NATIONAL PROPANE PARTNERS LP, 10-K, 1998-03-31

NATIONAL PROPANE PARTNERS LP
10-K, 1998-03-31
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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 DECEMBER 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 1-11867

- ----------------------------------------------------------
NATIONAL PROPANE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

DELAWARE 42-1453040
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

SUITE 1700 52401-1409
200 1ST STREET S.E. (ZIP CODE)
CEDAR RAPIDS, IA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (319) 365-1550

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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -------------------------------------------
<S> <C>
Common Units New York Stock Exchange
</TABLE>

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 [ ].

The aggregate market value as of March 27, 1998 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 $132,356,000. At March 27, 1998 there were outstanding 6,701,550
Common Units and 4,533,638 Subordinated Units.

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DOCUMENTS INCORPORATED BY REFERENCE:

None

________________________________________________________________________________

NATIONAL PROPANE PARTNERS, L.P.
INDEX TO ANNUAL REPORT
ON FORM 10-K

PART I

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PAGE
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Item 1. Business........................................................................................ 2
Item 2. Properties...................................................................................... 10
Item 3. Legal Proceedings............................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders............................................. 11

PART II
Item 5. Market for the Registrant's Units and Related Unitholder Matters................................ 12
Item 6. Selected Historical Consolidated Financial and Operating Data................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 15
Item 8. Financial Statements and Supplementary Data..................................................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 45

PART III
Item 10. Directors and Executive Officers of the Registrant.............................................. 45
Item 11. Executive Compensation.......................................................................... 48
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................. 52
Item 13. Certain Relationships and Related Transactions.................................................. 55

PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................. 56
Signatures................................................................................................. 59
</TABLE>

PART I.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS

Certain statements in this Annual Report on Form 10-K (this 'Form 10-K'),
including statements under 'Item 1. Business' and 'Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations', and
elsewhere in this Form 10-K that are not statements of historical facts
constitute 'forward-looking statements' within the meaning of the Private
Securities Litigation Reform Act of 1995 (the 'Reform Act') concerning, among
other things, the prospects, developments and business strategies of National
Propane Partners, L.P. (the 'Partnership') for its operations, all of which are
subject to risks and uncertainties. These forward-looking statements include
those statements indicated by their use of forms of such terms and phrases as
'may', 'intends', 'goals', 'estimates', 'expects', 'projects', 'plans',
'anticipates', 'should', 'future', 'believes' and 'scheduled' or the negation
thereof, or similar expressions. When a forward-looking statement includes a
statement of the assumptions or basis underlying the forward-looking statement,
the Partnership cautions that, while it believes such assumptions or basis to be
reasonable and makes them in good faith, assumed facts or basis almost always
vary from actual results, and the differences between assumed facts or basis and
actual results can be material, depending upon the circumstances. Where, in any
forward-looking statement, the Partnership or its management expresses an
expectation or belief as to future results, such expectation or belief is
expressed in good faith and believed to have a reasonable basis, but there can
be no assurance that the statement of expectation or belief will result or be
achieved or accomplished. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors with respect to the
Partnership include, among others, weather conditions, which affect the demand
for propane; changes in wholesale propane prices, which may affect the
Partnership's gross profits and the demand for the Partnership's products;
competition from others in the propane distribution industry and from
alternative energy sources, which may affect the Partnership's ability to
generate revenues; the mature nature of the retail propane industry and the
national trend toward increased conservation and technological advances, which
may affect demand for the Partnership's products; the Partnership being subject
to the operating hazards and risks associated with handling, storing and
delivering combustible liquids such as propane, which may subject the
Partnership to claims for which the Partnership is not insured; the amount of
the Partnership's available cash being dependent on a number of factors which
may be beyond the control of the Partnership, including, without limitation,
that a portion of the Partnership's annual cash receipts is derived from
interest payments from Triarc Companies, Inc. ('Triarc'), which may affect the
amount of the Partnership's cash distributions; the Partnership being
significantly leveraged, which may limit the Partnership's ability to make cash
distributions and may affect the Partnership's results of operations; the
Partnership's assumptions concerning future operations and weather conditions
may not be realized, which may affect the amount of the Partnership's cash
distributions and results of operations; the Partnership's reimbursements and
funds due to its managing general partner National Propane Corporation (the
'Managing General Partner') may be substantial, which may adversely affect the
Partnership's ability to make cash distributions; changes in business strategy,
which may, among other things, prolong the time it takes to achieve the
performance results included herein; changes in, or the failure to comply with,
government regulations; the Partnership may be unsuccessful in its attempts to
acquire other businesses in the industry; and other risks, uncertainties and
factors referenced in this Form 10-K and in the Partnership's other current and
periodic filings with the Securities and Exchange Commission. The Partnership
will not undertake and specifically declines any obligation to publicly release
the result of any revisions which may be made to any forward-looking statements
to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events. In addition, it
is the Partnership's policy generally not to make any specific projections as to
future earnings, and the Partnership does not endorse any projections regarding
future performance that may be made by third parties.

ITEM 1. BUSINESS

INTRODUCTION

National Propane Partners, L.P., a master limited partnership (the
'Partnership' or the 'MLP'), is a Delaware limited partnership formed in March
1996 to acquire, own and operate the business and assets of National Propane
Corporation, an indirect wholly-owned subsidiary of Triarc, ('National Propane')
through National Propane, L.P. (the 'Operating Partnership'), and is engaged
primarily in (i) the retail marketing of propane to residential, commercial and
industrial, and agricultural customers and to dealers that resell propane to
residential and commercial customers and (ii) the retail marketing of
propane-related supplies and equipment, including home and commercial
appliances. The Partnership believes it is the sixth largest retail marketer of
propane in terms of volume in the United States, supplying approximately 250,000
active retail and wholesale customers in 24 states through its 159 full service
centers located in 23 states. The Partnership's operations are concentrated in
the Midwest, Northeast, Southeast and West regions of the United States. The
retail propane sales volume of the Partnership was approximately 155.3 million
gallons in 1997. In 1997, approximately 42.7% of the Partnership's retail sales
volume was to residential customers, 40.6% was to commercial and industrial
customers, 7.2% was to agricultural customers, and 9.5% was to dealers. Sales to
residential customers in 1997 accounted for approximately 62% of the
Partnership's gross profit on propane sales, reflecting the higher-margin nature
of this segment of the market.

INITIAL PUBLIC OFFERING

Prior to 1993, National Propane's business was conducted through nine
regionally branded companies without central management or coordinated pricing
or distribution strategies. In July 1996 the MLP completed an initial public
offering (the 'IPO') of approximately 6.3 million common units representing
limited partner interests (together with subsequently issued common units the
'Common Units') and received therefrom net proceeds aggregating approximately
$117.4 million. Both National Propane and National Propane SGP Inc. ('SGP')
contributed substantially all of their assets to the Operating Partnership (the
'Partnership Conveyance') as a capital contribution and the Operating
Partnership assumed substantially all of their liabilities. National Propane and
SGP then conveyed their limited partner interests in the Operating Partnership
to the Partnership. As a result of such contributions, each of National Propane
and SGP have a 1.0% general partner interest in the Partnership and a 1.0101%
general partner interest in the Operating Partnership. In addition, National
Propane received in exchange for its contribution to the Partnership 4,533,638
subordinated units (the 'Subordinated Units') and the right to receive certain
incentive distributions. The entity representative of both the operations of (i)
National Propane prior to the Partnership Conveyance and (ii) the Partnership
subsequent to the Partnership Conveyance is referred to herein as 'National.'

Also immediately prior to the closing of the IPO, National Propane issued
$125 million aggregate principal amount of 8.54% first mortgage notes due 2010
(the 'First Mortgage Notes') to certain institutional investors in a private
placement (the 'Private Placement'). Approximately $59.3 million of the net
proceeds from the sale of the First Mortgage Notes (the entire net proceeds of
which were approximately $118.4 million) were used by National Propane to pay a
dividend to Triarc Companies, Inc. The remainder of the net proceeds from the
sale of the First Mortgage Notes (approximately $59.1 million) were contributed
by National Propane to the Operating Partnership to repay a portion of National
Propane's then existing bank debt and other indebtedness of National Propane and
certain of its subsidiaries.

After the repayment of the indebtedness described above, the net proceeds
of the IPO were contributed to the Operating Partnership which used such
proceeds to repay all remaining indebtedness under National Propane's then
existing bank debt, to make a $40.7 million loan to Triarc (the 'Partnership
Loan') and to pay certain accrued management fees and tax sharing payments due
to Triarc from National Propane.

Concurrently with the closing of the IPO, the Operating Partnership also
entered into a bank credit facility, which includes a revolving credit facility
to be used for working capital and other general partnership purposes and an
acquisition facility (the 'Bank Facility').

On November 7, 1996, the Partnership issued and sold an additional 400,000
common units in a private placement resulting in net proceeds of $7.4 million.

BUSINESS STRATEGY

The Partnership's operating strategy is to increase its efficiency,
profitability and competitiveness, while better serving its customers, by
building on the efforts it has already undertaken to improve pricing management,
marketing and purchasing. In addition, the Partnership's strategies for growth
involve expanding its operations and increasing its market share through
internal growth and possibly through acquisitions. The Partnership intends to
pursue internal growth at its existing service centers, and to attract new
customers and expand its market base by (i) providing superior service, (ii)
introducing innovative marketing programs and (iii) focusing on population
growth areas. The Partnership operates in several growth areas of the United
States, including western Colorado, a rapidly growing market in which the
Partnership believes it is one of the leading retail marketers, in central
Arizona, an area that has experienced a significant rate of population growth in
recent years and in northern California, an area with a substantial base of
residential home heating customers. The Partnership also intends to continue to
expand its business by opening new service centers, known as 'scratch-starts,'
in areas where there is relatively little competition. Scratch-starts typically
involve minimal startup costs because the infrastructure of the new service
center is developed as the customer base expands and the Partnership can, in
many circumstances, transfer existing assets, such as storage tanks and
vehicles, to the new service center. The Partnership intends to take two
approaches to acquisitions: (i) primarily to build on its broad geographic base
by acquiring smaller, independent competitors that operate within the
Partnership's existing geographic areas and (ii) to acquire propane businesses
in areas in the United States outside of its current geographic base where it
believes there is growth potential. During 1997, the Partnership acquired the
assets of six retail propane marketers for an aggregate purchase price of
approximately $9.2 million. In January 1998, the Partnership acquired the assets
of another small retail propane marketer for a purchase price of approximately
$0.3 million. Under its 'scratch-start' program, by December 31, 1997 the
Partnership had opened five new service centers in California, two each in
Minnesota and Arizona and one in Idaho.

INDUSTRY BACKGROUND

Propane, a by-product of natural gas processing and petroleum refining, is
a clean-burning energy source recognized for its transportability and ease of
use relative to alternative stand-alone energy sources. 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 economy
and ease of handling in shipping and distribution. When the pressure is released
or the temperature is increased, it is useable as a flammable gas. Propane is
colorless and odorless; an odorant is added to allow its detection. Propane is
clean-burning, producing negligible amounts of pollutants when consumed.

The Partnership's retail customers fall into four broad categories:
residential customers, commercial and industrial customers, agricultural
customers and dealers that resell propane to residential and commercial
customers. Residential customers use propane primarily for space heating, water
heating, cooking and clothes drying. Commercial and industrial customers use
propane for commercial applications such as cooking and clothes drying and
industrial uses such as fueling over-the-road vehicles, forklifts and stationary
engines, firing furnaces, as a cutting gas and in other process applications.
Agricultural customers use propane for tobacco curing, crop drying, poultry
brooding and weed control.

Based upon information provided by the National Propane Gas Association
(the 'NPGA'), a propane trade association, propane accounts for approximately
3.0% to 4.0% of total energy consumption in the United States, an average level
that has remained relatively constant for the past ten years. In addition,
propane is now the world's most widely used alternative fuel for automobiles
with approximately 350,000 and 3.5 million vehicles running on propane in the
United States and worldwide, respectively (according to the NPGA). The
Partnership believes, based on industry publications, that the domestic retail
market for propane is approximately 9.4 billion gallons annually.

PRODUCTS, SERVICES AND MARKETING

The Partnership distributes its propane through a nationwide distribution
network integrating 159 full service centers in 23 states. The Partnership's
operations are located primarily in the Midwest, Northeast, Southeast and West
regions of the United States. Typically, service centers are found in suburban
and rural areas where natural gas is not readily available. Generally, such
locations consist of an office and a warehouse and service facility, with one or
more 18,000 to 30,000 gallon storage tanks on the premises. Each service center
is managed by a district manager and also typically employs a customer service
representative, a service technician and one or two bulk truck drivers.

In 1997 the Partnership served approximately 250,000 active customers. No
single customer accounted for 10% or more of the Partnership's revenues in 1996
or 1997. Generally, the number of customers increases during the fall and winter
and decreases during the spring and summer. Historically, approximately 65% of
the Partnership's retail propane volume has been sold during the six-month
season from October through March, as many customers use propane for heating
purposes. Consequently, sales, gross profits and cash flows from operations are
concentrated in the Partnership's first and fourth fiscal quarters.

Year-to-year demand for propane is affected by the relative severity of the
winter and other climatic conditions. For example, while the frigid temperatures
that were experienced by the United States in January and February of 1994
significantly increased the overall demand for propane, the unusually warm
weather during the latter part of the winter of 1997-1998 significantly reduced
such demand. The Partnership believes, however, that the geographic diversity of
its areas of operations helps to reduce its exposure to regional weather
patterns. In addition, retail sales to the commercial and industrial markets,
while affected by economic patterns, are not as sensitive to variations in
weather conditions as sales to residential and agricultural markets. For
information on the impact of annual variations in weather on the operations of
the Partnership, see Item 7. 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General'.

Retail deliveries of propane are usually made to customers by means of bulk
and cylinder trucks. Propane is pumped from the bulk truck, which generally
holds 2,800 gallons of propane, into a stationary storage tank on the customer's
premises. The capacity of these tanks usually ranges from approximately 50 to
approximately 1,000 gallons, with a typical tank having a capacity of 250 to 500
gallons. Typically, service centers deliver propane to most of their residential
customers at regular intervals, based on estimates of such customers' usage,
thereby eliminating the customers' need to make affirmative purchase decisions.
The Partnership also delivers propane to retail customers in portable cylinders,
which typically have a capacity of 23.5 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 retail customers, primarily dealers and
large commercial accounts, in larger trucks known as transports, which have an
average capacity of approximately 9,000 gallons. Propane is generally
transported from refineries, pipeline terminals and storage facilities
(including the Partnership's underground storage facilities in Hutchinson,
Kansas and Loco Hills, New Mexico) to the Partnership's bulk plants by a
combination of common carriers, owner-operators, railroad tank cars and, in
certain circumstances, the Partnership's own highway transport fleet.

