Cost of products sold		779,029			358,582			276,574
Operating		361,696			232,462			216,641
General and administrative		53,888			36,661			30,771
Restructuring costs		2,942			—			—
Impairment of goodwill		3,177			—			—
Depreciation and amortization		36,743			27,520			28,355
Gain on sale of storage facility		—			—			(6,768	)
		1,237,475			655,225			545,573
Income before interest expense and provision for income taxes		69,779			79,850			89,549
Interest income		(429	)		(334	)		(600	)
Interest expense		41,261			33,963			35,925
Income before provision for income taxes		28,947			46,221			54,224
Provision for income taxes		3			202			703
Income from continuing operations		28,944			46,019			53,521
Discontinued operations (Note 17):
Gain on sale of customer service centers		26,332			2,483			—
(Loss) income from discontinued service centers		(972	)		167			3
Net income	$	54,304		$	48,669		$	53,524
General Partner's interest in net income	$	1,310		$	1,193		$	1,362
Limited Partners' interest in net income	$	52,994		$	47,476		$	52,162
Income per Common Unit - basic
Income from continuing operations	$	0.96		$	1.77		$	2.12
Discontinued operations		0.83			0.10			—
Net income	$	1.79		$	1.87		$	2.12
Weighted average number of Common Units outstanding - basic		29,599			25,359			24,631
Income per Common Unit - diluted
Income from continuing operations	$	0.96		$	1.76		$	2.12
Discontinued operations		0.82			0.10			—
Net income	$	1.78		$	1.86		$	2.12
Weighted average number of Common Units outstanding - diluted		29,705			25,495			24,665

The accompanying notes are an integral part of these consolidated financial statements.

F-4

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


	Year Ended
	September 25, 2004			September 27, 2003			September 28, 2002
Cash flows from operating activities:
Net income	$	54,304		$	48,669		$	53,524
Adjustments to reconcile net income to net cash provided by operations:
Depreciation expense		33,344			27,097			27,857
Amortization of intangible assets		3,399			423			498
Amortization of debt origination costs		1,421			1,291			1,338
Amortization of unearned compensation		1,171			863			985
Gain on disposal of property, plant and
equipment, net		(715	)		(636	)		(546	)
Gain on sale of customer service centers		(26,332	)		(2,483	)		—
Pension settlement charge		5,337			—			—
Impairment of goodwill		3,177			—			—
Gain on sale of storage facility		—			—			(6,768	)
Changes in assets and liabilities, net of businesses acquired
and of dispositions:
Decrease/(increase) in accounts receivable		10,047			(4,101	)		9,635
(Increase)/decrease in inventories		(11,655	)		(5,339	)		5,402
(Increase)/decrease in prepaid expenses and other current assets		(12,177	)		576			(2,526	)
Increase/(decrease) in accounts payable		17,603			(1,208	)		(10,862	)
Increase/(decrease) in accrued employment and benefit costs		1,024			(632	)		(8,518	)
Increase/(decrease) in accrued interest		2,610			(1,209	)		348
Increase/(decrease) in other accrued liabilities		20,233			(1,825	)		(1,153	)
Decrease/(increase) in other noncurrent assets		619			(7,435	)		(439	)
(Decrease)/increase in other noncurrent liabilities		(10,345	)		3,249			—
Net cash provided by operating activities		93,065			57,300			68,775
Cash flows from investing activities:
Capital expenditures		(26,527	)		(14,050	)		(17,464	)
Acquisition of Agway Energy, net of cash acquired		(211,181	)		—			—
Proceeds from sale of property, plant and equipment		1,799			1,994			2,625
Proceeds from sale of customer service centers, net		39,352			7,197			—
Proceeds from sale of storage facility, net		—			—			7,988
Net cash used in investing activities		(196,557	)		(4,859	)		(6,851	)
Cash flows from financing activities:
Long-term debt repayments		(42,911	)		(88,939	)		(408	)
Long-term debt issuance		175,000			—			—
Expenses associated with debt agreements		(5,947	)		(826	)		—
Net proceeds from issuance of Common Units		87,566			72,186			—
Partnership distributions		(72,500	)		(60,052	)		(57,055	)
Net cash provided by/(used in) financing activities		141,208			(77,631	)		(57,463	)
Net increase/(decrease) in cash and cash equivalents		37,716			(25,190	)		4,461
Cash and cash equivalents at beginning of year		15,765			40,955			36,494
Cash and cash equivalents at end of year		53,481			15,765			40,955
Supplemental disclosure of cash flow information:
Cash paid for interest	$	35,252		$	33,635		$	34,134
Non-cash adjustment for minimum pension liability	$	2,096		$	(4,938	)	$	37,800

The accompanying notes are an integral part of these consolidated financial statements.

F-5

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands)


	Number of Common Units		Common Unitholders			General Partner			Deferred Compen- sation			Common Units Held in Trust			Unearned Compen- sation			Accumulated Other Compre- hensive (Loss)/Income			Total Partners' Capital			Compre- hensive Income
Balance at September 29, 2001		24,631	$	105,549		$	1,888		$	(11,567	)	$	11,567		$	(1,211	)	$	(47,277	)	$	58,949
Net income				52,162			1,362															53,524		$	53,524
Other comprehensive income:
Net unrealized gains on cash flow hedges																			838			838			838
Less: Reclassification of realized gains on cash flow hedges into earnings																			(155	)		(155	)		(155	)
Minimum pension liability adjustment																			(37,800	)		(37,800	)		(37,800	)
Comprehensive income																								$	16,407
Partnership distributions				(55,729	)		(1,326	)														(57,055	)
Grants issued under Restricted Unit Plan, net of forfeitures				1,698												(1,698	)					—
Amortization of Compensation Deferral Plan																382						382
Amortization of Restricted Unit Plan, net of forfeitures																603						603
Balance at September 28, 2002		24,631		103,680			1,924			(11,567	)		11,567			(1,924	)		(84,394	)		19,286
Net income				47,476			1,193															48,669		$	48,669
Other comprehensive income:
Net unrealized losses on cash flow hedges																			(1,129	)		(1,129	)		(1,129	)
Less: Reclassification of realized gains on cash flow hedges into earnings																			(683	)		(683	)		(683	)
Minimum pension liability adjustment																			4,938			4,938			4,938
Comprehensive income																								$	51,795
Partnership distributions				(58,502	)		(1,550	)														(60,052	)
Sale of Common Units under public offering, net of offering expenses		2,625		72,186																		72,186
Distribution of Common Units held in trust										5,772			(5,772	)								—
Grants issued under Restricted Unit Plan, net of forfeitures				1,110												(1,110	)					—
Amortization of Restricted Unit Plan, net of forfeitures																863						863
Balance at September 27, 2003		27,256		165,950			1,567			(5,795	)		5,795			(2,171	)		(81,268	)		84,078
Net income				52,994			1,310															54,304		$	54,304
Other comprehensive income:
Net unrealized gains on cash flow hedges																			9,129			9,129			9,129
Less: Reclassification of realized losses on cash flow hedges into earnings																			1,129			1,129			1,129
Non-cash pension settlement charge																			5,337			5,337			5,337
Minimum pension liability adjustment																			(2,096	)		(2,096	)		(2,096	)
Comprehensive income																								$	67,803
Partnership distributions				(70,475	)		(2,025	)														(72,500	)
Sale of Common Units under public offering, net of offering expenses		2,990		87,566																		87,566
Common Units issued under Restricted Unit Plan		11
Common Units distributed into trust										(159	)		159									—
Distribution of Common Units held in trust										176			(176	)								—
Grants issued under Restricted Unit Plan, net of forfeitures				2,845												(2,845	)					—
Amortization of Restricted Unit Plan, net of forfeitures																1,171						1,171
Balance at September 25, 2004		30,257	$	238,880		$	852		$	(5,778	)	$	5,778		$	(3,845	)	$	(67,769	)	$	168,118

The accompanying notes are an integral part of these consolidated financial statements.

F-6

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per unit amounts)


1.	Partnership Organization and Formation

Suburban Propane Partners, L.P. (the "Partnership") is a publicly traded Delaware limited partnership principally engaged, through its operating partnership and subsidiaries, in the retail and wholesale marketing and distribution of propane, and related appliances, parts and service. In addition, with the acquisition of the assets and operations of Agway Energy on December 23, 2003 (see Note 3), the Partnership has expanded its activities to include the marketing and distribution of fuel oil and other refined fuels, as well as the marketing of natural gas and electricity in deregulated markets. The limited partner interests in the Partnership are evidenced by common units traded on the New York Stock Exchange ("Common Units"), with 30,256,767 Common Units outstanding at September 25, 2004. The limited partners are entitled to participate in distributions and exercise the rights and privileges available to limited partners under the Second Amended and Restated Agreement of Limited Partners (the "Partnership Agreement"), such as the election of three of the five members of the Board of Supervisors and vote on the removal of the general partner.

Suburban Propane, L.P. (the "Operating Partnership"), a Delaware limited partnership, is the Partnership's operating subsidiary formed to operate the propane business and assets. In addition, Suburban Sales & Service, Inc. (the "Service Company"), a subsidiary of the Operating Partnership, was formed to operate the service work and appliance and parts businesses of the Partnership. The Operating Partnership, together with its direct and indirect subsidiaries, accounts for substantially all of the Partnership's assets, revenues and earnings. The Partnership, the Operating Partnership and the Service Company commenced operations in March 1996 in connection with the Partnership's initial public offering.

The general partner of both the Partnership and the Operating Partnership is Suburban Energy Services Group LLC (the "General Partner"), a Delaware limited liability company. The General Partner is owned by senior management of the Partnership and, following the public offerings discussed in Note 16, owns a combined 1.54% general partner interest in the Partnership and the Operating Partnership. The General Partner appoints two of the five members of the Board of Supervisors.

On January 5, 2001, Suburban Holdings, Inc., a subsidiary of the Operating Partnership, was formed to hold the stock of Gas Connection, Inc. (d/b/a HomeTown Hearth & Grill), Suburban @ Home, Inc. and Suburban Franchising, Inc. HomeTown Hearth & Grill sells and installs natural gas and propane gas grills, fireplaces and related accessories and supplies. Suburban @ Home sells, installs, services and repairs a full range of heating, ventilation and air conditioning ("HVAC") products. Suburban Franchising creates and develops propane related franchising business opportunities.

On November 21, 2003, Suburban Heating Oil Partners, LLC, a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the fuel oil and other refined fuels and HVAC assets and businesses of Agway Energy (see Note 3). In addition, Agway Energy Services, LLC, also a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the natural gas and electricity marketing business of Agway Energy.

Suburban Energy Finance Corporation, a direct wholly-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as co-issuer, jointly and severally with the Partnership, of the Partnership's $175,000 6.875% senior notes due in 2013 (see Note 9).

The Partnership serves more than 1,000,000 active residential, commercial, industrial and agricultural customers from approximately 370 customer service centers in 30 states. The Partnership's operations are concentrated in the east and west coast regions of the United States. No single customer accounted for 10% or more of the Partnership's revenues during fiscal 2004, 2003 or 2002. During fiscal 2004, 2003 and 2002, three suppliers provided approximately 36%, 42% and 49%, respectively, of the Partnership's total domestic propane supply. The Partnership believes that, if supplies from any of these three suppliers were interrupted, it would be able to secure adequate propane supplies from other sources without a material disruption of its operations.

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2.	Summary of Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the accounts of the Partnership and all of its direct and indirect subsidiaries. All significant intercompany transactions and account balances have been eliminated. The Partnership consolidates the results of operations, financial condition and cash flows of the Operating Partnership as a result of the Partnership's 98.9899% limited partner interest in the Operating Partnership and its ability to influence control over the major operating and financial decisions through the powers of the Board of Supervisors provided for in the Second Amended and Restated Agreement of Limited Partnership.

Fiscal Period. The Partnership's fiscal year ends on the last Saturday nearest to September 30.

Revenue Recognition. Sales of propane, fuel oil and other refined fuels are recognized at the time product is delivered to the customer. Revenue from the sale of appliances and equipment is recognized at the time of sale or when installation is complete, as applicable. Revenue from repairs, maintenance and other service activities is recognized upon completion of the service. Revenue from HVAC service contracts is recognized ratably over the service period. Revenue from the natural gas and electricity business is recognized based on customer usage as determined by meter readings.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates have been made by management in the areas of insurance and litigation reserves, environmental reserves, pension and other postretirement benefit liabilities and costs, valuation of derivative instruments, asset valuation assessment, as well as the allowance for doubtful accounts. Actual results could differ from those estimates, making it reasonably possible that a change in these estimates could occur in the near term.

Cash and Cash Equivalents. The Partnership considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of these instruments.

Inventories. Inventories are stated at the lower of cost or market. Cost is determined using a weighted average method for propane, fuel oil and other refined fuels and a standard cost basis for appliances, which approximates average cost.

Derivative Instruments and Hedging Activities. The Partnership enters into a combination of exchange-traded futures and option contracts, forward contracts and in certain instances, over-the-counter options (collectively "derivative instruments") to manage the price risk associated with future purchases of the commodities used in its operations, principally propane and fuel oil, as well as to ensure supply during periods of high demand. All derivative instruments are reported on the balance sheet, within other current assets or other current liabilities, at their fair values pursuant to Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138 and No. 149 ("SFAS 133"). On the date that futures, forward and option contracts are entered into, the Partnership makes a determination as to whether the derivative instrument qualifies for designation as a hedge. Changes in the fair value of derivative instruments are recorded each period in current period earnings or other comprehensive income/(loss) ("OCI"), depending on whether a derivative instrument is designated as a hedge and, if it is, the type of hedge. For derivative instruments designated as cash flow hedges, the Partnership formally assesses, both at the hedge contract's inception and on an ongoing basis, whether the hedge contract is highly effective in offsetting changes in cash flows of hedged items. Changes in the fair value of derivative instruments designated as cash flow hedges are reported in OCI to the extent effective and reclassified into cost of products sold during the same period in which the hedged item affects earnings. The mark-to-market gains or losses on ineffective portions of cash flow hedges are recognized in cost of products sold immediately. Changes in the fair value of derivative instruments that are not designated as hedges are recorded in current period earnings within operating expenses.

A portion of the Partnership's option contracts are not classified as hedges and, as such, changes in the fair value of these derivative instruments are recognized within operating expenses as they occur. The

F-8

value of certain option contracts that do qualify as hedges and are designated as cash flow hedges under SFAS 133 have two components of value: time value and intrinsic value. The intrinsic value is the value by which the option is in the money (i.e., the amount by which the value of the commodity exceeds the exercise or "strike" price of the option). The remaining amount of option value is attributable to time value. The Partnership does not include the time value of option contracts in its assessment of hedge effectiveness and, therefore, records changes in the time value component of the options currently in earnings.

Market risks associated with the trading of futures, options and forward contracts are monitored daily for compliance with the Partnership's Hedging and Risk Management Policy which includes volume limits for open positions. Open inventory positions are also reviewed and managed daily as to exposures to changing market prices.

Long-Lived Assets. Long-lived assets include:

Property, plant and equipment. Property, plant and equipment are stated at cost. Expenditures for maintenance and routine repairs are expensed as incurred while betterments are capitalized as additions to the related assets and depreciated over the asset's remaining useful life. The Partnership capitalizes costs incurred in the acquisition and modification of computer software used internally, including consulting fees and costs of employees dedicated solely to a specific project. At the time assets are retired, or otherwise disposed of, the asset and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized within operating expenses. Depreciation is determined for related groups of assets under the straight-line method based upon their estimated useful lives as follows:


Buildings				40 Years
Building and land improvements				10-40 Years
Transportation equipment				4-30 Years
Storage facilities				7-40 Years
Equipment, primarily tanks and cylinders				3-40 Years
Computer software				3-7 Years

The Partnership reviews the recoverability of long-lived assets when circumstances occur that indicate that the carrying value of an asset group may not be recoverable. Such circumstances include a significant adverse change in the manner in which an asset group is being used, current operating losses combined with a history of operating losses experienced by the asset group or a current expectation that an asset group will be sold or otherwise disposed of before the end of its previously estimated useful life. Evaluation of possible impairment is based on the Partnership's ability to recover the value of the asset group from the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If the expected undiscounted cash flows are less than the carrying amount of such asset, an impairment loss is recorded as the amount by which the carrying amount of an asset group exceeds its fair value. The fair value of an asset group will be measured using the best information available, including prices for similar assets or the result of using a discounted cash flow valuation technique.

Goodwill. Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is subject to an impairment review at a reporting unit level, on an annual basis in August of each year, or when an event occurs or circumstances change that would indicate potential impairment. The Partnership assesses the carrying value of goodwill at a reporting unit level based on an estimate of the fair value of the respective reporting unit. Fair value of the reporting unit is estimated using discounted cash flow analyses taking into consideration estimated cash flows in a ten-year projection period and a terminal value calculation at the end of the projection period. If the fair value of the reporting unit exceeds its carrying value, the goodwill associated with the reporting unit is not considered to be impaired. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized to the extent that the carrying amount of the associated goodwill exceeds the implied fair value of the goodwill.

Other Intangible Assets. Other intangible assets consist of non-compete agreements and acquired leasehold interests, customer lists and trade names. Non-compete agreements are amortized under the straight-line method over the periods of the related agreements, ending periodically between fiscal years 2005 and 2011. Leasehold interests are amortized under the straight-line method over the shorter of the

F-9

lease term or the useful life of the related assets, through fiscal 2025. Customer lists and trade names are amortized under the straight-line method over the estimated period for which the assets are expected to contribute to the future cash flows of the reporting entities to which they relate, ending periodically between fiscal years 2006 and 2018.

Accrued Insurance. Accrued insurance represents the estimated costs of known and anticipated or unasserted claims under the Partnership's general and product, workers' compensation and automobile insurance policies. Accrued insurance provisions for unasserted claims arising from unreported incidents are based on an analysis of historical claims data. For each claim, the Partnership records a self-insurance provision up to the estimated amount of the probable claim utilizing actuarially determined loss development factors applied to actual claims data. The Partnership maintains insurance coverage wherein our net exposure for insured claims is limited to the insurance deductible, claims above which are paid by the Partnership's insurance carriers. For the portion of the estimated self-insurance liability that exceeds insurance deductibles, the Partnership records an asset within other assets related to the amount of the liability to be covered by insurance. Claims are generally settled within 5 years of origination.

Environmental Reserves. The Partnership establishes reserves for environmental exposures when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based upon the Partnership's best estimate of costs associated with environmental remediation and ongoing monitoring activities. Accrued environmental reserves are exclusive of claims against third parties, and an asset is established where contribution or reimbursement from such third parties has been agreed and the Partnership is reasonably assured of receiving such contribution or reimbursement. Environmental reserves are not discounted.

Income Taxes. As discussed in Note 1, the Partnership structure consists of two limited partnerships, the Partnership and the Operating Partnership, and several corporate entities (the "Corporate Entities"). For federal and state income tax purposes, the earnings attributable to the Partnership and the Operating Partnership are included in the tax returns of the individual partners. As a result, no recognition of income tax expense has been reflected in the Partnership's consolidated financial statements relating to the earnings of the Partnership and the Operating Partnership. The earnings attributable to the Corporate Entities are subject to federal and state income taxes. Accordingly, the Partnership's consolidated financial statements reflect income tax expense related to the Corporate Entities' earnings. Net earnings for financial statement purposes may differ significantly from taxable income reportable to Common Unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the Partnership Agreement.

Income taxes for the Corporate Entities are provided based on the asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted.

Unit-Based Compensation. The Partnership accounts for unit-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. Upon award of restricted units under the Partnership's Restricted Unit Plan, unearned compensation equivalent to the market price of the Restricted Units on the date of grant is established as a reduction of partners' capital. The unearned compensation is amortized ratably to expense over the restricted periods. The Partnership follows the disclosure only provision of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Pro forma net income and net income per Common Unit under the fair value method of accounting for Restricted Units under SFAS 123 would be the same as reported net income and net income per Common Unit.

Costs and Expenses. The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane, fuel oil and other refined fuels sold, including transportation costs to deliver product from the Partnership's supply points to storage or to the Partnership's customer service centers. Cost of products sold also includes the cost of appliances, equipment and related parts sold or installed by the Partnership's customer service centers computed on

F-10

a basis that approximates the average cost of the products. Cost of products sold is reported exclusive of any depreciation and amortization as such amounts are reported separately within the consolidated statements of operations.

All other costs of operating the Partnership's retail propane, fuel oil and other refined fuels distribution and appliance sales and service operations are reported within operating expenses in the consolidated statements of operations. These operating expenses include the compensation and benefits of field and direct operating support personnel, costs of operating and maintaining the vehicle fleet, overhead and other costs of the purchasing, training and safety departments and other direct and indirect costs of the Partnership's customer service centers.

All costs of back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.

Net Income Per Unit. Basic net income per Common Unit is computed by dividing net income, after deducting the General Partner's approximate 3.1% interest, by the weighted average number of outstanding Common Units. Diluted net income per Common Unit is computed by dividing net income, after deducting the General Partner's approximate 3.1% interest, by the weighted average number of outstanding Common Units and time vested Restricted Units granted under the 2000 Restricted Unit Plan. In computing diluted net income per Common Unit, weighted average units outstanding used to compute basic net income per Common Unit were increased by 105,711 units and 135,567 units for the years ended September 25, 2004 and September 27, 2003, respectively, to reflect the potential dilutive effect of the time vested Restricted Units outstanding using the treasury stock method. Net income is allocated to the Common Unitholders and the General Partner in accordance with their respective Partnership ownership interests, after giving effect to any priority income allocations for incentive distributions allocated to the General Partner.

On March 31, 2004, the Emerging Issues Task Force ("EITF") reached a consensus under EITF 03-6 "Participating Securities and the Two-Class Method Under FAS 128" ("EITF 03-6") which requires, among other things, the use of the two-class method of computing earnings per unit when participating securities exist. The two-class method is an earnings allocation formula that computes earnings per unit for each class of common unit and participating security according to distributions declared and participation rights in undistributed earnings, as if all of the earnings were distributed to limited partners and the general partner. EITF 03-6 was adopted by the Partnership at the end of fiscal 2004. However, the application of its consensus on the computation of our net income per Common Unit for the fiscal year ended September 25, 2004 did not have any impact on annual net income per Common Unit. EITF 03-6 may have an impact on the computation of net income per Common Unit on a quarterly basis, depending on the level of net income in relation to distributions declared.

Comprehensive Income. The Partnership reports comprehensive (loss)/income (the total of net income and all other non-owner changes in partners' capital) within the consolidated statement of partners' capital. Comprehensive (loss)/income includes unrealized gains and losses on derivative instruments accounted for as cash flow hedges and minimum pension liability adjustments.

Recently Issued Accounting Standards. In November 2004, the FASB issued SFAS No. 151, "Inventory Costs" ("SFAS 151"). SFAS 151 amends the guidance in Chapter 4 of Accounting Research Bulletin No. 43, "Inventory Pricing" to clarify the accounting for amounts of idle facility expense, freight, handling costs and wasted material. SFAS 151 requires that these types of items be recognized as current period charges as they occur. The provisions of SFAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of this standard is not expected to have an impact on the Partnership's consolidated financial position, results of operations or cash flows.

Reclassifications. Certain prior period amounts have been reclassified to conform with the current period presentation.

F-11


3.	Acquisition of Agway Energy

On December 23, 2003, the Partnership acquired substantially all of the assets and operations of Agway Energy Products, LLC, Agway Energy Services, Inc. and Agway Energy Services PA, Inc. (collectively referred to as "Agway Energy") pursuant to an asset purchase agreement dated November 10, 2003 (the "Agway Acquisition"). Agway Energy, based in Syracuse, New York, was a leading regional marketer of propane, fuel oil, gasoline and diesel fuel primarily in New York, Pennsylvania, New Jersey and Vermont. To complement its core marketing and delivery business, Agway Energy also installs and services a wide variety of home comfort equipment, particularly in the areas of heating, ventilation and air conditioning. The Agway Acquisition was consistent with the Partnership's business strategy of prudently pursuing acquisitions of retail propane distributors and other energy-related businesses that can complement or supplement its core propane operations and also expanded its presence in the northeast energy market. The total cost of the Agway Acquisition, including the purchase price of $205,055 (net of a working capital adjustment paid to the Partnership of $945), $2,650 for non-compete agreements with certain members of the management of Agway Energy and $3,500 in transaction related costs, was approximately $211,205.

The Agway Acquisition was financed with net proceeds of $87,566 from the issuance of 2,990,000 Common Units in December 2003 (see Note 16) and a portion of the net proceeds from the offering of unsecured 6.875% senior notes (see Note 9). The results of Agway Energy have been included in the Partnership's consolidated financial statements from the date of the Agway Acquisition. The cost of the Agway Acquisition has been allocated to the assets acquired and liabilities assumed according to their fair values.

The total cost of the Agway Acquisition has been allocated as follows:


Net current assets	$	31,241
Property, plant and equipment		112,187
Intangible assets		28,046
Goodwill		41,956
Environmental escrow asset		13,750
Deferred tax assets		21,519
Deferred tax asset valuation allowance		(21,519	)
Severance and other restructuring costs		(2,225	)
Environmental reserve		(13,750	)
Total cost of Acquisition	$	211,205

Property, plant and equipment. The fair value of acquired property, plant and equipment, including land, buildings, storage equipment, vehicles, tanks and cylinders and computer equipment is based upon their respective value-in-use, unless there was a known plan to dispose of an asset. Assets to be disposed of or otherwise abandoned were not assigned a value.

Intangible assets. Identifiable intangible assets include the fair value of customer lists of $19,866, trade names of $3,513, non-compete agreements of $2,700 and below market lease arrangements of $1,967. The values assigned to customer lists and trade names are being amortized on a straight-line basis over a period of two to 15 years. The non-compete agreements are being amortized on a straight-line basis over the non-compete period ranging from one to two years and the value assigned to the lease arrangements is being amortized over the remaining 21-year lease term.

Goodwill. In accordance with the requirements of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), the residual goodwill and acquired indefinite-lived intangible asset related to the $6,800 value assigned to the assembled workforce will not be amortized. Such goodwill and intangible asset are deductible for tax purposes.

Environmental escrow asset and reserves. The Partnership acquired certain surplus properties with either known or probable environmental exposure, some of which are currently in varying stages of investigation, remediation or monitoring. Additionally, the Partnership identified that certain active sites acquired contained environmental exposures which may require further investigation, future remediation

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or ongoing monitoring activities. Based on the Partnership's current best estimate of future costs for environmental investigations, remediation and ongoing monitoring activities associated with acquired properties with either known or probable environmental exposures an environmental reserve in the amount of $13,750 has been established in purchase accounting.

Under the Purchase and Sale Agreement, Agway, Inc. has set aside $15,000 from the total purchase price in a separate escrow account to fund any future environmental costs and expenses. Accordingly, in the preliminary allocation of the purchase price, the Partnership established a corresponding environmental escrow asset in the amount of $13,750 related to the future reimbursement from escrowed funds for environmental spending. Under the terms of the Purchase and Sale Agreement, the escrowed funds will be used to fund environmental costs and expenses during the first three years following the closing date of the Agway Acquisition. Subject to amounts withheld with respect to any pending claims made prior to the third anniversary of the closing date of the Agway Acquisition, any remaining escrowed funds will be remitted to Agway, Inc. at the end of the three-year period.

Deferred taxes. For tax purposes, the assets and operations of the propane segment are reported within the Operating Partnership. Accordingly, the earnings attributable to the propane operations are not subject to federal and state income taxes at the entity level; rather, such earnings are included in the tax returns of the individual partners. All other assets and operations acquired are reported within an indirect, wholly-owned subsidiary of the Operating Partnership that will be subject to corporate level federal and state income taxes. The deferred tax assets established in purchase accounting represent the tax effect of temporary differences between the financial statement basis and tax basis of assets acquired and liabilities assumed as of the date of the Agway Acquisition. The temporary differences primarily relate to certain accruals and reserves established for book purposes that are expected to give rise to future tax deductions.

A full valuation allowance has been established in purchase accounting to offset the deferred tax assets since, based on the Partnership's current projections of future taxable income for the Corporate Entities, it is more likely than not that the benefits of these future deductible items will not be utilized. To the extent future projections of taxable income indicate deferred tax assets may be utilized, the valuation allowance will be reversed, with a corresponding reduction to goodwill.

Severance and other restructuring costs. Termination benefits and relocation costs associated with employees of Agway Energy affected by integration and restructuring plans were recorded as part of purchase accounting. The individuals affected have been identified and their termination or relocation benefits have been communicated. Activities associated with the restructuring plans are expected to occur during the first twelve months following the Agway Acquisition. Additionally, as part of the Partnership's approved plans to integrate the operating facilities in the northeast, costs to exit certain facilities and relocate equipment have been recorded as part of purchase accounting.

Derivative assets. Net current assets acquired includes a derivative asset in the amount of $7,860 representing the fair value of futures and option contracts acquired that were identified as hedges of future purchases of fuel oil and propane. As the underlying futures and option contracts are settled the derivative assets are charged to cost of products sold as an offset to the realized gains from contract settlement. The impact on cost of products sold represents a non-cash charge resulting from the application of purchase accounting on derivative instruments acquired. For the year ended September 25, 2004, the Partnership recorded a non-cash charge of $6,327 within cost of products sold related to contracts settled during the period.

Pro Forma Results. The following unaudited pro forma information presents the results of operations of the Partnership as if the Agway Acquisition had occurred at the beginning of the periods shown. The pro forma information, however, is not necessarily indicative of the results of operations assuming the Agway Acquisition had occurred at the beginning of the periods presented, nor is it necessarily indicative of future results.

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	Year Ended
	September 25, 2004		September 27, 2003
As reported
Revenues	$	1,307,254	$	735,075
Income from continuing operations		28,944		46,019
Income from continuing operations per
Common Unit - basic	$	0.96	$	1.77
Pro Forma
Revenues	$	1,475,579	$	1,424,552
Income from continuing operations		33,235		56,302
Income from continuing operations per
Common Unit - basic	$	1.10	$	2.17

The as reported and pro forma income from continuing operations for the year ended September 25, 2004 above includes the restructuring charge of $2,942 as further described in Note 7 below, the $5,337 non-cash pension settlement charge described in Note 12 below and the $3,177 non-cash charge for the impairment of goodwill described in Note 6 below. These charges were not reflected in the pro forma results for the year ended September 27, 2003.


4.	Distributions of Available Cash

The Partnership makes distributions to its partners approximately 45 days after the end of each fiscal quarter of the Partnership in an aggregate amount equal to its Available Cash for such quarter. Available Cash, as defined in the Partnership Agreement, generally means all cash on hand at the end of the respective fiscal quarter less the amount of cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements. These reserves are retained for the proper conduct of the Partnership's business, the payment of debt principal and interest and for distributions during the next four quarters. Distributions by the Partnership in an amount equal to 100% of its Available Cash will generally be made 98.46% to the Common Unitholders and 1.54% to the General Partner, subject to the payment of incentive distributions to the General Partner to the extent the quarterly distributions exceed a target distribution of $0.55 per Common Unit.

As defined in the Partnership Agreement, the General Partner has certain Incentive Distribution Rights ("IDRs") which represent an incentive for the General Partner to increase distributions to Common Unitholders in excess of the target quarterly distribution of $0.55 per Common Unit. With regard to the first $0.55 of quarterly distributions paid in any given quarter, 98.46% of the Available Cash is distributed to the Common Unitholders and 1.54% is distributed to the General Partner (98.29% and 1.71%, respectively, prior to the December 2003 public offering and 98.11% and 1.89%, respectively, prior to the June 2003 public offering described in Note 16). With regard to the balance of quarterly distributions in excess of the $0.55 per Common Unit target distribution, 85% of the Available Cash is distributed to the Common Unitholders and 15% is distributed to the General Partner.

The following summarizes the quarterly distributions per Common Unit declared and paid in respect of each of the quarters in the three fiscal years in the period ended September 25, 2004:


	September 25, 2004		September 27, 2003		September 28, 2002
First Quarter	$	0.5875	$	0.5750	$	0.5625
Second Quarter		0.6000		0.5750		0.5625
Third Quarter		0.6125		0.5875		0.5750
Fourth Quarter		0.6125		0.5875		0.5750

On October 21, 2004, the Board of Supervisors declared a quarterly distribution of $0.6125 per Common Unit in respect of the fourth quarter of fiscal 2004, which was paid on November 9, 2004 to holders of record on November 2, 2004. This quarterly distribution includes incentive distributions payable to the General Partner to the extent the quarterly distribution exceeds $0.55 per Common Unit.

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5.	Selected Balance Sheet Information

Inventories consist of the following:


	September 25, 2004		September 27, 2003
Propane and refined fuels	$	50,286	$	34,033
Appliances and related parts		14,833		7,477
	$	65,119	$	41,510

The Partnership enters into contracts to buy propane for supply purposes. Such contracts generally have one year terms subject to annual renewal, with propane costs based on market prices at the date of delivery.

Property, plant and equipment consist of the following:


	September 25, 2004		September 27, 2003
Land and improvements	$	30,811	$	27,134
Buildings and improvements		77,119		59,543
Transportation equipment		43,529		36,677
Storage facilities		82,665		59,554
Equipment, primarily tanks and cylinders		424,174		370,494
Computer software		21,224		12,122
Construction in progress		10,088		2,531
		689,610		568,055
Less: accumulated depreciation		282,908		255,265
	$	406,702	$	312,790

Depreciation expense for the years ended September 25, 2004, September 27, 2003 and September 28, 2002 amounted to $33,344, $27,097 and $27,857, respectively. Depreciation expense for the year ended September 25, 2004 included a non-cash charge of $1,000 related to a write-down of assets abandoned as a result of facility integration efforts in the Partnership's northeast operations following the Agway Acquisition. As of September 25, 2004, the Partnership had approximately $4,000 of assets held for sale which were included in property, plant and equipment and are being actively marketed.


6.	Goodwill and Other Intangible Assets

During fiscal 2004, as a result of continued losses in one of the Partnership's reporting units acquired in fiscal 1999, the carrying value of goodwill was considered to be fully impaired when applying the discounted cash flow valuation analysis. Accordingly, the Partnership recorded a non-cash charge of $3,177 within the consolidated statements of operations related to goodwill for the year ended September 25, 2004.

The changes in the carrying amount of goodwill for the year ended September 25, 2004 are as follows:


	Propane		Fuel Oil and Refined Fuels		Natural Gas and Electricity		HVAC		All Other			Total
Balance as of September 27, 2003	$	240,059	$	—	$	—	$	—	$	3,177		$	243,236
Acquired goodwill		22,500		10,900		7,900		656		—			41,956
Goodwill impairment charge recognized		—		—		—		—		(3,177	)		(3,177	)
Balance as of September 25, 2004	$	262,559	$	10,900	$	7,900	$	656	$	—		$	282,015

In accordance with SFAS 142, the Partnership completed its annual impairment review and, as the fair values of identified reporting units exceeded their respective carrying values, goodwill was not considered impaired as of September 25, 2004 nor as of September 27, 2003.

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Other intangible assets consist of the following:


	September 25, 2004		September 27, 2003
Customer lists	$	19,866	$	—
Trade names		3,513		—
Non-compete agreements		5,467		3,608
Other		1,967		—
		30,813		3,608
Less: accumulated amortization		5,231		2,573
	$	25,582	$	1,035

Aggregate amortization expense related to other intangible assets for the years ended September 25, 2004, September 27, 2003 and September 28, 2002 was $3,399, $423 and $498, respectively.

Aggregate amortization expense related to other intangible assets for each of the five succeeding fiscal years as of September 25, 2004 is as follows: 2005 - $4,087; 2006 - $2,685; 2007 - $2,134, 2008 - $2,098 and 2009 - $2,093.


7.	Restructuring Costs

During fiscal 2004, in connection with the initial integration of certain management and back office functions of Agway Energy, the Partnership's management approved and initiated plans to restructure the operations of both the Partnership and Agway Energy. Restructuring charges related to plans that have an impact on the assets, employees and operations of the Partnership are recorded in current period earnings when specific decisions are approved and costs associated with such activities are incurred. Severance and other restructuring or relocation costs associated with assets, employees and operations of Agway Energy are recorded as liabilities assumed in the purchase business combination and result in an increase to goodwill (see Note 3).

For the year ended September 25, 2004, the Partnership recorded a restructuring charge of $2,942 within the consolidated statements of operations related primarily to employee termination costs incurred as a result of actions taken during fiscal 2004. The components of restructuring charges that were both expensed and recorded as part of purchase accounting are as follows:


	Restructuring Costs Incurred		Utilization Through September 25, 2004			Reserve at September 25, 2004
Charges expensed:
Severance and other employee costs	$	2,942	$	(2,227	)	$	715
Charges recorded in purchase accounting:
Severance and other employee costs	$	700	$	(561	)	$	139
Relocation costs		525		(290	)		235
Other exit costs		1,000		—			1,000
Total	$	2,225	$	(851	)	$	1,374

The $2,089 in restructuring and other exit costs as of September 25, 2004 is expected to be paid over the course of the next twelve months.


8.	Income Taxes

The Partnership and the Operating Partnership are not subject to corporate level income tax, rather the earnings of these entities are included in the tax returns of the individual partners. However, the earnings of the Corporate Entities that do not qualify under the Internal Revenue Code for partnership status are subject to federal and state income taxes. The Partnership's fuel oil and other refined fuels, natural gas and electricity and HVAC business segments are structured as Corporate Entities and, as such, are subject to corporate level income tax.

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The income tax provision/(benefit) of the Partnership consists of the following:


	September 25, 2004			September 27, 2003		September 28, 2002
Current
Federal	$	(302	)	$	10	$	464
State and local		305			192		239
Deferred		—			—		—
	$	3		$	202	$	703

The federal income tax benefit reported for fiscal 2004 results from a refund of prior taxes paid.

The provision for income taxes differs from income taxes computed at the United States federal statutory rate as a result of the following:


	September 25, 2004			September 27, 2003			September 28, 2002
Income tax provision at federal statutory tax rate	$	19,006		$	17,105		$	18,979
Impact of Partnership income not subject to federal income taxes		(27,477	)		(20,221	)		(20,964	)
Permanent differences		1,135			—			—
Change in valuation allowance		7,336			3,362			1,985
State income taxes		305			192			239
Other, net		(302	)		(236	)		464
Provision for income taxes	$	3		$	202		$	703

The components of net deferred taxes and the related valuation allowance as of September 25, 2004 and September 27, 2003 using current enacted tax rates are as follows:


	September 25, 2004			September 27, 2003
Deferred tax assets:
Net operating loss carryforwards	$	30,409		$	5,491
Allowance for doubtful accounts		1,097			—
Inventory		860			124
Amortization of intangible assets		531			10
Derivative instruments		301			—
Severance and other exit costs		473			—
Other accruals		1,301			299
Total deferred tax assets		34,972			5,924
Deferred tax liabilities:
Depreciation		261			5
Total deferred tax liabilities		261			5
Net deferred tax assets		34,711			5,919
Valuation allowance		(34,711	)		(5,919	)
Net deferred tax assets	$	—		$	—

In order to fully realize the net deferred tax assets, the Corporate Entities will need to generate future taxable income. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based upon the level of current taxable income and projections of future taxable income of the Corporate Entities over the periods which deferred tax assets are expected to be deductible, management believes that it is more likely than not that the Partnership will not realize the full benefit of its deferred tax assets as of September 25, 2004 and September 27, 2003. Of the total valuation allowance as of September 25, 2004, $21,519 was established through purchase

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accounting for the Agway Acquisition in December 2003. To the extent that a reversal of a portion of the valuation allowance is warranted in the future, the reversal will be recorded as a reduction of goodwill with no impact on the deferred tax provision.

As of September 25, 2004, the Partnership had tax loss carryforwards for federal income tax reporting purposes of approximately $81,541 which are available to offset future federal taxable income and expire between 2011 and 2024.


9.	Long-Term Borrowings

Long-term borrowings consist of the following:


	September 25, 2004		September 27, 2003
Senior Notes, 7.54%, due June 30, 2011	$	297,500	$	340,000
Senior Notes, 6.875%, due December 15, 2013		175,000		—
Senior Notes, 7.37%, due June 30, 2012		42,500		42,500
Note payable, 8%, due in annual installments through 2006		915		1,322
Amounts outstanding under Revolving Credit Agreement		—		—
Other long-term liabilities		—		4
		515,915		383,826
Less: current portion		42,940		42,911
	$	472,975	$	340,915

On December 23, 2003, the Partnership and its subsidiary Suburban Energy Finance Corporation issued $175,000 aggregate principal amount of Senior Notes (the "2003 144A Notes") with an annual interest rate of 6.875% through a debt offering under Rule 144A and Regulation S of the Securities Act of 1933. On May 13, 2004, pursuant to a registration rights agreement, the Partnership exchanged the $175,000 senior notes that were issued on December 23, 2003 with $175,000 senior notes that were registered with the SEC and which have substantially the same terms as the 2003 144A Notes (the "2003 Senior Notes"). The Partnership's obligations under the 2003 Senior Notes are unsecured and will rank senior in right of payment to any future subordinated indebtedness and equally in right of payment with any future senior indebtedness. The 2003 Senior Notes are structurally subordinated to, which means they rank effectively behind, the senior notes and other liabilities of the Operating Partnership. The 2003 Senior Notes will mature on December 15, 2013, and require semi-annual interest payments that began on June 15, 2004. The Partnership is permitted to redeem some or all of the 2003 Senior Notes any time on or after December 15, 2008, at redemption prices specified in the indenture governing the 2003 Senior Notes (the "2003 Senior Note Agreement"). The 2003 Senior Note Agreement contains certain restrictions applicable to the Partnership and certain of its subsidiaries with respect to (i) the incurrence of additional indebtedness; and, (ii) liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions.

On March 5, 1996, pursuant to a Senior Note Agreement (the "1996 Senior Note Agreement"), the Operating Partnership issued $425,000 of Senior Notes (the "1996 Senior Notes") with an annual interest rate of 7.54%. The Operating Partnership's obligations under the 1996 Senior Note Agreement are unsecured and rank on an equal and ratable basis with the Operating Partnership's obligations under the 2002 Senior Note Agreement and the Revolving Credit Agreement discussed below. The 1996 Senior Notes will mature June 30, 2011, and require semi-annual interest payments. Under the terms of the 1996 Senior Note Agreement, the Operating Partnership is obligated to pay the principal on the 1996 Senior Notes in equal annual payments of $42,500 which started on July 1, 2002.

Pursuant to the Partnership's intention to refinance the first annual principal payment of $42,500 under the 1996 Senior Note Agreement, the Operating Partnership executed on April 19, 2002 a Note Purchase Agreement for the private placement of 10-year 7.37% Senior Notes due June 30, 2012 (the "2002 Senior Note Agreement"). On July 1, 2002, the Partnership received $42,500 from the issuance of the Senior Notes under the 2002 Senior Note Agreement and used the funds to pay the first annual principal

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payment of $42,500 due under the 1996 Senior Note Agreement. The Operating Partnership's obligations under the 2002 Senior Note Agreement are unsecured and rank on an equal and ratable basis with the Operating Partnership's obligations under the 1996 Senior Note Agreement and the Revolving Credit Agreement. Rather than refinance the second and third annual principal payments of $42,500 each due under the 1996 Senior Note Agreement, the Partnership elected to repay them on June 30, 2003 and July 1, 2004, respectively.

On October 20, 2004, the Operating Partnership completed the Third Amended and Restated Credit Agreement (the "Revolving Credit Agreement") which replaced the Second Amended and Restated Credit Agreement, which would have expired in May 2006. The Revolving Credit Agreement expires on October 20, 2008 and provides available credit of $150,000 in the form of a $75,000 revolving working capital facility, of which $15,000 may be used to issue letters of credit, and a separate $75,000 letter of credit facility. Borrowings under the Revolving Credit Agreement bear interest at a rate based upon either LIBOR or Wachovia National Bank's prime rate, plus, in each case, the applicable margin; or the Federal Funds rate plus 1/2 of 1%. An annual facility fee ranging from 0.375% to 0.50%, based upon certain financial tests, is payable quarterly whether or not borrowings occur. These fees and the other terms of the Revolving Credit Agreement are substantially the same as the terms under the Second Amended and Restated Credit Agreement, which provided a $75,000 working capital facility and a $25,000 acquisition facility. In connection with the Third Amended and Restated Credit Agreement our leverage ratio was reduced from 5.0 to 1 to a requirement to maintain a ratio of less than 4.5 to 1. As a result of the change in the leverage ratio applicable to the Revolving Credit Agreement, the leverage ratio required under the 1996 Senior Note Agreement and the 2002 Senior Note Agreement were also reduced to 4.5 to 1. In addition, in connection with this amendment, the Operating Partnership added additional financial institutions to the bank group supporting the Revolving Credit Agreement. As of September 25, 2004 and September 27, 2003, there were no borrowings outstanding under the Revolving Credit Agreement.

As of September 25, 2004, the Partnership had borrowing capacity of $60,000 under the working capital facility of the Revolving Credit Agreement. The weighted average interest rate associated with borrowings under the Revolving Credit Agreement was 4.75%, 3.42% and 3.67% for fiscal 2004, 2003 and 2002, respectively.

The 1996 Senior Note Agreement, the 2002 Senior Note Agreement and the Revolving Credit Agreement contain various restrictive and affirmative covenants applicable to the Operating Partnership; including (a) maintenance of certain financial tests, including, but not limited to, a leverage ratio less than 4.5 to 1, an interest coverage ratio in excess of 2.50 to 1 and a leverage ratio of less than 5.25 to 1 when the underfunded portion of the Partnership's pension obligations is used in the computation of the ratio, (b) restrictions on the incurrence of additional indebtedness, and (c) restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions. The Partnership was in compliance with all covenants and terms of the 1996 Senior Note Agreement, the 2002 Senior Note Agreement and the Revolving Credit Agreement as of September 25, 2004.

Debt origination costs representing the costs incurred in connection with the placement of, and the subsequent amendment to, the Partnership's Senior Notes and Revolving Credit Agreement were capitalized within other assets and are being amortized on a straight-line basis over the term of the respective debt agreements. Other assets at September 25, 2004 and September 27, 2003 include debt origination costs with a net carrying amount of $10,506 and $5,960, respectively. Aggregate amortization expense related to deferred debt origination costs included within interest expense for the years ended September 25, 2004, September 27, 2003 and September 28, 2002 was $1,421, $1,291 and $1,338, respectively.

The aggregate amounts of long-term debt maturities subsequent to September 25, 2004 are as follows: 2005 - $42,940; 2006 - $42,975; 2007 - $42,500; 2008 - $42,500; and, thereafter - $345,000.


10.	Restricted Unit Plans

In November 2000, the Partnership adopted the Suburban Propane Partners, L.P. 2000 Restricted Unit Plan (the "2000 Restricted Unit Plan") which authorizes the issuance of Common Units with an aggregate

F-19

value of $10,000 (487,804 Common Units valued at the initial public offering price of $20.50 per unit) to executives, managers and other employees of the Partnership. Restricted Units issued under the 2000 Restricted Unit Plan vest over time with 25% of the Common Units vesting at the end of each of the third and fourth anniversaries of the issuance date and the remaining 50% of the Common Units vesting at the end of the fifth anniversary of the issuance date. The 2000 Restricted Unit Plan participants are not eligible to receive quarterly distributions or vote their respective Restricted Units until vested. Restrictions also limit the sale or transfer of the units during the restricted periods. The value of the Restricted Unit is established by the market price of the Common Unit at the date of grant. Restricted Units are subject to forfeiture in certain circumstances as defined in the 2000 Restricted Unit Plan.

Following is a summary of activity in the 2000 Restricted Unit Plan:


	Units			Weighted Average Grant Date Fair Value Per Unit
Outstanding September 28, 2002		111,986		$	24.19
Awarded		44,288			27.74
Forfeited		(5,726	)		(20.66	)
Outstanding September 27, 2003		150,548			25.37
Awarded		115,730			30.64
Forfeited		(27,560	)		(25.46	)
Issued		(10,605	)		(20.66	)
Outstanding September 25, 2004		228,113		$	28.25

During the years ended September 25, 2004, September 27, 2003 and September 28, 2002, the Partnership amortized $1,171, $863 and $603, respectively, of unearned compensation associated with the 2000 Restricted Unit Plan, net of forfeitures.


11.	Compensation Deferral Plan

In 1996, the Partnership adopted the 1996 Restricted Unit Award Plan (the "1996 Restricted Unit Plan") which authorized the issuance of Common Units with an aggregate value of $15,000 (731,707 Common Units valued at the initial public offering price of $20.50 per unit) to executives, managers and Elected Supervisors of the Partnership. According to the change of control provisions of the 1996 Restricted Unit Plan, all outstanding Restricted Units on the closing date of the Recapitalization in May 1999 vested and converted into Common Units. At the date of the Recapitalization, individuals who became members of the General Partner surrendered receipt of 553,896 Common Units, representing substantially all of their vested Restricted Units, in exchange for the right to participate in the Compensation Deferral Plan.

Effective May 26, 1999, in connection with the Partnership's Recapitalization, the Partnership adopted the Compensation Deferral Plan (the "Deferral Plan") which provided for eligible employees of the Partnership to defer receipt of all or a portion of the vested Restricted Units granted under the 1996 Restricted Unit Plan in exchange for the right to participate in and receive certain payments under the Deferral Plan. The Deferral Plan also allows eligible employees to defer receipt of Common Units subsequently granted by the Partnership under the Deferral Plan. The Partnership granted Common Units under the Deferral Plan only once during fiscal 2000. The Common Units granted under the Deferral Plan and related Partnership distributions were subject to forfeiture provisions such that (a) 100% of the Common Units would be forfeited if the grantee ceased to be employed prior to the third anniversary of the Recapitalization, (b) 75% would be forfeited if the grantee ceased to be employed after the third anniversary but prior to the fourth anniversary of the Recapitalization and (c) 50% would be forfeited if the grantee ceased to be employed after the fourth anniversary but prior to the fifth anniversary of the Recapitalization. All forfeiture provisions lapsed in August of 2002. Upon issuance of Common Units under the Deferral Plan, unearned compensation equivalent to the market value of the Common Units at the date of grant is recorded. The unearned compensation is amortized in accordance with the Deferral Plan's forfeiture provisions. The unamortized unearned compensation value is shown as a reduction of partners' capital in the accompanying consolidated balance sheets.

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Senior management of the Partnership surrendered 553,896 Common Units, at the date of the Recapitalization, into the Deferral Plan. The Partnership deposited into a trust on behalf of these individuals 553,896 Common Units. During fiscal 2000, certain members of management deferred receipt of an additional 42,925 Common Units granted under the Deferral Plan, with a fair value of $19.91 per Common Unit at the date of grant, by depositing the units into the trust.

In January 2003, in accordance with the terms of the Deferral Plan, 297,310 of the deferred units were distributed to the members of the General Partner and may now be voted and/or freely traded. Certain members of management elected to further defer receipt of their deferred units (totaling 299,511 Common Units) until January 2008. During fiscal 2004, an additional 5,310 were deposited into the Deferral Plan on behalf of individuals electing to defer receipt of units vested under the 2000 Restricted Unit Plan and 7,490 units were distributed out of the Deferral Plan. As a result of this activity, during fiscal 2004, the Partnership recorded a net reduction of $17 in the deferred compensation liability and a corresponding reduction in the value of Common Units held in trust, both within partners' capital.

As of September 25, 2004 and September 27, 2003, there were 297,331 and 299,511 Common Units, respectively, held in trust under the Deferral Plan. The value of the Common Units deposited in the trust and the related deferred compensation liability in the amount of $5,778 and $5,795 as of September 25, 2004 and September 27, 2003, respectively, are reflected in the accompanying condensed consolidated balance sheets as components of partners' capital.


12.	Employee Benefit Plans

Defined Contribution Plan. The Partnership has a defined contribution plan covering most employees. Employer contributions and costs are a percent of the participating employees' compensation, subject to the achievement of annual performance targets of the Partnership. These contributions totaled $1,261, $1,305 and $947 for the years ended September 25, 2004, September 27, 2003 and September 28, 2002, respectively.

Pension Benefits and Retiree Health and Life Benefits.

Pension Benefits. The Partnership has a noncontributory defined benefit pension plan which was originally designed to cover all eligible employees of the Partnership who met certain requirements as to age and length of service. Effective January 1, 1998, the Partnership amended its noncontributory defined benefit pension plan to provide for a cash balance format as compared to a final average pay format which was in effect prior to January 1, 1998. The cash balance format is designed to evenly spread the growth of a participant's earned retirement benefit throughout his/her career as compared to the final average pay format, under which a greater portion of employee benefits were earned toward the latter stages of one's career. Effective January 1, 2000, participation in the noncontributory defined benefit pension plan was limited to eligible participants in existence on that date with no new participants eligible to participate in the plan. On September 20, 2002, the Board of Supervisors approved an amendment to the defined benefit pension plan whereby, effective January 1, 2003, future service credits ceased and eligible employees will now receive interest credits only toward their ultimate retirement benefit.

Contributions, as needed, are made to a trust maintained by the Partnership. The trust's assets consist primarily of domestic and international mutual funds, as well as fixed income securities. Contributions to the defined benefit pension plan are made by the Partnership in accordance with the Employee Retirement Income Security Act of 1974 minimum funding standards plus additional amounts which may be determined from time to time. There were no minimum funding requirements for the defined benefit pension plan for fiscal 2004, 2003 or 2002. Recently, there has been increased scrutiny over cash balance defined benefit pension plans and resulting litigation regarding such plans sponsored by other companies. These developments may result in legislative changes impacting cash balance defined benefit pension plans in the future. While no such legislative changes have been adopted, and if adopted the impact on the Partnership's defined benefit pension plan is not certain, there can be no assurances that future legislative developments will not have an adverse effect on the Partnership's results of operations or cash flows.

Retiree Health and Life Benefits. The Partnership provides postretirement health care and life insurance benefits for certain retired employees. Partnership employees hired prior to July 1993 and that retired

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prior to March 1998 are eligible for such benefits if they reached a specified retirement age while working for the Partnership. Effective January 1, 2000, the Partnership terminated its postretirement benefit plan for all eligible employees retiring after March 1, 1998. All active and eligible employees who were to receive benefits under the postretirement plan subsequent to March 1, 1998, were provided a settlements by increasing their accumulated benefits under the cash balance pension plan noted above. The Partnership's postretirement health care and life insurance benefit plans are unfunded.

Projected Benefit Obligation, Fair Value of Plan Assets and Funded Status. The following tables provide a reconciliation of the changes in the benefit obligations and the fair value of the plan assets for each of the years ended September 25, 2004 and September 27, 2003 and a statement of the funded status for both years:

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	Pension Benefits						Retiree Health and Life Benefits
	2004			2003			2004			2003
Reconciliation of benefit obligations:
Benefit obligation at beginning of year	$	174,176		$	174,698		$	37,182		$	41,136
Service cost		—			629			18			17
Interest cost		9,765			11,376			2,138			2,641
Actuarial loss/(gain)		13,415			4,066			(956	)		(4,115	)
Settlement payments		(12,288	)		—			—			—
Benefits paid		(8,012	)		(16,593	)		(2,876	)		(2,497	)
Benefit obligation at end of year	$	177,056		$	174,176		$	35,506		$	37,182
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year	$	132,040		$	121,534		$	—		$	—
Actual return on plan assets		15,181			17,099			—			—
Employer contributions		15,100			10,000			2,876			2,497
Settlement payments		(12,288	)		—			—			—
Benefits paid		(8,012	)		(16,593	)		(2,876	)		(2,497	)
Fair value of plan assets at end of year	$	142,021		$	132,040		$	—		$	—
Funded status:
Funded status at end of year	$	(35,035	)	$	(42,136	)	$	(35,506	)	$	(37,182	)
Unrecognized prior service cost		—			—			(1,585	)		(2,306	)
Net unrecognized actuarial losses		76,898			80,139			2,646			3,603
Accumulated other comprehensive (loss)		(76,898	)		(80,139	)		—			—
Accrued benefit liability		(35,035	)		(42,136	)		(34,445	)		(35,885	)
Less: Current portion		—			—			2,829			2,450
Non-current benefit liability	$	(35,035	)	$	(42,136	)	$	(31,616	)	$	(33,435	)

During fiscal 2004, lump sum benefit payments to either terminated or retired individuals amounted to $12,288. The lump sum benefit payments exceeded the interest cost component of the net periodic pension cost of $9,765 and, as a result, the Partnership was required to recognize a non-cash settlement charge of $5,337 during the fourth quarter of fiscal 2004, pursuant to SFAS 88 "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits." The non-cash charge is required to accelerate recognition of a portion of cumulative unrecognized losses in the defined benefit pension plan. These unrecognized losses were previously accumulated as a reduction to partners' capital (cumulative reduction of $80,139 as of the end of the prior fiscal year) and were being amortized to expense as part of the Partnership's net periodic pension cost in accordance with SFAS 87 "Employers' Accounting for Pensions."

The Partnership made a voluntary contribution of $15,100 to the defined benefit pension plan during fiscal 2004, thereby taking proactive steps to improve the funded status of the plan and reduce the minimum pension liability. This is the second such voluntary contribution made to the defined benefit pension plan as the Partnership made a voluntary contribution of $10,000 to the plan in fiscal 2003.

F-23

Plan Asset Allocation. The following table presents the allocation of assets held in trust:



	September 25, 2004			September 27, 2003
	Actual Allocation			Actual Allocation
Common stock		42	%		37	%
Corporate bonds		8	%		6	%
Government bonds		12	%		20	%
Mutual funds		30	%		31	%
Cash and cash equivalents		8	%		6	%
		100	%		100	%

The Partnership's investment policies and strategies, as set forth in the Investment Management Policy and Guidelines, are monitored by a Benefits Committee comprised of five members of management. The investment objective related to the defined benefit pension plan assets is to maximize total return with strong emphasis on the preservation of capital. The target asset mix is as follows: (i) the domestic equity portfolio should range between 40% and 60%; (ii) the international equity portfolio should range between 5% and 25%; and, (iii) the fixed income portion of the portfolio should range between 20% and 50%.

