SUBURBAN PROPANE PARTNERS LP
10-K, 1997-12-23
MISCELLANEOUS RETAIL
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 27, 1997
                                                           OR
[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE
         SECURITIES EXCHANGE        ACT OF 1934

for the transition period from ______ to ______

                         Commission File Number: 1-14222

                         SUBURBAN PROPANE PARTNERS, L.P.
             (Exact name of registrant as specified in its charter)

DELAWARE                                             22-3410353
- ------------------------------------------------------------------------
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       Identification No.)

240 ROUTE 10 WEST,         WHIPPANY, NJ                07981
- -------------------------------------------------------------
(Address of principal executive office)     (Zip Code)

(973)887-5300
- ----------------------------------------------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
                                                     Name of each exchange on
         Title of each class                                which registered

         Common Units                                New York Stock Exchange
- --------------------------------------------------------------------------------
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  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for each shorter  period that the  Registrant
was  required  to file such  reports),  and (2) had 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 [X ].

The aggregate  market value as of December 16, 1997 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,  was
approximately  $365,214,800.   At  December  16,  1997  there  were  outstanding
21,562,500 Common Units and 7,163,750 Subordinated Units.

Documents Incorporated by Reference:  None
<PAGE>

                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 .............................................        6
ITEM  3.  LEGAL PROCEEDINGS ......................................        6
ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....        6

                                     PART II
ITEM  5.  MARKET FOR THE REGISTRANT'S UNITS AND
          RELATED UNITHOLDER MATTERS .............................        7

ITEM  6.  SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA .......        7
ITEM  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..........       10
ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............       14
ITEM  9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE ....................       14

                                    PART III
ITEM  10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .....       15
ITEM  11. EXECUTIVE COMPENSATION .................................       17
ITEM  12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT .........................................       21
ITEM  13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .........       23

                                     PART IV
ITEM  14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
          REPORTS ON FORM 8-K ....................................       24


Signatures .......................................................       25


DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------

STATEMENTS MADE IN THIS FORM 10-K WHICH RELATE TO THE PARTNERSHIP'S EXPECTATIONS
OR PREDICTIONS ARE OR MAY BE DEEMED TO BE FORWARD LOOKING  STATEMENTS WITHIN THE
MEANING OF  SECTION 27A OF THE  SECURITIES ACT OF 1933 AND 21E OF THE SECURITIES
EXCHANGE ACT OF 1934.  THE PARTNERSHIP'S  ACTUAL  RESULTS MAY  DIFFER MATERIALLY
FROM THOSE  CONTAINED IN ANY SUCH  FORWARD  LOOKING  STATEMENTS  DEPENDING  ON A
NUMBER  OF  FACTORS,  RISKS  AND  UNCERTAINTIES, SOME OF WHICH  ARE OUTSIDE  THE
PARTNERSHIP'S CONTROL, INCLUDING  THE UNIT  COST OF  PROPANE, WEATHER, CONTINUED
CONTROL OF EXPENSES, CUSTOMER RETENTION AND REGULATORY DEVELOPMENTS (SUCH AS THE
RSPA FINAL  RULE DISCUSSED IN THE  GOVERNMENT  REGULATION  SECTION OF "ITEM 1 - 
BUSINESS").




<PAGE>



                                     PART I


ITEM 1. BUSINESS.

GENERAL

     Suburban  Propane  Partners,  L.P. (the  "Partnership"),  a publicly traded
Delaware limited partnership is engaged, through subsidiaries, in the retail and
wholesale  marketing  of  propane  and  related  appliances  and  services.  The
Partnership  believes it is the third largest retail  marketer of propane in the
United  States,  serving  more  than  700,000  active  residential,  commercial,
industrial  and  agricultural  customers  from  more than 350  customer  service
centers in over 40 states. The Partnership's  operations are concentrated in the
east and west coast  regions  of the United  States.  The retail  propane  sales
volume of the  Partnership  was  approximately  541 million  gallons  during the
fiscal  year  ended  September  27,  1997.  Based on  industry  statistics,  the
Partnership   believes  that  its  retail   propane  sales  volume   constitutes
approximately 6% of the domestic retail market for propane.

     The Partnership  conducts its business  principally through its subsidiary,
Suburban  Propane,  L.P.  (the  "Operating  Partnership"),  a  Delaware  limited
partnership.  The Partnership and the Operating  Partnership were formed in 1995
to acquire and operate the propane  business and assets of the Suburban  Propane
Division of Quantum Chemical Corporation (the "Predecessor Company"), then owned
by Hanson PLC  ("Hanson").  In addition,  Suburban Sales and Service,  Inc. (the
"Service  Company"),  a subsidiary of the Operating  Partnership,  was formed to
acquire and operate the service work and appliance and propane  equipment  parts
businesses  of  the  Predecessor   Company.   The  Partnership,   the  Operating
Partnership and the Service Company are collectively  referred to hereinafter as
the "Partnership  Entities." The Partnership  Entities  commenced  operations on
March 5, 1996 upon  consummation  of an initial public  offering of Common Units
representing limited partner interests in the Partnership, the private placement
of $425 million  aggregate  principal amount of Senior Notes and the transfer of
all the propane assets  (excluding the net accounts  receivable  balance) of the
Predecessor Company to the Operating Partnership and Service Company.

     Suburban  Propane  GP,  Inc.  (the  "General  Partner")  is a  wholly-owned
subsidiary of Millennium Petrochemicals Inc., ("Millennium  Petrochemicals") and
serves as the general partner of the Partnership and the Operating  Partnership.
Both the General Partner and Millennium Petrochemicals are indirect wholly-owned
subsidiaries of Millennium  Chemicals Inc.  ("Millennium") which was formed as a
result of  Hanson's  demerger in October  1996.  Millennium  Petrochemicals  was
formerly named Quantum  Chemical  Corporation  ("Quantum").  The General Partner
holds a 1% general  partner  interest in the  Partnership  and a 1.0101% general
partner interest in the Operating Partnership.  In addition, the General Partner
owns a 24.4% limited partner  interest and a special limited partner interest in
the  Partnership.  The  limited  partner  interest  is  evidenced  by  7,163,750
Subordinated  Units and the special  limited  partner  interest is  evidenced by
Additional  Partnership Units ("APUs"). The General Partner has delegated to the
Partnership's  Board of Supervisors all management  powers over the business and
affairs of the  Partnership  Entities that the General  Partner  possesses under
applicable law.

HISTORY OF THE PARTNERSHIP'S OPERATIONS

     The Predecessor Company had been continuously engaged in the retail propane
business since 1928 and had been owned by Quantum since 1983.  During the 1980s,
the Predecessor  Company grew rapidly through  acquisitions and strengthened its
position as a leader in the industry. In September 1993, Quantum was acquired by
a wholly-owned  subsidiary of Hanson. On March 5, 1996, the Partnership acquired
the business and assets of the Predecessor  Company and commenced operating as a
public entity.






<PAGE>


BUSINESS STRATEGY

     The  Partnership's  strategy is to expand its  operations  and increase its
retail market share in selected  markets both through the  acquisition  of other
propane distributors and through internal growth. Although acquisitions continue
to be an important element of growth, the Partnership  believes that the current
market values being paid for propane  distributors  are greater than the cost to
grow internally through improved customer retention and marketing.  As a result,
the  Partnership  has  focused on  internal  growth but will  continue to pursue
selective  acquisitions  including non- propane related companies.  Acquisitions
during fiscal 1997 totaled 5 propane  distributors  for total  consideration  of
$1.7 million compared to 17 propane distributors acquired during fiscal 1996 for
total consideration of $31.7 million.

     In  order  to  facilitate  the  Partnership's   acquisition  strategy,  the
Operating Partnership's Bank Credit Facilities include a $25 million Acquisition
Facility. (See Item 7.)

     The Partnership plans to pursue internal growth by acquiring new customers,
retaining existing customers and by selling additional  products and services to
its customers. The Partnership employs a nationwide sales organization and has a
comprehensive  customer  retention  program.  By retaining  more of its existing
customers and continuing to seek new customers,  the Partnership believes it can
increase its customer base and improve its profitability.

INDUSTRY BACKGROUND AND COMPETITION

     Propane, a by-product of natural gas processing and petroleum refining,  is
a clean-burning  energy source recognized for its  transportability  and ease of
use relative to alternative forms of stand-alone energy sources.  Retail propane
use  falls  into  three  broad   categories:   (i)  residential  and  commercial
applications,  (ii) industrial  applications and (iii) agricultural uses. In the
residential and commercial markets, propane is used primarily for space heating,
water heating,  clothes drying and cooking.  Industrial  customers primarily use
propane  as a motor  fuel  burned in  internal  combustion  engines  that  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.  In its  wholesale  operations,  the  Partnership  sells  propane
principally to large industrial end-users and other propane distributors.

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

     Based upon information  provided by the Energy Information Agency,  propane
accounts for approximately three to four percent of household energy consumption
in the United States.  Propane competes  primarily with electricity and fuel oil
as an  energy  source,  principally  on the  basis of  price,  availability  and
portability.  In addition to competing  with  alternative  energy  sources,  the
Partnership  competes  with  other  companies  engaged  in  the  retail  propane
distribution business.  Competition in the propane industry is highly fragmented
and generally occurs on a local basis with other large full-service  multi-state
propane  marketers,  thousands of smaller local  independent  marketers and farm
cooperatives.  Based on industry publications, the Partnership believes that the
10 largest retailers,  including the Partnership,  account for approximately 33%
of the total  retail sales of propane in the United  States,  and that no single
marketer has a greater  than 10% share of the total retail  market in the United
States. Based on industry  statistics,  the Partnership believes that its retail
sales volume  constitutes  approximately  6% of the domestic  retail  market for
propane.  Most of the Partnership's  retail  distribution  branches compete with
five or more marketers or distributors. Each retail distribution outlet 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.
The typical  retail  distribution  outlet  generally has an effective  marketing
radius of  approximately  50 miles although in certain rural areas the marketing
radius may be extended by a satellite office.

<PAGE>

PRODUCTS, SERVICES AND MARKETING

     The   Partnership   distributes   propane   through  a  nationwide   retail
distribution  network  consisting of more than 350 customer  service  centers in
over 40 states.  The  Partnership's  operations are concentrated in the east and
west coast regions of the United States. In fiscal 1997, the Partnership  served
more  than  700,000   active   customers.   Approximately   two-thirds   of  the
Partnership's  retail  propane  volume is sold during the six-month peak heating
season from October  through  March,  as many  customers use propane for heating
purposes.  Typically,  customer  service centers are found in suburban and rural
areas where  natural gas is not readily  available.  Generally,  such  locations
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 the
Partnership's  residential customers receive their propane supply pursuant to an
automatic  delivery  system  which  eliminates  the  customer's  need to make an
affirmative   purchase  decision.   From  its  customer  service  centers,   the
Partnership also sells,  installs and services  equipment related to its propane
distribution  business,  including  heating and cooking  appliances and, at some
locations, propane fuel systems for motor vehicles.

     The  Partnership  sells  propane  primarily  to six  markets:  residential,
commercial, industrial (including engine fuel), agricultural, other retail users
and  wholesale.  Approximately  75.0% of the gallons sold by the  Partnership in
fiscal 1997 were to retail customers (27.9% to residential  customers,  25.6% to
commercial  customers,  11.0% to industrial  customers (including 8.5% to engine
fuel customers),  4.8% to agricultural customers and 5.2% to other retail users)
and  approximately  25.0%  were to  wholesale  customers.  Sales to  residential
customers in fiscal 1997 accounted for  approximately  55% of the  Partnership's
gross  profit on propane  sales,  reflecting  the  higher-margin  nature of this
segment  of the  market.  No single  customer  accounted  for 10% or more of the
Partnership's revenues during fiscal year 1997.

     Retail  deliveries  of propane are usually  made to  customers  by means of
bobtail  and rack  trucks.  Propane  is pumped  from the  bobtail  truck,  which
generally holds 2,200 gallons of propane,  into a stationary storage tank on the
customer's  premises.  The capacity of these tanks ranges from approximately 100
gallons to approximately 1,200 gallons, with a typical tank having a capacity of
300 to 400 gallons. The Partnership also delivers 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 picked up for
replenishment  at the  Partnership's  distribution  locations or are refilled in
place.  The Partnership also delivers 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
which use  propane  as a  supplemental  fuel to meet  peak  load  deliverability
requirements, and large agricultural accounts which use propane for crop drying.
Propane is generally  transported from refineries,  pipeline terminals,  storage
facilities  (including  the  Partnership's  storage  facilities in  Hattiesburg,
Mississippi  and  Elk  Grove,   California),   and  coastal   terminals  to  the
Partnership's  customer  service  centers by a combination  of common  carriers,
owner-operators,  the  Partnership's  own highway  transport fleet, and railroad
tank cars. (See Item 2.)

     In its wholesale operations,  the Partnership  principally sells propane to
large industrial end-users and other propane  distributors.  This market segment
includes  customers  who use propane to fire  furnaces,  as a cutting gas and in
other  process  applications.  Other  wholesale  customers may include local gas
utility  customers  who use  propane  as a  supplemental  fuel to meet peak load
deliverability requirements.

PROPANE SUPPLY

     The  Partnership's  propane  supply is purchased from over 90 oil companies
and natural gas  processors at more than 190 supply points located in the United
States and Canada.  The Partnership also makes purchases on the spot market. The
Partnership  purchased over 94% of its propane supplies from domestic  suppliers
during fiscal 1997.  Most of the propane  purchased by the Partnership in fiscal
1997 was purchased  pursuant to one year  agreements  subject to annual renewal,
but  the  percentage  of  contract  purchases  may  vary  from  year  to year as
determined by the Partnership. Supply contracts generally provide for pricing in
accordance  with posted  prices at the time of  delivery  or the current  prices
established  at major  storage  points,  and some  contracts  include  a pricing
formula that typically is based on such market prices.  Some of these agreements
provide maximum and minimum seasonal purchase guidelines. The Partnership uses a
number of  interstate  pipelines,  as well as  railroad  tank cars and  delivery
trucks  to  transport   propane  from  suppliers  to  storage  and  distribution
facilities.

<PAGE>

     Supplies of propane from the Partnership's  sources  historically have been
readily  available.  In the fiscal  year ended  September  27,  1997,  Shell Oil
Company ("Shell") and Exxon Corporation ("Exxon") provided approximately 16% and
14%,  respectively,  of the  Partnership's  total domestic  propane supply.  The
Partnership  believes  that,  if  supplies  from  either  Shell  or  Exxon  were
interrupted,  it would be able to secure  adequate  propane  supplies from other
sources  without a material  disruption of its  operations.  Aside from Shell or
Exxon,  no single  supplier  provided more than 10% of the  Partnership's  total
domestic propane supply in the fiscal year ended September 27, 1997.

     The  Partnership  has  expanded  its  product  procurement  and price  risk
management  activities  to reduce the effect of price  volatility on its product
costs and to help insure the  availability  of propane  during  periods of short
supply. The Partnership is currently a party to propane futures  transactions on
the New York  Mercantile  Exchange  and to a limited  extent  has  entered  into
contracts to purchase and sell product at fixed prices in the future.

     The  Partnership  operates  large  storage  facilities in  Mississippi  and
California and smaller  storage  facilities in other locations and has rights to
use storage  facilities  in  additional  locations.  The  Partnership's  storage
facilities  allow the  Partnership to buy and store large  quantities of propane
during periods of low demand,  which  generally  occur during the summer months.
The Partnership believes its storage facilities help ensure a more secure supply
of propane during periods of intense demand or price instability.

TRADEMARKS AND TRADENAMES

     The  Partnership  utilizes a variety of trademarks and tradenames  which it
owns, including "Suburban  Propane(R)".  The Partnership regards its trademarks,
tradenames  and other  proprietary  rights as valuable  assets and believes that
they have significant value in the marketing of its products.

GOVERNMENT REGULATION

     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  has been  named as a de minimis  potentially  responsible
party in connection with a predecessor's arranging for the shipment of waste oil
to the Purity Oil Superfund Site in Malaga, California. The Partnership, as part
of the de minimis group, entered into a negotiated  Administrative Consent Order
in January 1994  regarding  soil  remediation  at the site pursuant to which the
Partnership  paid  approximately  $192,000.  Negotiations  are  continuing  with
respect to  groundwater  contamination  at the site,  although  the  Partnership
believes it has  adequately  reserved for the likely  settlement  amount of such
negotiation and that such amount will not be material.  The Partnership believes
it has adequately  reserved for other  environmental  remediation  projects and,
based on information  currently available to the Partnership,  such projects are
not expected to have a material  adverse effect on the  Partnership's  financial
condition or results of operation.

<PAGE>

     National  Fire  Protection  Association  Pamphlets No. 54 and No. 58, which
establish  rules and  procedures  governing  the safe  handling of  propane,  or
comparable regulations, have been adopted as the industry standard in all of the
states  in  which  the  Partnership  operates.  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 by truck, the
Partnership  is 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.  The  Partnership  conducts  ongoing  training  programs to help
ensure that its operations are in compliance with applicable safety regulations.
The Partnership  maintains various permits that are necessary to operate some of
its facilities, some of which may be material to its operations. The Partnership
believes that the  procedures  currently in effect at all of its  facilities for
the handling,  storage and  distribution of propane are consistent with industry
standards and are in compliance in all material  respects with  applicable  laws
and regulations.

     The  Research  and  Special  Programs  Administration  (RSPA)  of the  U.S.
Department of Transportation has recently  promulgated Final Rule HM-225 (49 CFR
171.5)  which  adopts  temporary  operating  requirements  for cargo  tank motor
vehicles used to transport  propane.  The Final Rule,  which became effective on
August 16,  1997 but is  currently  not being  generally  enforced,  effectively
requires that such vehicles be equipped with remote control equipment capable of
shutting  off the flow of  propane  in the  event  of a break  in the  vehicle's
delivery  hose or  piping.  The Final  Rule also  contains  a  statement  that a
pre-existing  RSPA  regulation   (Hazardous  Materials  Regulation   177.834(i))
requires operators of cargo tank vehicles to maintain an "unobstructed  view" of
the  vehicle  itself  when  making   deliveries  to  customer  tanks.  This  new
interpretation  espoused by RSPA  regarding the  unobstructed  view  requirement
would  require  either two operators  being in  attendance  during most customer
deliveries, which would significantly increase operating costs, or one attendant
remaining at a mid-point  between  bobtails and the customer  tanks,  a practice
that the  Partnership  and the  propane  industry  consider  to be  unsafe.  The
Partnership  and  four other major propane  marketers  have filed suit in the
U.S.  District Court for the Western  District of Missouri  challenging the RSPA
Final Rule on the basis that it was  promulgated  in an arbitrary and capricious
manner and in violation of the Administrative Procedure Act. The plaintiffs seek
a preliminary injunction and other relief in this suit. The National Propane Gas
Association, the industry's trade association, has also filed a suit challenging
the Final Rule in the U.S.  District  Court for the Northern  District of Texas.
Since these pending suits are in their early stages,  the Partnership cannot yet
predict the outcome thereof or what modifications may be made to RSPA Final Rule
HM-225.

     Future developments, such as stricter environmental,  health or safety laws
and  regulations  thereunder,  could affect  Partnership  operations.  It is not
anticipated  that  the  Partnership's   compliance  with  or  liabilities  under
environmental,  health and safety laws and regulations,  including CERCLA,  will
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.

EMPLOYEES

     As of September 27, 1997 the Partnership had 3,376 full time employees,  of
whom  369  were  general  and   administrative   (including  fleet   maintenance
personnel), 127 were sales, 120 were transportation and product supply and 2,760
were customer service center employees.  Approximately 297 of such employees are
represented  by 12 different  local  chapters of labor unions.  The  Partnership
believes  that its  relations  with both its union and  non-union  employees are
satisfactory. From time to time, the Partnership hires temporary workers to meet
peak seasonal demands.



<PAGE>


ITEM 2. PROPERTIES.

     The  Partnership  currently  owns  approximately  70% of the  352  customer
service centers that it operates and leases the balance of its retail  locations
from third parties. In addition, the Partnership owns and operates a 187 million
gallon  underground  storage  facility  in  Hattiesburg,  Mississippi,  and a 22
million  gallon  refrigerated,  above-ground  storage  facility  in  Elk  Grove,
California.

     As of  September  27,  1997 the  Partnership  also  owned  3,610  shares or
approximately  8.6% of the common stock of the Dixie  Pipeline  Company  ("Dixie
Pipeline"),  which owns and operates a propane gas pipeline  that runs from Mont
Belvieu, Texas,  to Apex, North Carolina.  On December 22, 1997, the Partnership
sold its ownership interest  in the Dixie Pipeline to Shell  Western  E&P,  Inc.
and Conoco Pipe Line Company for net cash proceeds approximately $13 million and
realized a gain of approximately $5 million.

     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 27, 1997,  the
Partnership had a fleet of approximately  76 transport truck tractors,  of which
approximately  22% are owned by the Partnership,  and 638 railroad tank cars, of
which  approximately  2%  are  owned  by  the  Partnership.   In  addition,  the
Partnership  utilizes  approximately  1,700  bobtail and rack  trucks,  of which
approximately  85% are owned by the  Partnership and  approximately  1,800 other
delivery  and  service  vehicles,  of which  approximately  69% are owned by the
Partnership.  The balance of such vehicles that are not owned by the Partnership
are leased.  As of  September  27, 1997,  the  Partnership  owned  approximately
981,000 customer storage tanks with typical capacities of 300 to 400 gallons and
approximately  86,000  portable  cylinders  with typical  capacities  of 5 to 10
gallons.

     The Partnership  believes that it has satisfactory title to or valid rights
to use all of its material  properties and, although some of such properties are
subject to liabilities and leases and, in certain cases, liens for taxes not yet
due and payable and immaterial  encumbrances,  easements and  restrictions,  the
Partnership  does not believe that any such burdens  will  materially  interfere
with the continued use of such  properties by the  Partnership  in its business,
taken as a whole.

ITEM 3. LEGAL PROCEEDINGS.

LITIGATION

     A number of personal  injury,  property damage and product  liability suits
are pending or threatened  against the Partnership.  In general,  these lawsuits
have arisen in the  ordinary  course of the  Partnership's  business and involve
claims for actual damages, and in some cases,  punitive damages. The Partnership
is self-insured  for general and product,  workers'  compensation and automobile
liabilities  up to  predetermined  amounts  above which  third  party  insurance
applies. These self-insurance  reserves include provisions for losses related to
pending  or  threatened  litigation.   Although  any  litigation  is  inherently
uncertain,  based on past experience, the information currently available to it,
the  availability  of insurance  coverage  and the amount of its  self-insurance
reserves for known and unasserted self-insurance claims (which was approximately
$23.7  million at September  27, 1997),  the  Partnership  does not believe that
these  pending or  threatened  litigation  matters will have a material  adverse
effect on its results of operations or its financial condition.


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

      There  were no  matters  submitted  to a vote of  security  holders of the
Partnership, through the solicitation of proxies or otherwise, during the fourth
fiscal quarter of the year ended September 27, 1997.

<PAGE>

                                     PART II



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

     The  Common  Units,   representing   limited   partner   interests  in  the
Partnership,  are listed and  traded on the New York  Stock  Exchange  under the
symbol SPH. The Common Units began  trading on February 29, 1996,  at an initial
public  offering  price of $20.50 per Common Unit.  As of December 5, 1997 there
were 895  registered  Common  Unitholders  of record.  The following  table sets
forth, for the periods indicated,  the high and low sale prices per Common Unit,
as reported on the New York Stock Exchange, and the amount of cash distributions
paid per Common Unit.

                                        Common Unit Price Range
                                                             CASH DISTRIBUTION
                                         HIGH          LOW          PAID
                                         ----          ---          ----
1996 FISCAL YEAR
Second Quarter (beginning March 5, 1996)  $20.88      $20.50       $0.16*
Third Quarter                              20.75       19.75        0.50
Fourth Quarter                             21.75       19.63        0.50
     *Prorated distribution.



1997 FISCAL YEAR
First Quarter                             $21.88      $18.75       $0.50
Second Quarter                             20.63       17.75        0.50
Third Quarter                              18.75       17.00        0.50
Fourth Quarter                             20.19       18.06        0.50

     There  is no  established  public  trading  market  for  the  Partnership's
Subordinated  Units,  representing  limited partner interests,  all of which are
held by the General Partner.

     The  Partnership  makes  quarterly  distributions  to  its  partners  in an
aggregate  amount equal to its  Available  Cash (as  defined) for 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  and  purchases of
additional limited partner units APUs subsequent to the end of such quarter less
cash  reserves  established  by the  Board  of  Supervisors  in  its  reasonable
discretion for future cash requirements.

     The  Partnership  is a  publicly  traded  limited  partnership  that is not
subject to federal income tax. Instead, Unitholders are required to report their
allocable share of the Partnership's earnings or loss, regardless of whether the
Partnership makes distributions.


ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.

      The following table presents selected  condensed  consolidated  historical
and pro forma  financial data (which are unaudited) of the  Partnership  and the
Predecessor  Company.  The selected  condensed  consolidated  historical data is
derived from the audited financial statements of the Partnership and Predecessor
Company, except for the twelve months ended September 30, 1993 - See Note (c) to
the selected  historical and pro forma financial data. The dollar amounts in the
table below, except per Unit data, are in thousands. 

<PAGE>

<TABLE>
<CAPTION>

                                PARTNERSHIP (A)                      PREDECESSOR COMPANY (B) (C)
                     --------------------------------------------------------------------------------------
                                     PRO FORMA
                                       YEAR       MARCH 5, OCTOBER 1,
                       YEAR ENDED    ENDED (D)      1996     1995          YEAR ENDED       TWELVE MONTHS
                      ------------------------    THROUGH  THROUGH    ---------------------     ENDED
                        SEPT 27,     SEPT 28,    SEPT 28,   MARCH 4,   SEPT 30,  OCTOBER 1,  SEPTEMBER 30,
                          1997         1996        1996       1996       1995       1994         1993
                      -----------   ----------  ---------  ---------- ---------- ---------- --------------
<S>                      <C>         <C>        <C>        <C>        <C>        <C>         <C>
STATEMENT OF
 OPERATIONS DATA
Revenues ..............  $ 771,131   $ 707,946  $ 323,947  $ 383,999  $ 633,620  $ 677,767   $ 678,992
Gross Profit ..........    334,336     330,254    150,746    179,508    314,724    347,227     332,016
Depreciation and
Amortization ..........     37,307      35,862     21,046     14,816     34,055     34,300      37,706
Restructuring Charge...      6,911       2,340      2,340       --         --         --          --
Operating Income
(Loss) ................     47,763      58,332     (3,464)    61,796     55,544     75,490      58,149
Interest Expense,
Net ...................     33,979      31,197     17,171       --         --         --          --
Provision for
Income Taxes ..........        190         250        147     28,147     25,299     33,644      26,733
Net Income (Loss) .....     13,594      26,885    (20,782)    33,649     30,245     41,846      31,523
Net Income (Loss)
per Unit (e) ..........  $    0.46   $    0.92  $   (0.71)
BALANCE SHEET DATA
(END OF PERIOD)
Current Assets ........  $ 104,361   $ 120,692  $ 120,692             $  78,846  $  88,566   $ 124,033
Total Assets ..........    776,407     807,424    807,424               736,459    755,053     599,939
Current Liabilities ...     96,701     101,826    101,826                69,872     74,555      70,772
Long-term Debt ........    427,970     428,229    428,229                  --         --          --
Other Long-term
Liabilities ...........    110,497     112,690    112,690               108,352    120,946     107,824
Predecessor equity ......                                               558,235    559,552     421,344
Partners' Capital -
General Partner .......     12,830       3,567      3,286
Partners' Capital -
Limited Partners ......    128,409     174,790    161,393
STATEMENT OF
CASH FLOWS DATA
Cash Provided by
(Used in)
 Operating Activities    $  58,848   $  59,196  $  62,961  $  (3,765) $  53,717  $  77,067   $  58,312
 Investing Activities    $ (20,709)  $ (52,414) $ (30,449) $ (21,965) $ (22,317) $ (16,126)  $ (23,005)
 Financing Activities    $ (37,734)  $  12,013  $ (13,786) $  25,799  $ (31,562) $ (68,093)  $ (33,681)
OTHER DATA
EBITDA (f) ............  $  85,070   $  94,194  $  17,582  $  76,612  $  89,599  $ 109,790   $  95,855
Capital Expenditures (g)
Maintenance ...........  $  24,888   $  25,885  $  16,089  $   9,796  $  21,359  $  17,839   $  31,679
Acquisition ...........  $   1,880   $  28,529  $  15,357  $  13,172  $   5,817  $   1,448   $    --
Retail Propane
Gallons Sold ..........    540,799     566,900    257,029    309,871    527,269    568,809     563,291

</TABLE>


(a)  The Partnership acquired the propane business and assets of the Predecessor
     Company  on March  5,  1996  (the  Closing  Date).  There  are no  material
     differences in the basis of assets and liabilities  between the Partnership
     and the Predecessor Company.

<PAGE>

(b)  The  Predecessor  Company's  financial  data for the  fiscal  1995 and 1994
     periods may not be comparable to the twelve months ended September 30, 1993
     due to the  application  of purchase  accounting  adjustments in connection
     with Hanson's acquisition of Quantum on September 30, 1993.

(c)  In connection  with Hanson's  acquisition of Quantum on September 30, 1993,
     the  Predecessor  Company  changed its fiscal year ending  December 31 to a
     52-53 week fiscal year ending on the Saturday  nearest to September 30. The
     new fiscal year includes the full October  through  March  heating  season.
     Prior to the change in fiscal year,  the heating  season was split  between
     two fiscal years.  Solely for purposes of comparing the Predecessor Company
     operating results to fiscal 1994 and 1995, the statement of operations data
     of the  Predecessor  Company has been combined for the  following  periods:
     January 1 to September 30, 1993 with the corresponding  data for the period
     from  October  1, 1992 to  December  31,  1992 (the  "twelve  months  ended
     September 30, 1993").

(d)  The pro  forma  financial  and  operating  information  for the year  ended
     September 28, 1996 was derived from the historical  statement of operations
     of the Predecessor  Company for the period October 1, 1995 through March 4,
     1996 and the  consolidated  statement of operations of the Partnership from
     March 5, 1996 to September 28, 1996. The pro forma  financial and operating
     information  was  prepared  to  reflect  the  effects  of  the  Partnership
     formation as if it had been  completed in its entirety as of the  beginning
     of the periods presented.

    Significant pro forma  adjustments  reflected in the financial and operating
    information include the following:

    1. For the year ended September 28, 1996, an adjustment to interest  expense
       to reflect the interest expense associated with the Senior Notes and Bank
       Credit Facilities.

    2. For the year ended  September 28, 1996, the  elimination of the provision
       for income  taxes,  as income taxes will be borne by the partners and not
       the Partnership, except for corporate income taxes related to the Service
       Company.

    3. The  Partnership's  management  estimates that the  incremental  costs of
       operating as a  stand-alone  entity  during the year ended  September 28,
       1996 would have  approximated  the management fee paid to an affiliate of
       Hanson.  These  incremental costs are estimated to be $1,290 for the year
       ended September 28, 1996.

 (e) Net income  (loss) per Unit is computed by dividing  the limited  partners'
     interest in net income (loss) by the number of Units outstanding.

 (f) Defined as operating  income plus  depreciation  and  amortization.  EBITDA
     should not be considered as an  alternative  to net income (as an indicator
     of operating  performance)  or as an alternative to cash flow (as a measure
     of  liquidity  or  ability  to  service  debt  obligations)  and  is not in
     accordance with nor superior to generally  accepted  accounting  principles
     but  provides  additional  information  for  evaluating  the  Partnership's
     ability to pay the Minimum Quarterly Distribution.

 (g) The Partnership's  capital expenditures fall generally into two categories:
     (i) maintenance capital expenditures, which include expenditures for repair
     and  replacement  of property,  plant and equipment,  and (ii)  acquisition
     capital expenditures, which include expenditures related to the acquisition
     of retail propane  operations and a portion of the purchase price allocated
     to intangibles associated with such acquired businesses.



<PAGE>


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

     The following is a discussion  of the  historical  and pro forma  financial
condition  and  results  of  operations  of  the  Predecessor  Company  and  the
Partnership.  The discussion  should be read in conjunction  with the historical
and pro forma  consolidated  financial  statements  and notes  thereto  included
elsewhere in this Form 10-K. Since the Operating Partnership and Service Company
account  for  substantially  all of the  assets,  revenues  and  earnings of the
Partnership,  a separate  discussion of the Partnership's  results of operations
from other sources is not presented.

GENERAL

     The Partnership is engaged in the retail and wholesale marketing of propane
and related  appliances and services.  The Partnership  believes it is the third
largest  retail  marketer  of propane in the United  States,  serving  more than
700,000 active residential,  commercial,  industrial and agricultural  customers
from more than 350 customer service centers in over 40 states. The Partnership's
annual retail propane sales volume were  approximately 541 million,  567 million
and 527 million  gallons  during the fiscal  years  ended  September  27,  1997,
September 28, 1996 and September 30, 1995, respectively.