The Partnership also sells, leases and services equipment related to its
propane distribution business. In the residential market, the Partnership sells
household appliances such as cooking ranges, water heaters, space heaters,
central furnaces and clothes dryers, as well as barbecue equipment and gas logs.
In the industrial market, the Partnership sells or leases specialized equipment
for the use of propane as fork lift truck fuel, in metal cutting and atmospheric
furnaces and for portable heating for construction. In the agricultural market,
specialized equipment is leased or sold for the use of propane as engine fuel
and for chicken brooding and crop drying. The sale of specialized equipment,
service income and rental income represented less than 10% of the Partnership's
gross income during fiscal 1997. Parts and appliance sales, installation and
service activities are conducted through National Sales & Service, Inc.
('NSSI'), a wholly-owned corporate subsidiary of the Operating Partnership.

PROPANE SUPPLY AND STORAGE

The profitability of the Partnership is dependent upon the price and
availability of propane as well as seasonal and climatic factors. Contracts for
propane are typically made on a year-to-year basis, but the price of the propane
to be delivered depends upon market conditions at the time of delivery.
Worldwide availability of both gas liquids and oil affects the supply of propane
in domestic markets, and from time to time the ability to obtain propane at
attractive prices may be limited as a result of market conditions, thus
affecting price levels to all distributors of propane. The Partnership utilizes
a hedging program which is designed to protect margins on fixed price retail
sales and to mitigate the potential impact of sudden wholesale propane price
increases. See 'Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General'.

The Partnership purchased propane from over 35 domestic and Canadian
suppliers during 1997, primarily major oil companies and independent producers
of both gas liquids and oil. The Partnership purchases propane under both term
and spot contracts. In 1997, the Partnership purchased approximately 90% and 10%
of its propane supplies from domestic and Canadian suppliers, respectively.
Approximately 95% of propane purchases by the Partnership in 1997 were on a
contractual basis (generally, under one year agreements subject to annual
renewal), but the percentage of contract purchases may vary from year to year as
determined by National. Supply contracts generally do not lock in prices but
rather provide for pricing in accordance with posted prices at the time of
delivery or the current prices established at major storage points, such as Mont
Belvieu, Texas and Conway, Kansas. The Partnership is not currently a party to
any supply contracts containing 'take or pay' provisions.

Warren Petroleum Company ('Warren') supplied approximately 16% of the
Partnership's propane in 1997 and Amoco and Conoco each supplied approximately
10%. The Partnership believes that if supplies from Warren, Amoco or Conoco were
interrupted, it would be able to secure adequate propane supplies from other
sources without a material disruption of its operations; however, the
Partnership believes that the cost of procuring replacement supplies might be
significantly higher, at least on a short-term basis, which could negatively
affect the Partnership's margins. No other single supplier provided 10% or more
of the Partnership's total propane supply during 1997. Although the Partnership
has long-standing relations with a number of its important suppliers and has
generally been able to secure sufficient propane to meet its customers' needs,
no assurance can be given that supplies of propane will be readily available in
the future. The Partnership expects a sufficient supply to continue to be
available during 1998. However, increased demand for propane in periods of
severe cold weather, or otherwise, could cause future propane supply
interruptions or significant volatility in the price of propane. See 'Item 7.
Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- General'.

The Partnership owns underground storage facilities in Hutchinson, Kansas
and Loco Hills, New Mexico (the Partnership owns the underground storage space
and leases the real property on which it is located from the state of New
Mexico), leases above ground storage facilities in Crandon, Wisconsin and
Orlando, Florida, and owns or leases smaller storage facilities in other
locations throughout the United States. As of December 31, 1997, the
Partnership's total storage capacity was approximately 33.1 million gallons
(including approximately one million gallons of storage capacity currently
leased to third parties).

TRADEMARKS AND TRADENAMES

The Partnership utilizes a number of trademarks and tradenames which it
owns (including 'National Propane'tm''), some of which have a significant value
in the marketing of its products.

COMPETITION

Propane competes primarily with natural gas, electricity and fuel oil as an
energy source, principally on the basis of price, availability and portability.
Propane serves as an alternative to natural gas in rural and suburban areas
where natural gas is unavailable or portability of product is required. Propane
is

generally more expensive than natural gas on an equivalent BTU basis in
locations served by natural gas, although propane is sold in such areas as a
standby fuel for use during peak demand periods and during interruptions in
natural gas service. The expansion of natural gas into traditional propane
markets has historically been inhibited by the capital costs required to expand
distribution and pipeline systems. Although the extension of natural gas
pipelines tends to displace propane distribution in the areas affected, the
Partnership believes that new opportunities for propane sales arise as more
geographically remote neighborhoods are developed.

Propane is generally less expensive to use than electricity for space
heating, water heating, clothes drying and cooking. Although propane is similar
to fuel oil in certain applications, as well as in market demand and price,
propane and fuel oil have generally developed their own distinct geographic
markets, reducing competition between such fuels. Because furnaces and
appliances that burn propane will not operate on fuel oil and vice versa, a
conversion from one fuel to the other requires the installation of new
equipment.

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
domestic retail market for propane is approximately 9.4 billion gallons
annually, that the 10 largest retailers, including the Partnership, account for
approximately 32% of the total retail sales of propane in the United States, and
that no single marketer has a greater than 10% share of the total retail market
in the United States. Most of the Partnership's service centers compete with
several marketers or distributors and certain service centers compete with a
large number of marketers or distributors. Each service center 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
Partnership's typical service center has an effective marketing radius of
approximately 50 miles. The ability to compete effectively further depends on
the reliability of service, responsiveness to customers and the ability to
maintain competitive prices.

WORKING CAPITAL

Working capital requirements for the Operating Partnership fluctuate due to
the seasonal nature of its business. Typically, in late summer and fall,
inventories are built up in anticipation of the heating season and are depleted
over the winter months. During the spring and early summer, inventories are at
low levels due to lower demand. Accounts receivable reach their highest levels
in the middle of the winter and are gradually reduced as the volume of propane
sold declines during the spring and summer. Working capital requirements are
generally met through cash flow from operations supplemented by advances under a
revolving working capital facility which provides the Operating Partnership with
a $15 million line of credit (of which $9.8 million was available at March 1,
1998). Accounts receivable are generally due within 30 days of delivery.

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, automotive waste products, such as waste
oil, generated by the Partnership's truck fleet, as well as 'hazardous
substances' disposed of during past operations by third parties on the
Partnership's properties, could subject the Partnership to CERCLA. Such laws and
regulations could result in civil or criminal penalties in cases of

non-compliance or impose liability for remediation costs. Also, third parties
may make claims against owners or operators of properties for personal injuries
and property damage associated with releases of hazardous or toxic substances.

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 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.

National Propane and the Operating Partnership are subject to various
federal, state and local laws and regulations governing the transportation,
storage and distribution of propane, and the health and safety of workers, the
latter of which are primarily governed by the Occupational Safety and Health Act
and the regulations promulgated thereunder. For a discussion of the
Partnership's participation with other multi-state propane marketers in
litigation against the U.S. Department of Transportation, see 'Item 3. Legal
Proceedings.'

In May 1994, National Propane was informed of coal tar contamination which
was discovered at one of its properties in Wisconsin. National Propane purchased
the property from a company (the 'Successor') which had purchased the assets of
a utility that had previously owned the property. National Propane believes that
the contamination occurred during the use of the property as a coal gasification
plant by such utility. To assess the extent of the problem, National Propane
engaged environmental consultants in 1994. Based upon the information compiled
to date, which is not yet complete, it appears the likely remedy will involve
treatment of groundwater and the soil, including installation of a soil cap and,
if necessary, excavation, treatment and disposal of contaminated soil. The
environmental consultants' current range of estimated costs for remediation is
from $0.7 million to $1.7 million. National Propane will have to agree upon the
final remediation plan with the State of Wisconsin. Accordingly, the precise
remediation method to be used is unknown. Based on the preliminary results of
the ongoing investigation, there is a potential that the contaminant plume may
extend to locations down gradient from the original site. If it is ultimately
confirmed that the contaminant plume extends under such properties and if such
plume is attributable to the contaminants emanating from the Wisconsin property,
there is the potential for future third-party claims. National Propane has
engaged in discussions of a general nature with the Successor who has denied any
liability for the costs of remediation of the Wisconsin property or of
satisfying any related claims. However, National Propane, if found liable for
any of such costs, would still attempt to recover such costs from the Successor.
National Propane has notified its insurance carriers of the contamination and
the likely incurrence of costs to undertake remediation and the possibility of
related claims. Pursuant to a lease related to the Wisconsin facility, the
ownership of which was not transferred by National Propane to the Operating
Partnership at the time of the closing of the Offering, the Partnership has
agreed to be liable for any costs of remediation in excess of amounts received
from the Successor and from insurance. Because the remediation method to be used
is unknown, no amount within the cost ranges provided by the environmental
consultants can be determined to be a better estimate. Thus National has a
remaining accrual of approximately $0.7 million as of December 31, 1997, all of
which was provided in prior years, for the minimum costs estimated for the
anticipated remediation method. See Item 7. 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Contingencies'. The
ultimate outcome of this matter cannot presently be determined and the costs of
remediation and third-party claims, if any, may have a material adverse effect
on the Partnership's financial position, results of operations or ability to
make the distributions to the holders of its Common Units and Subordinated
Units.

EMPLOYEES

As of December 31, 1997, the Managing General Partner had approximately
1,000 full time employees, of whom 88 were general and administrative (including
fleet maintenance personnel), 22 were sales, 415 were transportation and product
supply and the balance were district employees. In addition, at December 31,
1997, the Managing General Partner had 24 temporary and part-time employees.
Approximately 160 of such full-time employees are covered by collective
bargaining agreements that expire on various dates in 1998 and 1999. The
Managing General Partner believes that its relations with both its union and
non-union employees are satisfactory.

The Partnership has no employees; however, for certain purposes, such as
workers' compensation claims, employees of the Managing General Partner who are
providing services for the benefit of the Partnership may also be considered to
be employees of the Partnership under applicable state law. The Managing General
Partner is reimbursed by the Partnership entities at cost for all direct and
indirect expenses incurred on behalf of the Partnership entities, including the
costs of compensation and employee benefit plans. See Note 19 of the
Partnership's Consolidated Financial Statements.

ORGANIZATIONAL STRUCTURE

The following chart depicts the organization and ownership of the
Partnership, the Operating Partnership and the Operating Partnership's corporate
subsidiary. The percentages reflected in the following chart represent the
approximate ownership interest in each of the Partnership and the Operating
Partnership, individually, and not on an aggregate basis.

[ORGANIZATION CHART]

ITEM 2. PROPERTIES

The Partnership maintains a large number of diverse properties, including
appliance showrooms, maintenance facilities, bulk plants, warehousing space,
garages, storage depots and related distribution equipment and underground space
for gas storage. The Partnership believes that these properties, taken as a
whole, are generally well-maintained and adequate for current and foreseeable
business needs. The majority of these properties are owned by the Partnership.

Certain information about the properties of the Partnership as of December
31, 1997, is set forth in the following table.

<TABLE>
<CAPTION>
NUMBER OF
DESCRIPTION OF FACILITIES FACILITIES STORAGE CAPACITY
- -------------------------------------------------------------------------- ------------------ ----------------
(IN THOUSANDS
OF GALLONS)
<S> <C> <C> <C>
Service Centers located throughout the United States...................... 130 owned
29 leased
---
159 7,678
Remote Storage Facilities................................................. 63 owned
42 leased
---
105 2,201
Above Ground Storage Facilities:
Crandon, Wisconsin(1)................................................ 1 leased 241
Orlando, Florida(2).................................................. 1 leased 1,020
--- -------
2 1,261
Underground Storage Facilities:
Hutchinson, Kansas(3)................................................ 1 owned 12,000
Loco Hills, New Mexico(4)............................................ 1 leased 10,000
--- -------
2 22,000
-------
Total................................................................ 33,140
-------
-------
</TABLE>

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

(1) The Partnership leases the real property from a third party on a
year-to-year basis, and the lease is terminable by either party upon 30
days' notice.

(2) The Partnership leases the real property from a third party pursuant to a
ground lease that terminates on October 31, 2006. The Partnership owns the
storage facility located at such property and leases it to Warren Petroleum
pursuant to an agreement that terminates October 31, 1999 and may be
canceled by the Partnership upon 60 days' notice under certain
circumstances.

(3) The Partnership owns the underground storage facility, which, pursuant to an
operating agreement, is operated by a third party that owns the equipment
necessary to use the facility for propane storage. Such operating agreement
may be terminated by either party at the end of any calendar year upon
thirty days' notice.

(4) The Partnership leases the real property from the State of New Mexico
pursuant to a ground lease with a termination date of November 10, 2000,
subject to the Partnership's option to extend the lease for an additional
5-year term.

------------------------
The transportation of propane requires specialized equipment. The trucks
utilized for this purpose carry specialized steel tanks that maintain the
propane in a liquefied state. As of December 31, 1997, the Partnership had a
fleet of 6 transport truck tractors, all of which are owned by the Partnership
and approximately 400 bulk delivery trucks and 400 service and light duty
trucks, all of which are owned by the Partnership. In addition, as of December
31, 1997, the Partnership had approximately 150 cylinder delivery vehicles and
55 automobiles. As of December 31, 1997, the Partnership owned approximately
210,000 customer storage tanks with typical capacities of 250 to 500 gallons.

The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties. Substantially all of the Partnership's
assets (other than the assets of NSSI) are pledged to

secure the First Mortgage Notes and indebtedness under the Bank Credit Facility.
In addition, some of the Partnership's properties are subject to liabilities and
leases and immaterial encumbrances, easements and restrictions, although the
Partnership does not believe that any such burdens will materially interfere
with the continued use by the Partnership of its properties, taken as a whole.

ITEM 3. LEGAL PROCEEDINGS

There are a number of lawsuits pending or threatened against National. In
general, these lawsuits have arisen in the ordinary course of National's
business and involve claims for actual damages, and in some cases punitive
damages, arising from the alleged negligence of National or as a result of
product defects or similar matters. Of the pending or threatened matters, a
number involve property damage, and several involve serious personal injuries or
deaths and the claims made are for relatively large amounts. Although any
litigation is inherently uncertain, based on past experience, the information
currently available to it and the availability of insurance coverage in certain
matters, the Partnership does not believe that the pending or threatened
litigation of which the Partnership is aware will have a material adverse effect
on its results of operations or its financial condition. However, any one or all
of these matters taken together may adversely affect the Partnership's quarterly
or annual results of operations and may limit the Partnership's ability to make
distributions to its Unitholders.

The Partnership is subject to various federal, state and local laws and
regulations governing the transportation, storage and distribution of propane,
and the health and safety of workers, primarily the regulations promulgated by
the Occupational Safety and Health Administration. On August 18, 1997, the U.S.
Department of Transportation (the 'DOT') published its Final Rule for Continued
Operation of the Present Propane Trucks (the 'Final Rule'). The Final Rule is
intended to address perceived risks during the transfer of propane. The Final
Rule required certain immediate changes in the Partnership's operating
procedures including retrofitting the Partnership's cargo tanks. The
Partnership, as well as the National Propane Gas Association and the propane
industry in general, believe that the Final Rule cannot practicably be complied
with in this current form. Accordingly, on October 15, 1997, the Partnership
joined four other multi-state propane marketers in filing an action against the
DOT in United States District Court seeking to enjoin enforcement of the Final
Rule. On February 13, 1998, the court preliminarily enjoined the DOT from
enforcing the Final Rule pending the final outcome of the litigation. At this
time, the Partnership cannot determine the likely outcome of the litigation or
what the ultimate long-term cost of compliance with the Final Rule will be.