Projected Contributions and Benefit Payments. There are no projected minimum funding requirements under the Partnership's defined benefit pension plan for fiscal 2005. The Partnership estimates that retiree health and life benefit contributions will be $3,087 for fiscal 2005. Estimated future benefit payments for both pension and retiree health and life benefits are as follows:


Fiscal Year
2005	$	20,952
2006		17,635
2007		17,724
2008		17,463
2009		17,748
2010 through 2014		82,023

Effect on Operations. The following table provides the components of net periodic pension costs included in operating expenses for the years ended September 25, 2004, September 27, 2003 and September 28, 2002:


	Pension Benefits									Retiree Health and Life Benefits
	2004			2003			2002			2004			2003			2002
Service cost	$	—		$	629		$	4,445		$	18		$	17		$	16
Interest cost		9,765			11,376			11,581			2,138			2,641			2,574
Expected return on plan assets		(9,848	)		(12,161	)		(14,974	)		—			—			—
Amortization of prior service cost		—			—			(210	)		(720	)		(720	)		(720	)
Settlement charge		5,337			—			—			—			—			—
Curtailment gain		—			—			(1,093	)		—			—			—
Recognized net actuarial loss		5,986			4,066			1,912			—			342			41
Net periodic pension cost	$	11,240		$	3,910		$	1,661		$	1,436		$	2,280		$	1,911

Actuarial Assumptions. The assumptions used in the measurement of the Partnership's benefit obligations, for the years ended September 25, 2004, September 27, 2003 and September 28, 2002 are shown in the following table:

F-24


	Pension Benefits									Retiree Health and Life Benefits

	2004			2003			2002			2004			2003			2002
Weighted-average discount rate		5.50	%		6.00	%		6.75	%		5.25	%		6.00	%		6.75	%
Average rate of compensation increase		n/a			n/a			3.50	%		n/a			n/a			n/a
Weighted-average expected long- term rate of return on plan assets		7.50	%		7.75	%		8.50	%		n/a			n/a			n/a
Healthcare cost trend		n/a			n/a			n/a			11.50	%		13.00	%		12.00	%

The 11.50% increase in health care costs assumed at September 25, 2004 is assumed to decrease gradually to 5.00% in fiscal 2013 and to remain at that level thereafter. Increasing the assumed health care cost trend rates by 1.0% in each year would increase the Partnership's benefit obligation as of September 25, 2004 by approximately $1,136 and the aggregate of service and interest components of net periodic postretirement benefit expense for the year ended September 25, 2004 by approximately $81. Decreasing the assumed health care cost trend rates by 1.0% in each year would decrease the Partnership's benefit obligation as of September 25, 2004 by approximately $1,023 and the aggregate of service and interest components of net periodic postretirement benefit expense for the year ended September 25, 2004 by approximately $73. Our actuaries have concluded that the prescription drug benefits within the retiree medical plan will not qualify for a Medicare subsidy available under recent legislation.


13.	Financial Instruments

Derivative Instruments and Hedging Activities. The Partnership purchases propane and refined fuels at various prices that are eventually sold to its customers, exposing the Partnership to market fluctuations in the price of these commodities. A control environment has been established which includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative instruments and hedging activities. The Partnership closely monitors the potential impacts of commodity price changes and, where appropriate, utilizes commodity futures, forward and option contracts to hedge its commodity price risk, to protect margins and to ensure supply during periods of high demand. Derivative instruments are used to hedge a portion of the Partnership's forecasted purchases for no more than one year in the future.

As of September 25, 2004, unrealized gains on derivative instruments designated as cash flow hedges in the amount of $9,129 were included in OCI and are expected to be recognized in earnings during the next 12 months as the hedged forecasted transactions occur. However, due to the volatility of the commodities market, the corresponding value in OCI is subject to change prior to its impact on earnings.

For the year ended September 25, 2004, operating expenses included unrealized losses in the amount of $4,523 compared to unrealized losses in the amount of $1,500 for the year ended September 27, 2003, attributable to changes in the fair value of derivative instruments not designated as hedges.

Credit Risk. The Partnership's principal customers are residential and commercial end users of propane and refined fuels served by approximately 370 customer service centers in 30 states. No single customer accounted for more than 10% of revenues during fiscal 2004, 2003 or 2002 and no concentration of receivables exists at the end of fiscal 2004 or 2003.

Futures contracts are traded on and guaranteed by the New York Mercantile Exchange ("NYMEX") and as a result, have minimal credit risk. Futures contracts traded with brokers of the NYMEX require daily cash settlements in margin accounts. The Partnership is subject to credit risk with forward and option contracts entered into with various third parties to the extent the counterparties do not perform. The Partnership evaluates the financial condition of each counterparty with which it conducts business and establishes credit limits to reduce exposure to credit risk based on non-performance. The Partnership does not require collateral to support the contracts.

Fair Value of Financial Instruments. The fair value of cash and cash equivalents are not materially different from their carrying amounts because of the short-term nature of these instruments. The fair value of the Revolving Credit Agreement approximates the carrying value since the interest rates are periodically adjusted to reflect market conditions. Based on the current rates offered to the Partnership

F-25

for debt of the same remaining maturities, the carrying value of the Partnership's Senior Notes approximates their fair market value.


14.	Commitments and Contingencies

Commitments. The Partnership leases certain property, plant and equipment, including portions of the Partnership's vehicle fleet, for various periods under noncancelable leases. Rental expense under operating leases was $27,315, $24,337 and $24,005 for the years ended September 25, 2004, September 27, 2003 and September 28, 2002, respectively.

Future minimum rental commitments under noncancelable operating lease agreements as of September 25, 2004 are as follows:


Fiscal Year
2005	$	22,139
2006		15,667
2007		11,140
2008		6,812
2009 and thereafter		6,201

Contingencies. As discussed in Note 2, the Partnership is self-insured for general and product, workers' compensation and automobile liabilities up to predetermined amounts above which third party insurance applies. At September 25, 2004 and September 27, 2003, the Partnership had accrued insurance liabilities of $38,241 and $33,568, respectively, representing the total estimated losses under these self-insurance programs. The Partnership is also involved in various legal actions which have arisen in the normal course of business, including those relating to commercial transactions and product liability. Management believes, based on the advice of legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Partnership's financial position or future results of operations, after considering its self-insurance liability for known and unasserted self-insurance claims. For the portion of the estimated self-insurance liability that exceeds insurance deductibles, the Partnership records an asset within other assets related to the amount of the liability to be covered by insurance which amounted to $2,941 and $4,929 as of September 25, 2004 and September 27, 2003, respectively.

The Partnership is subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge of pollutants and establish standards for the handling of solid and hazardous wastes. These laws 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 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. Propane is not a hazardous substance within the meaning of CERCLA. However, the Partnership owns real property where such hazardous substances may exist.

The Partnership is also subject to various laws and governmental regulations concerning environmental matters and expects that it will be required to expend funds to participate in the remediation of certain sites, including sites where it has been designated by the Environmental Protection Agency ("EPA") as a potentially responsible party ("PRP") under CERCLA and at sites with above ground and underground fuel storage tanks.

With the Agway Acquisition, the Partnership acquired certain properties and assets, including fuel oil tanks and gasoline stations, that are subject to extensive federal, state and local environmental laws and regulation, including investigation and remediation of contaminated soil and groundwater, transportation of hazardous materials, other environmental protection measures and health and safety matters. Based on a review of certain Phase I Environmental Site Assessments and, at certain sites, groundwater and/or soil sample analysis, the Partnership identified that certain of these properties had either known or probable

F-26

environmental exposure, some of which are currently in varying stages of investigation, remediation or monitoring. Under the agreement for the Agway Acquisition, the seller was required to deposit $15,000 from the total purchase price into an escrow account to be used to fund remediation costs at the acquired properties. The escrowed funds will be used to fund environmental costs and expenses during the first three years following the closing date of the Agway Acquisition. Subject to amounts withheld with respect to any pending claims made prior to the third anniversary of the closing date of the Agway Acquisition, any remaining escrowed funds will be remitted to the seller at the end of the three-year period.

Based on the Partnership's current best estimate of future costs for environmental investigations, remediation and ongoing monitoring activities associated with acquired properties with either known or probable environmental exposures an environmental reserve in the amount of $13,750 was established in purchase accounting. The Partnership established a corresponding environmental escrow asset in the amount of $13,750 related to the future reimbursement from escrowed funds for environmental spending. As of September 25, 2004, the environmental reserve and corresponding environmental escrow asset amounted to approximately $11,500. The environmental reserves are recorded on an undiscounted basis.

Estimating the extent of the Partnership's responsibility for a particular site and the method and ultimate cost of remediation of that site requires a number of assumptions and estimates on the part of management. As a result, the ultimate outcome of remediation of the sites may differ from current estimates. As additional information becomes available, estimates will be adjusted as necessary. Based on information currently available, and taking into consideration the level of the environmental reserve and the $15,000 environmental escrow, management believes that any liability that may ultimately result from changes in current estimates will not have a material impact on the results of operations, financial position or cash flows of the Partnership.

Future developments, such as stricter environmental, health or safety laws and regulations thereunder, could affect Partnership operations. The Partnership anticipates that compliance with or liabilities under environmental, health and safety laws and regulations, including CERCLA, will not have a material adverse effect on the Partnership. To the extent that there are any environmental liabilities unknown to the Partnership or environmental, health or safety laws or regulations are made more stringent, there can be no assurance that the Partnership's results of operations will not be materially and adversely affected.


15.	Guarantees

The Partnership has residual value guarantees associated with certain of its operating leases, related primarily to transportation equipment, with remaining lease periods scheduled to expire periodically through fiscal 2011. Upon completion of the lease period, the Partnership guarantees that the fair value of the equipment will equal or exceed the guaranteed amount, or the Partnership will pay the lessor the difference. Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments the Partnership could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, is approximately $18,249. Of this amount, the fair value of residual value guarantees for operating leases entered into after December 31, 2002 was $3,684 and $2,067 as of September 25, 2004 and September 27, 2003, respectively, which is reflected in other liabilities, with a corresponding amount included within other assets, in the accompanying consolidated balance sheets.


16.	Public Offerings

On December 16, 2003, the Partnership sold 2,600,000 Common Units in a public offering at a price of $30.90 per Common Unit realizing proceeds of $76,026, net of underwriting commissions and other offering expenses. On December 23, 2003, following the underwriters' full exercise of their over-allotment option, the Partnership sold an additional 390,000 Common Units at $30.90 per Common Unit, generating additional net proceeds of $11,540. The aggregate net proceeds of $87,566 were used to fund a portion of the purchase price for the Agway Acquisition. These transactions increased the total number of Common Units outstanding to 30,256,767. As a result of the Public Offering, the combined General Partner interest in the Partnership was reduced from 1.71% to 1.54% while the Common Unitholder interest in the Partnership increased from 98.29% to 98.46%.

F-27

On June 18, 2003, the Partnership sold 2,282,500 Common Units in a public offering at a price of $29.00 per Common Unit realizing proceeds of $62,879, net of underwriting commissions and other offering expenses. On June 26, 2003, following the underwriters' full exercise of their over-allotment option, the Partnership sold an additional 342,375 Common Units at $29.00 per Common Unit, generating additional net proceeds of $9,307. The aggregate net proceeds of $72,186 were used for general partnership purposes, including working capital and the repayment of outstanding borrowings under the Revolving Credit Agreement and the second annual principal payment of $42,500 due under the 1996 Senior Note Agreement on June 30, 2003. These transactions increased the total number of Common Units outstanding to 27,256,162. As a result of the Public Offering, the combined general partner interest in the Partnership was reduced from 1.89% to 1.71% while the Common Unitholder interest in the Partnership increased from 98.11% to 98.29%.


17.	Discontinued Operations and Disposition

The Partnership continuously evaluates its existing operations to identify opportunities to optimize the return on assets employed and selectively divests operations in slower growing or non-strategic markets and seeks to reinvest in markets that are considered to present more opportunities for growth. In line with that strategy, during fiscal 2004, the Partnership sold 24 customer service centers for net cash proceeds of $39,352. The Partnership recorded a gain on sale of $26,332 during fiscal 2004 which has been accounted for within discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). Accordingly, the individual captions on the consolidated statements of operations for the years ended September 25, 2004, September 27, 2003 and September 28, 2002 exclude the results from these discontinued operations, which were part of the Partnership's propane segment.

During fiscal 2003, the Partnership sold nine customer service centers, which were part of the Partnership's propane segment, for net cash proceeds of approximately $7,197. The Partnership recorded a gain on sale of $2,483 during fiscal 2003 which has been accounted for within discontinued operations pursuant to SFAS 144. Prior period results of operations attributable to these nine customer service centers were not significant and, as such, prior period results have not been reclassified to remove financial results from continuing operations.

On January 31, 2002, the Partnership sold its 170 million gallon propane storage facility in Hattiesburg, Mississippi, which was considered a non-strategic propane segment asset, for net cash proceeds of $7,988, resulting in a gain on sale of $6,768.


18.	Segment Information

As a result of the Agway Acquisition and beginning with the third quarter of fiscal 2004, the Partnership manages and evaluates its operations in four reportable segments: Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity and HVAC. The chief operating decision maker evaluates performance of the operating segments using a number of performance measures, including gross margins and operating profit. Costs excluded from these profit measures are captured in Corporate and include corporate overhead expenses not allocated to the operating segments. Unallocated corporate overhead expenses include all costs of back office support functions that are reported as general and administrative expenses in the consolidated statements of operations. In addition, certain costs associated with field operations support that are reported in operating expenses in the consolidated statements of operations, including purchasing, training and safety, are not allocated to the individual operating segments. Thus, operating profit for each operating segment includes only the costs that are directly attributable to the operations of the individual segment. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in Note 2.

The propane segment is primarily engaged in the retail distribution of propane to residential, commercial, industrial and agricultural customers and, to a lesser extent, wholesale distribution to large industrial end users. In the residential and commercial markets, propane is used primarily for space heating, water heating, cooking and clothes drying. Industrial customers use propane generally as a motor fuel burned in internal combustion engines that power over-the-road vehicles, forklifts and stationary engines, to fire

F-28

furnaces and as a cutting gas. In the agricultural markets, propane is primarily used for tobacco curing, crop drying, poultry brooding and weed control.

The fuel oil and refined fuels segment is primarily engaged in the retail distribution of fuel oil, diesel, kerosene and gasoline to residential and commercial customers for use primarily as a source of heat in homes and buildings.

The natural gas and electricity segment is engaged in the marketing of natural gas and electricity to residential and commercial customers in the deregulated energy markets of New York and Pennsylvania. Under this operating segment, the Partnership owns the relationship with the end consumer and has agreements with the local distribution companies to deliver the natural gas or electricity from the Partnership's suppliers to the customer.

The HVAC segment is engaged in the sale, installation and servicing of a wide variety of home comfort equipment and parts, particularly in the areas of heating, ventilation and air conditioning.

The following table presents certain data by reportable segment and provides a reconciliation of total operating segment information to the corresponding consolidated amounts for the periods presented:

F-29


	September 25, 2004			September 27, 2003			September 28, 2002
Revenues:
Propane	$	856,109		$	680,840		$	578,439
Fuel oil and refined fuels		281,682			—			—
Natural gas and electricity		68,452			—			—
HVAC		92,072			46,938			47,926
All other		8,939			7,297			8,757
Total revenues	$	1,307,254		$	735,075		$	635,122
Income before interest expense and income taxes:
Propane	$	143,933		$	133,278		$	127,193
Fuel oil and refined fuels		14,911			—			—
Natural gas and electricity		4,154			—			—
HVAC		(2,686	)		(4,281	)		(2,695	)
All other		(8,125	)		(3,460	)		(2,529	)
Corporate		(82,408	)		(45,687	)		(32,420	)
Total income before interest expense and income taxes		69,779			79,850			89,549
Reconciliation to income from continuing operations
Interest expense, net		40,832			33,629			35,325
Provision for income taxes		3			202			703
Income from continuing operations	$	28,944		$	46,019		$	53,521
Depreciation and amortization:
Propane	$	26,347		$	22,908		$	23,359
Fuel oil and refined fuels		4,302			—			—
Natural gas and electricity		555			—			—
HVAC		640			80			32
All other		343			383			396
Corporate		4,556			4,149			4,568
Total depreciation and amortization	$	36,743		$	27,520		$	28,355
Assets
Propane	$	720,645		$	621,547
Fuel oil and refined fuels		121,386			—
Natural gas and electricity		26,630			—
HVAC		20,715			6,487
All other		4,941			8,079
Corporate		185,671			37,946
Eliminations		(87,981	)		(3,500	)
Total assets	$	992,007		$	670,559

Income (loss) before interest expense and income taxes for the All other category for the year ended September 25, 2004 includes the $3,177 non-cash charge for goodwill impairment (see Note 6).

F-30

INDEX TO FINANCIAL STATEMENT SCHEDULE

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES


		Page
Schedule II	Valuation and Qualifying Accounts — Years Ended September 25, 2004, September 27, 2003 and September 28, 2002		S-2

S-1

SCHEDULE II

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)


	Balance at Beginning of Period		Charged to Costs and Expenses		Other Additions		Deductions			Balance at End of Period
Year Ended September 28, 2002
Allowance for doubtful accounts	$	3,992	$	1,147	$	—	$	(3,245	)	$	1,894
Year Ended September 27, 2003
Allowance for doubtful accounts	$	1,894	$	3,315	$	—	$	(2,690	)	$	2,519
Year Ended September 25, 2004 (a)
Allowance for doubtful accounts	$	2,519	$	9,128	$	2,966	$	(6,717	)	$	7,896


(a)	Other additions for the year ended September 25, 2004 reflects allowances for doubtful accounts associated with the acquisition of Agway Energy. Additionally, the increase in charges and deductions during fiscal 2004 was primarily attributable to the impact of increased sales and related accounts receivable from the Agway Energy operations.

S-2

GRAPHIC 2 ebox.gif GRAPHIC begin 644 ebox.gif M1TE&.#EA"@`*`(```````/___R'Y!```````+``````*``H```(1A(\0RVO= - -'G1J!CDQU+'FE!0`.S\_ ` end GRAPHIC 3 spacer.gif GRAPHIC begin 644 spacer.gif K1TE&.#EA`0`!`(```````````"'Y!`$`````+``````!``$```("1`$`.S\_ ` end GRAPHIC 4 xbox.gif GRAPHIC begin 644 xbox.gif M1TE&.#EA"@`*`(```````/___R'Y!```````+``````*``H```(6A(\0RVNA 2F'K0N0@QS3+Z6TE EX-10.7 5 file002.htm 2003 LONG TERM INCENTIVE PLAN



                                                                    Exhibit 10.7

                             SUBURBAN PROPANE, L.P.

                          2003 LONG TERM INCENTIVE PLAN

                           (EFFECTIVE OCTOBER 1, 2002)



              SUBURBAN PROPANE, L.P. 2003 LONG TERM INCENTIVE PLAN

                           (EFFECTIVE OCTOBER 1, 2002)

                                    ARTICLE I
                              PURPOSE AND APPROVAL

The purpose of this Plan is to strengthen Suburban Propane Partners, L.P.,
Suburban Propane, L.P., and their affiliates (collectively, the "Partnership"),
by providing an incentive to certain Participants (as hereinafter defined), and
thereby encouraging them to devote their abilities and experience to the success
of the Partnership's business enterprise in such a manner as to maximize the
total return to the Partnership's Unitholders. It is intended that this purpose
be achieved by extending to certain Participants added long-term incentive
compensation for continued service to the Partnership and achieving certain
Performance Measures (as hereinafter defined) which enhance the total return to
the Partnership's Unitholders. This Plan was adopted effective October 1, 2002.

                                   ARTICLE II
                                   DEFINITIONS

     For purposes of this Plan, capitalized terms shall have the following
meanings:

          2.1 "Beneficial Ownership" shall have the same meaning as that term is
used within the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended.

          2.2 "Beneficiary" means a Participant's Beneficiary pursuant to
Article VIII.

          2.3 "Board" means the Board of Supervisors of Suburban Propane
Partners, L.P.

          2.4 "Cause" means (a) a Participant's gross negligence or willful
misconduct in the performance of his duties, (b) a Participant's willful or
grossly negligent failure to perform his duties, (c) the breach by a Participant
of any written covenants to the Partnership, (d) dishonest, fraudulent or
unlawful behavior by a Participant (whether or not in conjunction with
employment) or a Participant being subject to a judgment, order or decree (by
consent or otherwise) by any governmental or regulatory authority which
restricts his ability to engage in



the business conducted by the Partnership, or any of their affiliates, or (e)
willful or reckless breach by a Participant of any policy adopted by the
Partnership concerning conflicts of interest, standards of business conduct or
fair employment practices or procedures with respect to compliance with
applicable laws.

          2.5 "Change in Capitalization" means any increase or reduction in the
number of Common Units, or any change in the Common Units, change in the
percentage ownership interest of the Partnership attributable to the Common
Units or exchange of Common Units for a different number or kind of units or
other securities of the Partnership by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or other convertible securities, unit
distribution, unit split or reverse unit split, cash dividends, property
dividend, combination or exchange of units, repurchase of units, change in
corporate structure or otherwise.

          2.6 "Change of Control" shall mean the occurrence of:

          (a) an acquisition (other than directly by the Partnership) of Common
     Units or voting equity interests of the Partnership ("Voting Securities")
     by any "Person" other than the Partnership, Suburban Energy Services Group
     LLC or any of their affiliates, immediately after which such Person has
     Beneficial Ownership of more than twenty five percent (25%) of the combined
     voting power of the Partnership's then outstanding Common Units; provided,
     however, that in determining whether a Change of Control has occurred,
     Common Units which are acquired in a "Non-Control Acquisition" shall not
     constitute an acquisition which would cause a Change of Control. A
     "Non-Control Acquisition" shall mean an acquisition by (i) an employee
     benefit plan (or a trust forming a part there) maintained by (A) the
     Partnership or Suburban Propane, L.P. or (B) any corporation, partnership
     or other Person of which a majority of its voting power or its voting
     equity securities or equity interest is owned, directly or indirectly, by
     the Partnership, (ii) the Partnership or its Subsidiaries, or (iii) any
     Person in connection with a "Non-Control Transaction"; or

          (b) approval by the partners of the Partnership of (A) a merger,
     consolidation or reorganization involving the Partnership, unless (x) the
     holders of the Common Units immediately before such merger, consolidation
     or reorganization own,


                                        2



     directly or indirectly immediately following such merger, consolidation or
     reorganization, at least sixty percent (60%) of the combined voting power
     of the outstanding Common Units of the entity resulting from such merger,
     consolidation or reorganization (the "Surviving Entity") in substantially
     the same proportion as their ownership of the Common Units immediately
     before such merger, consolidation or reorganization, and (y) no person or
     entity (other than the Partnership, any Subsidiary, any employee benefit
     plan {or any trust forming a part thereof} maintained by the Partnership,
     any Subsidiary, the Surviving Entity, or any Person who, immediately prior
     to such merger, consolidation or reorganization, had Beneficial Ownership
     of more than twenty five percent (25%) of the then outstanding Common
     Units), has Beneficial Ownership of more than twenty five percent (25%) of
     the combined voting power of the Surviving Entity's then outstanding voting
     securities; (B) a complete liquidation or dissolution of the Partnership;
     or (C) the sale or other disposition of fifty percent (50%) of the net
     assets of the Partnership to any Person (other than a transfer to a
     Subsidiary). A transaction described in clause (x) or (y) of subsection (A)
     hereof shall be referred to as a "Non-Control Transaction."

          Notwithstanding the foregoing, a Change of Control shall not be deemed
     to occur solely because any Person (the "Subject Person") acquired
     Beneficial Ownership of more than the permitted amount of the outstanding
     Voting Securities as a result of the acquisition of Voting Securities by
     the Partnership which, by reducing the number of Voting Securities
     outstanding, increases the proportional number of Common Units Beneficially
     Owned by the Subject Person, provided that if a Change of Control would
     occur (but for the operation of this sentence) as a result of the
     acquisition of the Voting Securities by the Partnership, and after such
     acquisition of Voting Securities by the Parntership, the Subject Person
     becomes the Beneficial Owner of any additional Voting Securities which
     increases the percentage of the then outstanding Voting Securities
     Beneficially Owned by the Subject Person, then a Change of Control shall
     occur.

          2.7 "Committee" means the Compensation Committee of the Board.

          2.8 "Common Unit" means the Common Units representing publicly traded
limited partnership interests of the Partnership.


                                        3



          2.9 "Disability" shall have the same meaning that such term (or
similar term) has under the long-term disability plan in which the Participant
is eligible to be covered.

          2.10 "Effective Date" shall mean October 1, 2002.

          2.11 "Fair Market Value of Partnership's Common Units" The twenty-day
average of the closing prices preceding a specific date.

          2.12 "Fiscal Year" means the fiscal year adopted by the Partnership.

          2.13 "General Partner" has the meaning set forth in the Partnership
Agreement.

          2.14 "Good Reason" means (a) any failure by the Partnership to comply
in any material respect with the compensation provisions of a written employment
agreement between a Participant and the Partnership, (b) a material adverse
change in a Participant's title without his or her consent, or (c) the
assignment to a Participant, without his or her consent, of duties and
responsibilities materially inconsistent with his or her level of responsibility
as an executive officer.

          2.15 "Measurement Period" has the same meaning as set forth in Article
5.2.

          2.16 "Participant" means an employee of Suburban Propane, L.P.
designated by the Committee to participate in the Plan.

          2.17 "Partnership" means Suburban Propane, L.P. and Suburban Propane
Partners, L.P., Delaware limited partnerships, and their successors.

          2.18 "Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of Suburban Propane Partners, L.P.

          2.19 "Percentage of Three-Year Annualized Total Return to Unitholders"
means a percentage representing the three-year annualized total return to
Unitholders from the commencement of the Measurement Period to the culmination
of the Measurement Period. This percentage shall be calculated by an
independent, third-party provider as designated by the Committee.

          2.20 "Performance Measures" has the same meaning as set forth in
Article 5.3.

          2.21 "Person" shall have the same meaning as that term is used for
purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended.


                                        4



          2.22 "Phantom Unit Distributions" shall have the same meaning as set
forth in Article 5.4.

          2.23 "Plan" means this Suburban Propane, L.P. 2003 Long Term Incentive
Plan.

          2.24 "Retirement Date" means the first day on which a retiring
Participant is considered inactive. For purposes of determining the abbreviated
Measurement Period described in Article 20, if this date occurs on a day on
which the stock market is closed, for purposes of this Plan, the Participant's
Retirement Date shall be the next business day on which the stock market is
open.

          2.25 "Subsidiary" shall mean any corporation, partnership, or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Partnership.

          2.26 "Target Grant" shall have the same meaning as set forth in
Article 5.1.

          2.27 "Unitholders" means the persons holding Common Units.

          2.28 "Unvested Phantom Units" means a hypothetical number of units
arrived at by dividing the Target Grant established upon commencement of the
Measurement Period by the Fair Market Value of Partnership Common Units on the
first day of the Measurement Period. If the market is closed on the first day of
the Measurement Period then the Fair Market Value on the next business day shall
be used.

          2.29 "Vested Phantom Units" means the quantity of a Participant's
Unvested Phantom Units which are earned upon culmination of the Measurement
Period.

                                   ARTICLE III
                                  PARTICIPATION

     Only those Participants designated from time to time by the Committee shall
participate in the Plan and receive Target Grants hereunder.


                                        5



                                   ARTICLE IV
                                 ADMINISTRATION

          4.1 Administration by the Committee. The Plan shall be administered by
the Committee, which shall hold meetings at such times as may be necessary for
the proper administration of the Plan. The Committee shall keep minutes of its
meetings. A quorum shall consist of not less than two members of the Committee
and a majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by a majority of all of the members
of the Committee shall be as fully effective as if made by a majority vote at a
meeting duly called and held. No member of the Committee shall be liable for any
action, failure to act, determination or interpretation made in good faith with
respect to this Plan or any transaction hereunder, except for liability arising
from his or her own willful misfeasance, gross negligence or reckless disregard
of his or her duties. The Partnership hereby agrees to indemnify each member of
the Committee for all costs and expenses and, to the extent permitted by
applicable law, any liability incurred in connection with defending against,
responding to, negotiating for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying authorization
for any transaction hereunder.

          4.2 Powers of the Committee. Subject to the express terms and
conditions set forth herein, the Committee shall have the power, from time to
time to:

          (a) select those Participants for whom Target Grants shall be
     established;

          (b) construe and interpret the Plan, the Target Grants, the Unvested
     and Vested Phantom Units and corresponding Phantom Unit Distributions, and
     establish, amend and revoke rules and regulations for the administration of
     the Plan, including, but not limited to, correcting any defect or supplying
     any omission, or reconciling any inconsistency in the Plan, in the manner
     and to the extent it shall deem necessary or advisable so that the Plan
     complies with applicable law and otherwise to make the Plan fully
     effective.

          (c) exercise its discretion with respect to the powers and rights
     granted to it as set forth in the Plan; and


                                        6



          (d) generally, exercise such powers and perform such acts as it deems
     necessary or advisable to promote the best interests of the Partnership
     with respect to the Plan.

          4.3 Decisions of the Committee are Final and Binding. The Committee's
decisions, actions, determinations and interpretations shall be final and
binding upon the Partnership, all Participants, Beneficiaries, equity holders of
the Partnership and any other person.

          4.4 Change in Capitalization. In the event of any Change in
Capitalization or in the event of any special distribution to the Common
Unitholders, the Committee may, but shall not be obligated to, make such
equitable adjustments in the Performance Measures, the Phantom Unit
Distributions or other aspects of the Plan, as the Committee determines are
necessary and appropriate.

                                    ARTICLE V
                                     GRANTS

          5.1 Target Grant. The Committee shall establish a Target Grant for
each Participant at the beginning of each Fiscal Year equal to a designated
percentage of such Participant's base salary at the start of the Fiscal Year.
Each participant's designated percentage shall be recorded in the minutes of the
Committee. In the event a Participant's base salary for the respective Fiscal
Year was adjusted within 120 days after the start of the Fiscal Year, the Target
Grant will be computed using such adjusted base salary.

          5.2 Measurement Period. This is a three-year period commencing on the
first day of the fiscal year during which the Target Grant was established and
ending on the last day of the second fiscal year following the fiscal year
during which the Target Grant was established.

          5.3 Performance Measures. The percentage of the Unvested Phantom Units
that shall be earned and immediately converted to Vested Phantom Units at the
end of the Measurement Period shall be determined based upon the ranking of the
Partnership's Percentage of Three-Year Annualized Total Return to Unitholders in
a peer group of eleven other publicly traded partnerships selected by the
Committee. If, at the end of the Measurement Period, it is determined that less
than 100% of the Unvested Phantom Units have been earned, the unearned portion
of said Unvested Phantom Units shall be forfeited.


                                        7



The following chart illustrates the percentage of the Unvested Phantom Units
that shall be converted to Vested Phantom Units based upon the Partnership's
ranking, at the end of the Measurement Period, of Percentage of Three-Year
Annualized Total Return to Unitholders among the peer group established pursuant
to Article 5.3.

- -------------------------------------------------------------
        THREE-YEAR ANNUALIZED TOTAL
     RETURN TO UNITHOLDERS PERCENTAGE       PERCENT OF TARGET
               PERFORMANCE                     GRANT EARNED
- -------------------------------------------------------------
Ranked in top 3 (top quartile)                     125%
- -------------------------------------------------------------
Ranked between 4 - 6 (50th/75th quartile)          100%
- -------------------------------------------------------------
Ranked between 7 - 9 (25th quartile)                50%
- -------------------------------------------------------------
Ranked 10 - 12 (bottom quartile)                     0%
- -------------------------------------------------------------

          5.4 Phantom Unit Distributions. These are cumulative phantom
partnership cash distributions equal to each Participant's Vested Phantom Units
multiplied by the per-Common Unit distribution declared and paid by the
Partnership for each quarter over the course of the Measurement Period.

          5.5 Plan Distributions. Upon vesting, each Participant will receive a
cash payment equal to the quantity of his Vested Phantom Units multiplied by the
Fair Market Value of the Partnership's Common Units on the last date of the
Measurement Period plus the Participant's Phantom Unit Distributions.

                                   ARTICLE VI
                                     VESTING

          6.1 Vesting Schedule. Subject to Articles 6.2 and 6.3, vesting is in
accordance with Article 5.3. Notwithstanding anything in this Article VI to the
contrary, the Committee may accelerate the vesting of Unvested Phantom Units and
all accrued Phantom Unit Distributions at any time for any reason with the
consent of the General Partner.


                                        8



          6.2 Change of Control. Notwithstanding anything in this Plan to the
contrary, upon a Change of Control, the cash value of 125% of all Unvested
Phantom Units and a sum equal to 125% of the Unvested Phantom Units multiplied
by an amount equal to the cumulative, per-Common Unit distribution from the
beginning of the Measurement Period through the date on which the Change of
Control occurred shall be fully vested and nonforfeitable and shall be paid to a
Participant within thirty (30) days after the Change in Control.

          6.3 Forfeiture. Subject to Articles 6.2, 6.4 and 6.5, Unvested Phantom
Units shall lapse and be forfeited upon the occurrence of either of the
following events: (a) termination of the Participant's employment or
participation in the Plan for any reason, except under the circumstances
provided in Articles 6.4 and 6.5; (b) any attempted or completed transfer, sale,
pledge, hypothecation, or assignment by the Participant of the Unvested Phantom
Units.

          6.4 Disability or Death. Notwithstanding the provisions of Article
6.3, if a Participant's employment terminates as a result of Disability or
death, all Unvested Phantom Units and the Phantom Unit Distributions associated
with said Unvested Phantom Units for such Participant shall vest in accordance
with Articles 6.1 and 6.2, as applicable, and shall be paid in accordance with
Article VII and VIII.

          6.5 Termination without Cause or for Good Reason. In the event a
Participant's employment by the Partnership is terminated by the Partnership
without Cause or by the Participant for Good Reason, all Unvested Phantom Units
and all Phantom Unit Distributions associated with said Unvested Phantom Units
shall vest upon the next succeeding scheduled vesting date pursuant to Articles
6.1 or 6.2, as applicable.

                                   ARTICLE VII
                                    PAYMENTS

          The Plan Distributions associated with Vested Phantom Units earned by
a Participant under the Plan shall be paid to the Participant within thirty days
following the culmination of the Measurement Period.


                                        9



                                  ARTICLE VIII
                                  BENEFICIARIES

          A Participant may at any time and from time to time prior to death
designate one or more Beneficiaries to receive any payments to be made following
the Participant's death. If no such designation is on file with the Partnership
at the time of a Participant's death, the Participant's Beneficiary shall be the
beneficiary or beneficiaries named in the Beneficiary designation most recently
filed by the Participant with the Partnership. If the Participant has not
effectively designated a Beneficiary, or if no Beneficiary so designated has
survived the Participant, the Participant's Beneficiary shall be the
Participant's surviving spouse, or, if no spouse has survived the Participant,
the estate of the deceased Participant. If an individual Beneficiary cannot be
located for a period of one year following the Participant's death, despite mail
notification to the Beneficiary's last known address, and if the Beneficiary has
not made a written claim for benefits within such period to the Committee, the
Beneficiary shall be deemed to have predeceased the Participant. The Committee
may require such proof of death and such evidence of the right of any person to
receive all or part of the benefit of a deceased Participant as the Committee
may consider to be appropriate. The Committee may rely upon any direction by the
legal representatives of the estate of a deceased Participant, without liability
to any other person. If a Participant has designated his or her spouse as
Beneficiary, upon entry of a judgment of divorce (or other evidence of formal
dissolution of the marriage), the designation of the spouse as Beneficiary will
be deemed to have been revoked unless the Participant reaffirms such designation
thereafter.

                                   ARTICLE IX
                      TERMINATION AND AMENDMENT OF THE PLAN

          The Plan shall terminate by its terms on the day preceding the tenth
anniversary of the Effective Date of this Plan as originally adopted and no
Target Grant may be established thereafter. The previous sentence
notwithstanding, the Board may, at any time and from time to time, amend,
terminate, modify or suspend the Plan; provided, however, that no such
amendment, modification, suspension or termination shall impair or adversely
affect any Target Grants established for a Participant under the Plan, except
with the consent of the Participant.


                                       10



                                    ARTICLE X
                           NON-EXCLUSIVITY OF THE PLAN

          The adoption of the Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement
or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of options to acquire Common Units, and such arrangements may be
either applicable generally or only in specific cases.

                                   ARTICLE XI
                             LIMITATION OF LIABILITY

As illustrative of the limitation of liability of the Partnership, but not
intended to be exhaustive thereof, nothing in the Plan shall be construed to:

          (a) give any person any right to the establishment of a Target Grant
     other than at the sole discretion of the Committee;

          (b) give any person any rights whatsoever with respect to a Target
     Grant or Unvested Phantom Units except as specifically provided in the
     Plan.

          (c) limit in any way the right of the Partnership to terminate the
     employment of any person at any time; or

          (d) be evidence of any agreement or understanding, express or implied,
     that the Partnership will employ any person at any particular rate of
     compensation or for any particular period of time.

                                   ARTICLE XII
                 REGULATIONS AND OTHER APPROVALS; GOVERNING LAW

          12.1 Except as to matters of federal law, this Plan and the rights of
all persons claiming hereunder shall be construed and determined in accordance
with laws of the State of New Jersey without giving effect to conflicts of law
principles.

          12.2 Except as provided in Article IX hereof the Board may make such
changes to the Plan or an Agreement as may be necessary or appropriate to comply
with the rules and regulations of any government authority.


                                       11



                                  ARTICLE XIII
                              WITHHOLDING OF TAXES

          At such time(s) as a Participant recognizes income for purposes of
income, employment, or other tax liability, the Partnership shall withhold an
amount equal to the federal, state and local taxes and other amounts as may be
required by law to be withheld by the Partnership.

                                   ARTICLE XIV
                        NO REQUIRED SEGREGATION OF ASSETS

          Neither the Partnership nor any subsidiary shall be required to
segregate any assets that may at any time be represented by Phantom Units or
Phantom Unit Distributions made pursuant to the Plan.

                                   ARTICLE XV
                           RIGHT OF DISCHARGE RESERVE

          Neither the Plan nor the establishment of any Target Grant shall
guarantee any Participant continued employment with the Partnership, or a
subsidiary, or guarantee the establishment of future Target Grants.

                                   ARTICLE XVI
                               NATURE OF PAYMENTS

          All Phantom Units awarded and Phantom Unit Distributions made pursuant
to the Plan are in consideration of services for the Partnership or its
subsidiaries. The Phantom Units and Phantom Unit Distributions constitute a
special incentive payment to the Participant and shall not be taken into account
as compensation for purposes of any of the employee benefit plans of the
Partnership or any subsidiary except as may be determined by the Committee.


                                       12



                                  ARTICLE XVII
                              CONSTRUCTION OF PLAN

     The captions used in this Plan are for convenience only and shall not be
construed in interpreting the Plan. Whenever the context so requires, the
masculine shall include the feminine and neuter, and the singular shall also
include the plural, and vice versa.

                                  ARTICLE XVIII
                                   SEVERABILTY

     If any provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part, the unlawfulness, invalidity or
unenforceability of said provision shall not affect any other provision of the
Plan or part thereof, each of which shall remain in full force and effect.

                                   ARTICLE XIX
                                    DEFERRAL

Payments under the Plan may not be deferred by the Participants.

                                   ARTICLE XX
                            RETIREMENT OF PARTICIPANT

     It is neither the intent nor the desire of the Committee to create a
pension plan. Therefore, upon retirement, the Measurement Period with respect to
a retired Participant's Unvested Phantom Units shall cease on his Retirement
Date. The Performance Measures described in Article 5.3 shall be applied to the
abbreviated Measurement Period to determine the quantity of Vested Phantom Units
earned by the retired Participant on his Retirement Date.Within thirty days of
his Retirement Date, the retired Participant shall receive a cash payment in
accordance with Article 5.5 except that the words "the last day of the
Measurement Period" shall be substituted with "the Participant's Retirement
Date" and the Participant's Phantom Unit Distributions on said Vested Phantom
Units shall be understood to equal the quantity of the retired Participant's
Vested Phantom Units multiplied by the cumulative, per-Common Unit distribution
declared and paid by the Partnership for each quarter over the course of the
abbreviated Measurement Period.


                                       13

EX-10.9 6 file003.htm COMPENSATION DEFERRAL PLAN


                                                                   EXHIBIT 10.9


                           COMPENSATION DEFERRAL PLAN
                                       OF
                         SUBURBAN PROPANE PARNERS, L.P.
                                       AND
                             SUBURBAN PROPANE, L.P.

               (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2004)

SECTION 1: DEFERRAL PLAN

     The purpose of the Compensation Deferral Plan sponsored by Suburban Propane
Partners, L.P. and Suburban Propane, L.P. (the "Deferral Plan") is to allow
Eligible Employees to surrender their right to receive all or a portion of their
unvested Common Units granted under the Suburban Propane Partners, L.P. 1996
Restricted Unit Plan and the 2000 Restricted Unit Plan ("Restricted Unit Plan")
prior to the time their Common Units are substantially certain to vest in
exchange for the right to participate in and receive certain payments under the
Deferral Plan. During the deferral period, all distributions incurring to said
deferred units will be immediately distributed to the Participant in accordance
with the quantity of units deferred by said Participant. The Deferral Plan is
intended to be a nonqualified "top-hat" plan; that is, an unfunded plan of
deferred compensation maintained for certain employees of a select group of
management of highly compensated employees pursuant to Sections 201 (1), 301 (a)
(3), and 401 (a) (1) of ERISA, and an unfunded plan of deferred compensation
under the Code.

SECTION 2: DEFINITIONS

2.1: "Beneficiary" means the individual, individuals or estate entitled (as
determined under Section 7) to receive payment under the Deferral Plan following
a Participant's death.

2.2: "Board" means the Board of Supervisors of the Partnership from time to time
established in accordance with the Second Amended and Restated Agreement of
Limited Partnership of the Partnership of even date herewith, as in effect from
time to time.

2.3: "Change in Control" means:

     (i) an acquisition (other than directly from the MLP) of Common Units or
     voting equity interests of the MLP ("Voting Securities") by any "Person"
     (as the term person is used for purposes of Section 13 (d) or 14 (d) of the
     Exchange Act), other than the MLP, the Partnership, the General Partner,
     immediately after which such Person has "Beneficial Ownership" (within the
     meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
     thirty three and one-third percent (33-1/3%) of the combined voting power
     of the MLP's then outstanding Units; PROVIDED, HOWEVER, that in determining
     whether



     a Change in Control has occurred, Units which are acquired in a
     "Non-Control Acquisition" shall not constitute an acquisition which would
     cause a Change in Control. For purposes of this definition of Change in
     Control, a "Non-Control Acquisition" means an acquisition by (i) an
     employee benefit plan (or trust forming a part thereof) maintained by (A)
     the MLP, the Partnership or any of its affiliates or (B) any corporation,
     partnership or other Person of which a majority of its voting power or its
     voting equity securities or equity interests is owned, directly or
     indirectly, by the MLP (for purposes of this definition by the MLP (for by
     the MLP (for purposes of this definition of Non-Control Acquisition, any
     such corporation, partnership or other person, a "Subsidiary"), (ii) the
     MLP or its Subsidiaries, or (iii) any Person in connection with a
     "Non-Control Transaction" (as defined in clause (ii) of this definition of
     Change in Control); or

     (ii)approval by the requisite percentage of the partners of the MLP of (A)
     a merger, consolidation or reorganization involving the MLP, unless (x) the
     holders of Units immediately before such merger, consolidation or
     reorganization own, directly or indirectly immediately following such
     merger, consolidation or reorganization, at least sixty percent (60%) of
     the combined voting power of the outstanding Units of the entity resulting
     from such merger, consolidation or reorganization (the "Surviving Entity")
     in substantially the same proportion as their ownership of the Units
     immediately before such merger, consolidation or reorganization, and (y) no
     person or entity (other than the MLP, any Subsidiary, any employee benefit
     plan (or any trust forming a part thereof) maintained by the Partnership,
     the MLP, the Surviving Entity, or any person who, immediately prior to such
     merger, consolidation or reorganization had Beneficial Ownership of more
     than thirty three and one-third percent (33-1/3%) of the then outstanding
     Units), has Beneficial Ownership of more than thirty three and one-third
     percent (33-1/3%) of the combined voting power of the Surviving Entity's
     then outstanding voting securities (any such merger or consolidation under
     the immediately preceding subclauses (x) and (y) of this clause (A), a
     "Non-Control Transaction"); (B) a complete liquidation or dissolution of
     the MLP; or (C) the sale or other disposition of 50% or more of the net
     assets of the MLP to any Person (other than a transfer to a Subsidiary).

          Notwithstanding the foregoing, a Change in Control shall not be deemed
     to occur solely because any Person (the "Subject Person") acquired
     Beneficial Ownership of more than the permitted amount of the outstanding
     Voting Securities as a result of the acquisition of Voting Securities by
     the MLP which, by reducing the number of Voting Securities outstanding,
     increases the proportional number of units Beneficially Owned by the
     Subject Person, provided that if a Change in Control would occur (but for
     the operation of this sentence) as a result of the acquisition of Voting
     Securities by the MLP, and after such acquisition by the MLP, the Subject
     Person becomes the Beneficial Owner of any additional Voting Securities
     which increases the percentage of the then outstanding Voting Securities
     Beneficially Owned by the Subject Person, then a Change in Control shall
     occur.

2.4: "Code" means the Internal Revenue Code of 1986, as amended from time to
time.



2.5: "Committee" means a committee consisting of at least two (2) members of the
Board appointed by the Board to administer the Plan and to perform the functions
set forth herein. Each of such member shall be a "non-employee" director within
the meaning of Section 16b-3 of the Exchange Act.

2.6: "Common Units" means the common units representing limited partnership
interests of the MLP.

2.7: "Date of Deferral" means (i) the date the MLP deposits Common Units into
the Trust pursuant to a Participant's election to surrender the right to receive
Common Units under the Restricted Unit Plan and (ii) with respect to Special
Common Units only, the date on which the MLP deposits such Special Common Units
into the trust on behalf of the Eligible Employee.

2.8: "Deferral Election Form" means the written agreement of a Participant, in
such form as may be prescribed by the Committee, filed with the Partnership
according to procedures and at such times as established by the Committee.

2.9: "Deferral Plan" has the meaning set forth in Section 1.

2.10: "Employee" means a person who is an employee of the Partnership or one of
its affiliates and "Eligible Employee" means a person who is a participant in
the Restricted Unit Plan designated by the Committee or any other employee so
designated by the Committee.

2.11: "Exchange Act" means the Securities Exchange Act of 1934, as amended.

2.12: "General Partner" means Suburban Energy Services Group LLC, a Delaware
limited liability company, as general partner of the MLP and the Partnership.

2.13: "MLP" means Suburban Propane Partners, L.P., a Delaware limited
partnership.

2.14: "MLP Partnership Agreement" means the Second Amended and Restated
Partnership Agreement of the MLP, as in effect from time to time.

2.15: "Operating Agreement" means the Operating Agreement of the General Partner
of even date herewith, as in effect from time to time.

2.16: "Participant" means an Eligible Employee who participates in the Deferral
Plan under Section 4.

2.17: "Partnership" means Suburban Propane, L.P. a Delaware limited partnership,
and its successors.

2.18: "Percentage Interest" means a Participant's membership interest in the
General Partner as determined in accordance with the Operating Agreement.



2.19: "Quarterly Distribution" means any quarterly distribution on the Common
Units and on the General Partner's general partner interest in the MLP made by
the MLP from time to time pursuant to the MLP Partnership Agreement.

2.20: "Trust Agreement" means the Benefits Protection Trust Agreement entered
into by the MLP with First Union National Bank, as trustee, effective as of May
26, 1999.

2.21: "Trust" means the Trust established under the Trust Agreement.

2.22: "Trustee" means First Union National Bank, as trustee, or its successor as
designated under the Trust Agreement.

2.23: "Unforeseen Emergency" means an event beyond the control of the
Participant that would result in severe financial hardship to the Participant if
early withdrawal of all or a portion of the Participant's account balance (as
provided for in Section 6.1(b)) were not permitted. Whether a Participant has an
Unforeseen Emergency shall be determined by the Committee.

SECTION 3: ADMINISTRATION

3.1: The Committee shall supervise the administration and interpretation of the
Deferral Plan, may establish administrative regulations to further the purpose
of the Deferral Plan and shall take any other action necessary to the proper
operation of the Deferral Plan. The Committee has the discretion to take any
action or make any decision it deems necessary in the administration of the
Deferral Plan. All decisions and acts of the Committee shall be final and
binding upon all Participants, their Beneficiaries and all other persons.

3.2: The Committee shall provide each Participant, semi-annually, a statement of
the Participant's account balance under the Deferral Plan.

SECTION 4: ELIGIBILITY TO PARTICIPATE

     An Eligible Employee shall become a Participant in the Deferral Plan by the
completion of a timely filing and acceptance by the Partnership of the Deferral
Election Form, in such form and according to the terms and conditions
established by the Committee. A Participant (or any Beneficiary who becomes
entitled) remains a Participant as to his account until his account balance is
fully distributed under the terms of the Deferral Plan.

SECTION 5: PARTICIPATION

     EFFECTIVE DATE OF PARTICIPATION. Participation under the Deferral Plan
shall become effective only on the Date of Deferral.



SECTION 6: PAYMENTS TO PARTICIPANTS AND BENEFICIARIES

6.1: TIME OF PAYMENT. (a) Subject to subsections (b) and (c) of this Section
6.1, a Participant shall make an irrevocable election to commence receipt of
payments under this Deferral Plan upon a specific future payment date as set
forth in the Deferral Election Form following the Date of Deferral.

(b) A Participant who has not yet terminated employment, but who has an
Unforeseen Emergency, may receive any or all of his or her account balance on or
after the Acquisition Loan Termination Date; PROVIDED that the Participant may
not receive an amount greater than the amount necessary to meet the Unforeseen
Emergency and any amounts necessary for the Participant to pay his or her
federal, state and local income taxes with respect to the amount received that
are reasonably anticipated to result from the withdrawal of such amount under
this Section 6.1.

(c) Notwithstanding any provision in this Deferral Plan to the contrary, a
Participant may, prior to a Change in Control, elect to receive payment of his
or her account balance under this Deferral Plan at such time as the Board
determines that a Change in Control has occurred. Such payment shall be made in
a lump sum within 45 days after the Change in Control.

(d) If a Participant dies at any time before having received any portion of his
or her account balance under this Deferral Plan, payment of the remaining
amounts shall be paid in a lump sum payment as soon as practical following the
Participant's death.

(e) If a Participant dies at any time after payment of his or her account
balance under this Deferral Plan has begun, such Participant's Beneficiary shall
continue to receive payment of the Participant's account in the same manner as
the Participant elected, or such shorter payment schedule as elected by the
Beneficiary.

(f) If any lump sum distribution otherwise payable under this Deferral Plan
would be disallowed in any part as a deduction to the Partnership in accordance
with Section l62(m) (or a successor section) of the Code, the Committee may
determine to distribute the amount of such benefit in installments such that the
Participant or Beneficiary shall receive the maximum amount permissible in each
installment and still preserve the Partnership's full tax deduction.

6.2: TERMINATION OF EMPLOYMENT. If the employment of a Participant is terminated
for any reason, including death, prior to the distribution date elected on the
Deferral Election Form, distribution shall commence to the Participant or the
Participant's Beneficiary as soon as practicable thereafter.

6.3: PAYMENT IN U.S. DOLLARS. All payments under this Deferral Plan shall be
made in U.S. dollars or Common Units, as applicable.

6.4: REDUCTION OF PAYMENTS. All payments under this Deferral Plan shall be
reduced by any and all amounts that the Partnership is required to withhold
pursuant to applicable law.



6.5: ADDITIONAL DEFERRALS. Notwithstanding Section 6.1, a Participant who has
made an election deferral in accordance with Section 5 hereof, may make an
election to further defer such amounts; PROVIDED such election is made no later
than one month prior to the scheduled date of distribution as set forth on the
Deferral Election Form.

SECTION 7: BENEFICIARIES

     A Participant may at any time and from time to time prior to death
designate one or more Beneficiaries to receive any payments to be made following
the Participant's death. If no such designation is on file with the Partnership
at the time of a Participant's death, the Participant's Beneficiary shall be the
beneficiary or beneficiaries named in the beneficiary designation most recently
filed by the Participant with the Partnership. If the Participant has not
effectively designated a beneficiary, or if no beneficiary so designated has
survived the Participant, the Participant's Beneficiary shall be the
Participant's surviving spouse, or, if no spouse has survived the Participant,
the estate of the deceased Participant. If an individual Beneficiary cannot be
located for a period of one year following the Participant's death, despite mail
notification to the Beneficiary's last known address, and if the Beneficiary has
not made a written claim for benefits within such period to the Committee, the
Beneficiary shall be treated as having predeceased the Participant. The
Committee may require such proof of death and such evidence of the right of any
person to receive all or part of the benefit of a deceased Participant as the
Committee may consider to be appropriate. The Committee may rely upon any
direction by the legal representatives of the estate of a deceased Participant,
without liability to any other person.

SECTION 8: GENERAL PROVISIONS

8.1: PROHIBITION OF ASSIGNMENT OF TRANSFER. Any assignment, hypothecation,
pledge or transfer of a Participant's or Beneficiary's right to receive payments
under the Deferral Plan shall be null and void and shall be disregarded.

8.2: DEFERRAL PLAN NOT TO BE FUNDED. The Partnership is not required to, and
will not, for the purpose of funding the Deferral Plan, segregate any monies
from its general funds, create any trusts, other than the Trust, or make any
special deposits, and the right of a Participant or Beneficiary to receive a
payment under the Deferral Plan shall be no greater than the right of an
unsecured general creditor of the Partnership.

8.3: EFFECT OF PARTICIPATION. Neither selection as an Eligible Employee, nor an
election to participate or participation in the Deferral Plan, shall affect the
Partnership's right to discharge an Eligible Employee or a Participant.

8.4: COMMUNICATIONS TO BE IN WRITING. All elections, requests and communications
to the Committee from Participants and Beneficiaries, and all communications to
such persons from the Committee, shall be in writing, and in such form and
manner, and within such time, as the Committee shall determine.



8.5: ABSENCE OF LIABILITY. No officer, supervisor or employee of the Partnership
shall be personally liable for any act or omission to act, under the Deferral
Plan, of any other person, or, except in circumstances involving bad faith, for
such officer's, supervisor's or employee's own act or omission to act.

8.6: TITLES FOR REFERENCE ONLY. The titles given herein to Sections and
subsections are for reference only and are not to be used to interpret the
provisions of the Deferral Plan.

8.7: NEW YORK LAW TO GOVERN. All questions pertaining to the construction,
regulation, validity and effect of the provisions of the Deferral Plan shall be
determined in accordance with New York law, without regard to the principles or
policies of conflicts of law thereof.

8.8: AMENDMENT. The Committee may amend the Deferral Plan at any time, but no
amendment may be adopted which alters the payments due Participants or
Beneficiaries, as of the date of the amendment, or the times at which payments
are due, without the consent of each Participant affected by the amendment and
of each Beneficiary (of a then deceased Participant) affected by the amendment.

8.9: PLAN TERMINATION. The Committee may terminate the Deferral Plan at any
time, but such termination may not alter the payments due Participants or
Beneficiaries, as of the date of such termination, without the consent of each
Participant affected by the termination.

                                        SUBURBAN PROPANE PARTNERS, L.P.
                                        SUBURBAN PROPANE, L.P.