     The retail  propane  business of the  Partnership  consists  principally of
transporting propane purchased on the contract and spot markets,  primarily from
major oil  companies,  to its retail  distribution  outlets  and then to storage
tanks located on the  customers'  premises.  In the  residential  and commercial
markets,  propane is primarily  used for space heating,  water heating,  clothes
drying and cooking  purposes.  Industrial  customers  primarily use propane as a
motor fuel  burned in  internal  combustion  engines  that  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. In its wholesale operations,  the Partnership sells propane principally
to large industrial end-users and other propane distributors.

     The retail propane  distribution  business is seasonal because of propane's
primary use for heating in residential and commercial  buildings.  Historically,
approximately  two-thirds of the  Partnership's  retail  propane  volume is sold
during the six-month peak heating season of October through March. Consequently,
sales and operating  profits are  concentrated  in the  Partnership's  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.  To the  extent  necessary,  the
Partnership   will  reserve  cash  from  the  second  and  third   quarters  for
distribution to Unitholders in the first and fourth fiscal quarters.

     The retail propane business is a "margin-based" business where the level of
profitability is largely dependent on the difference between retail sales prices
and product cost.  The unit cost of propane is subject to volatile  changes as a
result of product supply or other market  conditions.  Propane unit cost changes
can occur  rapidly  over a short period of time and can impact  retail  margins.
There is no assurance that the Partnership  will be able to pass on product cost
increases fully, particularly when product costs increase rapidly.

SELECTED QUARTERLY HISTORICAL AND PRO FORMA FINANCIAL DATA
(in thousands)

     The following  historical  pro forma  quarterly  financial data for periods
prior to the Partnership  formation were derived from the historical  statements
of operations of the Predecessor  Company for the period October 1, 1995 through
March 4, 1996 and  reflect the effects of the  Partnership  formation  as if the
formation had been  completed in its entirety as of the beginning of the periods
presented.




<PAGE>


The pro forma quarterly  financial data do not purport to present the results of
operations  of the  Partnership  had the  Partnership  formation  actually  been
completed as of the  beginning of the periods  presented.  In addition,  the pro
forma quarterly financial data are not necessarily  indicative of the results of
future  operations of the Partnership and should be read in conjunction with the
consolidated financial statements and notes thereto, appearing elsewhere in this
Form 10-K.

Fiscal year ended September 27, 1997 (unaudited)
<TABLE>
<CAPTION>

                       FIRST QUARTER   SECOND QUARTER   THIRD QUARTER   FOURTH QUARTER
                       -------------   --------------   -------------   --------------
<S>                       <C>            <C>              <C>             <C>
Revenues                  $246,028       $277,631         $132,363        $115,109
Gross Profit                97,934        114,487           64,885          57,030
Operating Income (Loss)     25,900         39,459          (10,953)         (6,643)
Net Income (Loss)           17,338         30,281          (19,181)        (14,844)
EBITDA                      35,181         48,647           (1,611)          2,853
Retail Gallons Sold        158,996        183,307          102,899          95,597

</TABLE>

Fiscal year ended September 28, 1996 (unaudited)
<TABLE>
<CAPTION>

                       Pro Forma       Pro Forma
                       FIRST QUARTER   SECOND QUARTER   THIRD QUARTER   FOURTH QUARTER
                       -------------   --------------   -------------   --------------
<S>                       <C>             <C>              <C>             <C>
Revenues                  $190,679        $259,992         $130,590        $126,685
Gross Profit                93,384         116,654           62,578          57,638
Operating Income (Loss)     26,396          44,337           (3,262)         (9,139)
Net Income (Loss)           18,103          36,493          (10,576)        (17,135)
EBITDA                      35,113          53,280            5,721              80
Retail Gallons Sold        157,592         204,991          102,896         101,421

</TABLE>

ANALYSIS OF HISTORICAL RESULTS OF OPERATIONS

     The Partnership acquired the propane business and assets of the Predecessor
Company on March 5, 1996.  Solely  for  purposes  of  comparing  the  results of
operations of the  Partnership  for the year ended September 27, 1997 with those
of the  Partnership and the  Predecessor  Company in the prior year period,  the
statement of operations  data for the year ended September 28, 1996 is comprised
of the combined  statements  of operations  of the  Predecessor  Company for the
period October 1, 1995 to March 4, 1996 and the Partnership for the period March
5, 1996 to September 28, 1996.

FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996

     REVENUES.  Revenues  increased  $63.2 million or 8.9% to $771.1  million in
fiscal 1997 as compared to $707.9 million in fiscal 1996.  The overall  increase
is primarily  attributable to higher average retail and wholesale selling prices
resulting from higher propane product costs.  Retail gallons sold decreased 4.6%
or 26.1 million  gallons to 540.8 million  gallons in fiscal 1997 as compared to
566.9 million gallons in the prior year, while wholesale  gallons sold decreased
2.4% or 4.5 million gallons to 184.5 million  gallons  compared to 189.0 million
in the prior year.  The  decrease  in gallons  sold is  primarily  due to warmer
temperatures  during the winter heating season in all areas of the Partnership's
operations.

<PAGE>

     GROSS PROFIT. Gross profit increased $4.1 million or 1.2% to $334.3 million
for fiscal 1997  compared to $330.3  million in the prior year.  The increase in
gross  profit  principally  resulted  from higher  average  retail  propane unit
margins partially offset by reduced volumes of propane sold.


     OPERATING  EXPENSES.  Operating  expenses increased $6.4 million or 3.1% to
$209.8  million for fiscal year 1997 as compared to $203.4  million in the prior
year. Operating expenses increased due to higher payroll, bad debt and equipment
and vehicle leasing costs.

     RESTRUCTURING CHARGE. Fiscal 1997 results reflect a restructuring charge of
$6.9 million compared to a $2.3 million  restructuring charge incurred in fiscal
1996.  In  fiscal  1997,  after  evaluating  certain  long-term  cost  reduction
strategies and organizational  changes, the Partnership  reorganized its product
procurement and logistics group, redesigned its fleet and maintenance, field and
corporate  office  organizations,  and  identified  facilities  to be closed and
impaired  assets whose  carrying  amounts would not be recovered.  In connection
with this effort, the Partnership recorded a $6.9 million  restructuring charge,
comprised of  severance,  employee  benefit and facility  closure  costs of $5.1
million and an impaired asset charge of $1.8 million.

     In fiscal  1996,  the  Partnership  reorganized  its  corporate  office and
terminated  certain  employees.  As a result  of this  action,  the  Partnership
recorded  a $2.3  million  restructuring  charge,  comprised  of  severance  and
employee benefit costs.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative expenses, including the management fee charged to the Predecessor
Company and excluding  restructuring charges,  increased $2.3 million or 7.5% to
$32.6  million  for fiscal  1997  compared  to $30.3  million in the prior year.
Expenses  increased  principally  due to higher  expenditures  for  professional
consulting  services (primarily  information  systems) and expansion of customer
satisfaction programs.

     OPERATING INCOME AND EBITDA.  Operating income, excluding the restructuring
charges,  decreased  $6.0  million  or 9.9% to $54.7  million  for  fiscal  1997
compared to $60.7 million in the prior year.  EBITDA,  decreased $9.1 or 9.7% to
$85.1 million.  The decrease is primarily  attributable to the higher operating,
selling,  general and administrative  expenses and the fiscal 1997 restructuring
charge partially  offset by higher overall retail margins.  EBITDA should not be
considered  as an  alternative  to net  income  (as in  indicator  of  operating
performance)  or as an  alternative  to cash flow (as a measure of  liquidity or
ability to service debt  obligations)  but provides  additional  information for
evaluating the Partnership's ability to pay the Minimum Quarterly Distribution.

FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995

     REVENUES.  Revenues  increased  $74.3 million or 11.7% to $707.9 million in
fiscal 1996 as compared to $633.6 million in fiscal 1995.  The overall  increase
is primarily attributable to higher retail volumes and wholesale volumes coupled
with  increased  retail  and  wholesale  selling  prices.  Retail  gallons  sold
increased 7.5% or 39.6 million  gallons to 566.9 million  gallons as compared to
527.3 million  gallons in fiscal 1995,  while  wholesale  gallons sold increased
4.6% or 8.2 million gallons to 189.0 million  gallons  compared to 180.7 million
in the  prior  year.  The  increase  in  gallons  sold  is  due  to  the  colder
temperatures in all sections of the country, except for the West region.

<PAGE>

     GROSS  PROFIT.  Gross  profit  increased  $15.5  million  or 4.9% to $330.3
million  for fiscal  1996  compared  to $314.7  million in the prior  year.  The
increase in gross profit principally resulted from higher retail propane volumes
partially offset by lower retail margins resulting from increased product costs.

     OPERATING  EXPENSES.  Operating  expenses increased $6.1 million or 3.1% to
$203.4  million for fiscal year 1996 as compared to $197.3  million in the prior
year.  Operating expenses increased due to higher delivery costs associated with
the higher gallon volumes and higher maintenance and product costs.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative expenses, including the management fee charged to the Predecessor
Company,  increased  $4.8  million or 17.3% to $32.6  million  for  fiscal  1996
compared  to $27.8  million  in the  prior  year.  Expenses  increased  due to a
nonrecurring  charge of $2.3 million  incurred in the fourth quarter as a result
of certain employee  terminations.  The increase is also  attributable to higher
expenditures  for the  implementation  of new  employee  training  and  customer
satisfaction programs.

     OPERATING  INCOME AND EBITDA.  Operating  income  increased $2.8 million or
5.0% to $58.3  million  for fiscal 1996  compared to $55.5  million in the prior
year.  EBITDA  increased $4.6 million or 5.1% to $94.2 million.  The increase is
primarily  attributable  to the higher volume of retail  gallons sold  partially
offset by lower  retail  margins and an increase  in  operating  and general and
administrative  expenses.  EBITDA should not be considered as an  alternative to
net income (as in indicator of operating  performance)  or as an  alternative to
cash flow (as a measure of liquidity or ability to service debt obligations) but
provides additional  information for evaluating the Partnership's ability to pay
the Minimum Quarterly Distribution.

LIQUIDITY AND CAPITAL RESOURCES

     The Partnership  believes that  approximately  $23.0 million of maintenance
capital  expenditures  will be  required  in  fiscal  year 1998 for  repair  and
replacement of property,  plant and equipment.  The Partnership  expects to fund
these capital  expenditures  from cash flow from  operations or from  borrowings
under the working capital facility.

<PAGE>

     Due to the  seasonal  nature  of the  propane  business,  cash  flows  from
operating  activities  are  greater  during the  winter  and  spring  seasons as
customers pay for propane purchased during the heating season.  For fiscal 1997,
net cash  provided  by  operating  activities  decreased  $0.4  million to $58.8
million  compared to $59.2  million in fiscal 1996.  Cash  provided by operating
activities  during  fiscal  1997,  reflects  increases  in  cash  from  accounts
receivable of $23.1  million,  prepaid and other current  assets of $6.2 million
and  inventories of $11.8 million  principally  due to lower sales volumes and a
resulting  decline in  propane  purchases.  These  increases  were  offset by an
aggregate decrease in accounts payable,  accrued interest and accrued employment
and  benefit  costs  of $37.9  million  and $4.3  million  of cash  expenditures
incurred in connection with the Partnership's restructuring.

     Net cash used in investing  activities  was $20.7  million for fiscal 1997,
reflecting  $24.9 million in capital  expenditures  and $1.8 million of payments
for  acquisitions,  offset  by net  proceeds  of $6.0  million  from the sale of
property,  plant and equipment.  Net cash used in investing activities was $52.4
million for fiscal 1996, consisting of capital expenditures of $25.9 million and
acquisition  payments  of $28.5  million,  offset by  proceeds  from the sale of
property  and  equipment  of  $2.0  million.  The  decrease  in  cash  used  for
acquisition activities of $26.6 million primarily results from the Partnership's
fiscal 1997 emphasis on internal growth through improved customer  retention and
marketing as compared to growth from acquisitions. The Partnership believes that
internal   growth,   given  the  high  values  being  paid  to  acquire  propane
distributors, is currently the more economical method of expanding its business.
The  Partnership  will,   however,   continue  to  pursue  selective   accretive
acquisitions during fiscal 1998.

     For fiscal year 1996, net cash provided by operating  activities  increased
$5.5 million or 10.2% to $59.2 million compared to $53.7 million for fiscal year
1995.  The  increase  is  primarily  attributable  to an  aggregate  increase in
accounts payable, accrued interest and expenses and other noncurrent liabilities
totaling $53.9 million  partially offset by an increase in accounts  receivable,
inventories,  prepaid  expenses and decreased net income  totaling $50.0 million
arising  from an increase in the cost and volume of gallons  sold and  operating
under the Partnership structure for seven months of fiscal 1996.

     Net cash used in  investing  activities  was $22.3  million for fiscal year
1995,  reflecting  $21.4  million in capital  expenditures  and $5.8  million of
payments for the  acquisition  of new  customer  service  centers  offset by net
proceeds of $4.9 million from the sale of marginal  performing  customer service
center locations and other property and equipment.

     Prior to March 5, 1996, the  Predecessor Company's  cash  accounts had been
managed  on  a  centralized  basis  by  HM  Holdings,  Inc. ("HM  Holdings"),  a
wholly-owned affiliate of Hanson.  Accordingly,  cash receipts and disbursements
relating to  the operations  of Suburban  Propane were  received or funded by HM
Holdings.  Net cash  provided by financing  activities,  which are  reflected as
an increase in  predecessor  equity, was  $25.8 million  during  the five months
ended March 5, 1996 compared to $31.6  million  of  cash used by  (reduction  of
predecessor  equity) during the year ended September 30, 1995.

<PAGE>

     In March 1996, the Operating  Partnership  issued $425.0 million  aggregate
principal  amount of Senior  Notes with an  interest  rate of 7.54% for net cash
proceeds of $418.8 million. Also, the Partnership, by means of an initial public
offering and the exercise of an overallotment option by the underwriters, issued
21,562,500  Common  Units  for net cash  proceeds  of  $413.6  million.  The net
proceeds of the Notes and Common Units issuance (which totaled $832.4  million),
less a $5.6 million closing price  adjustment paid by Quantum in connection with
the  transactions  and $97.7  million  reflecting  the retention of net accounts
receivable by Quantum, were used to acquire the propane assets from Quantum, pay
off the  intercompany  payables and make a special  distribution  to the General
Partner.

     In an  effort to reduce  annual  fees  associated  with  unutilized  credit
facilities,  effective September 30, 1997, the Operating Partnership amended its
Bank Credit  Facilities to reduce its  acquisition  facility to $25 million from
$100 million and retain its $75 million  working  capital  facility.  Borrowings
under the amended agreement will bear interest at a rate based upon either LIBOR
plus a margin,  First Union National Bank's prime rate or the Federal Funds rate
plus 1/2 of 1%. An annual  fee  ranging  from .20% to .25%  based  upon  certain
financial tests will be payable  quarterly  whether or not borrowings occur. The
facilities,  which expire on September  30, 2000,  are unsecured on an equal and
ratable  basis with the  Operating  Partnership's  obligations  under the Senior
Notes. At September 27, 1997, there were no amounts  outstanding  under the Bank
Credit Facilities.

     As a result of lower than  anticipated  earnings  for  fiscal  1997 and the
costs associated with the restructuring  efforts, the Partnership utilized $10.0
million of cash proceeds  available  under the  Distribution  Support  Agreement
between the  Partnership  and the General Partner in connection with the payment
of the Minimum  Quarterly  Distribution  on the Common Units with respect to the
third  fiscal  quarter  of  1997.  In  addition,  the  Partnership  received  an
additional  $12.0  million  of cash  proceeds  under  the  Distribution  Support
Agreement  in November  1997 to support the Minimum  Quarterly  Distribution  in
respect  to the  fourth  fiscal  quarter  of  1997.  The  Partnership  does  not
anticipate utilizing proceeds available under the Distribution Support Agreement
with respect to the funding of the Minimum Quarterly  Distribution for the first
quarter of fiscal  1998.  The  Distribution  Support  Agreement  provides  for a
maximum of approximately  $44 million in cash in return for APUs ($22 million of
which  has  been  utilized)  to  support  the  Partnership's  Minimum  Quarterly
Distributions to holders of Common Units through March 31, 2001. The Partnership
has not made a  distribution  on its  Subordinated  Units since the first fiscal
quarter of 1997 and does not intend to make a distribution  to the  Subordinated
Unitholder for the first fiscal quarter of 1998.

     The Partnership  will make  distributions  in an amount equal to all of its
Available  Cash  approximately  45 days after the end of each fiscal  quarter to
holders of record on the  applicable  record  dates.  The  Partnership  has made
distributions  to holders of its Common Units for each of the quarters in fiscal
1997.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The  Partnership's  Consolidated  Financial  Statements  and the Reports of
Independent  Accountants  thereon and the  Supplementary  Financial  Information
listed on the  accompanying  Index to Financial  Statement  Schedules are hereby
incorporated by reference. See Item 7 for Selected Quarterly Financial Data.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE.
None
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

PARTNERSHIP MANAGEMENT

     The  Partnership  Agreement  provides that all  management  powers over the
business and affairs of the Partnership  are exclusively  vested in its Board of
Supervisors  and,  subject to the  direction  of the Board of  Supervisors,  the
officers of the  Partnership.  No Unitholder has any  management  power over the
business and affairs of the Partnership or actual or apparent authority to enter
into  contracts  on behalf of, or to  otherwise  bind,  the  Partnership.  Three
independent Elected  Supervisors,  two Appointed  Supervisors and two Management
Supervisors  serve on the  Board of  Supervisors  pursuant  to the  terms of the
Partnership Agreement.

     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 the Partnership.  Any matters
approved  by the  Audit  Committee  will be  conclusively  deemed to be fair and
reasonable to the  Partnership,  approved by all partners of the Partnership and
not a breach by the General  Partner or the Board of  Supervisors  of any duties
they  may owe  the  Partnership  or the  Unitholders.  In  addition,  the  Audit
Committee will review  external  financial  reporting of the  Partnership,  will
recommend  engagement  of the  Partnership's  independent  accountants  and will
review the  Partnership's  procedures for internal  auditing and the adequacy of
the Partnership's internal accounting controls.

<PAGE>

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 executive officers of the Partnership as
of December 16, 1997.  Officers are elected for one-year  terms and  Supervisors
are elected or appointed for three-year terms.

                                  POSITION WITH THE
     NAME                  AGE    PARTNERSHIP
- -------------------------  ---    ----------------------------------------

Mark A. Alexander.......    39    President and Chief Executive Officer;
                                  Member of the Board of Supervisors (Management
                                  Supervisor)
David R. Feheley........    49    Senior Vice President -- Operations;
                                  Member of the Board of Supervisors (Management
                                  Supervisor)
Anthony M. Simonowicz...    46    Vice President and Chief Financial Officer
Michael M. Keating......    44    Vice President -- Human Resources and
                                  Administration
Kevin T. McIver.........    43    Vice President, General Counsel and Secretary
Thomas A. Nunan.........    64    Vice President -- Sales
Michael J. Dunn, Jr.....    48    Vice President - Procurement and Logistics
George H. Hempstead, II.    54    Member of the Board of Supervisors
                                  (Appointed Supervisor)
John E. Lushefski.......    42    Member of the Board of Supervisors
                                  (Appointed Supervisor)
John Hoyt Stookey.......    67    Member of the Board of Supervisors
                                  (Chairman and Elected Supervisor)
Harold R. Logan, Jr.....    53    Member of the Board of Supervisors
                                  (Elected Supervisor)
Dudley C. Mecum.........    62    Member of the Board of Supervisors
                                  (Elected Supervisor)

<PAGE>
     
     Mr.  Alexander  serves as President  and Chief  Executive  Officer and as a
Management Supervisor of the Partnership. Prior to October 1, 1996, he served as
Executive  Vice Chairman and Chief  Executive  Officer of the  Partnership.  Mr.
Alexander  was  Senior  Vice  President  --  Corporate   Development  of  Hanson
Industries  (Hanson's  management division in the United States) from 1995 until
March 4, 1996,  where he was  responsible  for  mergers and  acquisitions,  real
estate and  divestitures,  and was Vice President of  Acquisitions  from 1989 to
1995. He was an Associate  Director of Hanson from 1993 and a Director of Hanson
Industries from June 1995 until March 4, 1996.

     Mr.   Feheley  serves  as  Senior  Vice  President  --  Operations  of  the
Partnership  and was appointed a Management  Supervisor on October 1, 1996.  Mr.
Feheley  was Senior Vice  President  --  Operations  of  Suburban  Propane  from
September  1995 until March 4, 1996 and was an Area Vice  President from October
1990 to September 1995.

     Mr. Simonowicz  serves as Vice President  and  Chief  Financial  Officer of
the Partnership.  Mr. Simonowicz was Vice  President  -- Business Development of
the  Partnership  from  March  1996  to  March 1997.   Mr. Simonowicz  was  Vice
President  -- Business Development of Suburban Propane from September 1995 until
March  1996  and  was  Director  -- Financial Planning and Analysis from 1991 to
September  1995.   Mr.  Simonowicz  was  employed  as  Controller  at  Lifecodes
Corporation  (a genetic  identification and research company), then a subsidiary
of Quantum, from 1989 to 1991.

     Mr. Keating serves as Vice President -- Human Resources and  Administration
of the Partnership.  Mr. Keating was  Director  of  Human  Resources  at  Hanson
Industries  from  1993  to  July  1996  and  was Director of Human Resources and
Corporate Personnel at Quantum from 1989 to 1993.

     Mr. McIver serves as Vice President,  General Counsel and Secretary of  the
Partnership. He served as General Counsel and  Secretary of the Partnership from
March 1996 to August 1996.  Mr. McIver was General  Counsel of Suburban  Propane
from October  1994 until  March 1996 and  was chief  counsel of Suburban Propane
from 1984.

     Mr. Nunan serves as Vice  President -- Sales of the  Partnership. Mr. Nunan
was  Vice President -- Sales of  Suburban  Propane from October 1990 until March
1996. He is currently a director of the National Propane Gas Association.

     Mr. Dunn has served as Vice President  -- Procurement  and  Logistics since
March  1997.  Prior to joining  the Partnership, Mr. Dunn  was Vice President of
Commodity Trading for Goldman Sachs & Company, New York, NY since 1981.

     Mr. Hempstead serves as an Appointed  Supervisor of the Partnership.  He is
also Vice President and Secretary and a Director of the General Partner.  He has
served as Senior Vice  President,  Law and  Administration  of Millennium  since
October  1996,  as  Senior  Vice  President,  Law and  Administration  of Hanson
Industries from June 1995 to September 1996 as well as Senior Vice President and
General  Counsel of Hanson  Industries  from 1993 to 1995 and General Counsel of
Hanson Industries from 1982 to 1993. He was an Associate Director of Hanson from
1990 to  September  1996  and a  Director  of  Hanson  Industries  from  1986 to
September 1996. He joined Hanson Industries in 1976.

     Mr. Lushefski serves as an Appointed  Supervisor of the Partnership.  He is
also a Vice  President  and  Director of the General  Partner.  He has served as
Senior Vice President and Chief  Financial  Officer of Millennium  since October
1996.  He was  Senior  Vice  President  and Chief  Financial  Officer  of Hanson
Industries  from June 1995 until October  1996. He was Vice  President and Chief
Financial Officer of Peabody Holding Company, a Hanson subsidiary,  from January
1991 to May 1995 and Vice  President and  Controller of Hanson  Industries  from
1990 to 1991. He originally joined Hanson Industries in 1985.

<PAGE>

     Mr.  Stookey  is an  Elected  Supervisor  and  Chairman  of  the  Board  of
Supervisors of the  Partnership.  He has been the  non-executive  Chairman and a
director of Quantum  from the time it was  acquired by Hanson on  September  30,
1993 to October 31, 1995.  From 1986 to September 30, 1993, he was the Chairman,
President  and Chief  Executive  Officer of  Quantum.  He is also a director  of
United  States Trust Company of New York,  ACX  Technologies,  Inc.,  Chesapeake
Corporation and Cypress Amax Minerals  Company.  Mr. Stookey served from 1989 to
1993 as an executive officer of Petrolane Incorporated, Petrolane Finance Corp.,
and QJV Corp.,  which  companies  were  reorganized  in July 1993 under the U.S.
Bankruptcy  Code. These companies were affiliates of Quantum at the time of such
reorganization.

     Mr.  Logan  is an  Elected  Supervisor  of the  Partnership.  Mr.  Logan is
Executive  Vice  President  - Finance  and  Treasurer  as well as a Director  of
TransMontaigne  Oil  Company (a holding  company  formed to  purchase  companies
engaged in the marketing and distribution of petroleum  products).  From 1987 to
1995 he 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 which in 1994 was  acquired  by  Panhandle
Eastern Corporation). Mr. Logan is also a director of Snyder Oil Corporation (an
oil and gas exploration and production company).

     Mr. Mecum  is an Elected  Supervisor.  Mr. Mecum  is a partner of Capricorn
Holdings, LLC (a sponsor of and investor in leveraged  buyouts). He was Chairman
of Mecum Associates Inc.  (management  consultants) from June 1996 to 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.  He is also a director of  Travelers
Group,Inc., Travelers/Aetna P&C Corp., Lyondell Petrochemical Company, Fingerhut
Companies, Inc., Dyncorp, Vicorp Restaurants, Inc. and Metris Industries, Inc.

<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

     The  following  table sets forth a summary of all  compensation  awarded or
paid to or earned by the chief executive  officer and the four other most highly
compensated executive officers of the Partnership in fiscal 1997. Mr. Simonowicz
assumed  the  position  of Vice  President  and Chief  Financial  Officer of the
Partnership in March 1997.

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE


                                            ANNUAL COMPENSATION                LONG TERM COMPENSATION
                                            -------------------                ----------------------

                                                                               RESTRICTED
          NAME AND                                                                UNIT           ALL OTHER
     PRINCIPAL POSITION                      YEAR  SALARY ($)    BONUS ($)(1)  AWARD(S)($)(2)  COMPENSATION ($)(4)
    -------------------                     ------ -----------  -----------    ------------   -----------------
<S>                                          <C>     <C>          <C>           <C>                 <C>
Mark A. Alexander                            1997    374,000      100,000       2,000,000           18,756
President and Chief Executive Officer        1996    196,538       20,417       3,000,000            1,610

David R. Feheley                             1997    168,000       29,467         750,000           11,053
Senior Vice President-Operations             1996    135,000        7,425         500,000          139,050
                                             1995    106,000            0               0            2,319

Anthony M. Simonowicz                        1997    138,000       24,000         600,000           13,349
Vice President and Chief Financial Officer   1996    120,000        6,000         400,000          125,500
                                             1995     97,766            0               0            2,291

Thomas A. Nunan                              1997    145,000       19,358                 (3)        9,850
Vice President -Sales                        1996    135,000       17,542                          102,000
                                             1995     97,302       50,000

Kevin T. McIver                              1997    145,000       19,333         275,000            4,350
Vice President and General                   1996    138,000        6,210         325,000          143,140
Counsel                                      1995    131,553            0               0            3,963

</TABLE>


(1) Bonuses are reported for the year earned,  regardless of the year paid.  
(2) The  aggregate  dollar  value  of  Restricted  Unit  Awards  was computed by
multiplying the number of Restricted Units granted by $20.50, the initial public
offering price of the Common  Units.  The  Restricted  Units  are  subject  to a
bifurcated  vesting  procedure  such  that: (i)  25%  of the units vest in equal
amounts on  each of  March  5,  1999,  2001,  and  2003 (or  upon a  "change  of
control"  of the Partnership);  and the remaining 75% vest  automatically  upon,
and in the  same  proportion  as,  the conversion of the  Subordinated  Units to
Common Units,  which conversion  cannot  commence  prior to April 1999 under the
Partnership Agreement (or upon a "change of control" of the Partnership).  Until
such  Restricted  Units  vest,  their  holders  will  not  be  entitled  to  any
distributions or allocations of income and loss,  nor shall they have any voting
or other rights with  respect to such common Units.  At September  28, 1997, the
number of Restricted Units and the aggregate value thereof (calculated  at a per
Unit price of $19.625, the closing price of Common Unit on  September  27,  1997
as reported on the New York Stock Exchange)  were 243,902  ($4,786,577)  for Mr.
Alexander,  60,976  ( $1,196,654 ) for  Mr. Feheley,  48,780  ($957,308) for Mr.
Simonowicz, and 29,268 ($574,385) for Mr. McIver.  

<PAGE>

(3) In lieu of participation in the Restricted Unit Plan, Mr. Nunan is entitled,
subject to certain conditions, to receive cash payments  of $221,030 in December
1998, $141,610 in December 1999 and $131,132 in December 2000.
(4) These amounts include for year 1997 the following:
  a.  Health and welfare premiums for Messrs, Alexander, Feheley, Simonowicz and
      Nunan.  Mr. McIver does not participate in the Plan.
  b.  Vehicle  allowances  for Messrs,  Alexander,  Feheley and  Simonowicz.  
  c.  Matching contributions under the Suburban Retirement Savings and
      Investment Plan for Messrs.  Alexander,  Feheley,  Simonowicz,  Nunan and
      McIver.

RETIREMENT BENEFITS

   The following  table sets forth the annual benefits upon retirement at age 65
in 1997, without regard to statutory maximums, for various combinations of final
average  earnings  and  lengths  of  service  which may be  payable  to  Messrs.
Alexander,  Feheley,  Simonowicz,  Nunan,  and McIver under the Pension Plan for
Eligible  Employees of Suburban Propane,  L.P. and Subsidiaries and 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,  Feheley, Simonowicz,  Nunan,
and McIver have 1 year, 21 years, 8 years,  9 years,  and 14 years service under
the plans.

                                  PENSION PLAN
             ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN (2)
FINAL 5-YEAR (1)

AVERAGE EARNINGS 5 YEARS  10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS  35 YEARS
- ---------------- -------- -------- -------- -------- -------- --------  --------
   $100,000       8,109   16,218    24,327    32,436   40,545   48,654    56,763
   $200,000      16,859   33,718    50,577    67,436   84,295  101,154   118,013
   $300,000      25,609   51,218    76,827   102,436  128,045  153,654   179,263
   $400,000      34,359   68,718   103,077   137,436  171,795  206,154   240,513
   $500,000      43,109   86,218   129,327   172,436  215,545  258,654   301,763

1) The  Plans'  definition  of  earnings  consists  of base pay only.  
2) Annual Benefits are computed on the basis of straight life annuity amounts.
   The pension benefit is calculated as follows:
       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.

      In addition, certain additional retirement and life insurance benefits are
payable to Mr. McIver pursuant to two Suburban Propane executive plans that were
in effect prior to Quantum's  acquisition of Suburban Propane in 1983. Under the
Suburban Propane Deferred Compensation Plan, Mr. McIver is entitled,  subject to
certain  conditions  set  forth in the  Plan,  which  include  remaining  in the
Partnership's  employ until  retirement,  to receive a retirement  supplement of
approximately  $21,000 per year for a ten-year period  subsequent to retirement.
Under the  Suburban  Propane  Executive  Death  Benefit  Plan,  $100,000 of life
insurance  proceeds,  on an after tax basis, are payable to Mr. McIver's estate,
subject to the terms and conditions of the Plan, which include  remaining in the
employ of the Partnership until retirement.

<PAGE>

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

    The  Partnership  has  adopted  a   non-qualified,   unfunded   supplemental
retirement plan known as the Supplemental Executive Retirement Plan. The purpose
of the Plan is to provide certain executive  officers with a level of retirement
income from the  Partnership,  without regard to statutory  maximums.  Under the
Plan, a participant's annual benefit, assuming retirement at age 65, is equal to
(a) 1.4% of the participant's  Average Final  Compensation not in excess of 125%
of  Covered  Compensation  plus (b)  1.75% of the  participant's  Average  Final
Compensation  in  excess  of  125%  of  Covered   Compensation   times  (c)  the
participant's  years of benefit service with the Partnership  (not to exceed 35)
minus (d) the Pension Offset.  The defined terms in this paragraph will have the
same meanings as in the Plan or in the Partnership's  qualified Retirement Plan.
Messrs. Alexander and Feheley currently participate in this Plan.

RESTRICTED UNIT PLAN

     The Partnership has adopted a restricted  unit plan (the  "Restricted  Unit
Plan") for executives,  managers and Elected Supervisors of the Partnership. The
summary of the  Restricted  Unit Plan  contained  herein  does not purport to be
complete and is qualified  in its entirety by reference to the  Restricted  Unit
Plan,  which has been  filed as an  exhibit  to the  Partnership's  Registration
Statement on Form S-1 (Registration No. 33-80605).