In addition, certain contingent liabilities related to National Propane's
operations were assumed by the Partnership in connection with the Partnership
Conveyance. These contingent liabilities include potential environmental
remediation costs and related claims (primarily costs and claims related to the
coal tar contamination at the Managing General Partner's Marshfield, Wisconsin
facility). There can be no assurance that the ultimate liability relating to
this matter will not exceed the amount reserved or that such matter will not
have a material adverse effect on the Partnership's results of operations,
financial condition or its ability to make distributions to its Unitholders. See
'Item 1. Business -- Government Regulations'.

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 during the fiscal year ended December 31, 1997.

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 NPL. The Common Units began trading on June 26, 1996, at an initial
public offering price of $21.00 per Common Unit. As of March 1, 1998 there were
approximately 10,000 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.

<TABLE>
<CAPTION>
COMMON UNIT
PRICE RANGE
-------------------
1997 HIGH LOW CASH DISTRIBUTION PAID PER UNIT
- ---------------------------------------------------- ------- ------- --------------------------------
<S> <C> <C> <C>
First Quarter....................................... $21.000 $19.250 $0.525 (paid May 15, 1997)
Second Quarter...................................... 20.500 18.875 $0.525 (paid August 14, 1997)
Third Quarter....................................... 22.000 20.125 $0.525 (paid November 14, 1997)
Fourth Quarter...................................... 22.437 21.000 $0.525 (paid February 13, 1998)

1996
Third Quarter (beginning June 26, 1996)............. $21.000 $18.625 $0.525 (paid November 15, 1996)
Fourth Quarter...................................... 20.750 19.250 $0.525 (paid February 14, 1997)
</TABLE>

The Partnership has also issued Subordinated Units, all of which are held
by the Managing General Partner for which there is no established public trading
market. The Partnership will distribute to its partners on a quarterly basis,
all of its Available Cash in the manner described herein. Available Cash
generally means, with respect to any quarter of the Partnership, all cash on
hand at the end of such quarter less the amount of cash reserves that are
necessary or appropriate in the reasonable discretion of the Managing General
Partner to (i) provide for the proper conduct of the Partnership's business,
(ii) comply with applicable law or any Partnership debt instrument or other
agreement, or (iii) provide funds for distributions to Unitholders and the
General Partner in respect of any one or more of the next four quarters.
Available Cash is more fully defined in the Amended and Restated Agreement of
Limited Partnership of National Propane Partners, L.P. which is listed as an
exhibit to this Report. The Partnership Agreement defines Minimum Quarterly
Distributions as $.525 per Unit for each full fiscal quarter. Distributions of
Available Cash to the holder of the Subordinated Units are subject to the prior
rights of the holders of Common Units to receive Minimum Quarterly Distributions
for each quarter during the subordination period, and any arrearages in the
distribution of Minimum Quarterly Distributions on the Common Units for prior
quarters during the subordination period. The Managing General Partner
has agreed to forego any additional distributions on the Subordinated Units in
order to facilitate the Partnership's compliance with a covenant restriction
contained in the Bank Facility. Such distributions on the Subordinated Units
will be resumed when their payment will not impact compliance with such
covenant. For a discussion of the Partnership's cash distributions, see Note 5
to the accompanying consolidated financial statements. The subordination period
will not end earlier than June 30, 2001. Restrictions on the Partnership's
distributions required by Item 5 is incorporated herein by reference to Note 11
to the accompanying consolidated financial statements, and to 'Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Issuance of Indebtedness'.

ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

In connection with the Partnership Conveyance, the Partnership became the
successor to the businesses of National Propane. Because the Partnership
Conveyance was a transfer (as described in Note 1 to the accompanying
consolidated financial statements) of assets and liabilities in exchange for
partnership interests among a controlled group of companies, it has been
accounted for in a manner similar to a pooling of interests, resulting in the
presentation of the Partnership as the successor to the continuing businesses of
National Propane. The entity representative of both the operations of (1)
National Propane prior to the Partnership Conveyance and (2) the Partnership
subsequent to the Partnership Conveyance, is referred to as 'National'. Further
the selected financial data reflect the effects of the June 1995 merger of
Public Gas with and into National which is further described in Note 3 to the
accompanying consolidated financial statements.

<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------------------
1993(b)(c) 1994(a)(b) 1995(a)(b) 1996(a) 1997
------------ ---------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
Revenues................................... $119,249 $ 151,651 $ 148,983 $173,260 $165,169
Operating income (loss).................... (1,467)(d) 18,750 14,501 16,188 9,843
Income (loss) before extraordinary
charges.................................. (347) 12,021 (605) 5,747 3,848
Extraordinary charges(e)................... -- (2,116) -- (2,631) --
Net income (loss).......................... (347) 9,905 (605) 3,116 3,848
Income before extraordinary charge per
Unit -- basic and diluted(f)............. .27 .33
Total assets............................... 191,955 137,581 139,112 196,408 177,237
Long-term debt............................. 51,851 98,711 124,266 128,044 138,131
Partners' capital/Stockholders' equity
(deficit)(g)............................. 88,971 (19,502) (48,600) 34,063 13,454
Operating Data:
EBITDA(h)............................. 5,483 28,774 25,146 27,321 22,121
Capital expenditures(i)............... 11,260 12,593 11,013 7,868 11,546
Retail propane gallons sold........... 117,415 152,335 150,141 160,484 155,287
Weighted average number of units
outstanding.............................. 10,954,753 11,235,188
</TABLE>

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

(a) Reflects the results of National Propane Corporation and subsidiaries
('National Propane') through June 30, 1996 and of National Propane
Partners, L.P. (the 'Partnership'), National Propane, L.P. and subsidiary,
as successor to the continuing business of National Propane, thereafter. On
July 2, 1996 (effective June 30, 1996), National Propane and a subsidiary
conveyed substantially all of their assets and liabilities in exchange for
partnership interests among a controlled group of companies, which has been
accounted for in a manner similar to a pooling of interests. In July 1996
the Partnership consummated an initial public offering (the 'Offering') of
6,301,550 common units representing limited partnership interests in the
Partnership (the 'Common Units') and in November 1996 the Partnership sold
an additional 400,000 Common Units through a private placement (the 'Equity
Private Placement'). See Note 1 to the consolidated financial statements
included elsewhere herein for a further discussion of the basis of
presentation of the consolidated financial statements, the Partnership
Conveyance, the Offering and the Equity Private Placement. See Note 4 to
the consolidated financial statements included elsewhere herein for the
unaudited proforma operating results for the year ended December 31, 1996
adjusted as if the Partnership had been formed and the Partnership
Conveyance, the Offering and the Equity Private Placement had been
completed as of January 1, 1996.

(b) All of the periods presented above prior to June 29, 1995 have been
restated to reflect the effects of the June 29, 1995 merger (the 'Merger')
of Public Gas Company with and into National Propane. Because the Merger
was a transfer of assets and liabilities in exchange for shares among a

(footnotes continued on next page)

(footnotes continued from previous page)
controlled group of companies, it has been accounted for in a manner
similar to a pooling of interests.

(c) In October 1993 National Propane's fiscal year ending April 30 and Public
Gas' fiscal year ending February 28 were changed to a calendar year ending
December 31. In order to conform the reporting periods of the combined
entities and to select a period deemed to meet the Securities and Exchange
Commission requirement for filing financial statements for a period of one
year, the ten-month period ending December 31, 1993 ('Transition 1993') for
both National Propane and Public Gas has been presented above.

(d) Includes certain significant pretax charges consisting of (i) $8.4 million
of facilities relocation and corporate restructuring charges and (ii) $0.5
million of allocated costs of a payment to the special committee of
Triarc's Board of Directors.

(e) The extraordinary charges primarily represent the write-off of unamortized
deferred financing costs and original issue discount (in the 1994 period),
net of income taxes, associated with the early extinguishment of debt.

(f) Net income per Unit was computed by dividing net income (before an
extraordinary charge for the period July 1, 1996 (see Note (e) above) to
December 31, 1996), after deducting the general partners' interest (100%
through June 30, 1996 and 4% thereafter), by the weighted average number of
units outstanding. Basic and diluted income per unit are the same in 1996
since there were no dilutive securities outstanding and in 1997 since
potentially dilutive unit options had no effect.

(g) In November, 1994, National reclassified its receivable from Triarc as a
component of stockholders' equity which was not conveyed to the Partnership
as part of the July 2, 1996 Partnership Conveyance. Receivables from SEPSCO
were classified as a component of stockholders' equity though June 1995 at
which time the aggregate receivables were dividended to SEPSCO (see Note 13
to the accompanying consolidated financial statements).

(h) EBITDA is defined as operating income (loss) plus depreciation and
amortization (excluding amortization of deferred financing costs). 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 a measure
of performance or financial condition under generally accepted accounting
principles, but provides additional information for evaluating the
Partnership's ability to distribute the Minimum Quarterly Distribution.
Cash flows in accordance with generally accepted accounting principles
consist of cash flows from (i) operating, (ii) investing and (iii)
financing activities. Cash flows from operating activities reflect net
income (loss) (including charges for interest and income taxes not
reflected in EBITDA), adjusted for (i) all non-cash charges or income
(including, but not limited to, depreciation and amortization) and (ii)
changes in operating assets and liabilities (not reflected in EBITDA).
Further, cash flows from investing and financing activities are not
included in EBITDA. For a discussion of National's operating performance
and cash flows provided by (used in) operating, investing and financing
activities, see 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'

(i) National's capital expenditures, including capital leases, fall generally
into three categories: (i) maintenance capital expenditures, which include
expenditures for replacement of property, plant and equipment, (ii) growth
capital expenditures for the expansion of existing operations and (iii)
acquisition capital expenditures, which include expenditures related to the
acquisition of retail propane operations. An analysis by category for the
years ended December 31, 1995, 1996 and 1997 is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance................................................ $ 4,030(1) $ 3,108 $ 2,806
Growth..................................................... 4,936 3,922 4,987
Acquisition................................................ 2,047(2) 838 3,753
------- ------- -------
Total............................................ $11,013 $ 7,868 $11,546
------- ------- -------
------- ------- -------
</TABLE>

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

(1) Includes the purchase of an airplane for $590.

(2) Includes $1,864 of assets purchased and contributed by
Triarc (see Note 19 to the accompanying consolidated
financial statements).

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

CERTAIN STATEMENTS SET FORTH BELOW UNDER THIS CAPTION CONSTITUTE
'FORWARD-LOOKING STATEMENTS' WITHIN THE MEANING OF THE REFORM ACT. SEE 'SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS' ON PAGE ONE FOR
ADDITIONAL FACTORS RELATING TO SUCH STATEMENTS.

This 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' reflects the results of National Propane Corporation and
subsidiaries ('National Propane') through June 30, 1996 and of National Propane
Partners, L.P. (the 'Partnership'), a subsidiary partnership National Propane
L.P. (the 'Operating Partnership') and a subsidiary National Sales & Service,
Inc. ('NSSI' and together with the Partnership and the Operating Partnership,
the 'Partnership Entities'), as successor to the continuing business of National
Propane, thereafter. The Partnership was formed on March 13, 1996 to acquire,
own and operate National Propane's propane business and substantially all of the
related assets of National Propane. The Partnership's activities are conducted
through the Operating Partnership and NSSI. The entity representative of both
the operations of (i) National Propane prior to the Partnership Conveyance and
(ii) the Partnership Entities subsequent to the Partnership Conveyance is
referred to herein as 'National'. On July 2, 1996 (effective July 1, 1996),
National Propane and a subsidiary conveyed substantially all of their propane
related assets and liabilities (other than amounts due from a parent, deferred
financing costs and income tax liabilities) to the Operating Partnership.
Because such conveyance was a transfer of assets and liabilities in exchange for
partnership interests among a controlled group of companies, it has been
accounted for in a manner similar to a pooling of interests. Further, results of
operations of National Propane prior to June 29, 1995 have been restated to
reflect the effects of the June 29, 1995 merger (the 'Merger') of Public Gas
Company ('Public Gas') with and into National Propane. Because the Merger was a
transfer of assets and liabilities in exchange for shares among a controlled
group of companies, it has been accounted for in a manner similar to a pooling
of interests. See Note 1 to the consolidated financial statements included
elsewhere herein for a further discussion of the basis of presentation of the
consolidated financial statements and the Partnership Conveyance and see Note 3
to the consolidated financial statements for further discussion of the Merger.

GENERAL

National is primarily engaged in (i) the retail marketing of propane to
residential customers, commercial and industrial customers, agricultural
customers and to dealers that resell propane to residential and commercial
customers, and (ii) the retail marketing of propane-related supplies and
equipment, including home and commercial appliances. National believes it is the
sixth largest retail marketer of propane in terms of retail volume in the United
States, supplying approximately 250,000 active retail and wholesale customers in
24 states through its 159 full service centers. National's operations are
concentrated in the Midwest, Northeast, Southeast and West regions of the United
States.

National's residential and commercial customers use propane primarily for
space heating, water heating, clothes drying and cooking. In the industrial
market, propane is used as a motor fuel for over-the-road vehicles, forklifts
and stationary engines, to fire furnaces, as a cutting gas and in other process
applications. Agricultural customers use propane for tobacco curing, crop
drying, poultry brooding and

weed control. Dealers re-market propane in small quantities, primarily in
cylinders, for residential and commercial uses.

The retail propane sales volumes are dependent on weather conditions.
National sells approximately 65% of its retail volume during the first and
fourth quarters, which are the winter heating season. As a result, cash flow is
greatest during the first and fourth quarters as customers pay for their
purchases. Propane sales are also dependent on climatic conditions which may
affect agricultural regions. National believes that its exposure to regional
weather patterns is lessened because of the geographic diversity of its areas of
operations and through sales to commercial and industrial markets, which are not
as sensitive to variations in weather conditions.

Gross profit margins are not only affected by weather patterns but also by
changes in customer mix. In addition, gross profit margins vary by geographical
region. Accordingly, profit margins could vary significantly from year to year
in a period of similar sales volumes.

National reports on a calendar year basis; accordingly its results are
affected by two different winter heating seasons: the end of the first year's
heating season, National's first fiscal quarter, and the beginning of the second
heating season, National's fourth fiscal quarter.

Profitability is also affected by the price and availability of propane.
Worldwide availability of both gas liquids and oil affects the supply of propane
in domestic markets. National does not believe it is overly dependent on any one
supplier. National primarily buys propane on both one year contracts and the
spot market and generally does not enter into any fixed price take-or-pay
contracts. Furthermore, National purchases propane from a wide variety of
sources. In 1997, no provider supplied over 16% of National's propane needs.

Based on demand and weather conditions the price of propane can change
quickly over a short period of time; in most cases the increased cost of propane
is passed on to the customer. However, in cases where increases cannot be passed
on or when the price of propane escalates faster than the Partnership's ability
to raise customer prices, margins will be negatively affected.