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

EX-10.13 7 file004.htm THIRD AMENDED AND RESTATED CREDIT AGREEMENT



                                                                   Exhibit 10.13
================================================================================

                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT

                          dated as of October 20, 2004,

                                  by and among

                             SUBURBAN PROPANE, L.P.,
                                  as Borrower,

                         the Lenders referred to herein,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                            as Administrative Agent,
                     Swingline Lender and an Issuing Lender,

                              FLEET NATIONAL BANK,
                              as Syndication Agent,

                             CALYON NEW YORK BRANCH,
                              as Syndication Agent,

                               CITICORP USA, INC.,
                             as Documentation Agent,

                                       and

                               NATIONAL CITY BANK,
                             as Documentation Agent

                          WACHOVIA CAPITAL MARKETS, LLC
                   as Sole Lead Arranger and Sole Book Manager

================================================================================



                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
ARTICLE I  DEFINITIONS........................................................1
   SECTION 1.1     Definitions................................................1
   SECTION 1.2     Other Definitions and Provisions..........................22
   SECTION 1.3     Accounting Terms..........................................22
   SECTION 1.4     UCC Terms.................................................22
   SECTION 1.5     Rounding..................................................23
   SECTION 1.6     References to Agreement and Laws..........................23
   SECTION 1.7     Times of Day..............................................23
   SECTION 1.8     Letter of Credit Amounts..................................23

ARTICLE II  REVOLVING CREDIT FACILITY........................................23
   SECTION 2.1     Revolving Credit Loans....................................23
   SECTION 2.2     Swingline Loans...........................................24
   SECTION 2.3     Revolver Letters of Credit................................26

ARTICLE III  STAND-ALONE LETTER OF CREDIT FACILITY...........................30
   SECTION 3.1     Stand-Alone L/C Commitment................................30
   SECTION 3.2     Procedure for Issuance of Stand-Alone Letters
                      of Credit..............................................30
   SECTION 3.3     Commissions and Other Charges.............................31
   SECTION 3.4     Stand-Alone L/C Participations............................31
   SECTION 3.5     Stand-Alone Reimbursement Obligation of the Borrower......32
   SECTION 3.6     Obligations Absolute......................................33

ARTICLE IV  GENERAL LOAN PROVISIONS..........................................33
   SECTION 4.1     Procedure for Advances of Loans...........................33
   SECTION 4.2     Repayment of Loans........................................35
   SECTION 4.3     Evidence of Indebtedness..................................35
   SECTION 4.4     Repayment; Limited Incurrence during Cleandown
                      Period.................................................36
   SECTION 4.5     Permanent Reduction of the Revolving Credit
                      Commitment and the Stand-Alone L/C Commitment..........36
   SECTION 4.6     Termination of Credit Facilities..........................37
   SECTION 4.7     Interest..................................................37
   SECTION 4.8     Notice and Manner of Conversion or Continuation
                      of Loans...............................................38
   SECTION 4.9     Fees......................................................39
   SECTION 4.10    Manner of Payment.........................................39
   SECTION 4.11    Crediting of Payments and Proceeds........................40
   SECTION 4.12    Adjustments...............................................40
   SECTION 4.13    Nature of Obligations of Lenders Regarding Extensions
                      of Credit; Assumption by the Administrative Agent......41
   SECTION 4.14    Changed Circumstances.....................................42
   SECTION 4.15    Increased Costs...........................................42
   SECTION 4.16    Indemnity.................................................44



   SECTION 4.17    Taxes.....................................................44
   SECTION 4.18    Duty to Mitigate; Replacement of Lenders..................47

ARTICLE V  CLOSING; CONDITIONS OF CLOSING AND BORROWING......................48
   SECTION 5.1     Closing...................................................48
   SECTION 5.2     Conditions to Closing and Initial Extensions
                      of Credit..............................................48
   SECTION 5.3     Conditions to All Extensions of Credit....................51

ARTICLE VI  REPRESENTATIONS AND WARRANTIES OF THE BORROWER...................51
   SECTION 6.1     Representations and Warranties............................51
   SECTION 6.2     Survival of Representations and Warranties, Etc...........57

ARTICLE VII  FINANCIAL INFORMATION AND NOTICES...............................57
   SECTION 7.1     Financial Statements......................................58
   SECTION 7.2     Officer's Compliance Certificate..........................59
   SECTION 7.3     Other Reports.............................................59
   SECTION 7.4     Notice of Litigation and Other Matters....................60
   SECTION 7.5     Accuracy of Information...................................60

ARTICLE VIII  AFFIRMATIVE COVENANTS..........................................61
   SECTION 8.1     Existence; Businesses and Properties......................61
   SECTION 8.2     Insurance.................................................61
   SECTION 8.3     Taxes.....................................................61
   SECTION 8.4     Employee Benefits.........................................62
   SECTION 8.5     Access to Premises and Records; Confidentiality...........62
   SECTION 8.6     Compliance with Laws......................................62
   SECTION 8.7     Additional Guarantors.....................................62
   SECTION 8.8     Use of Proceeds...........................................63
   SECTION 8.9     Partnership Documents.....................................63
   SECTION 8.10    Compliance with Environmental and Safety Laws.............63
   SECTION 8.11    Preparation of Environmental Reports......................63
   SECTION 8.12    Corporate Identity........................................63
   SECTION 8.13    Federal Reserve Regulations...............................64
   SECTION 8.14    Available Cash Reserves...................................64
   SECTION 8.15    Further Assurances........................................64
   SECTION 8.16    Commodity Hedging Policy..................................64

ARTICLE IX  FINANCIAL COVENANTS..............................................65
   SECTION 9.1     Interest Coverage Ratio...................................65
   SECTION 9.2     Leverage Ratio............................................65

ARTICLE X  NEGATIVE COVENANTS................................................65
   SECTION 10.1    Indebtedness..............................................65
   SECTION 10.2    Liens.....................................................68
   SECTION 10.3    Sale and Lease-Back Transactions..........................70



   SECTION 10.4    Investments, Loans and Advances...........................70
   SECTION 10.5    Mergers, Consolidations, Sales of Assets and
                      Acquisitions...........................................71
   SECTION 10.6    Restricted Payments.......................................73
   SECTION 10.7    Transactions with Affiliates..............................74
   SECTION 10.8    Business of Borrower and Subsidiaries.....................74
   SECTION 10.9    Material Agreements; Tax Status...........................75
   SECTION 10.10   Lease Obligations.........................................75
   SECTION 10.11   Priority Indebtedness.....................................76
   SECTION 10.12   Certain Accounting Changes................................76
   SECTION 10.13   Restrictive Agreements....................................76

ARTICLE XI  DEFAULT AND REMEDIES.............................................76
   SECTION 11.1    Events of Default.........................................76
   SECTION 11.2    Remedies..................................................78
   SECTION 11.3    Rights and Remedies Cumulative; Non-Waiver; etc...........79

ARTICLE XII THE ADMINISTRATIVE AGENT.........................................79
   SECTION 12.1    Appointment and Authority.................................79
   SECTION 12.2    Rights as a Lender........................................79
   SECTION 12.3    Exculpatory Provisions....................................80
   SECTION 12.4    Reliance by the Administrative Agent......................80
   SECTION 12.5    Delegation of Duties......................................81
   SECTION 12.6    Resignation of Administrative Agent.......................81
   SECTION 12.7    Non-Reliance on Administrative Agent and
                      Other Lenders..........................................82
   SECTION 12.8    Administrative Agent May File Proofs of Claim.............82
   SECTION 12.9    No Other Duties, etc......................................83

ARTICLE XIII MISCELLANEOUS...................................................83
   SECTION 13.1    Notices...................................................83
   SECTION 13.2    Expenses; Indemnity.......................................84
   SECTION 13.3    Right of Set-off..........................................86
   SECTION 13.4    Governing Law.............................................87
   SECTION 13.5    Consent to Jurisdiction...................................87
   SECTION 13.6    Waiver of Jury Trial......................................87
   SECTION 13.7    Reversal of Payments......................................87
   SECTION 13.8    Injunctive Relief; Punitive Damages.......................87
   SECTION 13.9    Accounting Matters........................................88
   SECTION 13.10   Successors and Assigns; Participations....................88
   SECTION 13.11   Confidentiality...........................................91
   SECTION 13.12   Amendments, Waivers and Consents..........................91
   SECTION 13.13   Performance of Duties.....................................93
   SECTION 13.14   All Powers Coupled with Interest..........................93
   SECTION 13.15   Survival of Indemnities...................................93
   SECTION 13.16   Titles and Captions.......................................93
   SECTION 13.17   Severability of Provisions................................93
   SECTION 13.18   Counterparts..............................................93



   SECTION 13.19   Term of Agreement.........................................93
   SECTION 13.20   USA Patriot Act...........................................94
   SECTION 13.21   Inconsistencies with Other Documents; Independent
                      Effect of Covenants....................................94
   SECTION 13.22   Entire Agreement..........................................94



EXHIBITS
- --------
Exhibit A   -   Form of Revolving Credit Note
Exhibit B   -   Form of Notice of Borrowing
Exhibit C   -   Form of Notice of Account Designation
Exhibit D   -   Form of Notice of Prepayment
Exhibit E   -   Form of Notice of Conversion/Continuation
Exhibit F   -   Form of Officer's Compliance Certificate
Exhibit G   -   Form of Assignment and Assumption
Exhibit H   -   Form of Guaranty Agreement

SCHEDULES
- ---------
Schedule 1.1(a)   -   Lenders and Commitments
Schedule 1.1(b)   -   Existing Letters of Credit
Schedule 6.1(a)   -   Jurisdictions of Organization and Qualification
Schedule 6.1(b)   -   Subsidiaries and Capitalization
Schedule 6.1(m)   -   Defaults
Schedule 6.1(n)   -   Employee Relations
Schedule 6.1(u)   -   Indebtedness and Contingent Obligations
Schedule 8.16     -   Commodity Hedging Policy
Schedule 10.2     -   Existing Liens



     THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 20, 2004,
by and among SUBURBAN PROPANE, L.P., a limited partnership organized under the
laws of Delaware (the "Borrower"), the Lenders who are or may become a party
hereto, in their capacity as Lenders and in such other capacities as reflected
on the signature pages hereto and WACHOVIA BANK, NATIONAL ASSOCIATION, as
Administrative Agent.

                              STATEMENT OF PURPOSE

     Pursuant to the Second Amended and Restated Credit Agreement dated as of
May 8, 2003 (as amended, the "Original Credit Agreement"), by and among the
Borrower, the lenders party thereto (the "Original Lenders") and the
Administrative Agent, the Original Lenders extended certain credit facilities to
the Borrower pursuant to the terms thereof.

     The Borrower has requested, and, subject to the terms and conditions
hereof, the Administrative Agent and the Lenders have agreed, to amend and
restate the Original Credit Agreement on the terms and conditions of this
Agreement.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree that the Original Credit Agreement is hereby amended and restated
as follows:

                                    ARTICLE I

                                   DEFINITIONS

     SECTION 1.1 Definitions. The following terms when used in this Agreement
shall have the meanings assigned to them below:

     "Administrative Agent" means Wachovia in its capacity as Administrative
Agent hereunder, and any successor thereto appointed pursuant to Section 12.6.

     "Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
13.1.

     "Affiliate" means, with respect to any Person, any other Person (other than
a Subsidiary) which directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such first
Person or any of its Subsidiaries. The term "control" means the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.

     "Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be modified at any time or from time
to time pursuant to the terms hereof. On the Closing Date, the Aggregate
Commitment shall be One Hundred Fifty Million Dollars ($150,000,000).





     "Agreement" means this Third Amended and Restated Credit Agreement, as
further amended, restated, supplemented or otherwise modified from time to time.

     "Applicable Law" means all applicable provisions of constitutions,
statutes, laws, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of all Governmental Authorities and all
orders and decrees of all courts and arbitrators.

     "Applicable Margin" means, for purposes of calculating (a) the Base Rate
and LIBOR Rate for purposes of Section 4.7(a) and (b) the Facility Fee for
purposes of Section 4.9(a), the corresponding percentage per annum as set forth
below determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate as follows:



- ----------------------------------------------------------------------------------------
                                                      LIBOR
                                                     RATE +   BASE RATE +   FACILITY FEE
LEVEL                 LEVERAGE RATIO                   (%)        (%)            (%)
- ----------------------------------------------------------------------------------------

  I     Greater than or equal to 4.25 to 1.00         2.000      1.000          0.500
- ----------------------------------------------------------------------------------------
  II    Greater than or equal to 3.75 to 1.00,        1.750      0.750          0.500
        but less than 4.25 to 1.00
- ----------------------------------------------------------------------------------------
 III    Greater than or equal to 3.25 to 1.00,        1.625      0.625          0.375
        but less than 3.75 to 1.00
- ----------------------------------------------------------------------------------------
  IV    Greater than or equal to 2.75 to 1.00,        1.375      0.375          0.375
        but less  than 3.25 to 1.00
- ----------------------------------------------------------------------------------------
  V     Less than 2.75 to 1.00                        1.250      0.250          0.375
- ----------------------------------------------------------------------------------------


Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the third (3rd) Business Day after receipt by the
Administrative Agent of quarterly financial statements for the Borrower and its
Subsidiaries and the accompanying Officer's Compliance Certificate setting forth
the Leverage Ratio of the Borrower and its Subsidiaries as of the most recent
fiscal quarter end. Subject to Section 4.7(c), in the event the Borrower fails
to deliver such financial statements and certificate within the time required by
Section 7.2, the Applicable Margin shall be the highest Applicable Margin set
forth above until the delivery of such financial statements and Officer's
Compliance Certificate.

     "Application" means an application, in the form specified by the applicable
Issuing Lender from time to time, requesting such Issuing Lender to issue a
Letter of Credit.

     "Assignment and Assumption" means an assignment and assumption entered into
by a Lender and an Eligible Assignee (with the consent of any party whose
consent is required by Section 13.10), and accepted by the Administrative Agent,
in substantially the form of Exhibit G or any other form approved by the
Administrative Agent.


                                        2




     "Available Cash" means, with respect to any fiscal quarter of the Borrower:

     (a) the sum of the following, without duplication, (i) all cash and cash
equivalents of the Borrower and its Subsidiaries on hand at the end of such
quarter, (ii) all additional cash and cash equivalents of the Borrower and its
Subsidiaries on hand on the date of determination of Available Cash with respect
to such quarter resulting from borrowings hereunder and (iii) the amount of the
Revolving Credit Commitment available to be borrowed hereunder on the date of
determination of Available Cash, less

     (b) the amount of cash reserves that is necessary or appropriate in the
reasonable discretion of the Board of Supervisors of the Borrower to (i) provide
for the proper conduct of the business of the Borrower and its Subsidiaries
(including reserves for future capital expenditures) subsequent to such quarter,
(ii) comply with Applicable Law or any loan agreement (including, but not
limited to, this Agreement), security agreement, mortgage, debt instrument or
other agreement or obligation to which the Borrower or any Subsidiary is a party
or by which it is bound or its assets are subject and which is permitted by the
terms hereof or (iii) provide funds for distributions to partners of the Parent
and the General Partner in respect of any one or more of the next succeeding
four fiscal quarters; provided that the Board of Supervisors shall not establish
cash reserves pursuant to clause (iii) if the effect of such reserves would be
that the Parent is unable to distribute the Minimum Quarterly Distribution on
the Common Units with respect to such quarter; and provided, further, that
disbursements made or cash reserves established, increased or reduced after the
end of such quarter but on or before the date of determination of Available Cash
with respect to such quarter shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, within such
quarter if the Board of Supervisors of the Borrower so determines.

     In addition, without limitation or duplication of the foregoing, Available
Cash for any fiscal quarter shall reflect reserves equal to (A) 50% of the
interest projected to be paid on the Senior Notes, the Refinancing Notes and any
Loans outstanding or projected to be outstanding hereunder in the next
succeeding fiscal quarter and (B) beginning with a date three fiscal quarters
before a scheduled principal payment date on the Senior Notes, the Refinancing
Notes or the Loans, 25% of the aggregate principal amount thereof due on any
such payment date in the third succeeding fiscal quarter, 50% of the aggregate
principal amount due on any such quarterly payment date in the second succeeding
fiscal quarter and 75% of the aggregate principal amount due on any quarterly
payment date in the next succeeding fiscal quarter and (C) the aggregate amount
deemed not to constitute Designated Net Proceeds pursuant to the further proviso
contained in the definition of "Designated Net Proceeds". The foregoing reserves
for amounts to be paid at any time shall be reduced by the amount of the Blocked
Portion then in effect.

     "Base Rate" means, at any time, the higher of (a) the Prime Rate or (b) the
Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.

     "Base Rate Loan" means any Loan bearing interest at a rate based upon the
Base Rate as provided in Section 4.7(a).


                                        3




     "Blocked Portion" has the meaning assigned thereto in Section 2.1(b).

     "Board of Supervisors" means, with respect to the Parent or the Borrower,
as the case may be, such Board of Supervisors as defined in the Parent
Partnership Agreement or the Borrower Partnership Agreement, as applicable.

     "Borrower" has the meaning assigned thereto in the introductory paragraph
hereto.

     "Borrower Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of the Borrower, dated as of May 26, 1999, as
it may be amended, supplemented or otherwise modified from time to time pursuant
to the terms hereof.

     "Business" means the businesses of the Borrower and its Subsidiaries.

     "Business Day" means (a) for all purposes other than as set forth in clause
(b) below, any day other than a Saturday, Sunday or legal holiday on which banks
in Charlotte, North Carolina and New York, New York, are open for the conduct of
their commercial banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and
that is also a day for trading by and between banks in Dollar deposits in the
London interbank market.

     "Capital Asset" means, with respect to the Borrower and its Subsidiaries,
any asset that should, in accordance with GAAP, be classified and accounted for
as a capital asset on a Consolidated balance sheet of the Borrower and its
Subsidiaries.

     "Capital Lease" means, with respect to the Borrower and its Subsidiaries,
any lease of any property that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a Consolidated balance sheet of the
Borrower and its Subsidiaries.

     "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 stock, any limited or general partnership interest and
any limited liability company membership interest.

     "Change in Law" means the occurrence, after the date of this Agreement, of
any of the following: (a) the adoption or taking effect of any law, rule,
regulation or treaty, (b) any change in any law, rule, regulation or treaty or
in the administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.

     "Change in Ownership" means the occurrence, at any time prior to the
Termination Date, of any of the following events: (a) any Person or group of
Persons, other than those Persons owning Capital Stock of the General Partner on
the Closing Date, shall acquire, directly or indirectly, (i) more than 50% of
the outstanding


                                        4




Capital Stock of the General Partner entitled to vote in the election or removal
of the members of the Board of Supervisors or (ii) outstanding Capital Stock of
the General Partner entitled to more than 50% of the assets of the General
Partner upon the dissolution or liquidation thereof, (b) the General Partner
shall fail to own directly or indirectly, beneficially and of record, 100% of
the general partner interests in each of the Parent and the Borrower, (c) a
majority of the seats (excluding vacant seats) on the Board of Supervisors of
the Parent or the Borrower should at any time after the Closing Date be occupied
by Persons who were not nominated by the General Partner, by a majority of the
Board of Supervisors of the Parent or the Borrower or by Persons so nominated or
(d) a change in control with respect to the General Partner, the Parent, or the
Borrower (or similar event, however denominated) should occur under and as
defined in any indenture or agreement in respect of Indebtedness in an aggregate
outstanding principal amount in excess of $10,000,000 to which the General
Partner, the Parent, the Borrower or any Subsidiary is party.

     "Cleandown Period" means a period of thirty (30) consecutive days selected
by the Borrower during each Fiscal Year.

     "Closing Date" means the date of this Agreement or such later Business Day
upon which each condition described in Article V shall be satisfied or waived in
all respects in a manner acceptable to the Administrative Agent, in its sole
discretion.

     "Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.

     "Commitment" means, as to any Lender, on a collective basis, such Lender's
Revolving Credit Commitment and Stand-Alone L/C Commitment, as set forth
opposite such Lender's name on Schedule 1.1(a) hereto, as the same may be
modified at any time or from time to time pursuant to the terms hereof.

     "Commitment Percentage" means, as to any Lender at any time, the ratio of
(a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment
of all of the Lenders.

     "Commodity Hedging Agreement" means any agreement with respect to a
commodity swap or other agreement regarding the hedging of commodity purchase
and sale exposure executed in connection with hedging the commodity purchase and
sale exposure of the Borrower and its Subsidiaries, and any confirming letter
executed pursuant to such commodity hedging agreement, all as amended, restated
or otherwise modified.

     "Common Units" means Common Units of the Parent representing limited
partner interests in the Parent.

     "Consolidated" means, when used with reference to financial statements or
financial statement items of the Borrower and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.

     "Consolidated Billing Program" means an accounts receivable billing and
purchasing arrangement entered into between an ESCO and a utility provider


                                        5




whereby the utility provider performs billing and collection services with
respect to the commodity component of gas or electricity owned by an ESCO and
delivered to the utility's customers.

     "Contingent Obligation" means, with respect to the Borrower and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement condition or otherwise) or (b) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, that the term
Contingent Obligation shall not include endorsements for collection or deposit
in the ordinary course of business.

     "Covered Persons" has the meaning assigned thereto in the definition of
Restricted Payment.

     "Credit Facilities" means the collective reference to the Revolving Credit
Facility, the Revolver L/C Facility, the Stand-Alone L/C Facility, and the
Swingline Facility.

     "Default" means any of the events specified in Section 11.1, which with the
passage of time, the giving of notice or any other condition, would constitute
an Event of Default.

     "Defaulting Lender" means any Lender that (a) has failed to fund any
portion of the Revolving Credit Loans, participations in Revolver L/C
Obligations, participations in Stand-Alone L/C Obligations or participations in
Swingline Loans required to be funded by it hereunder within one Business Day of
the date required to be funded by it hereunder, (b) has otherwise failed to pay
over to the Administrative Agent or any other Lender any other amount required
to be paid by it hereunder within one Business Day of the date when due, unless
such amount is the subject of a good faith dispute, or (c) has been deemed
insolvent or become the subject of a bankruptcy or insolvency proceeding.

     "Designated Net Proceeds" means 100% of all proceeds in cash or cash
equivalents (including cash proceeds subsequently received in respect of noncash
consideration initially received), net of selling expenses (including reasonable
broker's fees or commissions, reasonable attorneys' and accountants' fees and
expenses incurred in connection therewith, transfer and similar taxes, the
Borrower's good faith estimate of income taxes incurred in connection with the
receipt of such proceeds and appropriate reserves to be provided by the Borrower
or any Subsidiary as a reserve required in accordance with GAAP against any
liabilities associated with such sale, transfer or other disposition and
retained by the Borrower or such Subsidiary after such sale, transfer or
disposition), from any sale, transfer or other disposition (other than the sale
of inventory in the ordinary course) of any asset or assets of the Borrower or
any Subsidiary (including the sale or issuance of any Capital Stock of any
Subsidiary) to any Person in any transaction, transactions or related series of
transactions; provided, that the first $15,000,000 of


                                        6




such net proceeds received in any Fiscal Year (the "Exempt Proceeds") shall not
constitute Designated Net Proceeds; provided further, that if the Borrower shall
deliver a certificate of a Responsible Officer to the Administrative Agent
promptly following receipt of any such proceeds in any Fiscal Year in excess of
the Exempt Proceeds for such Fiscal Year certifying that the Borrower intends to
use any portion of such excess proceeds to acquire productive assets in the same
line of business as the assets sold within twelve (12) months of receipt
thereof, such portion shall not constitute Designated Net Proceeds except to the
extent not so used within such twelve (12) month period.

     "Designated Net Insurance/Condemnation Proceeds" means 100% of all
insurance or condemnation proceeds received in cash or cash equivalents, net of
reasonable costs of proceedings in connection therewith and any settlement in
respect thereof, from any damage, destruction, condemnation or other taking
involving insurance or condemnation proceeds in excess of $100,000 with respect
to any single occurrence; provided, that the first $2,500,000 of such net
proceeds received in any Fiscal Year (the "Exempt Insurance/Condemnation
Proceeds") shall not constitute Designated Net Insurance/Condemnation Proceeds;
provided further, that if the Borrower shall deliver a certificate of a
Responsible Officer to the Administrative Agent promptly following receipt of
any such proceeds in any Fiscal Year in excess of the Exempt
Insurance/Condemnation Proceeds for such Fiscal Year certifying that the
Borrower intends to use any portion of such excess proceeds to restore, modify
or replace the properties or assets in respect of which such insurance or
condemnation proceeds were received within twelve (12) months of such receipt,
such portion shall not constitute Designated Net Insurance/Condemnation Proceeds
except to the extent not so used within such twelve (12) month period.

     "Disputes" has the meaning set forth in Section 13.6.

     "Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.

     "EBITDA" means, with respect to the Borrower and its Subsidiaries on a
Consolidated basis for any period, computed in accordance with GAAP, the
Consolidated net income of the Borrower and its Subsidiaries for such period,
plus, to the extent deducted in computing such Consolidated net income and
without duplication, the sum of (a) income tax expense, (b) Interest Expense,
(c) depreciation and amortization expense, (d) extraordinary losses during such
period and (e) other cash restructuring charges, in an aggregate amount not to
exceed $5,000,000 during the term of the Credit Facilities, minus, to the extent
added in computing such Consolidated net income and without duplication,
extraordinary gains during such period; provided, that (i) for the purposes of
determining EBITDA for any period during which a Permitted Business Acquisition
is consummated, EBITDA shall be adjusted in a manner reasonably satisfactory to
the Administrative Agent to give effect to the consummation of such Permitted
Business Acquisition on a pro forma basis in accordance with GAAP, as if such
Permitted Business Acquisition occurred on the first day of such period and (ii)
EBITDA shall exclude all unrealized gains and losses reported under Financial
Accounting Standards Board Statement No. 133 in connection with forward
contracts, futures contracts or other derivatives or Commodity Hedging
Agreements in accordance with the Borrower's existing commodity hedging policy.


                                        7




     "Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, and
(c) any other Person (other than a natural person) approved by (i) the
Administrative Agent, (ii) in the case of any assignment of a Revolving Credit
Commitment, the Swingline Lender and the Revolver Issuing Lender, (iii) in the
case of any assignment of a Stand-Alone L/C Commitment, the Stand-Alone Issuing
Lenders, and (iv) unless a Default or Event of Default has occurred and is
continuing, the Borrower (each such approval not to be unreasonably withheld or
delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall
not include the Borrower or any of the Borrower's Affiliates or Subsidiaries.

     "Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of the Borrower or any current or former ERISA
Affiliate.

     "Environmental and Safety Laws" means any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health (including, but not limited to employee health
and safety) or the environment, including, but not limited to, requirements
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of Hazardous Materials.

     "ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to time.

     "ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.

     "ERISA Event" means (i) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder, with respect to a Pension Plan;
(ii) the adoption of any amendment to a Pension Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (iii) the existence with respect to any Pension Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (iv) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Pension Plan; (v) the
incurrence of any liability under Title IV of ERISA with respect to the
termination of any Pension Plan or the withdrawal or partial withdrawal of the
Borrower or any of its ERISA Affiliates from any Pension Plan or Multiemployer
Plan; (vi) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to the intention to terminate any
Pension Plan or Pension Plans or to appoint a trustee to administer any Pension
Plan; (vii) the receipt by the Borrower or any ERISA Affiliate of any notice
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA or the institution of proceedings to
terminate, or the appointment of a trustee


                                        8




with respect to, any Pension Plan by the PBGC; (viii) the occurrence of a
"prohibited transaction" with respect to which the Borrower or any of its
subsidiaries is a "disqualified person" (within the meaning of Section 4975 of
the Code) and with respect to which the Borrower or any such subsidiary would be
liable for the payment of an excise tax and (ix) any other event or condition
which would constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan.

     "ESCO" means any Subsidiary of the Borrower which provides energy services
through a utility provider and participates in a Consolidated Billing Program in
the ordinary course of such Subsidiary's business.

     "Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.

     "Event of Default" means any of the events specified in Section 11.1;
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.

     "Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, the Issuing Lender or any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) taxes imposed on
or measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, and (b) all franchise
taxes or branch taxes imposed upon any Lender or its applicable lending office,
or any branch or affiliate thereof, in each case imposed: (i) by the
jurisdiction under the laws of which such Lender, applicable lending office,
branch or affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such jurisdiction is
located or any political subdivision thereof; or (ii) by reason of any
connection between the jurisdiction imposing such tax and such Lender,
applicable lending office, branch or affiliate other than a connection arising
solely from such Lender having executed, delivered or performed its obligations
under, or received payment under or enforced, this Agreement.

     "Exempt Insurance/Condemnation Proceeds" has the meaning assigned such term
in the definition of Designated Net Insurance/Condemnation Proceeds.

     "Exempt Proceeds" has the meaning assigned such term in the definition of
Designated Net Proceeds.

     "Existing Letters of Credit" means all letters of credit identified on
Schedule 1.1(b).


                                        9




     "Extensions of Credit" means, as to any Lender at any time, (a) an amount
equal to the sum of (i) the aggregate principal amount of all Revolving Credit
Loans made by such Lender then outstanding, (ii) such Lender's Revolving Credit
Commitment Percentage of the Revolver L/C Obligations then outstanding, (iii)
such Lender's Revolving Credit Commitment Percentage of the Swingline Loans then
outstanding and (iv) such Lender's Stand-Alone L/C Commitment Percentage of the
Stand-Alone L/C Obligations then outstanding, or (b) the making of any Loan or
participation in any Letter of Credit by such Lender, as the context requires.

     "Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "Federal Funds Rate" means a daily rate which
is determined, in the opinion of the Administrative Agent, to be the rate at
which federal funds are being offered for sale in the national federal funds
market at 9:00 a.m. Rates for weekends or holidays shall be the same as the rate
for the most immediate preceding Business Day.

     "Fee Letter" means the separate fee letter agreement executed by the
Borrower and the Administrative Agent and/or certain of its affiliates dated
September 28, 2004.

     "Financial Officer" means, as to any Person, the chief financial officer,
the treasurer or the principal accounting officer of such Person.

     "Fiscal Year" means the 52-week fiscal year of the Borrower and its
Subsidiaries ending on the last Saturday in September.

     "Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition, the United States, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

     "GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, consistently applied and maintained on a consistent basis for
the Borrower and its Subsidiaries throughout the period indicated and (subject
to Section 13.9) consistent with the prior financial practice of the Borrower
and its Subsidiaries.

     "General Partner" means Suburban Energy Services Group LLC, a Delaware
limited liability company.

     "General Partner Unit" means a unit representing a fractional part of the
General Partner's general partner interest in the Parent (which shall exclude
any limited partner or other interest that the General Partner may have from
time to time in the Parent).

     "Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.


                                       10




     "Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

     "Guarantee" of or by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor")
(excluding endorsements of checks for collection or deposit in the ordinary
course of business) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness.

     "Guaranty Agreement" means the Second Amended and Restated Guaranty
Agreement dated as of the date hereof executed by each Subsidiary of the
Borrower (other than any foreign Subsidiary and Suburban Sales and Service,
Inc.) in favor of the Administrative Agent for the ratable benefit of the
Lenders, substantially in the form of Exhibit H, as amended, restated,
supplemented or otherwise modified from time to time.

     "Guarantor" means each Subsidiary that is party to the Guaranty Agreement
on the Closing Date together with any Subsidiary who becomes a party to the
Guaranty Agreement after the Closing Date in accordance with the terms of
Section 8.7; provided, that Suburban Sales and Service, Inc. shall not be
required to become a Guarantor.

     "Hazardous Materials" means any substances or materials (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental and Safety Laws, (b) which are toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful
to human health or the environment and are or become regulated by any
Governmental Authority, (c) the presence of which require investigation or
remediation under any Environmental and Safety Laws or common law, (d) the
discharge or emission or release of which requires a permit or license under any
Environmental and Safety Laws or other Governmental Approval, (e) which are
deemed to constitute a nuisance or a trespass which pose a health or safety
hazard to Persons or neighboring properties, (f) which consist of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance, or (g) which contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic
gas.

     "Hedging Agreement" means any (a) interest rate swap agreement, (b)
interest rate cap agreement, (c) interest rate floor agreement, (d) interest
rate collar agreement, (e) interest rate option


                                       11




or (f) other agreement, in each case, entered into with the intent to protect
any Person against fluctuations in interest rates of existing or expected
issuances of Indebtedness and entered into as a bona fide hedging agreement and
not for purposes of investment or speculation and any confirming letter executed
pursuant to such agreement, all as amended, restated, supplemented or otherwise
modified from time to time.

     "Indebtedness" means, with respect to any Person, without duplication (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind (including repurchase obligations), (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, (f) all obligations under Capital Leases of such Person,
(g) all obligations of others secured by (or for which the holder of such
Indebtedness 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 Guarantees of such
Person, (i) all obligations of such Person with respect to Swap Agreements and
Commodity Hedging 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 or
Commodity Hedging Agreement, if any), (j) all obligations of such Person as an
account party in respect of letters of credit (i) securing Indebtedness (other
than letters of credit obtained in the ordinary course of business and
consistent with past practices) or (ii) obtained for any purpose not in the
ordinary course of business or not consistent with past practices and (k) all
obligations of such Person in respect of bankers' acceptances; provided that
accounts payable to suppliers incurred in the ordinary course of business and
paid in the ordinary course of business consistent with past practices shall not
constitute Indebtedness.

     "Indemnified Taxes" means Taxes and Other Taxes other than Excluded Taxes.

     "Interest Expense" means, with respect to any period, the sum of, without
duplication, gross interest expense and capitalized interest of the Borrower and
its Subsidiaries for such period minus interest income of the Borrower and its
Subsidiaries for such period, determined on a Consolidated basis in accordance
with GAAP.

     "Interest Period" has the meaning assigned thereto in Section 4.7(b).

     "Investment" means, as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of Capital Stock or other
securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person and any other item which
would be classified as an "investment" on a balance sheet of such Person
prepared in accordance with GAAP, including without limitation any direct or
indirect contribution by such Person of property or assets to a joint venture,
partnership or other business entity in which such Person retains an interest
(it being understood that a direct or indirect


                                       12




purchase or other acquisition by such Person of assets of any
other Person (other than Capital Stock or other securities) shall not constitute
an "Investment" for purposes of this Agreement).

     "ISP98" means the International Standby Practices (1998 Revision, effective
January 1, 1999), International Chamber of Commerce Publication No. 590.

     "Issuing Lender" means the Revolver Issuing Lender and/or any Stand-Alone
Issuing Lender, as applicable.

     "L/C Obligations" means, collectively, the Revolver L/C Obligations and the
Stand-Alone L/C Obligations.

     "Lender" means each Person executing this Agreement as a Lender (including,
without limitation, each Issuing Lender and the Swingline Lender unless the
context otherwise requires) set forth on the signature pages hereto and each
Person that hereafter becomes a party to this Agreement as a Lender pursuant to
Section 13.10.

     "Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.

     "Letters of Credit" means, collectively, the Revolver Letters of Credit and
the Stand-Alone Letters of Credit.

     "Leverage Ratio" means, on any date, the ratio of (a) Total Indebtedness as
of such date to (b) an amount equal to the aggregate amount of EBITDA of the
Borrower and its Subsidiaries for the period of four consecutive fiscal quarters
ended most recently on or prior to such date, determined on a Consolidated basis
in accordance with GAAP.

     "LIBOR" means the rate of interest per annum determined on the basis of the
rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a
period equal to the Interest Period selected which appears on the Telerate Page
Screen 3750 at approximately 11:00 a.m., London time, two (2) Business Days
prior to the first day of the applicable Interest Period (rounded upward, if
necessary, to the nearest one-one hundredth of one percent (1/100%)). If, for
any reason, such rate does not appear on Telerate Page Screen 3750, then "LIBOR"
shall be determined by the Administrative Agent to be the arithmetic average of
the rate per annum at which deposits in Dollars in minimum amounts of at least
$5,000,000 would be offered by first class banks in the London interbank market
to the Administrative Agent at approximately 11:00 a.m., London time, two (2)
Business Days prior to the first day of the applicable Interest Period for
settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected. Each
calculation by the Administrative Agent of LIBOR shall be conclusive and binding
for all purposes, absent manifest error.

     "LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the
next higher 1/100th of 1%) determined by the Administrative Agent pursuant to
the following formula:

     LIBOR Rate =                LIBORs
                  ----------------------------------
                  1.00-Eurodollar Reserve Percentage


                                       13




     "LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the
LIBOR Rate as provided in Section 4.7(a).

     "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation or encumbrance of any kind in respect
of such asset. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to such asset.

     "Loan" means any Revolving Credit Loan, or Swingline Loan made to the
Borrower pursuant to Article II, and all such Loans collectively as the context
requires.

     "Loan Documents" means, collectively, this Agreement, the Revolving Credit
Notes, the Applications, the Guaranty Agreement and each other document,
instrument, certificate and agreement executed and delivered by the Borrower,
its Subsidiaries or their counsel in connection with this Agreement or otherwise
referred to herein or contemplated hereby (excluding any Swap Agreement), all as
may be amended, restated, supplemented or otherwise modified from time to time.

     "Material Adverse Effect" means (a) a materially adverse effect on the
business, assets, operations, prospects or financial condition of the Business,
the General Partner, the Parent, the Borrower or the Borrower and its
Subsidiaries taken as a whole, (b) any material impairment of the ability of the
Borrower or any Subsidiary to perform any of its Obligations under any Loan
Document or (c) any material impairment of the rights of or benefits available
to the Lenders or the Administrative Agent under any of the Loan Documents.

     "Minimum Quarterly Distribution" has the meaning assigned thereto in the
Parent Partnership Agreement.

     "Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, or has accrued an obligation to make
contributions within the preceding six (6) years.

     "Notice of Account Designation" has the meaning assigned thereto in Section
4.1(b).

     "Notice of Borrowing" has the meaning assigned thereto in Section 4.1(a).

     "Notice of Conversion/Continuation" has the meaning assigned thereto in
Section 4.8.

     "Notice of Prepayment" has the meaning assigned thereto in Section 4.2(c).

     "Obligations" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Loans, (b) the L/C
Obligations, (c) all Swap Obligations and (d) all other


                                       14




fees and commissions (including attorney's fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by the Borrower or any of its Subsidiaries to the Lenders or the Administrative
Agent, in each case under or in respect of this Agreement, any Letter of Credit
or any of the other Loan Documents of every kind, nature and description, direct
or indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by any note,
and whether or not for the payment of money under or in respect of this
Agreement, any Letter of Credit or any of the other Loan Documents.

     "Officer's Compliance Certificate" has the meaning assigned thereto in
Section 7.2.

     "Original Credit Agreement" has the meaning set forth in the Statement of
Purpose.

     "Other Taxes" means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

     "Parent" means Suburban Propane Partners, L.P., a limited partnership
organized under the laws of the State of Delaware.

     "Parent Notes" means the 6.875% senior notes, due 2013, of the Parent
issued in the original principal amount of $175,000,000 pursuant to the
indenture dated as of December 23, 2003.

     "Parent Debt Service" means all scheduled payments of principal, interest
and fees due on the Parent Notes.

     "Parent Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of the Parent dated as of May 26, 1999, as it
may be amended, supplemented or otherwise modified from time to time pursuant to
the terms hereof.

     "Participant" has the meaning assigned thereto in Section 13.10(d).

     "PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.

     "Partnership Documents" means the Parent Partnership Agreement and the
Borrower Partnership Agreement, in each case as in effect on the date hereof and
as the same may from time to time be amended, supplemented or otherwise modified
in accordance with the terms hereof and thereof.

     "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Borrower or any ERISA
Affiliates or (b) has at any time within the preceding six years been maintained
for the employees of the Borrower or any of their current or former ERISA
Affiliates.

                                       15




     "Permitted Banks" has the meaning assigned to such term in Section 10.4(c).

     "Permitted Business Acquisition" means any acquisition of all or
substantially all the assets of, or all the shares or other equity interests in,
a Person or division or line of business of a Person (or any subsequent
investment made in a previously consummated Permitted Business Acquisition) if
immediately after giving effect thereto: (a) no Event of Default or Default or
Senior Note Default shall have occurred and be continuing or would result
therefrom, (b) all transactions related thereto shall be consummated in
accordance with applicable laws, (c) all the Capital Stock of any acquired or
newly formed corporation, partnership, association or other business entity is
owned directly by the Borrower or a domestic Wholly-Owned Subsidiary and such
acquired or newly formed Subsidiary shall have entered into the Guaranty
Agreement, (d) the Borrower and its Subsidiaries shall be in compliance, on a
pro forma basis after giving effect to such acquisition or formation, with the
covenants contained in Article IX recomputed as at the last day of the most
recently ended fiscal quarter of the Borrower and its Subsidiaries as if such
acquisition had occurred on the first day of each relevant period for testing
such compliance, and, in the case of any transaction involving consideration
(whether cash or property, as valued at the time such transaction is
consummated) in excess of $5,000,000, the Borrower shall have delivered to the
Administrative Agent a certificate of a Responsible Officer to such effect,
together with all relevant financial information for such Subsidiary or assets
and calculations demonstrating such compliance, (e) any acquired or newly formed
Subsidiary shall not be liable for any Indebtedness (except for Indebtedness
permitted by Section 10.1) and (f) the Required Lenders shall have given their
prior written consent (which consent shall not be unreasonably withheld, taking
into consideration the merits of the acquisition) in the case of (i) any
acquisition outside the business currently conducted by the Borrower involving
consideration (whether cash or property, as valued at the time each investment
is made) in excess of $5,000,000 and (ii) any acquisition if as a result thereof
the aggregate consideration (whether cash or property, as valued at the time
each investment is made) for all acquisitions (net of return of capital of (but
not return on) investments in such acquisitions) would be in excess of
$25,000,000.

     "Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.

     "Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by Wachovia as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by Wachovia as its Prime Rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.

     "Refinancing Note Agreement" means one or more indentures or agreements
pursuant to which Refinancing Notes are issued.


                                       16



     "Refinancing Notes" means one or more series of notes issued by the
Borrower, the net proceeds of which are used by the Borrower to (a) redeem
Senior Notes or (b) refinance the Senior Note Payments.

     "Register" has the meaning assigned thereto in Section 13.10(c).

     "Reimbursement Obligations" means, collectively, the Revolver Reimbursement
Obligations and the Stand-Alone Reimbursement Obligations.

     "Related Parties" means, with respect to any Person, such Person's
Affiliates and the directors, officers, employees, agents and advisors of such
Person and of such Person's Affiliates.

     "Required Lenders" means, at any date, any combination of Lenders whose
Commitments aggregate more than fifty percent (50%) of the Aggregate Commitment
or, if the Credit Facilities have been terminated pursuant to the terms hereof,
any combination of Lenders holding more than fifty percent (50%) of the
aggregate Extensions of Credit; provided that the Commitment of, and the portion
of the Extensions of Credit, as applicable, held or deemed held by, any
Defaulting Lender shall be excluded for purposes of making a determination of
Required Lenders.

     "Reserve Items" has the meaning set forth in Section 2.1(b).

     "Responsible Officer" means, with respect to any Person, any executive
officer or Financial Officer of such Person and any other officer or similar
official thereof responsible for the administration of the obligations of such
Person in respect of this Agreement. Any document delivered hereunder that is
signed by a Responsible Officer of the Borrower or any Guarantor, as applicable,
shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Person and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Person.

     "Restricted Payment" means with respect to the Borrower and each of its
Subsidiaries (the "Covered Persons"), (a) in the case of any Covered Person that
is a partnership, (i) any payment or other distribution, direct or indirect, in
respect of any partnership interest in such Covered Person, except a
distribution payable solely in additional partnership interests in such Covered
Person, and (ii) any payment, direct or indirect, by such Covered Person on
account of the redemption, retirement, purchase or other acquisition of any
partnership interest in such or any other Covered Person, except to the extent
that such payment consists of additional partnership interests in such Covered
Person; (b) in the case of any Covered Person that is a corporation, (i) any
dividend or other distribution, direct or indirect on account of any shares of
any class of stock of such Covered Person then outstanding, except a dividend
payable solely in shares of stock of such Covered Person, and (ii) any payment,
direct or indirect, by such Covered Person on account of the redemption,
retirement, purchase or other acquisition of any shares of any class of stock of
such Covered Person then outstanding, or of any warrants, rights or options to
acquire any such shares, except to the extent that such payment consists of
shares of Capital Stock of such Covered Person; and (c) in the case of any other
Covered Person, any payment analogous to the prepayments referred to in clauses
(a) and (b) above.


                                       17



     "Revolver Issuing Lender" means, with respect to Revolver Letters of
Credit, Wachovia, in its capacity as issuer thereof, or any successor thereto.

     "Revolver L/C Commitment" means the lesser of (a) Fifteen Million Dollars
($15,000,000) and (b) the Revolving Credit Commitment.

     "Revolver L/C Facility" means the letter of credit facility established
pursuant to Section 2.3.

     "Revolver L/C Obligations" means at any time, an amount equal to the sum of
(a) the aggregate undrawn and unexpired amount of the then outstanding Revolver
Letters of Credit and (b) the aggregate amount of drawings under Revolver
Letters of Credit which have not then been reimbursed pursuant to Section
2.3(e).

     "Revolver L/C Participants" means the collective reference to all of the
Lenders other than the Revolver Issuing Lender.

     "Revolver Letters of Credit" has the meaning assigned thereto in Section
2.3(a).

     "Revolver Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Revolver Issuing Lender pursuant to Section 2.3(e) for amounts
drawn under Revolver Letters of Credit.

     "Revolving Credit Commitment" means (a) as to any Lender, the obligation of
such Lender to make Revolving Credit Loans to the Borrower hereunder, to
participate in Revolver Letters of Credit hereunder and to participate in
Swingline Loans hereunder, in an aggregate principal amount at any time
outstanding not to exceed the amount so designated opposite such Lender's name
on Schedule 1.1(a) hereto, as the same may be modified at any time or from time
to time pursuant to the terms hereof and (b) as to all Lenders, the aggregate
commitment of all Lenders to make Revolving Credit Loans, as such amount may be
modified at any time or from time to time pursuant to the terms hereof. The
Revolving Credit Commitment of all Lenders on the Closing Date shall be
Seventy-Five Million Dollars ($75,000,000).

     "Revolving Credit Commitment Percentage" means, as to any Lender at any
time, the ratio of (a) the amount of the Revolving Credit Commitment of such
Lender to (b) the Revolving Credit Commitment of all Lenders.

     "Revolving Credit Facility" means the revolving credit facility established
pursuant to Section 2.1(a).

     "Revolving Credit Loan" means any of the revolving credit loans made by the
Lenders to the Borrower pursuant to Section 2.1(a) and all such loans
collectively as the context requires.

     "Revolving Credit Note" means a promissory note made by the Borrower in
favor of a Lender evidencing the Revolving Credit Loans made by such Lender,
substantially in the form of


                                       18



Exhibit A, and any amendments, supplements and modifications thereto, any
substitutes therefor, and any replacements, restatements, renewals or extension
thereof, in whole or in part.

     "SCANA Litigation" means the lawsuit captioned Heritage Propane Partners,
L.P. v. SCANA Corporation et al., Civil Action 01-CP-40-3262, filed in the Court
of Common Pleas for Richland County, South Carolina, and all claims and
counterclaims related thereto.

     "Senior Note Agreement" means, collectively, the note agreements pursuant
to which the Senior Notes were issued, dated as of February 28, 1996, as amended
by the Amendment No. 1 thereto, dated May 13, 1998, and the Amendment No. 2
thereto, dated March 29, 1999, Amendment No. 3 thereto, dated December 6, 2000,
Amendment No. 4 thereto, dated March 31, 2002, Amendment No. 5 thereto, dated
November 20, 2002, and as amended from time to time in accordance with Section
10.9.

     "Senior Note Default" means any payment default or any other event or
condition with respect to the Senior Notes or any Refinancing Note the effect of
which is to cause, or permit the holder or holders of the Senior Notes or any
Refinancing Note or a trustee under any Refinancing Note Agreement (with or
without the giving of notice, the lapse of time or both) to cause the Senior
Notes or any Refinancing Note to become due prior to its stated maturity.

     "Senior Note Payments" means the required annual principal payments on the
Senior Notes set forth in and pursuant to the terms of Section 4A of the Senior
Note Agreement.

     "Senior Notes" means the 7.54% Senior Notes, due 2011, of the Borrower.

     "Solvent" means, as to the Borrower and its Subsidiaries on a particular
date, that any such Person (a) has capital sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage and is able to pay its debts as they mature, (b) owns property having a
value, both at fair valuation and at present fair saleable value, greater than
the amount required to pay its probable liabilities (including contingencies),
and (c) does not believe that it will incur debts or liabilities beyond its
ability to pay such debts or liabilities as they mature.

     "Stand-Alone Issuing Lender" means (a) with respect to Stand-Alone Letters
of Credit issued hereunder, (i) Wachovia, in its capacity as issuer thereof, or
any successor thereto, and (ii) any other Lender acceptable to the
Administrative Agent and the Borrower which has agreed to issue Stand-Alone
Letters of Credit, and (b) with respect to the Existing Letters of Credit, the
Lender issuing such Existing Letter of Credit.

     "Stand-Alone L/C Commitment" means (a) as to any Lender, the obligation of
such Lender to participate in Stand-Alone Letters of Credit hereunder in an
aggregate principal amount at any time outstanding not to exceed the amount so
designated opposite such Lender's name on Schedule 1.1(a), as the same may be
modified at any time or from time to time pursuant to the terms hereof and (b)
as to all Lenders, the aggregate commitment of all Lenders to participate in
Stand-Alone Letters of Credit hereunder, as such amount may be modified at any


                                       19



time or from time to time pursuant to the terms hereof. The Stand-Alone L/C
Commitment of all Lenders on the Closing Date shall be Seventy-Five Million
Dollars ($75,000,000).

     "Stand-Alone L/C Commitment Percentage" means, as to any Lender at any
time, the ratio of (a) the amount of the Stand-Alone L/C Commitment of such
Lender to (b) the Stand-Alone L/C Commitment of all Lenders.

     "Stand-Alone L/C Facility" means the letter of credit facility established
pursuant to Article III.

     "Stand-Alone L/C Obligations" means at any time, an amount equal to the sum
of (a) the aggregate undrawn and unexpired amount of the then outstanding
Stand-Alone Letters of Credit and (b) the aggregate amount of drawings under
Stand-Alone Letters of Credit which have not then been reimbursed pursuant to
Section 3.5.

     "Stand-Alone L/C Participants" means the collective reference to all of the
Lenders other than the applicable Stand-Alone Issuing Lender.

     "Stand-Alone Letters of Credit" has the meaning assigned thereto in Section
3.1 and shall include the Existing Letters of Credit.

     "Stand-Alone Reimbursement Obligation" means the obligation of the Borrower
to reimburse the Stand-Alone Issuing Lenders pursuant to Section 3.5 for amounts
drawn under Stand-Alone Letters of Credit.

     "Subsidiary" means as to any Person, any corporation, partnership, limited
liability company or other entity of which more than fifty percent (50%) of the
outstanding capital stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity is at the
time, directly or indirectly, owned by or the management is otherwise controlled
by such Person (irrespective of whether, at the time, capital stock or other
ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency). Unless otherwise
qualified references to "Subsidiary" or "Subsidiaries" herein shall refer to
those of the Borrower.

     "Swap Agreement" means any (a) Hedging Agreement, (b) forward rate
agreement, (c) forward foreign exchange agreement, (d) currency swap agreement,
(e) cross-currency rate swap agreement, (f) currency option agreement or (g)
other agreement or arrangement, in each case, designed to alter the risks of any
Person arising from fluctuations in interest rates or currency values (including
such agreements entered into to swap obligations with a fixed rate of interest
to obligations with a floating rate of interest) and any confirming letter
executed pursuant to such agreement, all as amended, restated, supplemented or
otherwise modified from time to time.


                                       20



     "Swap Obligations" means all payment and other existing and future
obligations owing by the Borrower to any Lender or the Administrative Agent
under any Swap Agreement to which a Lender or the Administrative Agent is a
party which is permitted under this Agreement.

     "Swingline Commitment" means the lesser of (a) Seven Million Five Hundred
Thousand Dollars ($7,500,000) and (b) the Revolving Credit Commitment.

     "Swingline Lender" means Wachovia in its capacity as swingline lender
hereunder.

     "Swingline Loan" means the swingline loans made by the Swingline Lender to
the Borrower pursuant to Section 2.2, and all such loans collectively as the
context requires.

     "Swingline Rate" means the interest rate applicable to Swingline Loans, as
agreed upon from time to time by the Borrower and the Administrative Agent
pursuant to a written side letter agreement.

     "Swingline Facility" means the swingline facility established pursuant to
Section 2.2.

     "Swingline Termination Date" means the earlier to occur of (a) the
resignation of Wachovia as Administrative Agent in accordance with Section 12.6
and (b) the Termination Date.

     "Taxes" means all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.

     "Termination Date" means the earliest to occur of (a) October 20, 2008, (b)
the date of termination of the Aggregate Commitment by the Borrower pursuant to
Section 4.5(a), or (c) the date of termination by the Administrative Agent on
behalf of the Lenders pursuant to Section 11.2(a).

     "Total Indebtedness" means, at any time, all Indebtedness of the Borrower
and its Subsidiaries at such time (other than Indebtedness described under
clauses (i) and (j) of the definition of "Indebtedness"), determined on a
Consolidated basis in accordance with GAAP.

     "Uniform Customs" means the Uniform Customs and Practice for Documentary
Credits (1994 Revision), effective January, 1994, International Chamber of
Commerce Publication No. 500.

     "UCC" means the Uniform Commercial Code as in effect in the State of New
York, as amended or modified from time to time.

     "United States" means the United States of America.

     "Wachovia" means Wachovia Bank, National Association, a national banking
association, and its successors.


                                       21



     "Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of the
shares of Capital Stock or other ownership interests of which are, directly or
indirectly, owned or controlled by the Borrower and/or one or more of its
Wholly-Owned Subsidiaries.

     "Withdrawal Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

     SECTION 1.2 Other Definitions and Provisions. With reference to this
Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document: (a) the definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined, (b) whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms, (c) the words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation", (d) the word
"will" shall be construed to have the same meaning and effect as the word
"shall", (e) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (f) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (g) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (h) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement, (i) the words "asset" and "property" shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights, (j) the term "documents" includes any and all
instruments, documents, agreements, certificates, notices, reports, financial
statements and other writings, however evidenced, whether in physical or
electronic form, (k) in the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including;" the words
"to" and "until" each mean "to but excluding;" and the word "through" means "to
and including", and (l) Section headings herein and in the other Loan Documents
are included for convenience of reference only and shall not affect the
interpretation of this Agreement or any other Loan Document.

     SECTION 1.3 Accounting Terms. All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all
financial data (including financial ratios and other financial calculations)
required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time, applied in a manner consistent with that used in preparing the audited
financial statements required by Section 7.1(b), except as otherwise
specifically prescribed herein.

     SECTION 1.4 UCC Terms.


     Terms defined in the UCC in effect on the Closing Date and not otherwise
defined herein shall, unless the context otherwise indicates, have the meanings
provided by those definitions. Subject to the foregoing, the term "UCC" refers,


                                       22




as of any date of determination, to the UCC then in effect in the State of New
York.

     SECTION 1.5 Rounding. Any financial ratios required to be maintained by the
Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

     SECTION 1.6 References to Agreement and Laws. Unless otherwise expressly
provided herein, (a) references to formation documents, governing documents,
agreements (including the Loan Documents) and other contractual instruments
shall be deemed to include all subsequent amendments, restatements, extensions,
supplements and other modifications thereto, but only to the extent that such
amendments, restatements, extensions, supplements and other modifications are
not prohibited by any Loan Document; and (b) references to any Applicable Law
shall include all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting such Applicable Law.

     SECTION 1.7 Times of Day. Unless otherwise specified, all references herein
to times of day shall be references to Eastern time (daylight or standard, as
applicable).

     SECTION 1.8 Letter of Credit Amounts. Unless otherwise specified, all
references herein to the amount of a Letter of Credit at any time shall be
deemed to mean the maximum face amount of such Letter of Credit after giving
effect to all increases thereof contemplated by such Letter of Credit or the
Application therefor, whether or not such maximum face amount is in effect at
such time.

                                   ARTICLE II

                            REVOLVING CREDIT FACILITY

     SECTION 2.1 Revolving Credit Loans.

     (a) Subject to the terms and conditions (including without limitation
Section 4.4) of this Agreement, and in reliance upon the representations and
warranties set forth herein, each Lender severally agrees to make Revolving
Credit Loans to the Borrower from time to time from the Closing Date to, but not
including, the Termination Date as requested by the Borrower in accordance with
the terms of Section 4.1; provided, that (i) the aggregate principal amount of
all outstanding Revolving Credit Loans (after giving effect to any amount
requested) shall not exceed the Revolving Credit Commitment less the sum of (A)
all outstanding Swingline Loans and Revolver L/C Obligations and (B) the Blocked
Portion as of such date and (ii) the principal amount of outstanding Revolving
Credit Loans from any Lender to the Borrower shall not at any time exceed such
Lender's Revolving Credit Commitment less such Lender's Revolving Credit
Commitment Percentage of Revolver L/C Obligations and outstanding Swingline
Loans. Each Revolving Credit Loan by a Lender shall be in a principal amount
equal to such Lender's


                                       23




Revolving Credit Commitment Percentage of the aggregate principal amount of
Revolving Credit Loans requested on such occasion. Subject to the terms and
conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit
Loans hereunder until the Termination Date.

     (b) Blocked Portion of Revolving Credit Commitments. The Borrower may from
time to time deliver a certificate of a Financial Officer of the Borrower to the
Administrative Agent designating a portion of the then-available Revolving
Credit Commitments as being unavailable except for the purpose of funding items
("Reserve Items") specified in such certificate that would have been reserved
against pursuant to the definition of "Available Cash" but for the specification
of such amounts in such certificate. The aggregate amount of Revolving Credit
Commitments unavailable as a result of the delivery of such certificates at any
time shall be referred to as the "Blocked Portion" in effect at such time. The
Blocked Portion shall be reduced from time to time upon receipt by the
Administrative Agent of a certificate of a Financial Officer of the Borrower
certifying as to (a) the discharge of any portion of any Reserve Item, (b) the
establishment of a cash reserve in respect of any portion of any Reserve Item,
(c) the determination by the Board of Supervisors of the Borrower that any
reserve contemplated by clause (b) of the definition of "Available Cash" may be
reduced because the amount of the original reserve is no longer necessary or
appropriate by reason of a change in the anticipated timing or amount of the
item reserved against or (d) the delivery of a Notice of Borrowing for a
Revolving Credit Loan to be drawn under the Blocked Portion the proceeds of
which shall be used solely for the purpose of discharging any Reserve Item, each
of which reductions shall be in an amount equal to the amount of such discharged
portion, new cash reserve, adjustment to reserves or Revolving Credit Loan, as
applicable. Notwithstanding any other provision of this Agreement, at no time
shall any Revolving Credit Loan be made or any certificate increasing the
Blocked Portion become effective if as a result of the making of such Revolving
Credit Loan or the effectiveness of such increase the aggregate principal amount
of Revolving Credit Loans outstanding at such time would exceed the difference
between the aggregate amount of the Revolving Credit Commitments in effect at
such time and the amount of the Blocked Portion in effect at such time.

     SECTION 2.2 Swingline Loans.

     (a) Availability. Subject to the terms and conditions (including without
limitation Section 4.4) of this Agreement, the Swingline Lender agrees to make
Swingline Loans to the Borrower from time to time from the Closing Date through,
but not including, the Swingline Termination Date; provided, that the aggregate
principal amount of all outstanding Swingline Loans (after giving effect to any
amount requested), shall not exceed the lesser of (i) the Revolving Credit
Commitment less the sum of (A) all outstanding Revolving Credit Loans and the
Revolver L/C Obligations and (B) the Blocked Portion as of such date; and (ii)
the Swingline Commitment. Each Lender acknowledges that the aggregate principal
amount of all outstanding Swingline Loans made by the Swingline Lender, when
taken together with the aggregate principal amount of all outstanding Revolving
Credit Loans made by the Swingline Lender, may exceed the Swingline Lender's
Revolving Credit Commitment.


                                       24




     (b) Refunding.

          (i) Swingline Loans shall be reimbursed fully by the Lenders on demand
by the Swingline Lender. Such reimbursements shall be made by the Lenders in
accordance with their respective Revolving Credit Commitment Percentages and
shall thereafter be reflected as Revolving Credit Loans of the Lenders on the
books and records of the Administrative Agent; provided that no Lender shall be
required to reimburse any Swingline Loan if, after giving effect to such
reimbursement, the aggregate principal amount of such Lender's Revolving Credit
Loans outstanding would exceed such Lender's Revolving Credit Commitment. Each
Lender shall fund its respective Revolving Credit Commitment Percentage of
Revolving Credit Loans as required to repay Swingline Loans outstanding to the
Swingline Lender upon demand by the Swingline Lender but in no event later than
2:00 p.m. on the next succeeding Business Day after such demand is made. No
Lender's obligation to fund its respective Revolving Credit Commitment
Percentage of a Swingline Loan shall be affected by any other Lender's failure
to fund its Revolving Credit Commitment Percentage of a Swingline Loan, nor
shall any Lender's Revolving Credit Commitment Percentage be increased as a
result of any such failure of any other Lender to fund its Revolving Credit
Commitment Percentage of a Swingline Loan.

          (ii) The Borrower shall pay to the Swingline Lender on demand the
amount of such Swingline Loans to the extent amounts received from the Lenders
are not sufficient to repay in full the outstanding Swingline Loans requested or
required to be refunded. In addition, the Borrower hereby authorizes the
Administrative Agent to charge any account maintained by the Borrower with the
Swingline Lender (up to the amount available therein) in order to immediately
pay the Swingline Lender the amount of such Swingline Loans to the extent
amounts received from the Lenders are not sufficient to repay in full the
outstanding Swingline Loans requested or required to be refunded. If any portion
of any such amount paid to the Swingline Lender shall be recovered by or on
behalf of the Borrower from the Swingline Lender in bankruptcy or otherwise, the
loss of the amount so recovered shall be ratably shared among all the Lenders in
accordance with their respective Revolving Credit Commitment Percentages (unless
the amounts so recovered by or on behalf of the Borrower pertain to a Swingline
Loan extended after the occurrence and during the continuance of an Event of
Default of which the Administrative Agent has received notice in the manner
required pursuant to Section 12.3(c) and which such Event of Default has not
been waived by the Required Lenders or the Lenders, as applicable).