     Rights to acquire  authorized but unissued  Common Units of the Partnership
with an aggregate value of $15.0 million are available under the Restricted Unit
Plan for  purposes of  calculating  the value of these Unit  grants,  a value of
$20.50  (the  initial  public  offering  price  of the  Common  Units)  has been
utilized.  As of  September  27,  1997,  rights to acquire  Common Units with an
aggregate  value of $13.0  million  (the  "Initial  Units")  have been  granted,
subject to the vesting conditions described below and subject to other customary
terms and  conditions,  as follows:  (i) rights to acquire  Common Units with an
aggregate  value of $5.0 million  have been  allocated  to Mr.  Alexander,  (ii)
rights to acquire  Common  Units with an  aggregate  value of $7.1  million were
allocated to other  participants in the Plan who are officers or managers of the
Partnership's  business,  as  determined  by  the  Board  of  Supervisors  or  a
compensation committee thereof, and (iii) rights to acquire Common Units with an
aggregate  value  of  $0.9  million  were  allocated  among  the  three  Elected
Supervisors.

     The right to  acquire  the  remaining  $2.0  million  of the $15.0  million
aggregate  value of Initial  Units have been  reserved  and may be  allocated or
issued in the future to  executives  and  managers on such terms and  conditions
(including  vesting  conditions)  as are  described  below  or as the  Board  of
Supervisors,  or a compensation committee thereof, shall determine.  Without the
consent of the General Partner,  such awards to executives or managers cannot be
made to prior  award  recipients  except on terms and  conditions  substantially
identical  to  the  awards   previously   received.   Each  Elected   Supervisor
subsequently  appointed or elected will receive  rights to acquire  Common Units
with a value of $0.3 million on the same terms and  conditions  as those granted
to the three initial Elected Supervisors.

     The Initial Units are subject to a bifurcated  vesting  procedure such that
(i)  twenty-five  percent  of the  Initial  Units will vest over time (or upon a
"change of control" of the  Partnership as defined in the Restricted  Unit Plan,
if earlier) with one-third of such units vesting at the end of the third,  fifth
and seventh  anniversaries  of the  consummation  of the  Partnership's  initial
public  offering,  and (ii) the  remaining  seventy-five  percent of the Initial
Units  will  vest  automatically  upon,  and in the  same  proportions  as,  the
conversion  of the  Subordinated  Units to Common  Units  (or upon a "change  of
control" of the Partnership as defined in the Restricted Unit Plan, if earlier).

     Upon vesting in accordance  with the terms and conditions of the Restricted
Unit Plan, Common Units allocated to a plan participant will be issued to such a
participant.  Until such allocated,  but unissued,  Common Units have vested and
have been issued to a participant, such participant shall not be entitled to any
distributions  or allocations of income or loss and shall not have any voting or
other rights in respect of such Common Units.

     The issuance of the Common Units  pursuant to the  Restricted  Unit Plan is
intended to serve as a means of incentive  compensation  for performance and not
primarily as an opportunity to participate in the equity appreciation in respect
of the Common Units.  Therefore,  no  consideration  will be payable by the plan
participants upon vesting and issuance of the Common Units.

<PAGE>

EMPLOYMENT AGREEMENTS

       The  Partnership  entered into an employment  agreement (the  "Employment
Agreement")  with Mr.  Alexander  ("Executive")  which became effective March 5,
1996 and was amended  effective October 23, 1997. The summary of such Employment
Agreement  contained  herein does not purport to be complete and is qualified in
its entirety by reference to the Employment Agreement.

    Mr. Alexander's  Employment Agreement has an initial term of three years but
automatically renews for successive one-year periods,  unless earlier terminated
by the  Partnership  or by Mr.  Alexander or otherwise  terminated in accordance
with the  Employment  Agreement.  The  Employment  Agreement  for Mr.  Alexander
provided for an initial base salary of $350,000. In addition,  Mr. Alexander may
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 other senior  executives  and senior  managers of the  Partnership,
including the Restricted Unit Plan. The Partnership  also provides Mr. Alexander
with term life insurance with a face amount equal to three times his annual base
salary.


     Mr.  Alexander  will  also  participate  in  a  non-qualified  supplemental
retirement plan which  provides  retirement  income  which could not be provided
under the Partnership's  qualified  plans by  reason of limitations contained in
the Internal Revenue Code. If a "change of control"(as defined in the Employment
Agreement)of the Partnership  occurs and within six months  prior  thereto or at
any time  subsequent to  a change  of  control the  Partnership  terminates  the
Executive's  employment  without  "cause"  or  the  Executive resigns with "good
reason", then the Executive 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 and 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 the Executive is subject to the 20% federal excise
tax under Section 4999 of the Code, the payment will be grossed up to permit the
Executive to retain a net  amount on an  after-tax  basis equal to what he would
have received had the excise tax not been payable.

SEVERANCE PROTECTION PLAN FOR KEY EXECUTIVES

     The Partnership has adopted a Severance  Protection Plan which provides the
Partnership's officers and key employees with employment protection for one year
following a "change of control" as defined in the plan.  This plan  provides for
severance  payments  equal to  sixty-five  weeks of base  pay and  target  bonus
following a change of control for such officers and key employees.

COMPENSATION OF SUPERVISORS

     Mr. Stookey receives annual compensation of $75,000 for his services to the
Partnership.  The other two Elected  Supervisors  receive $15,000 per year, plus
$1,000 per meeting of the Board of Supervisors or committee thereof attended. In
addition,  each Elected Supervisor  participates in the Restricted Unit Plan and
has received Unit Awards with a value of $0.3 million.  All Elected  Supervisors
receive   reimbursement  of  reasonable   out-of-pocket   expenses  incurred  in
connection with meetings of the Board of Supervisors.  The Partnership  does not
expect to pay any additional  remuneration to its employees (or employees of any
of its  affiliates) or employees of the General Partner or any of its affiliates
for serving as members of the Board of Supervisors.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT.

     The following  table sets forth certain  information as of December 5, 1997
regarding  the  beneficial  ownership of Common and  Subordinated  Units by each
person or group known by the Partnership (based upon filings under Section 13(d)
or (g) under The Securities  Exchange Act of 1934) to own beneficially more than
5% thereof,  each member of the Board of  Supervisors,  each  executive  officer
named  in the  Summary  Compensation  table  and all  members  of the  Board  of
Supervisors and executive  officers as a group. Each individual or entity listed
below has sole voting and investment  power over the Units  reported,  except as
noted below.















<PAGE>


SUBURBAN PROPANE, L.P.

                 NAME                           AMOUNT AND NATURE OF    PERCENT
TITLE OF CLASS   OF BENEFICIAL OWNER            BENEFICIAL OWNERSHIP    OF CLASS
- --------------   -------------------            ---------------------  ---------
Common Units        Mark A. Alexander                      19,100          .089%
                    David R. Feheley                        3,000          .014%
                    Anthony M. Simonowicz                   2,000          .009%
                    Thomas A. Nunan                         2,500          .012%
                    Kevin T. McIver                         1,000          .005%
                    George H. Hempstead, III                    0           --
                    John E. Lushefski                           0           --
                    John Hoyt Stookey                      10,000          .046%
                    Harold R. Logan, Jr.                    2,500          .012%
                    Dudley C. Mecum                         1,000          .005%
                    All Members of the Board
                    of Supervisors and Executive
                    Officers as a Group (12 persons)       41,100          .191%

Subordinated Units  Millennium Chemicals Inc.           7,163,750         100.0%
                    99 Wood Avenue South
                    Iselin, New Jersey 08830

                    As executive  officers of  Millennium, Messrs. Hempstead and
                    Lushefski have  shared voting  and investment power over the
                    Subordinated Units. Messrs. Hempstead and Lushefski disclaim
                    beneficial ownership of the Subordinated Units.

<PAGE>


BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a) of the  Exchange Act requires  the  Partnership's  directors  and
executive  officers to file initial  reports of ownership and reports of changes
in ownership of the  Company's  Common  Units with the  Securities  and Exchange
Commission.  Directors  and  executive  officers  are  required  to furnish  the
Partnership  with copies of all Section  16(a) forms that they file.  Based on a
review of these  filings,  the  Partnership  believes that all such filings were
made timely during the 1997 fiscal year.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

RIGHTS OF THE GENERAL PARTNER

     The General  Partner owns all of the  Subordinated  Units,  representing an
aggregate  24.4%  limited  partner  interest  in  the  Partnership.   Millennium
Petrochemicals  owns 100% of the capital stock of the General  Partner.  Through
the General Partner's  ability,  as general partner,  to control the election of
the two Appointed  Supervisors of the Partnership,  its right as general partner
to approve certain Partnership  actions, its ownership of all of the outstanding
Subordinated  Units and its right to vote the  Subordinated  Units as a separate
class on certain  matters,  the  General  Partner  and its  affiliates  have the
ability  to  exercise   significant   influence  regarding   management  of  the
Partnership.

COMPUTER SERVICES AGREEMENT WITH QUANTUM

     The  Partnership  has  entered  into a  Computer  Services  Agreement  (the
"Computer  Services  Agreement")  with  Millennium   Petrochemicals  to  utilize
Millennium  Petrochemicals mainframe computer, which receives data and generates
customer  bills,  reports  and  information  regarding  the retail  sales of the
Partnership.  Pursuant  to  such  agreement,  the  Partnership  pays  Millennium
Petrochemicals a monthly fee of $33,550.  The Partnership believes these amounts
are no  higher  than  would  have  been paid to a third  party  vendor  for such
services.   The   Partnership   is  also   required  to   reimburse   Millennium
Petrochemicals for certain out-of-pocket expenses. Millennium Petrochemicals has
notified the  Partnership  of its intention to terminate  the Computer  Services
Agreement on or about March 31, 1998.

DISTRIBUTION SUPPORT AGREEMENT

     The Partnership and the General Partner have entered into the  Distribution
Support Agreement which is intended to enhance the Partnership's ability to make
the Minimum Quarterly  Distribution on the Common Units during the Subordination
Period. Pursuant to the Distribution Support Agreement,  the General Partner has
agreed to  contribute  cash, in exchange for APUs to enable the  Partnership  to
distribute the Minimum  Quarterly  Distribution up to a maximum of approximately
$44.3 million.  Through  December 5, 1997, the General Partner has contributed a
total  of  $22.0  million  to the  Partnership  and  received  220,000  APUs  in
consideration  thereof.  Millennium (the "APU Guarantor") has agreed pursuant to
the  Distribution  Support  Agreement to  guarantee  the General  Partner's  APU
contribution obligation.  The Unitholders have no independent right separate and
apart  from  the  Partnership  to  enforce  the  General  Partner's  or the  APU
Guarantor's obligations under the Distribution Support Agreement.


<PAGE>


                                     PART IV

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

     (a) 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.

              Management Contracts and Compensatory Plans and Arrangements

              -   Employment  Agreement  dated as of March 5, 1996  between  the
                  Operating Partnership and Mr. Alexander (filed as Exhibit 10.6
                  to the Partnership's Current Report on Form 8-K filed on April
                  29, 1996).

              -   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  (filed as Exhibit  10.7
                  herewith).

              -   The Partnership's  1996 Restricted Unit Plan (filed as Exhibit
                  10.8 to the Partnership's  Current Report on Form 8-K filed on
                  April 29, 1996).

              -   Form of Unit Grant  Agreement  pursuant  to the  Partnership's
                  1996  Restricted  Unit  Plan  (filed  as  Exhibit  10.9 to the
                  Partnership's  Current  Report  on Form 8-K filed on April 29,
                  1996).

              -   The  Partnership's   Supplemental  Executive  Retirement  Plan
                  (filed as Exhibit 10.11 to the Partnership's  Annual Report on
                  Form 10-K for the fiscal year ended September 28, 1996).

              -   The  Partnership's  Severance  Protection Plan dated September
                  1996  (filed  as  Exhibit  10.12 to the  Partnership's  Annual
                  Report on Form 10-K for the fiscal  year ended  September  28,
                  1996).

     (b) Reports on Form 8-K

              Report  on  Form  8-K  dated  December 19, 1997,   containing  the
              Partnership's press release dated December 19, 1997,  with respect
              to the sale of its 8.6%  ownership  interest in the Dixie Pipeline
              Company.

<PAGE>





                                                           SIGNATURES

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

                                          Suburban Propane Partners, L.P.



                                          By: /S/ MARK A. ALEXANDER
                                          -------------------------------
                                             Mark A. Alexander
                                             President, Chief Executive Officer
                                             and Management Supervisor


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/ DAVID R. FEHELEY               Management Supervisor       December 22, 1997
- --------------------
    (David R. Feheley)

/S/ GEORGE H. HEMPSTEAD, III       Appointed Supervisor        December 22, 1997
- ----------------------------
   (George H. Hempstead, III)

/S/ JOHN E. LUSHEFSKI              Appointed Supervisor        December 22, 1997
- ---------------------
   (John E. Lushefski)

/S/ JOHN HOYT STOOKEY              Elected Supervisor          December 22, 1997
- ---------------------
   (John Hoyt Stookey)

/S/ HAROLD R. LOGAN, JR.           Elected Supervisor          December 22, 1997
- ------------------------
   (Harold R. Logan, Jr.)

/S/ DUDLEY C. MECUM                Elected Supervisor          December 22, 1997
- -------------------
   (Dudley C. Mecum)

/S/ ANTHONY M.  SIMONOWICZ         Vice President and Chief    December 22, 1997
- --------------------------          Financial Officer of
   (Anthony M. Simonowicz)          Suburban Propane Partners, L.P.

/S/ EDWARD J. GRABOWIECKI          Controller and Chief        December 22, 1997
- -------------------------           Accounting Officer of
   (Edward J. Grabowiecki)          Suburban Propane Partners, L.P.

<PAGE>


INDEX TO EXHIBITS

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

  EXHIBIT
  NUMBER         DESCRIPTION
  ------         -----------

*    3.1         Amended and Restated Agreement of Limited Partnership of the
                 Partnership dated as of March 4, 1996.

*    3.2         Amended and Restated  Agreement of Limited  Partnership  of
                 the Operating Partnership dated as of March 4, 1996.

*** 10.1         Amended  and  Restated  Credit   Agreement  dated  as  of
                 September 30, 1997 among the Operating Partnership, First Union
                 National Bank, as administrative agent, and certain banks.

*   10.2         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.

*   10.3         Contribution, Conveyance and Assumption Agreement dated as
                 of  March  4,  1996  among  the   Partnership,   the  Operating
                 Partnership,  Quantum,  the  General  Partner  and the  Service
                 Company.

*   10.4         Computer  Services  Agreement  dated as of March 5,  1996
                 between Quantum and the Operating Partnership.

*   10.5         Distribution  Support Agreement dated as of March 5, 1996
                 among the Partnership, the General Partner and Millennium.

*   10.6         Employment Agreement dated as of March 5, 1996 between the
                 Operating Partnership and Mr. Alexander.

*** 10.7         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.

*   10.8         The Partnership's 1996 Restricted Unit Plan.

*   10.9         Form of Unit Grant Agreement pursuant to the Partnership's 1996
                 Restricted Unit Plan.




                                          E-1
<PAGE>


  EXHIBIT
  NUMBER         DESCRIPTION
  ------         -----------

**  10.11        The Partnership Supplemental Executive Retirement Plan
                 (effective as of March 5, 1996).

**  10.12        The Partnership's Severance Protection Plan dated September
                 1996.

**  21.1         Listing of Subsidiaries of the Partnership.

*** 23.1         Consent of Independent Accountants.

*** 27.1         Financial Data Schedule.

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

 *       Incorporated  by  reference  to  the  same  numbered   Exhibit  to  the
         Partnership's Current Report Form 8-K filed April 29, 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.

***      Filed herewith.















                                       E-2


<PAGE>



                                                             
                                                             EXECUTION COPY









                              AMENDED AND RESTATED

                                CREDIT AGREEMENT

                         dated as of September 30, 1997,

                                  by and among

                             SUBURBAN PROPANE, L.P.,
                                  as Borrower,

                         the Lenders referred to herein,

                           FIRST UNION NATIONAL BANK,
                            as Administrative Agent,

                                       and

                              THE BANK OF NEW YORK,
                             as Documentation Agent








<PAGE>



                                TABLE OF CONTENTS

                                                                          PAGE


ARTICLE I  DEFINITIONS......................................................1

     SECTION 1.01    Definitions............................................1

     SECTION 1.02    General...............................................14

     SECTION 1.03    Other Definitions and Provisions......................14


ARTICLE II  CREDIT FACILITIES..............................................14

     SECTION 2.01    Loans.................................................14

     SECTION 2.02    Swingline Loans.......................................15

     SECTION 2.03    Procedure for Advances of Loans.......................16

     SECTION 2.04    Repayment of Loans....................................17

     SECTION 2.05    Notes.................................................18

     SECTION 2.06    Reductions of the Aggregate Commitment................18

     SECTION 2.07    Termination of Credit Facilities; Extension
                     of Termination Date...................................19


ARTICLE III  GENERAL LOAN PROVISIONS.......................................20

     SECTION 3.01    Interest..............................................20

     SECTION 3.02    Notice and Manner of Conversion or Continuation
                     of Loans..............................................22

     SECTION 3.04    Manner of Payment.....................................22

     SECTION 3.05    Crediting of Payments and Proceeds....................23

     SECTION 3.06    Adjustments...........................................23

     SECTION 3.07    Nature of Obligations of Lenders Regarding Extensions
                     of Credit; Assumption by the Administrative Agent.....23

     SECTION 3.08    Changed Circumstances.................................24

     SECTION 3.09    Indemnity.............................................25

<PAGE>

     SECTION 3.10    Capital Requirements..................................25

     SECTION 3.11    Taxes.................................................25

     SECTION 3.12    Duty to Mitigate; Assignment of Commitments Under
                     Certain Circumstances.................................27


ARTICLE IV  CLOSING; CONDITIONS OF CLOSING AND BORROWING...................27

     SECTION 4.01    Closing...............................................27

     SECTION 4.02    Conditions to Closing and Initial Extensions of
                     Credit................................................27

     SECTION 4.03    Conditions to All Loans...............................30


ARTICLE V  REPRESENTATIONS AND WARRANTIES OF THE BORROWER..................30

     SECTION 5.01    Representations and Warranties........................30

     SECTION 5.02    Survival of Representations and Warranties, Etc.......35


ARTICLE VI  FINANCIAL INFORMATION AND NOTICES..............................35

     SECTION 6.01    Financial Statements..................................35

     SECTION 6.02    Officer's Compliance Certificate......................36

     SECTION 6.03    Other Reports.........................................36

     SECTION 6.04    Notice of Litigation and Other Matters................36

     SECTION 6.05    Accuracy of Information...............................37


ARTICLE VII  AFFIRMATIVE COVENANTS.........................................37

     SECTION 7.01    Existence; Businesses and Properties..................37

     SECTION 7.02    Insurance.............................................37

     SECTION 7.03    Taxes.................................................38

     SECTION 7.04    Employee Benefits.....................................38

     SECTION 7.05    Access to Premises and Records; Confidentiality.......38

<PAGE>

     SECTION 7.06    Compliance with Laws..................................38

     SECTION 7.07    Additional Guarantors.................................39

     SECTION 7.08    Use of Proceeds.......................................39

     SECTION 7.09    Partnership Documents.................................39

     SECTION 7.10    Compliance with Environmental and Safety Laws.........39

     SECTION 7.11    Preparation of Environmental Reports..................39

     SECTION 7.12    Corporate Identity....................................39

     SECTION 7.13    Federal Reserve Regulations...........................40

     SECTION 7.14    Available Cash Reserves...............................40

     SECTION 7.15    Further Assurances....................................40

     SECTION 7.16    Year 2000 Compatibility...............................40

     SECTION 7.17    Commodity Hedging Policy..............................40


ARTICLE VIII  FINANCIAL COVENANTS..........................................41

     SECTION 8.01    Interest Coverage Ratio...............................41

     SECTION 8.02    Leverage Ratio........................................41

     SECTION 8.03    Adjusted Consolidated Net Worth.......................41


ARTICLE IX  NEGATIVE COVENANTS.............................................41

     SECTION 9.01    Indebtedness..........................................41

     SECTION 9.02    Liens.................................................43

     SECTION 9.03    Sale and Lease-Back Transactions......................45

     SECTION 9.04    Investments, Loans and Advances.......................45

     SECTION 9.05    Mergers, Consolidations, Sales of Assets
                     and Acquisitions......................................46

<PAGE>

     SECTION 9.06    Restricted Payments...................................47

     SECTION 9.07    Transactions with Affiliates..........................48

     SECTION 9.08    Business of Borrower and Subsidiaries.................48

     SECTION 9.09    Material Agreements; Tax Status.......................49

     SECTION 9.10    Lease Obligations.....................................49

     SECTION 9.11    Priority Indebtedness.................................49

     SECTION 9.12    Certain Accounting Changes............................49

     SECTION 9.13    Restrictive Agreements................................49


ARTICLE X  DEFAULT AND REMEDIES............................................50

     SECTION 10.01   Events of Default.....................................50

     SECTION 10.02   Remedies..............................................51

     SECTION 10.03   Rights and Remedies Cumulative; Non-Waiver; etc.......52


ARTICLE XI  THE ADMINISTRATIVE AGENT.......................................52

     SECTION 11.01   Appointment...........................................52

     SECTION 11.02   Delegation of Duties..................................52

     SECTION 11.03   Exculpatory Provisions................................52

     SECTION 11.04   Reliance by the Administrative Agent..................53

     SECTION 11.05   Notice of Default.....................................53

     SECTION 11.06   Non-Reliance on the Administrative Agent and
                     Other Lenders.........................................53

     SECTION 11.07   Indemnification.......................................54

     SECTION 11.08   The Administrative Agent in Its Individual Capacity...54

     SECTION 11.09   Resignation of the Administrative Agent; Successor
                     Administrative Agent..................................54

     SECTION 11.10   Documentation Agent...................................54

<PAGE>

ARTICLE XII  MISCELLANEOUS.................................................55

     SECTION 12.01   Notices...............................................55

     SECTION 12.02   Expenses; Indemnity...................................56

     SECTION 12.03   Set-off...............................................57

     SECTION 12.04   Governing Law.........................................57

     SECTION 12.05   Consent to Jurisdiction...............................57

     SECTION 12.06   Binding Arbitration; Waiver of Jury Trial.............57

     SECTION 12.07   Reversal of Payments..................................58

     SECTION 12.08   Injunctive Relief; Punitive Damages...................58

     SECTION 12.09   Accounting Matters....................................59

     SECTION 12.10   Successors and Assigns; Participations................59

     SECTION 12.11   Amendments, Waivers and Consents......................61

     SECTION 12.12   Performance of Duties.................................62

     SECTION 12.13   All Powers Coupled with Interest......................62

     SECTION 12.14   Survival of Indemnities...............................62

     SECTION 12.15   Titles and Captions...................................62

     SECTION 12.16   Severability of Provisions............................62

     SECTION 12.17   Counterparts..........................................62

     SECTION 12.18   Term of Agreement.....................................62


EXHIBITS

Exhibit A-1         -        Form of Revolving Credit Note
Exhibit A-2         -        Form of Acquisition Loan Note
Exhibit A-3         -        Form of Swingline Note
Exhibit B           -        Form of Notice of Borrowing
Exhibit C           -        Form of Notice of Prepayment
Exhibit D           -        Form of Notice of Conversion/Continuation

<PAGE>

Exhibit E           -        Form of Officer's Certificate
Exhibit F           -        Form of Assignment and Acceptance
Exhibit G           -        Form of Notice of Account Designation
Exhibit H           -        Form of Guarantee Agreement
Exhibit I           -        Distribution Support Agreement
Exhibit J           -        Senior Note Agreement


SCHEDULES

Schedule 1            -      Lenders and Commitments
Schedule 5.01(a)      -      Jurisdictions of Organization and Qualification
Schedule 5.01(b)      -      Subsidiaries and Capitalization
Schedule 5.01(m)      -      Employee Relations
Schedule 5.01(t)      -      Indebtedness and Contingent Obligations
Schedule 5.01(u)      -      Litigation
Schedule 9.02         -      Existing Liens
Schedule 9.04         -      Existing Loans, Advances and Investments


<PAGE>




         AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the thirtieth day of
September,  1997, 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  to  this   Agreement,   FIRST  UNION  NATIONAL  BANK,  as
Administrative  Agent for the Lenders and THE BANK OF NEW YORK, as Documentation
Agent.

                              STATEMENT OF PURPOSE

         Pursuant  to a Credit  Agreement,  dated as of  February  28,  1996 (as
amended  by   the  First  Amendment,  dated  as  of   September  23,  1996,  the
"Original Credit Agreement"), among the Borrower, the lenders party thereto (the
"Original  Lenders") and The Chase  Manhattan  Bank,  formerly known as Chemical
Bank ("Chase"),  as Administrative  Agent for the Original Lenders, the Original
Lenders have extended  certain credit  facilities to the Borrower.  The Borrower
has  requested,  and the Lenders have agreed,  to amend and restate the Original
Credit  Agreement on the terms and conditions of this  Agreement.  In connection
with such amendment and restatement and as of the date hereof, the Lenders party
hereto shall constitute the Lenders hereunder and First Union National Bank will
become the  Administrative  Agent for the Lenders and Chase will have no further
duties or liabilities as Agent under the Original Credit 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 as follows:



         ARTICLE I

DEFINITIONS


         SECTION 1.01      DEFINITIONS.
                           ------------

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

         "ACQUISITION  LOAN"  means  any of the  acquisition  loans  made by the
Lenders to the Borrower pursuant to Section 2.01(b).

         "ACQUISITION LOAN COMMITMENT"  means, as to any Lender,  the obligation
of such  Lender  to make  Acquisition  Loans  to the  Borrower  hereunder  in an
aggregate  principal  or face amount at any time  outstanding  not to exceed the
amount so designated  opposite  such Lender's name on SCHEDULE 1 hereto,  as the
same may be reduced or modified at any time or from time to time pursuant to the
terms hereof.

         "ACQUISITION   LOAN  FACILITY"  means  the  acquisition  loan  facility
established pursuant to Article II hereof.

         "ACQUISITION LOAN NOTES" means the separate Acquisition Loan Notes made
by the Borrower  payable to the order of each Lender,  substantially in the form
of EXHIBIT  A-2  hereto,  evidencing  the  Acquisition  Loan  Facility,  and any
amendments  and  modifications   thereto,  any  substitutes  therefor,  and  any
replacements,  restatements, renewals or extension thereof, in whole or in part;
"Acquisition Loan Note" means any of such Notes.

         "ADDITIONAL PARTNERSHIP UNITS" means the non-voting limited partnership
interests in the Parent  contemplated by Section 5.6 of the Agreement of Limited
Partnership of the Parent and the Registration Statement.

         "ADJUSTED  CONSOLIDATED NET WORTH" means,  with respect to the Borrower
and the  Subsidiaries on a consolidated  basis at any time, the sum at such time
of (a)  Consolidated Net Worth of the Borrower and the Subsidiaries at such time
and (b) the aggregate  amount of goodwill  amortization  recorded from and after
the  "Effective  Date"  of  the  Original  Credit  Agreement,  determined  on  a
Consolidated basis in accordance with GAAP.

<PAGE>

         "ADMINISTRATIVE   AGENT"   means  First   Union  in  its   capacity  as
Administrative Agent hereunder,  and any successor thereto appointed pursuant to
Section 11.09.

         "ADMINISTRATIVE  AGENT'S OFFICE" means the office of the Administrative
Agent  specified in or determined in accordance  with the  provisions of Section
12.01.

         "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  ACQUISITION LOAN COMMITMENT"  means the aggregate amount of
the  Lenders'  Acquisition  Loan  Commitments  hereunder,  as such amount may be
reduced  or  modified  at any time or from  time to time  pursuant  to the terms
hereof. On the Closing Date, the Aggregate  Acquisition Loan Commitment shall be
Twenty-Five Million Dollars ($25,000,000).

         "AGGREGATE  COMMITMENT"  means the  aggregate  amount  of the  Lenders'
Commitments hereunder,  as such amount may be reduced or 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 Million Dollars ($100,000,000).

         "AGGREGATE  REVOLVING CREDIT  COMMITMENT" means the aggregate amount of
the  Lenders'  Revolving  Credit  Commitments  hereunder,  as such amount may be
reduced  or  modified  at any time or from  time to time  pursuant  to the terms
hereof. On the Closing Date, the Aggregate  Revolving Credit Commitment shall be
Seventy-Five Million Dollars ($75,000,000).

         "AGREEMENT"  means this  Amended  and  Restated  Credit  Agreement,  as
amended or modified from time to time.

         "APPLICABLE  LAW" means all  applicable  provisions  of  constitutions,
statutes,  laws,  rules,  treaties,  regulations and orders of all  Governmental
Authorities and all orders and decrees of all courts and arbitrators.

         "APPLICABLE MARGIN" shall have the meaning assigned thereto in Section
3.01(c).

         "ASSIGNMENT AND ACCEPTANCE"  shall have the meaning assigned thereto in
Section 12.10.

<PAGE>

         "AVAILABLE CASH" means, with  respect  to  any  fiscal  quarter  of the
Borrower:

                  (a)  the sum of (i)  all  cash  and  cash  equivalents  of the
         Borrower and the  Subsidiaries on hand at the end of such quarter,  and
         (ii) all additional  cash and cash  equivalents of the Borrower and the
         Subsidiaries  on hand on the date of  determination  of Available  Cash
         with respect to such quarter  resulting from  borrowings  hereunder and
         purchases of Additional  Partnership  Units, in each case subsequent to
         the end of such quarter, 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 the  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 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 3.01(a).

         "BLOCKED  PORTION"  shall  have the  meaning  assigned  to such term in
Section 2.01(c).

<PAGE>

         "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
Agreement  of  Limited  Partnership  of the Parent or the  Agreement  of Limited
Partnership of the Borrower, as applicable.

         "BORROWER" means  Suburban  Propane,  L.P. in  its capacity as borrower
hereunder.

         "BUSINESS" means  the  propane  business, assets and liabilities 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 OWNERSHIP"  means the  occurrence,  at any time prior to the
earlier  of March 31,  2002 and the date upon which the last  Subordinated  Unit
shall  have  converted  into a Common  Unit in  accordance  with the  terms  for
conversion  set  forth in the  Registration  Statement  of any of the  following
events: (a) the Qualified Owners, alone or together,  shall fail to own directly
or indirectly, beneficially and of record (i) 100% of the issued and outstanding
Capital  Stock of the  General  Partner,  (ii) 100% of the  general  partnership
interests in each of the Parent and the Borrower and (iii) any Subordinated Unit
not  converted  into a Common  Unit,  in each case free and clear of any and all
Liens  (other than any Lien  securing the payment of any taxes,  assessments  or
governmental charges or levies, either (A) not delinquent or (B) being contested
in good  faith by  appropriate  legal or  administrative  proceedings  and as to
which,  to the extent  required by GAAP,  adequate  reserves shall have been set
aside on the books of the Person whose  assets are subject to such Lien);  (b) 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 (c) 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.

<PAGE>

         "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,  such Lender's  Acquisition Loan
Commitment and Revolving Credit Commitment,  as set forth opposite such Lender's
name on Schedule 1 hereto, as the same may be reduced or 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) for  Revolving  Credit  Loans,  (i) the  amount of the  Revolving  Credit
Commitment of such Lender to (ii) the Aggregate  Revolving Credit  Commitment of
all of the  Lenders  and (b)  for  Acquisition  Loans,  (i)  the  amount  of the
Acquisition  Loan  Commitment of such Lender to (ii) the  Aggregate  Acquisition
Loan 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 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  NET  WORTH"  means,  with  respect to any Person and its
Subsidiaries on a consolidated basis at any time, the lesser at such time of (a)
partners' capital or stockholders' equity, as applicable, of such Person and its
Subsidiaries at such time, determined on a consolidated basis in accordance with
GAAP, and (b)  "Consolidated  Net Worth" as defined in the Senior Note Agreement
of such Person and its Subsidiaries at such time.

         "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.

<PAGE>

         "CREDIT  FACILITIES"  means the  collective  reference to the Revolving
Credit Facility and the Acquisition Loan Facility.

         "DEFAULT" means any of the events specified in Section 10.01 which with
the  passage  of time,  the  giving  of notice  or any  other  condition,  would
constitute an Event of Default.

         "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,  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 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 12 months of such receipt,  such portion shall not constitute
Designated  Net Proceeds  except to the extent not so used within such  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 12 months of such  receipt,  such
portion shall not  constitute  Designated  Net  Insurance/Condemnation  Proceeds
except to the extent not so used within such 12-month period.

         "DISTRIBUTION   SUPPORT  AGREEMENT"  means  the  Distribution   Support
Agreement dated as of March 5, 1996 by and among the General Partner, the Parent
and Millennium America, Inc., formerly known as Hanson America, Inc.