The propane industry is very competitive. National competes against other
major propane companies as well as local marketers in most of its markets, with
the highest concentration of competitors in the Midwest United States. Propane
also competes against other energy sources, primarily natural gas, oil and
electricity.

The following discussion compares the results of operations for the year
ended December 31, 1997 with the year ended December 31, 1996, and the year
ended December 31, 1996 with the year ended December 31, 1995.

RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1997
COMPARED TO YEAR ENDED DECEMBER 31, 1996

Revenues. Revenues declined $8.1 million, or 4.7% to $165.2 million for the
year ended December 31, 1997 as compared with $173.3 million for the year ended
December 31, 1996. This decrease consists of a $7.0 million, or 4.3%, decrease
in propane revenues and a $1.1 million, or 9.1%, decrease in revenues from other
product lines. The $7.0 million decrease in propane revenues was due to volume
decreases ($5.2 million) and decreased selling prices ($1.8 million). National's
propane sales volume decreased 5.2 million gallons, or 3.2% in 1997 to 155.3
million gallons compared with 160.5 million gallons in 1996 reflecting a
decrease of 10.4 million gallons sold to existing customers, primarily
residential. This decrease in sales to existing customers was partially offset
by an increase of 5.2 million gallons sold due to the acquisition of six propane
distributorships in 1997 and the full-year effect of two acquisitions in the
second half of 1996 (3.8 million gallons) and the opening of five new service
centers in 1997 (1.4 million gallons). This propane sales volume decrease to
residential customers is a result of the winter season in the first half of 1997
being 6.8% warmer than the winter season in the first half of 1996 according to
Degree Day data, published by the National Climatic Data Center, as applied to
the geographic regions of National's operations. In addition, record high
product cost caused customers to conserve in their use of propane and to shop
for lower prices, resulting in some residential customer turnover and losses.
The decrease in selling prices is due to a shift in the customer mix toward
lower-priced non-residential accounts and lower product cost. Revenues from
other product lines decreased $1.1 million due to (i) decreased terminal
sublease income due to the warm winter season, (ii) decreased

equipment rental charges in certain market areas due to competitive conditions
and (iii) decreased appliance sales.

Gross Profit. Gross profit declined $6.1 million, or 15.0%, to $34.5
million in 1997 compared with $40.6 million in 1996. The gross profit decrease
is attributable to (i) lower propane sales volume in 1997 compared with 1996
($2.5 million), (ii) a decrease in average margin per gallon (the spread between
the sales price and the direct product cost) ($0.2 million), (iii) an increase
in operating expenses attributable to revenues ($2.6 million) and (iv) a
decrease in other gross profit from other product lines ($0.8 million). The
decrease in the average margin per gallon is due to a shift in the customer mix
toward lower-margin non-residential customers ($1.9 million) partially offset by
increased average margin per gallon as the cost of propane declined during 1997
($1.7 million). Operating expenses attributable to revenues increased $2.6
million, or 5.8%, to $47.3 million in 1997 compared to $44.7 million in 1996 due
to a non-recurring charge of $1.1 million for severance benefits in the fourth
quarter of 1997 and increases in payroll, vehicle and depreciation expenses.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.7 million, or 7.4%, to $24.6 million in
1997 compared with $22.9 million in 1996. The increase is primarily a result of
increased professional fees, amortization of intangibles due to the six propane
distributorships acquired during 1997 and the 1997 full year effect of the
stand-alone operating costs incurred by the Partnership partially offset by
decreases in advertising and provision for doubtful accounts.

Management Fees. Management fees formerly paid to Triarc were eliminated
upon the commencement of the operations of the Partnership and the Partnership
Conveyance on July 2, 1996.

Interest Expense. Interest expense increased $0.5 million, or 4.2%, to
$12.6 million in 1997 compared with $12.1 million in 1996. This increase was due
to higher average borrowings, primarily for acquisitions, partially offset by
lower average interest rates.

Interest Income from Triarc. Interest income from Triarc increased $2.7
million, or 99.5%, to $5.5 million in 1997 compared with $2.8 million in 1996
due to the full year effect of interest on the Partnership Loan.

Other Income, Net. Other income, net increased $0.4 million due to an
increase in gains on asset sales.

Provision for Income Taxes. The Partnership Entities are not tax paying
entities except for NSSI. As such, the 1996 provision for income taxes relates
primarily to National's operations prior to the Partnership Conveyance. The
provision for income taxes for the second half of 1996 and the year ended
December 31, 1997 does not reflect a tax provision relating to the earnings of
the Partnership and the Operating Partnership.

Extraordinary Charge. The extraordinary charge of $2.6 million in 1996 is
the result of the early extinguishment of $128.5 million of existing
indebtedness and consists of the write-off of deferred financing costs of $4.1
million and prepayment penalties of $0.2 million, net of income tax benefit of
$1.7 million.

RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1996
COMPARED TO YEAR ENDED DECEMBER 31, 1995

Revenues. Revenues increased $24.3 million, or 16.3%, to $173.3 million for
the year ended December 31, 1996 as compared with $149.0 million for the year
ended December 31, 1995. This increase consists of a $25.2 million increase in
propane revenues partially offset by a $0.9 million decrease in revenues from
other product lines. Propane revenues increased 18.5% to $161.5 million in 1996
as compared to $136.3 million in 1995. The $25.2 million increase in propane
revenues was due to increased selling prices of $15.8 million and volume
increases of $9.4 million. The increase in selling prices consisted of increases
due to increased costs ($19.0 million), partially offset by decreases due to a
shift in the customer mix toward lower-priced non-residential accounts ($3.2
million). The propane sales volume increase reflects an increase of 10.4 million
gallons, or 6.9%, in 1996 to 160.5 million gallons compared with 150.1 million
gallons in 1995. The increase in gallons sold in 1996 was primarily to non-
residential customers as gallons sold to residential customers remained
relatively unchanged, in spite of

the fact that Degree Day data as applied to the geographic regions of National's
operations, indicated that the year ended December 31, 1996 was 5.2% colder than
1995.

Gross Profit. Gross profit increased $0.7 million, or 1.7%, to $40.6
million in 1996 compared with $39.9 million in 1995. Higher propane sales
volumes contributed an additional $5.1 million of gross profit in 1996.
Offsetting the volume increase was a decrease of $2.5 million due to a decrease
in the average margin per gallon sold in 1996 to 47.3% as compared with 54.1% in
1995. This lower margin was due to (i) a shift in customer mix toward
lower-priced non-residential accounts and (ii) an increase in product costs
which could not be fully passed on to certain customers in the form of higher
selling prices. During 1996 the average cost per gallon of propane increased
over 27% as compared to 1995. Contributing to this unusual increase in propane
costs were lower than normal inventories at the beginning of the heating season;
higher than average use for crop drying in 1996; higher exports to Mexico due to
the shut down of a major Mexican gas plant; and heavy consumption during the
summer of 1996 by chemical companies which use propane as a raw material. Also,
offsetting the increase in gross profit due to sales volume were higher
operating expenses ($1.2 million) attributable to the cost of fuel (propane) for
delivery vehicles and the costs associated with the start up of six new propane
plants which began operations during the last quarter of 1995 and the first half
of 1996. These plants had not yet achieved sufficient sales volumes in 1996 to
make a positive contribution to gross profit. Gross profit from other product
lines also decreased $0.6 million in 1996 as compared to 1995.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 2.1% or $0.5 million to $22.9 million in 1996
compared with $22.4 million in 1995, as increases in the provision for doubtful
accounts, business taxes and rent expense as well as stand-alone costs
associated with the Partnership effective July 2, 1996 were partially offset by
decreased training costs associated with a new computer system incurred in 1995
and a decrease in advertising expenses.

Management Fees. Management fees decreased $1.5 million to $1.5 million in
1996 compared to $3.0 million in 1995 due to management fees being eliminated
upon the commencement of the operations of the Partnership and the Partnership
Conveyance on July 2, 1996.

Interest Expense. Interest expense increased $0.4 million, or 3.0%, to
$12.1 million in 1996 compared with $11.7 million in 1995. This increase was due
to higher average borrowings partially offset by lower average interest rates
and lower amortization of deferred financing costs, primarily due to a longer
commitment period.

Interest Income from Triarc. Interest income from Triarc in 1996 is due to
interest on the Partnership Loan.

Other Income, Net. Other income, net decreased $0.1 million due to a
decrease in gains on asset sales.

Provision for Income Taxes. The provision for income taxes in 1996 and 1995
is related primarily to National's operations prior to the Partnership
Conveyance. The 1996 provision for income taxes decreased since the second half
of 1996 does not reflect a tax provision relating to the earnings of the
Partnership and the Operating Partnership.

Extraordinary Charge. The extraordinary charge of $2.6 million in 1996 is
discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities of $20.4 million in 1997 consisted of
(i) net income of $3.8 million, (ii) non-cash charges of $14.5 million,
principally depreciation and amortization and (iii) a $2.1 million decrease in
net working capital. The decrease in working capital is primarily due to lower
propane sales volumes and lower prices which caused decreased levels of accounts
receivable and inventories, partially offset by decreased accounts payable due
to lower propane costs.

Cash used in investing activities for 1997 amounted to $14.7 million,
reflecting capital expenditures and business acquisitions. Capital expenditures
amounted to $7.8 million of which $5.0 million was to support the growth of
operations, including $1.7 million to support the development of new scratch
plants, and $2.8 million was for recurring maintenance capital to support
current business levels. National expects to have total capital expenditures in
1998 of approximately $4.5 million consisting of $2.0 million for maintenance
and $2.5 million for growth. Such capital expenditures will be funded by

cash flow from operations and existing credit lines. At December 31, 1997
National had outstanding commitments of $0.8 million for such capital
expenditures. During 1997 National acquired the assets of six propane
distributors for an aggregate of $9.2 million including $8.5 million of cash. In
January, 1998 National acquired the assets of another propane distributor for
$0.3 million of cash.

Cash used in financing activities of $12.3 million in 1997 consisted of
distributions paid to unitholders of $24.6 million partially offset by net
proceeds of long-term debt of $12.3 million.

Total partners' capital at December 31, 1997 was $13.5 million as compared
with $34.1 million at December 31, 1996. The decrease of $20.6 million
principally reflects distributions paid of $24.6 million partially offset by net
income of the Partnership of $3.8 million.

The Partnership maintains a bank facility (the 'Bank Facility') with a
group of banks which, as amended, provides for a $15 million working capital
facility to be used for working capital and other general partnership purposes
and a $20 million acquisition facility, the use of which is restricted to
business acquisitions and capital expenditures for growth. At December 31, 1997,
$8.5 million and $12.0 million were outstanding under the working capital
facility and the acquisition facility, respectively. The acquisition facility
does not amortize prior to its conversion to a term loan in July, 1999 after
which time any loans outstanding will amortize in equal quarterly installments
over three years. The working capital facility matures in full on June 30, 1999.
National must reduce the borrowings under the working capital facility to zero
for a period of at least 30 consecutive days in each year between March 1 and
August 31 (the 'Principal Paydown'). There are no scheduled principal repayments
until 2003 with respect to the First Mortgage Notes.

The Operating Partnership's obligations under both the First Mortgage Notes
and the Bank Facility are secured on an equal and ratable basis by substantially
all of the assets of the Operating Partnership and are guaranteed by the
Managing General Partner.

The Partnership's principal cash requirements for 1998 are maintenance
capital expenditures (currently budgeted at $2.0 million for the year ending
December 31, 1998), funds for growth capital expenditures (currently budgeted at
$2.5 million for the year ending December 31, 1998), business acquisitions and
the Principal Paydown. The Partnership expects to meet such requirements through
a combination of cash flows from operations, the availability under the Bank
Facility and the $5.5 million of interest income on the Partnership Loan.

The Partnership distributes to its partners on a quarterly basis, all of
its Available Cash. Available Cash, which is defined in the Partnership
Agreement, generally means, with respect to any quarter of the Partnership, all
cash on hand at the end of such quarter less the amount of cash reserves that is
necessary or appropriate in the discretion of the Managing General Partner to
(i) provide for the proper conduct of the Partnership's business, (ii) comply
with applicable law or any Partnership debt instrument or other agreement, or
(iii) provide funds for distributions to Unitholders and the General Partners in
respect of any one or more of the next four quarters.

On February 14, 1997, May 15, 1997, August 14, 1997 and November 14, 1997
National paid quarterly distributions for the quarters ended December 31, 1996,
March 31, 1997, June 30, 1997 and September 30, 1997 to Unitholders of record on
February 5, 1997, May 8, 1997, August 7, 1997 and November 6, 1997,
respectively, each consisting of $0.525 per Common and Subordinated Unit, with a
proportionate amount for the 4% Unsubordinated General Partners' interest, or an
aggregate of $6,143,000 each quarter including $2,625,000 to the General
Partners related to the Subordinated Units and the 4% unsubordinated General
Partners' interest. On February 13, 1998 National paid a quarterly distribution
for the quarter ended December 31, 1997 of $0.525 per Common and Subordinated
Unit to Unitholders of record on February 5, 1998, with a proportionate amount
for the 4% unsubordinated General Partners' interest or an aggregate of
$6,143,000, including $2,625,000 to the General Partners related to the
Subordinated Units and the unsubordinated General Partners' interest.

Distributions of Available Cash to the holder of the Subordinated Units are
subject to the prior rights of the holders of Common Units to receive Minimum
Quarterly Distributions for each quarter during the subordination period, as
defined, and any arrearages in the distribution of Minimum Quarterly
Distributions on the Common Units for prior quarters during the subordination
period. However, the Managing General Partner has agreed to forego any
additional distributions on the Subordinated Units in order to facilitate the
Partnership's compliance with a covenant restriction

contained in the Bank Facility. Such distributions on the Subordinated Units
will be resumed when their payment will not impact compliance with such
covenant. Accordingly, the Partnership does not expect to pay any additional
distributions on the Subordinated Units for the remainder of 1998. For a more
detailed discussion regarding restrictions on the Partnership's distributions,
see Note 5 to the consolidated financial statements included elsewhere herein.