          (iii) Each Lender acknowledges and agrees that its obligation to
refund Swingline Loans in accordance with the terms of this Section 2.2 is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, non-satisfaction of the conditions
set forth in Article V. Further, each Lender agrees and acknowledges that if
prior to the refunding of any outstanding Swingline Loans pursuant to this
Section 2.2, one of the events described in Section 11.1(i) or (j) shall have
occurred, each Lender will, on the date the applicable Revolving Credit Loan
would have been made, purchase an undivided participating interest in the
Swingline Loan to be refunded in an amount equal to its Revolving Credit
Commitment Percentage of the aggregate amount of such Swingline Loan. Each
Lender will immediately transfer to the Swingline Lender, in immediately
available funds, the amount of its participation and upon receipt thereof the
Swingline Lender will deliver to such Lender a certificate evidencing such
participation dated the date of receipt of such funds and for


                                       25




such amount. Whenever, at any time after the Swingline Lender has received from
any Lender such Lender's participating interest in a Swingline Loan, the
Swingline Lender receives any payment on account thereof, the Swingline Lender
will distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded).

     SECTION 2.3 Revolver Letters of Credit.

     (a) Revolver L/C Commitment. Subject to the terms and conditions (including
without limitation Section 4.4) of this Agreement, the Revolver Issuing Lender,
in reliance on the agreements of the other Lenders set forth in Section 2.3(d),
agrees to issue standby letters of credit ("Revolver Letters of Credit") for the
account of the Borrower on any Business Day from the Closing Date to the date
which is five (5) Business Days prior to the applicable Termination Date in such
form as may be approved from time to time by the Revolver Issuing Lender;
provided, that the Revolver Issuing Lender shall have no obligation to issue any
Revolver Letter of Credit if, after giving effect to such issuance, (a) the
Revolver L/C Obligations would exceed the Revolver L/C Commitment or (b) the
aggregate principal amount of outstanding Revolving Credit Loans, plus the
aggregate principal amount of outstanding Swingline Loans, plus the aggregate
amount of Revolver L/C Obligations would exceed the Revolving Credit Commitment
less the Blocked Portion. Each Revolver Letter of Credit shall (i) be
denominated in Dollars in a minimum amount of $1,000,000, (ii) be a standby
letter of credit issued to support obligations of the Borrower or any of its
Subsidiaries, contingent or otherwise, incurred in the ordinary course of
business, (iii) have a term of no more than one (1) year (subject to automatic
renewal for additional one (1) year periods under terms and conditions
satisfactory to the Revolver Issuing Lender and the Administrative Agent), (iv)
expire on a date not later than the fifth (5th) Business Day prior to the
applicable Termination Date and (v) be subject to the Uniform Customs and/or
ISP98, as set forth in the Application or as determined by the Revolver Issuing
Lender and, to the extent not inconsistent therewith, the laws of the State of
New York. The Revolver Issuing Lender shall not at any time be obligated to
issue any Revolver Letter of Credit hereunder if such issuance would conflict
with, or cause the Revolver Issuing Lender or any Revolver L/C Participant to
exceed any limits imposed by, any Applicable Law. References herein to "issue"
and derivations thereof with respect to Revolver Letters of Credit shall also
include extensions or modifications of any existing Revolver Letters of Credit,
unless the context otherwise requires.

     (b) Procedure for Issuance of Revolver Letters of Credit. The Borrower may
from time to time request that the Revolver Issuing Lender issue a Revolver
Letter of Credit by delivering to the Revolver Issuing Lender at the
Administrative Agent's Office an Application therefor, completed to the
satisfaction of the Revolver Issuing Lender, and such other certificates,
documents and other papers and information as the Revolver Issuing Lender may
request. Upon receipt of any Application, the Revolver Issuing Lender shall
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and, unless the Revolver Issuing Lender has received notice
(by telephone or in writing) from the Administrative Agent (including at the
request of any Lender) prior to the proposed issuance date (i) directing the
Revolver Issuing Lender not to issue such Revolver Letter of Credit as a result
of the limitations set forth in Section 2.3(a), or (ii) that one or more of the
applicable conditions specified in


                                       26




Section 5.3 is not then satisfied, shall promptly issue the Revolver Letter of
Credit requested thereby (but in no event shall the Revolver Issuing Lender be
required to issue any Revolver Letter of Credit earlier than three (3) Business
Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Revolver Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by the Revolver Issuing Lender and the
Borrower. The Revolver Issuing Lender shall promptly furnish to the Borrower a
copy of such Revolver Letter of Credit and promptly notify each Lender of the
issuance thereof and upon request by any Lender, furnish to such Lender a copy
of such Revolver Letter of Credit and the amount of such Lender's participation
therein.

     (c) Commissions and Other Charges.

          (i) The Borrower shall pay to the Administrative Agent, for the
account of the Revolver Issuing Lender and the Revolver L/C Participants, a
letter of credit commission with respect to each Revolver Letter of Credit in an
amount equal to the product of (i) the average daily maximum amount available to
be drawn during the relevant quarter under such Revolver Letter of Credit and
(ii) the Applicable Margin for LIBOR Loans (determined on a per annum basis).
Such commission shall be payable quarterly in arrears on the last Business Day
of each calendar quarter and on the Termination Date. The Administrative Agent
shall, promptly following its receipt thereof, distribute to the Revolver
Issuing Lender and the Revolver L/C Participants all commissions received
pursuant to this Section 2.3(c)(i) in accordance with their respective Revolving
Credit Commitment Percentages.

          (ii) In addition to the foregoing commission, the Borrower shall pay
to the Administrative Agent, for the account of the Revolver Issuing Lender, an
issuance fee with respect to each Revolver Letter of Credit in an amount equal
to the product of (i) the face amount of such Revolver Letter of Credit and (ii)
one eighth of one percent (0.125%). Such issuance fee shall be payable quarterly
in arrears on the last Business Day of each calendar quarter and on the
Termination Date and shall be non-refundable.

          (iii) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Revolver Issuing Lender for such normal and customary
costs and expenses as are incurred or charged by the Revolver Issuing Lender in
issuing, effecting payment under, amending or otherwise administering any
Revolver Letter of Credit.


     (d) Revolver L/C Participations.

          (i) The Revolver Issuing Lender irrevocably agrees to grant and hereby
grants to each Revolver L/C Participant, and, to induce the Revolver Issuing
Lender to issue Revolver Letters of Credit hereunder, each Revolver L/C
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from the Revolver Issuing Lender, on the terms and conditions
hereinafter stated, for such Revolver L/C Participant's own account and risk an
undivided interest equal to such Revolver L/C Participant's Revolving Credit
Commitment Percentage in the Revolver Issuing Lender's obligations and rights
under and in respect of each Revolver Letter of Credit issued hereunder and the
amount of each draft paid by the Revolver


                                       27




Issuing Lender thereunder. Each Revolver L/C Participant unconditionally and
irrevocably agrees with the Revolver Issuing Lender that, if a draft is paid
under any Revolver Letter of Credit for which the Revolver Issuing Lender is not
reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise
in accordance with the terms of this Agreement, such Revolver L/C Participant
shall pay to the Revolver Issuing Lender upon demand at the Revolver Issuing
Lender's address for notices specified herein an amount equal to such Revolver
L/C Participant's Revolving Credit Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.

          (ii) Upon becoming aware of any amount required to be paid by any
Revolver L/C Participant to the Revolver Issuing Lender pursuant to Section
2.3(d)(i) in respect of any unreimbursed portion of any payment made by the
Revolver Issuing Lender under any Revolver Letter of Credit, the Revolver
Issuing Lender shall notify each Revolver L/C Participant of the amount and due
date of such required payment and such Revolver L/C Participant shall pay to the
Revolver Issuing Lender the amount specified on the applicable due date. If any
such amount is paid to the Revolver Issuing Lender after the date such payment
is due, such Revolver L/C Participant shall pay to the Revolver Issuing Lender
on demand, in addition to such amount, the product of (i) such amount, times
(ii) the daily average Federal Funds Rate as determined by the Administrative
Agent during the period from and including the date such payment is due to the
date on which such payment is immediately available to the Revolver Issuing
Lender, times (iii) a fraction the numerator of which is the number of days that
elapse during such period and the denominator of which is 360. A certificate of
the Revolver Issuing Lender with respect to any amounts owing under this Section
2.3(d)(ii) shall be conclusive in the absence of manifest error. With respect to
payment to the Revolver Issuing Lender of the unreimbursed amounts described in
this Section 2.3(d)(ii), if the Revolver L/C Participants receive notice that
any such payment is due (A) prior to 1:00 p.m. on any Business Day, such payment
shall be due that Business Day, and (B) after 1:00 p.m. on any Business Day,
such payment shall be due on the following Business Day.

          (iii) Whenever, at any time after the Revolver Issuing Lender has made
payment under any Revolver Letter of Credit and has received from any Revolver
L/C Participant its Revolving Credit Commitment Percentage of such payment in
accordance with this Section 2.3(d), the Revolver Issuing Lender receives any
payment related to such Revolver Letter of Credit, whether directly from the
Borrower or otherwise, or any payment of interest on account thereof, the
Revolver Issuing Lender will distribute to such Revolver L/C Participant its pro
rata share thereof; provided, that in the event that any such payment received
by the Revolver Issuing Lender shall be required to be returned by the Revolver
Issuing Lender, such Revolver L/C Participant shall return to the Revolver
Issuing Lender the portion thereof previously distributed to it by the Revolver
Issuing Lender.

          (e) Revolver Reimbursement Obligation of the Borrower. In the event of
any drawing under any Revolver Letter of Credit, the Borrower agrees to
reimburse (either with the proceeds of a Revolving Credit Loan as provided for
in this Section 2.3(e) or with funds from other sources), in same day funds, the
Revolver Issuing Lender on each date on which the Revolver Issuing Lender
notifies the Borrower of the date and amount of a draft paid under any Revolver
Letter of Credit for the amount of (a) such draft so paid and (b) any amounts
referred to


                                       28




in Section 2.3(c)(iii) incurred by the Revolver Issuing Lender in connection
with such payment. Unless the Borrower shall immediately notify the Revolver
Issuing Lender that the Borrower intends to reimburse the Revolver Issuing
Lender for such drawing from other sources or funds, the Borrower shall be
deemed to have timely given a Notice of Borrowing to the Administrative Agent
requesting that the Lenders make a Revolving Credit Loan bearing interest at the
Base Rate on such date in the amount of (a) such draft so paid and (b) any
amounts referred to in Section 2.3(c)(iii) incurred by the Revolver Issuing
Lender in connection with such payment, and the Lenders shall make a Revolving
Credit Loan bearing interest at the Base Rate in such amount, the proceeds of
which shall be applied to reimburse the Revolver Issuing Lender for the amount
of the related drawing and costs and expenses. Each Lender acknowledges and
agrees that its obligation to fund a Revolving Credit Loan in accordance with
this Section 2.3(e) to reimburse the Revolver Issuing Lender for any draft paid
under a Revolver Letter of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation,
non-satisfaction of the conditions set forth in Section 4.1(a) or Article V. If
the Borrower has elected to pay the amount of such drawing with funds from other
sources and shall fail to reimburse the Revolver Issuing Lender as provided
above, the unreimbursed amount of such drawing shall bear interest at the rate
which would be payable on any outstanding Base Rate Loans which were then
overdue from the date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full. Until each Lender
reimburses the Revolver Issuing Lender for any amount drawn under any Revolver
Letter of Credit, interest in respect of such Lender's Revolving Credit
Commitment Percentage of such amount shall be solely for the account of the
Revolver Issuing Lender.

     (f) Obligations Absolute. The Borrower's obligations under this Section 2.3
(including without limitation the Revolver Reimbursement Obligation) shall be
absolute and unconditional under any and all circumstances and irrespective of
any set-off, counterclaim or defense to payment which the Borrower may have or
have had against the Revolver Issuing Lender or any beneficiary of a Revolver
Letter of Credit or any other Person. The Borrower also agrees that the Revolver
Issuing Lender and the Revolver L/C Participants shall not be responsible for,
and the Borrower's Revolver Reimbursement Obligation under Section 2.3(e) shall
not be affected by, among other things, the validity or genuineness of documents
or of any endorsements thereon, even though such documents shall in fact prove
to be invalid, fraudulent or forged, or any dispute between or among the
Borrower and any beneficiary of any Revolver Letter of Credit or any other party
to which such Revolver Letter of Credit may be transferred or any claims
whatsoever of the Borrower against any beneficiary of such Revolver Letter of
Credit or any such transferee. The Revolver Issuing Lender shall not be liable
for any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Revolver Letter of Credit, except for errors or omissions caused by the Revolver
Issuing Lender's gross negligence or willful misconduct. The Borrower agrees
that any action taken or omitted by the Revolver Issuing Lender under or in
connection with any Revolver Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in ISP98 or the Uniform
Customs, as the case may be, and, to the extent not inconsistent therewith, the
UCC, shall be binding on the Borrower and shall not result in any liability of
the Revolver Issuing Lender or any Revolver L/C Participant to the Borrower.


                                       29




                                   ARTICLE III

                      STAND-ALONE LETTER OF CREDIT FACILITY

     SECTION 3.1 Stand-Alone L/C Commitment. Subject to the terms and conditions
of this Agreement, the Stand-Alone Issuing Lenders, in reliance on the
agreements of the other Lenders set forth in Section 3.4(a), agree to issue
standby letters of credit ("Stand-Alone Letters of Credit") for the account of
the Borrower on any Business Day from the Closing Date to the date which is five
(5) Business Days prior to the applicable Termination Date in such form as may
be approved from time to time by the applicable Stand-Alone Issuing Lender;
provided, that the Stand-Alone Issuing Lenders shall have no obligation to issue
any Stand-Alone Letter of Credit if, after giving effect to such issuance, the
Stand-Alone L/C Obligations would exceed the Stand-Alone L/C Commitment. Each
Stand-Alone Letter of Credit shall (i) be denominated in Dollars in a minimum
amount of $1,000,000 (other than any Existing Letter of Credit), (ii) be a
standby letter of credit issued to support obligations of the Borrower or any of
its Subsidiaries, contingent or otherwise, incurred in the ordinary course of
business, (iii) have a term of no more than one (1) year (subject to automatic
renewal for additional one (1) year periods under terms and conditions
satisfactory to the Stand-Alone Issuing Lender and the Administrative Agent),
(iv) expire on a date not later than the fifth (5th) Business Day prior to the
applicable Termination Date and (v) be subject to the Uniform Customs and/or
ISP98, as set forth in the Application or as determined by the applicable
Stand-Alone Issuing Lender and, to the extent not inconsistent therewith, the
laws of the State of New York. No Stand-Alone Issuing Lender shall at any time
be obligated to issue any Stand-Alone Letter of Credit hereunder if such
issuance would conflict with, or cause such Stand-Alone Issuing Lender or any
Stand-Alone L/C Participant to exceed any limits imposed by, any Applicable Law.
References herein to "issue" and derivations thereof with respect to Stand-Alone
Letters of Credit shall also include extensions or modifications of any existing
Stand-Alone Letters of Credit, unless the context otherwise requires. Each
Existing Letter of Credit shall be deemed to be a Stand-Alone Letter of Credit
issued and outstanding under this Agreement on and after the Closing Date.

     SECTION 3.2 Procedure for Issuance of Stand-Alone Letters of Credit. The
Borrower may from time to time request that a Stand-Alone Issuing Lender issue a
Stand-Alone Letter of Credit by delivering to such Stand-Alone Issuing Lender
and the Administrative Agent an Application therefor, completed to the
satisfaction of such Stand-Alone Issuing Lender and the Administrative Agent,
and such other certificates, documents and other papers and information as such
Stand-Alone Issuing Lender or the Administrative Agent may request. Upon receipt
of any Application, the applicable Stand-Alone Issuing Lender shall process such
Application and the related certificates, documents and other papers and
information delivered to it in accordance with its customary procedures and,
unless the applicable Stand-Alone Issuing Lender has received notice (by
telephone or in writing) from the Administrative Agent (including at the request
of any Lender) prior to the proposed issuance date (i) directing the applicable
Stand-Alone Issuing Lender not to issue such Stand-Alone Letter of Credit as a
result of the limitations set forth in Section 3.1, or (ii) that one or more of
the applicable conditions specified in Section 5.3 is not then satisfied, shall
promptly issue the Stand-Alone Letter of Credit requested thereby (but in no
event shall any Stand-Alone Issuing Lender be required to issue any Stand-Alone
Letter of Credit earlier than three (3) Business Days after its receipt of the


                                       30




Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Stand-Alone
Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the
applicable Stand-Alone Issuing Lender and the Borrower. The applicable
Stand-Alone Issuing Lender shall promptly furnish to the Borrower and the
Administrative Agent a copy of such Stand-Alone Letter of Credit and the
Administrative Agent shall promptly notify each Stand-Alone L/C Participant of
the issuance thereof and upon request by any Stand-Alone L/C Participant,
furnish to such Lender a copy of such Stand-Alone Letter of Credit and the
amount of such Lender's participation therein.

     SECTION 3.3 Commissions and Other Charges.

     (a) The Borrower shall pay to the Administrative Agent, for the account of
the applicable Stand-Alone Issuing Lender and the Stand-Alone L/C Participants,
a letter of credit commission with respect to each Stand-Alone Letter of Credit
in an amount equal to the product of (i) the average daily maximum amount
available to be drawn during the relevant quarter under such Stand-Alone Letter
of Credit and (ii) the Applicable Margin for LIBOR Loans (determined on a per
annum basis). Such commission shall be payable quarterly in arrears on the last
Business Day of each calendar quarter and on the Termination Date. The
Administrative Agent shall, promptly following its receipt thereof, distribute
to the applicable Stand-Alone Issuing Lender and the Stand-Alone L/C
Participants all commissions received pursuant to this Section 3.3(a) in
accordance with their respective Stand-Alone L/C Commitment Percentages.

     (b) In addition to the foregoing commission, the Borrower shall pay to the
Administrative Agent, for the account of the applicable Stand-Alone Issuing
Lender, an issuance fee with respect to each Stand-Alone Letter of Credit issued
by it in an amount equal to the product of (i) the face amount of such
Stand-Alone Letter of Credit and (ii) one eighth of one percent (0.125%) per
annum. Such issuance fee shall be payable quarterly in arrears on the last
Business Day of each calendar quarter and on the Termination Date and shall be
non-refundable.

     (c) In addition to the foregoing fees and commissions, the Borrower shall
pay or reimburse the applicable Stand-Alone Issuing Lender for such normal and
customary costs and expenses as are incurred or charged by such Stand-Alone
Issuing Lender in issuing, effecting payment under, amending or otherwise
administering any Stand-Alone Letter of Credit.

     SECTION 3.4 Stand-Alone L/C Participations.

     (a) Each Stand-Alone Issuing Lender irrevocably agrees to grant and hereby
grants to each Stand-Alone L/C Participant, and, to induce each Stand-Alone
Issuing Lender to issue Stand-Alone Letters of Credit hereunder, each
Stand-Alone L/C Participant irrevocably agrees to accept and purchase and hereby
accepts and purchases from each Stand-Alone Issuing Lender, on the terms and
conditions hereinafter stated, for such Stand-Alone L/C Participant's own
account and risk an undivided interest equal to such Stand-Alone L/C
Participant's Stand-Alone L/C Commitment Percentage in each Stand-Alone Issuing
Lender's obligations and rights under and in respect of each Stand-Alone Letter
of Credit issued hereunder and the amount of each draft paid by such Stand-Alone
Issuing Lender thereunder. Each Stand-Alone L/C Participant unconditionally and
irrevocably agrees with each Stand-Alone Issuing Lender that, if a draft is


                                       31




paid under any Stand-Alone Letter of Credit for which such Stand-Alone Issuing
Lender is not reimbursed in full by the Borrower in accordance with the terms of
this Agreement, such Stand-Alone L/C Participant shall pay to such Stand-Alone
Issuing Lender upon demand at such Stand-Alone Issuing Lender's address for
notices specified herein an amount equal to such Stand-Alone L/C Participant's
Stand-Alone L/C Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed.

     (b) Upon becoming aware of any amount required to be paid by any
Stand-Alone L/C Participant to the applicable Stand-Alone Issuing Lender
pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment
made by such Stand-Alone Issuing Lender under any Stand-Alone Letter of Credit,
such Stand-Alone Issuing Lender shall notify each Stand-Alone L/C Participant of
the amount and due date of such required payment and such Stand-Alone L/C
Participant shall pay to such Stand-Alone Issuing Lender the amount specified on
the applicable due date. If any such amount is paid to such Stand-Alone Issuing
Lender after the date such payment is due, such Stand-Alone L/C Participant
shall pay to such Stand-Alone Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the daily average Federal
Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to such Stand-Alone Issuing Lender, times (iii) a fraction
the numerator of which is the number of days that have elapsed since the due
date and the denominator of which is 360. A certificate of the applicable
Stand-Alone Issuing Lender with respect to any amounts owing under this Section
3.4(b) shall be conclusive in the absence of manifest error. With respect to
payment to the applicable Stand-Alone Issuing Lender of the unreimbursed amounts
described in this Section 3.4(b), if the Stand-Alone L/C Participants receive
notice that any such payment is due (A) prior to 1:00 p.m. on any Business Day,
such payment shall be due that Business Day, and (B) after 1:00 p.m. on any
Business Day, such payment shall be due on the following Business Day.

     (c) Whenever, at any time after any Stand-Alone Issuing Lender has made
payment under any Stand-Alone Letter of Credit and has received from any
Stand-Alone L/C Participant its Stand-Alone L/C Commitment Percentage of such
payment in accordance with this Section 3.4, such Stand-Alone Issuing Lender
receives any payment related to such Stand-Alone Letter of Credit, whether
directly from the Borrower or otherwise, or any payment of interest on account
thereof, such Stand-Alone Issuing Lender will distribute to such Stand-Alone L/C
Participant its pro rata share thereof; provided, that in the event that any
such payment received by such Stand-Alone Issuing Lender shall be required to be
returned by such Stand-Alone Issuing Lender, such Stand-Alone L/C Participant
shall return to such Stand-Alone Issuing Lender the portion thereof previously
distributed to it by such Stand-Alone Issuing Lender.

     SECTION 3.5 Stand-Alone Reimbursement Obligation of the Borrower. In the
event of any drawing under any Stand-Alone Letter of Credit, the Borrower agrees
to reimburse, in same day funds, the applicable Stand-Alone Issuing Lender on
each date on which such Stand-Alone Issuing Lender notifies the Borrower of the
date and amount of a draft paid under any Stand-Alone Letter of Credit for the
amount of (a) such draft so paid and (b) any amounts referred to in Section
3.3(c) incurred by such Stand-Alone Issuing Lender


                                       32




in connection with such payment. If the Borrower shall fail to reimburse the
applicable Stand-Alone Issuing Lender as provided above, the unreimbursed amount
of such drawing shall bear interest at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full. Until each Lender reimburses the applicable Stand-Alone Issuing
Lender for any amount drawn under any Stand-Alone Letter of Credit, interest in
respect of such Lender's Stand-Alone L/C Commitment Percentage of such amount
shall be solely for the account of the applicable Stand-Alone Issuing Lender.

     SECTION 3.6 Obligations Absolute. The Borrower's obligations under this
Article III (including without limitation the Stand-Alone Reimbursement
Obligation) shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against any Stand-Alone Issuing Lender or any
beneficiary of a Stand-Alone Letter of Credit or any other Person. The Borrower
also agrees that the Stand-Alone Issuing Lenders and the Stand-Alone L/C
Participants shall not be responsible for, and the Borrower's Stand-Alone
Reimbursement Obligation under Section 3.5 shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements thereon,
even though such documents shall in fact prove to be invalid, fraudulent or
forged, or any dispute between or among the Borrower and any beneficiary of any
Stand-Alone Letter of Credit or any other party to which such Stand-Alone Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Stand-Alone Letter of Credit or any such transferee. No
Stand-Alone Issuing Lender shall be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Stand-Alone Letter of Credit, except for
errors or omissions caused by the Stand-Alone Issuing Lender's gross negligence
or willful misconduct. The Borrower agrees that any action taken or omitted by
the applicable Stand-Alone Issuing Lender under or in connection with any
Stand-Alone Letter of Credit or the related drafts or documents, if done in the
absence of gross negligence or willful misconduct and in accordance with the
standards of care specified in ISP98 or the Uniform Customs, as the case may be,
and, to the extent not inconsistent therewith, the UCC, shall be binding on the
Borrower and shall not result in any liability of any Stand-Alone Issuing Lender
or any Stand-Alone L/C Participant to the Borrower.

                                   ARTICLE IV

                             GENERAL LOAN PROVISIONS

     SECTION 4.1 Procedure for Advances of Loans.

     (a) Requests for Borrowing. The Borrower shall give the Administrative
Agent irrevocable prior written notice in the form attached hereto as Exhibit B
(a "Notice of Borrowing") not later than 11:00 a.m. (i) on the same Business Day
as each Base Rate Loan and each Swingline Loan and (ii) at least three (3)
Business Days before each LIBOR Rate Loan, of its intention to borrow,
specifying (A) the date of such borrowing, which shall be a Business Day, (B)
the amount of such borrowing, which shall be (x) with respect to LIBOR Rate
Loans and Base Rate Loans, in an aggregate principal amount of $3,000,000 or a
whole multiple of $500,000 in excess thereof, and (y) with respect to Swingline
Loans in an aggregate principal


                                       33




amount of $500,000 or a whole multiple of $250,000 in excess thereof, (C)
whether such Loan is to be a Revolving Credit Loan or Swingline Loan, (D) in the
case of a Revolving Credit Loan, whether the Loans are to be LIBOR Rate Loans or
Base Rate Loans, and (E) in the case of a LIBOR Rate Loan, the duration of the
Interest Period applicable thereto. A Notice of Borrowing received after 11:00
a.m. shall be deemed received on the next Business Day. The Administrative Agent
shall promptly notify the Lenders of each Notice of Borrowing.

     (b) Disbursement of Loans. Not later than 2:00 p.m. on the proposed
borrowing date, each Lender will make available to the Administrative Agent, for
the account of the Borrower, at the office of the Administrative Agent in funds
immediately available to the Administrative Agent, such Lender's Revolving
Credit Commitment Percentage of the Revolving Credit Loans to be made on such
borrowing date. Unless the Swingline Lender has received notice (by telephone or
in writing) from the Administrative Agent (including at the request of any
Lender) prior to 12:00 noon on the proposed borrowing date (i) directing the
Swingline Lender not to make such Swingline Loan as a result of the limitations
set forth in Section 2.2(a), or (ii) that one or more of the applicable
conditions specified in Section 5.3 is not then satisfied, then, subject to the
terms and conditions hereof, not later than 2:00 p.m. on the proposed borrowing
date, the Swingline Lender will make available to the Administrative Agent, for
the account of the Borrower, at the office of the Administrative Agent in funds
immediately available to the Administrative Agent, the Swingline Loans to be
made to the Borrower on such borrowing date. The Borrower hereby irrevocably
authorizes the Administrative Agent to disburse the proceeds of each borrowing
requested pursuant to this Section 4.1 in immediately available funds by
crediting or wiring such proceeds to the deposit account of the Borrower
identified in the most recent notice substantially in the form of Exhibit C
hereto (a "Notice of Account Designation") delivered by the Borrower to the
Administrative Agent or as may be otherwise agreed upon by the Borrower and the
Administrative Agent from time to time. Subject to Section 4.13, the
Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Revolving Credit Loan requested pursuant to this Section 4.1 to
the extent that any Lender has not made available to the Administrative Agent
its Revolving Credit Commitment Percentage of such Loan. Revolving Credit Loans
to be made for the purpose of refunding Swingline Loans shall be made by the
Lenders as provided in Section 2.2(b).


                                       34



     SECTION 4.2 Repayment of Loans.

     (a) Repayment on Termination Date. On the Termination Date, the Borrower
shall repay the outstanding principal amount of (i) all Revolving Credit Loans
in full, and (ii) to the extent the Swingline Termination Date has not occurred,
all Swingline Loans together, in each case, with all accrued but unpaid interest
thereon.

     (b) Mandatory Repayment of Obligations. If at any time, as the case may be,
(i) the outstanding principal amount of all Revolving Credit Loans plus the sum
of (A) all outstanding Swingline Loans and Revolver L/C Obligations and (B) the
Blocked Portion as of such date exceeds the Revolving Credit Commitment, the
Borrower shall repay immediately upon notice from the Administrative Agent, by
payment to the Administrative Agent for the account of the Lenders, the
aggregate outstanding Revolving Credit Loans, Swingline Loans and Revolver L/C
Obligations in an amount equal to such excess with each such repayment applied
first to the principal amount of outstanding Swingline Loans, second to the
principal amount of outstanding Revolving Credit Loans and third, with respect
to any Revolver Letters of Credit then outstanding, a payment of cash collateral
into a cash collateral account opened by the Borrower with the Administrative
Agent, for the benefit of the Lenders (such cash collateral to be applied in
accordance with Section 11.2(b)), and (ii) the outstanding principal amount of
all Stand-Alone L/C Obligations exceeds the Stand-Alone L/C Commitment, the
Borrower shall, immediately upon notice from the Administrative Agent, make a
payment of cash collateral into a cash collateral account opened by the Borrower
with the Administrative Agent, for the benefit of the Lenders (such cash
collateral to be applied in accordance with Section 11.2(b)) in an amount equal
to such excess. Each such repayment shall be accompanied by any amount required
to be paid pursuant to Section 4.16.

     (c) Optional Repayments. The Borrower may at any time and from time to time
repay the Loans, in whole or in part, upon at least three (3) Business Days'
irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans
and one (1) Business Day irrevocable notice with respect to Base Rate Loans and
Swingline Loans, in the form attached hereto as Exhibit D (a "Notice of
Prepayment"), specifying (i) the date and amount of repayment, (ii) whether the
repayment is of a Revolving Credit Loan, a Swingline Loan or a combination
thereof, and, if of a combination thereof, the amount allocable to each and
(iii) if such Loan is a Revolving Credit Loan, whether such Loan is a LIBOR Rate
Loan or a Base Rate Loan. Upon receipt of such notice, the Administrative Agent
shall promptly notify each Lender. If any such notice is given, the amount
specified in such notice shall be due and payable on the date set forth in such
notice. Partial repayments shall be in an aggregate amount of $3,000,000 or a
whole multiple of $500,000 in excess thereof with respect to LIBOR Rate Loans
and Base Rate Loans and $500,000 or a whole multiple of $250,000 in excess
thereof with respect to Swingline Loans. Each such repayment shall be
accompanied by any amount required to be paid pursuant to Section 4.16.

     (d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay
any LIBOR Rate Loan on any day other than on the last day of the Interest Period
applicable thereto unless such repayment is accompanied by any amount required
to be paid pursuant to Section 4.16.

     SECTION 4.3 Evidence of Indebtedness.

     (a) Extensions of Credit. The Extensions of Credit made by each Lender
shall be evidenced by one or more accounts or records maintained by such Lender
and by the Administrative Agent in the ordinary course of business. The accounts
or records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Extensions of Credit made
by the Lenders to the Borrower and the interest and payments thereon. Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing with respect to the Obligations. In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of
the Administrative Agent in respect of such matters, the accounts and records of
the Administrative Agent shall control in the absence of manifest error. Upon
the request of any Lender made through the Administrative Agent, the Borrower


                                       35




shall execute and deliver to such Lender (through the Administrative Agent) a
Revolving Credit Note, which shall evidence such Lender's Revolving Credit
Loans, in addition to such accounts or records. Each Lender may attach schedules
to its Revolving Note and endorse thereon the date, amount and maturity of its
Loans and payments with respect thereto.

     (b) Participations. In addition to the accounts and records referred to in
subsection (a), each Lender and the Administrative Agent shall maintain in
accordance with its usual practice accounts or records evidencing the purchases
and sales by such Lender of participations in Letters of Credit and Swingline
Loans. In the event of any conflict between the accounts and records maintained
by the Administrative Agent and the accounts and records of any Lender in
respect of such matters, the accounts and records of the Administrative Agent
shall control in the absence of manifest error.

     SECTION 4.4 Repayment; Limited Incurrence during Cleandown Period. During
each Fiscal Year, the Borrower shall select a Cleandown Period. On the first day
of each Cleandown Period, the Borrower shall repay the Extensions of Credit then
outstanding to the extent necessary to reduce the total amount of outstanding
Revolving Credit Loans, Swingline Loans and Revolver L/C Obligations to an
amount not exceeding $15,000,000. For the duration of each such Cleandown
Period, the Borrower shall not request, create or incur any Revolving Credit
Loans, Swingline Loans or Revolver Letters of Credit to the extent that the
aggregate principal amount of all outstanding Revolving Credit Loans, Swingline
Loans and Revolver L/C Obligations (after giving effect to any amount requested,
created or incurred) would exceed $15,000,000.

     SECTION 4.5 Permanent Reduction of the Revolving Credit Commitment and the
Stand-Alone L/C Commitment.

     (a) Voluntary Reduction. The Borrower shall have the right, upon at least
three (3) Business Days prior irrevocable written notice to the Administrative
Agent, to permanently reduce, without premium or penalty, (i) at any time, the
entire Revolving Credit Commitment or the entire Stand-Alone L/C Commitment or
(ii) portions of the Revolving Credit Commitment or the Stand-Alone L/C
Commitment, from time to time, in each case, in an aggregate principal amount
not less than $2,000,000 or any whole multiple in excess thereof.

     (b) Repayment of Excess Obligations. Each permanent reduction permitted
pursuant to this Section 4.5 and, as applicable, Section 4.6 shall be (i) with
respect to the Revolving Credit Commitment, accompanied by a payment of
principal sufficient to reduce the aggregate outstanding Revolving Credit Loans,
Swingline Loans and Revolver L/C Obligations, after such reduction to the
Revolving Credit Commitment as so reduced, and if the Revolving Credit
Commitment as so reduced is less than the aggregate amount of all outstanding
Revolver L/C Obligations, the Borrower shall be required to deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and


                                       36




unexpired amount of such Revolver L/C Obligations, and (ii) with respect to the
Stand-Alone L/C Commitment, if the Stand-Alone L/C Commitment as so reduced is
less than the aggregate amount of all outstanding Stand-Alone L/C Obligations,
the Borrower shall be required to deposit in a cash collateral account opened by
the Administrative Agent an amount equal to the aggregate then undrawn and
unexpired amount of such Stand-Alone L/C Obligations. Any reduction of the
Revolving Credit Commitment to zero (i) shall be accompanied by payment of all
outstanding Revolving Credit Loans and Swingline Loans and the furnishing of
cash collateral satisfactory to the Administrative Agent for all Revolver L/C
Obligations, and (ii) shall result in the termination of the Revolving Credit
Commitment and the Revolving Credit Facility. If the reduction of the Revolving
Credit Commitment requires the repayment of any LIBOR Rate Loan, such repayment
shall be accompanied by any amount required to be paid pursuant to Section 4.15.
Any reduction of the Stand-Alone L/C Commitment to zero shall be accompanied by
the furnishing of cash collateral satisfactory to the Administrative Agent for
all Stand-Alone L/C Obligations and shall result in the termination of the
Stand-Alone L/C Commitment and the Stand-Alone L/C Facility. All such cash
collateral shall be applied in accordance with Section 11.2(b).

     SECTION 4.6 Termination of Credit Facilities. The Credit Facilities shall
terminate and each of the Revolving Credit Commitment and the Stand-Alone L/C
Commitment shall be automatically reduced to zero on the Termination Date.

     SECTION 4.7 Interest.

     (a) Interest Rate Options. Subject to the provisions of this Section 4.7,
at the election of the Borrower, the aggregate unpaid principal balance of (i)
each Revolving Credit Loan shall bear interest at the Base Rate or the LIBOR
Rate plus the Applicable Margin, and (ii) each Swingline Loan shall bear
interest at the Swingline Rate. The Borrower shall select the rate of interest
and Interest Period, if any, applicable to any LIBOR Rate Loan at the time a
Notice of Borrowing is given pursuant to Section 4.1(a) or at the time a Notice
of Conversion/Continuation is given pursuant to Section 4.8. Any Loan or any
portion thereof as to which the Borrower has not duly specified an interest rate
as provided herein shall be deemed a Base Rate Loan.

     (b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 4.7(a), shall elect
an interest period (each, an "Interest Period") to be applicable to such Loan,
which Interest Period shall be a period of one (1), two (2), three (3), or six
(6) months; provided that:

          (i) the Interest Period shall commence on the date of advance of or
conversion to any LIBOR Rate Loan and, in the case of immediately successive
Interest Periods, each successive Interest Period shall commence on the date on
which the next preceding Interest Period expires;

          (ii) if any Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, that if any Interest Period with respect to a LIBOR Rate
Loan would otherwise expire on a day that is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;

          (iii) any Interest Period with respect to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically


                                       37




corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the relevant calendar month at the end of
such Interest Period;

          (iv) no Interest Period shall extend beyond the Termination Date; and

          (v) there shall be no more than ten (10) Interest Periods outstanding
at any time.

     (c) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrower shall no longer have the option to request
LIBOR Rate Loans or Swingline Loans, (ii) all outstanding LIBOR Rate Loans shall
bear interest at a rate per annum two percent (2%) in excess of the rate then
applicable to LIBOR Rate Loans until the end of the applicable Interest Period
and thereafter at a rate equal to two percent (2%) in excess of the rate then
applicable to Base Rate Loans, (iii) all outstanding Swingline Loans shall bear
interest at a rate per annum equal to two percent (2%) in excess of the rate
then applicable to Swingline Loans and (iv) all outstanding Base Rate Loans,
Revolver Reimbursement Obligations and Stand-Alone Reimbursement Obligations
shall bear interest at a rate per annum equal to two percent (2%) in excess of
the rate then applicable to Base Rate Loans. Interest shall continue to accrue
on the Obligations after the filing by or against the Borrower of any petition
seeking any relief in bankruptcy or under any act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign.

     (d) Interest Payment and Computation. Interest on each Base Rate Loan shall
be payable in arrears on the last Business Day of each calendar quarter, with
the first such payment due on December 31, 2004. Interest on each LIBOR Rate
Loan shall be payable on the last day of each Interest Period applicable
thereto, and if such Interest Period extends over three (3) months, at the end
of each three (3) month interval during such Interest Period. All interest
rates, fees and commissions provided hereunder shall be computed on the basis of
a 360-day year and assessed for the actual number of days elapsed.

     (e) Maximum Rate. In no contingency or event whatsoever shall the aggregate
of all amounts deemed interest hereunder charged or collected pursuant to the
terms of this Agreement exceed the highest rate permissible under any Applicable
Law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that such a court determines that the
Lenders have charged or received interest hereunder in excess of the highest
applicable rate, the rate in effect hereunder shall automatically be reduced to
the maximum rate permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option promptly refund to the Borrower any interest
received by Lenders in excess of the maximum lawful rate or shall apply such
excess to the principal balance of the Obligations. It is the intent hereof that
the Borrower not pay or contract to pay, and that neither the Administrative
Agent nor any Lender receive or contract to receive, directly or indirectly in
any manner whatsoever, interest in excess of that which may be paid by the
Borrower under Applicable Law.

     SECTION 4.8 Notice and Manner of Conversion or Continuation of Loans.
Provided that no Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) convert at any time all or any portion of
its outstanding Base Rate Loans in a


                                       38





principal amount equal to $3,000,000 or any whole multiple of $500,000 in excess
thereof into one or more LIBOR Rate Loans or (b) upon the expiration of any
Interest Period, (i) convert all or any part of its outstanding LIBOR Rate Loans
in a principal amount equal to $3,000,000 or a whole multiple of $500,000 in
excess thereof into Base Rate Loans or (ii) continue such LIBOR Rate Loans as
LIBOR Rate Loans. Whenever the Borrower desires to convert or continue Loans as
provided above, the Borrower shall give the Administrative Agent irrevocable
prior written notice in the form attached as Exhibit E (a "Notice of Conversion/
Continuation") not later than 11:00 a.m. three (3) Business Days before the day
on which a proposed conversion or continuation of such Loan is to be effective
specifying (A) the Loans to be converted or continued, and, in the case of any
LIBOR Rate Loan to be converted or continued, the last day of the Interest
Period therefor, (B) the effective date of such conversion or continuation
(which shall be a Business Day), (C) the principal amount of such Loans to be
converted or continued, and (D) the Interest Period to be applicable to such
converted or continued LIBOR Rate Loan. The Administrative Agent shall promptly
notify the Lenders of such Notice of Conversion/Continuation.

     SECTION 4.9 Fees.

     (a) Facility Fees. The Borrower shall pay to the Administrative Agent, for
the account of the Lenders, a non-refundable facility fee at a rate per annum
equal to the Aggregate Commitment times the Applicable Margin, regardless of
usage. The facility fee shall be payable in arrears on the last Business Day of
each calendar quarter during the term of this Agreement, with the first such
payment due on December 31, 2004 and on the Termination Date. Such facility fee
shall be distributed by the Administrative Agent to the Lenders pro rata in
accordance with the Lenders' respective Commitment Percentages.

     (b) Administrative Agent's and Other Fees. To compensate the Administrative
Agent for structuring and syndicating the Loans and for its obligations
hereunder, the Borrower agrees to pay to the Administrative Agent, for its
account, the fees set forth in the Fee Letter.

     SECTION 4.10 Manner of Payment. Each payment by the Borrower on account of
the principal of or interest on the Loans or of any fee, commission or other
amounts payable to the Lenders under this Agreement shall be made not later than
1:00 p.m. on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office for the account of the
Lenders (other than as set forth below) pro rata in accordance with their
respective applicable Commitment Percentages, in Dollars, in immediately
available funds and shall be made without any set-off, counterclaim or deduction
whatsoever. Any payment received after such time but before 2:00 p.m. on such
day shall be deemed a payment on such date for the purposes of Section 11.1, but
for all other purposes shall be deemed to have been made on the next succeeding
Business Day. Any payment received after 2:00 p.m. shall be deemed to have been
made on the next succeeding Business Day for all purposes. Upon receipt by the
Administrative Agent of each such payment, the Administrative Agent shall
distribute to each Lender at its address for notices set forth herein its pro
rata share of such payment in accordance with such Lender's applicable
Commitment Percentage and shall wire advice of the amount of such credit to each
Lender. Each payment to the Administrative Agent of Administrative Agent's fees
or expenses shall be made for the account of the Administrative Agent and any


                                       39




amount payable to any Lender under Sections 4.14, 4.15, 4.16, 4.17 or 13.2 shall
be paid to the Administrative Agent for the account of the applicable Lender.
Subject to Section 4.7(b)(ii), if any payment under this Agreement shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day and such extension of time shall
in such case be included in computing any interest if payable along with such
payment.

     SECTION 4.11 Crediting of Payments and Proceeds. In the event that the
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 11.2, all payments received by the
Lenders upon the Obligations and all net proceeds from the enforcement of the
Obligations shall be applied:

     First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts, including attorney fees, payable to the
Administrative Agent in its capacity as such and each Issuing Lender in their
capacity as such (ratably among the Administrative Agent and the Issuing Lenders
in proportion to the respective amounts described in this clause First payable
to them);

     Second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the
Lenders, including attorney fees (ratably among the Lenders in proportion to the
respective amounts described in this clause Second payable to them);

     Third, to payment of that portion of the Obligations constituting accrued
and unpaid interest on the Loans and Reimbursement Obligations (ratably among
the Lenders in proportion to the respective amounts described in this clause
Third payable to them);

     Fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans, the Reimbursement Obligations and any Swap Obligations
(including any termination payments and any accrued and unpaid interest thereon)
(ratably among the Lenders in proportion to the respective amounts described in
this clause Fourth held by them);

     Fifth, to the Administrative Agent for the account of the applicable
Issuing Lenders, to cash collateralize the aggregate undrawn and unexpired
amount of the then outstanding Revolver Letters of Credit and Stand-Alone
Letters of Credit pursuant to Section 11.2(b) (ratably among the Issuing Lenders
in proportion to the respective amounts described in this clause Fifth held by
them); and

     Last, the balance, if any, after all of the Obligations have been
indefeasibly paid in full, to the Borrower or as otherwise required by
Applicable Law.

     SECTION 4.12 Adjustments. If any Lender shall, by exercising any right of
setoff or counterclaim or otherwise, obtain payment in respect of any principal
of or interest on any of its Loans or other obligations hereunder resulting in
such Lender's receiving payment of a proportion of the aggregate amount of its
Loans and accrued interest thereon or other such obligations (other than
pursuant to Sections 4.15, 4.16, 4.17 or 13.2) greater than its pro rata share
thereof as provided herein, then the Lender receiving such greater proportion
shall (a)



                                       40




notify the Administrative Agent of such fact, and (b) purchase (for cash at face
value) participations in the Loans and such other obligations of the other
Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and other amounts owing them; provided that

          (i) if any such participations are purchased and all or any portion of
the payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest, and

          (ii) the provisions of this paragraph shall not be construed to apply
to (x) any payment made by the Borrower pursuant to and in accordance with the
express terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in Swingline Loans and Letters of Credit to any assignee
or participant, other than to the Borrower or any Subsidiary thereof (as to
which the provisions of this paragraph shall apply).

The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under Applicable Law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower and each Guarantor rights of setoff and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower or such Guarantor in the amount of such participation.

     SECTION 4.13 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent. The obligations of the Lenders
under this Agreement to make the Loans and issue or participate in Letters of
Credit are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender from its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 4.1(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to the product of
(a) the amount not made available by such Lender in accordance with the terms
hereof, times (b) the daily average Federal Funds Rate during such period as
determined by the Administrative Agent, times (c) a fraction the numerator of
which is the number of days that elapse from and including such borrowing date
to the date on which such amount not made available by such Lender as required
by the terms hereof shall have become immediately available to the
Administrative Agent and the denominator of which is 360. A certificate of the
Administrative Agent with respect to any amounts owing under this Section 4.13
shall be conclusive, absent manifest error. If such Lender's Commitment
Percentage of such borrowing is not made available to the Administrative Agent
by such Lender within three (3) Business Days of such borrowing date, the
Administrative Agent shall be entitled to recover such amount made available by
the Administrative Agent with interest thereon at the rate per annum applicable
to Base Rate Loans hereunder, on demand, from the Borrower. The failure of


                                       41




any Lender to make available its Commitment Percentage of any Loan requested by
the Borrower shall not relieve it or any other Lender of its obligation, if any,
hereunder to make its Commitment Percentage of such Loan available on such
borrowing date, but no Lender shall be responsible for the failure of any other
Lender to make its Commitment Percentage of such Loan available on the borrowing
date.

     SECTION 4.14 Changed Circumstances.

     (a) Circumstances Affecting LIBOR Rate Availability. If with respect to any
Interest Period the Administrative Agent or any Lender (after consultation with
Administrative Agent) shall determine that, by reason of circumstances affecting
the foreign exchange and interbank markets generally, deposits in eurodollars,
in the applicable amounts are not being quoted via Telerate Page 3750 or offered
to the Administrative Agent or such Lender for such Interest Period, then the
Administrative Agent shall forthwith give notice thereof to the Borrower.
Thereafter, until the Administrative Agent notifies the Borrower that such
circumstances no longer exist, the obligation of the Lenders to make LIBOR Rate
Loans and the right of the Borrower to convert any Loan to or continue any Loan
as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay in full
(or cause to be repaid in full) the then outstanding principal amount of each
such LIBOR Rate Loans together with accrued interest thereon, on the last day of
the then current Interest Period applicable to such LIBOR Rate Loan or convert
the then outstanding principal amount of each such LIBOR Rate Loan to a Base
Rate Loan as of the last day of such Interest Period.

     (b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the
introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any of their respective Lending
Offices) with any request or directive (whether or not having the force of law)
of any such Authority, central bank or comparable agency, shall make it unlawful
or impossible for any of the Lenders (or any of their respective Lending
Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate
Loan, such Lender shall promptly give notice thereof to the Administrative Agent
and the Administrative Agent shall promptly give notice to the Borrower and the
other Lenders. Thereafter, until the Administrative Agent notifies the Borrower
that such circumstances no longer exist, (i) the obligations of the Lenders to
make LIBOR Rate Loans and the right of the Borrower to convert any Loan or
continue any Loan as a LIBOR Rate Loan shall be suspended and thereafter the
Borrower may select only Base Rate Loans hereunder, and (ii) if any of the
Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of
the then current Interest Period applicable thereto as a LIBOR Rate Loan, the
applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan
for the remainder of such Interest Period.

     SECTION 4.15 Increased Costs.

     (a) Increased Costs Generally. If any Change in Law shall:

          (i) impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for


                                       42




the account of, or advances, loans or other credit extended or participated in
by, any Lender (except any reserve requirement reflected in the LIBOR Rate) or
any Issuing Lender;

          (ii) subject any Lender or any Issuing Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
participation in a Letter of Credit or any LIBOR Rate Loan made by it, or change
the basis of taxation of payments to such Lender or such Issuing Lender in
respect thereof (except for Indemnified Taxes or Other Taxes covered by Section
4.17 and the imposition of, or any change in the rate of any Excluded Tax
payable by such Lender or such Issuing Lender); or

     (iii) impose on any Lender or any Issuing Lender or the London interbank
market any other condition, cost or expense affecting this Agreement or LIBOR
Rate Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making, converting into or maintaining any LIBOR Rate Loan (or of
maintaining its obligation to make any such Loan), or to increase the cost to
such Lender or such Issuing Lender of participating in, issuing or maintaining
any Letter of Credit (or of maintaining its obligation to participate in or to
issue any Letter of Credit), or to reduce the amount of any sum received or
receivable by such Lender or such Issuing Lender hereunder (whether of
principal, interest or any other amount) then, upon request of such Lender or
such Issuing Lender, the Borrower shall promptly pay to any such Lender or such
Issuing Lender, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Lender, as the case may be, for such
additional costs incurred or reduction suffered.

     (b) Capital Requirements. If any Lender or any Issuing Lender determines
that any Change in Law affecting such Lender or such Issuing Lender or any
lending office of such Lender or such Lender's or such Issuing Lender's holding
company, if any, regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or such Issuing Lender's capital or
on the capital of such Lender's or such Issuing Lender's holding company, if
any, as a consequence of this Agreement, the Commitments of such Lender or the
Loans made by, or participations in Letters of Credit held by, such Lender, or
the Letters of Credit issued by such Issuing Lender, to a level below that which
such Lender or such Issuing Lender or such Lender's or such Issuing Lender's
holding company could have achieved but for such Change in Law (taking into
consideration such Lender's or such Issuing Lender's policies and the policies
of such Lender's or such Issuing Lender's holding company with respect to
capital adequacy), then from time to time the Borrower shall promptly pay to
such Lender or such Issuing Lender, as the case may be, such additional amount
or amounts as will compensate such Lender or such Issuing Lender or such
Lender's or such Issuing Lender's holding company for any such reduction
suffered.

     (c) Certificates for Reimbursement. A certificate of a Lender or an Issuing
Lender setting forth the amount or amounts necessary to compensate such Lender
or such Issuing Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section 4.15 and delivered to the Borrower shall
be conclusive absent manifest error. The Borrower shall pay such Lender or such
Issuing Lender, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.


                                       43




     (d) Delay in Requests. Failure or delay on the part of any Lender or any
Issuing Lender to demand compensation pursuant to this Section 4.15 shall not
constitute a waiver of such Lender's or such Issuing Lender's right to demand
such compensation; provided that the Borrower shall not be required to
compensate a Lender or an Issuing Lender pursuant to this Section 4.15 for any
increased costs incurred or reductions suffered more than three (3) months prior
to the date that such Lender or such Issuing Lender, as the case may be,
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender's or such Issuing Lender's intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the three-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

     SECTION 4.16 Indemnity.

The Borrower hereby indemnifies each of the Lenders against any loss or expense
which may arise or be attributable to each Lender's obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or maintain any Loan
(a) as a consequence of any failure by the Borrower to make any payment when due
of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any
failure of the Borrower to borrow, continue or convert on a date specified
therefor in a Notice of Borrowing or Notice of Conversion/Continuation or (c)
due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date
other than the last day of the Interest Period therefor. The amount of such loss
or expense shall be determined, in the applicable Lender's sole discretion,
based upon the assumption that such Lender funded its Revolving Credit
Commitment Percentage of the LIBOR Rate Loans in the London interbank market and
using any reasonable attribution or averaging methods which such Lender deems
appropriate and practical. A certificate of such Lender setting forth the basis
for determining such amount or amounts necessary to compensate such Lender shall
be forwarded to the Borrower through the Administrative Agent and shall be
conclusively presumed to be correct save for manifest error.

     SECTION 4.17 Taxes.

     (a) Payments Free of Taxes. Any and all payments by or on account of any
Obligations shall be made free and clear of and without reduction or withholding
for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required by applicable law to deduct any Indemnified Taxes (including any Other
Taxes) from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.17) the
Administrative Agent, Lender or Issuing Lender, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall timely
pay the full amount deducted to the relevant Governmental Authority in
accordance with Applicable Law; provided, no such additional amount shall be
required to be paid to any Lender under clause (i) above except to the extent of
any change after the date hereof (in the case of each Lender listed on the
signature pages hereof on the Closing Date) or after the effective date of the
Assignment and Assumption pursuant to which such Lender became a Lender (in the
case of each other Lender) in any such requirement for a deduction, withholding
or payment from that in effect at the date hereof or at the date of such
Assignment Agreement, as the case may be, in respect of payments to such Lender.


                                       44





     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions
of paragraph (a) above, the Borrower shall timely pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

     (c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent, each Lender and each Issuing Lender, within thirty (30)
days after demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section 4.17) paid by the
Administrative Agent, such Lender or such Issuing Lender, as the case may be,
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender or an Issuing Lender (with a copy to the Administrative
Agent), or by the Administrative Agent on its own behalf or on behalf of a
Lender or an Issuing Lender, shall be conclusive absent manifest error.

     (d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in which
the Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any other
Loan Document shall deliver to the Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by Applicable Law or reasonably
requested by the Borrower or the Administrative Agent, such properly completed
and executed documentation prescribed by Applicable Law as will permit such
payments to be made without withholding or at a reduced rate of withholding. In
addition, any Lender, if requested by the Borrower or the Administrative Agent,
shall deliver such other documentation prescribed by Applicable Law or
reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender
is subject to backup withholding or information reporting requirements. Without
limiting the generality of the foregoing, in the event that the Borrower is a
resident for tax purposes in the United States, any Foreign Lender shall deliver
to the Borrower and the Administrative Agent (in such number of copies as shall
be requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Borrower or the Administrative Agent, but only if such
Foreign Lender is lawfully able to do so), whichever of the following is
applicable:

          (i) duly completed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States is a party,

          (ii) duly completed copies of Internal Revenue Service Form W-8ECI,


                                       45




          (iii) in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a "bank" within
the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder"
of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a
"controlled foreign corporation" described in section 881(c)(3)(C) of the Code
and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

          (iv) any other form prescribed by Applicable Law as a basis for
claiming exemption from or a reduction in United States Federal withholding tax
duly completed together with such supplementary documentation as may be
prescribed by Applicable Law to permit the Borrower to determine the withholding
or deduction required to be made.

     (f) Treatment of Certain Refunds. If the Administrative Agent, a Lender or
an Issuing Lender determines, in its sole discretion, that it has received a
refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 4.17, it shall pay to the Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower under this Section 4.17 with respect to the Taxes
or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of
the Administrative Agent, such Lender or such Issuing Lender, as the case may
be, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided that the Borrower,
upon the request of the Administrative Agent, such Lender or such Issuing
Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent, such Lender or such Issuing Lender in
the event the Administrative Agent, such Lender or such Issuing Lender is
required to repay such refund to such Governmental Authority. This paragraph
shall not be construed to require the Administrative Agent, any Lender or any
Issuing Lender to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to the Borrower or any other
Person.

     (g) Failure to Provide Documentation. For any period with respect to which
a Lender has failed to provide the Borrower with the appropriate form,
certificate or other document described in subsection (e) of this Section 4.17
(other than if such failure is due to a change in the applicable law, or in the
interpretation or application thereof, occurring after the date on which a form,
certificate or other document originally was required to be provided or if such
form, certificate or other document otherwise is not required under subsection
(e) of this Section 4.17), such Lender shall not be entitled to indemnification
or payment under subsection (a), (b) and (c) of this Section 4.17 with respect
to Taxes imposed by the United States by reason of such failure; provided,
however, that should a Lender become subject to Taxes because of its failure to
deliver a form, certificate or other document required hereunder, the Borrower
shall take such steps as such Lender may reasonably request to assist such
Lender in recovering such Taxes.

     (h) Survival. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 4.17 shall survive the payment in full of the Obligations and
the termination of the Commitments.


                                       46




     SECTION 4.18 Duty to Mitigate; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests
compensation under Section 4.15, or requires the Borrower to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 4.17, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section
4.15 or Section 4.17, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under
Section 4.15, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 4.17, or if any Lender defaults in its obligation to fund Loans
hereunder, then the Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 13.10), all of its interests,
rights and obligations under this Agreement and the related Loan Documents to an
assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that

          (i) the Borrower shall have paid to the Administrative Agent the
assignment fee specified in Section 13.10,

          (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in Letters of Credit
funded by such Lender which have not been reimbursed pursuant to the terms
hereof, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder and under the other Loan Documents (including any amounts under
Section 4.16) from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts),

          (iii) in the case of any such assignment resulting from a claim for
compensation under Section 4.15 or payments required to be made pursuant to
Section 4.17, such assignment will result in a reduction in such compensation or
payments thereafter, and

          (iv) such assignment does not conflict with applicable law.

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.


                                       47




                                    ARTICLE V

                  CLOSING; CONDITIONS OF CLOSING AND BORROWING

     SECTION 5.1 Closing. The closing shall take place at the offices of Kennedy
Covington Lobdell & Hickman, L.L.P., Charlotte, North Carolina at 9:00 a.m. on
October 20, 2004, or on such other date and at such other place as the parties
hereto shall mutually agree.

     SECTION 5.2 Conditions to Closing and Initial Extensions of Credit. The
obligations of the Lenders to close this Agreement and to make the initial Loan
and issue the initial Letters of Credit are subject to the satisfaction of each
of the following conditions:

     (a) Executed Loan Documents. This Agreement, the Guaranty Agreement and any
other Loan Documents shall have been duly authorized, executed and delivered to
the Administrative Agent by the parties thereto, shall be in full force and
effect and no default shall exist thereunder, and the Borrower shall have
delivered original counterparts thereof to the Administrative Agent.

     (b) Closing Certificates; etc.

          (i) Officer's Certificate of the Borrower. The Administrative Agent
shall have received a certificate from the chief executive officer or chief
financial officer of the Borrower, in form and substance satisfactory to the
Administrative Agent, to the effect that all representations and warranties of
the Borrower contained in this Agreement and the other Loan Documents are true,
correct and complete; that the Borrower is not in violation of any of the
covenants contained in this Agreement and the other Loan Documents; that, after
giving effect to the transactions contemplated by this Agreement, no Default or
Event of Default has occurred and is continuing; and that the Borrower has
satisfied each of the closing conditions.