<PAGE>

         "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,  the Consolidated net income of the Borrower
and its Subsidiaries for such period, computed in accordance with GAAP, 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 and (d) extraordinary  losses during such
period MINUS, to the extent added in computing such  Consolidated net income and
without duplication, extraordinary gains during such period.

         "ELIGIBLE  ASSIGNEE"  means,  with  respect  to any  assignment  of the
rights,  interest and obligations of a Lender hereunder, a Person that is at the
time of such  assignment  (a) a commercial  bank organized or licensed under the
laws of the United  States or any state  thereof,  having  combined  capital and
surplus in excess of $500,000,000,  (b) a finance company,  insurance company or
other financial  institution  which in the ordinary  course of business  extends
credit of the type  extended  hereunder  and that has total  assets in excess of
$1,000,000,000,  (c) already a Lender hereunder (whether as an original party to
this  Agreement  or as the  assignee  of  another  Lender)  or an  Affiliate  or
Subsidiary thereof, (d) the successor (whether by transfer of assets,  merger or
otherwise) to all or substantially all of the commercial lending business of the
assigning  Lender,  or (e) any other Person that has been approved in writing as
an Eligible Assignee by the Administrative  Agent and, if no Default or Event of
Default exists and is continuing, the Borrower.

         "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.

<PAGE>

         "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 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.

         "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 10.01;
PROVIDED  that any  requirement  for passage of time,  giving of notice,  or any
other condition, has been satisfied.

         "EXTENSIONS OF CREDIT"  means,  as to any Lender at any time, an amount
equal to the sum of the  aggregate  principal  amount of all Loans  made by such
Lender then outstanding.

         "FDIC"  means  the  Federal   Deposit  Insurance  Corporation,  or  any
successor thereto.

         "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.  (Charlotte  time).  Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.

<PAGE>

         "FINANCIAL  OFFICER"  of any  Person  shall  mean the  chief  financial
officer, the treasurer or the principal accounting officer of such Person.

         "FIRST  UNION"  means First Union  National  Bank,  a national  banking
association, and its successors.

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

         "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
consistent  with  the  prior   financial   practice  of  the  Borrower  and  its
Subsidiaries.

         "GENERAL   PARTNER"  means  Suburban   Propane  GP,  Inc.,  a  Delaware
corporation  and, on the Closing Date, a wholly-owned  subsidiary of Millennium,
or any  Person  thereafter  serving  as  successor  general  partner of both the
Borrower and the Parent, as permitted by the Agreement of Limited Partnership of
the  Borrower  and  the  Agreement  of  Limited   Partnership   of  the  Parent,
respectively.

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

         "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.

         "GUARANTEE AGREEMENT" shall mean the Guarantee Agreement, substantially
in the form of EXHIBIT H, to be entered into by each  Subsidiary of the Borrower
(other than any foreign Subsidiary, Suburban Sales and Service, Inc. and Jackson
Vangas) for the benefit of the Lenders and the Administrative Agent.

         "GUARANTOR" means  each  Subsidiary  that  is  party  to  the Guarantee
Agreement.

<PAGE>

         "HEDGING  AGREEMENT"  means any  agreement  with respect to an interest
rate swap,  collar,  cap, floor or a forward rate  agreement or other  agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower under this Agreement, and any
confirming letter executed pursuant to such hedging  agreement,  all as amended,
restated or otherwise modified.

         "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
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  interest  rate  protection   agreements   (including  without
limitation Hedging Agreements),  foreign currency exchange agreements, Commodity
Hedging  Agreements or other  hedging  arrangements  (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 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 a letter of
credit  that  would  not  constitute  Indebtedness  under  clause  (ii)) 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.

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

         "INTEREST PERIOD" shall have  the meaning assigned  thereto in  Section
3.01(b).

         "INVESTMENT"  means,  as applied to any Person,  any direct or indirect
purchase or other acquisition by such Person of 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 purchase or other acquisition by such Person of assets of any
other Person  (other than stock or other  securities)  shall not  constitute  an
"Investment" for purposes of this Agreement).

         "JACKSON VANGAS" means Jackson Vangas, a Wyoming corporation.

<PAGE>

         "LENDER"  means each Person  executing  this  Agreement as a Lender set
forth on the  signature  pages hereto and each Person that  hereafter  becomes a
party to this Agreement as a Lender pursuant to Section 12.10.

         "LENDERS'  PORTION" means,  with respect to any Designated Net Proceeds
or any Designated Net Insurance/Condemnation Proceeds, the ratio, expressed as a
percentage,  in effect as of noon,  Charlotte  time,  on the date on which  such
Designated Net Proceeds or Designated Net  Insurance/Condemnation  Proceeds,  as
applicable,  are being  applied  pursuant  to  Section  2.04(f)  and/or  Section
2.06(b),  of (i) the  Aggregate  Commitment  to (ii)  the sum of (x) the  amount
referred to in clause (i) and (y) the aggregate principal amount at such time of
the Senior Notes.

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

         "LIBOR"  means the rate for  deposits in Dollars for a period  equal to
the  Interest  Period  selected  which  appears  on the  Telerate  Page  3750 at
approximately  11:00  a.m.  London  time,  two (2)  Business  Days  prior to the
commencement of the applicable Interest Period. If, for any reason, such rate is
not  available,  then  "LIBOR"  shall  mean  the rate per  annum  at  which,  as
determined by the Administrative  Agent, Dollars in the amount of $5,000,000 are
being offered to leading banks at approximately  11:00 a.m. London time, two (2)
Business Days prior to the  commencement  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.

         "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 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 =               LIBOR
                                    -------------
                                          1.00-Eurodollar Reserve Percentage


         "LIBOR RATE LOAN" means any Loan bearing  interest at a rate based upon
the LIBOR Rate as provided in Section 3.01(a).

         "LIEN" means,  with respect to any asset, any mortgage,  lien,  pledge,
charge,  security  interest 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,  Acquisition Loan or Swingline
Loan  made  to the  Borrower  pursuant  to  Section  2.01,  and all  such  Loans
collectively as the context requires.

         "LOAN DOCUMENTS" means,  collectively,  this Agreement,  the Notes, any
Hedging Agreement executed by any Lender, the Guarantee Agreement and each other
document,  instrument 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,  all as may be amended,  restated or
otherwise modified.

         "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  the
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.

         "MILLENNIUM" means Millennium America, Inc., a Delaware corporation.

<PAGE>

         "MINIMUM QUARTERLY  DISTRIBUTION"  means, with respect to each quarter,
the  aggregate  amount  required (a) to pay each holder of Common Units and each
holder  of  Subordinated   Units  in  respect  of  each  Common  Unit  and  each
Subordinated Unit the minimum  quarterly  distribution per Unit specified in the
Registration  Statement  and (b) to pay the General  Partner an amount  equal to
2.0% of such aggregate amount.

         "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, contributions within the preceding six years.

         "NOTES" means the collective  reference to the Revolving  Credit Notes,
the  Acquisition  Loan Notes and the  Swingline  Note;  "Note" means any of such
Notes.

         "NOTICE OF ACCOUNT DESIGNATION" shall have the meaning assigned thereto
in Section 2.03(b).

         "NOTICE  OF  BORROWING"  shall  have the  meaning  assigned  thereto in
Section 2.03(a).

         "NOTICE OF  CONVERSION/CONTINUATION"  shall have the  meaning  assigned
thereto in Section 3.02.

         "NOTICE OF  PREPAYMENT"  shall  have the  meaning  assigned  thereto in
Section 2.04(d).

         "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)
all payment  and other  obligations  owing by the  Borrower to any Lender or the
Administrative  Agent under any Hedging  Agreement  to which a Lender is a party
which is permitted  under this Agreement and (c) all other fees and  commissions
(including  attorney's  fees),  charges,   indebtedness,   loans,   liabilities,
financial  accommodations,  obligations,  covenants  and  duties  owing  by  the
Borrower to the Lenders or the  Administrative  Agent, 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 Note or any of the other Loan Documents.

         "OFFICER'S  COMPLIANCE  CERTIFICATE"  shall have the  meaning  assigned
thereto in Section 6.02.

         "OTHER TAXES" shall have the meaning  assigned  thereto in Section 3.11
(b).

         "PARENT" means  Suburban  Propane  Partners,  L.P., a Delaware  limited
partnership.

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

         "PARTNERSHIP  DOCUMENTS" means the Agreement of Limited  Partnership of
the  Parent,  the  Agreement  of Limited  Partnership  of the  Borrower  and the
Distribution Support 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.

<PAGE>

         "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  acquired  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  Guarantee
Agreement,  (d) the Borrower and the Subsidiaries  shall be in compliance,  on a
pro forma basis after giving effect to such  acquisition or formation,  with the
covenants  contained in Article VIII  recomputed  as at the last day of the most
recently  ended fiscal quarter of the Borrower and the  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  9.01) 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,  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 First  Union 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 First Union 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.

         "QUALIFIED OWNER" means:

                  (a)  Millennium;

                  (b) at any time, the publicly-traded  Person that owns or that
         owned at any time after the Closing Date, directly or indirectly,  100%
         of the issued and outstanding Capital Stock of Millennium; or

                  (c) the  Person  that (i)  acquires  from  Millennium,  or its
         Subsidiary, (A) 100% of the issued and outstanding Capital Stock of the
         General  Partner  (PROVIDED that the General Partner shall at all times
         comply  with the  provisions  of the  Distribution  Support  Agreement,
         including without  limitation  section 3.1 thereof) and (B) 100% of the
         Subordinated  Units and (ii) assumes from Millennium its obligations as
         the "APU Guarantor" under the Distribution  Support  Agreement (as such
         term is defined therein),  in accordance with the provisions of section
         4.3 thereof.

         "REFINANCING NOTE AGREEMENT" means one or more indentures or agreements
pursuant to which Refinancing Notes are issued.

         "REFINANCING  NOTES"  means one or more  series of notes  issued by the
Borrower,  the net proceeds of which are used by the  Borrower to redeem  Senior
Notes.

<PAGE>

         "REGISTER" shall have the meaning assigned thereto in Section 12.10(d).

         "REGISTRATION   STATEMENT"   means  the   prospectus   filed  with  the
Registration  Statement on Form S-1 (No. 333-11055) filed by the Parent with the
Securities and Exchange  Commission on August 29, 1996 and declared effective as
of September 23, 1996.

         "REQUIRED LENDERS" means, at any date, any combination of holders of at
least fifty-one  percent (51%) of the aggregate  unpaid  principal amount of the
Notes (other than the Swingline  Note), or if no amounts are  outstanding  under
the Revolving  Credit Notes and the Acquisition  Loan Notes,  any combination of
Lenders  whose  Commitment  Percentages  for  the  Revolving  Credit  Loans  and
Acquisition  Loans on a combined  basis  aggregate  at least  fifty-one  percent
(51%).

         "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.

         "RESTRICTED PAYMENT" means with respect to each of the Borrower and 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.

         "REVOLVING CREDIT  COMMITMENT"  means, as to any Lender, the obligation
of such Lender to make  Revolving  Credit Loans to the Borrower  hereunder in an
aggregate  principal  or face amount at any time  outstanding  not to exceed the
amount so designated  opposite  such Lender's name on SCHEDULE 1 hereto,  as the
same may be reduced or modified at any time or from time to time pursuant to the
terms hereof.

         "REVOLVING   CREDIT  FACILITY"  means  the  revolving  credit  facility
established pursuant to Article II hereof.

         "REVOLVING CREDIT LOAN" means any of the revolving credit loans made by
the Lenders to the Borrower pursuant to Section 2.01(a).

         "REVOLVING CREDIT NOTES" means the separate Revolving Credit Notes made
by the Borrower  payable to the order of each Lender,  substantially in the form
of EXHIBIT  A-1  hereto,  evidencing  the  Revolving  Credit  Facility,  and any
amendments  and  modifications   thereto,  any  substitutes  therefor,  and  any
replacements,  restatements, renewals or extension thereof, in whole or in part;
"Revolving Credit Note" means any of such Notes.

         "SENIOR NOTE AGREEMENT" means collectively the note agreements pursuant
to which the Senior Notes were issued, dated as of February 28, 1996, as amended
from time to time in accordance with Section 9.09.

         "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.

<PAGE>

         "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.

         "SUBORDINATED   UNITS"   means   Subordinated   Units  of  the   Parent
representing limited partner interests in the Parent.

         "SUBSIDIARY"  means as to any Person,  any corporation,  partnership 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 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 of any other  class or classes of such  corporation
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.

         "SWINGLINE COMMITMENT"  means  Seven  Million,  Five  Hundred  Thousand
($7,500,000).

         "SWINGLINE LENDER"  means  First  Union  in its  capacity as  swingline
lender hereunder.

         "SWINGLINE LOAN" means the swingline loans made by the Swingline Lender
to the Borrower pursuant to Section 2.03.

         "SWINGLINE  NOTE" means the Swingline Note made by the Borrower payable
to the order of the Swingline  Lender,  substantially in the form of EXHIBIT A-3
hereto,  evidencing the Swingline  Facility,  and any amendments and supplements
thereto, any substitutes therefor, and any replacements,  restatements, renewals
or extension thereof, in whole or in part.

         "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  TERMINATION  DATE"  means the  earlier  to occur of (a) the
resignation of First Union as Agent in accordance with Section 11.09 and (b) the
Termination Date.

         "TAXES" shall have the meaning assigned thereto in Section 3.11(a).

         "TERMINATION  DATE"  means  September  30,  2000,  unless  such date is
extended or the Credit  Facilities  are earlier  terminated  pursuant to Section
2.07.

         "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.

         "UNITED STATES" means the United States of America.

         "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.

<PAGE>

         "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 1.02      GENERAL.
  Unless  otherwise  specified,  a reference  in this  Agreement to a particular
section,  subsection,  Schedule  or  Exhibit  is a  reference  to that  section,
subsection,  Schedule or Exhibit of this Agreement. Wherever from the context it
appears  appropriate,  each term stated in either the  singular or plural  shall
include the singular and plural, and pronouns stated in the masculine,  feminine
or neuter gender shall include the masculine,  the feminine and the neuter.  Any
reference  herein to "Charlotte  time" shall refer to the applicable time of day
in Charlotte, North Carolina.


         SECTION 1.03        OTHER DEFINITIONS AND PROVISIONS.

         (a) USE OF CAPITALIZED  TERMS.  Unless otherwise  defined therein,  all
capitalized terms defined in this Agreement shall have the defined meanings when
used  in  this  Agreement,  the  Notes  and  the  other  Loan  Documents  or any
certificate,  report  or  other  document  made or  delivered  pursuant  to this
Agreement.

         (b)  MISCELLANEOUS.  The words  "hereof",  "herein" and "hereunder" and
words  of  similar  import  when  used in this  Agreement  shall  refer  to this
Agreement as a whole and not to any particular provision of this Agreement.



         ARTICLE II

CREDIT FACILITIES


         SECTION 2.01      LOANS.
                           ------

         (a) REVOLVING CREDIT  COMMITMENTS.  Subject to the terms and conditions
of this Agreement,  each Lender  severally agrees to make Revolving Credit Loans
to the Borrower from time to time from the Closing Date through the  Termination
Date as requested by the Borrower in accordance  with the terms of Section 2.03;
PROVIDED,  that (a) the aggregate principal amount of all outstanding  Revolving
Credit Loans (after giving effect to any amount  requested) shall not exceed the
Aggregate  Revolving  Credit  Commitment  LESS  the  Swingline  Loans,  (b)  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
and (c) during each  Cleandown  Period,  the aggregate  principal  amount of all
outstanding Revolving Credit Loans (after giving effect to any amount requested)
shall not exceed  $25,000,000  LESS the Swingline  Loans.  Each Revolving Credit
Loan  by a  Lender  shall  be in a  principal  amount  equal  to  such  Lender's
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) ACQUISITION LOAN  COMMITMENTS.  Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make Acquisition Loans to the
Borrower from time to time from the Closing Date through the Termination Date as
requested  by the  Borrower  in  accordance  with  the  terms of  Section  2.03;
PROVIDED, that (a) the aggregate principal amount of all outstanding Acquisition
Loans  (after  giving  effect to any  amount  requested)  shall not  exceed  the
Aggregate  Acquisition  Loan  Commitment,   and  (b)  the  principal  amount  of
outstanding  Acquisition  Loans from any Lender to the Borrower shall not at any
time exceed such Lender's Acquisition Loan Commitment.  Each Acquisition Loan by
a Lender  shall be in a  principal  amount  equal  to such  Lender's  Commitment
Percentage of the aggregate  principal amount of Acquisition  Loans requested on
such  occasion.  Subject to the terms and  conditions  hereof,  the Borrower may
borrow,  repay and reborrow  Acquisition  Loans  hereunder until the Termination
Date.

<PAGE>

         (c) 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 2.02      SWINGLINE LOANS.
                           ----------------

         (a)   AVAILABILITY.  Subject  to  the  terms  and  conditions  of  this
Agreement, the Swingline Lender agrees to make Swingline  Loans to the  Borrower
from  time  to  time  from the  Closing  Date to 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) (A) during each Cleandown Period,  $25,000,000  and
(B) at all other times,  the Aggregate Revolving  Credit Commitment,  in  either
case  less  the  sum of  the  aggregate  principal  amount  of  all  outstanding
Revolving  Credit  Loans  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  of all  outstanding  Revolving Credit Loans  made by  such  Swingline
Lender,  may  exceed  such  Swingline  Lender's Revolving Credit Commitment.

         (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 Commitment  Percentages
         with  respect  to  Revolving  Credit  Loans  and  shall  thereafter  be
         reflected  as  Revolving  Credit  Loans of the Lenders on the books and
         records of the 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  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 3:00 p.m.  (Charlotte  time) on the
         date  such  demand is made if made on or  before  1:00 p.m.  (Charlotte
         time) on such date and no later than 12:00 noon (Charlotte time) on the
         next succeeding Business Day if demand therefor is made after 1:00 p.m.
         (Charlotte time).

<PAGE>

                  (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 Agent to charge any account  maintained
         by it 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 Commitment Percentages with respect to
         Revolving Credit Loans.

                  (iii) Each Lender  acknowledges and agrees that its obligation
         to refund  Swingline Loans in accordance with the terms of this Section
         2.02(b) is absolute and  unconditional and shall not be affected by any
         circumstance  whatsoever;  PROVIDED,  that if prior to the refunding of
         any outstanding  Swingline Loans pursuant to this Section 2.02(b),  one
         of the events described in Section 10.01(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 Commitment
         Percentage  (with  respect to Revolving  Credit Loans) 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 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 2.03      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.
(Charlotte time) (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 (1)  with  respect  to  Revolving  Credit  Loans  or Acquisition  Loans in an
aggregate  principal  amount of  $3,000,000  or a whole multiple  of $500,000 in
excess thereof and (2) with respect to Swingline Loans in an aggregate principal
amount  of  $500,000 or a  whole  multiple of  $250,000 in excess  thereof,  (C)
whether the Loans are to be LIBOR Rate Loans or Base Rate Loans, (D) in the case
of a LIBOR Rate Loan, the duration of the Interest  Period  applicable  thereto,
(E) if such Loan is a Revolving  Credit Loan or an  Acquisition  Loan and (F) if
such Loan is an  Acquisition  Loan,  the  aggregate principal amount of all then
outstanding Acquisition Loans. Notices received after 11:00 a.m.(Charlotte time)
shall  be deemed  received on the  next Business Day.  The  Administrative Agent
shall promptly notify the Lenders of each Notice of Borrowing.

<PAGE>

         (b)   DISBURSEMENT OF LOANS.  Not later than 2:00 p.m. (Charlotte time)
on the  proposed  borrowing  date,  (i)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 Commitment  Percentage (with respect to Revolving  Credit Loans or
Acquisition Loans, as applicable) of the Loans to be made on such borrowing date
and (ii) the Swingline Lender will make available to the 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  2.03  in immediately  available funds  by crediting
or wiring such proceeds to the deposit account  of the  Borrower  identified  in
the  most  recent  Notice  of  Account Designation  substantially in the form of
EXHIBIT G hereto  (a "Notice of Account Designation")  delivered by the Borrower
to the  Administrative Agent or may be otherwise agreed upon by the Borrower and
the Administrative  Agent from time to time.  Subject  to  Section 3.07  hereof,
the  Administrative  Agent shall not be obligated to disburse the portion of the
proceeds of any Loan requested pursuant to this Section  2.03 to the extent that
any Lender has not made  available to the  Administrative  Agent  its Commitment
Percentage of such Loan.


         SECTION 2.04      REPAYMENT OF LOANS.
                           -------------------

         (a) REPAYMENT  ON  TERMINATION DATE.   The  Borrower  shall  repay  the
outstanding  principal  amount  of  (i)  the  Revolving  Credit  Loans  and  the
Acquisition  Loans,  all  in full on the Termination Date, if not sooner repaid,
and (ii)  all Swingline Loans in  accordance  with Section 2.02(b), together, in
each case, with all accrued but unpaid interest thereon.

         (b) MANDATORY  REPAYMENT OF EXCESS  REVOLVING  CREDIT LOANS.  If at any
time the  outstanding  principal  amount of all Revolving  Credit Loans PLUS the
Swingline Loans exceeds the Aggregate 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 Revolving Credit
Loans in an amount equal to such excess.  Each such  repayment  shall be applied
first  to the  principal  amount  of  outstanding  Swingline  Loans.  Each  such
repayment  shall be  accompanied  by any amount  required to be paid pursuant to
Section 3.09 hereof.

         (c) MANDATORY  REPAYMENT OF EXCESS  ACQUISITION  LOANS.  If at any time
the outstanding  principal amount of all Acquisition Loans exceeds the Aggregate
Acquisition  Loan 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 Acquisition Loans in an amount equal to such excess.
Each such  repayment  shall be  accompanied  by any amount  required  to be paid
pursuant to Section 3.09 hereof.

         (d) 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, in
the form attached hereto as  EXHIBIT C (a  "Notice  of  Prepayment")  specifying
the date and amount of repayment and whether the repayment  is of (i)  Revolving
Credit  Loans  or  Acquisition  Loans  or  a  combination  thereof  and, if of a
combination thereof, the amount  allocable  to each and (ii)  LIBOR Rate  Loans,
Base Rate  Loans,  or a combination  thereof,  and, if of a combination thereof,
the amount allocable to each.  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:  (i)
$3,000,000  or a whole multiple of $500,000 in  excess  thereof with  respect to
Revolving  Credit Loans and  Acquisition  Loans  and (ii)  $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 3.09 hereof.

         (e) 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 any Revolving Credit Loans then
outstanding  to the extent  necessary to reduce the total amount of  outstanding
Revolving Credit Loans to an amount not exceeding  $25,000,00 LESS the Swingline
Loans.  For the duration of each such Cleandown  Period,  the Borrower shall not
request,  create or incur any  Revolving  Credit  Loans to the  extent  that the
aggregate  principal  amount of all  outstanding  Revolving  Credit Loans (after
giving  effect to any  amount  requested,  created  or  incurred)  would  exceed
$25,000,000 LESS the Swingline Loans.

<PAGE>

         (f) MANDATORY REPAYMENT OF ACQUISITION LOANS. On  and  after  March  5,
1999,  the  Borrower  shall apply the Lenders' Portion  of  the  Designated  Net
Proceeds and the Designated Net Insurance/Condemnation  Proceeds, promptly  upon
receipt thereof by the Borrower or any Subsidiary or upon the existence thereof,
as  applicable,  to  repay  Acquisition  Loans  outstanding at the time of  such
receipt or existence.

         (g)  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 3.09 hereof.


         SECTION 2.05      NOTES.
                           ------

         (a) REVOLVING CREDIT NOTES. Each  Lender's  Revolving  Credit Loans and
the  obligation of the Borrower to repay such  Revolving  Credit  Loans shall be
evidenced by a  Revolving Credit Note  executed by  the Borrower  payable to the
order of such Lender representing the Borrower's obligation to pay such Lender's
Commitment or, if less, the aggregate unpaid  principal amount of all  Revolving
Credit Loans made and to be made by such Lender to  the Borrower hereunder, PLUS
interest  and all  other fees, charges  and  other  amounts  due  thereon.  Each
Revolving  Credit Note shall be dated the date hereof and shall bear interest on
the unpaid  principal  amount  thereof at the applicable interest rate per annum
specified in Section 3.01.

         (b) ACQUISITION LOAN NOTES. Each Lender's  Acquisition  Loans  and  the
obligation of the Borrower to repay such Acquisition Loans shall be evidenced by
a Acquisition Loan Note  executed by the Borrower  payable to the order of  such
Lender representing the  Borrower's obligation to pay such Lender's  Acquisition
Loan  Commitment  or,  if less,  the aggregate  unpaid  principal  amount of all
Acquisition  Loans made and to be made by such Lender to the Borrower hereunder,
PLUS  interest  and all  other fees, charges and other amounts due thereon. Each
Acquisition Loan Note shall be dated the date hereof and shall  bear interest on
the unpaid  principal  amount thereof at the applicable  interest rate per annum
specified in Section 3.01.

         (c) SWINGLINE NOTE. The  Swingline  Loans  and  the  obligation  of the
Borrower to repay such Swingline Loans shall be  evidenced by the Swingline Note
executed  by  the  Borrower  payable  to  the  order  of  the  Swingline  Lender
representing the Borrower's  obligation to the Swingline  Lender  the  aggregate
unpaid  principal  amount of all  Swingline  Loans  made and  to be  made by the
Swingline  Lender to the  Borrower  hereunder, PLUS interest and all other fees,
charges  and  other  amounts due thereon. The  Swingline Note shall be dated the
date  hereof and shall bear  interest  on the unpaid principal amount thereof at
the applicable Swingline Rate.


         SECTION 2.06  REDUCTIONS OF THE AGGREGATE COMMITMENT.
                       ---------------------------------------

         (a) OPTIONAL PERMANENT REDUCTION. The Borrower  shall have the right at
any time and from  time to time,  upon at  least five (5)  Business  Days  prior
written notice to the  Administrative  Agent, to  permanently reduce,  in  whole
at any  time or in part  from  time to time, without premium or penalty, (i) the
Aggregate  Revolving  Credit Commitment or (ii) the  Aggregate Acquisition  Loan
Commitment, in either such case in an aggregate principal  amount  not less than
$2,000,000  or any  whole  multiple thereof.

         (b) MANDATORY  PERMANENT  REDUCTION OF ACQUISITION LOAN COMMITMENT . To
the extent that such amounts are not applied to repay Acquisition Loans pursuant
to  Section  2.04(f),  the  Aggregate   Acquisition  Loan  Commitment  shall  be
automatically and permanently  reduced by the Lenders' Portion of the Designated
Net Proceeds and the Designated Net  Insurance/Condemnation  Proceeds,  promptly
upon receipt  thereof by the Borrower or any  Subsidiary  or upon the  existence
thereof, as applicable.

<PAGE>

         (c) REQUIRED REPAYMENTS. Each reduction required or permitted  pursuant
to this Section 2.06 shall be accompanied  by a  payment of principal sufficient
to reduce  the   aggregate  outstanding  applicable  Extensions of Credit of the
Lenders after such reduction to the  Aggregate  Revolving  Credit  Commitment or
Aggregate  Acquisition  Loan  Commitment,  as  applicable,  as so  reduced.  Any
reduction  of  the  Aggregate  Revolving  Credit  Commitment  or  the  Aggregate
Acquisition  Loan  Commitment  to  zero  shall  be accompanied by payment of all
outstanding  Obligations  and  termination  of  the  applicable  Commitment  and
applicable Credit Facility. If the reduction of the Aggregate  Revolving  Credit
Commitment or Acquisition Loan Commitment requires the  repayment  of any  LIBOR
Rate  Loan,  such  repayment  shall  be accompanied by any amount required to be
paid pursuant to Section 3.09 hereof.


         SECTION 2.07        TERMINATION OF CREDIT FACILITIES; EXTENSION OF
                             TERMINATION DATE.
                             ----------------------------------------------

         (a) TERMINATION. The Credit Facilities  shall terminate on the earliest
of  (i)  the  Termination Date, (ii) the  date of  termination  by the  Borrower
pursuant  to  Section  2.06(a),  and  (iii)  the  date  of  termination  by  the
Administrative  Agent on behalf of the Lenders pursuant to Section 10.02(a).  It
is intended  by the  parties  hereto that the Revolving  Credit Facility and the
Acquisition Loan Facility shall terminate on the same date.

         (b)      EXTENSION OF TERMINATION DATE

         (i) REQUEST FOR EXTENTION. Unless the Credit Facilities shall have been
         terminated pursuant to clause (ii) or (iii) of Section 2.07(a),  above,
         the Borrower  may, by notice to the  Administrative  Agent (which shall
         promptly  deliver a copy to each of the  Lenders)  not less than  sixty
         (60) days and not more than ninety (90) day prior to any anniversary of
         the Closing Date (in each case, an  "Anniversary  Date"),  request that
         the Lenders extend the  Termination  Date for an additional one year to
         the  Anniversary  Date next  succeeding  the  Termination  Date then in
         effect;  PROVIDED  that the Borrower  shall request an extension of the
         Termination  Date for both of the  Revolving  Credit  Facility  and the
         Acquisition  Loan  Facility  together  and that both Credit  Facilities
         shall terminate on the same date.

         (ii)  LENDER  APPROVAL  PROCESS.   Each  Lender,  acting  in  its  sole
         discretion,  shall,  by notice to the Borrower  and the  Administrative
         Agent  given  not more  than  thirty  (30) days  after  receipt  of the
         Borrower's extension request advise the Borrower and the Administrative
         Agent  whether  or not such  Lender  agrees to such  extension.  If any
         Lender does not reply within such thirty-day period, it shall be deemed
         to have withheld its consent to such  extension.  Such extension  shall
         become  effective  upon three (3)  Business  Days after  receipt by the
         Administrative  Agent of the consent of all of the Lenders,  subject to
         the Borrower's right to find a replacement Lender under Section 3.12(b)
         for any  non-consenting  Lender prior to the related  Anniversary Date.
         Notwithstanding  anything  else herein to the  contrary,  if any Lender
         (other  than  Lenders  replaced  by the  Borrower  pursuant  to Section
         3.12(b)  prior to the related  Anniversary  Date) has not  consented to
         such requested extension, the Termination Date shall not be extended.

         (iii) NO WAIVER.  The  election of any Lender to agree to an  extension
         shall not obligate any other Lender to agree to such  extension and the
         agreement  by the  Lenders  to an  extension  shall  not  obligate  the
         Lenders, or any individual Lender, to agree to a subsequent  extension.
         The Borrower's right to request an extension under this Section 2.07(b)
         shall continue  irrespective  of whether (A) the Borrower  requested or
         failed to request an  extension on any prior  Anniversary  Date and (B)
         the Lenders consented to or withheld their consent to any such previous
         request.


<PAGE>

         ARTICLE III

GENERAL LOAN PROVISIONS


         SECTION 3.01      INTEREST.
                           ---------

         (a) INTEREST RATE OPTIONS. Subject to the  provisions  of this  Section
3.01, at the election of the Borrower,  the aggregate unpaid  principal  balance
of (i) each Revolving Credit Loan and each  Acquisition Loan shall bear interest
at the Base Rate or the LIBOR Rate PLUS, in each case, the  Applicable Margin as
set forth below; PROVIDED that the LIBOR Rate shall not be available until three
(3) Business Days after the Closing Date 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  Loan at the time  a Notice of
Borrowing  is  given  pursuant  to  Section  2.03 or  at the  time a  Notice  of
Conversion/Continuation  is given pursuant to Section 3.02. Each Loan or portion
thereof  bearing interest  based on the  Base Rate  shall be a "Base Rate Loan",
each Loan or portion thereof bearing interest based on the LIBOR Rate shall be a
"LIBOR  Rate Loan." 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  3.01(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 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 Interest Periods shall be selected by the Borrower
         so as to  permit  the  Borrower  to make  mandatory  reductions  of the
         Aggregate  Revolving  Credit  Commitment or Aggregate  Acquisition Loan
         Commitment  pursuant  to Section  2.06  without  payment of any amounts
         pursuant to Section 3.09; and

                        (v)  there  shall  be no more  than  ten  (10)  Interest
         Periods outstanding at any time.

<PAGE>

         (c) APPLICABLE  MARGIN.  The Applicable  Margin provided for in Section
3.01(a) with  respect to the Loans (the  "Applicable  Margin")  shall (i) on the
Closing  Date  equal  the  percentages  set forth in the  certificate  delivered
pursuant to Section  4.02(d)(iv) and (ii) for each fiscal quarter  thereafter be
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       FACILITY
LEVEL        LEVERAGE RATIO                        MARGIN      FEE
- -----        --------------                        ------      ---
                                                     (in basis points (bps))

I            Greater than or equal                  100.00     25.00
             to 4.50 to 1.00

II           Greater than or equal                   75.00     25.00
             to 3.75 to 1.00, but less
             than 4.50 to 1.00

III          Greater than or equal                   52.50     22.50
             to 3.00 to 1.00, but less
             than 3.75 to 1.00

IV           Less than 3.00 to 1.00                  30.00     20.00


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 3.01(d),  in the event the Borrower fails
to deliver such financial statements and certificate within the time required by
Section  6.02 hereof,  the  Applicable  Margin  shall be the highest  Applicable
Margin set forth  above  until the  delivery of such  financial  statements  and
certificate.