CONTINGENCIES

In May 1994, National Propane was informed of coal tar contamination which
was discovered at one of its properties in Wisconsin. National Propane purchased
the property from a company (the 'Successor') which had purchased the assets of
a utility that had previously owned the property. National Propane believes that
the contamination occurred during the use of the property as a coal gasification
plant by such utility. To assess the extent of the problem, National Propane
engaged environmental consultants in 1994. Based upon the information compiled
to date, which is not yet complete, it appears the likely remedy will involve
treatment of groundwater and the soil, including installation of a soil cap and,
if necessary, excavation, treatment and disposal of contaminated soil. The
environmental consultants' current range of estimated costs for remediation is
from $0.7 million to $1.7 million. National Propane will have to agree upon the
final remediation plan with the State of Wisconsin. Accordingly, the precise
remediation method to be used is unknown. Based on the preliminary results of
the ongoing investigation, there is a potential that the contaminant plume may
extend to locations down gradient from the original site. If it is ultimately
confirmed that the contaminant plume extends under such properties and if such
plume is attributable to the contaminants emanating from the Wisconsin property,
there is the potential for future third-party claims. National Propane has
engaged in discussions of a general nature with the Successor who has denied any
liability for the costs of remediation of the Wisconsin property or of
satisfying any related claims. However, National Propane, if found liable for
any of such costs, would still attempt to recover such costs from the Successor.
National Propane has notified its insurance carriers of the contamination and
the likely incurrence of costs to undertake remediation and the possibility of
related claims. Pursuant to a lease related to the Wisconsin facility, the
ownership of which was not transferred by National Propane to the Operating
Partnership at the time of the closing of the Offering, the Partnership has
agreed to be liable for any costs of remediation in excess of amounts received
from the Successor and from insurance. Because the remediation method to be used
is unknown, no amount within the cost ranges provided by the environmental
consultants can be determined to be a better estimate. Thus National has a
remaining accrual of approximately $0.7 million as of December 31, 1997, all of
which was provided in prior years, for the minimum costs estimated for the
anticipated remediation method. The ultimate outcome of this matter cannot
presently be determined and the costs of remediation and third-party claims, if
any, may have a material adverse effect on the Partnership's financial position,
results of operations or ability to make the distributions to the holders of its
Common Units and Subordinated Units.

some cases punitive damages, arising from the alleged negligence of National or
as a result of product defects or similar matters. Of the pending or threatened
matters, a number involve property damage, and several involve serious personal
injuries or deaths and the claims made are for relatively large amounts.
Although any litigation is inherently uncertain, based on past experience, the
information currently available to it and the availability of insurance coverage
in certain matters, the Partnership does not believe that the pending or
threatened litigation of which the Partnership is aware will have a material
adverse effect on its results of operations or its financial condition. However,
any one or all of these matters taken together may adversely affect the
Partnership's quarterly or annual results of operations and may limit the
Partnership's ability to make distributions to its Unitholders.

INFLATION AND CHANGING PRICES

In general, inflation has not had any significant impact on National in
recent years since inflation rates generally remained at relatively low levels
and changes in propane prices, in particular, have been dependent on factors
generally more significant than inflation, such as weather and availability of
supply. However, to the extent inflation affects the amounts National pays for
propane as well as operating and administrative expenses, National attempts to
limit the effects of inflation through passing on propane cost increases to
customers in the form of higher selling prices to the extent it can do so as
well as cost controls and productivity improvements. As such, inflation has not
had a material adverse effect on National's profitability and National does not
believe normal inflationary pressures will have a material adverse effect on
future results of operations of National.

YEAR 2000

The Partnership has undertaken a study of its functional application
systems to determine their compliance with year 2000 issues and, to the extent
of noncompliance, the required remediation. An assessment of the readiness of
third-party entities with which the Partnership has relationships, such as its
suppliers, customers, payroll processors and others, is ongoing. As a result of
such study, the Partnership believes the majority of its systems are year 2000
compliant. However, certain systems, which are significant to the Partnership,
require remediation. The Partnership currently estimates it will complete the
required remediation by the end of the first half of 1999. The current estimated
cost of such remediation is not expected to be material. Such costs, other than
software, will be expensed as incurred.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997 the Financial Accounting Standards Board (the 'FASB') issued
Statement of Financial Accounting Standards ('SFAS') No. 130 ('SFAS 130')
'Reporting Comprehensive Income'. SFAS 130 requires that all items which are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Comprehensive income is
defined as the change in equity during a period exclusive of partner investments
and distributions to partners. For the Partnership, in addition to net income
(loss), comprehensive income includes the amortization of unearned compensation.
In June 1997 the FASB also issued SFAS No. 131 ('SFAS 131') 'Disclosures about
Segments of an Enterprise and Related Information' which supersedes SFAS No. 14
'Financial Reporting for Segments of a Business Enterprise'. SFAS 131 requires
disclosure in the Partnership's consolidated financial statements (including
quarterly condensed consolidated financial statements) of financial and
descriptive information by operating segment as used internally for evaluating
segment performance and deciding how to allocate resources to segments. SFAS 130
and SFAS 131 are effective for the Partnership's fiscal year beginning January
1, 1998 (exclusive of the quarterly segment data under SFAS 131 which is
effective the following fiscal year) and require comparative information for
earlier periods presented. The application of the provisions of both SFAS 130
and SFAS 131 will require an additional financial statement and may result in
new segment disclosures but will not have any effect on the Partnership's
reported consolidated financial position and results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Independent Auditors' Report............................................................................... 23

Consolidated Balance Sheets -- December 31, 1996 and 1997.................................................. 24

Consolidated Statements of Operations -- Years ended December 31, 1995, 1996 and 1997...................... 25

Consolidated Statements of Partners' Capital/Stockholders' Deficit -- Years ended December 31, 1995, 1996
and 1997................................................................................................. 26

Consolidated Statements of Cash Flows -- Years ended December 31, 1995, 1996 and 1997...................... 27

Notes to Consolidated Financial Statements................................................................. 29
</TABLE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Partners of
NATIONAL PROPANE PARTNERS, L.P.:

We have audited the accompanying consolidated balance sheets of National
Propane Partners, L.P. and subsidiaries (successor to National Propane
Corporation and subsidiaries) as of December 31, 1996 and 1997, and the related
consolidated statements of operations, partners' capital/stockholders' deficit
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements give retroactive effect to the
1995 merger of Public Gas Company, which has been accounted for as a combination
of entities under common control in a manner similar to a pooling of interests
as described in Notes 1 and 3 to the consolidated financial statements.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of National Propane Partners, L.P.
and subsidiaries (successor to National Propane Corporation and subsidiaries) at
December 31, 1996 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Cedar Rapids, Iowa
March 30, 1998

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets (Note 11):
Cash and cash equivalents............................................................ $ 11,187 $ 4,616
Receivables, net (Note 6)............................................................ 24,217 13,955
Finished goods inventories........................................................... 14,130 9,599
Other current assets (Note 12)....................................................... 2,268 1,990
-------- --------
Total current assets............................................................ 51,802 30,160
Note receivable from Triarc Companies, Inc. (Notes 11 and 13)............................. 40,700 40,700
Properties, net (Notes 7 and 11).......................................................... 80,634 80,346
Unamortized costs in excess of net assets of acquired companies
(Notes 8, 18 and 19).................................................................... 14,601 17,616
Other assets (Notes 9, 11 and 12)......................................................... 8,671 8,415
-------- --------
$196,408 $177,237
-------- --------
-------- --------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt (Note 11).......................................... $ 6,312 $ 9,235
Accounts payable..................................................................... 15,859 5,877
Accrued expenses (Note 10)........................................................... 10,103 7,866
-------- --------
Total current liabilities....................................................... 32,274 22,978
Long-term debt (Note 11).................................................................. 128,044 138,131
Customer deposits and other long-term liabilities......................................... 2,027 2,674
Commitments and contingencies (Notes 2, 5, 12, 16, and 17)
Partners' capital (Notes 5, 11 and 20):
Common partners' capital (6,701,550 units outstanding in 1996 and 1997).............. 22,165 10,362
General partners' capital (including 4,533,638 subordinated units outstanding in 1996
and 1997)........................................................................... 11,898 3,092
-------- --------
Total partners' capital......................................................... 34,063 13,454
-------- --------
$196,408 $177,237
-------- --------
-------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS EXCEPT FOR UNIT
DATA)
<S> <C> <C> <C>
Revenues.................................................................. $148,983 $173,260 $165,169
-------- -------- --------
Cost of sales:
Cost of product -- propane and appliances............................ 65,563 87,973 83,429
Other operating expenses applicable to revenues...................... 43,496 44,705 47,251
-------- -------- --------
109,059 132,678 130,680
-------- -------- --------
Gross profit.................................................... 39,924 40,582 34,489

Selling, general and administrative expenses.............................. 22,423 22,894 24,646
Management fees (Note 19)................................................. 3,000 1,500 --
-------- -------- --------
Operating income................................................ 14,501 16,188 9,843
-------- -------- --------

Other income (expense):
Interest expense..................................................... (11,719) (12,076) (12,579)
Interest income from Triarc Companies, Inc. (Note 13)................ -- 2,755 5,495
Other income, net.................................................... 904 817 1,216
-------- -------- --------
(10,815) (8,504) (5,868)
-------- -------- --------
Income before income taxes and extraordinary charge............. 3,686 7,684 3,975
Provision for income taxes (Note 12)...................................... 4,291 1,937 127
-------- -------- --------
Income (loss) before extraordinary charge....................... (605) 5,747 3,848
Extraordinary charge (Note 14)............................................ -- (2,631) --
-------- -------- --------
Net income (loss).................................................... $ (605) $ 3,116 $ 3,848
-------- -------- --------
-------- -------- --------
General partners' interest in:
Income before extraordinary charge................................... $ 2,751 $ 154
Extraordinary charge................................................. (2,631) --
-------- --------
Net income...................................................... $ 120 $ 154
-------- --------
-------- --------
Unitholders' interest (common and subordinated) in net income............. $ 2,996 $ 3,694
-------- --------
-------- --------
Net income per unit -- basic and diluted (Note 1)......................... $ .27 $ .33
-------- --------
-------- --------
Weighted average number of units outstanding.............................. 10,954,753 11,235,188
---------- ----------
---------- ----------
</TABLE>

See accompanying notes to consolidated financial statements.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL/STOCKHOLDERS' DEFICIT
(IN THOUSANDS)

<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
(ACCUMULATED PARTNERS'
ADDITIONAL DEFICIT)/GENERAL COMMON CAPITAL/
COMMON PAID-IN DUE FROM PARTNERS' PARTNERS' STOCKHOLDERS'
STOCK CAPITAL PARENTS CAPITAL CAPITAL DEFICIT
------ ---------- --------- ---------------- -------- -------------

<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994........................ $ 1 $ 32,164 $(113,330) $ 61,663 $ -- $ (19,502)
Net loss.................. -- -- -- (605) -- (605)
Cash dividends paid....... -- -- -- (30,000) -- (30,000)
Increase in due from
SEPSCO classified in
equity (Note 13)........ -- -- (2,599) -- -- (2,599)
Dividend of due from
SEPSCO (Note 13)........ -- -- 34,537 (34,537) -- --
Capital contribution (Note
19)..................... -- 4,240 -- -- -- 4,240
Repurchase of the 0.3%
minority interest in
Public Gas (Note 3)..... -- (134) -- -- -- (134)
------ ---------- --------- -------- -------- -------------
Balance at December 31,
1995........................ 1 36,270 (81,392) (3,479) -- (48,600)
Net income:
January 1, 1996 to June
30, 1996.............. -- -- -- 2,625 -- 2,625
July 1, 1996 to December
31, 1996:
Income before
extraordinary
charge............ -- -- -- 1,293 1,829 3,122
Extraordinary
charge............ -- -- -- (2,631) -- (2,631)
Assets/(liabilities)
retained by the Managing
General Partner (Notes 1
and 13)................. (1 ) (36,270) 81,392 (25,413) -- 19,708
Dividends paid (including
$59,300 in cash) (Note
1)...................... -- -- -- (59,324) -- (59,324)
Capital contribution from
General Partners........ -- -- -- 338 -- 338
Net proceeds of initial
public offering (Note
1)...................... -- -- -- 101,105 16,277 117,382
Net proceeds of private
equity placement (Note
1)...................... -- -- -- -- 7,367 7,367
Cash distributions paid
(Note 5)................ -- -- -- (2,616) (3,308) (5,924)
------ ---------- --------- -------- -------- -------------
Balance at December 31,
1996........................ -- -- -- 11,898 22,165 34,063
Net income................ -- -- -- 1,644 2,204 3,848
Cash distributions paid
(Note 5)................ -- -- -- (10,499) (14,073) (24,572)
Amortization of unearned
compensation on below
market unit options
(Note 20)............... -- -- -- 49 66 115
------ ---------- --------- -------- -------- -------------
Balance at December 31,
1997........................ $-- $ -- $ -- $ 3,092 $ 10,362 $ 13,454
------ ---------- --------- -------- -------- -------------
------ ---------- --------- -------- -------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $ (605) $ 3,116 $ 3,848
Adjustments to reconcile net income (loss) to
net cash
and cash equivalents provided by operating
activities:
Depreciation and amortization of
properties................................ 9,546 10,016 10,594
Amortization of deferred financing
costs..................................... 1,305 841 854
Amortization of costs in excess of net
assets of acquired companies.............. 617 722 874
Other amortization........................ 482 395 811
Write-off of deferred financing costs..... -- 4,126 --
Provision for (benefit from) deferred
income taxes.............................. 1,995 (870) (52)
Provision for doubtful accounts........... 848 1,347 1,147
Other, net................................ (79) 69 241
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable......................... (56) (9,028) 9,378
Decrease (increase) in inventories.... (286) (3,475) 4,665
Decrease (increase) in other current
assets............................. (662) (2,283) 281
Increase (decrease) in accounts
payable and accrued expenses....... 2,823 9,294 (12,229)
------- -------- --------
Net cash provided by operating
activities..................... 15,928 14,270 20,412
------- -------- --------
Cash flows from investing activities:
Business acquisitions......................... (373) (2,046) (8,480)
Capital expenditures.......................... (8,082) (6,740) (7,793)
Proceeds from sales of properties............. 599 317 1,591
Increase in due from parents.................. (1,643) -- --
Other......................................... 32 -- --
------- -------- --------
Net cash used in investing
activities..................... (9,467) (8,469) (14,682)
------- -------- --------
Cash flows from financing activities:
Proceeds from long-term debt.................. 32,729 12,685 12,612
Repayments of long-term debt.................. (9,532) (139,114) (341)
Payments of distributions..................... -- (5,924) (24,572)
Payments of dividends to Triarc Companies,
Inc.......................................... (30,000) (59,300) --
Proceeds of First Mortgage Notes.............. -- 125,000 --
Net proceeds of initial public offering....... -- 117,382 --
Net proceeds of private placement of equity... -- 7,367 --
Capital contribution from General Partners.... -- 338 --
Advances to and repayments of obligations to
Triarc Companies, Inc........................ -- (49,246) --
Payment of deferred financing costs........... (816) (6,600) --
Other......................................... -- (27) --
------- -------- --------
Net cash provided by (used in)
financing activities........... (7,619) 2,561 (12,301)
------- -------- --------

Net increase (decrease) in cash and cash
equivalents..................................... (1,158) 8,362 (6,571)
Cash and cash equivalents at beginning of year.... 3,983 2,825 11,187
------- -------- --------
Cash and cash equivalents at end of year.......... $ 2,825 $ 11,187 $ 4,616
------- -------- --------
------- -------- --------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................................... $11,158 $ 13,337 $ 11,647
------- -------- --------
------- -------- --------
Income taxes (net of refunds)............... $ 1,261 $ (258) $ 189
------- -------- --------
------- -------- --------
Supplemental disclosures of noncash investing and
financing activities:
Capital expenditures:
Total capital expenditures................ $ 8,966 $ 6,981 $ 7,793
Amounts representing capitalized leases... (884) (241) --
------- -------- --------
Capital expenditures paid in cash......... $ 8,082 $ 6,740 $ 7,793
------- -------- --------
------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

Due to their non-cash nature, the following are not reflected in the
respective consolidated statements of cash flows:

In June 1995 aggregate receivables from Southeastern Public Service Company
('SEPSCO'), a wholly owned subsidiary of Triarc Companies, Inc. ('Triarc'), of
$34,537,000 were dividended to SEPSCO prior to a merger of Public Gas Company
('Public Gas') with and into National Propane Corporation (see Note 3).