          (ii) Partnership Documents; Secretary's Certificates. The
Administrative Agent shall have received (A) a certificate of the Secretary or
Assistant Secretary of the Borrower and each Guarantor dated the Closing Date
and certifying with respect to the Borrower and each Guarantor (1) that attached
thereto is a true and complete copy of the organizational documents and all
amendments thereto of each of them, certified as of a recent date by the
appropriate Governmental Authority in its jurisdiction of organization, (2) that
attached thereto is a true and complete copy of the partnership agreement,
by-laws or equivalent document of each of them in effect on the Closing Date and
at all times since a date prior to the date of the resolutions described in
clause (3) below, (3) that attached thereto is a true and complete copy of
resolutions duly adopted by the respective governing boards of each of them
authorizing, as applicable, the execution, delivery and performance of the Loan
Documents to which it is party and, in the case of the Borrower, the borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (4) that the organizational documents
of each of them have not been amended since the date of the last amendment
thereto shown on the certificate of good standing attached thereto and (5) as to
the incumbency and specimen signature of each officer executing any Loan
Document, Partnership Document or any other document delivered in connection
herewith on its behalf; and (B) a certificate of another


                                       48





officer as to the incumbency and specimen signature of such Secretary or
Assistant Secretary executing the certificate pursuant to (A) above.

          (iii) Certificates of Good Standing. The Administrative Agent shall
have received long-form certificates as of a recent date of the good standing of
the Borrower and each Subsidiary under the laws of their respective
jurisdictions of organization and a certificate of the relevant taxing
authorities of such jurisdictions certifying that such Person has filed required
tax returns and owes no delinquent taxes.

          (iv) Opinions of Counsel. The Administrative Agent shall have received
favorable opinions of counsel to the Borrower addressed to the Administrative
Agent and the Lenders with respect to the Borrower, the Guarantors, the Loan
Documents and such other matters as the Lenders shall request.

          (v) Tax Forms. The Administrative Agent shall have received copies of
the United States Internal Revenue Service forms required by Section 4.17(e).

          (vi) Insurance Certificate. The Administrative Agent shall have
received a detailed schedule of the Borrower's insurance then in effect, stating
the names of the insurance companies, the amounts and rates of the insurance,
the dates of the expiration thereof and the properties and risks covered
thereby.

     (c) Consents; Defaults.

          (i) Governmental and Third Party Approvals. All necessary approvals,
authorizations and consents, if any be required, of any Person, including,
without limitation, board approvals of the Parent and the General Partner, as
applicable, and of all Governmental Authorities and courts having jurisdiction
with respect to the transactions contemplated by this Agreement and the other
Loan Documents shall have been obtained.

          (ii) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby, or which, in the Administrative Agent's
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement and such other Loan Documents.

          (iii) No Event of Default. No Default or Event of Default shall have
occurred and be continuing.

     (d) Financial Matters.

          (i) Financial Statements. The Administrative Agent shall have received
the most recent audited Consolidated financial statements and unaudited
consolidated financial


                                       49




statements for the period ended June 26, 2004 of the Borrower and its
Subsidiaries, all in form and substance satisfactory to the Administrative
Agent.

          (ii) Payment at Closing; Fee Letters. There shall have been paid by
the Borrower to the Administrative Agent and the Lenders the fees set forth or
referenced in Section 4.9 and any other accrued and unpaid fees or commissions
due hereunder (including, without limitation, legal fees and expenses), and to
any other Person such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and other charges in
connection with the execution, delivery, recording, filing and registration of
any of the Loan Documents.

     (e) Miscellaneous.

          (i) Notice of Borrowing; Notice of Account Designation. The
Administrative Agent shall have received a Notice of Borrowing from the Borrower
in accordance with Section 4.1(a), and a Notice of Account Designation
specifying the account or accounts to which the proceeds of any loans made after
the Closing Date are to be disbursed.

          (ii) Proceedings and Documents. All opinions, certificates and other
instruments and all proceedings in connection with the transactions contemplated
by this Agreement shall be satisfactory in form and substance to the Lenders.
The Lenders shall have received copies of all other instruments and other
evidence as the Lender may reasonably request, in form and substance
satisfactory to the Lenders, with respect to the transactions contemplated by
this Agreement and the taking of all actions in connection therewith.

          (iii) Continuation of the Existing Loans. (A) All outstanding
Revolving Credit Loans under the Original Credit Agreement (the "Existing
Revolving Credit Loans") made by any Original Lender who is not a Lender
hereunder shall be repaid in full and the commitments and other obligations and
rights (except as expressly set forth in the Original Credit Agreement) of such
Original Lender shall be terminated, (B) all Existing Revolving Credit Loans not
being repaid under item (A) above, shall be, from and after the Closing Date,
Revolving Credit Loans hereunder and the Administrative Agent shall make such
transfers of funds as are necessary in order that the outstanding balance of
such Revolving Credit Loans, together with any Revolving Credit Loans funded
hereunder on the Closing Date, reflect the Revolving Credit Commitments of the
Lenders hereunder, (C) all outstanding Acquisition Loans (as defined in the
Original Credit Agreement) under the Original Credit Agreement shall be repaid
in full and the commitments and other obligations and rights (except as
expressly set forth in the Original Credit Agreement) of the Original Lenders in
connection with the Acquisition Loans shall be terminated, (D) all of the
Existing Letters of Credit shall be, from and after the Closing Date, Stand
Alone Letters of Credit hereunder, (E) all accrued but unpaid interest due on
the Existing Revolving Credit Loans and the Acquisition Loans to the Closing
Date shall be paid in cash in full on the Closing Date, (F) all accrued but
unpaid fees under the Original Credit Agreement owing to the Administrative
Agent and the Lenders under the Original Credit Agreement to the Closing Date
shall be paid in cash in full on the Closing Date, and (G) all outstanding
promissory notes issued by the Borrower to the Original Lenders under the
Original Credit Agreement shall


                                       50




be deemed canceled and the originally executed copies thereof shall be promptly
returned to the Administrative Agent who shall forward such notes to the
Borrower.

     SECTION 5.3 Conditions to All Extensions of Credit. The obligations of the
Lenders to make any Extension of Credit is subject to the satisfaction of the
following conditions precedent on the relevant borrowing or issue date, as
applicable:

     (a) Continuation of Representations and Warranties. The representations and
warranties contained in Article VI or otherwise made by the Borrower or any
Subsidiary in any Loan Document shall be true and correct, in all material
respects, on and as of such borrowing or issuance date with the same effect as
if made on and as of such date.

     (b) No Existing Default. No Default or Event of Default shall have occurred
and be continuing hereunder (i) on the borrowing date with respect to such Loan
or after giving effect to the Loans to be made on such date or (ii) or the issue
date with respect to such Letter of Credit or after giving affect to such
Letters of Credit on such date.

     (c) Officer's Compliance Certificate; Additional Documents. The
Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or other
item of information reasonably requested by it.

                                   ARTICLE VI

                 REPRESENTATIONS AND WARRANTIES OF THE BORROWER

     SECTION 6.1 Representations and Warranties. To induce the Administrative
Agent and Lenders to enter into this Agreement and to induce the Lenders to make
the Extensions of Credit, the Borrower hereby represents and warrants to the
Administrative Agent and Lenders both before and after giving effect to the
transactions contemplated hereunder that:

     (a) Organization; Power; Qualification. Each of the Borrower, its
Subsidiaries, the Parent and the General Partner is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be conducted
and is duly qualified and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its business requires
such qualification and authorization, except where the failure to so qualify
would not have a Material Adverse Effect. The jurisdictions in which the
Borrower and its Subsidiaries are organized and qualified to do business are
described on Schedule 6.1(a).

     (b) Ownership.

          (i) Each Subsidiary of the Borrower is listed on Part I of Schedule
6.1(b). The capitalization of the Borrower and its Subsidiaries consists of the
number of shares of stock or other ownership interests, authorized, issued and
outstanding, of such classes and series, with


                                       51





or without par value, described on Part I of Schedule 6.1(b). All outstanding
shares or other ownership interests have been duly authorized and validly issued
and are fully paid and nonassessable. The shareholders or other equity owners of
its Subsidiaries of the Borrower and the number of shares or other ownership
interests owned by each are described on Part I of Schedule 6.1(b). There are no
outstanding warrants, subscriptions, options, securities, instruments 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 or other ownership interests of the Borrower or its Subsidiaries, except
as described on Part I of Schedule 6.1(b).

          (ii) The sole general partner of the Parent is the General Partner,
which owns 224,625 General Partner Units, representing in the aggregate a 1.0%
general partner interest in the Parent. The sole general partner of the Borrower
is the General Partner, which owns a 1.0101% general partner interest in the
Borrower. The only limited partner of the Borrower is the Parent, which owns a
98.9899% limited partner interest in the Borrower and the Borrower does not have
any partners other than the General Partner and the Parent. Each General Partner
Unit is entitled to share pro rata with the Common Units in all distributions by
the Parent.

     (c) Authorization of Agreement, Loan Documents and Borrowing. Each of the
Borrower and its Subsidiaries has the right, power and authority and has taken
all necessary corporate and other action to authorize the execution, delivery
and performance of this Agreement and each of the other Loan Documents to which
it is a party in accordance with their respective terms. This Agreement and each
of the other Loan Documents have been duly executed and delivered by the duly
authorized officers of the Borrower and each of its Subsidiaries party thereto,
and each such document constitutes the legal, valid and binding obligation of
the Borrower or its Subsidiary party thereto, enforceable in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state or federal debtor relief laws from
time to time in effect which affect the enforcement of creditors' rights in
general and the availability of equitable remedies.

     (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.
The execution, delivery and performance by the Borrower and its Subsidiaries of
the Loan Documents to which each such Person is a party, in accordance with
their respective terms, the borrowings hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving of
notice or otherwise, (i) require any Governmental Approval or violate any
Applicable Law relating to the Borrower or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute a default under the articles
of incorporation, bylaws or other organizational documents of the Borrower or
any of its Subsidiaries or any indenture, agreement or other instrument to which
such Person is a party or by which any of its properties may be bound or any
Governmental Approval relating to such Person, 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 such Person other than Liens arising under the
Loan Documents.

     (e) Compliance with Law; Governmental Approvals. Each of the Borrower and
its Subsidiaries (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and effect,
is final and not subject to review


                                       52





on appeal and is not the subject of any pending or, to the best of its
knowledge, threatened attack by direct or collateral proceeding, and (ii) is in
compliance with each Governmental Approval applicable to it and in compliance
with all other Applicable Laws relating to it or any of its respective
properties, except, in each case, to the extent such non-compliance would not
have a Material Adverse Effect.

     (f) Tax Returns and Payments. Each of the Borrower, its Subsidiaries, the
General Partner and the Parent has duly filed or caused to be filed all material
federal, state and local tax returns required by Applicable Law to be filed, and
has paid, or made adequate provision for the payment of, all federal, state,
local and other taxes, assessments and governmental charges or

levies upon it and its property, income, profits and assets which are due and
payable, other than those the validity of which the Borrower, any Subsidiary,
the General Partner or the Parent is contesting in good faith by appropriate
proceedings and with respect to which the Borrower, such Subsidiary, the General
Partner or the Parent shall, to the extent required by GAAP, have set aside on
its books adequate reserves. No Governmental Authority has asserted any Lien or
other claim against the Borrower or Subsidiary thereof with respect to unpaid
taxes which has not been discharged or resolved. The charges, accruals and
reserves on the books of the Borrower and any of its Subsidiaries in respect of
federal, state, local and other taxes for all Fiscal Years and portions thereof
since the organization of the Borrower and any of its Subsidiaries are in the
judgment of the Borrower adequate, and the Borrower does not anticipate any
additional taxes or assessments for any of such years.

     (g) Intellectual Property Matters. Each of the Borrower and its
Subsidiaries owns or possesses rights to use all franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade names, trade name rights,
copyrights and rights with respect to the foregoing which are required to
conduct its business. No event has occurred which permits, or after notice or
lapse of time or both would permit, the revocation or termination of any such
rights, and neither the Borrower nor any Subsidiary thereof is liable to any
Person for infringement under Applicable Law with respect to any such rights as
a result of its business operations.

     (h) Environmental and Safety Matters. Each of the Business, the Borrower,
each Subsidiary, the General Partner and the Parent has complied in all respects
with all Environmental and Safety Laws except for violations that either alone
or in the aggregate could not reasonably be expected to result in a Material
Adverse Effect. None of the Business, the Borrower, any Subsidiary, the General
Partner or the Parent has received notice of any failure so to comply which
alone or together with any other such failure could reasonably be expected to
result in a Material Adverse Effect. None of the Business, the Borrower, any
Subsidiary, the General Partner or the Parent manages or handles any hazardous
wastes, hazardous substances, hazardous materials, toxic substances or toxic
pollutants referred to in or regulated by Environmental and Safety Laws in
violation of such laws or of any other applicable law where such violation could
reasonably be expected to result, individually or together with other
violations, in a Material Adverse Effect. To the best knowledge of the Borrower,
none of the Business, the Borrower, any Subsidiary, the General Partner or the
Parent has any liabilities or contingent liabilities relating to environmental
or employee health and safety matters (including


                                       53




on-site or off-site contamination) which, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.

     (i) ERISA.

          (i) The Borrower and each ERISA Affiliate is in material compliance
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder and no ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other ERISA Events could
reasonably be expected to result in a Material Adverse Effect.

          (ii) Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified, and each trust related to such plan has been determined to
be exempt under Section 501(a) of the Code.

          (iii) Except where the failure of any of the following representations
to be correct in all material respects could not reasonably be expected to have
a Material Adverse Effect, neither the Borrower nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code, (B) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid, (C) failed to make a required contribution or
payment to a Multiemployer Plan, or (D) failed to make a required installment or
other required payment under Section 412 of the Code.

     (j) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used in the regulations of the Board of Governors of the
Federal Reserve System). No part of the proceeds of any of the Loans will be
used for purchasing or carrying margin stock in violation of, or for any purpose
which violates, the provisions of Regulation T, U or X of such Board of
Governors.

     (k) Government Regulation. Neither the Borrower nor any Subsidiary thereof
is an "investment company" or a company "controlled" by an "investment company"
(as each such term is defined or used in the Investment Company Act of 1940, as
amended) and neither the Borrower nor any Subsidiary thereof is, or after giving
effect to any Extension of Credit will be, subject to regulation under the
Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each
as amended, or any other Applicable Law which limits its ability to incur or
consummate the transactions contemplated hereby.

     (l) Agreements. (i) None of the Business, the Borrower, any of its
Subsidiaries, the General Partner nor the Parent is a party to any agreement or
instrument or subject to any restriction in its partnership or corporate
organizational documents that (i) will have the effect of prohibiting or
restraining, or will impose adverse conditions upon, any of the transactions
contemplated hereby or the payment of dividends or the making of any loans,
investments or transfers by any Subsidiary to or in the Borrower or (ii) has
resulted or could reasonably be expected to result in a Material Adverse Effect.


                                       54




     (m) No Defaults. None of the Business, the Borrower, any of its
Subsidiaries, the General Partner or the Parent is in default in any manner, and
there is no event or condition which with notice or lapse of time or both would
constitute such a default or event of default, under any provision of any Senior
Note, any Refinancing Note, the Senior Note Agreement, any Refinancing Note
Agreement, or any indenture or other agreement or instrument evidencing
Indebtedness, any Contingent Obligation set forth on Schedule 6.1(m) or any
other material agreement or instrument to which it is a party or by which it or
any of its properties or assets are or may be bound, where such default could
reasonably be expected to result in a Material Adverse Effect.

     (n) Employee Relations. None of the Borrower and its Subsidiaries is,
except as set forth on Schedule 6.1(n), party to any collective bargaining
agreement nor has any labor union been recognized as the representative of its
employees. There are no strikes against the Business, the Borrower or any
Subsidiary pending or, to the best knowledge of the Borrower, threatened, other
than strikes which, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. The hours worked and payments
made to employees of the Business, the Borrower, each Subsidiary, the General
Partner and the Parent have not been in violation of the Fair Labor Standards
Act or any other applicable law dealing with such matters except for violations
that either alone or in the aggregate could not reasonably be expected to result
in a Material Adverse Effect. All material payments due from the Business, the
Borrower, any Subsidiary, the General Partner and the Parent, or for which any
claim may be made against the Business, the Borrower, any Subsidiary, the
General Partner or the Parent, on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability on
the books of the Business, the Borrower, such Subsidiary, the General Partner or
the Parent, as applicable, in compliance with GAAP.

     (o) Burdensome Provisions. Neither the Borrower nor any Subsidiary thereof
is subject to any Governmental Approval or Applicable Law which is so unusual or
burdensome as in the foreseeable future could be reasonably expected to have a
Material Adverse Effect. The Borrower and its Subsidiaries do not presently
anticipate that future expenditures needed to meet the provisions of any
statutes, orders, rules or regulations of a Governmental Authority will be so
burdensome as to have a Material Adverse Effect.

     (p) Financial Statements. The audited Consolidated balance sheets of the
Borrower and its Subsidiaries as of September 27, 2003 and the related
statements of income and partners' capital and cash flows for the Fiscal Years
then ended, copies of which have been furnished to the Administrative Agent and
each Lender, are complete and correct and fairly present the assets, liabilities
and financial position of the Borrower and its Subsidiaries as at such dates,
and the results of the operations and changes of financial position for the
periods then ended. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP. The
Borrower and its Subsidiaries have no Indebtedness, obligation or other unusual
forward or long-term commitment which is not fairly reflected in the foregoing
financial statements or in the notes thereto.


                                       55




     (q) No Material Adverse Change. Since September 27, 2003 there has been no
material adverse change in the properties, business, operations, prospects, or
condition (financial or otherwise) of the Borrower and its Subsidiaries, taken
as a whole, and no event has occurred or condition arisen that could reasonably
be expected to have a Material Adverse Effect.

     (r) Solvency. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, the Borrower and its Subsidiaries, on a
consolidated basis, will be Solvent.

     (s) Titles to Properties. Each of the Borrower and its Subsidiaries has
such title to the real property owned by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its material
personal property and assets, including, but not limited to, those reflected on
the balance sheets of the Borrower and its Subsidiaries delivered pursuant to
Section 6.1(p), except those which have been disposed of by the Borrower or its
Subsidiaries subsequent to such date which dispositions have been in the
ordinary course of business, of assets or properties no longer used or usable in
the conduct of its business or as otherwise expressly permitted hereunder.

     (t) Liens. None of the properties and assets of the Borrower or any
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 10.2. No financing statement under the Uniform Commercial Code of any
state which names the Borrower or any Subsidiary thereof or any of their
respective trade names or divisions as debtor and which has not been terminated,
has been filed in any state or other jurisdiction and neither the Borrower nor
any Subsidiary thereof has signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens permitted by Section 10.2. The
Obligations hereunder are senior unsecured obligations of the Borrower which
rank pari passu with the Senior Notes.

     (u) Indebtedness and Contingent Obligations. Schedule 6.1(u) is a complete
and correct listing of all Indebtedness and Contingent Obligations of the
Borrower and its Subsidiaries in excess of $5,000,000.

     (v) Litigation. Except for the SCANA Litigation, there are no actions,
suits or proceedings pending nor, to the knowledge of the Borrower, threatened
against or in any other way relating adversely to or affecting the Borrower or
any Subsidiary thereof or any of their respective properties in any court or
before any arbitrator of any kind or before or by any Governmental Authority,
except for actions, suits or proceedings that, if adversely determined, could,
individually or in the aggregate, not reasonably be expected to result in a
Material Adverse Effect. The information regarding the SCANA Litigation
contained in the materials filed by the Parent with the Securities Exchange
Commission is true and correct in all material respects.

     (w) Absence of Defaults. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by the Borrower or any Subsidiary thereof under any
judgment, decree or order by which the Borrower or its


                                       56




Subsidiaries or any of their respective properties may be bound or which would
require the Borrower or its Subsidiaries to make any payment thereunder prior to
the scheduled maturity date therefor.

     (x) Senior Note Agreement. No default or event of default, or event or
condition which with notice or lapse of time or both would constitute such a
default or event of default with respect to the Borrower exists under the Senior
Note Agreement.

     (y) Accuracy and Completeness of Information. All written information,
reports and other papers and data produced by or on behalf of the Borrower or
any Subsidiary thereof and furnished to the Lenders were, at the time the same
were so furnished, complete and correct in all

material respects; provided, that any projections or pro forma financial
information contained in any of the foregoing are represented and warranted only
to have been based upon good faith estimates and assumptions believed by the
management of the Borrower and its Subsidiaries to be reasonable at the time
prepared. No document furnished or written statement made to the Administrative
Agent or the Lenders by the Borrower or any Subsidiary thereof in connection
with the negotiation, preparation or execution of this Agreement or any of the
Loan Documents contains or will contain any untrue statement of a fact material
to the creditworthiness of the Borrower or its Subsidiaries or omits or will
omit to state a fact necessary in order to make the statements contained therein
not misleading. The Borrower is not aware of any facts which it has not
disclosed in writing to the Administrative Agent having a Material Adverse
Effect, or insofar as the Borrower can now foresee, could reasonably be expected
to have a Material Adverse Effect.

     SECTION 6.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date, shall survive the Closing Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.

                                   ARTICLE VII

                        FINANCIAL INFORMATION AND NOTICES

     Until all the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 13.12, the Borrower will furnish or
cause to be furnished to the Administrative Agent and to the Lenders at their
respective addresses as set forth on Schedule 1.1(a), or such other office as
may be designated by the Administrative Agent and Lenders from time to time:


                                       57




     SECTION 7.1 Financial Statements.

     (a) Quarterly Financial Statements. As soon as practicable and in any event
within fifty (50) days after the end of each of the first three fiscal quarters
(or, if such date is earlier, five (5) days after the date of any required
public filing by the Parent of Form 10-Q for such fiscal quarter with the
Securities and Exchange Commission), an unaudited Consolidated balance sheet of
the Borrower and its Subsidiaries as of the close of such fiscal quarter and
unaudited Consolidated statements of income, partners' capital and cash flows
for the fiscal quarter then ended and that portion of the Fiscal Year then
ended, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by the Borrower
in accordance with GAAP and, if applicable, containing disclosure of the effect
on the financial position or results of operations of any change in the
application of accounting principles and practices during the period, and
certified by the chief financial officer of the Borrower to present fairly in
all material respects the financial condition of the Borrower and its
Subsidiaries as of their respective dates and the results of operations of the
Borrower and its Subsidiaries for the respective periods then ended, subject to
normal year end adjustments.

     (b) Annual Financial Statements of Borrower. As soon as practicable and in
any event within ninety-five (95) days after the end of each Fiscal Year (or, if
such date is earlier, five (5) days after the date of any required public filing
by the Parent of Form 10-K for such Fiscal Year with the Securities and Exchange
Commission), an unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries as of the close of such Fiscal Year and unaudited Consolidated
statements of income, partners' capital and cash flows for the Fiscal Year then
ended, including the notes thereto, all in reasonable detail setting forth in
comparative form the corresponding figures for the preceding Fiscal Year and
prepared by the Borrower in accordance with GAAP and, if applicable, containing
disclosure of the effect on the financial position or results of operations of
any change in the application of accounting principles and practices during the
period, and certified by the chief financial officer of the Borrower to present
fairly in all material respects the financial condition of the Borrower and its
Subsidiaries as of their respective dates and the results of operations of the
Borrower and its Subsidiaries for the respective periods then ended.

     (c) Annual Financial Statements of Parent. As soon as practicable and in
any event within ninety-five (95) days after the end of each Fiscal Year (or, if
such date is earlier, five (5) days after the date of any required public filing
by the Parent of Form 10-K for such Fiscal Year with the Securities and Exchange
Commission), an audited Consolidated balance sheet of the Parent and its
Subsidiaries as of the close of such Fiscal Year and audited Consolidated
statements of income, partners' capital and cash flows for the Fiscal Year then
ended, including the notes thereto, all in reasonable detail setting forth in
comparative form the corresponding figures for the preceding Fiscal Year and
audited by PricewaterhouseCoopers LLP or other independent certified public
accountants reasonably acceptable to the Administrative Agent and, if
applicable, containing disclosure of the effect on the financial position or
results of operation of any change in the application of accounting principles
and practices during the year, and accompanied by a report thereon by such
certified public accountants that is not qualified with respect to scope
limitations imposed by the Parent or any of its Subsidiaries or with respect to


                                       58




accounting principles followed by the Parent or any of its Subsidiaries not in
accordance with GAAP.

     (d) Annual Projections. Within thirty (30) days following the request of
the Administrative Agent, financial projections of the Borrower and its
Subsidiaries for the ensuing four (4) fiscal quarters, such projections to
include, on a quarterly basis, projected income statements, statements of cash
flows and balance sheets, accompanied by a certificate from the chief financial
officer of the Borrower to the effect that, to the best of such officer's
knowledge, such projections are good faith estimates (utilizing reasonable
assumptions) of the financial condition and operations of the Borrower and its
Subsidiaries for such period.

     SECTION 7.2 Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 7.1(a) ,(b) or (c), a certificate
of the chief financial officer or the treasurer of the Borrower in the form of
Exhibit F attached hereto (an "Officer's Compliance Certificate").

     SECTION 7.3 Other Reports.

     (a) Promptly upon receipt thereof, copies of all reports, if any, submitted
to the Parent, the Borrower or their respective Board of Supervisors by their
independent public accountants in connection with their auditing function,
including, without limitation, any management report and any management
responses thereto;

     (b) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
General Partner, the Parent, the Borrower or any Subsidiary with the Securities
and Exchange Commission or any Governmental Authority succeeding to any of or
all the functions of said Commission, or with any national securities exchange,
or distributed to the holders of Common Unit, as the case may be;

     (c) concurrently with any delivery of any statement, report, certificate or
other material under Section 5A of the Senior Note Agreement that has not
otherwise been delivered to the Lenders, a copy of each such statement, report,
certificate or other material, which shall in the case of officers' and
accountants' certificates be addressed to the Lenders and provide the analogous
information and certifications in respect of the Loan Documents;

     (d) written notice of any action or decision by the Board of Supervisors of
the Parent to change the amount of the Minimum Quarterly Distribution or not to
pay all or any portion of the Minimum Quarterly Distribution, which notice shall
be delivered within three (3) Business Days after such action or decision;

     (e) such information and documents relating to the SCANA Litigation as may
be reasonably requested by the Administrative Agent, to the extent such
information or documents are not protected by either the attorney-client or
attorney work product privileges; provided that the Borrower shall deliver to
the Administrative Agent copies of all filings made by any Person with the court
in connection with the SCANA Litigation within five (5) Business Days of such
filing; and


                                       59




     (f) such other information regarding the operations, business affairs and
financial condition of the Borrower or any of its Subsidiaries (including,
without limitation, any financial or actuarial reports or filings made with
respect to any Employee Benefit Plan) as the Administrative Agent or any Lender
may reasonably request.

     SECTION 7.4 Notice of Litigation and Other Matters. Prompt (but in no event
later than ten (10) days after an officer of the Borrower obtains knowledge
thereof) telephonic and written notice of:

     (a) the commencement of all proceedings and investigations by or before any
Governmental Authority and all actions and proceedings in any court or before
any arbitrator against or involving the Borrower or any Subsidiary thereof or
any of their respective properties, assets or businesses, which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;

     (b) any notice of any violation received by the Borrower or any Subsidiary
thereof from any Governmental Authority including, without limitation, any
notice of violation of Environmental and Safety Laws which in any such case
could reasonably be expected to have a Material Adverse Effect;

     (c) any labor controversy that has resulted in a strike or other work
action against the Borrower or any Subsidiary thereof that could reasonably be
expected to have a Material Adverse Effect;

     (d) any attachment, judgment, lien, levy or order exceeding $10,000,000
that may be assessed against the Borrower or any Subsidiary thereof;

     (e) any Default, Event of Default or Senior Note Default;

     (f) any event which makes any of the representations set forth in Section
6.1 inaccurate in any respect; and

     (g) any other development that has resulted in, or could reasonably be
expected to result in a Material Adverse Effect.

     SECTION 7.5 Accuracy of Information. All written information, reports,
statements and other papers and data furnished by or on behalf of the Borrower
to the Administrative Agent or any Lender (other than financial forecasts)
whether pursuant to this Article VII or any other provision of this Agreement,
or any other of the Loan Documents, shall be, at the time the same is so
furnished, complete and correct in all material respects to the extent necessary
to give the Administrative Agent or any Lender, (a) with respect to financial
statements and reports, complete, true and accurate knowledge of the subject
matter based on the Borrower's knowledge of the financial condition of the
Borrower and/or its Subsidiaries for the date or period to which such financial
statements or reports relate and, (b) with respect to all


                                       60





other written information, reports, statements and other papers and data,
complete, true and accurate knowledge of the subject matter based on the
Borrower's knowledge thereof.

                                  ARTICLE VIII

                              AFFIRMATIVE COVENANTS

     Until the Obligations have been finally and indefeasibly paid and satisfied
in full and the Commitments terminated, unless consent has been obtained in the
manner provided for in Section 13.12, the Borrower will, and will cause each of
its Subsidiaries to:

     SECTION 8.1 Existence; Businesses and Properties.

          (i) Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its legal existence and qualify and remain
qualified as a foreign entity in each jurisdiction in which the failure to do so
would have a Material Adverse Effect, except as otherwise permitted by Section
10.5.

          (ii) Do or cause to be done all things necessary to preserve, renew
and keep in full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the
conduct of its business; maintain and operate such business in substantially the
manner in which it is presently conducted and operated; and at all times
maintain and preserve all property material to the conduct of such business and
keep such property in good repair, working order and condition and from time to
time make, or cause to be made, all needed and proper repairs, renewals,
additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times.

     SECTION 8.2 Insurance. Keep its insurable properties adequately insured at
all times by financially sound and reputable insurers; maintain such other
insurance, to such extent and against such risks, including fire and other risks
insured against by extended coverage, as is customary with similarly situated
companies in the same or similar businesses, including public liability
insurance against claims for personal injury or death or property damage
occurring upon in, about or in connection with the use of any properties owned
occupied or controlled by it and maintain such other insurance as may be
required by Applicable Law; provided, however, that nothing in this Section 8.2
shall preclude the Borrower or any Subsidiary from being self-insured to the
extent customary with similarly situated companies in the same or similar
businesses.

     SECTION 8.3 Taxes. Pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, would give rise to a Lien upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so


                                       61





long as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and adequate reserves in respect thereof shall be
maintained in accordance with GAAP.

     SECTION 8.4 Employee Benefits. Comply in all material respects with the
applicable provisions of ERISA and the Code and furnish to the Administrative
Agent as soon as possible after, and in any event within 10 days after any
Responsible Officer of the Borrower or any ERISA Affiliate knows or has reason
to know that, any ERISA Event has occurred that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower in an aggregate amount exceeding $5,000,000, a
statement of a Financial Officer setting forth details as to such ERISA Event
and the action, if any, that the Borrower proposes to take with respect thereto.

     SECTION 8.5 Access to Premises and Records; Confidentiality. Maintain
financial records in accordance with GAAP, and upon reasonable notice permit
representatives of the Lenders to have access to such financial records and the
premises of the Borrower or any Subsidiary at reasonable times and to make such
excerpts from such records as such representatives deem necessary in connection
with their evaluation of the Borrower's ability to repay the Loans or any
Subsidiary's ability to perform its obligations under the Guaranty Agreement.
Each Lender agrees to keep all information obtained by it pursuant to this
Section 8.5 and all other non-public information delivered to it by the Borrower
or any Subsidiary pursuant to this Agreement confidential except to the extent
that (i) disclosure is made, subject to this confidentiality agreement, to
Affiliates, officers, directors, employees, agents and representatives of such
Lender or to the Administrative Agent or any other Lender, (ii) disclosure of
such information is made pursuant to applicable law, regulations, subpoena,
judicial process or the like or at the request of any regulatory authority to
which it is subject or to its counsel or auditors or in any legal proceeding
arising out of this Agreement, (iii) such information is or becomes publicly
available other than by such Lender's breach of this Section 8.5, (iv)
disclosure is made to an actual or prospective assignee or participant pursuant
to Section 13.10 or (v) such information becomes available to such Lender from a
third party which, by making such information available, has not, to such
Lender's knowledge, breached any obligation of confidentiality it may owe.

     SECTION 8.6 Compliance with Laws. Comply with all applicable laws, rules
and regulations, and all orders of any Governmental Authority, applicable to it
or any of its property, business, operations or transactions (including ERISA
and all Environmental and Safety Laws), except where the failure so to comply
could not reasonably be expected to result in a Material Adverse Effect, and
provide prompt written notice to the Lenders following the receipt of any notice
of any violation of any such laws, rules, regulations or orders from any
Governmental Authority charged with enforcing the same where such violation
could reasonably be expected to result in a Material Adverse Effect.

     SECTION 8.7 Additional Guarantors. Notify the Administrative Agent if at
any time the Borrower or any Subsidiary determines to acquire or form any Person
which would upon such acquisition or formation constitute a domestic Subsidiary
and to cause any such newly acquired or formed domestic Subsidiary to become a
guarantor under the Guaranty Agreement


                                       62





by the execution of documentation reasonably satisfactory to the Administrative
Agent immediately upon such acquisition or formation.

     SECTION 8.8 Use of Proceeds. Use the proceeds of the Loans and Letters of
Credit (a) for working capital and general partnership purposes of the Borrower
and its Subsidiaries, and (b) for payment of fees and expenses incurred in
connection with this Agreement.

     SECTION 8.9 Partnership Documents. Perform and comply with, and cause each
of the General Partner and the Parent to perform and comply in all material
respects with all its obligations under each of the Partnership Documents to
which it is a party and enforce and cause each of the General Partner and the
Parent to enforce, in all material respects, each such Partnership Document
against each other party thereto.

     SECTION 8.10 Compliance with Environmental and Safety Laws. Comply, and use
reasonable efforts to cause all lessees and other Persons occupying its
properties to comply, in all material respects with all Environmental and Safety
Laws and environmental permits applicable to its operations and properties;
obtain and renew all material environmental permits necessary for its operations
and properties; and conduct any necessary remedial action in accordance with
Environmental and Safety Laws; provided, however, that neither the Borrower nor
any of its Subsidiaries shall be required to undertake any remedial action to
the extent that its obligation to do so is being contested in good faith and by
proper proceedings and appropriate reserves are being maintained under GAAP with
respect to such circumstances.

     SECTION 8.11 Preparation of Environmental Reports. If a Default caused by
reason of a breach of Sections 6.1(h) or 8.10 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to Lenders within forty-five (45) days after such request, at the
expense of the Borrower, an environmental site assessment report for the
properties which are the subject of such Default prepared by an environmental
consulting firm acceptable to the Administrative Agent and consented to by the
Borrower (which consent shall not be unreasonably withheld or delayed),
indicating the presence or absence of hazardous materials and the estimated cost
of any compliance or remedial action in connection with such properties.

     SECTION 8.12 Corporate Identity. Do or cause to be done (or refrain from
doing or causing to be done, as the case may be) all things necessary to ensure
that the separate legal identity of the Borrower will at all times be respected
and that neither the Borrower nor any of its Subsidiaries will be liable for any
obligations, contractual or otherwise, of the General Partner, the Parent or any
other entity in which the General Partner or the Parent owns any equity
interest, except as permitted under Section 10.6(b) or Section 10.7. Without
limiting the foregoing, the Borrower will (a) observe, and cause the General
Partner and the Parent to observe, all requirements, procedures and formalities
necessary or advisable in order that the Borrower will for all purposes be
considered a validly existing partnership separate and distinct from the General
Partner, the Parent and their other subsidiaries, (b) not permit any commingling
of the assets of the General Partner, the Parent or any of their other
subsidiaries with assets of the Borrower or any Subsidiary which would prevent
the assets of the General Partner, the Parent or


                                       63




any of their subsidiaries from being readily distinguished from the assets of
the Borrower and its Subsidiaries and (c) take reasonable and customary actions
to ensure that creditors of the General Partner, the Parent and their other
subsidiaries are aware that each such Person is an entity separate and distinct
from the Borrower and its Subsidiaries.

     SECTION 8.13 Federal Reserve Regulations. In the event the Borrower or any
Subsidiary shall use any proceeds of Loans to acquire or carry any Margin Stock,
the Borrower will not at any time thereafter permit more than 25% of the value
of the assets of the Borrower and its Subsidiaries subject to the provisions of
Section 10.2 or 10.5 to be Margin Stock.

     SECTION 8.14 Available Cash Reserves. Maintain an amount of cash reserves
that is necessary or appropriate in the reasonable discretion of the Board of
Supervisors of the Borrower to (i) provide for the proper conduct of the
business of the Borrower and its Subsidiaries (including reserves for future
capital expenditures) subsequent to such quarter, (ii) comply with applicable
law or any loan agreement (including, but not limited to, this Agreement),
security agreement, mortgage, debt instrument or other agreement or obligation
to which the Borrower or any, Subsidiary is a party or by which it is bound or
its assets are subject and (iii) provide funds for distributions to partners of
the Parent and the General Partner in respect of any one or more of the next
four quarters; provided that disbursements made or cash reserves established,
increased or reduced after the end of any quarter but on or before the date of
determination of Available Cash with respect to such quarter shall be deemed to
have been made, established, increased or reduced for purposes of determining
Available Cash, within such quarter if the Board of Supervisors of the Company
so determines. In addition, without limitation or duplication of the foregoing,
Available Cash for any fiscal quarter shall reflect an amount of cash reserves
equal to the reserves required pursuant to the last paragraph of the definition
of "Available Cash".

     SECTION 8.15 Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender may reasonably require to document and consummate the
transactions contemplated hereby and to vest completely in and insure the
Administrative Agent and the Lenders their respective rights under this
Agreement and the other Loan Documents.

     SECTION 8.16 Commodity Hedging Policy. The Borrower shall not amend the
Borrower's commodity hedging policy in place as of the Closing Date as set forth
on Schedule 8.16 in any manner that increases the risk exposure of the Borrower
(including, without limitation, any increase of the limits thereunder) without
the prior written consent of the Required Lenders, which consent shall not be
unreasonably withheld.

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                                   ARTICLE IX

                               FINANCIAL COVENANTS

     Until all of the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 13.11, the Borrower and its
Subsidiaries on a Consolidated basis will not:

     SECTION 9.1 Interest Coverage Ratio. Permit the ratio of EBITDA to Interest
Expense as of the end of any fiscal quarter for the four-quarter-period ending
as of such date to be less than 2.50 to 1.00.

     SECTION 9.2 Leverage Ratio. Permit the Leverage Ratio as of the end of any
fiscal quarter to be greater than 4.50 to 1.00.

                                    ARTICLE X

                               NEGATIVE COVENANTS

     Until all of the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 14.11, the Borrower will not, and
will not cause or permit any of its Subsidiaries to:

     SECTION 10.1 Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:

     (a) Indebtedness for borrowed money existing on the date hereof in an
aggregate principal amount not in excess of $100,000;

     (b) Indebtedness created hereunder and under the other Loan Documents;

     (c) in the case of the Guarantors, the Guarantees under the Guaranty
Agreement and the Senior Note Agreement and any Refinancing Note Agreement;

     (d) in the case of the Borrower, the Senior Notes and Refinancing Notes in
an aggregate principal amount not in excess of the aggregate principal amount of
the Senior Notes redeemed using the net proceeds of such Refinancing Notes;
provided that, notwithstanding anything to the contrary in this Agreement or any
other Loan Document, no Refinancing Notes shall be issued (and no Indebtedness
shall be incurred under any Refinancing Note Agreement) unless: (i) concurrently
with the issuance of any Refinancing Notes, Senior Notes in a principal amount
equal to the principal amount of such Refinancing Notes shall have been redeemed
and canceled, at a price not in excess of 100% of the principal amount thereof
(plus any premium in respect of such redemption to the extent paid with the
proceeds of the contemporaneous issuance of Common Units of the Parent), (ii)
the terms of the Refinancing Notes and the Refinancing Note Agreement shall be
reasonably satisfactory to the Required Lenders (provided, however,



                                       65




that the terms of the Refinancing Notes and the Refinancing Note Agreement shall
be deemed to be satisfactory to the Required Lenders if the Refinancing Notes
are issued with substantially the same terms as the Senior Notes (other than any
changes thereto that are not adverse in any respect to the interests of the
Lenders)), (iii) the interest rate of the Refinancing Notes shall be a fixed,
non-increasing interest rate per annum not in excess of the rate payable in
respect of the Senior Notes, payable on a principal amount of the Refinancing
Notes not in excess of the gross proceeds of the sale thereof and interest on
the Refinancing Notes shall be payable not more frequently than interest is
payable on the Senior Notes and (iv) the Refinancing Notes shall mature not
earlier than the maturity date of the Senior Notes and shall not have a shorter
weighted average maturity than the Senior Notes. Notwithstanding anything
contained in this Section 10.1(d) to the contrary, the Borrower may incur
Indebtedness in the form of Refinancing Notes the net proceeds of which are used
to refinance the Senior Note Payments; provided that (i) the aggregate principal
amount of such notes shall not exceed the principal amount of the Senior Note
Payments being refinanced thereby, (ii) such notes shall mature not earlier than
the date that is two years after the Termination Date, and (iii) such notes
would not violate the provisions of the Senior Note Agreement or any Refinancing
Note Agreement at the time in effect;

     (e) [Intentionally Omitted]

     (f) [Intentionally Omitted]

     (g) Indebtedness of the Borrower or any Wholly-Owned Subsidiary to any
Subsidiary or the Borrower, as the case may be;

     (h) Indebtedness of the Borrower and its Subsidiaries owed to any Person
providing worker's compensation, health, disability or other employee benefits
or property, casualty or liability insurance to the Borrower or any Subsidiary,
pursuant to reimbursement or indemnification obligations to such Person;

     (i) Indebtedness of the Borrower or its Subsidiaries in respect of
performance bonds, bid bonds, appeal bonds, surety bonds and similar
obligations, in each case provided in the ordinary course of business, including
those incurred to secure health, safety and environmental obligations in the
ordinary course of business, and any extension, renewal or refinancing thereof
to the extent not provided to secure the repayment of other Indebtedness and to
the extent that the amount of refinancing Indebtedness is not greater than the
amount of Indebtedness being refinanced;

     (j) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business; provided that such Indebtedness is
extinguished within two (2) Business Days of its incurrence;

     (k) Indebtedness of a Subsidiary acquired after the date hereof and
Indebtedness of a corporation merged or consolidated with or into the Borrower
or any Subsidiary after the date hereof, which Indebtedness in each case exists
at the time of such acquisition, merger,


                                       66



consolidation or conversion into a Subsidiary and is not created in
contemplation of such event and where such acquisition, merger or consolidation
is otherwise permitted by this Agreement; provided that the aggregate principal
amount of Indebtedness under this paragraph (k) shall not at any time exceed
$5,000,000;

     (l) Indebtedness incurred, issued or assumed by the Borrower (i) to finance
the acquisitions, improvements or repairs (to the extent such improvements and
repairs may be capitalized on the books of the Borrower in accordance with GAAP)
of, or additions to, the property and assets of the Borrower, or (ii) to
replace, extend, renew, refund or refinance any such Indebtedness; provided
that:

          (i) the aggregate principal amount of Indebtedness incurred in
connection with any such replacement, extension, renewal, refunding or
refinancing shall not exceed the outstanding principal amount of Indebtedness so
replaced, extended, renewed, refunded or refinanced;

          (ii) the aggregate principal amount of Indebtedness incurred under
this clause (l) and outstanding at any time shall not exceed (A) $25,000,000
plus (B) an amount equal to the aggregate net proceeds received by the Borrower
as consideration for the issuance by the Borrower of additional partnership
interests or as a capital contribution in each case for the purpose of financing
such acquisitions, improvements, repairs or additions less (C) any amount of
excess proceeds used to permanently reduce the Commitments pursuant to Section
4.5;

          (iii) such Indebtedness is secured by a Lien on the property or assets
so acquired, improved or repaired and does not include a negative pledge on any
other assets of the Borrower or its Subsidiaries;

     (m) obligations described under clause (j) of the definition of
"Indebtedness" in an aggregate stated amount at any time outstanding, not in
excess of $5,000,000;

     (n) obligations under Commodity Hedging Agreements respecting actual
volumes of propane inventory of the Borrower incurred in accordance with the
Borrower's commodity hedging policy, previously approved by the Lenders;

     (o) Indebtedness incurred in connection with Hedging Agreements entered
into with respect to the Parent, the Borrower or any Subsidiary with a
counterparty and upon terms and conditions (including interest rate) reasonably
satisfactory to the Administrative Agent; provided that any counterparty that is
a Lender shall be deemed satisfactory to the Administrative Agent;

     (p) Indebtedness incurred in connection with Swap Agreements entered into
with respect to the Parent, the Borrower or any Subsidiary (other than Hedging
Agreements permitted pursuant to Section 10.1(o)) in an aggregate amount not to
exceed $15,000,000 (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) on any
date of determination; and


                                       67



     (q) other unsecured Indebtedness of the Borrower in an aggregate principal
amount at any time outstanding not in excess of $5,000,000; provided, however,
that no Indebtedness may be incurred, created, assumed or permitted to exist if
such insurance, creation, assumption or existence would violate the provisions
of the Senior Note Agreement or any Refinancing Note Agreement at the time in
effect.

     SECTION 10.2 Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any Person,
including any Subsidiary) now owned or hereafter acquired by it or any income or
revenues or rights in respect or any thereof, or sell or transfer any account
receivable or any right in respect thereof, except:

     (a) Liens on property or assets of the Borrower existing on the date hereof
and set forth in Schedule 10.2; provided that such Liens shall secure only those
obligations that they secure on the date hereof and shall not apply to any other
property or assets of the Borrower or any Subsidiary;

     (b) any Lien arising as a result of a transaction permitted under Section
10.5(e);

     (c) any Lien existing on any property or asset of the Borrower or any
Subsidiary prior to the acquisition thereof by the Borrower or any Subsidiary
securing Indebtedness permitted by Section 10.1(j); provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition and
(ii) such Lien does not apply to any other property or asset of the Borrower or
any Subsidiary;

     (d) Liens (other than any Lien imposed by ERISA) incurred and pledges and
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, old-age pensions, retiree health benefits
and other social security benefits and deposits securing liability to insurance
carriers under insurance or self-insurance arrangements in respect of such
obligations;

     (e) Liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory obligations surety,
customs and appeal bonds and other obligations of a like nature, incurred as an
incident to and in the ordinary course of business;

     (f) Liens imposed by law, such as carriers', warehousemen's, mechanics',
materialmen's and vendors' liens, incurred in good faith in the ordinary course
of business and securing obligations which are not yet due or which are being
contested in good faith by appropriate proceedings as to which the Borrower or a
Subsidiary, as the case may be, shall have, to the extent required by GAAP, set
aside on its books adequate reserves;

     (g) Liens securing the payment of taxes, assessments and governmental
charges or levies, either (i) not delinquent or (ii) being contested in good
faith by appropriate legal or administrative proceedings and as to which the
Borrower or a Subsidiary, as the case may be, shall have, to the extent required
by GAAP, set aside on its books adequate reserves;


                                       68



     (h) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or
irregularities of title (and with respect to leasehold interests, mortgages,
obligations, liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under a landlord or owner of the
leased property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;

     (i) Liens on the property or assets of any Subsidiary in favor of the
Borrower or any other Wholly-Owned Subsidiary;

     (j) extensions, renewals and replacements of Liens referred to in
paragraphs (a) through (i) of this Section 10.2; provided that any such
extension, renewal or replacement Lien shall be limited to the property or
assets (or improvements thereon) covered by the Lien extended, renewed or
replaced and that the obligations secured by any such extension, renewal or
replacement Lien shall be in an amount not greater than the amount of the
obligations secured by the Lien extended, renewed or replaced;

     (k) attachment or judgment Liens not giving rise to an Event of Default and
which are being contested in good faith by appropriate proceedings;

     (l) leases or subleases of equipment to customers that do not materially
interfere with the conduct of the business of the Borrower and its Subsidiaries
taken as a whole;

     (m) Liens consisting of interests of lessors under Capital Leases permitted
hereunder;

     (n) any Lien created to secure all or any part of the purchase price, or to
secure Indebtedness incurred or assumed to pay all or any part of the purchase
price or cost of construction, of property acquired or constructed by the
Borrower or a Subsidiary after the date hereof; provided, that (i) any such Lien
shall be confined solely to the item or items of such property (or improvement
therein) so acquired or constructed and, if required by the terms of the
instrument creating such Lien, other property (or improvement thereon) which is
an improvement to such acquired or constructed property, (ii) any such Lien
shall be created contemporaneously with, or within ten (10) Business Days after,
the acquisition or construction of such property, and (iii) such Lien does not
exceed an amount equal to 85% (100% in the case of Capital Leases) of the fair
market value of such assets (as determined in good faith by the Board of
Supervisors of the Borrower) at the time of acquisition thereof;

     (o) Liens securing Indebtedness permitted by Section 10.1(l);

     (p) Liens securing Indebtedness (including interests of lessors under
Capital Leases) permitted by Section 10.1, so long as immediately after giving
effect thereto, the aggregate amount of the Indebtedness secured by such Liens
shall not exceed 2.5% of Total Assets (as defined in the Senior Note Agreement);
and


                                       69



     (q) Liens on accounts receivable granted by any ESCO in connection with a
Consolidated Billing Program.

Notwithstanding the foregoing, the Borrower will not, and will not permit any
Subsidiary to, create, assume or incur any Lien upon or with respect to any of
its proprietary software developed by or on behalf of the Borrower or its
Affiliates and necessary and useful for the conduct of the Business.

     SECTION 10.3 Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any Person whereby it shall sell or transfer any
property, real or personal used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred, in an aggregate amount not to exceed
$25,000,000.

     SECTION 10.4 Investments, Loans and Advances. Directly or indirectly
purchase or own any stock, obligations or securities of, or any other interest
in, or make any capital contribution to, any Person, or make or permit to remain
outstanding any loan or advance to, or guarantee, endorse or otherwise be or
become contingently liable, directly or indirectly, in connection with the
obligations of any Person, or make any other Investment, except:

     (a) Investments (i) arising out of loans and advances to employees incurred
in the ordinary course of business, (ii) arising out of extensions of trade
credit or advances to third parties in the ordinary course of business and (iii)
acquired by reason of the exercise of customary creditors' rights upon default
or pursuant to the bankruptcy, insolvency or reorganization of a debtor;

     (b) Guarantees that constitute Indebtedness to the extent permitted by
Sections 9.2 and 10.1 and other Guarantees that are not Guarantees of
Indebtedness and are undertaken in the ordinary course of business;

     (c) Investments in (collectively, "Cash Equivalents")

          (i) marketable obligations issued or unconditionally guaranteed by the
United States of America, or issued by any agency thereof and backed by the full
faith and credit of the United States of America, in each case maturing within
one year or less from the date of acquisition thereof;

          (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and having as at such date the highest rating obtainable from either
Standard & Poor's Rating Group or Moody's Investors Service, Inc.;


                                       70



          (iii) commercial paper maturing no more than 270 days from the date of
creation thereof and having as at the date of acquisition thereof one of the two
highest ratings obtainable from either Standard & Poor's Rating Group or Moody's
Investors Service, Inc.;

          (iv) certificates of deposit maturing one year or less from the date
of acquisition thereof issued by commercial banks incorporated under the laws of
the United States of America or any state thereof or the District of Columbia or
Canada or issued by the United States branch of any commercial bank organized
under the laws of any country in Western Europe or Japan, with capital and
stockholders' equity of at least $500,000,000 (or the equivalent in the currency
of such country), (A) the commercial paper or other short term unsecured debt
obligations of which are as at such date rated either A-2 or better (or
comparably if the rating system is changed) by Standard & Poor's Rating Group or
Prime-2 or better (or comparably if the rating system is changed) by Moody's
Investors Service, Inc. or (B) the long-term debt obligations of which are as at
such date rated either A or better (or comparably if the rating system is
changed) by Standard & Poor's Rating Group or A-2 or better (or comparably if
the rating system is changed) by Moody's Investors Service, Inc. ("Permitted
Banks");

          (v) Eurodollar time deposits having a maturity of less than 270 days
from the date of acquisition thereof purchased directly from any Permitted Bank;

          (vi) bankers' acceptances eligible for rediscount under requirements
of The Board of Governors of the Federal Reserve System and accepted by
Permitted Banks;

          (vii) to the extent permitted under the Senior Note Agreement, money
market funds having assets of not less than $500,000,000;

          (viii) obligations of the type described in clauses (i), (ii), (iii),
(iv) or (v) above purchased from a securities dealer designated as a "primary
dealer" by the Federal Reserve Bank of New York or from a Permitted Bank as
counterparty to a written repurchase agreement obligating such counterparty to
repurchase such obligations not later than fourteen (14) days after the purchase
thereof and which provides that the obligations which are the subject thereof
are held for the benefit of the Borrower or a Subsidiary by a custodian which is
a Permitted Bank and which is not a counterparty to the repurchase agreement in
question;

     (d) liabilities with respect to any Swap Agreements or Commodities Hedging
Agreements; and

     (e) investments made by a Subsidiary in the Borrower.

     SECTION 10.5 Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any substantial
part of its assets (whether now owned or hereafter acquired), or purchase, lease
or otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of, or any division or line of business of, any
other Person, except that this Section 10.5 shall not prohibit;


                                       71



     (a) the purchase and sale of inventory in the ordinary course of business
by the Borrower or any Subsidiary or the acquisition of facilities and equipment
in the ordinary course of business;

     (b) if at the time thereof and immediately after giving effect thereto no
Event of Default or Default shall have occurred and be continuing

          (i) the merger of any Subsidiary into the Borrower in a transaction in
which the Borrower is the surviving Person, or the merger or consolidation of
any Subsidiary with and into any other Wholly-Owned domestic Subsidiary, in each
case in a transaction in which no Person other than the Borrower or a Subsidiary
receives any consideration; and

          (ii) the merger of any other Person with and into the Borrower or a
Subsidiary if the Borrower or such Subsidiary is the surviving entity and after
giving effect to such transaction (A) the Consolidated Net Worth (as defined in
the Senior Note Agreement) of the Borrower and its Subsidiaries shall be not
less than the Consolidated Net Worth (as defined in the Senior Note Agreement)
of the Borrower and its Subsidiaries immediate, prior to such transaction, (B)
substantially all the assets and business of the Borrower and its Subsidiaries
shall be located in the United States and (C) the Borrower and its Subsidiaries
shall be in compliance, on a pro forma basis after giving effect to such
transaction, with the covenants contained in Article IX recomputed as of the
last day of the most recently ended fiscal quarter of the Borrower and its
Subsidiaries as if such transaction had occurred on the first day of each
relevant period for testing such compliance, and the Borrower shall have
delivered to the Administrative Agent an Officer's Compliance Certificate to
such effect, together with all relevant financial information and calculations
demonstrating such compliance;

     (c) Permitted Business Acquisitions and other investments permitted by
Section 10.4;

     (d) sales, leases or other dispositions of equipment or real property of
the Borrower or its Subsidiaries determined by the Board of Supervisors of the
Borrower or senior management of the Borrower to be no longer useful or
necessary in the operation of the business of the Borrower or its Subsidiaries;

     (e) sales, leases or other dispositions of property for consideration

          (i) at least 80% of which consists of cash and the remainder of which
consists of investments permitted under Section 10.4, or

          (ii) consisting of cash and one or more Permitted Business
Acquisitions which the Board of Supervisors of the Borrower shall have
determined, as evidenced by a resolution thereof, have in the aggregate a fair
market value not less than the fair market value of the property being sold,
leased or otherwise disposed of; provided that (A) no issuance of the Capital
Stock (or of any warrant, right or option to purchase or otherwise acquire any
such Capital Stock or any security convertible into or exchangeable for any such
Capital Stock) of any Subsidiary may be made to any Person other than the
Borrower or a Wholly-Owned domestic Subsidiary



                                       72



except for the purpose of qualifying directors or in satisfaction of pre-emptive
rights of holders of minority interests which are triggered by an issuance of
Capital Stock to the Borrower or any Wholly-Owned domestic Subsidiary and (B) no
sale may be made of the Capital Stock (or of any warrant, right or option to
purchase or otherwise acquire any such Capital Stock or any security convertible
into or exchangeable for any such Capital Stock) of any Subsidiary except in
connection with a sale, transfer or other disposition in which (1)
simultaneously with such sale, transfer or disposition, all the Capital Stock
and Indebtedness of such Subsidiary at the time owned by the Borrower and any
other Subsidiary shall be sold, transferred or disposed of as an entirety; (2)
in the case of any such transaction involving value of $1,000,000 or more, the
Board of Supervisors of the Borrower shall have determined, as evidenced by a
resolution thereof, that the proposed sale, transfer or disposition of such
Capital Stock and Indebtedness is in the best interests of the Borrower; (3)
such Capital Stock and Indebtedness are sold, transferred or otherwise disposed
of to a Person for cash or other consideration that would constitute an
investment permitted under Section 10.4 and, in the case of any such transaction
involving value of $1,000,000 or more, on terms reasonably determined by the
Board of Supervisors of the Borrower to be adequate and satisfactory; (4) the
Subsidiary being disposed of shall not have any continuing investment in the
Borrower or any other Subsidiary not being simultaneously disposed of; and (5)
such sale, transfer or other disposition shall not otherwise be prohibited by
this Agreement; and

     (f) sales of accounts receivable by any ESCO in connection with a
Consolidated Billing Program.

     SECTION 10.6 Restricted Payments. Directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Payment, except that:

     (a) the Borrower may declare or order, and make, pay or set apart, once
during each fiscal quarter, a Restricted Payment in an amount not exceeding the
sum of an amount to be distributed by the Parent to its partners promptly upon
receipt from the Borrower plus an amount equal to the proportionate distribution
from the Borrower to the General Partner in respect of such distribution,

     (b) the Borrower may declare or order, and make, pay or set apart,
Restricted Payments to the General Partner and the Parent to fund the payment by
them of tax liabilities, legal, accounting and other professional fees and
expenses, compensation, fees and expenses of the Elected Supervisors of the
Parent (as defined in the Parent Partnership Agreement) and indemnification of
and contribution to all Persons entitled to indemnification or contribution
under Section 8.14 of the Parent Partnership Agreement (as in effect on the
Closing Date), any fees and expenses associated with registration statements
filed with the Securities and Exchange Commission and subsequent ongoing public
reporting requirements, and other liabilities, obligations or costs of the
General Partner or the Parent in each case to the extent actually incurred by
the General Partner or the Parent, as applicable, in connection with, arising
from, or relating to the Business or the Parent's ownership of Capital Stock of
the Borrower and its Subsidiaries, and


                                       73



     (c) the Borrower may declare or order, and make, pay or set apart,
Restricted Payments to the Parent at such times and in such amounts as necessary
to fund the Parent Debt Service;

provided that

          (i) the aggregate amount of Restricted Payments declared or ordered,
or made, paid, or set apart in any fiscal quarter shall not exceed Available
Cash for the immediately preceding fiscal quarter and

          (ii) no Default or Event of Default then exists and is continuing, or
would be caused by such Restricted Payment, and the Borrower and it Subsidiaries
shall be in compliance, on a pro forma basis, with the covenants contained in
Article IX recomputed as of the last day of the most recently ended fiscal
quarter of the Borrower and its Subsidiaries as if such action had occurred on
the first day of each relevant period for testing such compliance, and the
Borrower shall have delivered to the Administrative Agent an officer's
certificate in form and substance satisfactory to the Administrative Agent to
such effect on the date such Restricted Payment is declared or ordered, together
with all relevant financial information and calculations demonstrating such
compliance.