         (d) 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, (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,  and (iii) all outstanding Base Rate Loans 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 Notes  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.

<PAGE>

         (e) INTEREST PAYMENT AND COMPUTATION.  Interest  on each Base Rate Loan
shall be  payable  in arrears  on the last Business Day of each calendar quarter
commencing  December 31, 1997; 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.

         (f) MAXIMUM RATE. In  no  contingency  or event  whatsoever  shall  the
aggregate  of all amounts deemed interest hereunder  or under  any of the  Notes
charged  or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes 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 3.02  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 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 D (a "Notice of  Conversion/  Continuation")  not later than
11:00 a.m.  (Charlotte  time) 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 3.03        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  percentage  set  forth  in  Section  3.01 (c)  times  the
Aggregate Commitment, 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 commencing  December 31, 1997, and on the Termination  Date. Such
commitment fee shall be distributed by the Administrative  Agent to the  Lenders
PRO RATA in accordance with the Lenders' respective Commitment Percentages.

<PAGE>

         (b) ADMINISTRATIVE AGENT'S AND OTHER FEES.  In order 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  separate  fee  letter  agreement
executed by the Borrower and the  Administrative Agent dated August 15, 1997.


         SECTION 3.04        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 or any Note shall be made not later  than 1:00 p.m.
(Charlotte time) 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. (Charlotte
time) on such day  shall be deemed a payment  on such date for the  purposes  of
Section  10.01,  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.
(Charlotte  time)  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 amount payable to any Lender
under  Sections  3.08,   3.09,  3.10,  3.11  or  12.02  shall  be  paid  to  the
Administrative Agent for the account of the applicable Lender.


         SECTION 3.05        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  10.02,  all  payments received by the  Lenders  upon the  Notes and the
other  Obligations and all net proceeds from the enforcement of the  Obligations
shall  be  applied  first to all  expenses then due and  payable by the Borrower
hereunder,  then to  all indemnity  obligations  then  due  and  payable  by the
Borrower  hereunder,  then  to all Administrative  Agent's  fees  then  due  and
payable, then to all fees and commissions then due and payable,  then to accrued
and unpaid  interest  on the  Swingline  Note,  then  to  the  unpaid  principal
amount outstanding under the Swingline Note, then to accrued and unpaid interest
on the  Revolving  Credit Notes and Acquisition Loan Notes, in that order.


         SECTION 3.06        ADJUSTMENTS.
                             ------------

              If any Lender (a "Benefitted Lender")shall at any time receive any
payment of all or part of its Extensions of Credit, or interest  thereon,  or if
any Lender shall at any time receive any collateral in respect to its Extensions
of Credit (whether  voluntarily or involuntarily,  by set-off or otherwise) in a
greater proportion than any such payment to and collateral received by any other
Lender, if any,  in respect of  such other  Lender's  Extensions  of Credit,  or
interest thereon,  such Benefitted Lender shall purchase for cash from the other
Lenders such portion of each such other Lender's  Extensions of Credit, or shall
provide such other  Lenders  with the  benefits of any such  collateral,  or the
proceeds thereof,  as  shall be  necessary  to cause such  Benefitted  Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the  Lenders;  provided,  that  if all or any  portion  of  such  excess
payment or benefits is thereafter recovered from such  Benefitted  Lender,  such
purchase shall be rescinded, and the purchase price and benefits returned to the
extent of such recovery,  but without  interest. The Borrower  agrees  that each
Lender so  purchasing a  portion of  another  Lender's  Extensions of Credit may
exercise all rights of payment(including, without limitation, rights of set-off)
with respect to such portion as fully as if such Lender  were the  direct holder
of such portion.

<PAGE>

         SECTION  3.07       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  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 of 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 2.03(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 of such  Lender's applicable Commitment Percentage of such borrowing,
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  Lender's  Commitment Percentage of such borrowing  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 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  any  Lender   to  make  its  applicable  Commitment
Percentage of any Loan available shall not relieve it or any other Lender of its
obligation,  if any,  hereunder to make its  applicable 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 applicable Commitment Percentage
of such Loan available on the borrowing date.


         SECTION 3.08        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.

<PAGE>

         (c) INCREASED COSTS. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or 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 of the
Lenders(or any of their respective Lending Offices)with any request or directive
(whether  or not having  the force of law) of such  Authority,  central  bank or
comparable agency;

                  (i)  shall  subject  any  of the  Lenders  (or  any  of  their
         respective  Lending  Offices)  to any tax,  duty or other  charge  with
         respect to any Note or shall  change the basis of  taxation of payments
         to any of the Lenders (or any of their  respective  Lending Offices) of
         the principal of or interest on any Note or any other amounts due under
         this  Agreement in respect  thereof  (except for changes in the rate of
         tax on the  overall  net  income of any of the  Lenders or any of their
         respective  Lending Offices  imposed by the  jurisdiction in which such
         Lender is organized or is or should be qualified to do business or such
         Lending Office is located); or

                  (ii)  shall  impose,  modify or deem  applicable  any  reserve
         (including,  without limitation,  any imposed by the Board of Governors
         of the Federal Reserve System),  special deposit,  insurance or capital
         or similar  requirement  against  assets of,  deposits  with or for the
         account  of, or credit  extended by any of the Lenders (or any of their
         respective  Lending  Offices) or shall impose on any of the Lenders (or
         any of their  respective  Lending  Offices) or the foreign exchange and
         interbank markets any other condition affecting any Note;

and the result of any of the  foregoing  is to increase  the costs to any of the
Lenders of  maintaining  any LIBOR Rate Loan or to reduce the yield or amount of
any sum received or  receivable  by any of the Lenders  under this  Agreement or
under the Notes in respect of a LIBOR Rate Loan, then such Lender shall promptly
notify the  Administrative  Agent, and the  Administrative  Agent shall promptly
notify the Borrower of such fact and demand  compensation  therefor and,  within
ten (10)  Business  Days  after such  notice by the  Administrative  Agent,  the
Borrower  shall pay to such  Lender  such  additional  amount or amounts as will
compensate  such Lender or Lenders for such  increased  cost or  reduction.  The
Administrative  Agent will promptly notify the Borrower of any event of which it
has knowledge  which will entitle such Lender to  compensation  pursuant to this
Section  3.08(c);  PROVIDED,  that  the  Administrative  Agent  shall  incur  no
liability  whatsoever to the Lenders or the Borrower in the event it fails to do
so. The  amount of such  compensation  shall be  determined,  in the  applicable
Lender's sole discretion,  based upon the assumption that such Lender funded its
Commitment Percentage of the LIBOR Rate Loans in the London interbank Eurodollar
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.


<PAGE>

         SECTION 3.09        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 on a date  specified
therefor in a Notice of  Borrowing or Notice of  Continuation/Conversion  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 Commitment  Percentage of
the  LIBOR  Rate  Loans  in  the  London  interbank  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 3.10        CAPITAL REQUIREMENTS.
                             ---------------------

              If either (a) the  introduction of,  or any  change in, or in  the
interpretation of, any Applicable Law or (b) compliance  with  any  guideline or
request  from  any central  bank or  comparable  agency  or  other  Governmental
Authority (whether or not having the force of law), has or would have the effect
of  reducing the  rate of  return on the  capital of, or has  affected or  would
affect  the  amount of  capital required to be  maintained by, any Lender or any
corporation  controlling such Lender as a  consequence  of, or with reference to
the Commitments and other commitments of this type,  below  the rate  which  the
Lender  or such other corporation could have achieved but for such introduction,
change or compliance, then within five (5) Business Days after written demand by
any such Lender,  the Borrower  shall pay to such  Lender from  time to  time as
specified by such Lender additional amounts sufficient to compensate such Lender
or other  corporation for such  reduction.  A  certificate  as to  such  amounts
submitted to the Borrower and the Administrative  Agent by such  Lender,  shall,
in the  absence of manifest error, be presumed to be correct and binding for all
purposes.


         SECTION 3.11        TAXES.
                             ------ 

         (a) PAYMENTS FREE AND CLEAR.  Any  and  all  payments  by the  Borrower
hereunder  or  under the Notes  shall be  made  free and  clear of  and  without
deduction  for any and all present or future taxes, levies, imposts, deductions,
charges or withholding, and all liabilities with  respect thereto excluding, (i)
in the case of each Lender and the  Administrative  Agent,  income and franchise
taxes imposed by the  jurisdiction under the  laws of which such  Lender or  the
Administrative Agent  (as the case may be) is  organized  or  is  or  should  be
qualified to do business or any  political subdivision  thereof and (ii) in  the
case of each Lender,  income and franchise taxes imposed  by the jurisdiction of
such  Lender's  Lending Office  or any political  subdivision  thereof (all such
non-excluded  taxes,  levies,  imposts, deductions,   charges, withholdings  and
liabilities being hereinafter referred to as "Taxes").  If the Borrower shall be
required by  law to  deduct any Taxes  from or in  respect of  any  sum  payable
hereunder or under any Note to any Lender or the Administrative  Agent,  (A) the
sum payable  shall  be  increased  as may be necessary  so that after making all
required deductions (including deductions applicable to  additional sums payable
under this Section 3.11) such Lender or the Administrative Agent(as the case may
be) receives an amount equal to the amount such party would have received had no
such deductions been made, (B) the Borrower shall make such deductions,  (C) the
Borrower shall pay the full amount deducted to the relevant taxing  authority or
other authority in  accordance with  applicable law, and (D) the  Borrower shall
deliver to the  Administrative  Agent evidence of  such  payment to the relevant
taxing  authority or other authority in the manner provided in Section 3.11(d).

         (b) STAMP AND OTHER TAXES. In  addition, the  Borrower  shall  pay  any
present or future stamp, registration,  recordation or documentary  taxes or any
other similar fees or charges or excise or property taxes, levies of the  United
States  or any state or  political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made  hereunder or from the execution,
delivery or registration  of, or otherwise with respect to, this Agreement,  the
Loans, the other Loan Documents, or the  perfection of any  rights  or  security
interest  in  respect  thereto (hereinafter referred to as "Other Taxes").

         (c) INDEMNITY.  The  Borrower  shall  indemnify  each  Lender  and  the
Administrative  Agent  for the full amount of  Taxes and Other Taxes (including,
without limitation,  any Taxes and Other  Taxes imposed by any  jurisdiction  on
amounts  payable  under  this  Section  3.11 )  paid  by  such   Lender  or  the
Administrative Agent(as the case may be) and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such   Taxes  or   Other  Taxes   were  correctly  or   legally  asserted.  Such
indemnification shall be made within thirty (30) days  from the date such Lender
or the Administrative Agent (as the case may be) makes written demand therefor.

         (d) EVIDENCE OF PAYMENT. Within  thirty (30) days after the date of any
payment  of   Taxes  or  Other  Taxes,   the   Borrower  shall  furnish  to  the
Administrative  Agent, at its address referred to in Section 12.01, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.

<PAGE>

         (e) DELIVERY OF TAX FORMS. Each Lender organized  under the  laws  of a
jurisdiction  other than the United States or any state thereof shall deliver to
the Borrower,  with a copy to the Administrative  Agent, on the  Closing Date or
concurrently  with the delivery of the relevant  Assignment and  Acceptance,  as
applicable,  (i) two United States Internal  Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms)  properly  completed  and certifying in
each case  that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any  United States  federal income taxes,  and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor  applicable  form,
as  the  case  may  be, to  establish an  exemption  from United  States  backup
withholding taxes.  Each such Lender further agrees to deliver to the  Borrower,
with a copy to the  Administrative  Agent, a Form 1001  or 4224 and  Form W-8 or
W-9, or successor  applicable forms or  manner of certification, as the case may
be, on  or before the  date that any such  form  expires or becomes  obsolete or
after the occurrence of any event  requiring a  change in the  most recent  form
previously  delivered by  it to the Borrower,  certifying in the  case of a Form
1001  or 4224 that  such Lender is  entitled  to  receive  payments  under  this
Agreement  without  deduction or withholding of any United States federal income
taxes (unless in any such case an event (including without limitation any change
in treaty,  law or regulation) has occurred prior to the date  on which any such
delivery would  otherwise be required  which renders such forms  inapplicable or
the exemption to which such forms relate unavailable and  such  Lender  notifies
the  Borrower and the  Administrative Agent  that it is not  entitled to receive
payments without deduction or withholding of United States federal income taxes)
and, in the case  of a Form W-8 or W-9, establishing  an exemption  from  United
States backup  withholding tax. The Borrower  shall not  be required to  pay any
additional amount to any non-U.S. Lender in respect of United States withholding
tax pursuant to Section 3.11(a) to the  extent that the  obligation to  withhold
such  tax  existed at the  time such non-U.S.  Lender became a Lender hereunder,
unless such obligation would not have arisen but for a failure by such  non-U.S.
Lender to deliver the documents referred to in this Section 3.11(e).

         (f) 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  3.11  shall  survive  the  payment in  full of  the
Obligations and the termination of the Commitments.


         SECTION 3.12        DUTY TO MITIGATE; ASSIGNMENT OF COMMITMENTS
                             UNDER CERTAIN CIRCUMSTANCES.
                             ----------------------------


         (a) Any Lender (or Eligible  Assignee)  claiming any additional amounts
payable  pursuant to Section  3.08,  3.10 or 3.11 shall use  reasonable  efforts
(consistent  with legal and regulatory  restrictions) to file any certificate or
document  requested  by  the  Borrower  or to  change  the  jurisdiction  of its
applicable  lending  office if the making of such a filing or change would avoid
the need for or reduce  the  amount  of any such  additional  amounts  which may
thereafter  accrue or avoid the  circumstances  giving rise to such exercise and
would not, in the sole determination of such Lender (or Eligible  Assignee),  be
otherwise disadvantageous to such Lender (or Eligible Assignee).

<PAGE>

         (b) In the event that any Lender shall have delivered a notice pursuant
to Section 3.08 or 3.10,  or the Borrower  shall be required to make  additional
payments to any Lender under  Section  3.11,  or any Lender shall have failed to
advise the Borrower and the Administrative  Agent of its agreement to extend the
Termination Date on or prior to the thirtieth (30th) day following any extension
request by the Borrower pursuant to Section 2.07(b), the Borrower shall have the
right, at its own expense (which shall include the assignment fee referred to in
Section  12.10),  upon notice to such Lender and the  Administrative  Agent,  to
require such Lender to transfer and assign without  recourse (in accordance with
and  subject to the  restrictions  contained  in Section  12.10) all  interests,
rights and  obligations  contained  hereunder to another  financial  institution
(including  any  other  Lender)  approved  by the  Administrative  Agent  (which
approval  shall  not  be   unreasonably   withheld)   which  shall  assume  such
obligations;  PROVIDED that (i) no such assignment  shall conflict with any law,
rule or regulation or order of any Governmental  Authority and (ii) the assignee
or the  Borrower,  as the case  may be,  shall  pay to the  affected  Lender  in
immediately  available funds on the date of such assignment the principal of and
interest  accrued to the date of payment on the Loans made by it  hereunder  and
all other amounts accrued for its account or owed to it hereunder (including the
additional  amounts asserted and payable pursuant to Section 3.08, 3.10 or 3.11,
if any).



         ARTICLE IV

CLOSING; CONDITIONS OF CLOSING AND BORROWING


         SECTION 4.01        CLOSING.
                             --------

              The closing shall take place  at the offices of Kennedy  Covington
Lobdell & Hickman  at  9:00 a.m. on  September 30, 1997 or on such other date as
the parties hereto shall mutually agree.


         SECTION 4.02        CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF
                             CREDIT. 
                             -----------------------------------------------

              The  obligation of the Lenders to close this Agreement and to make
the  initial  Loan is  subject to the  satisfaction  of  each of  the  following
conditions:

         (a) EXECUTED LOAN DOCUMENTS. This Agreement,  the  Notes, the Guarantee
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) OFFICERS'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.

<PAGE>

                  (ii)  PARTNERSHIP  DOCUMENTS;  SECRETARY'S  CERTIFICATES.  The
         Administrative  Agent  shall  have  received  (A) a copy of each of the
         Partnership  Documents and the organizational  documents of the General
         Partner and each  Subsidiary,  certified by the  Secretary or Assistant
         Secretary  of  the  Borrower,  and  such  other  documents  as  may  be
         reasonably  required to evidence  the  authority of each of the General
         Partner,  the  Borrower  and each  Subsidiary  to enter  into each Loan
         Document and Partnership  Document to which it is party and to complete
         the  transactions  to  which it is a party;  (B) a  certificate  of the
         Secretary or Assistant Secretary of the Borrower dated the Closing Date
         and  certifying  with  respect  to each  of the  General  Partner,  the
         Borrower and each  Subsidiary  (1) that attached  thereto is a true and
         complete copy of the 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  (2)  below,  (2)  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,  (3) 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 (4) 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 (C) a certificate of another  officer as to the incumbency
         and  specimen  signature  of  such  Secretary  or  Assistant  Secretary
         executing the certificate pursuant to (2) 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 the General Partner and  each  Subsidiary
         under the laws of their  respective jurisdictions  of organization  and
         each other  jurisdiction  where  any  such  Person is  qualified  to do
         business  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 3.11(e) hereof.

                  (vi)  INSURANCE CERTIFICATE. The  Administrative  Agent  shall
         have  received  a  detailed  list 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 the holders of the Senior Notes,
         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.

<PAGE>

                  (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 of
         the  Borrower  and  its   Subsidiaries,   all  in  form  and  substance
         satisfactory to the Administrative Agent.

                  (ii) FINANCIAL CONDITION CERTIFICATE.  The Borrower shall have
         delivered  to the  Administrative  Agent a  certificate,  in  form  and
         substance  satisfactory to the  Administrative  Agent, and certified as
         accurate by the chief executive  officer or chief financial  officer of
         the Borrower,  that the Borrower and each of its  Subsidiaries are each
         Solvent.

                  (iii) 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 3.03 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.  The  Administrative  Agent
         shall have  received  duly  authorized  and executed  copies of the fee
         letter agreement referred to in Section 3.03(c).

                  (iv) APPLICABLE  MARGIN  CERTIFICATE.  The Borrower shall have
         delivered to the  Administrative  Agent a  certificate  executed by the
         chief financial  officer or treasurer of the Borrower setting forth the
         calculation of the Applicable Margin pursuant to Section 3.01(c).

         (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  2.03(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) SENIOR NOTES AND RELATED  DOCUMENTS.  The Borrower shall
         have delivered to the  Administrative  Agent a true and correct copy of
         the Senior Note  Agreement  and a true and  correct  copy of a specimen
         Senior Note.

<PAGE>

                  (iv) DISTRIBUTION  SUPPORT AGREEMENT.  The Borrower shall have
         delivered  to the  Administrative  Agent a true and correct copy of the
         Distribution Support Agreement.

                  (v) RESIGNATION OF CHASE. The Administrative  Agent shall have
         received the written resignation of Chase as Administrative Agent under
         the Original Credit Agreement.

                  (vi)  PAYOFF  LETTERS.  The  Administrative  Agent  shall have
         received a pay-off  letter from each lender under the  Original  Credit
         Agreement that is not continuing as a Lender under this Agreement.

                  (vii) DUE DILIGENCE AND OTHER  DOCUMENTS.  The Borrower  shall
         have  delivered  to the  Administrative  Agent  such  other  documents,
         certificates  and  opinions  as  the  Administrative  Agent  reasonably
         requests,  certified  by a  secretary  or  assistant  secretary  of the
         Borrower as a true and correct copy thereof.


         SECTION 4.03        CONDITIONS TO ALL LOANS.
                             ------------------------

              The obligations of the Lenders to make any  Loan 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 V hereof 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 on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made 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 V

REPRESENTATIONS AND WARRANTIES OF THE BORROWER


         SECTION 5.01        REPRESENTATIONS  AND  WARRANTIES.
                             ---------------------------------

             To induce the Administrative Agent to enter into this Agreement and
the  Lenders to make the Loans, the  Borrower hereby  represents and warrants to
the  Administrative  Agent and Lenders 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 5.01(A).

<PAGE>

         (b)      OWNERSHIP.

                  (i) Each  Subsidiary  of the  Borrower  is listed on  SCHEDULE
         5.01(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 or
         without par value,  described  on  SCHEDULE  5.01(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 the  Subsidiaries  of the  Borrower and the
         number  of  shares  or  other  ownership  interests  owned  by each are
         described  on  SCHEDULE  5.01(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 SCHEDULE 5.01(B).

                  (ii) The sole  general  partner of the  Parent is the  General
         Partner,  which owns a 1.0% general partnership  interest in the Parent
         and a  limited  partnership  interest  in the  Parent  of not less than
         24.4%. The sole general partner of the Borrower is the General Partner,
         which owns a 1.0101% general  partnership  interest in the Borrower and
         is a wholly owned subsidiary of Millennium. The only limited partner of
         the Borrower is the Parent,  which owns a 98.9899% limited  partnership
         interest in the Borrower  and the  Borrower  does not have any partners
         other than the General Partner and 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 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.

<PAGE>

         (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   on-site  or  off-site
contamination)  which,  individually  or in the aggregate,  could  reasonably be
expected to result in a Material Adverse Effect.

<PAGE>

         (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) The present value of all benefit  liabilities under each
         Employee Benefit Plan (based on those  assumptions used for purposes of
         Statement of Financial  Accounting Standards No. 87) did not, as of the
         last annual  valuation  date  applicable  thereto,  exceed by more than
         $5,000,000 the fair market value of the assets of such Employee Benefit
         Plan and the present  value of all  underfunded  plans  (based on those
         assumptions  used for purposes of  Statement  of  Financial  Accounting
         Standards  No.  87) did not,  as of the  last  annual  valuation  dates
         applicable  thereto,  exceed by more than  $5,000,000  the fair  market
         value of the assets of all such underfunded Employee Benefit Plans.

         (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 Regulations G and U 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  G, 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.

<PAGE>

         (l)  AGREEMENTS.  (i) None of the Business,  the  Borrower,  any of the
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.

         (m) None of the Business,  the Borrower,  any of the 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  5.01(T)  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  5.01(M)  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 (i) audited Consolidated balance sheets
of the Borrower and its  Subsidiaries  as of September  30, 1996 and the related
statements  of income and retained  earnings and cash flows for the Fiscal Years
then ended and (ii) unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries  as of June 28, 1997 and related  unaudited  interim  statements of
revenue  and  retained  earnings,  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.

<PAGE>

         (q) NO MATERIAL  ADVERSE CHANGE.  Since  September 30, 1996,  there has
been  no  material  adverse  change  in the  properties,  business,  operations,
prospects,  or  condition  (financial  or  otherwise)  of the  Borrower  and its
Subsidiaries 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 each of its  Subsidiaries
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 5.01(o), 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 9.02. 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 9.02 hereof.

         (u)  INDEBTEDNESS  AND CONTINGENT  OBLIGATIONS.  SCHEDULE  5.01(T) 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 as set forth on SCHEDULE 5.01(U),  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.

         (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  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.

<PAGE>

         (x) DISTRIBUTION  SUPPORT AGREEMENT.  Attached hereto as EXHIBIT I is a
true and correct copy of the Distribution Support Agreement. Except as set forth
in  EXHIBIT  I,  there  have  been no  amendments  to the  Distribution  Support
Agreement  and, to the best  knowledge of the  Borrower,  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  parties
thereto exists.

         (y) SENIOR NOTE  AGREEMENT.  Attached hereto as EXHIBIT J is a true and
correct  copy of the Senior  Note  Agreement.  Except as set forth in EXHIBIT J,
there have been no  amendments  to the Senior Note  Agreement  and 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.

         (z) 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.  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 5.02        SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC .
                             -------------------------------------------------

              All representations and  warranties set forth in  this  Article  V
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 VI

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  12.11  hereof,  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, or such other office
as may be designated by the Administrative Agent and Lenders from time to time:


<PAGE>

         SECTION 6.01        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,  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,  retained  earnings and cash flows for the fiscal  quarter
then ended and that portion of 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,  subject to
normal year end adjustments.

         (b) ANNUAL  FINANCIAL  STATEMENTS.  As soon as  practicable  and in any
event within ninety-five (95) days after the end of each Fiscal Year, an audited
Consolidated  balance sheet of the Borrower and its Subsidiaries as of the close
of such Fiscal  Year and audited  Consolidated  statements  of income,  retained
earnings  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 Price
Waterhouse LLP or other  independent  certified  public  accountants  reasonably
acceptable  to  the  Administrative  Agent  in  accordance  with  GAAP  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 Borrower or any of its  Subsidiaries or with respect
to accounting principles followed by the Borrower or any of its Subsidiaries not
in accordance with GAAP.


         SECTION 6.02        OFFICER'S  COMPLIANCE  CERTIFICATE .
                             ------------------------------------              

            At each time financial statements are delivered pursuant to Sections
6.01 (a)or (b), a certificate of the chief financial officer or the treasurer of
the Borrower in the form of EXHIBIT E attached hereto  (an "Officer's Compliance
Certificate").


         SECTION 6.03        OTHER REPORTS.
                             --------------

         (a) Promptly  upon  receipt  thereof,  copies of all  reports,  if any,
submitted to the Borrower or its Board of  Directors by its  independent  public
accountants  in connection  with their  auditing  function,  including,  without
limitation, any management report and any management responses thereto;

<PAGE>

         (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; and

         (d)  such other information regarding the operations,  business affairs
and  financial  condition  of the  Borrower  or any of its  Subsidiaries  as the
Administrative Agent or any Lender may reasonably request.


         SECTION 6.04        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;

<PAGE>

         (e) any Default,  Event of Default or Senior Note Default or any event,
known to the Borrower,  which  constitutes  or which with the passage of time or
giving of notice or both would  constitute  a default or event of default  under
the Distribution Support Agreement;

         (f) any  event  which  makes  any of the  representations  set forth in
Section 5.01 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 6.05        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 VI
or any  other provision of this  Agreement, or any  of the  Security  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 complete, true and accurate knowledge of the subject matter  based on
the Borrower's knowledge thereof.



         ARTICLE VII

AFFIRMATIVE 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  provided for in Section  12.11,  the Borrower  will, and
will cause each of its Subsidiaries to:


         SECTION 7.01        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 9.05.

<PAGE>

                  (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 7.02        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 7.02 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 7.03        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
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 7.04        EMPLOYEE BENEFITS.
                             ------------------

              (i) Comply in all material respects with the applicable provisions
of ERISA and the Code and (b)  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.


<PAGE>

         SECTION 7.05        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  Guarantee Agreement. Each Lender agrees to keep all
information  obtained  by  it  pursuant  to  this  Section  7.05  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  7.05,  (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 7.06        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 7.07        ADDITIONAL GUARANTORS. 
                             ----------------------

              The Borrower agrees to 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  Subsidiary and to
cause any such newly acquired or formed  Subsidiary to become a guarantor  under
the   Guarantee   Agreement  by  the   execution  of   documentation  reasonably
satisfactory  to the  Administrative  Agent immediately upon such acquisition or
formation.

<PAGE>

         SECTION 7.08        USE OF PROCEEDS.
                             ----------------      

              Use the proceeds of the (a)  Acquisition  Loans  solely to finance
Permitted  Business  Acquisitions  in  an   aggregate  amount   not  to   exceed
$25,000,000,  and  (b) Revolving  Credit  Loans  for  working  capital purposes,
including general partnership requirements of the Borrower  and its Subsidiaries
and the payment of certain fees and expenses  incurred in  connection  with  the
transactions, PROVIDED that no such proceeds may be used to fund any  Restricted
Payment  other  than  proceeds  of  Revolving  Credit  Loans  (i)  made  in  any
four-fiscal-quarter period in an aggregate principal amount not in excess of the
lesser of (A) $29,300,000 and (B) two times the Minimum  Quarterly  Distribution
in effect as of the Closing Date and (ii) used solely for the purpose of funding
Restricted  Payments to the Parent,  the  proceeds of  each of which are in turn
used by the Parent solely for the purpose of paying (A) all or a  portion of any
Minimum  Quarterly  Distribution and the  related pro rata  distribution  to the
General Partner that could not be paid out of Available  Cash but for the making
of such a Revolving Credit Loan or (B) reasonable  expenses of the Parent  which
may be funded  with a Restricted Payment pursuant to clause (b) of Section 9.06.


         SECTION 7.09        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 parry 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 7.10        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 the 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  7.11       PREPARATION OF ENVIRONMENTAL REPORTS.
                             -------------------------------------

              If a Default caused by reason of a breach of Sections  5.01(h)  or
7.10  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.

<PAGE>

         SECTION 7.12      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  the  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 9.06(b)or Section 9.07.  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  any  of  their   subsidiaries   from  being  readily
distinguished  from the assets of the Borrower and the 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 the Subsidiaries.


         SECTION 7.13       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
the Subsidiaries subject to the provisions of  Section 9.02 or 9.05 to be Margin
Stock.


         SECTION 7.14        AVAILABLE CASH RESERVES. 
                             ------------------------

              The Borrower  will  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 the  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 the Board of Supervisors need 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 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 sentence of the definition of "Available Cash".


         SECTION 7.15        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, the  Notes and the other
Loan Documents.

<PAGE>

         SECTION 7.16        YEAR 2000 COMPATIBILITY. 
                             ------------------------

              Take  all   action   reasonably  necessary   to  ensure  that  the
computer-based systems of the Borrower and its  Subsidiaries are able to operate
and process effectively data that includes dates on and after January 1, 2000.


         SECTION  7.17       COMMODITY HEDGING POLICY.
                             ------------------------- 

              Deliver to the Administrative Agent,  for the  review and  written
approval of the  Required  Lenders (which  approval  shall  not be  unreasonably
withheld),  the Borrower's written commodity hedging policy.  The Borrower shall
not amend such commodity hedging  policy 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.



         ARTICLE VIII

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 12.11  hereof,  the Borrower and its
Subsidiaries on a Consolidated basis will not:


         SECTION  8.01       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 8.02        LEVERAGE  RATIO.
                             ----------------

              Permit the Leverage  Ratio as of the end of any fiscal  quarter to
be greater than 5.25 to 1.00.


         SECTION 8.03        ADJUSTED CONSOLIDATED NET WORTH.
                             --------------------------------

              Permit Adjusted Consolidated Net Worth at any time to be less than
$125,000,000.



         ARTICLE IX

NEGATIVE COVENANTS

         The Borrower covenants and agrees with each Lender that, from and after
the Closing Date so long as this Agreement  shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all Fees and all other expenses or amounts  payable under any Loan Document have
been paid in full,  unless  the  Required  Lenders  shall  otherwise  consent in
writing,  the  Borrower  will  not,  and will not  cause  or  permit  any of the
Subsidiaries to:

<PAGE>

         SECTION 9.01        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 amountnot 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 Guarantee
Agreement and the Senior 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,  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;

         (e) Indebtedness of the Borrower to the General Partner or an Affiliate
of the  General  Partner  that  is  subordinated  to the  Obligations  on  terms
satisfactory to the Required Lenders and otherwise on terms  satisfactory in all
respects to the Required Lenders;

         (f) Indebtedness of the Borrower or any Wholly-Owned  Subsidiary to any
Subsidiary or the Borrower,as the case may be;

         (g) Indebtedness  of the  Borrower  and  the  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;

<PAGE>

         (h)  Indebtedness  of the  Borrower or the  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;

         (i) 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 Business Days of its incurrence;

         (j)  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,  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 (j) shall not at any time exceed $5,000,000;

         (k)  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 (k) 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 2.06(a);

                  (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;

<PAGE>

         (l)  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;

         (m) obligations  under Commodity Hedging  Agreements  respecting actual
volumes of  propane  inventory  of the  Borrower  incurred  as  follows:  (i) in
accordance with the Borrower's  commodity hedging policy,  upon approval of such
policy in accordance with in Section 7.17 and (ii) until such commodity  hedging
policy has been approved as set forth in Section 7.17, in the ordinary course of
business,  on a  non-speculative  basis  and in a  manner  consistent  with  the
Borrower's past practices; and

         (n)  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 9.02        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  9.02;  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 9.05(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 9.01(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;

<PAGE>

         (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;

         (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  9.02;  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;

<PAGE>

         (o) Liens securing Indebtedness permitted by Section 9.01(k); and

         (p) Liens securing  Indebtedness  (including interests of lessors under
Capital Leases)  permitted by Section 9.01, 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).

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 9.03        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;  PROVIDED  that the Designated Net
Proceeds  thereof  shall be  applied as a  prepayment of the  Acquisition  Loans
and/or reduction of the Aggregate Acquisition Commitment as required pursuant to
Section  2.04(f) and 2.06(b).