In September 1995 the stock of a subsidiary of Triarc which held the stock
of two related entities engaged in the liquefied petroleum gas distribution
business was contributed to National Propane Corporation by Triarc resulting in
an increase to 'Additional paid-in capital' of $4,240,000. See Note 19 to the
consolidated financial statements for further discussion.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

National Propane Partners, L.P. (the 'Partnership') was formed on March 13,
1996 as a Delaware limited partnership. The Partnership and its subsidiary
partnership National Propane, L.P. (the 'Operating Partnership') were formed to
acquire, own and operate the propane business and substantially all the assets
and liabilities (principally all assets and liabilities other than amounts due
from a parent, deferred financing costs and income tax liabilities) of National
Propane Corporation and subsidiaries ('National Propane', and referred to
subsequent to the initial public offering (described below) as the 'Managing
General Partner'), a wholly-owned subsidiary of Triarc Companies, Inc.
('Triarc'). In addition, National Sales & Service, Inc. ('NSSI'), a subsidiary
of the Operating Partnership, was formed to acquire and operate the service work
and appliance and parts sales business of National Propane. The Partnership, the
Operating Partnership and NSSI are collectively referred to hereinafter as the
'Partnership Entities'. The Partnership Entities consummated in July, 1996, an
initial public offering (the 'Offering') of 6,301,550 common units representing
limited partner interests in the Partnership (the 'Common Units') for an
offering price of $21.00 per Common Unit aggregating $132,333,000 before
$14,951,000 of underwriting discounts and commissions and other expenses related
to the Offering. On November 6, 1996 the Partnership sold an additional 400,000
Common Units through a private placement (the 'Equity Private Placement') at a
price of $21.00 per Common Unit aggregating $8,400,000 before $1,033,000 of fees
and expenses. On July 2, 1996 the Managing General Partner issued in a private
placement $125,000,000 of 8.54% First Mortgage Notes due June 30, 2010 (the
'First Mortgage Notes'). The Operating Partnership assumed the Managing General
Partner's obligation under the First Mortgage Notes in connection with the
conveyance on July 2, 1996 (the 'Partnership Conveyance') by the Managing
General Partner and National Propane SGP Inc., a subsidiary of the Managing
General Partner (the 'Special General Partner' and, together with the Managing
General Partner, the 'General Partners'), of substantially all of their assets
and liabilities (excluding an existing $81,392,000 intercompany note from
Triarc, $59,300,000 of the net proceeds from the issuance of the First Mortgage
Notes which was used to pay a dividend to Triarc and certain net liabilities of
the General Partners).

The General Partners own general partner interests representing an
aggregate 4% unsubordinated general partner interest (the 'General Partners'
Interest') in the Partnership and the Operating Partnership on a combined basis.
In addition, the Managing General Partner owns 4,533,638 subordinated units (the
'Subordinated Units') representing a 38.7% subordinated general partner interest
in the Partnership Entities.

BASIS OF PRESENTATION

The accompanying consolidated financial statements presented herein reflect
the effects of the Partnership Conveyance,in which the Partnership Entities
became the successor to the businesses of National Propane. As such, the
consolidated financial statements represent National Propane prior to the
Partnership Conveyance and the Partnership Entities subsequent to the
Partnership Conveyance. Because the Partnership Conveyance was a transfer of
assets and liabilities in exchange for partnership interests among a controlled
group of companies, it has been accounted for in a manner similar to a pooling
of interests, resulting in the presentation of the Partnership Entities as the
successor to the continuing businesses of National Propane. The entity
representative of both the operations of (i) National Propane prior to the
Partnership Conveyance, and (ii) the Partnership Entities subsequent to the
Partnership Conveyance, is referred to herein as 'National'. Those assets and
liabilities not conveyed to the Partnership were retained by the Managing
General Partner. All significant intercompany balances and transactions have
been eliminated in consolidation.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The accompanying consolidated financial statements reflect the effects of
the June 1995 merger (the 'Merger') of Public Gas Company ('Public Gas') with
and into National (see Note 3). Prior thereto Public Gas was an indirect
wholly-owned subsidiary of Triarc. Because the Merger was a transfer of assets
and liabilities in exchange for shares among a controlled group of companies, it
has been accounted for in a manner similar to a pooling of interests and,
accordingly, the accompanying consolidated financial statements for 1995 have
been restated to reflect the Merger.

REVENUE RECOGNITION

National records sales of liquefied petroleum gas ('propane') when
inventory is delivered to the customer.

CASH EQUIVALENTS

All highly liquid investments with a maturity of three months or less when
acquired are considered cash equivalents.

INVENTORIES

Inventories, all of which are classified as finished goods, are stated at
the lower of cost or market using an average cost basis.

PROPERTIES AND DEPRECIATION

Properties are carried at cost less accumulated depreciation. Depreciation
of properties is computed on the straight-line method over their estimated
useful lives of 20 to 45 years for buildings and improvements, 4 to 30 years for
equipment and customer installation costs, 3 to 10 years for office furniture
and fixtures and 3 to 8 years for automotive and transportation equipment. Gains
and losses arising from disposals are included in current operations.

AMORTIZATION OF INTANGIBLES

Costs in excess of net assets of acquired companies ('Goodwill') arising
after November 1, 1970 are being amortized on the straight-line basis
principally over 15 to 30 years; Goodwill of $3,560,000 arising prior to that
date is not being amortized. Non-compete agreements are being amortized on the
straight-line basis over five years. Deferred financing costs are being
amortized as interest expense over the lives of the respective debt using the
interest rate method.

IMPAIRMENT

Intangible Assets

The amount of impairment, if any, in unamortized Goodwill is measured based
on projected future results of operations of those acquired companies to which
the goodwill relates. To the extent future results of operations through the
period such Goodwill is being amortized are sufficient to absorb the related
amortization, the Company has deemed there to be no impairment of Goodwill.

Long-Lived Assets

Effective October 1, 1995, National adopted Statement of Financial
Accounting Standards ('SFAS') No. 121, 'Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of'. This standard requires that
long-lived assets and certain identifiable intangibles held and

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.

ACCRUED INSURANCE

Accrued insurance includes reserves for incurred but not reported claims.
Such reserves are based on actuarial studies using historical loss experience.
Adjustments to recorded estimates resulting from subsequent actuarial
evaluations or ultimate payments are reflected in the operations of the periods
in which such adjustments become known.

INCOME TAXES

The earnings of the Partnership and Operating Partnership are included in
the Federal and state income tax returns of the individual partners. As a
result, no income tax expense has been reflected in National's consolidated
financial statements relating to the earnings of the Partnership and Operating
Partnership. Federal and state income taxes are, however, provided on the
earnings of NSSI. The Partnership Entities provide deferred income taxes to
recognize the effect of temporary differences between NSSI's basis of assets and
liabilities for tax and financial statement purposes. Federal and state income
tax expense for periods prior to the Partnership Conveyance relate to National
Propane, which is included in the consolidated Federal income tax return of
Triarc. Under a tax sharing agreement with Triarc, National Propane provided
income taxes on the same basis as if it filed a separate consolidated return.
National Propane provided deferred income taxes to recognize the effect of
temporary differences between the basis of assets and liabilities for tax and
financial statement purposes. In connection with the Partnership Conveyance, all
income tax liabilities of National Propane were retained by the Managing General
Partner.

UNIT OPTIONS

In 1996 National adopted SFAS No. 123, 'Accounting for Stock-Based
Compensation' ('SFAS 123'). SFAS 123 defines a fair value based method of
accounting for employee unit-based compensation and encourages adoption of that
method of accounting but permits accounting under the intrinsic value method
prescribed by an accounting pronouncement prior to SFAS 123. National has
elected to continue to measure compensation costs for its employee unit-based
compensation under the intrinsic value method. Accordingly, compensation cost
for National's unit options is measured as the excess, if any, of the market
price of National's units at the date of grant over the amount an employee must
pay to exercise the options.

NET INCOME PER UNIT

In the fourth quarter of 1997 the Company adopted SFAS No. 128 'Earnings
Per Share' ('SFAS 128'). This standard requires the presentation of 'basic' and
'diluted' earnings per share, which replace the 'primary' and 'fully diluted'
earnings per share measures required under prior accounting pronouncements.
Basic and diluted income per share are the same for 1996 and 1997 since the only
potentially dilutive securities are the unit options granted in 1997 which had
no impact on net income per unit in 1997. The income per unit has been computed
by dividing the net income, after deducting the General Partners' 4% interest,
by the weighted average number of outstanding Common Units and Subordinated
Units during the period. Although SFAS 128 requires restatement of all prior
periods, the standard has had no effect on the Partnership's reported income per
unit for 1996 since there were no potentially dilutive securities. The
extraordinary item in 1996 was allocated entirely to the Managing General
Partner.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FUTURES CONTRACTS AND PURCHASE COMMITMENTS

National uses commodity futures contracts to reduce the risk of future
price fluctuations for propane inventories and contracts. Gains and losses on
futures contracts purchased as hedges are deferred and recognized in cost of
sales as a component of the product cost for the related hedged transaction. In
the statement of cash flows, cash flows from qualifying hedges are classified in
the same category as the cash flows of the items being hedged. Net realized
gains and losses and unrealized gains and losses on open positions are not
material.

(2) SIGNIFICANT RISKS AND UNCERTAINTIES

NATURE OF OPERATIONS

National is engaged primarily in the retail marketing of propane to
residential customers, commercial and industrial customers, agricultural
customers and resellers. National also markets propane-related supplies and
equipment including home and commercial appliances. National's operations are
concentrated in the Midwest, Northeast, Southeast and West regions of the United
States.

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.

SIGNIFICANT ESTIMATES

National's significant estimates are for costs related to (i) insurance
loss reserves (see Note 1) and (ii) an environmental contingency (see Note 17).

CERTAIN RISK CONCENTRATIONS

National's significant risk concentration arises from propane being its
principal product. Both sales levels and costs of propane are sensitive to
weather conditions, particularly in the residential home heating market.
National's profitability depends on the spread between its cost for propane and
the selling price. National generally is able to pass on cost increases to the
customer in the form of higher selling prices. However, where increases cannot
be passed on, margins can be adversely affected. National is also impacted by
the competitive nature of the propane industry, as well as by competition from
alternative energy sources such as natural gas, oil and electricity.

Warren Petroleum Company ('Warren') supplied approximately 16% of
National's propane in 1997 and Amoco Oil Company ('Amoco') and Conoco Inc.
('Conoco') each supplied approximately 10%. National believes that if supplies
from Warren, Amoco or Conoco were interrupted, it would be able to secure
adequate propane supplies from other sources without a material disruption of
its operations; however, National believes that the cost of procuring
replacement supplies might be significantly higher, at least on a short-term
basis, which could negatively affect National's margins. No other single
supplier provided 10% or more of National's total propane purchases during 1997.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) PUBLIC GAS MERGER

Effective June 29, 1995, Public Gas, previously a wholly-owned subsidiary
of SEPSCO engaged in the propane business, was merged with and into National
(the 'Merger'), with National continuing as the surviving corporation. In
consideration for their investments in Public Gas and National Propane, SEPSCO
received 330 shares of the merged corporation representing 24.8% of its issued
and outstanding common stock and Triarc continued to hold 1,000 shares
representing 75.2% of the stock of the merged corporation (see Note 19 for
discussion of subsequent issuance of 30 shares of National Propane). Such
percentages were based upon the relative fair values of Public Gas and National
Propane prior to the Merger. In June 1995 prior to the Merger, Public Gas
acquired the 0.3% of its common stock that SEPSCO did not own for $134,000.

The following sets forth summary operating results of the combined entities
for the year ended December 31, 1995 (in thousands):

<TABLE>
<S> <C>
Operating revenues:
National Propane......... $133,456(a)
Public Gas............... 15,542(b)
Eliminations............. (15)
--------
$148,983
--------
--------
Net income (loss):
National Propane......... $ (2,287)(a)
Public Gas............... 1,682(b)
--------
$ (605)
--------
--------
</TABLE>

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

(a) Reflects the results of National Propane prior to the Merger and the
combined company after the Merger.

(b) Reflects the results of Public Gas prior to the Merger.

(4) UNAUDITED PRO FORMA SUPPLEMENTAL FINANCIAL INFORMATION

The following unaudited pro forma supplemental financial information sets
forth the operating results of National for the year ended December 31, 1996 and
has been adjusted as if the Partnership had been formed and the Partnership
Conveyance, the Offering, the Equity Private Placement and related transactions
had been completed as of January 1, 1996 to give effect to (i) the elimination
of management fees paid to Triarc, (ii) the addition of the estimated
stand-alone general and administrative costs associated with National's
operation as a partnership, (iii) a net decrease to interest expense to reflect
the interest expense associated with the First Mortgage Notes and to eliminate
interest expense on the refinanced debt and (iv) the elimination of the
provision for income taxes, as income taxes will be borne by the partners and
not the Partnership or the Operating Partnership, except for corporate income
taxes relative to NSSI. Such following pro forma supplemental financial
information does not purport to be indicative of the actual results of
operations that would have resulted had the Partnership been formed and the
Partnership Conveyance, the Offering, the Equity Private Placement and related
transactions been consummated as of January 1, 1996 or of the future results of
operations of National.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT FOR UNIT DATA)
<S> <C>
Revenues................................................................................... $ 173,260
Operating income........................................................................... 16,938
Income before income taxes and extraordinary charge........................................ 11,731
Income before extraordinary charge......................................................... 11,616
General partners' interest in income before extraordinary charge........................... 465
Unitholders' interest (common and subordinated) in income before extraordinary charge...... 11,151
Unitholders' income before extraordinary charge per unit -- basic and diluted.............. .99
Weighted average number of units outstanding............................................... 11,235,188
</TABLE>

(5) QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH

The Partnership distributes to its partners, on a quarterly basis, all of
its 'Available Cash' which 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 that is necessary or appropriate in the discretion of the
Managing General Partner to (i) provide for the proper conduct of the
Partnership's business, (ii) comply with applicable law or any Partnership debt
instrument or other agreement, or (iii) provide funds for distributions to
Unitholders and the General Partners in respect of any one or more of the next
four quarters.

Available Cash is generally distributed 96% to the Unitholders (including
the Managing General Partner as the holder of Subordinated Units) and 4% to the
General Partners, pro rata, except that if distributions of Available Cash
exceed target distribution levels, as defined, above $0.525 quarterly per unit
(the 'Minimum Quarterly Distribution'), the General Partners will receive an
additional percentage of such excess distributions that will increase to up to
50% of the distributions above the highest target distribution level. See
subsequent discussion of expectations regarding 1998 distributions.