The Borrower will comply with the reserve provisions required under the
definition of Available Cash. The Borrower will not, in any event, directly or
indirectly declare, order, pay or make any Restricted Payment except in cash.
The Borrower will not permit any Subsidiary to declare, order, pay or make any
Restricted Payment or to set apart any sum or property for any such purpose
other than to (i) the Borrower or any Wholly-Owned Subsidiary and (ii) so long
as no Default or Event of Default shall have occurred and be continuing or would
be caused thereby, all holders of Capital Stock of or other equity interests in
such Subsidiary on a pro rata basis.

     SECTION 10.7 Transactions with Affiliates. Sell or transfer any assets to,
or purchase or acquire any assets from, or otherwise engage in any material
transaction with, any Affiliate except upon fair and reasonable terms no less
favorable to the Borrower or any Subsidiary than those that would prevail in an
arm's-length transaction with a Person which was not an Affiliate and in a
transaction entered into in the ordinary course of business and pursuant to the
reasonable requirements at the time of the Borrower or such Subsidiary; provided
that this Section 10.7 shall not apply to (a) Restricted Payments permitted
under Section 10.6, (b) indemnification of and contribution to all Persons
entitled to indemnification or contribution under Section 7.14 of the Borrower
Partnership Agreement (as in effect on the Closing Date) to the extent such
indemnification or contribution arises from business or activities in connection
with the Business (including securities issuances in connection with funding the
Business) or (c) transactions between the Borrower and any Wholly-Owned domestic
Subsidiary, or between Wholly-Owned domestic Subsidiaries or between
Wholly-Owned foreign Subsidiaries.

     SECTION 10.8 Business of Borrower and Subsidiaries.

Engage at any time in any business or business activity other than the business
currently conducted by it and business activities reasonably incidental thereto,
except to the extent resulting from any acquisition permitted under Section
10.5.

                                       74



     SECTION 10.9 Material Agreements; Tax Status.

     (a) (i) Directly or indirectly, make any payment, retirement, repurchase or
redemption on account of the principal of or directly or indirectly prepay or
defease any Indebtedness prior to the stated maturity date of such Indebtedness
(other than Indebtedness under the Loan Documents, Senior Notes redeemed with
the proceeds of Refinancing Notes or as required under Section 4C of the Senior
Note Agreement as in effect on the Closing Date or any analogous provision under
any Refinancing Note Agreement to the extent there is no increase in the amount
required to be redeemed), (ii) make any payment or prepayment of any such
Indebtedness that would violate the terms of this Agreement or of such
Indebtedness, any agreement or document evidencing, related to or securing the
payment or performance of such Indebtedness or any subordination agreement or
provision applicable to such Indebtedness or (iii) pay in cash any amount in
respect of any Indebtedness that may at the Borrower's option be paid in kind;
provided that nothing in this Section 10.9 shall prohibit the termination of any
Swap Agreement.

     (b) Amend or modify in any manner adverse to the Lenders, or grant any
waiver or release under (if such action shall be adverse to the Lenders), any
Partnership Document, the Senior Notes, the Senior Note Agreement, any
Refinancing Notes or any Refinancing Note Agreement or terminate in any manner
any Partnership Document, it being understood, without limitation, that no
modification that reduces principal, interest or fees, premiums, make-wholes or
penalty charges, or extends any scheduled or mandatory payment, prepayment or
redemption of principal or interest, or makes less restrictive any agreement or
waives any condition precedent or default, or entails the incurrence of
additional Indebtedness by the Borrower under the Senior Notes, the Senior Note
Agreement, any Refinancing Notes or any Refinancing Note Agreement shall be
adverse to the Lenders for purposes of this Agreement; provided, that with
respect to the incurrence of additional Indebtedness, subsequent to such
additional Indebtedness, the Borrower shall remain in compliance with Sections
9.1, 9.2 and 10.11 and such additional Indebtedness shall be on terms and
conditions no more restrictive than the terms and conditions contained in the
Senior Note Agreement.

     (c) Permit any Subsidiary to enter into any agreement or instrument that by
its terms restricts the payment of dividends or the making of cash advances by
such Subsidiary to the Borrower or any Subsidiary that is a direct or indirect
parent of such Subsidiary, other than those set forth in the Loan Documents.

     (d) Permit the Parent or the Borrower to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for Federal
income tax purposes.

     SECTION 10.10 Lease Obligations.

     Permit the aggregate obligations that are due and payable during any fiscal
year of the Borrower and its Subsidiaries under leases (other than obligations
under Capital Leases) to exceed $30,000,000 during such fiscal year.

                                       75



     SECTION 10.11 Priority Indebtedness. The Borrower will not permit Priority
Indebtedness (as defined in the Senior Note Agreement) at any time to exceed 25%
of Consolidated Net Worth (as defined in the Senior Note Agreement).

     SECTION 10.12 Certain Accounting Changes. Change its Fiscal Year end, or
make any change in its accounting treatment and reporting practices except as
required by GAAP.

     SECTION 10.13 Restrictive Agreements. Enter into any Indebtedness which
contains any covenants (including, without limitation, a negative pledge on
assets) more restrictive than the provisions of Articles VIII, IX and X.

                                   ARTICLE XI

                              DEFAULT AND REMEDIES

     SECTION 11.1 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:

     (a) Default in Payment of Principal of Loans and Reimbursement Obligations.
The Borrower shall default in any payment of principal of any Loan or
Reimbursement Obligation when and as due (whether at maturity, by reason of
acceleration or otherwise).

     (b) Other Payment Default. The Borrower shall default in the payment when
and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan or Reimbursement Obligation or the payment of any other
Obligation, and such default shall continue unremedied for three (3) Business
Days.

     (c) Misrepresentation. Any representation or warranty made or deemed to be
made by the Borrower or any of its Subsidiaries under this Agreement, any Loan
Document or any amendment hereto or thereto, shall prove to have been incorrect
or misleading in any material respect when made or deemed made.

     (d) Default in Performance of Certain Covenants. The Borrower shall default
in the performance or observance of any covenant or agreement contained in
Section 7.1, 7.2, 7.4(e) or Articles IX or X of this Agreement.

     (e) Default in Performance of Other Covenants and Conditions. The Borrower
or any Subsidiary thereof shall default in the performance or observance of any
term, covenant, condition or agreement contained in this Agreement (other than
as specifically provided for otherwise in this Section 11.1) or any other Loan
Document and such default shall continue for a period of thirty (30) days after
written notice thereof has been given to the Borrower by the Administrative
Agent.

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     (f) Indebtedness Cross-Default. The Parent, the Borrower or any of their
Subsidiaries shall (i) default in the payment of any Indebtedness (other than
that evidenced by the Loans or any Reimbursement Obligation; but including,
without limitation, the Indebtedness evidenced by the Senior Notes or any
Refinancing Notes), the aggregate outstanding amount of which Indebtedness is in
excess of $10,000,000 beyond the period of grace if any, provided in the
instrument or agreement under which such Indebtedness was created, or (ii)
default in the observance or performance of any other agreement or condition
relating to any Indebtedness (other than that evidenced by the Loans or any
Reimbursement Obligation; but including, without limitation, the Indebtedness
evidenced by the Senior Notes or any Refinancing Notes) the aggregate
outstanding amount of which Indebtedness is in excess of $10,000,000, or
contained in any instrument or agreement evidencing, securing or relating
thereto or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, with the giving of notice if required, any such Indebtedness
to become due prior to its stated maturity (any applicable grace period having
expired).

     (g) Other Cross-Defaults. The Borrower or any of its Subsidiaries shall
default in the payment when due, or in the performance or observance, of any
obligation or condition of any material contract or agreement unless, but only
as long as, the existence of any such default is being contested by the Borrower
or such Subsidiary in good faith by appropriate proceedings and adequate
reserves in respect thereof have been established on the books of the Borrower
or such Subsidiary to the extent required by GAAP.

     (h) Change in Ownership. A Change in Ownership shall occur.

     (i) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary thereof
shall (i) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect), (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of creditors, or
(vii) take any corporate action for the purpose of authorizing any of the
foregoing.

     (j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
commenced against the Borrower or any Subsidiary thereof in any court of
competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue undismissed or unstayed for a period of sixty (60)
consecutive days, or an order granting the


                                       77



relief requested in such case or proceeding (including, but not limited to, an
order for relief under such federal bankruptcy laws) shall be entered.

     (k) Failure of Agreements. Any provision of this Agreement or any provision
of any other Loan Document shall for any reason cease to be valid and binding on
the Borrower or any Subsidiary party thereto or any such Person shall so state
in writing, other than in accordance with the express terms hereof or thereof.

     (l) ERISA Event. The occurrence of any ERISA Event that, when taken
together with all other ERISA Events that have occurred, results in or could
reasonably be expected to result in liability of the Borrower and its ERISA
Affiliates in an aggregate amount exceeding $10,000,000.

     (m) Judgment. A judgment or order for the payment of money which causes the
aggregate amount of all such judgments to exceed $10,000,000 in any Fiscal Year
shall be entered against the Borrower or any of its Subsidiaries by any court
and such judgment or order shall continue undischarged or unstayed for a period
of thirty (30) days.

     SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower:

     (a) Acceleration; Termination of Credit Facilities. Declare the principal
of and interest on the Loans and the Reimbursement Obligations at the time
outstanding, and all other amounts owed to the Lenders and to the Administrative
Agent under this Agreement or any of the other Loan Documents (including,
without limitation, all L/C Obligations, whether or not the beneficiaries of the
then outstanding Letters of Credit shall have presented the documents required
thereunder) and all other Obligations (other than Swap Obligations), to be
forthwith due and payable, whereupon the same shall immediately become due and
payable without presentment, demand, protest or other notice of any kind, all of
which are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding, and terminate the Credit Facilities
and any right of the Borrower to request borrowings or Letters of Credit
thereunder; provided, that upon the occurrence of an Event of Default specified
in Section 11.1(i) or (j), the Credit Facilities shall be automatically
terminated and all Obligations (other than Swap Obligations) shall automatically
become due and payable without presentment, demand, protest or other notice of
any kind, all of which are expressly waived, anything in this Agreement or in
any other Loan Document to the contrary notwithstanding.

     (b) Letters of Credit. With respect to all Letters of Credit with respect
to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to Section 11.2(a), require the Borrower at such time to
deposit in a cash collateral account with the Administrative Agent an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit; ; provided, that upon the occurrence of an Event of Default specified in
Section 11.1(i) or (j), the obligation of the Borrower to cash collateralize
such Letters of Credit shall automatically become effective without further
action of the Administrative Agent or any Lender. Amounts held in such cash
collateral account shall be applied by the Administrative


                                       78



Agent to the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay the other Obligations.
After all such Letters of Credit shall have expired or been fully drawn upon,
the Reimbursement Obligation shall have been satisfied and all other Obligations
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower.

     (c) Rights of Collection. Exercise on behalf of the Lenders all of its
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.

     SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrower, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.

                                   ARTICLE XII

                            THE ADMINISTRATIVE AGENT

     SECTION 12.1 Appointment and Authority. Each of the Lenders and each of the
Issuing Lenders hereby irrevocably appoints Wachovia to act on its behalf as the
Administrative Agent hereunder and under the other Loan Documents and authorizes
the Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article XII are solely for the benefit of the
Administrative Agent, the Lenders and the Issuing Lenders, and neither the
Borrower nor any Subsidiary thereof shall have rights as a third party
beneficiary of any of such provisions.

     SECTION 12.2 Rights as a Lender. The Person serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, act


                                       79



as the financial advisor or in any other advisory capacity for and generally
engage in any kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if such Person were not the Administrative Agent hereunder
and without any duty to account therefor to the Lenders.

     SECTION 12.3 Exculpatory Provisions. The Administrative Agent shall not
have any duties or obligations except those expressly set forth herein and in
the other Loan Documents. Without limiting the generality of the foregoing, the
Administrative Agent:

     (a) shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing;

     (b) shall not have any duty to take any discretionary action or exercise
any discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as shall be expressly provided for
herein or in the other Loan Documents), provided that the Administrative Agent
shall not be required to take any action that, in its opinion or the opinion of
its counsel, may expose the Administrative Agent to liability or that is
contrary to any Loan Document or applicable law; and

     (c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of their Affiliates
that is communicated to or obtained by the Person serving as the Administrative
Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken
by it (i) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Section 13.11 and Section 11.2) or (ii) in the
absence of its own gross negligence or willful misconduct. The Administrative
Agent shall be deemed not to have knowledge of any Default unless and until
notice describing such Default is given to the Administrative Agent by the
Borrower, a Lender or an Issuing Lender.

The Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or (v) the satisfaction
of any condition set forth in Article V or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent.

     SECTION 12.4 Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing (including any

                                       80



electronic message, Internet or intranet website posting or other distribution)
believed by it to be genuine and to have been signed, sent or otherwise
authenticated by the proper Person. The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying
thereon. In determining compliance with any condition hereunder to the making of
a Loan, or the issuance of a Letter of Credit, that by its terms must be
fulfilled to the satisfaction of a Lender or an Issuing Lender, the
Administrative Agent may presume that such condition is satisfactory to such
Lender or such Issuing Lender unless the Administrative Agent shall have
received notice to the contrary from such Lender or such Issuing Lender prior to
the making of such Loan or the issuance of such Letter of Credit. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

     SECTION 12.5 Delegation of Duties. The Administrative Agent may perform any
and all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. The exculpatory provisions of this
Article XII shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

     SECTION 12.6 Resignation of Administrative Agent.

     (a) The Administrative Agent may at any time give notice of its resignation
to the Lenders, the Issuing Lenders and the Borrower. Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor, which shall be a bank
with an office in the United States, or an Affiliate of any such bank with an
office in the United States. If no such successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may on behalf of the Lenders and the Issuing
Lenders, appoint a successor Administrative Agent meeting the qualifications set
forth above provided that if the Administrative Agent shall notify the Borrower
and the Lenders that no qualifying Person has accepted such appointment, then
such resignation shall nonetheless become effective in accordance with such
notice and (1) the retiring Administrative Agent shall be discharged from its
duties and obligations hereunder and under the other Loan Documents (except that
in the case of any collateral security held by the Administrative Agent on
behalf of the Lenders or the Issuing Lenders under any of the Loan Documents,
the retiring Administrative Agent shall continue to hold such collateral
security until such time as a successor Administrative Agent is appointed) and
(2) all payments, communications and determinations provided to be made by, to
or through the Administrative Agent shall instead be made by or to each Lender
and each Issuing Lender directly, until such time as the Required Lenders
appoint a successor Administrative Agent as provided for above in this
paragraph. Upon the acceptance of a successor's appointment as Administrative
Agent


                                       81



hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired)
Administrative Agent, and the retiring Administrative Agent shall be discharged
from all of its duties and obligations hereunder or under the other Loan
Documents (if not already discharged therefrom as provided above in this
paragraph). The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the retiring Administrative
Agent's resignation hereunder and under the other Loan Documents, the provisions
of this Article XII and Section 13.12 shall continue in effect for the benefit
of such retiring Administrative Agent, its sub-agents and their respective
Related Parties in respect of any actions taken or omitted to be taken by any of
them while the retiring Administrative Agent was acting as Administrative Agent.

     (b) Any resignation by Wachovia as Administrative Agent pursuant to this
Section 12.6 shall also constitute its resignation as an Issuing Lender and as
Swingline Lender. Upon the acceptance of a successor's appointment as
Administrative Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
Issuing Lender and Swingline Lender, (b) the retiring Issuing Lender and
Swingline Lender shall be discharged from all of their respective duties and
obligations hereunder or under the other Loan Documents, and (c) the successor
Issuing Lender shall issue letters of credit in substitution for the Letters of
Credit, if any, outstanding at the time of such succession or make other
arrangement satisfactory to the retiring Issuing Lender to effectively assume
the obligations of the retiring Issuing Lender with respect to such Letters of
Credit.

     SECTION 12.7 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender and each Issuing Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender or any of
their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender and each Issuing Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.

     SECTION 12.8 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any Guarantor, the Administrative Agent
(irrespective of whether the principal of any Loan or L/C Obligation shall then
be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

     (a) to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans, L/C Obligations and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of the Lenders and the
Administrative Agent (including any claim for the reasonable


                                       82



compensation, expenses, disbursements and advances of the Lenders and the
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders and the Administrative Agent under Sections 2.3(c)(i),
3.3(a), 4.9 and 13.2) allowed in such judicial proceeding; and

     (b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 4.9 and 13.2.

Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize the Administrative Agent
to vote in respect of the claim of any Lender in any such proceeding.

     SECTION 12.9 No Other Duties, etc. Anything herein to the contrary
notwithstanding, none of the syndication agents, documentation agents,
co-agents, book manager, lead manager, arranger, lead arranger or co-arranger
listed on the cover page or signature pages hereof shall have any powers, duties
or responsibilities under this Agreement or any of the other Loan Documents,
except in its capacity, as applicable, as the Administrative Agent, a Lender or
an Issuing Lender hereunder.


                                  ARTICLE XIII

                                  MISCELLANEOUS

     SECTION 13.1 Notices.

     (a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.

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     (b) Addresses for Notices. Notices to any party shall be sent to it at the
following addresses, or any other address as to which all the other parties are
notified in writing.

If to the Borrower:        Suburban Propane, L.P.
                           One Suburban Plaza
                           240 Route 10 West
                           P.O. Box 206
                           Whippany, New Jersey 07981-0206
                           Attention: A. Davin D'Ambrosio
                           Telephone No.: 973-503-9396
                           Telecopy No.: 973-503-9395

With copies to:            Weil, Gotshal & Manges LLP
                           767 Fifth Avenue
                           New York, New York 10153
                           Attention: Marsha E. Simms, Esq.
                           Telephone No.: 212-310-8116
                           Telecopy No.: 212-310-8007

If to Wachovia as          Wachovia Bank, National Association
   Administrative Agent:   Charlotte Plaza, CP-8
                           201 South College Street
                           Charlotte, North Carolina 28288-0608
                           Attention: Syndication Agency Services
                           Telephone No.: 704-374-2698
                           Telecopy No.: 704-383-0288


With copies to:            Kennedy Covington Lobdell & Hickman, L.L.P.
                           Hearst Tower, 47th Floor
                           214 North Tryon Street
                           Charlotte, North Carolina 28202
                           Attention: Eric L. Burk
                           Telephone No.: 704-331-7585
                           Telecopy No.: 704-331-7598

If to any Lender:          To the Address set forth on Schedule 1.1(a) hereto.

     (c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed and
Letters of Credit issued.

     SECTION 13.2 Expenses; Indemnity.


                                       84



     (a) Costs and Expenses. The Borrower shall pay (i) all reasonable
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates
(including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent), in connection with the syndication of the Credit
Facilities, the preparation, negotiation, execution, delivery and administration
of this Agreement and the other Loan Documents or any amendments, modifications
or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by each Issuing Lender in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, any Lender or any Issuing Lender (including the fees,
charges and disbursements of any counsel for the Administrative Agent, any
Lender or any Issuing Lender), in connection with the enforcement or protection
of its rights (A) in connection with this Agreement and the other Loan
Documents, including its rights under this Section 13.2, or (B) in connection
with the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

     (b) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent (and any sub-agent thereof), each Lender and each Issuing
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an "Indemnitee") against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses (including
the fees, charges and disbursements of any counsel for any Indemnitee), incurred
by any Indemnitee or asserted against any Indemnitee by any third party or by
the Borrower or any Guarantor arising out of, in connection with, or as a result
of (i) the execution or delivery of this Agreement, any other Loan Document or
any agreement or instrument contemplated hereby or thereby, the performance by
the parties hereto of their respective obligations hereunder or thereunder or
the consummation of the transactions contemplated hereby or thereby, (ii) any
Loan or Letter of Credit or the use or proposed use of the proceeds therefrom
(including any refusal by any Issuing Lender to honor a demand for payment under
a Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
owned or operated by the Borrower or any of its Subsidiaries, or any liability
under Environmental and Safety Laws related in any way to the Borrower or any of
its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by the
Borrower or any Guarantor, and regardless of whether any Indemnitee is a party
thereto, provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses (x) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee or (y) result from a claim brought by the
Borrower or any Guarantor against an Indemnitee for breach in bad faith of such
Indemnitee's obligations hereunder or under any other Loan Document, if the
Borrower or such Guarantor has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent jurisdiction.


                                       85



     (c) Reimbursement by Lenders. To the extent that the Borrower for any
reason fails to pay any amount required under paragraph (a) or (b) of this
Section 13.2 to be paid by it to the Administrative Agent (or any sub-agent
thereof), any Issuing Lender or any Related Party of any of the foregoing, each
Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent), any Issuing Lender or such Related Party, as the case may be, such
Lender's Commitment Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount,
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent (or any such sub-agent) or any Issuing Lender
in its capacity as such, or against any Related Party of any of the foregoing
acting for the Administrative Agent (or any such sub-agent) or Issuing Bank in
connection with such capacity. The obligations of the Lenders under this
paragraph (c) are subject to the provisions of Section 4.13.

     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted
by applicable law, the Borrower shall not assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or the
use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above
shall be liable for any damages arising from the use by unintended recipients of
any information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or
thereby, except for damages which are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.

     (e) Payments. All amounts due under this Section 13.2 shall be payable
promptly after demand therefor.

     SECTION 13.3 Right of Set-off. If an Event of Default shall have occurred
and be continuing, each Lender, each Issuing Lender, the Swingline Lender and
each of their respective Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by applicable law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final, in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender, such Issuing Lender, the Swingline
Lender or any such Affiliate to or for the credit or the account of the Borrower
or any Guarantor against any and all of the obligations of the Borrower or such
Guarantor now or hereafter existing under this Agreement or any other Loan
Document to such Lender, such Issuing Lender or the Swingline Lender,
irrespective of whether or not such Lender, such Issuing Lender or the Swingline
Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Borrower or such Guarantor may be
contingent or unmatured or are owed to a branch or office of such Lender, such
Issuing Lender or the Swingline Lender different from the branch or office
holding such deposit or obligated on such indebtedness. The rights of each
Lender, each Issuing Lender, the Swingline Lender and their respective
Affiliates under this


                                       86



Section 13.3 are in addition to other rights and remedies (including other
rights of setoff) that such Lender, such Issuing Lender, the Swingline Lender or
their respective Affiliates may have. Each Lender, each Issuing Lender and the
Swingline Lender agrees to notify the Borrower and the Administrative Agent
promptly after any such setoff and application; provided that the failure to
give such notice shall not affect the validity of such setoff and application.

     SECTION 13.4 Governing Law. This Agreement and the other Loan Documents,
unless otherwise expressly set forth therein, shall be governed by, construed
and enforced in accordance with the laws of the State of New York.

     SECTION 13.5 Consent to Jurisdiction. The Borrower hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
New York County, New York, in any action, claim or other proceeding arising out
of any dispute in connection with this Agreement and the other Loan Documents,
any rights or obligations hereunder or thereunder, or the performance of such
rights and obligations. The Borrower hereby irrevocably consents to the service
of a summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this
Agreement or the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 13.1. Nothing in this
Section 13.5 shall affect the right of the Administrative Agent or any Lender to
serve legal process in any other manner permitted by Applicable Law or affect
the right of the Administrative Agent or any Lender to bring any action or
proceeding against the Borrower or its properties in the courts of any other
jurisdictions.

     SECTION 13.6 Waiver of Jury Trial.


THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF ANY JUDICIAL PROCEEDING, ANY DISPUTE, CLAIM OR
CONTROVERSY ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT ("DISPUTES") IN CONNECTION WITH THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

     SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.

     SECTION 13.8 Injunctive Relief; Punitive Damages.

                                       87


     (a) The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, the Borrower agrees that the Lenders, at the Lenders' option, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.

     (b) The Administrative Agent, the Lenders and the Borrower (on behalf of
itself and its Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute.

     (c) The parties agree that they shall not have a remedy of punitive or
exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute.

     SECTION 13.9 Accounting Matters. All financial and accounting calculations,
measurements and computations made for any purpose relating to this Agreement,
including, without limitation, all computations utilized by the Borrower or any
Subsidiary thereof to determine compliance with any covenant contained herein,
shall, except as otherwise expressly contemplated hereby or unless there is an
express written direction by the Administrative Agent to the contrary agreed to
by the Borrower, be performed in accordance with GAAP as in effect on the
Closing Date. In the event that changes in GAAP shall be mandated by the
Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrower's certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrower and the
Required Lenders shall have amended this Agreement to the extent necessary to
reflect any such changes in the financial covenants and other terms and
conditions of this Agreement.

     SECTION 13.10 Successors and Assigns; Participations.

     (a) Successors and Assigns Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that neither the
Borrower nor any Guarantor may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Administrative
Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in accordance
with the provisions of paragraph (b) of this Section 13.10, (ii) by way of
participation in accordance with the provisions of paragraph (d) of this Section
13.10 or (iii) by way of pledge or assignment of a security interest subject to
the restrictions of paragraph (f) of this Section 13.10 (and any other attempted
assignment or transfer by any party hereto shall be null and void). Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in paragraph (d) of this
Section 13.10 and, to the extent expressly contemplated hereby,


                                       88



the Related Parties of each of the Administrative Agent and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Assignments by Lenders. Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans at
the time owing to it); provided that

          (i) except in the case of an assignment of the entire remaining amount
of the assigning Lender's Commitment and the Loans at the time owing to it or in
the case of an assignment to a Lender or an Affiliate of a Lender with respect
to a Lender, the aggregate amount of the Commitment (which for this purpose
includes Loans outstanding thereunder) or, if the applicable Commitment is not
then in effect, the principal outstanding balance of the Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent or, if "Trade Date" is specified in the Assignment and
Assumption, as of the Trade Date) shall not be less than $5,000,000, unless each
of the Administrative Agent and, so long as no Default or Event of Default has
occurred and is continuing, the Borrower otherwise consent (each such consent
not to be unreasonably withheld or delayed);

          (ii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations under
this Agreement with respect to the Loans or the Commitment assigned;

          (iii) any assignment of a Revolving Credit Commitment must be approved
by the Administrative Agent, the Swingline Lender and the Revolver Issuing
Lender unless the Person that is the proposed assignee is itself a Lender with a
Revolving Credit Commitment (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee);

          (iv) any assignment of a Stand-Alone L/C Commitment must be approved
by the Administrative Agent and each Stand-Alone Issuing Lender unless the
Person that is the proposed assignee is itself a Lender (whether or not the
proposed assignee would otherwise qualify as an Eligible Assignee); and

          (v) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to paragraph (c) of this Section 13.10, from and after the effective date
specified in each Assignment and Assumption, the Eligible Assignee thereunder
shall be a party to this Agreement and, to the extent of the interest assigned
by such Assignment and Assumption, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Sections 4.14, 4.15,


                                       89




4.16, 4.17 and 13.2 with respect to facts and circumstances occurring prior to
the effective date of such assignment. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (d) of this Section 13.10.

     (c) Register. The Administrative Agent, acting solely for this purpose as
an agent of the Borrower, shall maintain at one of its offices in Charlotte,
North Carolina, a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.

     (d) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrower or the Administrative Agent, sell participations to any
Person (other than a natural person or the Borrower or any of the Borrower's
Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such
Lender's rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Loans owing to it); provided that (i) such
Lender's obligations under this Agreement shall remain unchanged, (ii) such
Lender shall

remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement.

     Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver or modification described in the
Section 13.12 that directly affects such Participant. Subject to paragraph (e)
of this Section 13.10, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 4.14, 4.15, 4.16 and 4.17 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (b) of this Section 13.10. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 13.4 as
though it were a Lender, provided such Participant agrees to be subject to
Section 4.12 as though it were a Lender.

     (e) Limitations upon Participant Rights. A Participant shall not be
entitled to receive any greater payment under Sections 4.15 and 4.17 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower's prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 4.17 unless the Borrower is notified of the
participation sold to such Participant

                                       90



and such Participant agrees, for the benefit of the Borrower, to comply with
Section 4.17(e) as though it were a Lender.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including without limitation any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no
such pledge or assignment shall release such Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

     SECTION 13.11 Confidentiality. Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by, or required to be disclosed to, any rating agency, or regulatory or similar
authority (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party hereto, (e) in connection with the exercise of any remedies
under this Agreement or under any other Loan Document (or any Hedging Agreement
with a Lender or the Administrative Agent) or any action or proceeding relating
to this Agreement or any other Loan Document (or any Hedging Agreement with a
Lender or the Administrative Agent) or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section 13.11, to (i) any Purchasing Lender, proposed
Purchasing Lender, Participant or proposed Participant or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to the Borrower and its obligations, (g) with the consent of the
Borrower, (h) to Gold Sheets and other similar bank trade publications, such
information to consist of deal terms and other information customarily found in
such publications, or (i) to the extent such Information (x) becomes publicly
available other than as a result of a breach of this Section 13.11 or (y)
becomes available to the Administrative Agent or any Lender on a nonconfidential
basis from a source other than the Borrower. For purposes of this Section 13.11,
"Information" means all information received from the Borrower or any Subsidiary
relating to the Borrower, any Subsidiary or any of their respective businesses,
other than any such information that is available to the Administrative Agent or
any Lender on a nonconfidential basis prior to disclosure by the Borrower or any
Subsidiary; provided that, in the case of information received from the Borrower
or any Subsidiary after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 13.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

     SECTION 13.12 Amendments, Waivers and Consents. Except as set forth below
or as specifically provided in any Loan Document, any term, covenant, agreement
or condition of this Agreement or any of the other Loan Documents may be amended
or waived by the Lenders, and any consent given by the Lenders, if, but only if,
such amendment, waiver or consent is in


                                       91



writing signed by the Required Lenders (or by the Administrative Agent with the
consent of the Required Lenders) and delivered to the Administrative Agent and,
in the case of an amendment, signed by the Borrower; provided, that no
amendment, waiver or consent shall:

     (a) extend or increase the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to Section 13.2) or the amount of Loans of any
Lender without the written consent of such Lender;

     (b) postpone any date fixed by this Agreement or any other Loan Document
for any payment of principal, interest, fees or other amounts due to the Lenders
(or any of them) hereunder or under any other Loan Document or extend the
Termination Date without the written consent of each Lender directly affected
thereby;

     (c) reduce the principal of, or the rate of interest specified herein on,
any Loan or Reimbursement Obligation, or (subject to clause (iv) of the second
proviso to this Section 13.12) any fees or other amounts payable hereunder or
under any other Loan Document without the written consent of each Lender
directly affected thereby; provided that only the consent of the Required
Lenders shall be necessary (i) to waive any obligation of the Borrower to pay
interest at the rate set forth in Section 4.7(c) during the continuance of an
Event of Default, or (ii) to amend any financial covenant hereunder (or any
defined term used therein) even if the effect of such amendment would be to
reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee
payable hereunder;

     (d) change Section 4.10 or Section 4.11 in a manner that would alter the
pro rata sharing of payments required thereby without the written consent of
each Lender;

     (e) change any provision of this Section 13.12 or the definition of
"Required Lenders" or any other provision hereof specifying the number or
percentage of Lenders required to amend, waive or otherwise modify any rights
hereunder or make any determination or grant any consent hereunder, without the
written consent of each Lender; or

     (f) release any Guarantor from its obligations under a Guaranty Agreement
without the written consent of each Lender unless the Capital Stock, or all or
substantially all the assets, of such Guarantor are sold in a transaction
permitted by this Agreement;

provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by each Stand-Alone Issuing Lender in addition to the Lenders
required above, affect the rights or duties of any Stand-Alone Issuing Lender
under this Agreement or any Application relating to any Stand-Alone Letter of
Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Revolver Issuing Lender in addition to the
Lenders required above, affect the rights or duties of the Revolver Issuing
Lender under this Agreement or any Application relating to any Revolver Letter
of Credit issued or to be issued by it; (iii) no amendment, waiver or consent
shall, unless in writing and signed by the Swingline Lender in addition to the
Lenders required above, affect the rights or duties of the Swingline Lender
under this Agreement; (iv) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Lenders
required above, affect the rights or


                                       92



duties of the Administrative Agent under this Agreement or any other Loan
Document; and (v) the Fee Letter may be amended, or rights or privileges
thereunder waived, in a writing executed only by the parties thereto.
Notwithstanding anything to the contrary herein, no Defaulting Lender shall have
any right to approve or disapprove any amendment, waiver or consent hereunder,
except that the Commitment of such Lender may not be increased or extended
without the consent of such Lender.

     SECTION 13.13 Performance of Duties. The Borrower's obligations under this
Agreement and each of the Loan Documents shall be performed by the Borrower at
its sole cost and expense.

     SECTION 13.14 All Powers Coupled with Interest. All powers of attorney and
other authorizations granted to the Lenders, the Administrative Agent and any
Persons designated by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or the Credit Facilities have not been
terminated.

     SECTION 13.15 Survival of Indemnities.

     Notwithstanding any termination of this Agreement, the indemnities to which
the Administrative Agent and the Lenders are entitled under the provisions of
this Article XIII and any other provision of this Agreement and the Loan
Documents shall continue in full force and effect and shall protect the
Administrative Agent and the Lenders against events arising after such
termination as well as before.

     SECTION 13.16 Titles and Captions. Titles and captions of Articles,
Sections and subsections in, and the table of contents of, this Agreement are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.

     SECTION 13.17 Severability of Provisions. Any provision of this Agreement
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

     SECTION 13.18 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.

     SECTION 13.19 Term of Agreement. This Agreement shall remain in effect from
the Closing Date through and including the date upon which all Obligations shall
have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination or in respect of any provision
of this Agreement which survives such termination.


                                       93



     SECTION 13.20 USA Patriot Act. The Administrative Agent and each Lender
hereby notifies the Borrower that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the "Act"), it is required to obtain, verify and record information that
identifies the Borrower and Guarantors, which information includes the name and
address of the Borrower and each Guarantor and other information that will allow
such Lender to identify the Borrower or such Guarantor in accordance with the
Act.

     SECTION 13.21 Inconsistencies with Other Documents; Independent Effect of
Covenants.

     (a) In the event there is a conflict or inconsistency between this
Agreement and any other Loan Document, the terms of this Agreement shall
control.

     (b) The Borrower expressly acknowledges and agrees that each covenant
contained in Articles VIII, IX or X shall be given independent effect.
Accordingly, the Borrower shall not engage in any transaction or other act
otherwise permitted under any covenant contained in Articles VIII, IX or X if,
before or after giving effect to such transaction or act, the Borrower shall or
would be in breach of any other covenant contained in Articles VIII, IX or X.

     SECTION 13.22 Entire Agreement. This Agreement and the other Loan Documents
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties.

                           [Signature pages to follow]



                                       94


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.

                                SUBURBAN PROPANE, L.P., as Borrower


                                By:
                                    --------------------------------------------
                                Name: Robert M. Plante
                                Title: Vice President, Chief Financial Officer



                                WACHOVIA BANK, NATIONAL ASSOCIATION,
                                as Administrative Agent, as Lender, as Swingline
                                Lender and as an Issuing Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                FLEET NATIONAL BANK, as Syndication
                                Agent and Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                CAYLON NEW YORK BRANCH,
                                as Syndication Agent and Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                CITICORP USA, INC., as Documentation
                                Agent and Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                NATIONAL CITY BANK, as Documentation
                                Agent and Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                THE BANK OF NEW YORK, as Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                LASALLE BANK NATIONAL ASSOCIATION,
                                as Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                GOLDMAN SACHS CREDIT PARTNERS L.P.,
                                as Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                ISRAEL DISCOUNT BANK OF NEW YORK,
                                as Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                BANK LEUMI USA, as Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------



                                FIRSTRUST BANK, as Lender


                                By:
                                    --------------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                           -------------------------------------

EX-10.14 8 file005.htm PURCHASE AND NONCOMPETITION AGREEMENT



                                                                   Exhibit 10.14

                      PURCHASE AND NONCOMPETITION AGREEMENT

          THIS PURCHASE AND NONCOMPETITION AGREEMENT (this "Agreement") is made
and entered into this _____ day of January, 2004, by and between Ferrellgas,
L.P., a Delaware limited partnership ("Buyer"), and Suburban Propane, L.P., a
Delaware limited partnership ("SP"), and Suburban Sales and Service, Inc., a
Delaware corporation ("SSS" and, collectively with SP, "Seller").

                                   WITNESSETH

          That in consideration of the mutual covenants herein contained, the
parties agree as follows:

I.   SALE AND PURCHASE.

          1.1 Agreements to Sell and Purchase. Seller agrees to sell, transfer,
assign and deliver to Buyer, and Buyer agrees to purchase and accept from
Seller, on the Closing Date (hereinafter defined), the property of Seller
referred to in this Section 1.1 (not specifically excluded under Section 1.2
below), relating to Seller's propane operations (the "Operations") within the
states of Texas, Oklahoma, Missouri and Kansas as carried on at the locations
identified in Exhibit 1.1 ("the "Locations"), as follows:

               a. All propane inventory held by Seller at the Locations on the
     Closing Date;

               b. All propane tanks, cylinders, dispensers, regulators, piping,
     vehicles, fixtures constituting Seller's bulk facilities, tools and other
     equipment at or serviced from the Locations, including, without limitation,
     those assets described on Exhibit 1.1b;

               c. To the extent assignable, all of Seller's right, title and
     interest in and to permits, licenses (including truck licenses) and
     telephone numbers used in connection with the Operations at the Locations;

               d. All of Seller's propane products accounts, retail accounts and
     service customers serviced from or at the Locations, including without
     limitation, all of Seller's right, title and interest in and to the
     originals and all copies of customer lists and records;

               e. All customer contracts and fuel supply contracts with
     customers serviced from or at the Locations, including, without limitation,
     contracts on product



     tanks and customer locations; and all contract rights arising from
     non-compete and non-solicit agreements;

               f. All customer leases and lease option agreements covering the
     propane tanks and cylinders owned or leased by Seller to customers serviced
     from the Locations;

               g. All real estate owned by Seller for use in the Operations, as
     more particularly described in the deeds attached hereto as Exhibit 2.2.3,
     including all fixtures attached thereto and improvements and buildings
     thereon;

               h. Unless specifically excluded, all rights of Seller under real
     property leases for leased real estate used in the Operations, and
     contracts of the Operations;

               i. Trade accounts receivable of the Operations for account
     debtors serviced from the Locations, as of the Closing Date (the "Purchased
     Accounts Receivable");

               j. All warranty rights of Seller, express or implied, with
     respect to the property described in this Section 1.1;

               k. All of Seller's propane parts and fittings which are used at
     the Locations as operating supplies to maintain and repair propane tanks
     and lines, whether or not generally billed to Seller's customers;

               l. All of Seller's appliance inventory at the Locations.

          1.2 Excluded Assets. The assets and properties of Seller to be sold
and purchased under Section 1.1 shall not include (i) cash on hand or in banks;
(ii) any Underground Storage Tanks (as defined by 40 C.F.R. 280); (iii) the
Retained Accounts Receivable (as defined in Section 1.3c); (iv) any right,
title, or interest in or to the names Suburban Propane, L.P., Suburban Propane,
Suburban Sales and Service, Inc., or any derivatives thereof, or any other
trademarks, service marks or trade names, or any software or intellectual
property used in connection with or otherwise attributable to the Seller's
business at any business locations, whether or not such marks, names, or
property are registered; (v) any item, instrument, property, claim, right,
equipment, furniture, fixture, appliance, inventory, tool/or machinery or other
asset associated with the Seller's businesses other than at the Locations; and
(vi) those assets and properties of Seller listed on Exhibit 1.2.

          1.3 Purchase Price; Noncompetition Payment.

               a. Price of Assets. The price to be paid for the assets to be
     sold and purchased pursuant to Sections 1.1b, 1.1c, 1.1d, 1.1e, 1.1f, 1.1g,
     1.1h, and 1.1j shall be $23,000,000, allocated to the assets pursuant to
     Exhibit 1.8.

               b. Price of Inventory. To determine the price of the assets
     described in Section 1.1a (the "Propane Inventory), a physical inventory of
     propane in bulk storage,


                                        2



     bobtails, in cylinders on trucks, and in customer tanks in the yard at the
     Locations shall be taken by representatives of Buyer and Seller as of the
     open of business on the Closing Date. The price to be paid shall be
     determined based upon the pricing information on Exhibit 1.3b for that
     inventory (corrected to 60 degrees Fahrenheit based on the temperature of
     the propane in the vessel containing the greatest quantity) which Buyer and
     Seller so verify.

               c. Price of Accounts Receivable. To determine the price of the
     Purchased Accounts Receivable, Seller's total Purchased Accounts Receivable
     for the Operations shall be verified by representatives of Buyer and Seller
     as of the close of business on the day preceding the Closing Date by review
     of the business records. The price to be paid shall be the applicable
     percentage (as set forth below) of the amount of the Purchased Accounts
     Receivable; provided, however, that Buyer shall not be obligated to
     purchase any account (i) which is due from a customer that is at the time
     of such verification a debtor in bankruptcy or reorganization proceedings;
     or (ii) which otherwise appears to be uncollectible or unwanted as
     determined by Buyer in its sole discretion (the "Retained Accounts
     Receivable").

           Account Receivable Age        Percentage of Face Amount
     ---------------------------------   -------------------------
      0 - 30 days after statement date              100%
     31 - 60 days after statement date               75%
     61 - 90 days after statement date               50%
     over 90 days after statement date                0%

               d. Price of Appliances and Parts. The price for the assets
     described in Section 1.1k and 1.1l (parts and fittings and appliances,
     hereinafter "Appliance Inventory") shall be an amount equal to 90% of
     Seller's cost, determined by an inventory of said items at the Locations
     conducted jointly by Seller and Buyer on Closing Date.

          1.4 Seller's Liabilities.

               a. Excluded Liabilities. Other than the assumed liabilities
     described in Section 1.4b, all liabilities, debts and obligations of every
     character or description, known or unknown, of Seller accruing or arising
     from acts (whether or not the resulting event or occurrence of damage is
     before, on or after the Closing Date), transactions or occurrences prior to
     the Closing (hereinafter defined) shall be Seller's sole obligation and
     responsibility and Buyer is not assuming any such liability, debt or
     obligation and Buyer shall have no responsibility therefor.

               b. Assumed Liabilities. Notwithstanding the above, Buyer agrees
     to assume and pay the liabilities and obligations (i) arising after the
     Closing Date with regard to the assigned leases, (ii) listed on Exhibit
     1.4b, (iii) that arise on or after the Closing Date pursuant to executory
     contracts, orders and commitments that relate to the sale of equipment,
     merchandise or services of the Operations at the Locations, (iv) that are
     incurred with respect to, result from, are caused by or arise out of the
     assets acquired


                                        3



     pursuant to Section 1.1, provided that Buyer does not assume any liability
     with respect to any asset or installation at a customer location until the
     earlier of (x) the date on which the Buyer first delivers propane into,
     services or inspects such asset and (y) 120 days after the Closing Date.
     Buyer agrees that it shall bear all costs and expenses associated with the
     foregoing and that said costs and expenses shall be in addition to the
     purchase price of the assets.

          1.5 Proration of Certain Items. Provided the Closing occurs, Buyer
shall receive a credit with respect to the following items (the "Prorations"):

               (a) Real and Personal Property Taxes. With respect to the assets
     being transferred pursuant to this Agreement, Buyer will pay all real and
     personal property taxes, if any, (prorated as of the Closing Date) for the
     calendar year within which the Closing Date occurs, which are not payable
     until after the Closing Date. Buyer will make such payments as and when due
     and Buyer shall receive a credit for Seller's prorated share of the amounts
     to be paid by Buyer.

               (b) Customer Propane Prepayments or Level Payments. Customer
     prepayments for propane and level payment plan payments shall be prorated
     as of the Closing Date. Buyer shall receive a credit for the amount by
     which the retail price of gas provided to customers before the Closing is
     less than the retail amount paid to Seller by such customers.

               (c) Customer Tank Rent Prepayment. Prepayments of tank rent and
     all tank rent accounts receivable shall be prorated over the period to
     which the prepayment applies. Buyer shall receive a credit for the amount
     by which the prepayment of tank rent and tank rent accounts receivable
     exceeds the tank rent due through the end of the day prior to the Closing
     Date.

               (d) Customer Deposits and Balances. Buyer shall receive a credit
     for (i) all customer deposits made with Seller in connection with the use,
     lease or purchase of propane or propane tanks, cylinders, regulators or
     equipment and (ii) all customer credit balances of any kind.

          The foregoing items will be computed as of the time of the Closing and
will be offset against the payment to be made by Buyer to Seller within three
business days after the calculation of the Purchased Accounts Receivable, the
Propane Inventory and Appliance Inventory, and the Prorations, as further
described in Section 2.3.

          1.6 Accounts Receivable Payments. Seller hereby irrevocably
constitutes and appoints Buyer and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Seller and in the name of Seller
or in its own name, without notice to or assent by Seller, for the sole and
exclusive purposes of signing, endorsing and negotiating any check, draft,
deposit item or other instruments received by Buyer as a customer payment on the
Purchased Accounts Receivable transferred or assigned hereunder. The power and
authority granted to Buyer pursuant


                                        4



to this Section 1.6 shall expire 90 days after the Closing Date. Seller will
immediately remit to Buyer any payments received by Seller on any Purchased
Accounts Receivable transferred to Buyer hereunder. Buyer will immediately remit
to Seller any payments received by Buyer with respect to the Retained Accounts
Payable.

          1.7 Adjustments.

               a. As promptly as practicable, but no later than ten (10) days
     after the Closing Date, Seller shall cause to be prepared and delivered to
     Buyer the Closing Statement (as defined below) and a certificate based on
     such Closing Statement setting forth Seller's calculation of inventory
     price, Prorations, and Purchased Accounts Receivable ("Closing
     Adjustments"). The closing statement (the "Closing Statement") shall fairly
     present in all material respects calculation of the Closing Adjustments.

               b. If Buyer disagrees with Seller's calculation of Closing
     Adjustments delivered pursuant to Section 1.7a, Buyer may, within ten (10)
     days after delivery of the Closing Statement, deliver a notice to Seller
     disagreeing with such calculation and setting forth Buyer's calculation of
     such amount. Any such notice of disagreement shall specify those items or
     amounts as to which Buyer disagrees, and Buyer shall be deemed to have
     agreed with all other items and amounts contained in the Closing Statement
     and the calculation of Closing Adjustments delivered pursuant to Section
     1.7a and shall pay those undisputed amounts within 10 days of delivery of
     the Closing Statement .

               c. If a notice of disagreement shall be duly delivered pursuant
     to Section 1.7b, Buyer and Seller shall, during the ten (10) days following
     such delivery, use their reasonable best efforts to reach agreement on the
     disputed items or amounts in order to determine, as may be required, the
     amount of Closing Adjustments. If during such period, Buyer and Seller are
     unable to reach such agreement, they shall promptly thereafter cause Ernst
     & Young (the "Accounting Referee") to review this Agreement and the
     disputed items or amounts for the purpose of calculating Closing
     Adjustments (it being understood that in making such calculation, the
     Accounting Referee shall be functioning as an expert and not as an
     arbitrator). In making such calculation, the Accounting Referee shall
     consider only those items or amounts in the Closing Statement and Seller's
     calculation of Closing Adjustments as to which Buyer has disagreed. The
     Accounting Referee shall deliver to Buyer and Seller, as promptly as
     practicable (but in any case no later than thirty (30) days from the date
     of engagement of the Accounting Referee), a report setting forth such
     calculation. Such report shall be final and binding upon Buyer and Seller.
     The cost of such review and report shall be borne equally by Buyer and
     Seller.

               d. Buyer and Seller shall, and shall cause their respective
     representatives to, cooperate and assist in the preparation of the Closing
     Statement and the calculation of Closing Adjustments and in the conduct of
     the review referred to in this Section 1.7, including, without limitation,
     the making available to the extent necessary of books, records, work papers
     and personnel.


                                        5



               e. The Closing Adjustments remaining due, as finally determined
     by the process described in Section 1.7c, shall be paid within three (3)
     days of calculation by wire transfer. The amount of any payment to be made
     pursuant to this Section 1.7e shall bear interest from and including the
     thirteenth day after the Closing Date to but excluding the date of payment
     at a rate per annum equal to the rate of interest published from time to
     time by The Wall Street Journal as the "prime rate" at large U.S. money
     center banks during the period from the thirteenth day after the Closing
     Date to the date of payment. Such interest shall be payable at the same
     time as the payment to which it relates and shall be calculated daily on
     the basis of a year of three hundred sixty five (365) days and the actual
     number of days elapsed.

          1.8 Purchase Price Allocation. The Buyer and Seller agree to allocate
the aggregate purchase price among the purchased assets hereunder for all
purposes (including financial accounting and tax purposes) as in accordance with
the Allocation Schedule attached hereto as Exhibit 1.8. Buyer and Seller shall
each report the federal, state and local income and other tax consequences of
the transactions contemplated by this Agreement in a manner consistent with such
allocation, including, without limitation, the preparation and filing of Form
8594 (or any successor form or successor provision of any future tax law) under
Section 1060 of the Internal Revenue Code of 1986, as amended, with their
respective federal income tax returns for the taxable year that includes the
Closing Date, and neither Buyer nor Seller will take any position inconsistent
with such allocation unless otherwise required by applicable law.

II.  CLOSING.

          2.1 Closing Date. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place on January 9, 2004, or such
earlier or later date as may be mutually agreeable and set by the parties (the
"Closing Date"). The Closing shall be conducted by mail and deemed held at the
offices of Cole, Schotz, Meisel, Forman & Leonard, P.A. Hackensack, New Jersey,
at a time to be set by the parties. At the Closing, all actions taken and all
documents delivered will be deemed to have been taken and delivered
contemporaneously and no action will be taken nor any documents deemed delivered
until all actions have been taken and all documents have been delivered.

          2.2 Closing Deliveries by Seller. At the Closing, as a condition to
the Closing for Buyer, Seller shall transfer and assign all of the properties
and assets to be sold hereunder and shall deliver to Buyer a General Bill of
Sale (as set forth in Exhibit 2.2.1), an Assignment of Customer Leases (as set
forth in Exhibit 2.2.2), the Special and General Warranty Deeds (as set forth in
Exhibit 2.2.3), an Assignment of Real Property Leases (as set forth in Exhibit
2.2.4), vehicle titles and such other appropriate instruments of transfer and
physical possession as shall, in the reasonable opinion of counsel for Buyer, be
effective to vest in Buyer good and marketable title to said properties and
assets, including, but not limited to, releases of all outstanding security
interests in the properties and assets being transferred (other than the
Permitted Liens). Seller shall prepare a customer list based solely on its
readily available computer files of all customers who have purchased inventory
from the Locations during the fifteen (15) months preceding the Closing
("Customer List") and, at the Closing, transfer possession of such Customer
List,


                                        6



accounts receivable records and all other records concerning the Operations at
the Locations, including, without limitation, all customer records at the
Locations. Seller may retain historical records compiled at its corporate
office.

          2.3 Delivery and Payment by Buyer. At the Closing, Buyer will wire
transfer: (i) to an account designated by Seller funds in the amount of
$21,000,000 and (ii) to the U.S. Bank ("Escrow Agent") funds in the amount of
$2,000,000 and will deliver to Seller resale exemption certificates in the form
set forth in Exhibit 2.3a. Within three business days following the final
calculation of the Purchased Accounts Receivable, the Propane Inventory, the
Appliance Inventory, and the Prorations, and the Seller's and Buyer's execution
of the final Closing Statement (substantially in the form of Exhibit 2.3
attached hereto) evidencing their agreement to the calculation of such amounts,
Buyer will wire transfer to Seller the amount due pursuant to Section 1.3b
(Propane Inventory), Section 1.3c (Purchased Accounts Receivable) and Section
1.3d (Appliance Inventory), less any credits due Buyer under Section 1.5
(Prorations) or otherwise. On the first anniversary date of the Closing, Escrow
Agent shall wire transfer to the Seller the amount of $2,000,000, less any
amount that is not subject to disbursement or is payable to Buyer pursuant to
the Escrow Agreement.

          2.4 Further Assurances. Without further consideration, Seller or
Buyer, as the case may be, will at any time, and from time to time, execute and
deliver such further instruments of transfer or assignment and take such other
action as Buyer or Seller, as the case may be, reasonably may request to give
effect to the transactions contemplated by the terms of this Agreement.

          2.5 Procedures Pending Closing. Between the date of this Agreement and
the Closing Date:

               a. Access. Seller will give to Buyer and Buyer's representatives
     reasonable access during normal business hours to Seller's properties,
     books, records, and personnel files related solely to the Operations, and
     will allow such persons to make copies (at Buyer's expense) of all of such
     documents and all such financial and operating data and information as any
     such person shall reasonably request from time to time, provided, that no
     such access shall be requested or required to be given at any time or in
     any manner which interferes with the normal conduct of Seller's business.
     All such documents, data, and other materials are confidential and Buyer
     shall not release them to anyone except its employees and agents, and then
     only for the purposes of this transaction; provided, however, that any such
     documents, data, or other materials shall not be deemed confidential for
     purposes of this paragraph to the extent that the same (1) is a part of the
     public domain at the time of disclosure, (2) subsequently becomes a part of
     the public domain by publication or otherwise through no fault of Buyer or
     its representatives, (3) may be shown by Buyer to have been contained in a
     writing in its possession at the time of disclosure, which information had
     not been wrongfully acquired, directly or indirectly, from Seller and Buyer
     is not under an obligation of confidentiality with respect thereto, or (4)
     is subsequently disclosed to Buyer by a third party not in violation of any
     rights of, or obligations to, Seller. Such examination and investigation by
     Buyer shall not operate as a waiver of, or limit in any way, the warranties
     and


                                        7



     representations of Seller hereunder. If for any reason the transactions
     contemplated by this Agreement are not consummated, then upon Seller's
     written request Buyer shall return to Seller (and not thereafter use in its
     own business or otherwise, or disclose the contents of) all documents, data
     and other materials respecting Seller's business furnished to or obtained
     by Buyer or its representatives from Seller or its representatives.

               b. Conduct of Business. Without the prior written consent of
     Buyer and solely with respect to the Operations:

                    (1) Seller will not sell or otherwise dispose of, or
          purchase or acquire any assets at the Locations in any manner, except
          in the ordinary course of business;

                    (2) Seller will not make, accrue, or become liable in any
          way for any bonus, profit sharing, pension or incentive compensation
          payments to any employee of Seller other than in conformity with
          arrangements existing on or before November 24, 2003;

                    (3) Seller will not make or enter into any material
          agreement providing for any change in rates of wages or salaries or
          employment benefits or term or duration of employment of any employee
          of Seller;

                    (4) Seller will carry on its business in the same manner as
          heretofore conducted and will not take any action or enter into any
          contracts other than in conformity with prior practice in the ordinary
          and regular course of business as heretofore conducted; and

                    (5) Seller will use commercial good faith to maintain and
          preserve the Operations, consistent with past practice..

          2.6 Verification of Tanks. During the period commencing on the Closing
Date and ending June 30, 2004 (the "Verification Period"), Buyer shall use
commercially reasonable efforts to locate and verify (a) the quantity and sizes
of the tanks and cylinders as listed on Exhibit 1.1b (b) ownership of the tanks
and cylinders, and (c) proper identification (i.e., data plates) with respect to
the tanks and cylinders. At the end of the Verification Period, Buyer shall
submit to Seller a report (x) of all tanks and cylinders that cannot be located
and/or verified by Buyer, (y) with respect to which ownership is being contested
by a customer or other third party and (z) that do not have proper
identification as required by applicable laws or regulations, in each case,
within the Verification Period (the "Verification Report"). If Seller is unable
to resolve any claim by Buyer with respect to a tank or cylinder included in the
Verification Report within the thirty (30) day period following the Seller's
receipt of the Verification Report, Seller shall, at its option, (1) pay to
Buyer the replacement value of such tanks and cylinders in accordance with the
replacement costs set forth on Exhibit 2.6 or (2) provide Buyer with replacement
tanks and cylinders, which shall be equivalent in size, in good condition and
otherwise in accordance with Exhibit 1.1b. In the event that Seller pays the
replacement value or replaces an unverified or missing tank or cylinder, Seller
shall be assigned all of Buyer's


                                        8



ownership interest in the unverified or missing tank or cylinder, and Buyer
shall notify Seller if such unverified or missing tank is located.

          2.7 Closing Date Receipts. Provided the Closing occurs, the proceeds
resulting from the Operations conducted on the Closing Date shall accrue to the
benefit of and be deemed to be the property of Buyer. This Section does not
affect in any way the liabilities of Seller referenced in Section 1.4a.