         SECTION  9.04       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  8.02,  8.03 and 9.01 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;

<PAGE>

                           (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.;

                           (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; and

                           (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 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;

<PAGE>

         (d) liabilities  with respect  to any Hedging Agreements or Commodities
 Hedging Agreements;

         (e) investments made by a Subsidiary in the Borrower; and

         (f) the investment  existing on the Closing Date of the Borrower in The
Dixie Pipeline Company (a Delaware corporation).


         SECTION  9.05       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 9.05 shall not
prohibit;

         (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 of the Borrower and the  Subsidiaries  shall be not less
than the Consolidated Net Worth of the Borrower and its Subsidiaries  immediate,
prior to such transaction,  (B) substantially all the assets and business of the
Borrower and the Subsidiaries  shall be located in the United States and (C) the
Borrower and the Subsidiaries shall be in compliance, on a pro forma basis after
giving effect to such transaction,  with the covenants contained in Article VIII
recomputed as of the last day of the most recently  ended fiscal  quarter of the
Borrower and the  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  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 9.04;

         (d) sales,  leases or other  dispositions of equipment or real property
of the Borrower or the  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 the  Subsidiaries;
PROVIDED that the  Designated  Net Proceeds  shall be applied as a prepayment of
the Acquisition Loans and/or reduction of the Aggregate  Acquisition  Commitment
as required pursuant to Section 2.04(f) and Section 2.06(b); and

<PAGE>

         (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 9.04 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 the
Designated  Net  Proceeds  shall be applied as a prepayment  of the  Acquisition
Loans  and/or  reduction of the  Aggregate  Acquisition  Commitment  as required
pursuant to Section 2.04(f) and Section 2.06(b); PROVIDED,  FURTHER, that (i) 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 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 (ii) 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 (i) 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;  (ii) 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;  (iii) 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  9.04  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;  (iv) the  Subsidiary  being
disposed  of shall not have any  continuing  investment  in the  Borrower or any
other  Subsidiary  not being  simultaneously  disposed  of;  and (v) such  sale,
transfer  or  other  disposition  shall  not  otherwise  be  prohibited  by this
Agreement.


         SECTION 9.06        RESTRICTED PAYMENTS. 
                             --------------------

              The Borrower will not 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 (including with respect
to Additional Partnership Units) 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,  and (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  Agreement  of Limited of
Partnership  of the  Parent)  and  indemnification  of and  contribution  to all
Persons entitled to  indemnification  or contribution  under Section 7.13 of the
Agreement  of Limited  Partnership  of the  Parent (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


<PAGE>

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 the  Subsidiaries;  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  VIII  recomputed  as of the last day of the most  recently
ended fiscal quarter of the Borrower and the  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 to such effect, 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 9.07        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 9.07 shall
not  apply  to  (a)  Restricted  Payments  permitted  under  Section  9.06,  (b)
indemnification of and contribution to all Persons  entitled to  indemnification
or contribution under Section 7.13 of the  Agreement  of Limited Partnership  of
the   Borrower  (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.

<PAGE>


         SECTION 9.08        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 9.04(g).


         SECTION 9.09      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.

         (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),  the
Distribution Support Agreement,  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  8.01,  8.02,  8.03 and 9.11 hereof and such
additional  Indebtedness  shall be on terms and  conditions no more  restrictive
than the terms and conditions contained in the Senior Note Agreement.

<PAGE>

         (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 9.10        LEASE OBLIGATIONS. 
                             ------------------

              Permit the aggregate obligations  that are due and payable  during
any fiscal year of the Borrower  and the  Subsidiaries  under leases (other than
obligations under Capital Leases) to exceed $30,000,000 during such fiscal year.


         SECTION 9.11       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  9.12       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 9.13        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 VII, VIII and IX hereof.


<PAGE>

         ARTICLE X

DEFAULT AND REMEDIES


         SECTION 10.01       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.  The  Borrower  shall
default in any payment of principal of any Loan or Note 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 Note 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 6.04(e) or Articles VIII or IX 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
10.01) 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.

         (f) INDEBTEDNESS CROSS-DEFAULT. The Borrower or any of its Subsidiaries
shall (i) default in the payment of any Indebtedness  (other than that evidenced
by the Notes; 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
Notes; 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).

<PAGE>

         (g) OTHER CROSS-DEFAULTS.  (i) the Distribution Support Agreement shall
terminate,  expire or otherwise be of no further force and effect or there shall
have occurred a default  thereunder and such default shall continue for a period
of  thirty  (30)  days  without  cure,  or  (ii)  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 CONTROL. 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 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 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.

<PAGE>

         (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 10.02       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 FACILITIES.  Declare the principal of
and  interest  on the Loans,  the Notes 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 and all other  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  thereunder;  PROVIDED,  that upon the
occurrence  of an Event of Default  specified  in Section  10.01(j) or (k),  the
Credit  Facilities shall be automatically  terminated and all Obligations  shall
automatically become due and payable.

         (b) 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 10.03       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.


<PAGE>

         ARTICLE XI

THE ADMINISTRATIVE AGENT


         SECTION 11.01       APPOINTMENT. 
                             ------------

              Notwithstanding the appointment of Chase  pursuant to the Original
Credit Agreement, each of the Lenders hereby irrevocably designates and appoints
First Union as Administrative  Agent of such Lender under this Agreement and the
other Loan Documents and each such Lender irrevocably authorizes First  Union as
Administrative  Agent for such  Lender,  to take such action on its behalf under
the  provisions of this  Agreement and the other Loan  Documents and to exercise
such  powers  and  perform  such  duties  as  are  expressly  delegated  to  the
Administrative  Agent  by the  terms  of this  Agreement  and  such  other  Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding  any  provision to the contrary  elsewhere in this  Agreement or
such other Loan Documents, the Administrative Agent shall not have any duties or
responsibilities,  except those  expressly set forth herein and therein,  or any
fiduciary  relationship with any Lender,  and no implied  covenants,  functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Agreement  or  the  other  Loan   Documents  or  otherwise   exist  against  the
Administrative Agent.


         SECTION 11.02       DELEGATION OF DUTIES. 
                             ---------------------

              The Administrative  Agent may execute any of its respective duties
under  this  Agreement and the other  Loan  Documents  by  or  through agents or
attorneys-in-fact  and  shall be  entitled to  advice of counsel  concerning all
matters  pertaining to such  duties.  The  Administrative  Agent  shall  not  be
responsible for the negligence or misconduct of any agents or  attorneys-in-fact
selected by the Administrative Agent with reasonable care.


         SECTION 11.03       EXCULPATORY PROVISIONS.
                             -----------------------

            Neither the Administrative Agent nor any of its officers, directors,
employees,  agents,  attorneys-in-fact,  Subsidiaries or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection  with this Agreement or the other Loan Documents  (except
for actions  occasioned  solely by its or such Person's own gross  negligence or
willful misconduct),  or (b) responsible in any manner to any of the Lenders for
any recitals, statements,  representations or warranties made by the Borrower or
any of its  Subsidiaries or any officer  thereof  contained in this Agreement or
the other Loan  Documents  or in any  certificate,  report,  statement  or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection  with,  this Agreement or the other Loan Documents or for
the value, validity, effectiveness,  genuineness,  enforceability or sufficiency
of this Agreement or the other Loan Documents or for any failure of the Borrower
or any of its  Subsidiaries to perform its obligations  hereunder or thereunder.
The  Administrative  Agent  shall not be under any  obligation  to any Lender to
ascertain  or to  inquire  as to the  observance  or  performance  of any of the
agreements  contained in, or conditions  of, this  Agreement,  or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries.

<PAGE>

         SECTION  11.04      RELIANCE BY THE ADMINISTRATIVE AGENT.
                             -------------------------------------

              The Administrative  Agent shall be  entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by  the proper  Person
or Persons and upon advice and statements of legal counsel  (including,  without
limitation, counsel to the Borrower),  independent accountants and other experts
selected by the  Administrative  Agent.  The  Administrative  Agent may deem and
treat the payee of any Note as the owner  thereof for all  purposes  unless such
Note shall have been  transferred in accordance  with Section 12.10 hereof.  The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan  Documents  unless it shall first
receive such advice or concurrence  of the Required  Lenders (or, when expressly
required  hereby or by the relevant other Loan Document,  all the Lenders) as it
deems  appropriate or it shall first be indemnified to its  satisfaction  by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or  continuing to take any such action except for its own gross
negligence or willful misconduct. The Administrative Agent shall in all cases be
fully protected in acting,  or in refraining  from acting,  under this Agreement
and the Notes in  accordance  with a request of the Required  Lenders (or,  when
expressly  required  hereby,  all the Lenders),  and such request and any action
taken or failure to act pursuant  thereto  shall be binding upon all the Lenders
and all future holders of the Notes.


         SECTION 11.05       NOTICE OF DEFAULT.
                             ------------------

              The Administrative Agent shall not be deemed to have  knowledge or
notice of the occurrence of any Default or Event of Default hereunder  unless it
has received notice from a Lender or the Borrower referring  to this  Agreement,
describing  such  Default or Event of Default and stating  that such notice is a
"notice of default".  In the event that the Administrative Agent receives such a
notice, it shall promptly give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably  directed by the Required Lenders;  PROVIDED that unless and
until  the  Administrative  Agent  shall  have  received  such  directions,  the
Administrative  Agent may (but shall not be obligated  to) take such action,  or
refrain  from  taking  such  action,  with  respect to such  Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.


         SECTION 11.06       NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER
                             LENDERS.  
                             -------------------------------------------------- 

              Each Lender expressly acknowledges that neither the Administrative
Agent  nor  any  of  its  respective  officers,  directors,  employees,  agents,
attorneys-in-fact, Subsidiaries  or  Affiliates has made  any representations or
warranties to it and that no act by the Administrative  Agent hereinafter taken,
including any review of the affairs of the  Borrower or any of its Subsidiaries,
shall  be   deemed  to   constitute  any   representation  or  warranty  by  the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has,  independently  and without  reliance upon the Administrative
Agent or any  other  Lender, and  based on such documents and information  as it
has deemed  appropriate, made its own  appraisal  of and investigation  into the
business,   operations,   property,   financial   and    other   condition   and
creditworthiness of the Borrower and its Subsidiaries and made its own  decision
to make its Loans  hereunder  and enter  into this  Agreement.  Each Lender also
represents  that  it   will,  independently   and   without  reliance  upon  the
Administrative  Agent or any  other  Lender,  and  based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  analysis,  appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents,  and to make such  investigation as
it deems  necessary to inform itself as to the business,  operations,  property,
financial  and other  condition  and  creditworthiness  of the  Borrower and its
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the  Administrative  Agent hereunder or by the
other  Loan  Documents,  the  Administrative  Agent  shall  not have any duty or
responsibility  to  provide  any  Lender  with any  credit or other  information
concerning the business, operations,  property, financial and other condition or
creditworthiness  of the Borrower or any of its Subsidiaries which may come into
the possession of the  Administrative  Agent or any of its respective  officers,
directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates.

<PAGE>

         SECTION 11.07       INDEMNIFICATION. 
                             ----------------

              The Lenders agree to  indemnify  the  Administrative  Agent in its
capacity as such and (to the extent not  reimbursed by the  Borrower and without
limiting the obligation  of the Borrower  to do so),  ratably  according  to the
respective amounts of their Commitment Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or  disbursements  of any kind whatsoever which may at any time
(including,  without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the  Administrative  Agent in any
way relating to or arising out of this Agreement or the other Loan Documents, or
any  documents  contemplated  by  or  referred  to  herein  or  therein  or  the
transactions  contemplated  hereby or thereby or any action  taken or omitted by
the  Administrative  Agent  under or in  connection  with any of the  foregoing;
PROVIDED  that no Lender  shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses  or  disbursements  resulting  solely  from the  Administrative
Agent's bad faith,  gross  negligence or willful  misconduct.  The agreements in
this Section  11.07 shall survive the payment of the Notes and all other amounts
payable hereunder and the termination of this Agreement.


         SECTION  11.08     THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
                            ----------------------------------------------------


              The  Administrative  Agent  and  its  respective Subsidiaries  and
Affiliates may make loans to, accept  deposits from and generally  engage in any
kind of business with the Borrower as though the  Administrative  Agent were not
an Administrative Agent hereunder.  With respect to any Loans made or renewed by
it and any Note  issued to it,  the  Administrative  Agent  shall  have the same
rights  and powers  under this  Agreement  and the other Loan  Documents  as any
Lender and may exercise the same as though it were not an Administrative  Agent,
and the terms "Lender" and "Lenders" shall include the  Administrative  Agent in
its individual capacity.


         SECTION  11.09      RESIGNATION OF THE ADMINISTRATIVE AGENT;  SUCCESSOR
                             ADMINISTRATIVE AGENT.
                             ---------------------------------------------------

              Subject  to  the  appointment and  acceptance  of a  successor  as
provided below, the Administrative Agent may resign at any time by giving notice
thereof  to  the  Lenders  and the  Borrower.  Upon  any  such resignation,  the
Required  Lenders  shall  have the  right to  appoint a successor Administrative
Agent, which  successor shall  have minimum  capital  and  surplus  of  at least
$500,000,000.  If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such  appointment within  thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the  Administrative  Agent  may,  on behalf of the  Lenders, appoint a successor
Administrative Agent, which successor shall have minimum capital and surplus  of
at least $500,000,000.  Upon the acceptance of any appointment as Administrative
Agent   hereunder   by  a   successor   Administrative   Agent,  such  successor
Administrative Agent shall  thereupon  succeed to  and  become vested  with  all
rights, powers, privileges and  duties of the retiring Administrative Agent, and
the retiring  Administrative  Agent  shall be  discharged  from  its  duties and
obligations  hereunder.  After any retiring  Administrative Agent's  resignation
hereunder as Administrative  Agent, the  provisions  of this Section 11.09 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.

<PAGE>

         SECTION 11.10       DOCUMENTATION AGENT. 
                             --------------------

              The  Documentation  Agent  shall  have no  liabilities,  duties or
responsibilities arising under this  Agreement other  than those imposed upon it
in its capacity as a Lender.



         ARTICLE XII

MISCELLANEOUS


         SECTION 12.01       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.

         (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:        Robert M. Plante
                                     Telephone No.:    973-503-9110
                                     Telecopy No.:     973-515-5996

         With copies to:             Weil Gotshal & Manges
                                     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 First Union as        First Union National Bank
          Administrative Agent:      One First Union Center, TW-10
                                     301 South College Street
                                     Charlotte, North Carolina 28288-0608
                                     Attention:      Syndication Agency Services
                                     Telephone No.:  704-383-0281
                                     Telecopy No.:   704-383-0288
<PAGE>

         With copies to:             Kennedy Covington Lobdell & Hickman
                                     NationsBank Corporate Center
                                     Suite 4200
                                     100 North Tryon Street
                                     Charlotte, North Carolina 28202-4006
                                     Attention:      Jefferson W. Brown
                                     Telephone No.:  704-331-7471
                                     Telecopy No.:   704-331-7598

         If to any Lender:       To the Address set forth on SCHEDULE 1 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.


         SECTION 12.02       EXPENSES; INDEMNITY. 
                             --------------------

              The  Borrower  will  (a)  pay  all  out-of-pocket  expenses of the
Administrative  Agent  in connection  with: (i) the  preparation,  execution and
delivery of this Agreement and each other Loan Document, whenever the same shall
be  executed  and  delivered,  including  without  limitation  all out-of-pocket
syndication and due diligence expenses and reasonable fees and  disbursements of
counsel for the Administrative  Agent and (ii) the  preparation,  execution  and
delivery of any waiver,  amendment or consent by the Administrative Agent or the
Lenders relating to this Agreement or any other Loan Document, including without
limitation reasonable fees and disbursements of counsel for  the  Administrative
Agent, (b) pay all out-of-pocket  expenses of the  Administrative  Agent and the
Lenders in connection with the  administration and enforcement of any rights and
remedies of the  Administrative Agent and Lenders  under the Credit  Facilities,
including  consulting  with  appraisers, accountants, engineers,  attorneys  and
other  Persons concerning  the nature,  scope or value of any right or remedy of
the  Administrative  Agent  or  any  Lender hereunder  or  under  any other Loan
Document or any factual matters in connection therewith,  which  expenses  shall
include  without  limitation  the  reasonable  fees  and  disbursements  of such
Persons, and (c) defend, indemnify and hold harmless  the  Administrative  Agent
and  the  Lenders,  and  their  respective  parents,  Subsidiaries,  Affiliates,
employees,  agents,  officers  and  directors,  from  and  against  any  losses,
penalties,  fines,   liabilities,   settlements,  damages,  costs and  expenses,
suffered  by  any such Person  in  connection  with  any  claim,  investigation,
litigation  or  other proceeding  (whether  or not the  Administrative  Agent or
any Lender is a party thereto) and the prosecution and defense thereof,  arising
out of or in any way connected  with the Agreement,  any  other Loan Document or
the Loans,  including without  limitation reasonable attorney's and consultant's
fees, except to the extent  that any of the foregoing  directly  result from the
gross  negligence  or willful  misconduct of  the party  seeking indemnification
therefor.

<PAGE>

         SECTION 12.03       SET-OFF.
                             --------

             In addition to any rights now or hereafter granted under Applicable
Law  and  not  by  way of  limitation of  any such  rights,  upon  and after the
occurrence  of any  Event of  Default and  during  the  continuance thereof, the
Lenders and any assignee or participant of a Lender in accordance  with  Section
12.10 are hereby authorized by the  Borrower  at any time or from time  to time,
without  notice to the Borrower or to any other  Person,  any such notice  being
hereby  expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, time or demand, including,  but  not  limited  to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other indebtedness at any time held or owing by the Lenders, or any such
assignee  or  participant  to or for the credit or the  account of the  Borrower
against and on account of the Obligations irrespective of whether or not (a) the
Lenders shall have made any demand under this Agreement or any of the other Loan
Documents or (b) the Administrative  Agent shall have declared any or all of the
Obligations  to be due and payable as  permitted  by Section  10.02 and although
such Obligations shall be contingent or unmatured.


         SECTION 12.04       GOVERNING LAW.
                             --------------

              This  Agreement, the Notes 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 12.05       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,  the Notes 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,  the Notes 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  12.01.
Nothing in this Section 12.05 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.

<PAGE>

         SECTION 12.06       BINDING ARBITRATION; WAIVER OF JURY TRIAL.
                             ------------------------------------------


         (a) BINDING ARBITRATION.  Upon demand of any party, whether made before
or within  one  hundred  twenty  (120) days after  institution  of any  judicial
proceeding,  any dispute, claim or controversy arising out of, connected with or
relating to the Notes or any other Loan Documents ("Disputes"), between or among
parties to the Notes or any other Loan  Document  shall be  resolved  by binding
arbitration as provided herein.  Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims,  counterclaims,  claims brought as
class actions,  claims arising from Loan  Documents  executed in the future,  or
claims  concerning  any  aspect of the  past,  present  or future  relationships
arising  out of or  connected  with the  Loan  Documents.  Arbitration  shall be
conducted under and governed by the Commercial  Financial  Disputes  Arbitration
Rules (the  "Arbitration  Rules") of the American  Arbitration  Association  and
Title 9 of the U.S.  Code.  All  arbitration  hearings shall be conducted in New
York,  New York.  The expedited  procedures set forth in Rule 51, ET SEQ. of the
Arbitration  Rules shall be  applicable to claims of less than  $1,000,000.  All
applicable  statutes of limitation  shall apply to any Dispute.  A judgment upon
the award may be entered in any court having jurisdiction.  The panel from which
all  arbitrators  are selected  shall be comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction,  state or federal, of the state where
the hearing  will be  conducted,  or, if no such judge is  available,  a retired
judge,  with  substantial  appellate  experience,  from any  appellate  court of
general  jurisdiction,  state or  federal,  of such state.  Notwithstanding  the
foregoing,  this  paragraph  shall not apply to any Hedging  Agreement that is a
Loan Document.

         (b) JURY TRIAL.  TO THE EXTENT  PERMITTED  BY LAW,  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 DISPUTE IN CONNECTION WITH THIS  AGREEMENT,  THE NOTES OR THE
OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER,  OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

         (c)  PRESERVATION OF CERTAIN  REMEDIES.  Notwithstanding  the preceding
binding arbitration provisions,  the parties hereto and the other Loan Documents
preserve,  without diminution,  certain remedies that such Persons may employ or
exercise  freely,  either alone, in conjunction  with or during a Dispute.  Each
such Person shall have and hereby  reserves the right to proceed in any court of
proper  jurisdiction  or by self help to exercise  or  prosecute  the  following
remedies:  (i) all rights to foreclose  against any real or personal property or
other  security by  exercising a power of sale granted in the Loan  Documents or
under  applicable law or by judicial  foreclosure  and sale,  (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and  peaceful  possession  of  property,  (iii)  obtaining  provisional  or
ancillary remedies including  injunctive relief (including,  without limitation,
pursuant to Section 12.08), sequestration,  garnishment, attachment, appointment
of receiver and in filing an involuntary  bankruptcy  proceeding,  and (iv) when
applicable, a judgment by confession of judgment. Preservation of these remedies
does not limit the power of an arbitrator to grant similar  remedies that may be
requested by a party in a Dispute.


         SECTION 12.07       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 12.08       INJUNCTIVE RELIEF; PUNITIVE DAMAGES.
                             ------------------------------------

         (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, Lenders and 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, whether such Dispute is resolved through arbitration or judicially.

<PAGE>

         (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 whether the Dispute is resolved by
arbitration or judicially.


         SECTION 12.09       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  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 12.10       SUCCESSORS AND ASSIGNS; PARTICIPATIONS
                             --------------------------------------

         (a) BENEFIT OF  AGREEMENT.  This  Agreement  shall be binding  upon and
inure to the benefit of the Borrower,  the Administrative Agent and the Lenders,
all future holders of the Notes,  and their  respective  successors and assigns,
except  that the  Borrower  shall not  assign or  transfer  any of its rights or
obligations  under this  Agreement  without  the prior  written  consent of each
Lender.

         (b)  ASSIGNMENT  BY LENDERS.  Each Lender may,  with the consent of the
Administrative Agent and the Borrower,  which consents shall not be unreasonably
withheld and not required of the Borrower upon the occurrence  and  continuation
of a Default or Event of Default,  assign to one or more Eligible  Assignees all
or a portion of its  interests,  rights  and  obligations  under this  Agreement
(including,  without limitation, all or a portion of the Extensions of Credit at
the time owing to it and the Notes held by it); PROVIDED that:

                  (i) each such  assignment  shall be of a  constant,  and not a
         varying,   percentage  of  all  the  assigning   Lender's   rights  and
         obligations under this Agreement;

                  (ii) if less than all of the assigning Lender's  Commitment is
         to be  assigned,  the  Commitment  so  assigned  shall not be less than
         $5,000,000;

                  (iii) the parties to each such  assignment  shall  execute and
         deliver to the  Administrative  Agent, for its acceptance and recording
         in the Register,  an Assignment and Acceptance in the form of EXHIBIT F
         attached  hereto (an "Assignment  and  Acceptance"),  together with any
         Note or Notes subject to such assignment;

                  (iv) such  assignment  shall not,  without  the consent of the
         Borrower,  require the Borrower to file a  registration  statement with
         the Securities and Exchange Commission or apply to or qualify the Loans
         or the Notes under the blue sky laws of any state;

                  (v) no consent of the  Borrower  or the  Administrative  Agent
         shall be required for an  assignment  to an Affiliate or  Subsidiary of
         the assigning Lender; and

                  (vi) the  assigning  Lender  shall  pay to the  Administrative
         Agent an assignment  fee of $3,000 upon the execution by such Lender of
         the  Assignment  and  Acceptance;  PROVIDED  that no such fee  shall be
         payable upon any assignment by a Lender to an Affiliate thereof.

Upon such  execution,  delivery,  acceptance and  recording,  from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business  Days after the execution  thereof,  (A) the
assignee  thereunder shall be a party hereto and, to the extent provided in such
Assignment and  Acceptance,  have the rights and  obligations of a Lender hereby
and (B) the Lender  thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.

<PAGE>

         (c) RIGHTS AND DUTIES UPON  ASSIGNMENT.  By executing and delivering an
Assignment  and  Acceptance,  the assigning  Lender  thereunder and the assignee
thereunder  confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.

         (d) REGISTER.  The  Administrative  Agent shall maintain a copy of each
Assignment and Acceptance  delivered to it and a register for the recordation of
the names and  addresses  of the  Lenders  and the amount of the  Extensions  of
Credit  with  respect to each  Lender  from time to time (the  "Register").  The
entries in the Register shall be conclusive,  in the absence of manifest  error,
and the Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this  Agreement.  The Register shall be available for inspection by the Borrower
or Lender at any  reasonable  time and from time to time upon  reasonable  prior
notice.

         (e)  ISSUANCE  OF NEW  NOTES.  Upon its  receipt of an  Assignment  and
Acceptance  executed by an assigning  Lender and an Eligible  Assignee  together
with any Note or Notes  subject to such  assignment  and the written  consent to
such  assignment,  the  Administrative  Agent  shall,  if  such  Assignment  and
Acceptance has been completed and is substantially in the form of EXHIBIT F:

              (i)    accept such Assignment and Acceptance;

             (ii)    record the information contained therein in the Register;

            (iii)    give prompt notice thereof to the Lenders and the Borrower;
                     and

             (iv)    promptly deliver  a copy of such  Assignment and Acceptance
                     to the Borrower.

Within  five (5)  Business  Days after  receipt of notice,  the  Borrower  shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes,  a new Note or Notes to the order of such  Eligible  Assignee  in
amounts equal to the  Commitment  assumed by it pursuant to such  Assignment and
Acceptance  and a new Note or Notes to the order of the  assigning  Lender in an
amount equal to the Commitment retained by it hereunder.  Such new Note or Notes
shall be in an  aggregate  principal  amount  equal to the  aggregate  principal
amount of such surrendered  Note or Notes,  shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially  the form
of the assigned Notes delivered to the assigning  Lender.  Each surrendered Note
or Notes shall be canceled and returned to the Borrower.

         (f) PARTICIPATIONS.  Each Lender may sell participations to one or more
banks or other entities in all or a portion of its rights and obligations  under
this  Agreement  (including,  without  limitation,  all  or  a  portion  of  its
Extensions of Credit and the Notes held by it); PROVIDED that:

                  (i)   each such participation shall be in an amount not less
          than $5,000,000;

                  (ii)  such   Lender's   obligations   under   this   Agreement
         (including, without limitation, its Commitment) shall remain unchanged;

                  (iii) such Lender shall remain solely responsible to the other
         parties hereto for the performance of such obligations;

                  (iv)  such Lender shall remain the holder of the Notes held by
         it for all purposes of this Agreement;

                  (v)   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;

<PAGE>

                  (vi) such Lender shall not permit such  participant  the right
         to approve  any  waivers,  amendments  or other  modifications  to this
         Agreement or any other Loan Document other than waivers,  amendments or
         modifications  which would reduce the principal of or the interest rate
         on any Loan,  extend the term or increase the amount of the Commitment,
         reduce the amount of any fees to which such  participant  is  entitled,
         extend any scheduled  payment date for principal of any Loan or, except
         as expressly contemplated hereby or thereby,  release substantially all
         of the Collateral; and

                  (vii) any such  disposition  shall not, without the consent of
         the  Borrower,  require the Borrower to file a  registration  statement
         with the  Securities  and Exchange  Commission  to apply to qualify the
         Loans or the Notes under the blue sky law of any state.

         (g)  DISCLOSURE OF  INFORMATION;  CONFIDENTIALITY.  The  Administrative
Agent and the Lenders shall hold all non-public  information with respect to the
Borrower  obtained  pursuant  to the Loan  Documents  in  accordance  with their
customary procedures for handling confidential  information.  Any Lender may, in
connection with any assignment,  proposed assignment,  participation or proposed
participation  pursuant  to  this  Section  12.10,  disclose  to  the  assignee,
participant, proposed assignee or proposed participant, any information relating
to the  Borrower  furnished  to such  Lender by or on  behalf  of the  Borrower;
PROVIDED,  that  prior to any such  disclosure,  each  such  assignee,  proposed
assignee,  participant or proposed  participant shall agree with the Borrower or
such Lender to preserve  the  confidentiality  of any  confidential  information
relating to the Borrower received from such Lender.

         (h) CERTAIN PLEDGES OR  ASSIGNMENTS.  Nothing herein shall prohibit any
Lender  from  pledging or  assigning  any Note to any  Federal  Reserve  Bank in
accordance with Applicable Law.


         SECTION 12.11       AMENDMENTS, WAIVERS AND CONSENTS. 
                             ---------------------------------

              Except  as set  forth  below,  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 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)
increase the amount or extend the time of the  obligation of the Lenders to make
Loans  (including  without  limitation pursuant to Section 2.07), (b) extend the
originally scheduled time  or times of  payment of the  principal of any Loan or
the time or  times of payment of  interest  on any Loan,  (c) reduce the rate of
interest  or fees  payable on any  Loan, (d) permit  any  subordination  of  the
principal  or  interest  on  any  Loan, (e)  terminate  or  cancel any Guarantee
Agreement  or  release  any Guarantor  from its  obligations  under a  Guarantee
Agreement or (f) amend the  provisions  of Section  12.10(a), this Section 12.11
or the definition of Required Lenders, without the prior written consent of each
Lender. In addition, no amendment,  waiver or consent to the  provisions  of (a)
Article XI shall be made without the written consent of the Administrative Agent
and (b) Article III without the written consent of the Issuing Lender.


         SECTION 12.12       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 12.13       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 12.14       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 XII 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.

<PAGE>


         SECTION 12.15       TITLES AND CAPTIONS. 
                             --------------------

              Titles and captions of Articles, Sections and subsections  in this
Agreement are for convenience only, and neither limit nor amplify the provisions
of this Agreement.


         SECTION  12.16      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 12.17     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 12.18       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.



<PAGE>


                           [Signature pages to follow]


<PAGE>





         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.



                                             By /S/ROBERT M. PLANTE
                                             ----------------------
                                             Name:ROBERT M. PLANTE
                                             Title:TREASURER



                                             FIRST UNION NATIONAL BANK,
                                             as Administrative Agent and
                                             as Lender


                                             By:  /S/ JAMES J. PETRONCHAK
                                             ----------------------------
                                             Name:  JAMES J. PETRONCHAK
                                             Title : SENIOR VICE PRESIDENT



<PAGE>


                                             THE BANK OF NEW YORK,
                                             as Documentation Agent and
                                             as Lender

                                             By:  /S/ RANDOLPH E. J. MEDRANO
                                             -------------------------------
                                             Name:   RANDOLPH E. J. MEDRANO
                                             Title:   VICE PRESIDENT


                                             BANQUE PARIBAS

                                             By:  /S/ ROBERT G. CARINO
                                            --------------------------
                                             Name:   ROBERT G. CARINO
                                             Title:   VICE PRESIDENT

                                             By:  /S/ MARY T. FINNEGAN
                                             -------------------------
                                             Name:  MARY T. FINNEGAN
                                             Title:  DIRECTOR


                                             ROYAL BANK OF CANADA

                                             By:  /S/ GIL J. BENARD
                                             ----------------------      
                                             Name:   GIL J. BENARD
                                             Title:   SENIOR MANAGER


                                             MELLON BANK

                                             By:  /S/ JOHN D. SABROSKE
                                             -------------------------
                                             Name:   JOHN D. SABROSKE
                                             Title:   VICE PRESIDENT


                                             THE FIRST NATIONAL BANK OF CHICAGO

                                             By:  /S/ STEPHEN E. MCDONALD
                                             ----------------------------
                                             Name:   STEPHEN E. MCDONALD
                                             Title:   FIRST VICE PRESIDENT


                                             ABN AMRO BANK, N.V.