With respect to each quarter during the subordination period (the
'Subordination Period' -- see following paragraph), to the extent there is
sufficient Available Cash, the holders of Common Units will have the right to
receive the Minimum Quarterly Distribution, plus any common unit arrearages,
prior to any distribution of Available Cash to the holders of Subordinated
Units. Subordinated Units do 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 June 30, 2001 in respect of which (i) 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 (the
'Periods') immediately preceding such date equaled or exceeded the aggregate of
the Minimum Quarterly Distribution on all of the outstanding Common Units and
Subordinated Units during such periods, (ii) the adjusted operating surplus
generated during the 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 the related distribution on the General Partner
Interests during such periods and (iii) there are no outstanding common unit
arrearages.

Prior to the end of the Subordination Period, a portion of the Subordinated
Units will convert into Common Units on a one-for-one basis on the first day
after the record date established for the distribution in respect of any quarter
ending on or after (a) June 30, 1999 (with respect to 1,133,410 Subordinated
Units, subject to adjustment as discussed below), and (b) June 30, 2000 (with
respect to 1,133,410 Subordinated Units, subject to adjustments as discussed
below) in respect of which (i) distributions of Available Cash from operating
surplus on the Common Units and the Subordinated Units with respect to the
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

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

during such periods, (ii) the Adjusted Operating Surplus generated during each
of the two 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 the related distribution on
the General Partners' Interest during such periods, and (iii) there are no
outstanding Common Unit arrearages; provided, however, that the early conversion
of the second tranche of Subordinated Units may not occur until at least one
year following the early conversion of the first tranche of Subordinated Units.
Such number of units eligible for early conversion on June 30, 1999 and June 30,
2000 shall be subject to increase in each case by a number of Subordinated Units
equal to 25% of the total units issued upon any conversion of the Special
General Partner's 2% General Partner Interest.

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 addition, if the Managing General Partner is removed as a general
partner of the Partnership other than for cause (i) the Subordination Period
will end and all outstanding Subordinated Units will immediately convert into
Common Units on a one-for-one basis, (ii) any existing Common Unit arrearages
will be extinguished and (iii) the General Partners will have the right to
convert their remaining General Partners' Interest (and the right to receive
incentive distributions) into Common Units or to receive cash in exchange for
such interests.

On November 14, 1996 National paid a distribution of $0.525 per Common and
Subordinated Unit with a proportionate amount for the General Partners'
Interest, or an aggregate $5,924,000, including $2,616,000 to the General
Partners. On February 14, 1997, May 15, 1997, August 14, 1997 and November 14,
1997 National paid quarterly distributions for the quarters ended December 31,
1996, March 31, 1997, June 30, 1997 and September 30, 1997 to Unitholders of
record on February 5, 1997, May 8, 1997, August 7, 1997 and November 6, 1997,
respectively, each consisting of $0.525 per Common and Subordinated unit with a
proportionate amount for the General Partners' Interest, or an aggregate of
$6,143,000 each including $2,625,000 to the General Partners related to the
Subordinated Units and the General Partners' Interest. On February 13, 1998
National paid a quarterly distribution for the quarter ended December 31, 1997
of $0.525 per Common and Subordinated Unit to Unitholders of record on February
5, 1998, with a proportionate amount for the General Partners' Interest or an
aggregate of $6,143,000, including $2,625,000 to the General Partners related to
the Subordinated Units and the General Partners' Interest. However, the Managing
General Partner has agreed to forego any additional distributions on the
Subordinated Units in order to facilitate the Partnership's compliance with a
covenant restriction contained in the Bank Facility. Such distributions on the
Subordinated Units will be resumed when their payment will not impact compliance
with such covenant. Accordingly, the Partnership does not expect to pay any
additional distributions on the Subordinated Units for the remainder of 1998.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) RECEIVABLES

The following is a summary of the components of receivables:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Receivables:
Trade........................................................................ $25,449 $14,892
Other........................................................................ 205 242
------- -------
25,654 15,134
Less allowance for doubtful accounts (trade)...................................... 1,437 1,179
------- -------
$24,217 $13,955
------- -------
------- -------
</TABLE>

The following is an analysis of the allowance for doubtful accounts for the
years ended December 31, 1995, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996 1997
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year.............................................. $1,072 $ 980 $ 1,437
Provision for doubtful accounts........................................... 848 1,347 1,147
Uncollectible accounts written off........................................ (940) (890) (1,405)
------ ------ -------
Balance at end of year.................................................... $ 980 $1,437 $ 1,179
------ ------ -------
------ ------ -------
</TABLE>

(7) PROPERTIES

The following is a summary of the components of properties:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................................ $ 5,306 $ 5,742
Buildings and improvements...................................................... 12,012 12,369
Equipment and customer installation costs....................................... 122,609 120,494
Office furniture and fixtures................................................... 6,991 6,669
Automotive and transportation equipment......................................... 23,806 23,597
-------- --------
170,724 168,871
Less accumulated depreciation................................................... 90,090 88,525
-------- --------
$ 80,634 $ 80,346
-------- --------
-------- --------
</TABLE>

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) UNAMORTIZED COSTS IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES

The following is a summary of the components of unamortized costs in excess
of net assets of acquired companies:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Costs in excess of net assets of acquired companies............................... $16,875 $20,764
Less accumulated amortization..................................................... 2,274 3,148
------- -------
$14,601 $17,616
------- -------
------- -------
</TABLE>

(9) OTHER ASSETS

The following is a summary of the components of other assets:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred financing costs.......................................................... $ 6,600 $ 6,600
Non-compete agreements............................................................ 2,718 3,558
Other............................................................................. 861 1,314
------- -------
10,179 11,472
------- -------
Less accumulated amortization:
Deferred financing costs..................................................... 236 1,089
Non-compete agreements....................................................... 1,098 1,630
Other........................................................................ 174 338
------- -------
1,508 3,057
------- -------
$ 8,671 $ 8,415
------- -------
------- -------
</TABLE>

(10) ACCRUED EXPENSES

The following is a summary of the components of accrued expenses:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- ------
(IN THOUSANDS)
<S> <C> <C>
Accrued compensation and related benefits.......................................... $ 2,375 $3,215
Accrued insurance.................................................................. 3,404 3,161
Other accrued expenses............................................................. 4,324 1,490
------- ------
$10,103 $7,866
------- ------
------- ------
</TABLE>

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
8.54% First Mortgage Notes, due June 30, 2010 payable in equal annual installments of
$15,625,000 commencing 2003 through 2010................................................ $125,000 $125,000
Bank Facility:
Working capital facility, weighted average interest rate of 7.95% at December 31,
1997................................................................................ 6,000 8,500
Acquisition facility, weighted average interest rate of 7.35% at December 31, 1997... 1,885 11,997
Acquisition notes, bearing interest at rates of 6% to 10%, due through 2001............... 1,424 1,869
Capitalized lease obligations............................................................. 47 --
-------- --------
Total debt...................................................................... 134,356 147,366
Less current portion of long-term debt.................................................... 6,312 9,235
-------- --------
$128,044 $138,131
-------- --------
-------- --------
</TABLE>

The aggregate annual maturities of long-term debt are as follows as of
December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- --------------------------------------------------------------
<S> <C>
1998....................................................... $ 9,235
1999....................................................... 2,737
2000....................................................... 4,146
2001....................................................... 4,251
2002....................................................... 1,997
Thereafter................................................. 125,000
--------
$147,366
--------
--------
</TABLE>

The Partnership maintains a bank facility (the 'Bank Facility') with a
group of banks which, as amended, provides for a $15,000,000 working capital
facility (the 'Working Capital Facility') and a $20,000,000 acquisition facility
(the 'Acquisition Facility'), the use of which is restricted to business
acquisitions and capital expenditures for growth. The Bank Facility bears
interest, at National's option, at either (i) the 30, 60, 90 or 180-day London
Interbank Offered Rate plus a margin generally ranging from 1.00% to 1.75% or
(ii) the higher of (a) the prime rate and (b) the Federal funds rate plus 0.5%
in either case, plus a margin of up to 0.25%. Borrowing under the Working
Capital Facility will mature in full on June 30, 1999. However, National must
reduce the borrowings under the Working Capital Facility to zero for a period of
at least 30 consecutive days in each year between March 1 and August 31. The
Acquisition Facility converts to a term loan in July 1999 and amortizes
thereafter in twelve equal quarterly installments through July 2002.
Amendments to the Bank Facility, effective as of December 31, 1997, modified
certain covenants, reduced the amount of the Acquisition Facility from
$40,000,000 to $20,000,000 and extended the conversion date of the Acquisition
Facility to June 30, 1999.

National's Bank Facility and the First Mortgage Notes contain certain
restrictive covenants which, among other matters, (i) require meeting certain
financial amount and ratio tests, (ii) limit the incurrence of certain other
additional indebtedness and certain investments, asset dispositions and
transactions with affiliates other than in the normal course of business and
(iii) restrict the payment of distributions by the Operating Partnership. The
Managing General Partner has agreed to forego any

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

additional distributions on the Subordinated Units in order to facilitate the
Partnership's compliance with a covenant restriction contained in the Bank
Facility. (see Note 5).

National's obligations under both the First Mortgage Notes and the Bank
Facility are secured on an equal and ratable basis by substantially all of the
assets of the Operating Partnership and are guaranteed by the Managing General
Partner.

The fair value of the First Mortgage Notes as of December 31, 1997 was
$133,050,000 using a discounted cash flow analysis based on an estimate of the
Operating Partnership's then current borrowing rate for similar securities. As
of December 31, 1996, the fair value of the First Mortgage Notes was assumed to
reasonably approximate their carrying value due to their then recent issuance
on July 2, 1996 and an insignificant change in borrowing rates from July 2, 1996
to December 31, 1996. The fair values of the revolving loans and the acquisition
loans under the Bank Facility at December 31, 1996 and 1997 approximated their
carrying values due to their floating interest rates. The fair values of all
other long-term debt were assumed to reasonably approximate their carrying
amounts since the interest rates approximate current levels.

(12) INCOME TAXES

The provision for (benefit from) income taxes for the years ended December
31, 1995 and through the Partnership Conveyance in 1996 relate to National
Propane and subsequent to the Partnership Conveyance relate only to NSSI since
no taxes are provided on the earnings of the Partnership and the Operating
Partnership.

The provision for income taxes before extraordinary charge for the years
ended December 31, 1995, 1996 and 1997 consists of the following components:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
------ ------ ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal...................................... $1,890 $2,309 $ 44
State........................................ 406 498 135
------ ------ ----
2,296 2,807 179
------ ------ ----
Deferred:
Federal...................................... 2,114 (716) (42)
State........................................ (119) (154) (10)
------ ------ ----
1,995 (870) (52)
------ ------ ----
$4,291 $1,937 $127
------ ------ ----
------ ------ ----
</TABLE>

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The difference between the reported tax provision and a computed tax
provision based on income before income taxes and extraordinary charge at the
statutory Federal income tax rate of 35% is reconciled as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes computed at Federal statutory tax rate...................... $1,290 $ 2,690 $ 1,391
Increase (decrease) in taxes resulting from:
Partnership income taxable directly to the partners................. -- (1,085) (1,347)
State income taxes, net of Federal income tax benefit............... 187 223 81
Amortization of non-deductible Goodwill............................. 126 98 --
Provision for income tax contingencies.............................. 2,500 -- --
Other, net.......................................................... 188 11 2
------ ------- -------
$4,291 $ 1,937 $ 127
------ ------- -------
------ ------- -------
</TABLE>

During 1995 National Propane provided $2,500,000 included in 'Provision for
income taxes', for certain adjustments relating to National Propane proposed by
the Internal Revenue Service as a result of its examination of Triarc's Federal
income tax returns for the tax years 1989 through 1992. In connection with the
formation of the Partnership, the tax sharing agreement between Triarc and
National Propane was amended to provide that Triarc would be responsible for any
Federal income tax liability with respect to the proposed adjustments and in
connection with the Partnership Conveyance, the $2,500,000 reserve for the
settlement of the proposed adjustments was retained by the Managing General
Partner.

(13) DUE FROM PARENTS

Concurrent with the closing of the Offering, the Partnership made a
$40,700,000 loan to Triarc. The note bears interest at 13.5% per annum,
amortizes $5,087,500 per year commencing 2003 and is secured by a pledge by
Triarc of the 75.7% of the shares of capital stock of the Managing General
Partner that are owned by Triarc directly. Interest is payable semi-annually on
June 30 and December 30. The estimated fair value of the loan to Triarc as of
December 31, 1997 was $43,321,000 and was determined by using a discounted cash
flow analysis based on an estimate of Triarc's then current borrowing rate for a
similar security.

As of January 1, 1996, National Propane had $81,392,000 of interest-bearing
advances to Triarc which were not conveyed to the Partnership as part of the
Partnership Conveyance (see Note 1). As of January 1, 1995, National Propane had
$31,938,000 of non-interest bearing advances to SEPSCO. During 1995 such
advances, together with $2,599,000 of additional advances during 1995, were
dividended to SEPSCO prior to the Merger (see Note 3).

(14) EXTRAORDINARY CHARGE

In connection with the early extinguishment of debt in the year ended
December 31, 1996, National recognized a $2,631,000 extraordinary charge
consisting of the write-off of unamortized deferred financing costs of
$4,126,000 and the payment of prepayment penalties and fees of $225,000 less an
income tax benefit of $1,720,000. In accordance with the Partnership Conveyance,
the extraordinary charge was allocated entirely to the General Partners.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15) RETIREMENT PLANS

As discussed in Note 19, following the Partnership Conveyance and the
Offering, the management and employees of the Managing General Partner manage
and operate the propane business and assets owned by National. The Managing
General Partner is reimbursed for all such costs incurred on behalf of National
including the cost of retirement plans.

The Managing General Partner maintains a 401(k) defined contribution plan
(the 'Plan') which covers all employees meeting certain eligibility
requirements. The Plan allows eligible employees to contribute up to 15% of
their compensation and the Managing General Partner makes matching contributions
of 25% of employee contributions up to the first 5% of an employee's
contribution. The Managing General Partner also makes an annual contribution
equal to 1/4 of 1% of employee's compensation. In connection with these employer
contributions, National provided $142,000, $143,000 and $187,000 in 1995, 1996
and 1997 respectively.

Under certain union contracts, the Managing General Partner is required to
make payments to the unions' pension funds based upon hours worked by the
eligible employees. In connection with these union plans, National provided
$669,000, $669,000 and $614,000 in 1995, 1996 and 1997, respectively.
Information from the administrators of the union plans is not available to
permit National to determine its proportionate share of unfunded vested
benefits, if any.

(16) LEASE COMMITMENTS

National has entered into certain operating leases for office space, trucks
and other equipment.

The future minimum rental commitments at December 31, 1997 under operating
leases having an initial or remaining noncancellable term of one year or more
are as follows (in thousands):

<TABLE>
<S> <C>
1998...................................................... $ 776
1999...................................................... 457
2000...................................................... 245
2001...................................................... 135
2002...................................................... 71
Thereafter................................................ 210
-------
Total minimum lease payments......................... $1,894
-------
-------
</TABLE>

National incurred rent expense under operating leases of $669,000, $935,000
and $1,008,000 in 1995, 1996 and 1997, respectively.