III. REPRESENTATIONS AND WARRANTIES.

          3.1 Representations and Warranties of Seller. Seller represents,
warrants and agrees to and with Buyer as follows:

               a. Organizational Status. SP is a limited partnership, and SSS is
     a corporation, both duly organized, validly existing and in good standing
     under the laws of the state of Delaware and have full power and authority
     to carry on their business as presently conducted and to own and operate
     their assets, properties and business. SP and SSS are qualified to do
     business and are in good standing under the laws of the states of Texas,
     Oklahoma, Missouri and Kansas. Seller has full power and authority to
     execute this Agreement and carry out its obligations hereunder.

               b. Financial Information. Seller has delivered to Buyer copies of
     certain information (including financial information, operational data and
     sales information), copies of which are attached as Exhibit 3.1b hereto,
     relating to Seller's Operations ("Financial Information"). The Financial
     Information represents fairly the financial position of the Operations as
     of the dates thereof and the information included in the Financial
     Information presents fairly and accurately the financial and operational
     results of the Operations for the periods referred to therein, all prepared
     on a basis consistent with prior periods.

               c. Changes During Preceding Year. Except as set forth on Exhibit
     3.1c, during the year preceding the date hereof, with respect to the
     Operations there has not been:

                    (1) Any material change, financial or otherwise, in the
          condition of the properties, assets, liabilities, prospects or
          business, except normal and usual changes in the ordinary course of
          business or changes disclosed in the Financial Information, which have
          not in the aggregate been adverse to the Operations at the Locations;

                    (2) Any damage, destruction or loss (whether or not covered
          by insurance) suffered by Seller in an aggregate amount exceeding
          $10,000;

                    (3) Any sale, lease, abandonment or other disposition by
          Seller of any interest in any real property, or, except in the
          ordinary course of business,


                                        9



          in any machinery, equipment or other operating property, or any lease
          or sale of any propane tanks owned by Seller;

                    (4) Any other occurrence, event or condition which
          materially and adversely affects or, to Seller's knowledge, is likely
          to materially and adversely affect the Operations; or

                    (5) Any material and adverse change in the Financial
          Information.

               d. Personal Property. Except for the leased assets listed on
     Exhibit 3.1d (including the real property leases and vehicle leases),
     Seller owns and has good and marketable title to the personal and
     intangible property to be sold to Buyer hereunder including, without
     limitation, the propane tanks, equipment, vehicles and other assets
     described on Exhibit 1.1b. Except for the Permitted Liens, none of the
     personal property and assets to be transferred to Buyer pursuant to this
     Agreement at the Closing are subject to any contract of sale, encumbrance,
     security agreement, lien or charge of any kind or character. Except for the
     leased assets, no person, corporation or firm other than Seller has any
     ownership interest in the personal property being transferred pursuant to
     this Agreement. All appliances and other equipment installed by Seller, and
     the propane tanks, cylinders, regulators, vehicles and other equipment
     transferred hereunder, are in working order and are in compliance with all
     applicable safety regulations. The assets listed on Exhibit 1.1b attached
     hereto along with the leased assets are sufficient to enable Buyer to
     continue to conduct the Operations in the ordinary course of business,
     consistent with past practices. "Permitted Lien" means, as to real
     property, Permitted Real Estate Liens, and, as to all other property, (i)
     any lien for taxes not yet due or delinquent or being contested in good
     faith by appropriate proceedings, (ii) any statutory lien arising in the
     ordinary course of business by operation of law with respect to a liability
     that is not yet due or delinquent, and (iii) any other lien which
     individually or in the aggregate with other such liens could not reasonably
     be expected to materially impair the use or value of the asset to which it
     attaches.

               e. Real Property. The Special and General Warranty Deeds attached
     hereto as Exhibit 2.2.3 set forth a complete legal description of each
     parcel of real property owned by Seller and used in the Operations. Seller
     has good and marketable title in fee simple absolute to such real property
     and to the improvements thereon, free and clear of all liens, security
     interests, leases, encumbrances, easements, covenants, restrictions,
     defects or other burdens, except for Permitted Real Estate Liens. The
     transfer of such real property will pass to Buyer good and marketable fee
     simple title and full entitlement to the use and enjoyment of each parcel
     being transferred. Seller does not own, and the real property described in
     the General Warranty Deeds attached hereto as Exhibit 2.2.3 does not
     contain, any Underground Storage Tanks. "Permitted Real Estate Liens" means
     (i) statutory liens for current taxes or other governmental charges with
     respect to the real property (x) not yet due and payable or (y) with
     respect to which Seller retains all liability and the amount or validity of
     which is being contested in good faith by appropriate proceedings by
     Seller; (ii) mechanics', carriers', workers', repairers' and


                                       10



     similar statutory liens arising or incurred in the ordinary course of
     business for amounts which are not delinquent and which are not,
     individually or in the aggregate, material to the business Locations; (iii)
     zoning, entitlement, building and other land use regulations imposed by
     governmental agencies having jurisdiction over the real property which are
     not violated by the current use and operation of the real property; and
     (iv) covenants, conditions, restrictions, easements and other matters or
     record affecting title to the real property which do no materially impair
     the use or value of the affected parcel of real property for the purposes
     for which it is used in connection with the applicable Location.

               f. Other Contracts and Encumbrances. Except as disclosed on
     Exhibit 3.1f, Seller is not a party to any written or oral (i) contract not
     made in the ordinary course of business, (ii) franchise agreement, (iii)
     chattel mortgage, equipment lease, security agreement or conditional sales
     contract or (iv) partnership, joint venture or other business agreement
     with respect to the Operations, in each case where the consideration to be
     paid or received by Seller exceeds $5,000 or which cannot be terminated by
     Seller upon notice of thirty (30) or fewer days without penalty. Seller has
     performed all obligations and is not in default in any respect under any
     contract to which Seller is a party. Attached hereto as Exhibit 3.1f is a
     listing of, and Seller has provided complete copies of, all contracts and
     agreements to which Seller is a party for the future sale by Seller of
     propane for a fixed or capped price, or in volumes in excess of 5,000
     gallons per year.

               g. Taxes. Seller has filed all income tax returns and all real
     and personal property tax returns required to have been filed, and has paid
     all taxes as shown on said returns, all assessments received by it and all
     amounts due any governmental authority to the extent that such taxes,
     assessments and amounts have become due.

               h. Restrictions. Seller is not subject to any restriction
     contained in any charter, articles of incorporation, bylaw, mortgage, lien,
     lease, agreement, instrument, order, judgment or decree, which would
     prevent the consummation of the transactions contemplated by this
     Agreement.

               i. Easements. Seller has all easements and rights of ingress and
     egress necessary for the conduct of the Operations, for placement of its
     propane tanks, and all easements for utilities and services necessary for
     the conduct of the Operations on the real property to be sold to or leased
     by Buyer pursuant to this Agreement. The transfer, conveyance and
     assignment by Seller to Buyer at the Closing of the property and rights
     described in Section 1.1 will pass to Buyer good and marketable title to
     such property, together with all necessary easements and rights of ingress
     and egress associated therewith. Seller expressly represents and warrants
     that it will execute and deliver any additional deeds, instruments or
     documents required to convey to Buyer all easements necessary for the
     lawful conduct of the Operations at the Locations (including, without
     limitation, placement of all equipment and tanks on Seller's property) in
     the manner in which such Operations were conducted on the last business day
     before the Closing.


                                       11



               j. Litigation. Except as set forth on Exhibit 3.1j, Seller is not
     engaged in, or to its knowledge threatened with, any legal action or other
     proceeding before any court or administrative agency, has not been charged
     with, and to its knowledge is not under investigation with respect to any
     charge concerning, any material violation of any provision of federal,
     state or local law or administrative regulation in respect of or affecting
     either the property and assets conveyed hereunder or the Operations.

               k. Employees. Seller has not made any representations to its
     employees with respect to any undertaking or commitment by Buyer to
     continue the employment of such employees. None of Seller's employees at
     the Locations is or has been subject to any union, labor or collective
     bargaining agreement nor have there been any demands for such an agreement.
     Seller has no liability under the Employee Retirement Income Security Act,
     the National Labor Relations Act, the Fair Labor Standards Act, the Civil
     Rights Act, the Equal Employment Opportunity Act or any other social,
     employment or labor law affecting Seller which is not being retained by
     Seller as Seller's obligation. Seller has no accrued liability to any
     employee for wages, fringe benefits or otherwise which is not being
     retained by Seller as Seller's obligation.

               l.   Environment.

                    (1) With respect to the Operations and except as disclosed
          on Exhibit 3.1l, Seller is in full compliance with all aspects of each
          (i) federal, state or local law relating to pollution or the
          environment, including but not limited to laws relating to emissions,
          discharges, releases or threatened releases of pollutants,
          contaminants, chemicals or industrial, toxic or hazardous substances
          or wastes (collectively "Hazardous Wastes") into the environment or
          otherwise relating to the manufacture, processing, distribution, use,
          treatment, storage, disposal, transportation or handling of Hazardous
          Wastes (collectively "Environmental Laws"); and (ii) regulation, code,
          plan, order, decree, judgment, injunction, notice or demand letter
          issued, entered, promulgated or approved pursuant to or in connection
          with any Environmental Laws (which collectively with Environmental
          Laws are hereinafter referred to as "Environmental Laws and
          Regulations"). With respect to the Operations and except as disclosed
          on Exhibit 3.1l, there is no civil, criminal, administrative or other
          action, suit, demand, claim, hearing, notice of violation,
          investigation, proceeding, notice or demand letter pending, received
          or, to the knowledge of Seller, threatened against Seller relating in
          any way to Environmental Laws and Regulations.

                    (2) With respect to the Operations and except as disclosed
          on Exhibit 3.1l, during the period of ownership, leasehold interest or
          operation by Seller or its affiliates with respect to such parcel of
          Transferred Property there have occurred no and there are no
          anticipated, releases or substantial threats of a release of any
          Hazardous Wastes, from or onto any Transferred Property (as defined
          below) which release or threatened release is or may be subject to
          regulation under Environmental Laws and Regulations. Without limiting
          the


                                       12



          foregoing, no asbestos fibers or materials or polychlorinated
          biphenyls (PCBs) are on or in any Transferred Property. None of the
          Transferred Property has previously been used, is now being used or is
          contemplated to be used for the generation, transportation, treatment,
          storage, abatement or disposal of any Hazardous Wastes subject to
          regulation under Environmental Laws and Regulations. "Transferred
          Property" means any Location which (i) is currently owned, leased or
          utilized by Seller and (ii) which Buyer is purchasing, leasing,
          assuming the existing lease or otherwise obtaining the right to
          utilize such property in connection with the transactions contemplated
          by this Agreement.

                    (3) With respect to each parcel of Transferred Property and
          except as disclosed on Exhibit 3.1l, during the period of ownership,
          leasehold interest or operation by Seller or its affiliates with
          respect to such parcel of Transferred Property, there have occurred no
          conditions, circumstances, activities, practices, incidents, actions
          or plans which may give rise to any common law or legal liability, or
          otherwise form the basis of any claim, action, demand, suit,
          proceeding, hearing, notice of violation, study or investigation,
          based on or related to the manufacture, generation, ownership,
          possession, distribution, use, treatment, abatement, storage,
          disposal, transportation or handling, or the emission, discharge,
          release or threatened release into the environment of any Hazardous
          Wastes. For purposes of this Section 3.1, the affiliates of Seller
          shall be defined as: Suburban Propane, a division of Quantum Chemical
          Corporation; Quantum Chemical Corporation; Hanson PLC; and Millennium
          Petrochemicals, Inc.

               m. Licenses and Permits. Seller and its employees have all
     material licenses, permits and approvals required under federal law, the
     laws of the states of Texas, Oklahoma, Missouri and Kansas, or any local or
     regional governmental authority to conduct the business of Seller at all
     Locations. Seller will cooperate with Buyer in transferring to Buyer or its
     employees those licenses, permits or approvals which may be transferable.
     Seller has no knowledge of any facts or occurrences which constitute
     violations of any licensing, permit or other laws to which Seller, its
     employees or the Operations are subject.

               n. Compliance with Law and Applicable Government Regulations.
     With respect to the Operations, Seller has not previously failed nor is
     currently failing to comply with any applicable federal, state or local law
     or regulation, including without limitation, any energy, antitrust, health
     and safety or Environmental Laws and Regulations. With respect to the
     Operations, there are no proceedings of record, no proceedings are pending
     or to Seller's knowledge threatened, nor has Seller received any written
     notice regarding any violation of any law, ordinance, requirement, order,
     rule or regulation enforced by any governmental agency or other entity
     (federal, state or local) claiming jurisdiction over Seller, including
     without limitation, any requirement of OSHA or any pollution and/or
     environmental control agency.


                                       13



               o. Insurance. Seller maintains in effect insurance covering
     Seller's Operations and any liabilities relating thereto in an amount
     believed adequate by Seller, and such insurance coverage shall be
     maintained by Seller through the Closing Date. The products liability and
     personal injury insurance maintained by Seller has been on an "occurrence"
     basis during the six-year period prior to the Closing Date. Seller has
     previously delivered to Buyer a true and complete schedule of its general
     liability insurance policies.

               p. Authorization. This Agreement and all documents and actions
     required to consummate the transactions contemplated hereby have been duly
     approved and authorized by the SP's Board of Supervisors and SSS's Board of
     Directors.

               q. Brokerage Fees and Expenses. Seller has no liability for
     brokerage fees or other commissions relative to this Agreement, or to the
     transactions contemplated hereby.

               r. Exhibits Correct. The exhibits and schedules attached hereto
     are true, complete and accurate as of the date hereof and Seller shall
     notify Buyer of all changes in such information in writing at the Closing
     so that such exhibits and schedules will be true, complete and correct as
     of the Closing Date.

               s. Warranties Correct, Etc. The representations and warranties of
     Seller contained in this Agreement or otherwise made in writing in
     connection with the transactions contemplated by this Agreement shall be
     true on and as of the Closing Date with the same effect (except as to
     transactions contemplated by this Agreement) as though such representations
     and warranties had been made on and as of such date, and each and all of
     the agreements and conditions to be performed or observed by Seller on or
     before the Closing Date pursuant to the terms hereof shall have been duly
     performed or observed.

               t. Disclaimer of other Representations and Warranties. Except as
     expressly set forth in this Section 3.1 or otherwise provided in this
     Agreement, Seller makes no representation or warranty, express or implied,
     at law or in equity, including any representation or warranty in respect of
     the Operations or the assets transferred or the liabilities assumed, or the
     MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE of the acquired
     assets and any such other representations or warranties are hereby
     expressly disclaimed.

          3.2 Representations and Warranties of Buyer. Buyer represents,
warrants and agrees to and with Seller as follows:

               a. Organizational Status. Buyer is a limited partnership duly
     organized, validly existing and in good standing under the laws of the
     state of Delaware and has the power and authority to own its property and
     to carry on its business as


                                       14



     presently conducted. Buyer has full power and authority to execute this
     Agreement and carry out its obligations hereunder.

               b. Restrictions. Buyer is not subject to any restriction
     contained in any charter, partnership agreement, mortgage, lien, lease,
     agreement, instrument, order, judgment or decree, which would prevent the
     consummation of the transactions contemplated by this Agreement.

               c. Authorization. This Agreement and the transactions
     contemplated hereby have been duly approved and authorized by all necessary
     corporate action of the Board of Directors of Buyer's general partner.

               d. Brokerage Fees and Expenses. Buyer shall indemnify Seller and
     hold Seller harmless against and in respect of any claim for brokerage fees
     or other commissions incurred or owing by Buyer relative to this Agreement,
     or to the transactions contemplated hereby, and also in respect of all
     expenses of any character incurred by Buyer in connection with this
     Agreement or such transactions.

               e. Investigation by Buyer. Buyer acknowledges that except for
     Seller's express representations and warranties set forth in this
     Agreement, Buyer is relying upon Buyer's own independent investigation of
     the assets acquired hereunder and liabilities assumed in entering into this
     Agreement. In entering into this Agreement, Buyer has relied solely upon
     the express representations, warranties and covenants of Seller set forth
     in Section 3 hereof and Buyer's own investigation and analysis. Buyer
     further acknowledges, that except as expressly set forth in the
     representations and warranties in Section 3 there are NO EXPRESS OR IMPLIED
     WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

               f. Warranties Correct, Etc. The representations and warranties of
     Buyer contained in this Agreement or otherwise made in writing in
     connection with the transactions contemplated by this Agreement shall be
     true on and as of the Closing Date with the same effect as though such
     representations and warranties had been made on and as of such date.


                                       15



IV.  CONDITIONS TO CLOSING.

          4.1 Conditions to Buyer's Obligations. If, for any reason whatsoever,
the following conditions are not satisfied (or waived by Buyer) by the Closing,
then Buyer, at its option, may terminate this Agreement without further
obligation to Seller (other than for confidentiality, return of Seller
confidential information, liability for any prior breach of the Agreement and
those other provisions of this Agreement intended to survive):

               a. Documents. Seller shall have furnished Buyer with all
     documents, certificates and other instruments required to be furnished by
     Seller pursuant to the terms of this Agreement, including without
     limitation, the Customer List, vehicle titles, and certified copies of
     resolutions duly adopted by the SP's Board of Supervisors and SSS's Board
     of Directors authorizing all action necessary to enable Seller to comply
     with the terms of this Agreement.

               b. No Actions or Proceedings. No material action or proceeding
     against Seller which is adverse to the Operations shall have been
     instituted or, to the knowledge of Seller, threatened before a court or
     other governmental body or instituted or threatened by any public
     authority.

               c. Title Insurance. Buyer shall obtain a commitment for title
     insurance evidencing the obligation of a title insurer to insure
     merchantable fee simple title in Buyer subject to Permitted Real Estate
     Liens, as of the Closing Date, to the real property described in the deeds
     attached hereto as Exhibit 2.2.3, and Buyer's reasonable objections to the
     state of title shown on such commitment shall have been satisfied.

               d. No Material Adverse Change. No material adverse change in the
     amount or condition of the properties, assets, liabilities or business of
     Seller with respect to the Operations at the Locations, taken as a whole,
     shall have occurred during the period between the date of execution hereof
     and the Closing.

               e. Representations, Warranties, Etc. The representations and
     warranties of Seller hereunder shall be true when made and shall be true in
     all material respects at the Closing Date as though such representation and
     warranty had been made on the Closing Date, and Seller shall have
     substantially performed all covenants and agreements on its part required
     to be performed, and shall not be in default under any of the provisions of
     this Agreement, at the Closing Date.

          4.2 Conditions to Seller's Obligations. If, for any reason whatsoever,
the following conditions are not satisfied (or waived by Seller) by the Closing,
then Seller, at its option, may terminate this Agreement with no further
obligation to Buyer (other than for confidentiality, liability for any prior
breach of the Agreement and those other provisions of this Agreement intended to
survive):


                                       16



               a. Deliveries. Buyer shall have furnished Seller with all
     documents, payments, certificates and other instruments required to be
     furnished to Seller by Buyer pursuant to the terms of this Agreement.

               b. Representations, Warranties, Etc. Each and every
     representation and warranty of Buyer hereunder shall be true in all
     material respects at the Closing Date as though such representation and
     warranty had been made on the Closing Date, and Buyer shall have
     substantially performed all covenants and agreements on its part required
     to be performed, and shall not be in default under any of the provisions of
     this Agreement, at the Closing Date.

V.   FURTHER AGREEMENTS.

          5.1 Survival of Representations and Warranties; Indemnity.

               a. Warranty Survival. All of the representations and warranties
     of the Seller contained in Sections 3.1b, 3.1c, 3.1d, 3.1e, 3.1f, 3.1h,
     3.1i, 3.1j, 3.1k, 3.1m, 3.1n, 3.1o, 3.1q, 3.1r, and 3.1s above shall
     survive the Closing Date and continue in full force and effect for a period
     of eighteen (18) months thereafter. All of the representations and
     warranties of the Seller contained in Section 3.1g above shall survive the
     Closing Date and continue in full force and effect for a period of five (5)
     years thereafter. All of the representations and warranties of Seller
     contained in Section 3.1l above shall survive the Closing Date and continue
     in full force and effect for a period of three (3) years thereafter. All of
     the covenants and the other representations and warranties of the parties
     contained in this Agreement shall survive the Closing Date and continue in
     full force and effect forever thereafter (subject to any applicable
     statutes of limitations).

               b. Seller Indemnification. Seller will indemnify and hold Buyer,
     Buyer's directors, officers and employees harmless against any loss, cost,
     liability or expense (including, without limitation, costs and expenses of
     litigation and reasonable attorneys' fees) (hereinafter "Damages") incurred
     or suffered by Buyer or any affiliate of Buyer as a result of (i) the
     incorrectness or breach of any of the representations, warranties,
     covenants or agreements of Seller contained in this Agreement or given on
     the Closing Date or (ii) the assertion against Buyer of any liability of
     Seller; provided, however, that the Seller shall not have any obligation to
     indemnify the Buyer from and against any Damages resulting from, arising
     out of, relating to, in the nature of, or caused by (A) the breach of any
     such representation or warranty listed above until the Buyer has Damages by
     reason of all such breaches in excess of a $250,000 aggregate threshold (at
     which point the Seller will be obligated to indemnify the Buyer from and
     against all such Damages relating back to the first dollar), or for Damages
     in excess of a maximum aggregate of $5,000,000, or (B) the breach of the
     representations or any violation of Environmental Laws and Regulations
     except caused by the Operations or, with respect to the Transferred
     Properties, which occurred during the period of ownership, leasehold
     interest or operation by Seller or its affiliates. Without limiting the
     remedies available to Buyer to enforce the indemnities provided by this
     Section 5.1 and subject to the Escrow


                                       17



     Agreement, Seller agrees that the amount of any Damages suffered by Buyer
     may be credited and set off against any sums of money at any time or from
     time to time payable or deliverable by Buyer or its successors to Seller.
     Individual Damages of less than $5,000 shall not be subject to
     indemnification and shall not count toward the aggregate threshold or the
     maximum aggregate. Seller shall have a further duty to indemnify Buyer for
     Damages incurred or suffered by Buyer arising out of or with respect to the
     environmental conditions listed on Exhibit 3.1l (to the extent the event or
     condition arose or occurred during the period of ownership, leasehold
     interest or operation by Seller or its affiliates) and the litigation
     listed on Exhibit 3.1j, subject to the aggregate threshold, maximum
     aggregate and individual Damages threshold set forth above.

               c. Buyer's Indemnification. Buyer will indemnify and hold Seller
     and Seller's directors, officers, and employees harmless against any
     Damages incurred or suffered by Seller or affiliate of Seller as a result
     of or arising from (i) the incorrectness or breach of any of the
     representations, warranties, covenants and agreements of Buyer contained in
     this Agreement or given on the Closing Date; or (ii) any Assumed Liability.

          5.2 Indemnification Procedures

               a. In the event that any legal proceedings shall be instituted or
     that any claim or demand ("Claim") shall be asserted by any third person in
     respect of which payment may be sought under Section 5.1 hereof, the
     indemnified party shall reasonably and promptly cause written notice of the
     assertion of any Claim of which it has knowledge which is covered by this
     indemnity to be forwarded to the indemnifying party. The indemnifying party
     shall have the right, at its sole option and expense, to be represented by
     counsel of its choice (which must be reasonably satisfactory to the
     indemnified party), and to defend against, negotiate, settle or otherwise
     deal with any Claim which relates to any Damages indemnified against
     hereunder. If the indemnifying party elects to defend against, negotiate,
     settle or otherwise deal with any Claim which relates to any Damages
     indemnified against hereunder, it shall within five (5) days (or sooner, if
     the nature of the Claim so requires) notify the indemnified party of its
     intent to do so. If the indemnifying party elects not to defend against,
     negotiate, settle or otherwise deal with any Claim which relates to any
     Damages indemnified against hereunder, fails to notify the indemnified
     party of its election as herein provided or contests its obligation to
     indemnify the indemnified party for such Damages under this Agreement, the
     indemnified party may defend against, negotiate, settle or otherwise deal
     with such Claim. If the indemnified party defends any Claim, then the
     indemnifying party shall reimburse the indemnified party for the costs and
     expenses (including reasonable attorneys' and other professionals' fees and
     expenses) of defending such Claim upon submission of periodic bills. If the
     indemnifying party shall assume the defense of any Claim, the indemnified
     party may participate, at his or its own expense, in the defense of such
     Claim; provided, however, that such indemnified party shall be entitled to
     participate in any such defense with separate counsel at the expense of the
     indemnifying party if, (i) so requested by the indemnifying party to
     participate or (ii) in the reasonable opinion of counsel to the indemnified
     party, a conflict or potential conflict exists between the indemnified
     party and the indemnifying party that would make such separate


                                       18



     representation advisable; and provided, further, that the indemnifying
     party shall not be required to pay for more than one such counsel for all
     indemnified parties in connection with any Claim. The parties agree to
     cooperate fully with each other in connection with the defense, negotiation
     or settlement of any such Claim.

               b. In the case of a Claim brought by a third party, the party to
     be indemnified shall be reimbursed for any legal or other expenses
     reasonably incurred by the party to be indemnified in connection with
     investigating or defending any such Claim as such expenses are incurred. In
     the case of a Claim brought by Seller against Buyer, or by Buyer against
     Seller, after any final judgment or award shall have been rendered by a
     court, arbitration board or administrative agency of competent jurisdiction
     and the expiration of the time in which to appeal there from, or a
     settlement shall have been consummated, or Buyer and Seller shall have
     arrived at a mutually binding agreement with respect to such a Claim, the
     indemnified party shall forward to the indemnifying party notice of any
     sums due and owing by the indemnifying party pursuant to this Agreement
     with respect to such matter and the indemnifying party shall be required to
     pay all of the sums so due and owing to the indemnified party by wire
     transfer of immediately available funds within 10 business days after the
     date of such notice.

               c. No settlement of any Claim may be made by the indemnifying
     party without the consent of the indemnified party unless such settlement
     releases the indemnified party from any liability in respect thereof and
     does not include any admission of culpability on the part of the
     indemnified party.

               d. In the event that an indemnified party should have a claim
     against the indemnifying party hereunder which does not involve a claim or
     demand being asserted by a third party, the indemnified party shall send a
     written notice with respect to such claim to the indemnifying party. The
     indemnifying party shall have 10 days from the date such notice is
     delivered during which to notify the indemnified party in writing of any
     good faith objections it has to the indemnified party's notice or claims
     for indemnification, setting forth in reasonable detail each of the
     indemnifying party's objections thereto. If the indemnifying party does
     deliver such written notice of objection within such 10-day period, the
     indemnifying party and the indemnified party shall attempt in good faith to
     resolve any such dispute within 10 days of the delivery by the indemnifying
     party of such written notice of objection.

          5.3 Indemnification as Sole Remedy. Except in connection with fraud or
specific performance, Buyer acknowledges that the indemnification provisions
contained in this Section 5 constitute Buyer's sole and exclusive remedy with
respect to any claims or disputes arising out of or in connection with the
Agreement.

          5.4  Covenants Against Competition.

               a. Seller agrees that Seller, and Seller's affiliates and
     officers will not (i) for the period commencing on the Closing Date and
     ending five years after such date, reveal, make known or use, directly or
     indirectly, any confidential business information


                                       19



     (including without limitation, customer lists and records) sold to Buyer
     pursuant to this Agreement, nor (ii) for the period commencing on the
     Closing Date and ending three years after such date, within a 50-mile
     radius of the location of any of Seller's Operations in Texas, Oklahoma,
     Missouri or Kansas, directly or indirectly (whether as owner, director,
     shareholder (with the exception of beneficial ownership by such persons or
     entities, individually and in the aggregate, of not more than five percent
     of the outstanding equity securities of any publicly held corporation),
     employee, officer, agent, broker, dealer, representative or in any other
     capacity), (a) solicit, market or provide or attempt to market or provide
     to any person or entity either propane, tanks, cylinders or any other
     products or services associated with the Operations, (b) divert or attempt
     to divert from Buyer any business with any customer or account with which
     Seller had any contact or association, which was under the supervision of
     Seller, or the identity of which was learned by Seller as a result of
     conducting the Operations, (c) induce any salesperson, distributor,
     manufacturer, representative, agent, jobber or other person transacting
     business with Buyer at the Locations to terminate his, her or its
     relationship or association with Buyer, or to represent, distribute or sell
     services or products in competition with the services or products of Buyer,
     (d) induce or cause any employee of Buyer at the Locations to leave the
     employ of Buyer or (e) lend money to, invest in or otherwise assist in any
     manner any individual or entity engaged in activities described in (a),
     (b), (c) or (d) above. Notwithstanding the preceding, the restrictions of
     this Section 5.4 shall not be construed in any manner to prohibit or
     restrict the Seller, from directly or indirectly (i) acquiring all or
     substantially all of the assets or capital stock of any of the entities
     listed on Exhibit 5.4, or their successors or assigns. Recognizing the
     irreparable nature of the injury which would be caused Buyer by violation
     of this Section 5.4, Seller agrees that in addition to and without
     limitation of any rights which Buyer might have hereunder, any violation of
     this Section 5.4 shall be the proper subject matter for immediate
     injunctive relief and Buyer shall have the right to offset any Damages it
     might have incurred by reason of any breach hereof against any sums of
     money at any time deliverable by Buyer or its successors to Seller subject
     to the Escrow Agreement.

               b. If any covenant, undertaking or other provision of Section
     5.4a hereof shall be determined to be invalid, illegal or incapable of
     being enforced by reason of any rule of law or public policy, all other
     covenants, undertakings and provisions of such Section shall nevertheless
     remain in full force and effect and shall be deemed separable and divisible
     from all other covenants, undertakings and provisions thereof and none
     shall be deemed to be dependent upon any other unless so expressed herein.
     If any provision of such Section relating to time periods or geographical
     area is found by a court of competent jurisdiction to exceed the maximum
     time period or geographical area such court deems reasonable and
     enforceable, the parties agree that such court may enforce such provisions
     for the maximum time period and/or geographical area as the court finds to
     be reasonable.

          5.5 Retained Access. Following the Closing, to the extent reasonably
required for any bona fide business purpose, Buyer will allow, and will use its
reasonable efforts to cause its affiliates to allow, Seller (and Seller's
agents, representatives and affiliates) access to all business records
concerning the Operations, the acquired assets hereunder or the Assumed


                                       20



Liabilities which relate to the period prior to the Closing Date and will permit
such person to make copies of same. Such access will be granted upon reasonable
advance notice, during normal business hours, and in such a manner so as not to
interfere unreasonably with the operations of the Business. Without limiting the
generality of the foregoing, if either Buyer or Seller or any of its affiliates
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand in connection with (a) any
transaction contemplated hereby, or (b) any fact, situation, circumstances,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing relating to
the Operations, then the other party will cooperate, and use its reasonable
efforts to cause its affiliates to cooperate, with the contesting or defending
party and its counsel in such contest or defense, make available such other
party's and its affiliates' personnel and provide such testimony and access to
books and records as are reasonably requested in connection with such contest or
defense, all at the contesting or defending party's expense.

          5.6 Taxes. Buyer shall be solely responsible for the payment of any
sales or transfer or other taxes as may be required to paid in connection with
the transactions provided for herein, together with all documentary, filing and
recording taxes, fees and charges associated with the transactions contemplated
by this Agreement. All personal property and other taxes and assessments based
upon or measured by the ownership of property, or the receipt of proceeds
therefrom, shall be prorated between Seller and Buyer as of the Closing Date;
provided, however, that each party shall be responsible for its own income and
franchise taxes. Seller may require Buyer to remit any and all applicable taxes
to Seller; under these circumstances, Seller shall be responsible for remitting
said taxes to the appropriate taxing authorities.

          5.7 Employees. Except as set forth on Exhibit 5.7, Buyer agrees to
extend offers of employment to all employees of Seller who shall be working as
of the Closing Date at any of the Locations and who meet Buyer's employment
qualifications and criteria, and shall employ such employees who accept such
offers ("Hired Employees") at no less than the same wage or salary rate in
effect and on other terms, conditions, and benefits as are provided to similarly
situated employees of the Buyer.

          5.8 Name Change; Use of Seller's Name. Buyer shall remove the name and
logo of Seller from the assets at the Locations within a commercially reasonable
time, but in no event later than ninety (90) days after the Closing for primary
locations, and at secondary locations and customer locations six (6) months
after the Closing, at Buyer's sole cost and expense. From and after the Closing,
Buyer shall use only Buyer's own name when taking action in respect of the
Operations or in connection with any Location. Buyer shall not state, represent
or imply that Buyer is connected in any manner with, or acting for or on behalf
of, Seller or any of Seller's affiliates. Buyer shall not (a) use the marks
and/or names of, or otherwise refer to Seller or any of Seller's affiliates or
(b) use any names and/or marks similar to the names and/or marks of any Seller
or any of Seller's affiliates.

          5.9 Confidential Information. The parties acknowledge and agree that
the Confidentiality Agreements dated February 26, 2003 and April 4, 2003 between
Seller as "Discloser" and Buyer as "Disclosee" remain in full force and effect
and shall survive the


                                       21



termination of this Agreement, but shall not survive the Closing, and if Closing
occurs, shall be null and void thereafter.

          5.10 Public Announcements. All public announcements prior to and on
the Closing Date relating to this Agreement or the transactions contemplated
hereby, including announcements to employees, will be made only as may be agreed
upon jointly by the parties hereto; provided, however, that Buyer or Seller may
make any public disclosure it believes in good faith is required by applicable
law or stock exchange requirement (in which case the disclosing party will use
its reasonable best efforts to advise the other party prior to making the
disclosure).

          5.11 Notices. Any notice, request, instrument or other document to be
given hereunder shall be in writing and delivered personally or sent by
certified or registered mail, postage prepaid:

          If to Buyer, addressed as follows:

               Ferrellgas, L.P.
               c/o Ferrellgas, Inc.
               One Liberty Plaza
               Liberty, Missouri 64068
               Attention: Kenneth A. Heinz, Sr. Vice President,
               Corporate Development

     with a copy to:

               Bryan Cave LLP
               1200 Main Street, Suite 3500
               Kansas City, Missouri 64105
               Attention: Morris K. Withers, Esq.

          If to Seller, addressed as follows:

               Suburban Propane, L.P.
               240 Route 10 West, P.O. Box 206
               Whippany, NJ 07981
               Attention: Janice Meola, Esq.

     with a copy to:

               Cole, Schotz, Meisel, Forman & Leonard, P.A.
               Court Plaza North
               25 Main Street
               Hackensack, NJ 07601
               Attention: Alan Rubin, Esq.


                                       22



or to such other address as any of the parties hereto may designate by notice
given as above provided. Any item sent by registered or certified mail, as above
provided, will be deemed given when deposited in the United States mails.

          5.12 Risk of Loss. Seller shall bear the risk of loss or damage to the
properties and assets to be sold hereunder until the Closing.

          5.13 Bulk Sales Law. Buyer waives compliance by Seller with the
provisions of any applicable bulk sales, fraudulent conveyance or other law for
the protection of creditors of any jurisdiction that may otherwise be applicable
in connection with the transfer of the assets under this Agreement and in
consideration of such waiver, Seller agrees to indemnify Buyer and hold Buyer
harmless from and against any Damages arising out of or resulting from such
non-compliance.

          5.14 Vehicle Leases. Seller shall negotiate a settlement of the
vehicle leases for all vehicles used in the Operations at the Locations and
Buyer shall then direct its vehicle leasing company to purchase of all such
vehicles, at which time Seller shall arrange for its leasing company to provide
title to such vehicles as directed by Buyer. Buyer shall pay all transfer taxes
relating to such transaction. The parties acknowledge that the leased vehicles
transactions will not be consummated prior to Closing, and Seller shall make all
leased vehicles available for use by Buyer in conducting operations effective on
the Closing Date. In the event that the buyout of the leases owned by LeasePlan,
Donlen, Fleet Capital, Verizon, GE Capital, Emigrant and All First (with respect
to leased vehicles) are not executed at the time of the Closing, Buyer and
Seller agree as follows:

               (a) Buyer may operate in the ordinary course of business, but
     shall not remove from the Locations, the vehicles corresponding to those
     leases until the buyout and purchase by Buyer's leasing company are
     executed by all relevant parties; and

               (b) Provided Buyer has diligently pursued good faith efforts to
     complete the transactions contemplated by this Section, if a buyout for any
     vehicle is not executed within sixty (60) days of the Closing Date, Seller
     shall buyout the lease on any such vehicles and Buyer shall reimburse
     Seller for the buyout amount, after which Seller shall transfer title to
     said vehicles. Each party shall pay its own transfer taxes in that event.
     In the event that Seller, after good faith efforts, is unable to transfer
     title to any vehicle to Buyer pursuant to the terms above, Buyer may
     purchase a new vehicle of a similar make, model and type in which case
     Seller shall pay to Buyer the difference between the cost of the
     replacement vehicle and the buyout value of the existing vehicle.

               (c) At all times that Seller is a guarantor or otherwise remains
     potentially liable in any manner with respect to any motor vehicle lease
     (each, a "Vehicle Lease") set forth on Exhibit 3.1d: (i) Buyer shall
     faithfully abide by, perform and discharge, at its sole cost and expense,
     each and every obligation, covenant and agreement under such Vehicle Lease
     arising after the Closing Date and shall do so prior


                                       23



     to the expiration of any applicable grace or cure period. Buyer hereby
     agrees to indemnify and hold Seller harmless from and against any and all
     loss, cost, expense (including reasonable attorneys' fees), damage and
     liability incurred by Seller as a result of claims brought against Seller
     with respect to the performance of all of the terms, covenants and
     conditions of such Vehicle Lease to be performed from and after the Closing
     Date. (ii) Buyer shall not modify, amend or alter the terms or provisions
     of such Vehicle Lease, and otherwise shall not take any action that could,
     in either case, reasonably be expected to increase the aggregate liability
     of Buyer or Seller thereunder. (iii) Buyer shall not (A) sell, encumber,
     assign, transfer or otherwise dispose of such Vehicle Lease, the motor
     vehicles in respect thereof (in respect of any such Lease, the "Leased
     Motor Vehicle") or Buyer's interest therein, whether effected voluntarily
     or involuntarily, directly or indirectly, by operation of law or otherwise,
     or (B) consent to or enter into any contract, agreement or arrangement to
     take any action prohibited by clause (A) above. (iv) Buyer shall faithfully
     maintain any and all insurance requirements set forth by the Lessor of the
     Leased Motor Vehicles.

               (d) If Buyer shall fail to perform any covenant contained in any
     Vehicle Lease and does not cure said failure within ten days of receipt of
     written notice of said failure, (i) Seller may (but shall have no
     obligation to) make advances to perform the same on Buyer's behalf, and all
     sums so advanced shall be repaid by Buyer immediately upon the demand of
     Seller, (ii) Buyer shall transfer such Vehicle Lease and surrender
     possession of the related Leased Motor Vehicle to Seller immediately upon
     the demand of Seller and (iii) Seller shall be authorized, absent voluntary
     surrender by Buyer, to assume the obligations of Buyer under the applicable
     Vehicle Lease and to take possession of the Leased Motor Vehicle subject to
     such Lease. To secure the prompt and complete performance and observance of
     the covenants and other obligations of Buyer above, Buyer hereby grants,
     conveys, pledges, hypothecates and transfers to Seller a security interest
     in and to all of Buyer's right, title and interest in and to the Vehicle
     Leases and the Leased Motor Vehicles.

          5.15 Tax Disclosures. Notwithstanding any other agreement among the
parties or anything else herein to the contrary, each party to this Agreement
(and any employee, representative or other agent thereof) may disclose to any
and all persons, without limitation of any kind, the U.S. federal income tax
treatment and any tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided, that no party (or any employee, representative or other
agent thereof) shall disclose pursuant to this section (i) any information that
is not relevant to an understanding of the U.S. federal income tax treatment of
the transactions contemplated by this Agreement, including the identity of any
party to this Agreement (or its employees, representatives or agents) or other
information that could lead any person to determine such identity or (ii) any
information to the extent such disclosure could result in a violation of any
federal or state securities laws; and provided further, that this section shall
not apply until the earliest of (a) the date of public announcement of
discussions relating to the transactions, (b) the date of public announcement of
the transactions, or (c) the date of execution of an agreement, with or without
consideration, to enter into the transactions.


                                       24



          5.16 Miscellaneous. This Agreement, including the documents and
exhibits referred to herein, contains the entire understanding of the parties
hereto and supersedes all prior understandings, agreements or undertakings of
the parties with respect to the subject matter contained herein, and may be
amended only by a written instrument executed by all of the parties hereto.
Wherever possible, each provision of this Agreement shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or declared invalid under applicable
law, such provision shall be void and of no effect and the remaining provisions
of this Agreement shall remain in full force and effect. This Agreement shall be
a contract made under, governed by and construed under, the laws of the state of
Delaware, except no doctrine of choice of law shall be used to apply any law
other than that of the state of Delaware. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors,
assigns and personal representatives; provided, however, that no assignment by
any party hereto of any right hereunder shall be made on or prior to the Closing
Date, and no assignment, by operation of law or otherwise, shall relieve any
party of its obligations hereunder. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
shall constitute together but one and the same instrument.

                            (SIGNATURES ON NEXT PAGE)


                                       25



          IN WITNESS WHEREOF, the parties hereto have caused this Purchase and
Noncompetition Agreement to be executed as of the day and year first above
written.

SELLER:                                   BUYER:

SUBURBAN PROPANE, L.P.                    FERRELLGAS, L.P.

                                          By: Ferrellgas, Inc., General Partner


By:                                       By:
    ---------------------------------         ----------------------------------
                                              Kenneth A. Heinz, Sr. Vice
                                              President Corporate Development

Fed. ID #                                 Fed. ID # 43-1698481


SUBURBAN SALES AND SERVICE, INC.


By:
    ---------------------------------

Fed. ID #


                                       26

EX-10.15 9 file006.htm PURCHASE AND NONCOMPETITION AGREEMENT



                                                                   Exhibit 10.15

                      PURCHASE AND NONCOMPETITION AGREEMENT

     THIS PURCHASE AND NONCOMPETITION AGREEMENT (this "Agreement") is made and
entered into this 1st day of September 2004, by and between Ferrellgas, L.P., a
Delaware limited partnership ("Buyer"), and Suburban Propane, L.P., a Delaware
limited partnership ("SP"), and Suburban Sales and Service, Inc., a Delaware
corporation ("SSS" and, collectively with SP, "Seller").

                                   WITNESSETH

     That in consideration of the mutual covenants herein contained, the parties
agree as follows:

I    SALE AND PURCHASE.

     1.1. Agreements to Sell and Purchase. Seller agrees to sell, transfer,
assign and deliver to Buyer, and Buyer agrees to purchase and accept from
Seller, on the Closing Date (hereinafter defined), the property of Seller
referred to in this Section 1.1 (not specifically excluded under Section 1.2
below), relating to Seller's propane operations (the "Operations") within the
states of Minnesota, North Dakota and Wisconsin as carried on at the locations
identified in Exhibit 1.1 ("the "Locations"), as follows:

          a. All propane inventory held by Seller at the Locations on the
Closing Date;

          b. All propane tanks, cylinders, dispensers, regulators, piping,
vehicles, fixtures constituting Seller's bulk facilities, tools and other
equipment at or serviced from the Locations, including, without limitation,
those assets described on Exhibit 1.1b;

          c. To the extent assignable, all of Seller's right, title and interest
in and to permits, licenses (including truck licenses) and telephone numbers
used in connection with the Operations at the Locations;

          d. All of Seller's propane products accounts, retail accounts and
service customers serviced from or at the Locations, including without
limitation, all of Seller's right, title and interest in and to the originals
and all copies of customer lists and records;

          e. All customer contracts and fuel supply contracts with customers
serviced from or at the Locations, including, without limitation, contracts on
product tanks and customer locations; and all contract rights arising from
non-compete and non-solicit agreements;



          f. All customer leases and lease option agreements covering the
propane tanks and cylinders owned or leased by Seller to customers serviced from
the Locations;

          g. The real estate owned by Seller for use in the Operations, as more
particularly described in the deeds attached hereto as Exhibit 2.2.3, including
all fixtures attached thereto and improvements and buildings thereon;

          h. Unless specifically excluded, all rights of Seller under real
property leases for leased real estate used in the Operations, and contracts of
the Operations;

          i. Trade accounts receivable of the Operations for account debtors
serviced from the Locations, as of the Closing Date (the "Purchased Accounts
Receivable");

          j. All warranty rights of Seller, express or implied, with respect to
the property described in this Section 1.1;

          k. All of Seller's propane parts and fittings which are used at the
Locations as operating supplies to maintain and repair propane tanks and lines,
whether or not generally billed to Seller's customers;

          l. All of Seller's appliance inventory at the Locations.

     1.2. Excluded Assets. The assets and properties of Seller to be sold and
purchased under Section 1.1 shall not include (i) cash on hand or in banks; (ii)
any Underground Storage Tanks (as defined by 40 C.F.R. 280); (iii) the Retained
Accounts Receivable (as defined in Section 1.3c); (iv) any right, title, or
interest in or to the names Suburban Propane, L.P., Suburban Propane, Suburban
Sales and Service, Inc., or any derivatives thereof, or any other trademarks,
service marks or trade names, or any software or intellectual property used in
connection with or otherwise attributable to the Seller's business at any
business locations, whether or not such marks, names, or property are
registered; (v) any item, instrument, property, claim, right, equipment,
furniture, fixture, appliance, inventory, tool/or machinery or other asset
associated with the Seller's businesses other than at the Locations; and (vi)
those assets and properties of Seller listed on Exhibit 1.2.

     1.3. Purchase Price; Noncompetition Payment.

          a. Price of Assets. The price to be paid for the assets to be sold and
purchased pursuant to Sections 1.1b, 1.1c, 1.1d, 1.1e, 1.1f, 1.1g, 1.1h, and
1.1j shall be $14,500,000, allocated to the assets pursuant to Exhibit 1.8.


                                        2



          b. Price of Inventory. To determine the price of the assets described
in Section 1.1a (the "Propane Inventory), a physical inventory of propane in
bulk storage, bobtails, in cylinders on trucks, and in customer tanks in the
yard at the Locations shall be taken by representatives of Buyer and Seller as
of the open of business on the Closing Date. The price to be paid shall be
determined based upon the pricing information on Exhibit 1.3b for that inventory
(corrected to 60 degrees Fahrenheit based on the temperature of the propane in
the vessel containing the greatest quantity) which Buyer and Seller so verify.

          c. Price of Accounts Receivable. To determine the price of the
Purchased Accounts Receivable, Seller's total Purchased Accounts Receivable for
the Operations shall be verified by representatives of Buyer and Seller as of
the close of business on the day preceding the Closing Date by review of the
business records. The price to be paid shall be the applicable percentage (as
set forth below) of the amount of the Purchased Accounts Receivable; provided,
however, that Buyer shall not be obligated to purchase any account (i) which is
due from a customer that is at the time of such verification a debtor in
bankruptcy or reorganization proceedings; or (ii) which otherwise appears to be
uncollectible or unwanted as determined by Buyer in its sole discretion (the
"Retained Accounts Receivable").

      Account Receivable Age        Percentage of Face Amount
- ---------------------------------   -------------------------
0 - 30 days after statement date               100%
31 - 60 days after statement date               75%
61 - 90 days after statement date               50%
over 90 days after statement date                0%

          d. Price of Appliances and Parts. The price for the assets described
in Section 1.1k and 1.1l (parts and fittings and appliances, hereinafter
"Appliance Inventory") shall be an amount equal to 90% of Seller's cost,
determined by an inventory of said items at the Locations conducted jointly by
Seller and Buyer on Closing Date.

     1.4. Seller's Liabilities.

          a. Excluded Liabilities. Other than the assumed liabilities described
in Section 1.4b, all liabilities, debts and obligations of every character or
description, known or unknown, of Seller accruing or arising from acts (whether
or not the resulting event or occurrence of damage is before, on or after the
Closing Date), transactions or occurrences prior to the Closing (hereinafter
defined) shall be Seller's sole obligation and responsibility and Buyer is not
assuming any such liability, debt or obligation and Buyer shall have no
responsibility therefor.


                                        3



          b. Assumed Liabilities. Notwithstanding the above, Buyer agrees to
assume and pay the liabilities and obligations (i) arising after the Closing
Date with regard to the assigned leases, (ii) listed on Exhibit 1.4b, (iii) that
arise on or after the Closing Date pursuant to executory contracts, orders and
commitments that relate to the sale of equipment, merchandise or services of the
Operations at the Locations, (iv) that are incurred with respect to, result
from, are caused by or arise out of the assets acquired pursuant to Section 1.1,
provided that Buyer does not assume any liability with respect to any asset or
installation at a customer location until the earlier of (x) the date on which
the Buyer first delivers propane into, services or inspects such asset and (y)
120 days after the Closing Date. Buyer agrees that it shall bear all costs and
expenses associated with the foregoing and that said costs and expenses shall be
in addition to the purchase price of the assets.

     1.5. Proration of Certain Items. Provided the Closing occurs, Buyer shall
receive a credit with respect to the following items (the "Prorations"):

          a. Real and Personal Property Taxes. With respect to the assets being
transferred pursuant to this Agreement, Buyer will pay all real and personal
property taxes, if any, (prorated as of the Closing Date) for the calendar year
within which the Closing Date occurs, which are not payable until after the
Closing Date. Buyer will make such payments as and when due and Buyer shall
receive a credit for Seller's prorated share of the amounts to be paid by Buyer.

          b. Customer Propane Prepayments or Level Payments. Customer
prepayments for propane and level payment plan payments shall be prorated as of
the Closing Date. Buyer shall receive a credit for the amount by which the
retail price of gas provided to customers before the Closing is less than the
retail amount paid to Seller by such customers.

          c. Customer Tank Rent Prepayment. Prepayments of tank rent and all
tank rent accounts receivable shall be prorated over the period to which the
prepayment applies. Buyer shall receive a credit for the amount by which the
prepayment of tank rent and tank rent accounts receivable exceeds the tank rent
due through the end of the day prior to the Closing Date.

          d. Customer Deposits and Balances. Buyer shall receive a credit for
(i) all customer deposits made with Seller in connection with the use, lease or
purchase of propane or propane tanks, cylinders, regulators or equipment and
(ii) all customer credit balances of any kind.

     The foregoing items will be computed as of the time of the Closing and will
be offset against the payment to be made by Buyer to Seller within three
business days after


                                        4



the calculation of the Purchased Accounts Receivable, the Propane Inventory and
Appliance Inventory, and the Prorations, as further described in Section 2.3.

     1.6. Accounts Receivable Payments. Seller hereby irrevocably constitutes
and appoints Buyer and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Seller and in the name of Seller
or in its own name, without notice to or assent by Seller, for the sole and
exclusive purposes of signing, endorsing and negotiating any check, draft,
deposit item or other instruments received by Buyer as a customer payment on the
Purchased Accounts Receivable transferred or assigned hereunder. The power and
authority granted to Buyer pursuant to this Section 1.6 shall expire 90 days
after the Closing Date. Seller will immediately remit to Buyer any payments
received by Seller on any Purchased Accounts Receivable transferred to Buyer
hereunder. Buyer will immediately remit to Seller any payments received by Buyer
with respect to the Retained Accounts Payable.

     1.7. Adjustments.

          a. As promptly as practicable, but no later than ten (10) days after
the Closing Date, Seller shall cause to be prepared and delivered to Buyer the
Closing Statement (as defined below) and a certificate based on such Closing
Statement setting forth Seller's calculation of inventory price, Prorations, and
Purchased Accounts Receivable ("Closing Adjustments"). The closing statement
(the "Closing Statement") shall fairly present in all material respects
calculation of the Closing Adjustments.

          b. If Buyer disagrees with Seller's calculation of Closing Adjustments
delivered pursuant to Section 1.7a, Buyer may, within ten (10) days after
delivery of the Closing Statement, deliver a notice to Seller disagreeing with
such calculation and setting forth Buyer's calculation of such amount. Any such
notice of disagreement shall specify those items or amounts as to which Buyer
disagrees, and Buyer shall be deemed to have agreed with all other items and
amounts contained in the Closing Statement and the calculation of Closing
Adjustments delivered pursuant to Section 1.7a and shall pay those undisputed
amounts within 10 days of delivery of the Closing Statement.

          c. If a notice of disagreement shall be duly delivered pursuant to
Section 1.7b, Buyer and Seller shall, during the ten (10) days following such
delivery, use their reasonable best efforts to reach agreement on the disputed
items or amounts in order to determine, as may be required, the amount of
Closing Adjustments. If during such period, Buyer and Seller are unable to reach
such agreement, they shall promptly thereafter cause Ernst & Young (the
"Accounting Referee") to review this Agreement and the disputed items or amounts
for the purpose of calculating Closing Adjustments (it being understood that in
making such calculation, the Accounting Referee shall be functioning as an
expert and not as an arbitrator). In making such calculation, the


                                        5



Accounting Referee shall consider only those items or amounts in the Closing
Statement and Seller's calculation of Closing Adjustments as to which Buyer has
disagreed. The Accounting Referee shall deliver to Buyer and Seller, as promptly
as practicable (but in any case no later than thirty (30) days from the date of
engagement of the Accounting Referee), a report setting forth such calculation.
Such report shall be final and binding upon Buyer and Seller. The cost of such
review and report shall be borne equally by Buyer and Seller.

          d. Buyer and Seller shall, and shall cause their respective
representatives to, cooperate and assist in the preparation of the Closing
Statement and the calculation of Closing Adjustments and in the conduct of the
review referred to in this Section 1.7, including, without limitation, the
making available to the extent necessary of books, records, work papers and
personnel.

          e. The Closing Adjustments remaining due, as finally determined by the
process described in Section 1.7c, shall be paid within three (3) days of
calculation by wire transfer. The amount of any payment to be made pursuant to
this Section 1.7e shall bear interest from and including the thirteenth day
after the Closing Date to but excluding the date of payment at a rate per annum
equal to the rate of interest published from time to time by The Wall Street
Journal as the "prime rate" at large U.S. money center banks during the period
from the thirteenth day after the Closing Date to the date of payment. Such
interest shall be payable at the same time as the payment to which it relates
and shall be calculated daily on the basis of a year of three hundred sixty five
(365) days and the actual number of days elapsed.

     1.8. Purchase Price Allocation. The Buyer and Seller agree to allocate the
aggregate purchase price among the purchased assets hereunder for all purposes
(including financial accounting and tax purposes) as in accordance with the
Allocation Schedule attached hereto as Exhibit 1.8. Buyer and Seller shall each
report the federal, state and local income and other tax consequences of the
transactions contemplated by this Agreement in a manner consistent with such
allocation, including, without limitation, the preparation and filing of Form
8594 (or any successor form or successor provision of any future tax law) under
Section 1060 of the Internal Revenue Code of 1986, as amended, with their
respective federal income tax returns for the taxable year that includes the
Closing Date, and neither Buyer nor Seller will take any position inconsistent
with such allocation unless otherwise required by applicable law.

II   CLOSING.

     2.1. Closing Date. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place on August 31, 2004, or such
earlier or later date as may be mutually agreeable and set by the parties (the
"Closing Date"). The Closing shall be conducted by mail and deemed held at the
offices of Cole, Schotz,


                                        6



Meisel, Forman & Leonard, P.A. Hackensack, New Jersey, at a time to be set by
the parties. At the Closing, all actions taken and all documents delivered will
be deemed to have been taken and delivered contemporaneously and no action will
be taken nor any documents deemed delivered until all actions have been taken
and all documents have been delivered.

     2.2. Closing Deliveries by Seller. At the Closing, as a condition to the
Closing for Buyer, Seller shall transfer and assign all of the properties and
assets to be sold hereunder and shall deliver to Buyer a General Bill of Sale
(as set forth in Exhibit 2.2.1), an Assignment of Customer Leases (as set forth
in Exhibit 2.2.2), the Special Warranty Deeds (as set forth in Exhibit 2.2.3),
an Assignment of Real Property Leases (as set forth in Exhibit 2.2.4), vehicle
titles and such other appropriate instruments of transfer and physical
possession as shall, in the reasonable opinion of counsel for Buyer, be
effective to vest in Buyer good and marketable title to said properties and
assets, including, but not limited to, releases of all outstanding security
interests in the properties and assets being transferred (other than the
Permitted Liens). Seller shall prepare a customer list based solely on its
readily available computer files of all customers who have purchased inventory
from the Locations during the fifteen (15) months preceding the Closing
("Customer List") and, at the Closing, transfer possession of such Customer
List, accounts receivable records and all other records concerning the
Operations at the Locations, including, without limitation, all customer records
at the Locations. Seller may retain historical records compiled at its corporate
office.

     2.3. Delivery and Payment by Buyer. At the Closing, Buyer will wire
transfer: (i) to an account designated by Seller funds in the amount of
$13,050,000 and (ii) to the U.S. Bank ("Escrow Agent") funds in the amount of
$1,450,000 and will deliver to Seller resale exemption certificates and the
license set forth in Exhibit 2.3a. Within three business days following the
final calculation of the Purchased Accounts Receivable, the Propane Inventory,
the Appliance Inventory, and the Prorations, and the Seller's and Buyer's
execution of the final Closing Statement (substantially in the form of Exhibit
2.3 attached hereto) evidencing their agreement to the calculation of such
amounts, Buyer will wire transfer to Seller the amount due pursuant to Section
1.3b (Propane Inventory), Section 1.3c (Purchased Accounts Receivable) and
Section 1.3d (Appliance Inventory), less any credits due Buyer under Section 1.5
(Prorations) or otherwise. On the first anniversary date of the Closing, Escrow
Agent shall wire transfer to the Seller the amount of $1,450,000, less any
amount that is not subject to disbursement or is payable to Buyer pursuant to
the Escrow Agreement.

     2.4. Further Assurances. Without further consideration, Seller or Buyer, as
the case may be, will at any time, and from time to time, execute and deliver
such further instruments of transfer or assignment and take such other action as
Buyer or Seller, as the


                                        7



case may be, reasonably may request to give effect to the transactions
contemplated by the terms of this Agreement.

     2.5. Procedures Pending Closing. Between the date of this Agreement and the
Closing Date:

          a. Access. Seller will give to Buyer and Buyer's representatives
reasonable access during normal business hours to Seller's properties, books,
records, and personnel files related solely to the Operations, and will allow
such persons to make copies (at Buyer's expense) of all of such documents and
all such financial and operating data and information as any such person shall
reasonably request from time to time, provided, that no such access shall be
requested or required to be given at any time or in any manner which interferes
with the normal conduct of Seller's business. All such documents, data, and
other materials are confidential and Buyer shall not release them to anyone
except its employees and agents, and then only for the purposes of this
transaction; provided, however, that any such documents, data, or other
materials shall not be deemed confidential for purposes of this paragraph to the
extent that the same (1) is a part of the public domain at the time of
disclosure, (2) subsequently becomes a part of the public domain by publication
or otherwise through no fault of Buyer or its representatives, (3) may be shown
by Buyer to have been contained in a writing in its possession at the time of
disclosure, which information had not been wrongfully acquired, directly or
indirectly, from Seller and Buyer is not under an obligation of confidentiality
with respect thereto, or (4) is subsequently disclosed to Buyer by a third party
not in violation of any rights of, or obligations to, Seller. Such examination
and investigation by Buyer shall not operate as a waiver of, or limit in any
way, the warranties and representations of Seller hereunder. If for any reason
the transactions contemplated by this Agreement are not consummated, then upon
Seller's written request Buyer shall return to Seller (and not thereafter use in
its own business or otherwise, or disclose the contents of) all documents, data
and other materials respecting Seller's business furnished to or obtained by
Buyer or its representatives from Seller or its representatives.

          b. Conduct of Business. Without the prior written consent of Buyer and
solely with respect to the Operations:

               (i) Seller will not sell or otherwise dispose of, or purchase or
acquire any assets at the Locations in any manner, except in the ordinary course
of business;

               (ii) Seller will not make, accrue, or become liable in any way
for any bonus, profit sharing, pension or incentive compensation payments to any
employee of Seller other than in conformity with arrangements existing on or
before June 1, 2004;


                                        8



               (iii) Seller will not make or enter into any material agreement
providing for any change in rates of wages or salaries or employment benefits or
term or duration of employment of any employee of Seller;

               (iv) Seller will carry on its business in the same manner as
heretofore conducted and will not take any action or enter into any contracts
other than in conformity with prior practice in the ordinary and regular course
of business as heretofore conducted; and

               (v) Seller will use commercial good faith to maintain and
preserve the Operations, consistent with past practice..