                                             By:  /S/ GEORGE M. DUGAN
                                             ------------------------
                                             Name:   GEORGE M. DUGAN
                                             Title:   VICE PRESIDENT


                                             By:  /S/ PAULINE MCHUGH
                                             -----------------------
                                             Name:   PAULINE MCHUGH
                                             Title:   VICE PRESIDENT



                                             CREDIT LYONNAIS NEW YORK BRANCH

                                             By:  /S/ MARY E. COLLIER
                                             ------------------------
                                             Name:   MARY E. COLLIER
                                             Title:   VICE PRESIDENT


<PAGE>



<TABLE>
<CAPTION>


                       SCHEDULE 1: LENDERS AND COMMITMENTS


                      COMMITMENT AND COMMITMENT PERCENTAGE

                                                                REVOLVING        ACQUISITION
LENDER                                      TOTAL               CREDIT           LOAN
- ------                                      -----               ------           ----

<S>                                         <C>                 <C>              <C>
First Union National Bank                   $20,000,000         $15,000,000      $5,000,000
One First Union Center, TW-10               20.00%              20.00%           20.00%
301 South College Street
Charlotte, North Carolina 28288-0608
Attention:  Syndication Agency Services
Telephone No.:   (704) 383-0281
Facsimile No.:   (704) 382-0288

The Bank of New York                        $16,000,000         $12,000,000      $4,000,000
One Wall Street                             16.00%              16.00%           16.00%
New York, New York  10286
Attention: Randolph E.J. Medrano
Telephone No.:   212-635-6804
Facsimile No.:   212-635-7970

Banque Paribas                              $12,000,000         $9,000,000       $3,000,000
787 Seventh Avenue                          12.00%              12.00%           12.00%
New York, New York 10019
Attention:  Robert Carino
            Vice President
Telephone No.:   212-841-2564
Facsimile No.:   212-841-2333

Credit Lyonnais New York Branch             $12,000,000         $9,000,000       $3,000,000
Credit Lyonnais Building                    12.00%              12.00%           12.00%
1301 Avenue of the Americas
New York, New York  10019-6022
Attention:  Tom Randolph
            Vice President
Telephone No.:   212-261-7431
Facsimile No.:   212-459-3179

The First National Bank of Chicago          $12,000,000         $9,000,000       $3,000,000
153 West 51st Street                        12.00%              12.00%           12.00%
Mail Suite 4000
New York, New York  10019
Attention:  Stephen E. McDonald
            First Vice President
Telephone No.:   212-373-1580
Facsimile No.:   212-373-1388

Mellon Bank                                 $12,000,000         $9,000,000       $3,000,000
One Mellon Bank Center                      12.00%              12.00%           12.00%
Pittsburgh, PA  15258-0001
Attention: John D. Sabroske
          Vice President
Telephone No.:   412-234-0349
Facsimile No.:   412-234-8888

</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                      COMMITMENT AND COMMITMENT PERCENTAGE

                                                                REVOLVING        ACQUISITION
LENDER                                      TOTAL               CREDIT           LOAN
- ------                                      -----               ------           ----

<S>                                         <C>                 <C>              <C>
ABN AMRO Bank N.V.                          $8,000,000          $6,000,000       $2,000,000
New York Branch                             8.00%               8.00%            8.00%
500 Park Avenue
New York, New York 10022
Attention: George M. Dugan
           Vice President
Telephone No.:  212-446-4263
Facsimile No.:  212-446-4237

Royal Bank of Canada                        $8,000,000          $6,000,000       $2,000,000
12450 Greenspoint Drive, Suite 1450         8.00%               8.00%            8.00%
Houston, Texas 77060
Attention: Gil Bernard, Senior Manager
Telephone No.:   281-874-5662
Facsimile No.:   281-874-0081

</TABLE>


<PAGE>



                                                                  EXHIBIT 10.7
                                                                  ------------


FIRST AMENDMENT TO EMPLOYMENT AGREEMENT DATED AS OF MARCH 5, 1996 BY AND BETWEEN
SUBURBAN PROPANE L.P.(THE "PARTNERSHIP") AND MARK A. ALEXANDER(THE "EXECUTIVE").

The  Partnership  and the  Executive  agree to amend  Article  6  (Payment  Upon
Termination) of the aforementioned Employment Agreement set forth below.

1.)      Section  6.1 (CHANGE OF  CONTROL)  is deleted in its  entirety  and the
         following is inserted in lieu thereof:

               "6.1  CHANGE OF CONTROL.  Subject to Section  6.4 hereof,  in the
         event that a Change of Control  occurs during the  Employment  Term and
         within six months prior  thereto or at any time  thereafter  either the
         Partnershi  terminates the  Executive's  employment  hereunder  without
         Cause  (including  pursuant to a  Non-Renewal  Notice) or the Executive
         terminates his  employment  hereunder with Good Reason or the Executive
         elects to  terminate  his  employment  hereunder  during  the six month
         period  commencing  on the sixth  month  anniversary  and ending on the
         twelve month  anniversary of a Change of Control,  (a) the  Partnership
         shall  pay to the  Executive  the sum of (i) the  portion  of the  Base
         Salary  earned  but  unpaid  as of the  Date of  Termination,  (ii) the
         Pro-rata  Bonus (as defined  below) and (iii) an amount  equal to three
         times the sum of (A) the Base Salary plus (B) the Maximum  Annual Bonus
         and  (b)  the  Partnership  shall  provide  to the  Executive  and  his
         dependents  from the Date of  Termination  until the  expiration of the
         third anniversary of the Date of Termination (the "Severance  Period"),
         medical  benefits  substantially  equivalent  to the  medical  benefits
         provided by the Partnership to senior  executives and their  dependents
         during  such  period;   PROVIDED,   HOWEVER,  that  benefits  otherwise
         receivable by the Executive  pursuant to clause (b) of this Section 6.1
         shall  be  reduced  to the  extent  comparable  benefits  are  actually
         provided to the  Executive or his  dependents by another party (and the
         Executive  shall  report  to the  Partnership  any  benefits  that  are
         actually provided to him);  PROVIDED,  FURTHER,  that the Partnership's
         obligation and the  Executive's  rights under clause (a) (ii) and (iii)
         and clause (b) of this Section 6.1 shall terminate immediately upon the
         occurrence of a Competition Event (as defined below)."

2.)      Section 6.2. (GOOD REASON, TERMINATION WITHOUT CAUSE) is deleted in its
         entirety and the following is inserted in lieu thereof;

         "6.2 GOOD  REASON,  TERMINATION  WITHOUT  CAUSE.  In the event that the
         Executive  terminates his employment for Good Reason or the Partnership
         terminates the Executive's  employment without Cause or has delivered a
         Non-Renewal Notice to the Executive,  then, subject to Section 6.4, the
         Partnership shall,  without duplication of any amounts paid or benefits
         provided  pursuant to Section  6.1,  (a) pay to the  Executive  (i) all
         earned but unpaid Base Salary as of the Date of  Termination,  (ii) the
         Pro-rata Bonus and (iii) an amount equal to three times the Base Salary
         and  (b)  provide  to the  Executive  and  his  dependents,  until  the
         expiration of three years from the Date of Termination  (the "Severance
         Period"),  medical  benefits  substantially  equivalent  to the medical
         benefits  provided by the  Partnership  to senior  executives and their
         dependents  during  such  period;  PROVIDED,   HOWEVER,  that  benefits
         otherwise  receivable by the  Executive  pursuant to clause (b) of this
         Section  6.2 shall be  reduced to the extent  comparable  benefits  are
         actually  provided on the Executive's  behalf by another party (and the
         Executive  shall  report  to the  Partnership  any  benefits  that  are
         actually provided to him);  PROVIDED,  FURTHER,  that the Partnership's
         obligation  and the  Executive's  rights under clause (a)(ii) and (iii)
         and clause (b) of this Section 6.2 shall terminate immediately upon the
         occurrence of a Competition Event (as defined below)."

3.)      This  Amendment  shall be  effective  as of the date set  forth  below.
         Except  as  expressly  modified  hereby,  the  terms of the  Employment
         Agreement shall remain in full force and effect.

IN WITNESS  WHEREOF,  the parties have executed this  Amendment this 23rd day of
October, 1997.


                                          Suburban Propane, L.P.

                                          By:/S/ MICHAEL M. KEATING
                                          -------------------------

                                          Name:MICHAEL M. KEATING
                                          -----------------------

                                          Title:VICE PRESIDENT - HUMAN RESOURCES
                                          --------------------------------------


                                          /S/ MARK A. ALEXANDER
                                          ---------------------
                                            Mark A. Alexander

<PAGE>


                     INDEX TO FINANCIAL STATEMENTS

              SUBURBAN PROPANE PARTNERS, L.P.AND SUBSIDIARIES



                                                                            PAGE

Reports of Independent Accountants........................................  F-2
Consolidated Balance Sheets-September 27, 1997 and September 28, 1996.....  F-4
Consolidated Statements of Operations -
  Years Ended September 27, 1997,  September 28, 1996 (Combined)
  and September 30, 1995 (Predecessor)....................................  F-5
  March 5, 1996 through September 28, 1996
  October 1, 1995 through March 4, 1996 (Predecessor)
Consolidated Statements of Cash Flows -
  Year Ended September 27, 1997, September 28, 1996 (Combined)
  and September 30, 1995 (Predecessor) ...................................  F-7
  March 5, 1996 through  September 28, 1996 and
  October 1, 1995 through March 4, 1996 (Predecessor)
Consolidated Statement of Partners' Capital -
  Year Ended September 27, 1997
  March 5, 1996 through September 28, 1996................................  F-9
Notes to Consolidated Financial Statements................................  F-10


























                                       F-1


<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


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

      In our  opinion,  the  consolidated  financial  statements  listed  in the
indices  referred to under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1
present fairly,  in all material  respects,  the financial  position of Suburban
Propane Partners, L.P. and its subsidiaries (the "Partnership") at September 27,
1997 and  September  28, 1996,  and the results of its  operations  and its cash
flows for the year ended  September  27,  1997 and the  period  March 5, 1996 to
September 28, 1996, in conformity with generally accepted accounting principles.
These  financial   statements  are  the   responsibility  of  the  Partnership's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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 the opinion  expressed
above.






PRICE WATERHOUSE LLP
Morristown, NJ
October 22, 1997, except as to Note 14, which is as of December 22, 1997




















                                       F-2

<PAGE>


                             REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholder
Quantum Chemical Corporation

      In our opinion, the financial statements listed in the indices referred to
under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1 present  fairly,  in
all  material  respects,  the  Suburban  Propane  division  of Quantum  Chemical
Corporation  results of operations and cash flows for the period October 1, 1995
to March 4, 1996 and the year ended  September  30,  1995,  in  conformity  with
generally accepted  accounting  principles.  These financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which 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 the opinion expressed above.






PRICE WATERHOUSE LLP
Morristown, NJ
October 22, 1997, except as to Note 14, which is as of December 22, 1997

















                                      F-3

<PAGE>


                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


                                                     SEPTEMBER 27, SEPTEMBER 28,
                                                         1997          1996
                                                     ------------- -------------
ASSETS
Current assets:
     Cash and cash equivalents ......................   $  19,336    $  18,931
     Accounts receivable, less allowance for doubtful
         accounts of $2,682 and  $3,312, respectively      45,927       55,021
     Inventories ....................................      31,915       40,173
     Prepaid expenses and other current assets ......       7,183        6,567
                                                        ---------    ---------
          Total current assets ......................     104,361      120,692
Property, plant and equipment, net ..................     364,347      374,013
Net prepaid pension cost ............................      48,598       47,514
Goodwill and other intangible assets, net ...........     249,790      255,948
Other assets ........................................       9,311        9,257
                                                        ---------    ---------
          Total assets ..............................   $ 776,407    $ 807,424
                                                        =========    =========

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
     Accounts payable ...............................   $  37,785    $  40,730
     Accrued employment and benefit costs ...........      19,957       23,049
     Accrued insurance ..............................       5,280        5,280
     Customer deposits and advances .................      12,795        8,242
     Accrued interest ...............................       8,306        8,222
     Other current liabilities ......................      12,578       16,303
                                                        ---------    ---------
          Total current liabilities .................      96,701      101,826
Long-term debt ......................................     427,970      428,229
Postretirement benefits obligation ..................      81,896       81,374
Accrued insurance ...................................      18,468       19,456
Other liabilities ...................................      10,133       11,860
                                                        ---------    ---------
          Total liabilities .........................     635,168      642,745
                                                        ---------    ---------
Commitments and contingencies

Partners' capital:
     Common unitholders .............................     100,476      129,283
     Subordinated unitholder ........................      39,835       40,100
     General Partner ................................      12,830        3,286
     Unearned compensation ..........................     (11,902)      (7,990)
                                                        ---------    ---------

          Total partners' capital ...................     141,239      164,679
                                                        ---------    ---------
          Total liabilities and partners' capital ...   $ 776,407    $ 807,424
                                                        =========    =========



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      F-4
<PAGE>



                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

                                                           YEAR ENDED
                                            ------------------------------------------
                                                          SEPTEMBER 28,  SEPTEMBER 30,
                                            SEPTEMBER 27,     1996           1995
                                                1997       (COMBINED)    (PREDECESSOR)
                                            ------------ -------------  --------------
<S>                                            <C>          <C>            <C>
Revenues
     Propane ...............................   $700,767     $641,679       $570,064
     Other .................................     70,364       66,267         63,556
                                               --------     --------       --------
                                                771,131      707,946        633,620
                                               --------     --------       --------


Costs and expenses
     Cost of sales .........................    436,795      377,692        318,896
     Operating .............................    209,799      203,426        197,348
     Depreciation and amortization .........     37,307       35,862         34,055
     Selling, general and administrative
       expenses ............................     32,556       29,004         24,677
     Management fee ........................       --          1,290          3,100
     Restructuring charge ..................      6,911        2,340           --
                                               --------     --------       --------
                                                723,368      649,614        578,076
                                               --------     --------       --------

Income before interest expense and
  income taxes .............................     47,763       58,332         55,544
Interest expense, net ......................     33,979       17,171           --
                                               --------     --------       --------
Income before provision for income taxes ...     13,784       41,161         55,544
Provision for income taxes .................        190       28,294         25,299
                                               --------     --------       --------
     Net income ............................   $ 13,594     $ 12,867       $ 30,245
                                               ========     ========       ========


General Partner's interest in net income ...   $    272
                                               --------
Limited Partners' interest in net income ...   $ 13,322
                                               ========
Net income per Unit ........................   $   0.46
                                               ========
Weighted average number of Units outstanding     28,726
                                               --------



</TABLE>





The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      F-5
<PAGE>


                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    ( in thousands, except per Unit amounts)
<TABLE>
<CAPTION>




                                             OCTOBER 1, 1995                      OCTOBER 1, 1995
                                                 THROUGH         MARCH 5, 1996         THROUGH
                                            SEPTEMBER 28, 1996      THROUGH         MARCH 4, 1996
                                                (COMBINED)      SEPTEMBER 28, 1996  (PREDECESSOR)
                                                ----------      ------------------  -------------

<S>                                            <C>                 <C>               <C>
Revenues
     Propane ...............................   $ 641,679           $ 289,058         $ 352,621
     Other .................................      66,267              34,889            31,378
                                               ---------           ---------         ---------
                                                 707,946             323,947           383,999


Costs and expenses
     Cost of sales .........................     377,692             173,201           204,491
     Operating .............................     203,426             114,436            88,990
     Depreciation and amortization .........      35,862              21,046            14,816
     Selling, general and administrative
      expenses .............................      29,004              16,388            12,616
     Management fee ........................       1,290                 --              1,290
     Restructuring charge ..................       2,340               2,340               --
                                               ---------           ---------         ---------
                                                 649,614             327,411           322,203

Income (loss) before interest expense
  and income taxes .........................      58,332              (3,464)           61,796
Interest expense, net ......................      17,171              17,171               --
                                               ---------           ---------         ---------
Income (loss) before provision
  for income taxes .........................      41,161             (20,635)           61,796
Provision for income taxes .................      28,294                 147            28,147
                                               ---------           ---------         ---------
     Net income (loss) .....................   $  12,867           $ (20,782)        $  33,649
                                               =========           =========         =========

General Partner's interest in net loss .....                       $    (416)
                                                                   ---------
Limited Partners' interest in net loss .....                       $ (20,366)
                                                                   =========
Net loss per Unit ..........................                       $   (0.71)
                                                                   =========
Weighted average number of Units outstanding                          28,726
                                                                   ---------




</TABLE>




The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      F-6
<PAGE>


                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                              YEAR ENDED
                                                           -----------------------------------------------
                                                                             SEPTEMBER 28,   SEPTEMBER 30,
                                                              SEPTEMBER 27,      1996            1995
                                                                1997          (COMBINED)    (PREDECESSOR)
                                                           -------------     -------------  --------------
<S>                                                          <C>                <C>            <C>
Cash flows from operating activities:
     Net income ..........................................   $  13,594          $  12,867      $  30,245
     Adjustments to reconcile net income to
      net cash provided by operations:
          Depreciation ...................................      29,718             28,920         27,746
          Amortization ...................................       7,589              6,942          6,309
          Restructuring charge ...........................       6,911              2,340           --
          (Gain) on disposal of property, plant
            and equipment ................................        (774)              (241)        (1,492)
     Changes in operating assets and liabilities,
       net of acquisitions and dispositions:
         Decrease/(increase) in accounts receivable ......       9,094            (13,976)         6,173
         Decrease/(increase) in inventories ..............       8,258             (3,510)         2,692
         (Increase)/decrease in prepaid expenses
            and other current assets .....................        (616)            (5,565)           693
          (Decrease)/increase in accounts payable ........      (2,945)            18,432            878
          (Decrease)/increase in accrued employment
           and benefit costs .............................      (5,031)             3,414         (1,199)
          Increase in accrued interest ...................          84              8,222           --
          Increase/(decrease) in other accrued liabilities        (112)             5,417         (4,362)
     Other noncurrent assets .............................      (1,138)            (2,872)        (1,372)
     Deferred credits and other noncurrent liabilities ...      (5,784)            (1,194)       (12,594)
                                                             ---------          ---------      ---------
               Net cash provided by operating activities .      58,848             59,196         53,717
                                                             ---------          ---------      ---------
Cash flows from investing activities:
      Capital expenditures ...............................     (24,888)           (25,885)       (21,359)
      Acquisitions .......................................      (1,880)           (28,529)        (5,817)
      Proceeds from the sale of property, plant
       and equipment .....................................       6,059              2,000          4,859
                                                             ---------          ---------      ---------
               Net cash used in investing activities .....     (20,709)           (52,414)       (22,317)
                                                             ---------          ---------      ---------
Cash flows from financing activities:
     Cash activity with parent, net ......................        --               25,799        (31,562)
     Proceeds from settlement with former parent .........        --                5,560           --
     Proceeds from debt placement ........................        --              425,000           --
     Proceeds from General Partner APU contribution ......      10,000               --             --
     Proceeds from Common Unit offering ..................        --              413,569           --
     Debt repayment ......................................        (299)              --             --
     Debt placement and credit agreement expenses ........        --               (6,224)          --
     Cash distribution to General Partner ................        --             (832,345)          --
     Partnership distribution ............................     (47,435)           (19,346)          --
                                                             ---------          ---------      ---------
       Net cash (used in) provided by financing activities     (37,734)            12,013        (31,562)
                                                             ---------          ---------      ---------
Net Increase (decrease) in cash and cash equivalents .....         405             18,795           (162)
Cash and cash equivalents at beginning of period .........      18,931                136            298
                                                             ---------          ---------      ---------
Cash and cash equivalents at end of period ...............   $  19,336          $  18,931      $     136
                                                             =========          =========      =========

Supplemental disclosure of cash flow information:
      Cash paid for interest .............................   $  32,836          $  10,550      $    --
                                                             =========          =========      =========

Non cash investing and financing activities
   Assets acquired by incurring note payable .............   $    --            $   3,528      $    --
                                                             =========          =========      =========
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      F-7
<PAGE>

                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                              OCTOBER 1, 1995                             OCTOBER 1, 1995
                                                                  THROUGH            MARCH 5, 1996            THROUGH
                                                            SEPTEMBER 28, 1996          THROUGH            MARCH 4, 1996
                                                                 (COMBINED)        SEPTEMBER 28, 1996       (PREDECESSOR)
                                                                 ----------        ------------------       -------------
<S>                                                            <C>                     <C>                    <C>
Cash flows from operating activities:
     Net income (loss) .....................................   $  12,867               $ (20,782)             $  33,649
     Adjustments to reconcile net income (loss) to net
      cash provided by (used in) operations:
          Depreciation .....................................      28,920                  16,887                 12,033
          Amortization .....................................       6,942                   4,159                  2,783
          Restructuring charge .............................       2,340                   2,340                    --
          (Gain) on disposal of property, plant and
            equipment ......................................        (241)                   (156)                   (85)
     Changes in operating assets and liabilities, net of
       acquisitions and dispositions:
          (Increase)/decrease in accounts receivable .......     (13,976)                 42,667                (56,643)
          (Increase)/decrease in inventories ...............      (3,510)                 (6,339)                 2,829
          (Increase) in prepaid expenses and
           other current assets ............................      (5,565)                 (3,691)                (1,874)
          Increase in accounts payable .....................      18,432                   9,097                  9,335
          Increase in accrued employment
           and benefit costs ...............................       3,414                   1,111                  2,303
          Increase in accrued interest .....................       8,222                   8,222                    --
          Increase/(decrease) in other accrued liabilities .       5,417                   8,947                 (3,530)
     Other noncurrent assets ...............................      (2,872)                 (1,669)                (1,203)
     Deferred credits and other noncurrent liabilities .....      (1,194)                  2,168                 (3,362)
                                                               ---------               ---------              ---------
         Net cash provided by (used in) operating activities      59,196                  62,961                 (3,765)
                                                               ---------               ---------              ---------

Cash flows from investing activities:
      Capital expenditures .................................     (25,885)                (16,089)                (9,796)
      Acquisitions .........................................     (28,529)                (15,357)               (13,172)
      Proceeds from the sale of property, plant
        and equipment ......................................       2,000                     997                  1,003
                                                               ---------               ---------              ---------
               Net cash used in investing activities .......     (52,414)                (30,449)               (21,965)
                                                               ---------               ---------              ---------
Cash flows from financing activities:
      Cash activity with parent, net .......................      25,799                      --                 25,799
      Proceeds from settlement with former parent ..........       5,560                   5,560                    --
      Proceeds from debt placement .........................     425,000                 425,000                    --
      Proceeds from Common Unit offering ...................     413,569                 413,569                    --
      Debt placement and credit agreement expenses .........      (6,224)                 (6,224)                   --
      Cash distribution to General Partner .................    (832,345)               (832,345)                   --
      Partnership distribution .............................     (19,346)                (19,346)                   --
                                                               ---------               ---------              ---------
         Net cash provided by (used in) financing activities      12,013                 (13,786)                25,799
                                                               ---------               ---------              ---------
Net increase in cash and cash equivalents ..................      18,795                  18,726                     69
Cash and cash equivalents at beginning of period ...........         136                     205                    136
                                                               ---------               ---------              ---------
Cash and cash equivalents at end of period .................   $  18,931               $  18,931              $     205
                                                               =========               =========              =========

Supplemental disclosure of cash flow information:
      Cash paid for interest ...............................   $  10,550               $  10,550              $     --
                                                               =========               =========              =========

Non cash investing and financing activities
    Assets acquired by incurring note payable ..............   $   3,528               $   3,528              $     --
                                                               =========               =========              =========


</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      F-8
<PAGE>

                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                              UNEARNED           TOTAL
                                  NUMBER OF UNITS                                 GENERAL     COMPENSATION      PARTNERS'
                               COMMON    SUBORDINATED    COMMON     SUBORDINATED  PARTNER    RESTRICTED UNITS   CAPITAL
                               ------    ------------    ------     ------------  -------    ----------------   -------

<S>                           <C>           <C>       <C>            <C>         <C>            <C>           <C>
Balance at March 5, 1996          -            -            -            -            -                               -

Contribution in connection
with formation of the
Partnership and issuance
of Common Units                21,562        7,164    $ 150,488      $  49,890   $ 4,089                      $ 204,467

Partnership distribution                                (14,239)        (4,720)     (387)                       (19,346)

Grants under
Restricted Unit Plan                                      8,330                                    (8,330)           -

Amortization of  Restricted
Unit compensation                                            -                                       340            340

Net Loss                          -            -        (15,296)        (5,070)     (416)              -        (20,782)
                               ------    ------------    ------     ------------  -------    ----------------   -------
Balance at
September 28, 1996             21,562        7,164      129,283         40,100     3,286           (7,990)      164,679

Grants under
Restricted Unit Plan                                      4,313                                    (4,313)         -

Partnership distribution                                (43,125)        (3,582)     (728)                       (47,435)

Amortization of Restricted
Unit compensation                                                                                     401           401

APU Contribution
(100 Units)                                                                       10,000                         10,000

Net Income                        -            -         10,005          3,317       272               -         13,594
                               ------    ------------    ------     ------------  -------    ----------------   ---------
Balance at
September 27, 1997             21,562        7,164    $ 100,476       $ 39,835   $12,830        $ (11,902)     $ 141,239
                               ======       ======    =========     ============  =======    ================   =========





</TABLE>



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

                                       F-9

<PAGE>



                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 27, 1997
                             (Dollars in thousands)

1.  PARTNERSHIP ORGANIZATION AND FORMATION

Suburban Propane Partners,  L.P. (the  "Partnership") was formed on December 19,
1995 as a Delaware  limited  partnership.  The  Partnership  and its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and
operate the propane  business  and assets of the  Suburban  Propane  Division of
Quantum Chemical Corporation (the "Predecessor Company"). In addition,  Suburban
Sales & Service,  Inc.  (the "Service  Company"),  a subsidiary of the Operating
Partnership,  was formed to acquire and operate the service  work and  appliance
and parts businesses of the Predecessor Company. The Partnership,  the Operating
Partnership and the Service Company are collectively  referred to hereinafter as
the "Partnership  Entities." The Partnership  Entities  commenced  operations on
March 5, 1996 (the  "Closing  Date")  upon  consummation  of an  initial  public
offering of 18,750,000  Common Units  representing  limited partner interests in
the  Partnership  (the  "Common  Units"),  the  private  placement  of  $425,000
aggregate  principal  amount of Senior  Notes due 2011  issued by the  Operating
Partnership  (the  "Senior  Notes") and the  transfer of all the propane  assets
(excluding the net accounts  receivable  balance) of the Predecessor  Company to
the  Operating  Partnership  and the Service  Company.  On March 25,  1996,  the
underwriters  of  the  Partnership's   initial  public  offering   exercised  an
overallotment option to purchase an additional 2,812,500 Common Units.

Suburban Propane GP, Inc. (the "General  Partner") is a wholly-owned  subsidiary
of  Millennium  Petrochemicals  Inc.,  ("Millennium  Petrochemicals"),  formerly
Quantum  Chemical  Corporation  ("Quantum") and serves as the general partner of
the  Partnership  and the Operating  Partnership.  Both the General  Partner and
Millennium  Petrochemicals are indirect wholly-owned  subsidiaries of Millennium
Chemicals Inc.  ("Millennium") which was formed as a result of Hanson PLC's (the
"Parent  Company")  demerger in October  1996.  The General  Partner  holds a 1%
general  partner  interest  in the  Partnership  and a 1.0101%  general  partner
interest in the Operating  Partnership.  In addition, the General Partner owns a
24.4% limited partner  interest and a special  limited  partner  interest in the
Partnership. The limited partner interest is evidenced by 7,163,750 Subordinated
Units and the special  limited  partner  interest  is  evidenced  by  Additional
Partnership  Units  ("APUs")  (See  Notes 4 and 14).  The  General  Partner  has
delegated to the  Partnership's  Board of Supervisors all management powers over
the business and affairs of the  Partnership  Entities that the General  Partner
possesses under applicable law.

The Partnership  Entities are, and the Predecessor  Company was,  engaged in the
retail and wholesale  marketing of propane and related  appliances and services.
The  Partnership  believes it is the third largest retail marketer of propane in
the United  States,  serving more than 700,000 active  residential,  commercial,
industrial  and  agricultural  customers  from  more than 350  customer  service
centers in over 40 states. The Partnership's  operations are concentrated in the
east and west coast  regions  of the United  States.  The retail  propane  sales
volume of the  Partnership  was  approximately  541 million  gallons  during the
fiscal  year  ended  September  27,  1997.  Based on  industry  statistics,  the
Partnership   believes  that  its  retail   propane  sales  volume   constitutes
approximately 6% of the domestic retail market for propane.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS  OF  PRESENTATION.  The  consolidated  financial  statements  present  the
consolidated  financial  position,  results of operations  and cash flows of the
Partnership Entities and the Predecessor  Company. All significant  intercompany
transactions and accounts have been eliminated.

FISCAL PERIOD.  The Partnership and the Predecessor  Company's  fiscal year ends
on the last Saturday  nearest to September 30. Because the Partnership commenced
operations on the  Closing Date, the  accompanying  statements of operations and

                                      F-10

<PAGE>

cash flows present the consolidated  results of operations and cash flows of the
Partnership for the fiscal year ended September 27, 1997 and the period March 5,
1996 to September 28, 1996,  and the results of operations and cash flows of the
Predecessor  Company  for the  period  October  1, 1995 to March 4, 1996 and the
fiscal year ended  September  30, 1995.  Solely for  purposes of  comparing  the
results of operations of the  Partnership  and the  Predecessor  Company for the
years ended  September 27, 1997,  September 28, 1996 and September 30, 1995, the
statement of  operations  for the year ended  September 28, 1996 is comprised of
the combined  statements of operations of the Predecessor Company for the period
October 1, 1995 to March 4, 1996 and the  Partnership  for the  period  March 5,
1996 to September 28, 1996.

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. Actual results could differ from those estimates.

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.

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

INVENTORIES.  Inventories are stated at the lower of  cost  or  market.  Cost is
determined  using  a   weighted  average  method  for  propane  and  a  specific
identification basis for appliances.

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at cost.
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                10-20 Years
     Transportation equipment                       5-30 Years
     Storage facilities                               30 Years
     Equipment, primarily tanks and cylinders       3-40 Years

Expenditures for maintenance and routine repairs are expensed as incurred.

GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill and  other intangible  assets are
comprised of the following:

                                                 SEPTEMBER 27,    SEPTEMBER 28,
                                                     1997             1996
                                                  --------          --------


     Goodwill                                     $266,212          $265,292
     Debt origination costs                          6,224             6,224
     Other, principally noncompete agreements        4,514             4,003
                                                  --------          --------
                                                   276,950           275,519
     Less: Accumulated amortization                 27,160            19,571
                                                  --------          --------
                                                  $249,790          $255,948
                                                  ========          ========

Goodwill  represents the excess of the purchase price over the fair value of net
assets acquired and is being amortized on a straight-line basis over forty years
from the date of acquisition.

                                      F-11
<PAGE>


Debt  origination  costs  represent the costs  incurred in  connection  with the
placement  of the  $425,000  of  Senior  Notes  which  is being  amortized  on a
straight-line basis over 15 years.

The Partnership  periodically  evaluates  goodwill for impairment by calculating
the anticipated future cash flows attributable to its operations.  Such expected
cash flows, on an undiscounted basis, are compared to the carrying values of the
tangible and  intangible  assets,  and if impairment is indicated,  the carrying
value of goodwill is adjusted.  In the opinion of  management,  no impairment of
goodwill exists.

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 or the
amount of the  deductible,  whichever  is lower.  Claims are  generally  settled
within 5 years of origination.

INCOME TAXES.  As discussed in Note 1, the Partnership  Entities  consist of two
limited  partnerships,  the Partnership and the Operating  Partnership,  and one
corporate  entity,  the  Service  Company.  For  federal  and state  income  tax
purposes, the earnings attributable to the Partnership and 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 Operating Partnership.  The earnings attributable to the Service Company are
subject  to federal  and state  income  taxes.  Accordingly,  the  Partnership's
consolidated  financial  statements  reflect  income tax expense  related to the
Service Company's  earnings.  Net earnings for financial  statement purposes may
differ  significantly  from taxable income reportable to unitholders as a result
of differences between the tax basis and financial reporting basis of assets and
liabilities and the taxable income allocation requirements under the Partnership
agreement.

For federal  income tax purposes,  the  Predecessor  Company was included in the
consolidated tax return of a United States affiliate of the Parent Company.  The
Predecessor Company's tax assets, liabilities, expenses and benefits result from
the tax effect of its  transactions  determined  as if the  Predecessor  Company
filed a separate income tax return. The Predecessor  Company's income taxes were
paid by an  affiliate  of the Parent  Company in which  income tax  expense  was
credited through an intercompany account.

Income  taxes are  provided  based on the  provisions  of  Financial  Accounting
Standards Board ("FASB")  Statement of Financial  Accounting  Standards ("SFAS")
No. 109,  "Accounting for Income Taxes," which requires  recognition of deferred
tax assets and liabilities  for the expected  future tax  consequences of events
that have been included in the financial statements and tax returns in different
years.  Under this  method,  deferred  income tax  assets  and  liabilities  are
determined based on the difference between the financial statement and tax bases
of assets  and  liabilities  using  enacted  tax rates in effect for the year in
which the differences are expected to reverse.

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 issuance of Units
under the plan,  unearned  compensation  equivalent  to the market  value of the
restricted Units is charged at the date of grant.  The unearned  compensation is
amortized  ratably  over  the  restricted  periods.   The  unamortized  unearned
compensation  value  is  shown  as a  reduction  of  partners'  capital  in  the
accompanying consolidated balance sheet.

NET INCOME  (LOSS) PER UNIT.  Net income (loss) per Unit is computed by dividing
net income (loss),  after  deducting the General  Partner's 2% interest,  by the
weighted average number of outstanding Common Units and Subordinated Units.

RECLASSIFICATIONS.  Certain  prior  period  balances  have been  reclassified to
conform with the current period presentation.