     2.6. Verification of Tanks. During the period commencing on the Closing
Date and ending February 28, 2005 (the "Verification Period"), Buyer shall use
commercially reasonable efforts to locate and verify (a) the quantity and sizes
of the tanks and cylinders as listed on Exhibit 1.1b (b) ownership of the tanks
and cylinders, and (c) proper identification (i.e., data plates) with respect to
the tanks and cylinders. At the end of the Verification Period, Buyer shall
submit to Seller a report (x) of all tanks and cylinders that cannot be located
and/or verified by Buyer, (y) with respect to which ownership is being contested
by a customer or other third party and (z) that do not have proper
identification as required by applicable laws or regulations, in each case,
within the Verification Period (the "Verification Report"). If Seller is unable
to resolve any claim by Buyer with respect to a tank or cylinder included in the
Verification Report within the thirty (30) day period following the Seller's
receipt of the Verification Report, Seller shall, at its option, (1) pay to
Buyer the replacement value of such tanks and cylinders in accordance with the
replacement costs set forth on Exhibit 2.6 or (2) provide Buyer with replacement
tanks and cylinders, which shall be equivalent in size, in good condition and
otherwise in accordance with Exhibit 1.1b. In the event that Seller pays the
replacement value or replaces an unverified or missing tank or cylinder, Seller
shall be assigned all of Buyer's ownership interest in the unverified or missing
tank or cylinder, and Buyer shall notify Seller if such unverified or missing
tank is located.

     2.7. Closing Date Receipts. Provided the Closing occurs, the proceeds
resulting from the Operations conducted on the Closing Date shall accrue to the
benefit of and be deemed to be the property of Buyer. This Section does not
affect in any way the liabilities of Seller referenced in Section 1.4a.

III  REPRESENTATIONS AND WARRANTIES.

     3.1. Representations and Warranties of Seller. Seller represents, warrants
and agrees to and with Buyer as follows:


                                        9



          a. Organizational Status. SP is a limited partnership, and SSS is a
corporation, both duly organized, validly existing and in good standing under
the laws of the state of Delaware and have full power and authority to carry on
their business as presently conducted and to own and operate their assets,
properties and business. SP and SSS are qualified to do business and are in good
standing under the laws of the states of Minnesota, North Dakota and Wisconsin.
Seller has full power and authority to execute this Agreement and carry out its
obligations hereunder.

          b. Financial Information. Seller has delivered to Buyer copies of
certain information (including financial information, operational data and sales
information), copies of which are attached as Exhibit 3.1b hereto, relating to
Seller's Operations ("Financial Information"). The Financial Information
represents fairly the financial position of the Operations as of the dates
thereof and the information included in the Financial Information presents
fairly and accurately the financial and operational results of the Operations
for the periods referred to therein, all prepared on a basis consistent with
prior periods.

          c. Changes During Preceding Year. Except as set forth on Exhibit 3.1c,
during the year preceding the date hereof, with respect to the Operations there
has not been:

               (i) Any material change, financial or otherwise, in the condition
of the properties, assets, liabilities, prospects or business, except normal and
usual changes in the ordinary course of business or changes disclosed in the
Financial Information, which have not in the aggregate been adverse to the
Operations at the Locations;

               (ii) Any damage, destruction or loss (whether or not covered by
insurance) suffered by Seller in an aggregate amount exceeding $10,000;

               (iii) Any sale, lease, abandonment or other disposition by Seller
of any interest in any real property, or, except in the ordinary course of
business, in any machinery, equipment or other operating property, or any lease
or sale of any propane tanks owned by Seller;

               (iv) Any other occurrence, event or condition which materially
and adversely affects or, to Seller's knowledge, is likely to materially and
adversely affect the Operations; or

               (v) Any material and adverse change in the Financial Information.


                                       10



          d. Personal Property. Except for the leased assets listed on Exhibit
3.1d (including the real property leases and vehicle leases), Seller owns and
has good and marketable title to the personal and intangible property to be sold
to Buyer hereunder including, without limitation, the propane tanks, equipment,
vehicles and other assets described on Exhibit 1.1b. Except for the Permitted
Liens, none of the personal property and assets to be transferred to Buyer
pursuant to this Agreement at the Closing are subject to any contract of sale,
encumbrance, security agreement, lien or charge of any kind or character. Except
for the leased assets, no person, corporation or firm other than Seller has any
ownership interest in the personal property being transferred pursuant to this
Agreement. All appliances and other equipment installed by Seller, and the
propane tanks, cylinders, regulators, vehicles and other equipment transferred
hereunder, are in working order and are in compliance with all applicable safety
regulations. The assets listed on Exhibit 1.1b attached hereto along with the
leased assets are sufficient to enable Buyer to continue to conduct the
Operations in the ordinary course of business, consistent with past practices.
"Permitted Lien" means, as to real property, Permitted Real Estate Liens, and,
as to all other property, (i) any lien for taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings, (ii) any statutory
lien arising in the ordinary course of business by operation of law with respect
to a liability that is not yet due or delinquent, and (iii) any other lien which
individually or in the aggregate with other such liens could not reasonably be
expected to materially impair the use or value of the asset to which it
attaches.

          e. Real Property. The Special Warranty Deeds attached hereto as
Exhibit 2.2.3 set forth a complete legal description of each parcel of real
property owned by Seller and used in the Operations. Seller has good and
marketable title in fee simple absolute to such real property and to the
improvements thereon, free and clear of all liens, security interests, leases,
encumbrances, easements, covenants, restrictions, defects or other burdens,
except for Permitted Real Estate Liens. The transfer of such real property will
pass to Buyer good and marketable fee simple title and full entitlement to the
use and enjoyment of each parcel being transferred. Seller does not own, and the
real property described in the Special Warranty Deeds attached hereto as Exhibit
2.2.3 does not contain, any Underground Storage Tanks. "Permitted Real Estate
Liens" means (i) statutory liens for current taxes or other governmental charges
with respect to the real property (x) not yet due and payable or (y) with
respect to which Seller retains all liability and the amount or validity of
which is being contested in good faith by appropriate proceedings by Seller;
(ii) mechanics', carriers', workers', repairers' and similar statutory liens
arising or incurred in the ordinary course of business for amounts which are not
delinquent and which are not, individually or in the aggregate, material to the
business Locations; (iii) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the real
property which are not violated by the current use and operation of the real
property; and (iv) covenants, conditions, restrictions, easements and other
matters or record affecting title to the real property


                                       11



which do no materially impair the use or value of the affected parcel of real
property for the purposes for which it is used in connection with the applicable
Location.

          f. Other Contracts and Encumbrances. Except as disclosed on Exhibit
3.1f, Seller is not a party to any written or oral (i) contract not made in the
ordinary course of business, (ii) franchise agreement, (iii) chattel mortgage,
equipment lease, security agreement or conditional sales contract or (iv)
partnership, joint venture or other business agreement with respect to the
Operations, in each case where the consideration to be paid or received by
Seller exceeds $5,000 or which cannot be terminated by Seller upon notice of
thirty (30) or fewer days without penalty. Seller has performed all obligations
and is not in default in any respect under any contract to which Seller is a
party. Attached hereto as Exhibit 3.1f is a listing of, and Seller has provided
complete copies of, all contracts and agreements to which Seller is a party for
the future sale by Seller of propane for a fixed or capped price, or in volumes
in excess of 5,000 gallons per year.

          g. Taxes. Seller has filed all income tax returns and all real and
personal property tax returns required to have been filed, and has paid all
taxes as shown on said returns, all assessments received by it and all amounts
due any governmental authority to the extent that such taxes, assessments and
amounts have become due.

          h. Restrictions. Seller is not subject to any restriction contained in
any charter, articles of incorporation, bylaw, mortgage, lien, lease, agreement,
instrument, order, judgment or decree, which would prevent the consummation of
the transactions contemplated by this Agreement.

          i. Easements. Seller has all easements and rights of ingress and
egress necessary for the conduct of the Operations, for placement of its propane
tanks, and all easements for utilities and services necessary for the conduct of
the Operations on the real property to be sold to or leased by Buyer pursuant to
this Agreement. The transfer, conveyance and assignment by Seller to Buyer at
the Closing of the property and rights described in Section 1.1 will pass to
Buyer good and marketable title to such property, together with all necessary
easements and rights of ingress and egress associated therewith. Seller
expressly represents and warrants that it will execute and deliver any
additional deeds, instruments or documents required to convey to Buyer all
easements necessary for the lawful conduct of the Operations at the Locations
(including, without limitation, placement of all equipment and tanks on Seller's
property) in the manner in which such Operations were conducted on the last
business day before the Closing.

          j. Litigation. Except as set forth on Exhibit 3.1j, Seller is not
engaged in, or to its knowledge threatened with, any legal action or other
proceeding before any court or administrative agency, has not been charged with,
and to its knowledge is not under investigation with respect to any charge
concerning, any material violation of any


                                       12



provision of federal, state or local law or administrative regulation in respect
of or affecting either the property and assets conveyed hereunder or the
Operations. The parties agree that Seller shall retain any and all condemnation
proceeds associated with the properties set forth on Exhibit 3.1j, except for
Buyer's reasonable "cost-to-cure." For the purpose of this subparagraph (j),
"cost-to-cure" shall be described as the reasonable costs associated with, by
way of example, replacing bituminous asphalt, or the relocation of existing
fences or signs. The reasonable cost-to-cure for 1310 Highway 55 East, Buffalo,
Minnesota 55313-9100 (FGB file No. 744.16575) shall be deemed to be the sum of
Twenty-One Thousand Three Hundred Ninety and 00/100 ($21,390.00) Dollars.

          k. Employees. Seller has not made any representations to its employees
with respect to any undertaking or commitment by Buyer to continue the
employment of such employees. None of Seller's employees at the Locations is or
has been subject to any union, labor or collective bargaining agreement nor have
there been any demands for such an agreement. Seller has no liability under the
Employee Retirement Income Security Act, the National Labor Relations Act, the
Fair Labor Standards Act, the Civil Rights Act, the Equal Employment Opportunity
Act or any other social, employment or labor law affecting Seller which is not
being retained by Seller as Seller's obligation. Seller has no accrued liability
to any employee for wages, fringe benefits or otherwise which is not being
retained by Seller as Seller's obligation, except as provided in Section 5.7.

          l. Environment.

               (i) With respect to the Operations and except as disclosed on
Exhibit 3.1l, Seller is in full compliance with all aspects of each (i) federal,
state or local law relating to pollution or the environment, including but not
limited to laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes (collectively "Hazardous Wastes") into the
environment or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transportation or handling of Hazardous
Wastes (collectively "Environmental Laws"); and (ii) regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved pursuant to or in connection with any Environmental Laws
(which collectively with Environmental Laws are hereinafter referred to as
"Environmental Laws and Regulations"). With respect to the Operations and except
as disclosed on Exhibit 3.1l, there is no civil, criminal, administrative or
other action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending, received or, to the knowledge of
Seller, threatened against Seller relating in any way to Environmental Laws and
Regulations.


                                       13



               (ii) With respect to the Operations and except as disclosed on
Exhibit 3.1l, during the period of ownership, leasehold interest or operation by
Seller or its affiliates with respect to such parcel of Transferred Property
there have occurred no and there are no anticipated, releases or substantial
threats of a release of any Hazardous Wastes, from or onto any Transferred
Property (as defined below) which release or threatened release is or may be
subject to regulation under Environmental Laws and Regulations. Without limiting
the foregoing, no asbestos fibers or materials or polychlorinated biphenyls
(PCBs) are on or in any Transferred Property. None of the Transferred Property
has previously been used, is now being used or is contemplated to be used for
the generation, transportation, treatment, storage, abatement or disposal of any
Hazardous Wastes subject to regulation under Environmental Laws and Regulations.
"Transferred Property" means any Location which (i) is currently owned, leased
or utilized by Seller and (ii) which Buyer is purchasing, leasing, assuming the
existing lease or otherwise obtaining the right to utilize such property in
connection with the transactions contemplated by this Agreement.

               (iii) With respect to each parcel of Transferred Property and
except as disclosed on Exhibit 3.1l, during the period of ownership, leasehold
interest or operation by Seller or its affiliates with respect to such parcel of
Transferred Property, there have occurred no conditions, circumstances,
activities, practices, incidents, actions or plans which may give rise to any
common law or legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, notice of violation, study or investigation,
based on or related to the manufacture, generation, ownership, possession,
distribution, use, treatment, abatement, storage, disposal, transportation or
handling, or the emission, discharge, release or threatened release into the
environment of any Hazardous Wastes. For purposes of this Section 3.1, the
affiliates of Seller shall be defined as: Suburban Propane, a division of
Quantum Chemical Corporation; Quantum Chemical Corporation; Hanson PLC;
Millennium Petrochemicals, Inc.; TexGas Corporation; and Home Gas Company, Inc.

          m. Licenses and Permits. Seller and its employees have all material
licenses, permits and approvals required under federal law, the laws of the
states of Minnesota, North Dakota and Wisconsin, or any local or regional
governmental authority to conduct the business of Seller at all Locations.
Seller will cooperate with Buyer in transferring to Buyer or its employees those
licenses, permits or approvals which may be transferable. Seller has no
knowledge of any facts or occurrences which constitute violations of any
licensing, permit or other laws to which Seller, its employees or the Operations
are subject.

          n. Compliance with Law and Applicable Government Regulations. With
respect to the Operations, Seller has not previously failed nor is currently
failing to comply with any applicable federal, state or local law or regulation,
including without


                                       14



limitation, any energy, antitrust, health and safety or Environmental Laws and
Regulations. With respect to the Operations, there are no proceedings of record,
no proceedings are pending or to Seller's knowledge threatened, nor has Seller
received any written notice regarding any violation of any law, ordinance,
requirement, order, rule or regulation enforced by any governmental agency or
other entity (federal, state or local) claiming jurisdiction over Seller,
including without limitation, any requirement of OSHA or any pollution and/or
environmental control agency.

          o. Insurance. Seller maintains in effect insurance covering Seller's
Operations and any liabilities relating thereto in an amount believed adequate
by Seller, and such insurance coverage shall be maintained by Seller through the
Closing Date. The products liability and personal injury insurance maintained by
Seller has been on an "occurrence" basis during the six-year period prior to the
Closing Date. Seller has previously delivered to Buyer a true and complete
schedule of its general liability insurance policies.

          p. Authorization. This Agreement and all documents and actions
required to consummate the transactions contemplated hereby have been duly
approved and authorized by the SP's Board of Supervisors and SSS's Board of
Directors.

          q. Brokerage Fees and Expenses. Seller has no liability for brokerage
fees or other commissions relative to this Agreement, or to the transactions
contemplated hereby.

          r. Exhibits Correct. The exhibits and schedules attached hereto are
true, complete and accurate as of the date hereof and Seller shall notify Buyer
of all changes in such information in writing at the Closing so that such
exhibits and schedules will be true, complete and correct as of the Closing
Date.

          s. Warranties Correct, Etc. The representations and warranties of
Seller contained in this Agreement or otherwise made in writing in connection
with the transactions contemplated by this Agreement shall be true on and as of
the Closing Date with the same effect (except as to transactions contemplated by
this Agreement) as though such representations and warranties had been made on
and as of such date, and each and all of the agreements and conditions to be
performed or observed by Seller on or before the Closing Date pursuant to the
terms hereof shall have been duly performed or observed.

          t. Disclaimer of other Representations and Warranties. Except as
expressly set forth in this Section 3.1 or otherwise provided in this Agreement,
Seller makes no representation or warranty, express or implied, at law or in
equity, including any representation or warranty in respect of the Operations or
the assets transferred or the liabilities assumed, or the MERCHANTABILITY OR
FITNESS FOR ANY


                                       15



PARTICULAR PURPOSE of the acquired assets and any such other representations or
warranties are hereby expressly disclaimed.

     3.2. Representations and Warranties of Buyer. Buyer represents, warrants
and agrees to and with Seller as follows:

          a. Organizational Status. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has the power and authority to own its property and to carry on its
business as presently conducted. Buyer has full power and authority to execute
this Agreement and carry out its obligations hereunder.

          b. Restrictions. Buyer is not subject to any restriction contained in
any charter, partnership agreement, mortgage, lien, lease, agreement,
instrument, order, judgment or decree, which would prevent the consummation of
the transactions contemplated by this Agreement.

          c. Authorization. This Agreement and the transactions contemplated
hereby have been duly approved and authorized by all necessary corporate action
of the Board of Directors of Buyer's general partner.

          d. Brokerage Fees and Expenses. Buyer shall indemnify Seller and hold
Seller harmless against and in respect of any claim for brokerage fees or other
commissions incurred or owing by Buyer relative to this Agreement, or to the
transactions contemplated hereby, and also in respect of all expenses of any
character incurred by Buyer in connection with this Agreement or such
transactions.

          e. Investigation by Buyer. Buyer acknowledges that except for Seller's
express representations and warranties set forth in this Agreement, Buyer is
relying upon Buyer's own independent investigation of the assets acquired
hereunder and liabilities assumed in entering into this Agreement. In entering
into this Agreement, Buyer has relied solely upon the express representations,
warranties and covenants of Seller set forth in Section 3 hereof and Buyer's own
investigation and analysis. Buyer further acknowledges, that except as expressly
set forth in the representations and warranties in Section 3 there are NO
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.

          f. Warranties Correct, Etc. The representations and warranties of
Buyer contained in this Agreement or otherwise made in writing in connection
with the transactions contemplated by this Agreement shall be true on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.


                                       16



IV   CONDITIONS TO CLOSING.

     4.1. Conditions to Buyer's Obligations. If, for any reason whatsoever, the
following conditions are not satisfied (or waived by Buyer) by the Closing, then
Buyer, at its option, may terminate this Agreement without further obligation to
Seller (other than for confidentiality, return of Seller confidential
information, liability for any prior breach of the Agreement and those other
provisions of this Agreement intended to survive):

          a. Documents. Seller shall have furnished Buyer with all documents,
certificates and other instruments required to be furnished by Seller pursuant
to the terms of this Agreement, including without limitation, the Customer List,
vehicle titles, and certified copies of resolutions duly adopted by the SP's
Board of Supervisors and SSS's Board of Directors authorizing all action
necessary to enable Seller to comply with the terms of this Agreement.

          b. No Actions or Proceedings. No material action or proceeding against
Seller which is adverse to the Operations shall have been instituted or, to the
knowledge of Seller, threatened before a court or other governmental body or
instituted or threatened by any public authority.

          c. Title Insurance. Buyer shall obtain a commitment for title
insurance evidencing the obligation of a title insurer to insure merchantable
fee simple title in Buyer subject to Permitted Real Estate Liens, as of the
Closing Date, to the real property described in the deeds attached hereto as
Exhibit 2.2.3, and Buyer's reasonable objections to the state of title shown on
such commitment shall have been satisfied.

          d. No Material Adverse Change. No material adverse change in the
amount or condition of the properties, assets, liabilities or business of Seller
with respect to the Operations at the Locations, taken as a whole, shall have
occurred during the period between the date of execution hereof and the Closing.

          e. Representations, Warranties, Etc. The representations and
warranties of Seller hereunder shall be true when made and shall be true in all
material respects at the Closing Date as though such representation and warranty
had been made on the Closing Date, and Seller shall have substantially performed
all covenants and agreements on its part required to be performed, and shall not
be in default under any of the provisions of this Agreement, at the Closing
Date.

     4.2. Conditions to Seller's Obligations. If, for any reason whatsoever, the
following conditions are not satisfied (or waived by Seller) by the Closing,
then Seller, at its option, may terminate this Agreement with no further
obligation to Buyer (other than for confidentiality, liability for any prior
breach of the Agreement and those other provisions of this Agreement intended to
survive):


                                       17



          a. Deliveries. Buyer shall have furnished Seller with all documents,
payments, certificates and other instruments required to be furnished to Seller
by Buyer pursuant to the terms of this Agreement.

          b. Representations, Warranties, Etc. Each and every representation and
warranty of Buyer hereunder shall be true in all material respects at the
Closing Date as though such representation and warranty had been made on the
Closing Date, and Buyer shall have substantially performed all covenants and
agreements on its part required to be performed, and shall not be in default
under any of the provisions of this Agreement, at the Closing Date.

V    FURTHER AGREEMENTS.

     5.1. Survival of Representations and Warranties; Indemnity.

          a. Warranty Survival. All of the representations and warranties of the
Seller contained in Sections 3.1b, 3.1c, 3.1d, 3.1e, 3.1f, 3.1h, 3.1i, 3.1j,
3.1k, 3.1m, 3.1n, 3.1o, 3.1q, 3.1r, and 3.1s above shall survive the Closing
Date and continue in full force and effect for a period of eighteen (18) months
thereafter. All of the representations and warranties of the Seller contained in
Section 3.1g above shall survive the Closing Date and continue in full force and
effect for a period of five (5) years thereafter. All of the representations and
warranties of Seller contained in Section 3.1l above shall survive the Closing
Date and continue in full force and effect for a period of three (3) years
thereafter. All of the covenants and the other representations and warranties of
the parties contained in this Agreement shall survive the Closing Date and
continue in full force and effect forever thereafter (subject to any applicable
statutes of limitations).

          b. Seller Indemnification. Seller will indemnify and hold Buyer,
Buyer's directors, officers and employees harmless against any loss, cost,
liability or expense (including, without limitation, costs and expenses of
litigation and reasonable attorneys' fees) (hereinafter "Damages") incurred or
suffered by Buyer or any affiliate of Buyer as a result of (i) the incorrectness
or breach of any of the representations, warranties, covenants or agreements of
Seller contained in this Agreement or given on the Closing Date or (ii) the
assertion against Buyer of any liability of Seller; provided, however, that the
Seller shall not have any obligation to indemnify the Buyer from and against any
Damages resulting from, arising out of, relating to, in the nature of, or caused
by (A) the breach of any such representation or warranty listed above until the
Buyer has Damages by reason of all such breaches in excess of a $150,000
aggregate threshold (at which point the Seller will be obligated to indemnify
the Buyer from and against all such Damages relating back to the first dollar),
or for Damages in excess of a maximum aggregate of $3,000,000, or (B) the breach
of the representations or any violation of Environmental Laws and Regulations
except caused by the Operations or, with respect to the Transferred Properties,
which occurred during the period of ownership, leasehold


                                       18



interest or operation by Seller or its affiliates. Without limiting the remedies
available to Buyer to enforce the indemnities provided by this Section 5.1 and
subject to the Escrow Agreement, Seller agrees that the amount of any Damages
suffered by Buyer may be credited and set off against any sums of money at any
time or from time to time payable or deliverable by Buyer or its successors to
Seller. Individual Damages of less than $5,000 shall not be subject to
indemnification and shall not count toward the aggregate threshold or the
maximum aggregate. Seller shall have a further duty to indemnify Buyer for
Damages incurred or suffered by Buyer arising out of or with respect to the
environmental conditions listed on Exhibit 3.1l (to the extent the event or
condition arose or occurred during the period of ownership, leasehold interest
or operation by Seller or its affiliates) and the litigation listed on Exhibit
3.1j, subject to the aggregate threshold, maximum aggregate and individual
Damages threshold set forth above.

          c. Additional Seller Indemnification and Access.

               (i) As used in this Article V, the following terms shall have the
following meanings:

               "Barnesville Site" shall mean the property located at U.S. Route
No. 52, Barnesville, MN.

               "Compliance Costs" shall mean all costs to obtain the
Environmental Compliance, including without limitation all costs of
investigation, remediation, removal, containment, monitoring or disposal of
Hazardous Wastes, all consulting and engineering fees and all governmental fees
and penalties.

               "Environmental Compliance" shall mean written confirmation from
the Minnesota Pollution Control Agency or other governmental entity with
jurisdiction that no further action is required to investigate the Known
Hazardous Wastes and the Unknown Seller Hazardous Wastes.

               "Known Hazardous Wastes" shall mean the Hazardous Wastes
identified in Exhibit 3.11 with respect to the Rochester Site or the Barnesville
Site, as the case may be, and any further migration or dispersal of those
Hazardous Wastes.

               "Rochester Site" shall mean the property located at 1410 7th
Street Northwest, Rochester, MN

               "Unknown Seller Hazardous Wastes" shall mean, with respect to the
Barnesville Site and Rochester Site, Hazardous Wastes for which Seller is
responsible under section 5.1(b) that are presently unknown to Seller and are
discovered during Seller's remediation of the Known Hazardous Wastes.


                                       19



               (ii) After the Closing, Seller shall obtain Environmental
Compliance for the Rochester Site within a commercially reasonable time and at
Seller's cost. Seller's remediation may be performed to the minimum requirements
of Environmental Laws and Regulations applicable to properties used in the
manner in which the Rochester Site is used on the date hereof. Buyer shall
cooperate with Seller's remediation to the foregoing standard, including by
signing any required consent thereto. Seller shall indemnify and hold Buyer and
its officers, directors and employees harmless from and against any third party
claim asserted against Buyer or its affiliates arising from or related to the
presence of the Known Hazardous Substances affecting the Rochester Site or the
Barnesville Site.

               (iii) Buyer shall provide access to the Rochester Site to Seller
and Seller's representatives to perform the work to obtain the Environmental
Compliance. Seller shall provide Buyer with commercially reasonable notice prior
to access by Seller or its representatives and shall use commercially reasonable
efforts to avoid interference with Buyer's operations. Notwithstanding anything
contained herein, provided Seller complies with the provisions of this section
5.1(c), Buyer hereby releases Seller from any claim Buyer may have now or in the
future arising from or related to Environmental Compliance, or the presence of
Known Hazardous Wastes or Unknown Seller Hazardous Wastes which are remediated
pursuant to this Section 5.1, on the Rochester Site or the Barnesville Site,
including interference with the use of the such Site and consequential damages
of Buyer arising from Seller's efforts to obtain Environmental Compliance and
any claims for diminution in property value arising from the presence of Known
Hazardous Wastes and Unknown Seller Hazardous Wastes on such Site; however, this
release shall have no effect upon Buyer's right to make a claim for
indemnification arising from a third party claim as described in Section
5.1(c)(ii).

               (iv) Seller is providing Buyer with access to the Barnesville
Site pursuant to the Access Agreement by and between the parties, executed on
the date hereof. During the period of Buyer's occupancy of the Barnesville Site
pursuant to the Access Agreement, Seller may, at its option, perform any
investigation at the Barnesville Site to investigate Known Hazardous Substances
and Seller shall perform any notification, investigation or remediation required
by applicable law while Buyer has access to the Barnesville Site. In the event
that Seller exercises its option to assign the lease, as set forth in paragraph
7 of the Access Agreement, then Seller shall obtain Environmental Compliance for
the Barnesville Site in the same manner and on the same terms as for the
Rochester Site set forth in subsections 5.1(c)(ii) and (iii) above. In the event
that Seller exercises its option to relocate Buyer, as set forth in paragraph 7
of the Access Agreement, then Seller shall not have an obligation to obtain
Environmental Compliance for the Barnesville Site, except as required by
applicable law.


                                       20



               (v) Notwithstanding the provisions of 5.1(b) above, all
indemnification obligations incurred by Seller pursuant to the provisions of the
section 5.1(c) shall not be subject to the individual Damages threshold or
aggregate Damages threshold but shall count toward the $3 million maximum
aggregate of Damages set forth in paragraph 5.1(b) above.

          d. Buyer's Indemnification. Buyer will indemnify and hold Seller and
Seller's directors, officers, and employees harmless against any Damages
incurred or suffered by Seller or affiliate of Seller as a result of or arising
from (i) the incorrectness or breach of any of the representations, warranties,
covenants and agreements of Buyer contained in this Agreement or given on the
Closing Date; or (ii) any Assumed Liability.

     5.2. Indemnification Procedures

          a. In the event that any legal proceedings shall be instituted or that
any claim or demand ("Claim") shall be asserted by any third person in respect
of which payment may be sought under Section 5.1 hereof, the indemnified party
shall reasonably and promptly cause written notice of the assertion of any Claim
of which it has knowledge which is covered by this indemnity to be forwarded to
the indemnifying party. The indemnifying party shall have the right, at its sole
option and expense, to be represented by counsel of its choice (which must be
reasonably satisfactory to the indemnified party), and to defend against,
negotiate, settle or otherwise deal with any Claim which relates to any Damages
indemnified against hereunder. If the indemnifying party elects to defend
against, negotiate, settle or otherwise deal with any Claim which relates to any
Damages indemnified against hereunder, it shall within five (5) days (or sooner,
if the nature of the Claim so requires) notify the indemnified party of its
intent to do so. If the indemnifying party elects not to defend against,
negotiate, settle or otherwise deal with any Claim which relates to any Damages
indemnified against hereunder, fails to notify the indemnified party of its
election as herein provided or contests its obligation to indemnify the
indemnified party for such Damages under this Agreement, the indemnified party
may defend against, negotiate, settle or otherwise deal with such Claim. If the
indemnified party defends any Claim, then the indemnifying party shall reimburse
the indemnified party for the costs and expenses (including reasonable
attorneys' and other professionals' fees and expenses) of defending such Claim
upon submission of periodic bills. If the indemnifying party shall assume the
defense of any Claim, the indemnified party may participate, at his or its own
expense, in the defense of such Claim; provided, however, that such indemnified
party shall be entitled to participate in any such defense with separate counsel
at the expense of the indemnifying party if, (i) so requested by the
indemnifying party to participate or (ii) in the reasonable opinion of counsel
to the indemnified party, a conflict or potential conflict exists between the
indemnified party and the indemnifying party that would make such separate
representation advisable; and provided, further, that the indemnifying party
shall


                                       21



not be required to pay for more than one such counsel for all indemnified
parties in connection with any Claim. The parties agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any such
Claim.

          b. In the case of a Claim brought by a third party, the party to be
indemnified shall be reimbursed for any legal or other expenses reasonably
incurred by the party to be indemnified in connection with investigating or
defending any such Claim as such expenses are incurred. In the case of a Claim
brought by Seller against Buyer, or by Buyer against Seller, after any final
judgment or award shall have been rendered by a court, arbitration board or
administrative agency of competent jurisdiction and the expiration of the time
in which to appeal there from, or a settlement shall have been consummated, or
Buyer and Seller shall have arrived at a mutually binding agreement with respect
to such a Claim, the indemnified party shall forward to the indemnifying party
notice of any sums due and owing by the indemnifying party pursuant to this
Agreement with respect to such matter and the indemnifying party shall be
required to pay all of the sums so due and owing to the indemnified party by
wire transfer of immediately available funds within 10 business days after the
date of such notice.

          c. No settlement of any Claim may be made by the indemnifying party
without the consent of the indemnified party unless such settlement releases the
indemnified party from any liability in respect thereof and does not include any
admission of culpability on the part of the indemnified party.

          d. In the event that an indemnified party should have a claim against
the indemnifying party hereunder which does not involve a claim or demand being
asserted by a third party, the indemnified party shall send a written notice
with respect to such claim to the indemnifying party. The indemnifying party
shall have 10 days from the date such notice is delivered during which to notify
the indemnified party in writing of any good faith objections it has to the
indemnified party's notice or claims for indemnification, setting forth in
reasonable detail each of the indemnifying party's objections thereto. If the
indemnifying party does deliver such written notice of objection within such
10-day period, the indemnifying party and the indemnified party shall attempt in
good faith to resolve any such dispute within 10 days of the delivery by the
indemnifying party of such written notice of objection.

     5.3. Indemnification as Sole Remedy. Except in connection with fraud or
specific performance, Buyer acknowledges that the indemnification provisions
contained in this Section 5 constitute Buyer's sole and exclusive remedy with
respect to any claims or disputes arising out of or in connection with the
Agreement.

     5.4. Covenants Against Competition.


                                       22



          a. Seller agrees that Seller, and Seller's affiliates and officers
will not (i) for the period commencing on the Closing Date and ending three
years after such date, reveal, make known or use, directly or indirectly, any
confidential business information (including without limitation, customer lists
and records) sold to Buyer pursuant to this Agreement, nor (ii) for the period
commencing on the Closing Date and ending three years after such date, within a
50-mile radius of the location of any of Seller's Operations in Minnesota, North
Dakota and Wisconsin, directly or indirectly (whether as owner, director,
shareholder (with the exception of beneficial ownership by such persons or
entities, individually and in the aggregate, of not more than five percent of
the outstanding equity securities of any publicly held corporation), employee,
officer, agent, broker, dealer, representative or in any other capacity), (a)
solicit, market or provide or attempt to market or provide to any person or
entity either propane, tanks, cylinders or any other products or services
associated with the Operations, (b) divert or attempt to divert from Buyer any
business with any customer or account with which Seller had any contact or
association, which was under the supervision of Seller, or the identity of which
was learned by Seller as a result of conducting the Operations, (c) induce any
salesperson, distributor, manufacturer, representative, agent, jobber or other
person transacting business with Buyer at the Locations to terminate his, her or
its relationship or association with Buyer, or to represent, distribute or sell
services or products in competition with the services or products of Buyer, (d)
induce or cause any employee of Buyer at the Locations to leave the employ of
Buyer or (e) lend money to, invest in or otherwise assist in any manner any
individual or entity engaged in activities described in (a), (b), (c) or (d)
above. Notwithstanding the preceding, the restrictions of this Section 5.4 shall
not be construed in any manner to prohibit or restrict the Seller, from directly
or indirectly (i) acquiring all or substantially all of the assets or capital
stock of any of the entities listed on Exhibit 5.4, or their successors or
assigns. Recognizing the irreparable nature of the injury which would be caused
Buyer by violation of this Section 5.4, Seller agrees that in addition to and
without limitation of any rights which Buyer might have hereunder, any violation
of this Section 5.4 shall be the proper subject matter for immediate injunctive
relief and Buyer shall have the right to offset any Damages it might have
incurred by reason of any breach hereof against any sums of money at any time
deliverable by Buyer or its successors to Seller subject to the Escrow
Agreement.

          b. If any covenant, undertaking or other provision of Section 5.4a
hereof shall be determined to be invalid, illegal or incapable of being enforced
by reason of any rule of law or public policy, all other covenants, undertakings
and provisions of such Section shall nevertheless remain in full force and
effect and shall be deemed separable and divisible from all other covenants,
undertakings and provisions thereof and none shall be deemed to be dependent
upon any other unless so expressed herein. If any provision of such Section
relating to time periods or geographical area is found by a court of competent
jurisdiction to exceed the maximum time period or geographical area such court
deems reasonable and enforceable, the parties agree that such court may enforce


                                       23



such provisions for the maximum time period and/or geographical area as the
court finds to be reasonable.

     5.5. Retained Access. Following the Closing, to the extent reasonably
required for any bona fide business purpose, Buyer will allow, and will use its
reasonable efforts to cause its affiliates to allow, Seller (and Seller's
agents, representatives and affiliates) access to all business records
concerning the Operations, the acquired assets hereunder or the Assumed
Liabilities which relate to the period prior to the Closing Date and will permit
such person to make copies of same. Such access will be granted upon reasonable
advance notice, during normal business hours, and in such a manner so as not to
interfere unreasonably with the operations of the Business. Without limiting the
generality of the foregoing, if either Buyer or Seller or any of its affiliates
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand in connection with (a) any
transaction contemplated hereby, or (b) any fact, situation, circumstances,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing relating to
the Operations, then the other party will cooperate, and use its reasonable
efforts to cause its affiliates to cooperate, with the contesting or defending
party and its counsel in such contest or defense, make available such other
party's and its affiliates' personnel and provide such testimony and access to
books and records as are reasonably requested in connection with such contest or
defense, all at the contesting or defending party's expense.

     5.6. Taxes. Buyer shall be solely responsible for the payment of any sales
or transfer or other taxes as may be required to paid in connection with the
transactions provided for herein, together with all documentary, filing and
recording taxes, fees and charges associated with the transactions contemplated
by this Agreement. All personal property and other taxes and assessments based
upon or measured by the ownership of property, or the receipt of proceeds
therefrom, shall be prorated between Seller and Buyer as of the Closing Date;
provided, however, that each party shall be responsible for its own income and
franchise taxes. Seller may require Buyer to remit any and all applicable taxes
to Seller; under these circumstances, Seller shall be responsible for remitting
said taxes to the appropriate taxing authorities.

     5.7. Employees. Except as set forth on Exhibit 5.7, Buyer agrees to extend
offers of employment to all employees of Seller who shall be working as of the
Closing Date at any of the Locations and who meet Buyer's employment
qualifications and criteria, and shall employ such employees who accept such
offers ("Hired Employees") at no less than the same wage or salary rate in
effect and on other terms, conditions, and benefits as are provided to similarly
situated employees of the Buyer. Buyer and Seller acknowledge that some
employees of Seller at the Locations have accrued bonus due to them from Seller
for the period October 1, 2003 through September 30, 2004, contingent


                                       24



upon their continued employment by Seller on December 10, 2004. The bonus plan
and estimated payments due thereunder are more particularly described on Exhibit
5.7.2. Buyer and Seller agree that it is appropriate to honor the bonus plan to
each employee who remains in the employ of Buyer on December 10, 2004,
contingent upon said employee executing Buyer's standard Employment Agreement.
Seller convenants and agrees to pay to Buyer upon demand the bonus payments made
by Buyer pursuant to Seller's bonus plan and this Section 5.7, along with all
applicable payroll taxes incurred by Buyer therefore. Seller's obligations
pursuant to this Section 5.7 shall not be subject to the thresholds, caps,
procedures and other limitations set forth in Section 5.1 and 5.2.

     5.8. Name Change; Use of Seller's Name. Buyer shall remove the name and
logo of Seller from the assets at the Locations within a commercially reasonable
time, but in no event later than ninety (90) days after the Closing for primary
locations, and at secondary locations and customer locations six (6) months
after the Closing, at Buyer's sole cost and expense. From and after the Closing,
Buyer shall use only Buyer's own name when taking action in respect of the
Operations or in connection with any Location. Buyer shall not state, represent
or imply that Buyer is connected in any manner with, or acting for or on behalf
of, Seller or any of Seller's affiliates. Buyer shall not (a) use the marks
and/or names of, or otherwise refer to Seller or any of Seller's affiliates or
(b) use any names and/or marks similar to the names and/or marks of any Seller
or any of Seller's affiliates.

     5.9. Confidential Information. The parties acknowledge and agree that the
Confidentiality Agreements dated August 9, 2004 between Seller as "Discloser"
and Buyer as "Disclosee" remain in full force and effect and shall survive the
termination of this Agreement, but shall not survive the Closing, and if Closing
occurs, shall be null and void thereafter.

     5.10. Public Announcements. All public announcements prior to and on the
Closing Date relating to this Agreement or the transactions contemplated hereby,
including announcements to employees, will be made only as may be agreed upon
jointly by the parties hereto; provided, however, that Buyer or Seller may make
any public disclosure it believes in good faith is required by applicable law or
stock exchange requirement (in which case the disclosing party will use its
reasonable best efforts to advise the other party prior to making the
disclosure).

     5.11. Notices. Any notice, request, instrument or other document to be
given hereunder shall be in writing and delivered personally or sent by
certified or registered mail, postage prepaid:


                                       25



     If to Buyer, addressed as follows:

          Ferrellgas, L.P.
          c/o Ferrellgas, Inc.
          One Liberty Plaza
          Liberty, Missouri 64068
          Attention: Kenneth A. Heinz, Sr. Vice President,
          Corporate Development

with a copy to:

          Bryan Cave LLP
          1200 Main Street, Suite 3500
          Kansas City, Missouri 64105
          Attention: Morris K. Withers, Esq.

     If to Seller, addressed as follows:

          Suburban Propane, L.P.
          240 Route 10 West, P.O. Box 206
          Whippany, NJ 07981
          Attention: Janice Meola Sokol, Esq.

with a copy to:

          Cole, Schotz, Meisel, Forman & Leonard, P.A.
          Court Plaza North
          25 Main Street
          Hackensack, NJ 07601
          Attention: Alan Rubin, Esq.

or to such other address as any of the parties hereto may designate by notice
given as above provided. Any item sent by registered or certified mail, as above
provided, will be deemed given when deposited in the United States mails.

     5.12. Risk of Loss. Seller shall bear the risk of loss or damage to the
properties and assets to be sold hereunder until the Closing.

     5.13. Bulk Sales Law. Buyer waives compliance by Seller with the provisions
of any applicable bulk sales, fraudulent conveyance or other law for the
protection of creditors of any jurisdiction that may otherwise be applicable in
connection with the transfer of the assets under this Agreement and in
consideration of such waiver, Seller agrees to indemnify Buyer and hold Buyer
harmless from and against any Damages arising out of or resulting from such
non-compliance.


                                       26



     5.14. Vehicle Leases.

          a. Buyer agrees to buy out, at its sole cost and expense, the leases
listed on Schedule no later than sixty (60) days from the Closing Date for an
amount not to exceed $1,800,000. Until such time as the Buyer has purchased the
lease pertaining to specific vehicles, Buyer may operate the vehicles in the
ordinary course of business, but shall remove them from the Locations.

          b. Covenants with respect to the Leases. At all times that Seller is a
guarantor or otherwise remains potentially liable in any manner with respect to
any motor vehicle lease (each, a "Lease") set forth on Exhibit 3.1(d):

               (i) Buyer shall faithfully abide by, perform and discharge, at
          its sole cost and expense, each and every obligation, covenant and
          agreement under such Lease prior to the expiration of any applicable
          grace or cure period and Buyer hereby agrees to indemnify and hold
          Seller harmless from and against any and all loss, cost, expense
          (including reasonable attorneys' fees), damage and liability incurred
          by Seller as a result of claims brought against Seller with respect to
          the performance of all of the terms, covenants and conditions of such
          Lease to be performed from and after the Closing Date;

               (ii) Buyer shall not modify, amend or alter the terms or
          provisions of such Lease, and otherwise shall not take any action that
          could, in either case, reasonably be expected to increase the
          aggregate liability of Buyer or Seller thereunder;

               (iii) Buyer shall not (A) sell, encumber, assign, transfer or
          otherwise dispose of such Lease, the motor vehicles in respect thereof
          (in respect of any such Lease, the "Leased Motor Vehicle") or Buyer's
          interest therein, whether effected voluntarily or involuntarily,
          directly or indirectly, by operation of law or otherwise, or (B)
          consent to or enter into any contract, agreement or arrangement to
          take any action prohibited by clause (A) above; and

               (iv) Buyer shall faithfully maintain any and all insurance
          requirements set forth by the Lessor of the Leased Motor Vehicles.

     If Buyer shall fail to perform any covenant contained in any Lease, (i)
Seller may (but shall have no obligation to) make advances to perform the same
on Buyer's behalf, and all sums so advanced shall be repaid by Buyer immediately
upon the demand of Seller, (ii) Buyer shall transfer such Lease and surrender
possession of the related Leased Motor Vehicle to Seller immediately upon the
demand of Seller and (iii) Seller shall be


                                       27



authorized, absent voluntary surrender by Buyer, to assume the obligations of
Buyer under the applicable Lease and to take possession of the Leased Motor
Vehicle subject to such Lease. Upon the transfer or assumption of any Lease and
the surrender or taking of possession of any Leased Motor Vehicle by Seller
pursuant to this Section, Seller shall be entitled to use, operate, manage,
control and dispose of such Lease and related Leased Motor Vehicle solely for
its own account (subject, in each case, to the terms of the applicable Lease).

     5.15. Tax Disclosures. Notwithstanding any other agreement among the
parties or anything else herein to the contrary, each party to this Agreement
(and any employee, representative or other agent thereof) may disclose to any
and all persons, without limitation of any kind, the U.S. federal income tax
treatment and any tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided, that no party (or any employee, representative or other
agent thereof) shall disclose pursuant to this section (i) any information that
is not relevant to an understanding of the U.S. federal income tax treatment of
the transactions contemplated by this Agreement, including the identity of any
party to this Agreement (or its employees, representatives or agents) or other
information that could lead any person to determine such identity or (ii) any
information to the extent such disclosure could result in a violation of any
federal or state securities laws; and provided further, that this section shall
not apply until the earliest of (a) the date of public announcement of
discussions relating to the transactions, (b) the date of public announcement of
the transactions, or (c) the date of execution of an agreement, with or without
consideration, to enter into the transactions.

     5.16. Miscellaneous. This Agreement, including the documents and exhibits
referred to herein, contains the entire understanding of the parties hereto and
supersedes all prior understandings, agreements or undertakings of the parties
with respect to the subject matter contained herein, and may be amended only by
a written instrument executed by all of the parties hereto. Wherever possible,
each provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or declared invalid under applicable law, such provision
shall be void and of no effect and the remaining provisions of this Agreement
shall remain in full force and effect. This Agreement shall be a contract made
under, governed by and construed under, the laws of the state of Delaware,
except no doctrine of choice of law shall be used to apply any law other than
that of the state of Delaware. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors, assigns
and personal representatives; provided, however, that no assignment by any party
hereto of any right hereunder shall be made on or prior to the Closing Date, and
no assignment, by operation of law or otherwise, shall relieve any party of its
obligations hereunder. This Agreement


                                       28



may be executed in any number of counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
instrument.

     5.17. Seller's Affirmative Covenants. Seller covenants and agrees as
follows:

          a. New Brighton, MN.

               (i) Buyer has disclosed to Seller that it has received
information of a proposed acquisition by eminent domain the real estate located
at 1430 Old Highway 8, New Brighton, Minnesota. In the event there is a taking
by governmental agencies of this property within five (5) years from the Closing
Date, to the extent such Damages are not otherwise reimbursed or recovered by
Buyer, Seller shall reimburse Buyer its costs to replace the New Brighton plant
with a comparable plant of similar size, storage and construction, not to exceed
a maximum aggregate of $100,000.

               (2) Buyer and Seller have knowledge of a possible cloud on title
relating to a Contract of Deed between King Gas Sales, Inc. and T.C. Leasing,
Inc. dated December 5, 1977, as disclosed on Exhibit A to that certain Bargain
and Sale Deed, dated January 26, 2001 between Millennium Petrochemicals Inc. and
Suburban Propane, L.P. Buyer and Seller agree to obtain a title insurance policy
relating to this property at Seller's cost not to exceed the sum of $2,000. In
the event the cost of such title insurance policy shall exceed $2,000, the
excess cost shall be divided equally between Buyer and Seller.

          b. Condemnation Proceedings. With respect to the condemnation
proceedings listed on Exhibit 3.1j. Seller shall indemnify and hold Buyer
harmless for Buyer's reasonable "costs to cure" (defined in Section 3.1j)
arising or resulting from such condemnation proceedings; provided, however, that
the parties agree that the reasonable "cost to cure" for 1310 Highway 55 East,
Buffalo, Minnesota shall be deemed to be the sum of $21,390.00.

     5.18. Environmental Covenants.

          a. With respect to the real properties located at Sauk Center,
Buffalo, Princeton and Cedar, Minnesota, Seller covenants and agrees to perform,
at each location and at its sole cost, any repair or replacement required by
state or local law to bring such septic systems into compliance with applicable
state or local laws and shall indemnify and hold Buyer harmless against third
party claims arising therefrom.

          b. Seller covenants and agrees to cap and abandon, in compliance with
state and local laws and at its sole cost, the drinking water well at the real
property located at Princeton, Minnesota and shall indemnify and hold Buyer
harmless against third party claims arising therefrom.


                                       29



          c. In consideration of and contingent upon Seller's performance of its
obligations pursuant to this Section 5.18, as to all properties which are the
subject of this Section 5.18, Buyer hereby releases Seller from any claim Buyer
may have now or in the future arising from either Known Hazardous Wastes or
other Hazardous Wastes remediated pursuant to this Section 5.18 on such
properties, including interference with the use of such properties and
consequential damages of Buyer and any claims for diminution in property value
arising from the presence of such remediated Hazardous Wastes on such
properties; however, this release shall have no effect upon Buyer's right to
make a claim for indemnification arising from a third party claim as described
in subsection 5.18 (a) and (b).

          d. Notwithstanding the provisions of 5.1(b) above, all covenants and
indemnification obligations of Seller pursuant to the provisions of Section 5.17
and Section 5.18 shall not be subject to the individual Damages threshold or
aggregate Damages threshold but shall count toward the $3 million maximum
aggregate of Damages set forth in paragraph 5.1(b) above.

                            (SIGNATURES ON NEXT PAGE)


                                       30



     IN WITNESS WHEREOF, the parties hereto have caused this Purchase and
Noncompetition Agreement to be executed as of the day and year first above
written.

SELLER:                                   BUYER:

SUBURBAN PROPANE, L.P.                    FERRELLGAS, L.P.

                                          By: Ferrellgas, Inc., General Partner


By:                                       By:
    ---------------------------------         ----------------------------------
Name: Michael J. Dunn, Jr.                Name: Ken A. Heinz
Title: Senior Vice President,             Title: Sr. Vice President,
       Corporate Development                     Corporate Development

Fed. ID# 22-3410352                       Fed. ID# 43-1698481


SUBURBAN SALES AND SERVICE, INC.


By:
    ---------------------------------
Name: Michael J. Dunn, Jr.
Title: Senior Vice President,
       Corporate Development

Fed. ID# 22-3421999


                                       31

EX-14.1 10 file007.htm CODE OF ETHICS



                                                                    EXHIBIT 14.1

                         SUBURBAN PROPANE PARTNERS, L.P.
     CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER AND
                                   CONTROLLER

The Partnership has adopted a Code of Ethics for its Chief Executive Officer,
Chief Financial Officer, Controller and any other senior executives or financial
officers and managers performing similar functions and so designated from time
to time by the Chief Executive Officer (collectively the "Senior Executive
Officers and Financial Management"). This Code of Ethics is designed to promote
honest and ethical conduct; full, fair, accurate, timely and understandable
disclosure of financial information in the periodic reports of the Partnership;
and compliance with applicable laws, rules and regulations. The obligations of
this Code of Ethics supplement, but do not replace, the Code of Business Conduct
applicable to all employees. Senior Executive Officers and Financial Management
of the Partnership will, to the best of their knowledge and ability:

o    Act with honesty and integrity, avoiding actual or apparent conflicts of
     interest in personal and professional relationships

o    Provide information that is accurate, complete, objective, relevant, timely
     and understandable to ensure full, fair, accurate, timely, and
     understandable disclosure in reports and documents that the Partnership
     files with, or submits to, government agencies and in other public
     communications.

o    Comply with rules and regulations of federal, state and local governments,
     and other appropriate private and public regulatory agencies.

o    Act in good faith, responsibly, with due care, competence and diligence,
     without misrepresenting material facts or allowing one's independent
     judgment to be subordinated.

o    Respect the confidentiality of information acquired in the course of one's
     work except when authorized or otherwise legally obligated to disclose such
     information. Do not use confidential information acquired in the course of
     one's work for personal advantage.

o    Proactively promote and be an example of ethical behavior among employees
     throughout the Partnership.

o    Achieve responsible use of and control over all assets and resources
     employed or entrusted under their responsibility.

o    Promptly report to Chairman of the Audit Committee of the Board of
     Supervisors any conflict of interest or any conduct that the individual
     believes to be a violation of law or business ethics or of any provision of
     this Code of Ethics, including any transaction or relationship that
     reasonably could be expected to give rise to such an actual or apparent
     conflict of interest with the Partnership.

The Audit Committee of the Board of Supervisors will assess compliance with this
Code of Ethics, report violations of this Code of Ethics to the Board of
Supervisors, and, based upon the relevant facts and circumstances, recommend to
the Board of Supervisors appropriate action. The Audit Committee of the Board of
Supervisors shall approve any waiver or amendment of this Code of Ethics, and
any such waiver or amendment shall be disclosed promptly, as required



by law or SEC regulation. A violation of this Code of Ethics may result in
disciplinary action, including termination of employment.

EX-21.1 11 file008.htm SUBSIDIARIES OF THE PARTNERSHIP





                                                                    EXHIBIT 21.1

                 SUBSIDIARIES OF SUBURBAN PROPANE PARTNERS, L.P.


SUBURBAN PROPANE, L. P. (Delaware)
SUBURBAN PROPANE GAS CORPORATION  (Delaware)
GAS CONNECTION, INC.  (Oregon)
SUBURBAN @ HOME, INC.  (Delaware)
SUBURBAN HOLDINGS, INC.  (Delaware)
SUBURBAN FRANCHISING, INC.  (Nevada)
SUBURBAN @ HOME HOLDINGS, INC.
SUBURBAN ENERGY FINANCE CORP.
SUBURBAN PLUMBING NEW JERSEY, LLC
SUBURBAN PIPELINE LLC
SUBURBAN HEATING OIL PARTNERS, LLC
AGWAY ENERGY SERVICES, LLC  (Delaware)
SUBURBAN ALBANY PROPERTY, LLC  (Delaware)
SUBURBAN BUTLER MONROE STREET PROPERTY, LLC  (Delaware)
SUBURBAN CANTON BUCK STREET PROPERTY, LLC  (Delaware)
SUBURBAN CANTON ROUTE 11 PROPERTY, LLC  (Delaware)
SUBURBAN CHAMBERSBURG FIFTH AVENUE PROPERTY, LLC  (Delaware)
SUBURBAN COLONIE PROPERTY LLC  (Delaware)
SUBURBAN ELLENBURG DEPOT PROPERTY, LLC  (Delaware)
SUBURBAN GETTYSBURG PROPERTY, LLC  (Delaware)
SUBURBAN LEWISTOWN PROPERTY, LLC  (Delaware)
SUBURBAN MA SURPLUS PROPERTY, LLC  (Delaware)
SUBURBAN MARCY PROPERTY, LLC  (Delaware)
SUBURBAN MIDDLETOWN NORTH STREET PROPERTY, LLC  (Delaware)
SUBURBAN NEW MILFORD SMITH STREET PROPERTY, LLC  (Delaware)
SUBURBAN NJ PROPERTY ACQUISITIONS, LLC  (Delaware)
SUBURBAN NJ SURPLUS PROPERTY, LLC  (Delaware)
SUBURBAN NY PROPERTY ACQUISITIONS, LLC  (Delaware)
SUBURBAN NY SURPLUS PROPERTY, LLC  (Delaware)
SUBURBAN PA PROPERTY ACQUISITIONS, LLC  (Delaware)
SUBURBAN PA SURPLUS PROPERTY, LLC  (Delaware)
SUBURBAN ROCHESTER PROPERTY, LLC  (Delaware)
SUBURBAN SODUS PROPERTY, LLC  (Delaware)
SUBURBAN TEMPLE PROPERTY, LLC  (Delaware)
SUBURBAN TONAWANDA PLANT PROPERTY, LLC  (Delaware)
SUBURBAN TOWANDA PROPERTY, LLC  (Delaware)
SUBURBAN VERBANK PROPERTY, LLC  (Delaware)
SUBURBAN VINELAND PROPERTY, LLC  (Delaware)
SUBURBAN VT PROPERTY ACQUISITIONS, LLC  (Delaware)
SUBURBAN WALTON PROPERTY, LLC  (Delaware)
SUBURBAN WASHINGTON PROPERTY, LLC  (Delaware)
PARGAS, INC.  (Delaware)
VANGAS, INC.  (Delaware)
PLATEAU, INC.  (New Mexico)

EX-23.1 12 file009.htm CONSENT OF INDEPENDENT REGISTERED PAF




                                                                    EXHIBIT 23.1


                       CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-109714) and Form S-8 (No. 333-72972) of Suburban
Propane Partners, L.P. of our report dated December 8, 2004 relating to the
financial statements and financial statement schedule, which appears in this
Form 10-K.



PricewaterhouseCoopers LLP
Florham Park, NJ
December 8, 2004

EX-31.1 13 file010.htm CERTIFICATION PURSUANT TO SECTION 302




                                                                    EXHIBIT 31.1

     Certification of the President and Chief Executive Officer Pursuant to
                             18 U.S.C. Section 1350,
                             as Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark A. Alexander, certify that:

1.   I have reviewed this Annual Report on Form 10-K of Suburban Propane
     Partners, L.P.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)  Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

     b)  Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     c)  Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's Board
     of Supervisors:

     a)  All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     b)  Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.


December 9, 2004


                             /s/ MARK A. ALEXANDER
                             -------------------------------------
                                Mark A. Alexander
                             President and Chief Executive Officer

EX-31.2 14 file011.htm CERTIFICATION PURSUANT TO SECTION 302




                                                                    EXHIBIT 31.2

   Certification of the Vice President and Chief Financial Officer Pursuant to
                             18 U.S.C. Section 1350,
                             as Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert M. Plante, certify that:

1.   I have reviewed this Annual Report on Form 10-K of Suburban Propane
     Partners, L.P.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

     (b) Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     (c) Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's Board
     of Supervisors:

     (a) All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.


December 9, 2004
                         /s/ ROBERT M. PLANTE
                         ------------------------------------------
                         Robert M. Plante
                         Vice President and Chief Financial Officer

EX-32.1 15 file012.htm CERTIFICATION PURSUANT TO SECTION 906




                                                                    EXHIBIT 32.1

     Certification of the President and Chief Executive Officer Pursuant to
                             18 U.S.C. Section 1350,
                             as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the Annual Report of Suburban Propane Partners, L.P. (the
"Partnership") on Form 10-K for the period ended September 25, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Mark A. Alexander, Chief Executive Officer and President of the Partnership,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Partnership.


                                    /s/ MARK A. ALEXANDER
                                    -------------------------------------
                                    Mark A. Alexander
                                    President and Chief Executive Officer
                                    December 9, 2004


A signed original of this written statement required by Section 906 has been
provided to the Partnership and will be retained by the Partnership and
furnished to the Securities and Exchange Commission or its staff upon request.


This certification shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.

EX-32.2 16 file013.htm CERTIFICATION PURSUANT TO SECTION 906





                                                                    EXHIBIT 32.2

   Certification of the Vice President and Chief Financial Officer Pursuant to
                             18 U.S.C. Section 1350,
                             as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the Annual Report of Suburban Propane Partners, L.P. (the
"Partnership") on Form 10-K for the period ended September 25, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Robert M. Plante, Vice President and Chief Financial Officer of the
Partnership, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Partnership.


                              /s/ ROBERT M. PLANTE
                               --------------------
                                Robert M. Plante
                                Vice President and Chief Financial Officer
                                December 9, 2004


A signed original of this written statement required by Section 906 has been
provided to the Partnership and will be retained by the Partnership and
furnished to the Securities and Exchange Commission or its staff upon request.


This certification shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.

-----END PRIVACY-ENHANCED MESSAGE-----

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)