                                      F-12
<PAGE>


3. SUPPLEMENTAL UNAUDITED PRO FORMA FINANCIAL INFORMATION

The  following  unaudited  pro  forma  condensed   consolidated   statements  of
operations  for the years ended  September  28, 1996 and September 30, 1995 were
derived from the historical  statements of operations of the Predecessor Company
for the  period  October  1, 1994  through  March 4,  1996 and the  consolidated
statement of operations of the Partnership from March 5, 1996 through  September
28,  1996.  The  unaudited  pro  forma  condensed  consolidated   statements  of
operations were prepared to reflect the effects of the Partnership  formation as
if it had been completed in its entirety as of October 1, 1994.  However,  these
statements  do  not  purport  to  present  the  results  of  operations  of  the
Partnership  had the  Partnership  formation  actually been  completed as of the
beginning  of the  periods  presented.  In  addition,  the  unaudited  pro forma
condensed  consolidated  financial  statements of operations are not necessarily
indicative of the results of future operations of the Partnership.

                                                            PRO FORMA
                                                  SEPTEMBER 28,    SEPTEMBER 30,
                                                      1996             1995
                                                  ------------     -------------
Revenues
  Propane                                          $ 641,679         $ 570,064
  Other                                               66,267            63,556
                                                   ---------         ---------
                                                     707,946           633,620
                                                   ---------         ---------
Cost and Expenses
  Cost of sales                                      377,692           318,896
  Operating                                          203,426           197,348
  Depreciation and amortization                       35,862            34,055
  Selling, general and administrative expenses        29,004            24,677
  Management fee                                       1,290             3,100
  Restructuring charge                                 2,340                 -
                                                   ---------         ---------
                                                     649,614           578,076
                                                   ---------         ---------

Income before interest expense and income taxes       58,332            55,544
Interest expense, net                                 31,197            32,045
                                                   ---------         ---------
Income before provision for income taxes              27,135            23,499
Provision for income taxes                               250               250
                                                   ---------         ---------
Net income                                         $  26,885         $  23,249
                                                   =========         =========

General Partner's interest in net income           $     538         $     465
                                                   ---------         ---------
Limited Partners' interest in net income           $  26,347         $  22,784
                                                   =========         =========
Net income per Unit                                $    0.92         $    0.79
                                                   =========         =========
Weighted average number of Units outstanding          28,726            28,726
                                                   =========         =========

Significant  pro forma  adjustments  reflected  in the above  data  include  the
following for each of the years presented:

   a. An  adjustment  to  interest  expense  to  reflect  the  interest  expense
associated with the Senior Notes and Bank Credit Facilities.

   b. The elimination of the provision for income taxes, as income taxes will be
borne by the partners and not the Partnership, except for corporate income taxes
related to the Service Company.

   c. The  Partnership's  management  estimates  that the  incremental  costs of
operating as a stand-alone  entity would have  approximated  the  management fee
paid to an affiliate of Hanson PLC. These  incremental costs are estimated to be
$1,290 and $3,100 for the years ended September 28, 1996 and September 30, 1995.




                                      F-13
<PAGE>


4. DISTRIBUTIONS OF AVAILABLE CASH

The Partnership makes  distributions to its partners with respect to each fiscal
quarter of the  Partnership  in an aggregate  amount equal to its Available Cash
for such quarter.  Available  Cash generally  means,  with respect to any fiscal
quarter of the Partnership, all cash on hand at the end of such 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% to the Common and  Subordinated  Unitholders and
2% to the General Partner,  subject to the payment of incentive distributions in
the event Available Cash exceeds the Minimum  Quarterly  Distribution  ($.50) on
all units.  To the extent there is  sufficient  Available  Cash,  the holders of
Common Units have the right to receive the Minimum Quarterly Distribution,  plus
any  arrearages,  prior to the  distribution  of  Available  Cash to  holders of
Subordinated  Units.  Common  Units will not accrue  arrearages  for any quarter
after the  Subordination  Period (as defined below) and Subordinated  Units will
not accrue any arrearages with respect to distributions for any quarter.

The  Subordination  Period  will  generally  extend  until  the first day of any
quarter  beginning after March 31, 2001 in respect of which (a) distributions of
Available Cash from Operating  Surplus on the Common Units and the  Subordinated
Units  with  respect  to  each of the  three  consecutive  four-quarter  periods
immediately  preceding  such date  equaled or  exceeded  the sum of the  Minimum
Quarterly  Distribution on all of the outstanding  Common Units and Subordinated
Units during such periods,  (b) the Adjusted  Operating Surplus generated during
each of the three consecutive  four-quarter  periods immediately  preceding such
date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the outstanding Common Units and Subordinated Units and related  distribution on
the General  Partner  interest in the Partnership  during such periods,  and (c)
there  are  no  outstanding  Common  Unit  Arrearages.  Upon  expiration  of the
Subordination Period, all remaining  Subordinated Units will convert into Common
Units on a one-for-one  basis and will thereafter  participate pro rata with the
other Common Units in distributions of Available Cash.

In accordance with the Distribution Support Agreement among the Partnership, the
General  Partner  and  Millennium,  to  enhance  the  Partnership's  ability  to
distribute the Minimum  Quarterly  Distribution on the Common Units, the General
Partner has agreed to contribute to the  Partnership  cash in exchange for APUs.
This  obligation to purchase APUs remains in effect  through March 31, 2001. The
General  Partner's maximum  contribution  obligation is $43,600 or 436,000 APUs,
and is  limited  to the  number of Common  Units  issued on the  initial  public
offering  date  plus  common  Units  issued  in  connection   with  the  related
underwriters  over-allotment  option exercised in full (i.e.,  21,562,500 Common
Units).  Issuance of  additional  Common Units will not cause an increase in the
General Partner's maximum contribution  obligation. A wholly-owned subsidiary of
Millennium has unconditionally guaranteed the General Partner's APU contribution
obligation.

The APUs represent  non-voting,  limited  partner  Partnership  interests with a
stated value per unit of $100.  The APUs are not entitled to cash  distributions
or allocations  of any items of Partnership  income,  gain,  loss,  deduction or
credit.

The APUs are subject to quarterly mandatory redemption,  in whole or in part, by
the  Partnership  pursuant  to the  order of  priority  for  distributions  from
Available Cash. During the Subordination  Period,  the APUs may only be redeemed
after  distributions  of Available Cash have been made on the Minimum  Quarterly
Distribution on outstanding Common Units (including any arrearages), the related
distribution  on the General Partner  interest  (including any unpaid amounts of
prior quarters),  and the current quarter's  Minimum  Quarterly  Distribution on
outstanding  Subordinated  Units.  After the Subordination  Period, the APUs may
only be redeemed  after  distributions  of Available  Cash have been made on the
current quarter's Minimum Quarterly Distribution on outstanding Common Units and
the current quarter's related distribution on the General Partner interest.

Upon  dissolution of the Partnership,  to the extent possible,  the APUs will be
redeemed  only after the Common and  Subordinated  unitholders  and the  General
Partner  have  received  Unrecovered  Capital,  as  defined  by the  partnership
agreement.

                                      F-14
<PAGE>



In August 1997, the General  Partner  contributed  $10,000 to the Partnership in
exchange for 100,000 APUs.  The proceeds were used to enhance the  Partnership's
ability to distribute the Minimum Quarterly  Distribution to Common  unitholders
with respect to the third fiscal quarter of 1997.

See  Note 14 for  additional  amounts  contributed  by the  General  Partner  in
exchange for APUs with respect to the fourth fiscal quarter of 1997.

5. RELATED PARTY TRANSACTIONS

The Predecessor Company was provided management,  treasury,  insurance, employee
benefits,  tax and  accounting  services by an  affiliate  of the former  Parent
Company.  As  consideration  for the  services  provided by the  affiliate,  the
Predecessor  Company was charged an annual  management fee based on a percentage
of  revenue.  In the  opinion  of  management,  the  management  fee  allocation
represented  a  reasonable  estimate  of the cost of  services  provided  by the
affiliate  on  behalf  of the  Predecessor  Company.  However,  the  fee was not
necessarily  indicative of the level of expenses  which might have been incurred
by the Predecessor Company operating on a stand-alone basis. Management fees for
the period  October 1, 1995 to March 4, 1996 and the year  ended  September  30,
1995 were $1,290 and $3,100 respectively.

Pursuant to the  Contribution,  Conveyance and Assumption  Agreement dated as of
March 4,  1996,  between  Millennium  Petrochemicals  and the  Partnership  (the
"Contribution  Agreement"),  Millennium Petrochemicals retained ownership of the
Predecessor  Company's  accounts  receivable,  net  of  allowance  for  doubtful
accounts, as of the Closing Date. The Partnership retained from the net proceeds
of the Common  Unit  offering  cash in an amount  equal to the net book value of
such accounts  receivable.  In accordance with the Contribution  Agreement,  the
Partnership  agreed to collect such accounts  receivable on behalf of Millennium
Petrochemicals which amounted to $97,700 as of the Closing Date. As of September
28, 1996, the Operating  Partnership  had satisfied its obligation to Millennium
Petrochemicals under such arrangement.

The Predecessor was provided computerized  information services by Quantum under
an  agreement  which  terminates  on March 31,  1998.  Charges  related to these
services,  included  in  selling,  general  and  administrative  expenses in the
accompanying  statements  of  operations,  were $148 and  $1,731  for the period
October  1,  1995 to  March  4,  1996 and the year  ended  September  30,  1995,
respectively.

Pursuant to a Computer Services Agreement (the "Services Agreement") dated as of
the  Closing  Date  between  Millennium   Petrochemicals  and  the  Partnership,
Millennium   Petrochemicals   permits  the  Partnership  to  utilize  Millennium
Petrochemicals' mainframe computer for the generation of customer bills, reports
and information  regarding the  Partnership's  retail sales.  For the year ended
September  27,  1997  and  the  seven  months  ended  September  28,  1996,  the
Partnership incurred expenses of $384 and $218, respectively, under the Services
Agreement.

6.  SELECTED BALANCE SHEET INFORMATION

Inventories consist of:

                                         SEPTEMBER 27,        SEPTEMBER 28,
                                            1997                  1996
                                         -------------        -------------


            Propane                         $ 27,753              $ 36,213
            Appliances                         4,162                 3,960
                                            --------              --------
                                            $ 31,915              $ 40,173
                                            ========              ========


The Partnership  enters into contracts to buy propane for supply purposes.  Such
contracts  generally have terms of less than one year,  with propane costs based
on market prices at the date of delivery.
                                     
                                      F-15
<PAGE>



Property, plant and equipment consist of:

                                           SEPTEMBER 27,          SEPTEMBER 28,
                                                1997                   1996
                                          ---------------         -------------


  Land and improvements                       $  29,345              $  29,462
  Buildings and improvements                     46,785                 43,909
  Transportation equipment                       56,532                 48,470
  Storage facilities                             24,008                 16,836
  Equipment, primarily tanks and cylinders      323,382                321,323
                                              ---------              ---------
                                                480,052                460,000
  Less: accumulated depreciation                115,705                 85,987
                                              ---------              ---------
                                              $ 364,347              $ 374,013
                                              =========              =========

7.  LONG-TERM DEBT AND BANK CREDIT FACILITIES

Long-term debt consists of:
                                                SEPTEMBER 27,    SEPTEMBER 28,
                                                    1997             1996
                                                -------------    -------------
        Senior Notes, 7.54%, due
          June 30, 2011                           $ 425,000        $ 425,000
        Note Payable, 8%, due
          in Annual Installments through 2006         3,229            3,528
                                                  ---------        ---------
                                                    428,229          428,528
                  Less:  current portion                259              299
                                                  ---------        ---------
                                                  $ 427,970        $ 428,229
                                                  =========        =========

On the Closing Date, the Operating  Partnership  issued $425,000 of Senior Notes
with an annual interest rate of 7.54%. The Operating  Partnership's  obligations
under the Senior  Note  Agreement  are  unsecured  and will rank on an equal and
ratable basis with the Operating Partnership's obligations under the Bank Credit
Facilities  discussed  below.  The Senior Notes will mature June 30,  2011,  and
require  semiannual  interest  payments which  commenced June 30, 1996. The Note
Agreement  requires  that the  principal  be paid in equal  annual  payments  of
$42,500 starting June 30, 2002.

At  September  27,  1997,  the Bank Credit  Facilities  consisted  of a $100,000
acquisition facility (the "Acquisition  Facility") and a $75,000 working capital
facility  (the  "Working  Capital   Facility").   The  Operating   Partnership's
obligations  under the Bank  Credit  Facilities  are  unsecured  on an equal and
ratable  basis with the  Operating  Partnership's  obligations  under the Senior
Notes.  The Bank  Credit  Facilities  bear  interest at a rate based upon either
LIBOR,  Chemical  Bank's prime rate or the Federal Funds effective rate plus 1/2
of 1% and in each case,  plus a margin.  In addition,  an annual fee (whether or
not borrowings  occur), is payable quarterly ranging from 0.125% to 0.375% based
upon certain financial tests.

On September  30,  1997,  the  Partnership  amended and restated its Bank Credit
Facilities.  The  amended  agreement  provides  for a  $75,000  working  capital
facility  and  a  $25,000  acquisition  facility.  The  Operating  Partnership's
obligations, under the terms of the new agreement, will continue to be unsecured
on an equal and ratable basis with the Operating Partnership's obligations under
the Senior Notes. Borrowings under the amended agreement will bear interest at a
rate based upon either LIBOR plus a margin,  First Union  National  Bank's prime
rate or the Federal  Funds rate plus 1/2 of 1%. An annual fee ranging  from .20%
to .25% based upon certain  financial tests will be payable quarterly whether or
not borrowings occur. The new agreement expires September 30, 2000.

No amounts were outstanding under the Bank Credit Facilities as of September 27,
1997 and as of September 28, 1996.
                                    
                                      F-16

<PAGE>


The fair value of the  Partnership's  long-term  debt is estimated  based on the
current  rates  offered  to the  Partnership  for  debt  of the  same  remaining
maturities.  The carrying value of the Partnership's long-term debt approximates
its fair market value.

The Senior Note Agreement and Bank Credit Facilities contain various restrictive
and affirmative covenants applicable to the Operating Partnership, including (a)
maintenance of certain  financial  tests,  (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.

For the year ended  September 27, 1997 and the period March 5, 1996 to September
28, 1996, interest expense was $34,330 and $18,772, respectively.

8.    RESTRICTED UNIT PLAN

In 1996,  the  Partnership  adopted  the 1996  Restricted  Unit  Award Plan (the
"Restricted  Unit Plan") which  authorizes  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.  Units issued under the Restricted Unit Plan are
subject to a bifurcated  vesting procedure such that (a) twenty-five  percent of
the issued Units will vest over time with one-third of such units vesting at the
end of each of the third, fifth and seventh  anniversaries of the issuance date,
and (b) the remaining  seventy-five percent of the Units will vest automatically
upon, and in the same  proportions as, the conversion of  Subordinated  Units to
Common  Units.  Restricted  Unit Plan  participants  are not eligible to receive
quarterly   distributions   or  vote  their   respective   Units  until  vested.
Restrictions  generally  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 Restricted Unit
Plan.

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

                                               UNITS            VALUE PER UNIT
                                             ---------          --------------

       OUTSTANDING, MARCH 5, 1996                 -                    -

       Awarded                                388,533                $20.50
                                            ---------               -------

       OUTSTANDING, SEPTEMBER 28, 1996        388,533                $20.50

       Awarded                                364,634            $18.41 - $21.63
       Forfeited                             (119,019)               $20.50
                                            ---------            ---------------

       OUTSTANDING, SEPTEMBER 27, 1997        634,148            $18.41 - $21.63
                                            =========            ===============


For the year ended  September 27, 1997 and the seven months ended  September 28,
1996,  the  Partnership  amortized  $401  and  $340  respectively,  of  unearned
compensation.

9.    PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Concurrent with the Partnership formation,  employees of the Predecessor Company
became employees of the Partnership and the Partnership  assumed the Predecessor
Company's employee-related liabilities.

                                      F-17
<PAGE>


DEFINED BENEFIT PLANS

Prior  to  the  Partnership  formation,  employees  of the  Predecessor  Company
participated  in  two   noncontributory   defined  benefit  pension  plans  with
contributions  being made by  Millennium  Petrochemicals  and the  assets  being
maintained  in  the  Hanson  America  Inc.  Master  Trust.   Subsequent  to  the
Partnership  formation,  the two defined  benefit plans were merged and the plan
assets were transferred into a separate trust maintained by the Partnership. The
trusts' assets consist  primarily of common stock,  fixed income  securities and
real estate.  As of September 28, 1996 the trust  maintained by the  Partnership
included Hanson  ordinary  shares which, at market value,  comprised 1.9% of the
trust assets.

The  benefits  for the plan are  based on years of  service  and the  employee's
salary at or near retirement. Contributions to the defined benefit 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.

The following table sets forth the plan's actuarial assumptions:

                                                 SEPTEMBER 27,     SEPTEMBER 28,
                                                     1997              1996
                                                 -------------     -------------
  Weighted-average discount rate                       7.25%             7.75%
  Average rate of compensation increase                4.25%             4.25%
  Weighted-average expected long-term rate of
  return on plan assets                                 9.0%              9.0%


The following  table sets forth the plan's funded status and net prepaid pension
cost:

                                                  SEPTEMBER 27,    SEPTEMBER 28,
                                                      1997             1996
                                                  -------------    -------------
  Actuarial present value of benefit obligation
    Vested benefit obligation                        $137,872         $ 122,786
    Non-vested benefit obligation                       6,142             5,859
                                                  -----------      ------------
    Accumulated benefit obligation                   $144,014         $ 128,645
                                                  ===========      ============

  Projected benefit obligation                       $161,700         $ 140,535
  Plan assets at fair value                           198,594           172,773
                                                  -----------      ------------

  Plan assets in excess of projected
     benefit obligation                                36,894            32,238
  Unrecognized prior service cost                      (1,067)               -
  Unrecognized net loss                                12,771            15,276
                                                  -----------      ------------
      Net prepaid pension cost                       $ 48,598         $  47,514
                                                  ===========      ============










                                      F-18


<PAGE>


The net periodic pension income includes the following:

<TABLE>
<CAPTION>
                                                        PERIOD            PERIOD          YEAR ENDED
                                      YEAR ENDED     MARCH 5, 1996    OCTOBER 1, 1995    SEPTEMBER 30,
                                     SEPTEMBER 27,  TO SEPTEMBER 28,  TO MARCH 4, 1996       1995
                                         1997            1996          (PREDECESSOR)    (PREDECESSOR)
                                     ------------   ----------------  ----------------  --------------
<S>                                    <C>              <C>             <C>                <C>
  Service cost-benefits earned
   during the period                   $   4,504        $   2,616       $   1,869          $  4,322
  Interest cost on projected benefit
   obligation                             10,364            5,748           4,106             9,308
  Actual return on plan assets           (41,491)         (10,233)         (7,310)          (14,180)
  Net amortization and deferral           25,540              310             221                --
                                       ---------       ----------       ---------          --------
      Net periodic pension income      $  (1,083)       $  (1,559)      $  (1,114)         $   (550)
                                       =========       ==========       =========          ========
</TABLE>

DEFINED CONTRIBUTION PENSION PLANS

The  Partnership  has  defined   contribution  plans  covering  most  employees.
Contributions  and  costs  are  a  percent  of  the   participating   employees'
compensation. These amounts totaled $1,828, $1,103, $788 and $1,774 for the year
ended  September 27, 1997,  the seven months ended  September 28, 1996, the five
months ended March 4, 1996 and the year ended September 30, 1995, respectively.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Partnership provides  postretirement health care and life insurance benefits
for certain retired  employees.  The  Partnership  employees hired prior to July
1993 are eligible  for such  benefits if they reach a specified  retirement  age
while working for the Partnership.

The  Partnership  does not fund its  postretirement  benefit plan. The following
table  presents the plan's accrued  postretirement  benefit cost included in the
accompanying balance sheets at September 27, 1997 and September 28, 1996:

                                               SEPTEMBER 27,      SEPTEMBER 28,
                                                   1997               1996
                                               -------------      -------------

   Retirees                                       $  71,088         $  76,769
   Fully eligible active plan participants            7,639             2,160
   Other active plan participants                    18,797            11,776
                                                  ---------         ---------

   Accumulated postretirement benefit obligation     97,524            90,705
   Unrecognized net loss                            (11,550)           (5,660)
                                                  ---------         ---------
   Accrued postretirement benefit cost               85,974            85,045
   Less:  current portion                             4,078             3,671
                                                  ---------         ---------

   Noncurrent liability                           $  81,896         $  81,374
                                                  =========         =========



                                      F-19

<PAGE>


The net periodic postretirement benefit cost includes the following components:

<TABLE>
<CAPTION>

                                                                                               YEAR ENDED
                                     YEAR ENDED     PERIOD MARCH 5, 1996   PERIOD OCTOBER 1,    SEPTEMBER 30,
                                    SEPTEMBER 27,     TO SEPTEMBER 28,     1995 TO MARCH 4,         1995
                                        1997               1996            1996(PREDECESSOR)    (PREDECESSOR)
                                    -------------   --------------------   -----------------    -------------
<S>                                   <C>                <C>                    <C>                 <C>
  Service cost                        $   811            $   473                $  338              $  730
  Interest cost                         3,074                918                   656               1,174
                                      -------            -------                ------              ------

        Net periodic postretirement
        benefit cost                  $ 3,885            $ 1,391                $  994              $1,904
                                      =======            =======                ======              ======
</TABLE>

The accumulated  postretirement  benefit  obligation was based  on a 10% and 11%
increase  in the cost of  covered  health  care  benefits  for  1997  and  1996,
respectively.  This rate is assumed to decrease  gradually  to 6% in 2003 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  accumulated
postretirement  benefit  obligation  as of September  27, 1997 by $4,097 and the
aggregate of service and  interest  components  of net  periodic  postretirement
benefit cost for the year ended September 27, 1997 by $14.

The   weighted-average   discount  rate  used  in  determining  the  accumulated
postretirement  benefit  obligation  was 7.5% and 8% at  September  27, 1997 and
September 28, 1996, respectively.

10.  RESTRUCTURING CHARGE

In  March  1997,  the  Partnership  announced  that  it was  evaluating  certain
long-term cost reduction  strategies and organizational  changes. As a result of
this effort, the Partnership  reorganized its product  procurement and logistics
group,  redesigned  its  fleet  and  maintenance,  field  and  corporate  office
organizations,  and identified facilities to be closed and impaired assets whose
carrying amounts would not be recovered. In support of this effort in June 1997,
the Partnership  recorded a restructuring  charge of $6,911,  which included the
following:

  Severance, other employee benefits and facility closure costs       $5,076
  Impaired asset write-down                                            1,835
                                                                      ------
                                                                      $6,911
                                                                      ======

In fiscal 1996, the Partnership  reorganized its corporate office and terminated
certain employees. As a result of this action, the Partnership recorded a $2,340
restructuring charge, comprised of severance and employee benefit costs.

At September  27, 1997,  the  remaining  accruals  related to the  restructuring
charges totaled $4,566. For the year, cash expenditures totaled $4,285.

11.  PREDECESSOR EQUITY

The  predecessor  equity account  reflects the  Predecessor  Company's  activity
between an affiliate of the former Parent Company for the period October 1, 1995
to March 4, 1996 and for the year ended September 30, 1995.



                                      F-20

<PAGE>



An analysis of the predecessor equity is as follows:

                                             PERIOD OCTOBER 1,     YEAR ENDED
                                             1995 TO MARCH 4,     SEPTEMBER 30,
                                                 1996                 1995
                                             -----------------    -------------

  Beginning balance                              $558,235            $559,552
                                                 --------            --------
  Net income                                       33,649              30,245
                                                 --------            --------
  Cash transfers, net                             (26,236)            (99,845)
  Amounts paid or accrued by parent on
      behalf of the Predecessor Company,
      net                                          52,035              68,283
                                                 --------            --------
         Cash activity with parent, net            25,799             (31,562)
                                                 --------            --------
         Ending balance                          $617,683            $558,235
                                                 ========            ========

The predecessor equity account was non-interest  bearing with no repayment terms
and included $449,749 and $265,625 in intercompany payables at March 4, 1996 and
September 30, 1995, respectively.

12. INCOME TAXES

As discussed in Note 2, the Partnership's  earnings for federal and state income
tax  purposes  is  included  in the  tax  returns  of the  individual  partners.
Accordingly,  no recognition has been given to income taxes in the  accompanying
financial  statements  of the  Partnership  except for  earnings  of the Service
Company  which are subject to federal and state income  taxes.  The  information
presented below relates to the Predecessor Company.

The provision for income taxes consists of the following:

                                         PERIOD OCTOBER 1,        YEAR ENDED
                                         1995  TO MARCH 4,       SEPTEMBER 30,
                                             1996                    1995
                                         -----------------       -------------
     Current:
        Federal                              $20,516                 $18,458
        State                                  5,809                   5,216
                                            --------                --------
                                             $26,325                 $23,674
     Deferred                                  1,822                   1,625
                                            --------                --------
         Total provision for income taxes    $28,147                 $25,299
                                            ========                ========

A reconciliation of the statutory federal tax rate to the Predecessor  Company's
effective tax rate follows:

                                                  PERIOD           YEAR ENDED
                                             OCTOBER 1, 1995      SEPTEMBER 30,
                                             TO MARCH 4, 1996         1995
                                             ----------------     -------------

      Statutory federal tax rate                   35.0%              35.0%
      Difference in tax rate due to:
         State income taxes, net of federal
           income tax benefit                       6.0%               6.0%
         Goodwill                                   4.1%               4.1%
         Other, net                                 0.5%               0.5%
                                                --------            -------
      Effective tax rate                           45.6%              45.6%
                                                ========            =======

                                      F-21
<PAGE>


13. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

The Partnership leases certain property, plant and equipment for various periods
under noncancelable  leases.  Rental expense under operating leases was $14,995,
$7,844,  $5,603 and $11,563 for the year ended  September  27,  1997,  the seven
months ended  September  28,  1996,  the five months ended March 4, 1996 and the
year ended September 30, 1995, respectively.

Future minimum rental commitments under noncancelable operating lease agreements
as of September 27, 1997 are as follows:

     FISCAL YEAR
     1998                                                     $11,333
     1999                                                       6,765
     2000                                                       3,701
     2001                                                       3,126
     2002   and thereafter                                      7,948

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 27, 1997 and September
28,  1996,  accrued  insurance  liabilities  amounted  to $23,748  and  $24,736,
respectively, representing the total estimated losses under these self-insurance
programs. These liabilities represent the gross estimated losses as no claims or
lawsuits,  individually  or in the  aggregate,  were  estimated  to  exceed  the
Partnership's deductibles and its insurance policies.

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.  It is the opinion of management,  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.

14.  SUBSEQUENT EVENTS

In November 1997, the General Partner  contributed $12,000 to the Partnership in
exchange for an additional 120,000 APUs. Such contributions were used to enhance
the Partnership's  ability to distribute the Minimum  Quarterly  Distribution to
Common Unitholders with respect to the fourth fiscal quarter of 1997.

On December 22, 1997, the Partnership sold its  ownership interest in  the Dixie
Pipeline Company to Shell Western E&P, Inc. and Conoco Pipe Line Company for net
cash proceeds of approximately $13 million and realized a gain  of approximately
$5 million.

                                      F-22

<PAGE>






INDEX TO FINANCIAL STATEMENT SCHEDULES
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                                                                         PAGE
                                                                         ----
Schedule 11    Valuation and Qualifying Accounts for the year
               ended September 27, 1997,  the period March 5,
               1996 through  September  28, 1996, October  1,
               1995  through  March 4,  1996 and for the year
               ended September 30, 1995                                  S-2



































                                       S-1



<PAGE>

                                                                     SCHEDULE II

                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>



                                    BALANCE AT  CHARGED               DEDUCTIONS   BALANCE
                                    BEGINNING   TO COST/    OTHER      (AMOUNTS    AT END
                                    OF PERIOD   EXPENSES  ADDITIONS  CHARGED OFF)  OF PERIOD
                                    ---------   --------  ---------  ------------  ---------

<S>                                   <C>       <C>       <C>          <C>          <C>
YEAR ENDED SEPTEMBER 30, 1995
- -----------------------------

Allowance for doubtful accounts ...   $ 3,462   $ 3,140   $      --    $ (3,440)    $ 3,162
                                      =======   =======   =========    ========     =======

Accumulated amortization:
  Goodwill ........................   $ 6,250   $ 6,309   $      --    $   --       $12,559
  Other intangibles ...............   $  --     $    70   $      --    $   --       $    70
                                      -------   -------   ---------    --------     -------
                  Total ...........   $ 6,250   $ 6,379   $      --    $   --       $12,629
                                      =======   =======   =========    ========     =======


OCTOBER 1, 1995 TO MARCH 4, 1996
- --------------------------------

Allowance for doubtful accounts ...   $ 3,162   $ 1,510   $      --    $ (1,510)    $ 3,162
                                      =======   =======   =========    ========     =======

Accumulated amortization:
  Goodwill ........................   $12,559   $ 2,714   $      --    $   --       $15,273
  Other intangibles ...............   $    70   $    69   $      --    $   --       $   139
                                      -------   -------   ---------    --------     -------
                  Total ...........   $12,629   $ 2,783   $      --    $   --       $15,412
                                      =======   =======   =========    ========     =======


MARCH 5, 1996 TO SEPTEMBER 28, 1996
- -----------------------------------

Allowance for doubtful accounts ...   $ 3,162   $ 1,790   $      --    $ (1,640)    $ 3,312
                                      =======   =======   =========    ========     =======

Accumulated amortization:
  Goodwill ........................   $15,273   $ 3,716   $      --    $   --       $18,989
  Other intangibles ...............   $   139   $   443   $      --    $   --       $   582
                                      -------   -------   ---------    --------     -------
                  Total ...........   $15,412   $ 4,159   $      --    $   --       $19,571
                                      =======   =======   =========    ========     =======


YEAR ENDED SEPTEMBER 27, 1997
- -----------------------------

Allowance for doubtful accounts ...   $ 3,312   $ 4,569   $      --    $ (5,199)    $ 2,682
                                      =======   =======   =========    ========     =======

Accumulated amortization:
  Goodwill ........................   $18,989   $ 6,644   $      --    $   --       $25,633
  Other intangibles ...............   $   582   $   945   $      --    $   --       $ 1,527
                                      -------   -------   ---------    --------     -------
                  Total ...........   $19,571   $ 7,589   $      --    $   --       $27,160
                                      =======   =======   =========    ========     =======


</TABLE>

<PAGE>



                                                                   EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS


We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement on Form S-8 (No. 333-10197) of Suburban Propane Partners,  L.P. of our
reports  dated  October 22, 1997  appearing  on pages F-2 and F-3 of this Annual
Report on Form 10-K. We also consent to the  application  of such reports to the
Financial  Statement  Schedule  listed under Item 14(a) 2 of this Form 10-K when
such schedule is read in conjunction with the financial  statements  referred to
in our  reports.  The audits  referred to in such  reports  also  included  this
schedule.



PRICE WATERHOUSE LLP
Morristown, NJ
December 22, 1997




























<TABLE> <S> <C>

<ARTICLE>                                          5
<LEGEND>
This shedule contains summary financial information extracted from the financial
statementscontained  in the body of the accompanying  Form 10-K and is qualified
in it's entirety by reference to such financial statements 
</LEGEND>
<MULTIPLIER>                                                  1,000
       
<S>                                                     <C>
<FISCAL-YEAR-END>                                        SEP-27-1997
<PERIOD-TYPE>                                                12-MOS
<PERIOD-START>                                           SEP-30-1996
<PERIOD-END>                                             SEP-27-1997
<CASH>                                                       19,336
<SECURITIES>                                                      0
<RECEIVABLES>                                                48,609
<ALLOWANCES>                                                  2,682
<INVENTORY>                                                  31,915
<CURRENT-ASSETS>                                            104,361
<PP&E>                                                      480,052
<DEPRECIATION>                                              115,705
<TOTAL-ASSETS>                                              776,407
<CURRENT-LIABILITIES>                                        96,701
<BONDS>                                                     427,970
                                             0
                                                       0
<COMMON>                                                          0
<OTHER-SE>                                                  141,239
<TOTAL-LIABILITY-AND-EQUITY>                                776,407
<SALES>                                                     771,131
<TOTAL-REVENUES>                                            771,131
<CGS>                                                       436,795
<TOTAL-COSTS>                                               646,594
<OTHER-EXPENSES>                                                  0
<LOSS-PROVISION>                                              4,569
<INTEREST-EXPENSE>                                           33,979
<INCOME-PRETAX>                                              13,784
<INCOME-TAX>                                                    190
<INCOME-CONTINUING>                                          13,594
<DISCONTINUED>                                                    0
<EXTRAORDINARY>                                                   0
<CHANGES>                                                         0
<NET-INCOME>                                                 13,594
<EPS-PRIMARY>                                                     0
<EPS-DILUTED>                                                     0
        


</TABLE>


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