(17) LEGAL MATTERS

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contaminant plume extends under such properties and if such plume is
attributable to the contaminants emanating from the Wisconsin property, there is
the potential for future third-party claims. National Propane has engaged in
discussions of a general nature with the Successor who has denied any liability
for the costs of remediation of the Wisconsin property or of satisfying any
related claims. However, National Propane, if found liable for any of such
costs, would still attempt to recover such costs from the Successor. National
Propane has notified its insurance carriers of the contamination and the likely
incurrence of costs to undertake remediation and the possibility of related
claims. Pursuant to a lease related to the Wisconsin facility, the ownership of
which was not transferred by National Propane to the Operating Partnership at
the time of the closing of the Offering, the Partnership has agreed to be liable
for any costs of remediation in excess of amounts received from the Successor
and from insurance. Because the remediation method to be used is unknown, no
amount within the cost ranges provided by the environmental consultants can be
determined to be a better estimate. Thus National has a remaining accrual of
approximately $700,000 as of December 31, 1997, all of which was provided in
prior years, for the minimum costs estimated for the anticipated remediation
method. The ultimate outcome of this matter cannot presently be determined and
the costs of remediation and third-party claims, if any, may have a material
adverse effect on the Partnership's financial position, results of operations or
ability to make the distributions to the holders of its Common Units and
Subordinated Units.

(18) ACQUISITIONS

During 1995, 1996 and 1997 National acquired several companies engaged in
the sale of propane and related merchandise. The purchase prices (including debt
issued and assumed) aggregated $373,000, $2,045,000 and $9,237,000 and resulted
in increases in Goodwill of $116,000, $162,000 and $3,889,000 in

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1995, 1996 and 1997, respectively. (See Note 19 for discussion of Triarc's 1995
acquisition on behalf of National).

(19) TRANSACTIONS WITH AFFILIATES

In August 1995 Triarc, through a wholly owned subsidiary, acquired all of
the outstanding stock of two companies engaged in the propane distribution
business. The aggregate purchase price was $4,240,000 (including the assumption
of certain existing indebtedness). In September 1995 the stock of the subsidiary
which acquired the two companies was contributed by Triarc to NPC Holdings, Inc.
('NPC Holdings'), a wholly-owned subsidiary of Triarc, which in turn contributed
such stock to National. Such contribution resulted in increases in National's
'Additional paid-in capital' of $4,240,000 and 'Goodwill' of $2,181,000. In
consideration for such contribution, NPC Holdings received an additional 30
shares of National Propane's common stock, increasing its ownership of National
Propane to 75.7% from 75.2%.

In the fourth quarter of 1995 National sold certain of its accounts
receivable to Triarc for cash of $3,809,000. Collections received on such
receivables by National were remitted to Triarc on a periodic basis. As of
December 31, 1996 all remittances had been made.

Following the Partnership Conveyance and the Offering, the management and
employees of the Managing General Partner manage and operate the propane
business and assets owned by the Partnership Entities. The Partnership Entities
do not have any officers or employees of their own. The Managing General Partner
is reimbursed by the Partnership Entities at cost for all direct and indirect
expenses incurred on behalf of the Partnership Entities, including the costs of
compensation and employee benefit plans described herein that are properly
allocable to the Partnership Entities, and all other expenses necessary or
appropriate to the conduct of the business of, and allocable to, the Partnership
Entities. The Partnership Agreement provides that the Managing General Partner
will determine the expenses that are allocable to the Partnership Entities in
any reasonable manner determined by the Managing General Partner in its sole
discretion. The Partnership Entities reimbursed the Managing General Partner
$15,429,000 and $34,099,000 during the period from the Partnership Conveyance
through December 31, 1996 and for the year ended December 31, 1997,
respectively. Affiliates of the General Partners (including Triarc) provide
administrative services for the General Partners on behalf of the Partnership
Entities and are reimbursed for all expenses incurred in connection therewith.
Such charges aggregated $103,000 from Triarc for 1997. There were no similar
charges for the period from the Partnership Conveyance through December 31,
1996. In addition, the General Partners and their Affiliates (including Triarc)
may provide additional services to the Partnership Entities, for which National
will be charged reasonable fees as determined by the Managing General Partner.

Prior to the Partnership Conveyance and the Offering, National Propane
received from Triarc certain management services including legal, accounting,
tax, insurance, financial and other management services. Under a management
services agreement such costs were allocated based upon the greater of (i) the
sum of earnings before income taxes, depreciation and amortization and (ii) 10%
of revenues, as a percentage of Triarc's corresponding consolidated amount.
Management of National believes that such allocation method is reasonable. Costs
charged to National under the management services agreement with Triarc were
$3,000,000 and $1,500,000 for 1995 and the six months ended June 30, 1996,
respectively. National understands Triarc is predominately a holding company and
substantially all of the expenses it incurs are for services or purchases made
on behalf of its affiliated companies and, accordingly, are chargeable to such
companies in accordance with management services and other agreements. However,
National believes that the costs allocated prior to the Partnership Conveyance
and the Offering exceed those which would have been, and are being, incurred by
National on a standalone basis. Such costs for services provided by Triarc would
have approximated amounts not in excess of $1,500,000 and $750,000 for 1995 and
for the six months ended June 30, 1996, respectively.

NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

See also Notes 1, 3, 5, 11, 12 and 13 for discussion of other transactions
with related parties.

(20) UNIT OPTION PLAN

Prior to the Offering and effective July 2, 1996, the Managing General
Partner adopted the National Propane Corporation 1996 Unit Option Plan (the
'Option Plan'), which provides for the grant of (i) options ('Unit Options') to
purchase Common Units and Subordinated Units and (ii) Common Unit appreciation
rights ('UARs') to National's directors, officers and employees. The Unit
Options have maximum terms of ten years. Expenses recognized resulting from
grants under the Opton Plan are allocated to the Partnership in accordance with
an agreement between the Managing General Partner and the Partnership. As of
December 31, 1997 there were an aggregate of 1,002,015 Common Units and
Subordinated Units available for grant.

During 1997, the Managing General Partner granted 315,000 Unit Options at
an option price of $17.30 which was below the fair market value of the Common
Units of $21.625 at the date of grant. Such difference resulted in aggregate
unearned compensation for the Partnership of $1,362,000; such amount was
recognized as 'Partners' Capital' with an equal amount recognized as an offset
to 'Partners' Capital.' Such unearned compensation is being amortized over the
applicable service period of five years. During 1997, $115,000 was amortized to
compensation expense, resulting in a remaining unamortized balance of
$1,247,000. Of the unit options granted in 1997, 60% of the options vest one-
third per year over the three-year period commencing two years from date of
grant and 40% of the options vest upon, and in the same proportion as, the
conversion of the outstanding Subordinated Units into Common Units in accordance
with the terms of the Partnership Agreement (for further description of the
timing of the conversion of the Subordinated Units, see Note 5) but, in any
event, no later than March 2007.

As of December 31, 1997 there were 315,000 unit options outstanding, none
of which were exercisable, each with (i) an option price of $17.30, (ii) a
remaining contractual life of 9.7 years and (iii) a fair value (see below) of
$2.27. The Partnership accounts for stock-based compensation using the intrinsic
value method. Had compensation cost for Unit Options granted in 1997 been (i)
determined based on the fair value method as provided for in SFAS 123, (ii)
reduced for compensation expense recorded in accordance with the intrinsic value
method by eliminating the amortization of unearned compensation and (iii) income
tax affected, the Partnership's 1997 net income and earnings per unit would have
been increased by $74,000, or $.01 per Common and Subordinated Unit. The fair
value of the options granted during 1997 was determined using the Black-Sholes
option pricing model with the following assumption: (i) distribution amount of
$.525 per unit per quarter, (ii) average Common Unit price volatility of 19.4%
(also used as an estimate of Subordinated Unit volatility), (iii) risk-free
interest rate of 6% and (iv) expected option life of 7 years.

<TABLE>
<CAPTION>
NUMBER OF FAIR
UNITS EXERCISE PRICE VALUE
--------- -------------- -----
<S> <C> <C> <C>
Outstanding at January 1, 1997..................................... -- $-- $--
Granted............................................................ 315,000 17.30 2.27
Forfeited.......................................................... -- -- --
--------- ------- -----
Outstanding at December 31, 1997................................... 315,000 $17.30 $2.27
--------- ------- -----
--------- ------- -----
Options exercisable at December 31, 1997........................... 0
---------
---------
</TABLE>

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT DECEMBER 31, 1997
- ----------------------------------------
<S> <C>
Option prices at end of year................................................................ $ 17.30
Remaining contractual life.................................................................. 9.7 years
</TABLE>

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 Managing General Partner manages and operates the business activities
of the Partnership. Unitholders do not directly or indirectly participate in the
management or operation of the Partnership and have no actual or apparent
authority to enter into contracts on behalf of, or to otherwise bind, the
Partnership. The Managing General Partner owes a fiduciary duty to the
Unitholders. Notwithstanding any limitation on obligations or duties, the
Managing General Partner and the Special General Partner are liable, as the
general partners of the Partnership, for all debts of the Partnership (to the
extent not paid by the Partnership), except to the extent that indebtedness or
other obligations incurred by the Partnership are made specifically non-recourse
to either or both of the General Partners. Whenever possible, the Managing
General Partner intends to make any such indebtedness or other obligations
non-recourse to it and the Special General Partner. However, if the Operating
Partnership defaults under the First Mortgage Notes or the Bank Credit Facility,
the Managing General Partner will be liable for any deficiency remaining after
foreclosure on the Operating Partnership's assets.

The Managing General Partner appointed Frederick W. McCarthy and Willis G.
Ryckman III, who are neither officers nor employees of the General Partners or
any affiliate of the General Partners, to its Board of Directors. Such directors
serve on the Audit Committee with the authority to review, at the request of the
Managing General Partner, specific matters as to which the Managing General
Partner believes there may be a conflict of interest in order to determine if
the resolution of such conflict proposed by the Managing General Partner is fair
and reasonable to the Partnership. Absent specific delegation from the Board of
Directors of the Managing General Partner, determinations of the Audit Committee
are advisory and do not bind the Managing General Partner. 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 Managing General Partner of any duties it may owe the Partnership or the
Unitholders. In addition, the Audit Committee reviews external financial
reporting of the Partnership, recommends engagement of the Partnership's
independent accountants and reviews the Partnership's procedures for internal
auditing and the adequacy of the Partnership's internal accounting controls.
With respect to such additional matters, the Audit Committee may act on its own
initiative to question the Managing General Partner and, absent the delegation
of specific authority by the entire Board of Directors, its recommendations will
be advisory.

The Special General Partner, a wholly owned subsidiary of the Managing
General Partner, is a non-managing general partner of the Partnership and the
Operating Partnership with no operations or business other than acting as a
general partner of the Partnership and the Operating Partnership. In the event
that the Managing General Partner is merged with and into Triarc, the Audit
Committee of the Special General Partner will perform the functions described
above previously performed by the Audit Committee of the Managing General
Partner. The Audit Committee of the Special General Partner is composed of the
same directors that serve on the Audit Committee of the Managing General
Partner. In addition, if following a merger of the Managing General Partner with
and into Triarc, a bankruptcy event involving Triarc occurs, the Special General
Partner will become the managing general partner of the Partnership, continue
the business of the Partnership and have all the rights, authority and powers of
the Managing General Partner described in the partnership agreement.

As is commonly the case with publicly traded limited partnerships, the
Partnership does not directly employ any of the persons responsible for managing
or operating the Partnership. In general, the management of National Propane
continues to manage and operate the Partnership's business as officers and
employees of the Managing General Partner and its affiliates. See Item 1.
'Business -- Employees'.

DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER

The following table sets forth certain information with respect to the
current directors and executive officers of the Managing General Partner.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE MANAGING GENERAL PARTNER
- ------------------------------ --- -----------------------------------------------------------------
<S> <C> <C>
Nelson Peltz.................. 55 Director and Chairman
Peter W. May.................. 55 Director and Vice Chairman
Frederick W. McCarthy......... 56 Director
Ronald D. Paliughi............ 54 Director
Willis G. Ryckman III......... 53 Director
Ronald R. Rominiecki.......... 44 President and Chief Operating Officer
C. David Watson............... 39 Senior Vice President, Administration, General Counsel and
Assistant Secretary
R. Brooks Sherman, Jr. ....... 32 Vice President and Chief Financial Officer
Martin A. Woods............... 39... Vice President of Supply and Distribution
</TABLE>

Nelson Peltz has been a director of the Managing General Partner and a
director and Chairman of the Board and Chief Executive Officer of
Triarc Companies, Inc. since April 23, 1993, and Chairman of the Board of the
Managing General Partner since April 1997. Since April 1993, he has also been a
director and Chairman of the Board and Chief Executive Officer of certain of
Triarc's other subsidiaries, including RC/Arby's Corporation ('RCAC'). He is
also a general partner of DWG Acquisition Group, L.P. ('DWG Acquisition'), whose
principal business is ownership of securities of Triarc. From its formation in
January 1989 until April 23, 1993, Mr. Peltz was Chairman and Chief Executive
Officer of Trian Group, Limited Partnership ('Trian'), which provided investment
banking and management services for entities controlled by Mr. Peltz and Mr.
May. From 1983 to December 1988, he was Chairman and Chief Executive Officer and
a director of Triangle Industries, Inc. ('Triangle'), which, through
wholly-owned subsidiaries, was, at that time, a manufacturer of packaging
products, copper electrical wire and cable and steel conduit and currency and
coin handling products.

Peter W. May has been a director of the Managing General Partner and a
director and President and Chief Operating Officer of Triarc since
April 23, 1993, and Vice Chairman of the Board of the Managing General Partner
since April 1997. Since April 1993, he has also been a director and President
and Chief Operating Officer of certain of Triarc's other subsidiaries, including
RCAC. He is also a general partner of DWG Acquisition. From its formation in
January 1989 until April 23, 1993, Mr. May was President and Chief Operating
Officer of Trian. He was President and Chief Operating Officer and a director
of Triangle from 1983 until December 1988.

Frederick W. McCarthy has been a director of the Managing General Partner
since September 25, 1996. Mr. McCarthy has been Chairman of Triumph Capital
Group, Inc., an investment management firm, since 1990. Mr. McCarthy was
formerly a Managing Director of Drexel Burnham Lambert where he was employed
from 1974 until 1990. Mr. McCarthy serves as a director of Tutor Time Learning
Systems, Inc., an operator and franchisor of educational child care centers, and
of Paragon Acceptance Corporation, an automotive finance company.

Ronald D. Paliughi is a director of the Managing General Partner and was
President and Chief Executive Officer of the Managing General Partner from April
29, 1993 until his retirement effective January 2, 1998. From 1987 to 1990, Mr.
Paliughi was Senior Vice President -- Western Operations of AmeriGas Propane,
Inc. (then a subsidiary of UGI Corporation), the largest propane company in the
U.S. During 1986, Mr. Paliughi was Director of Retail Operations of CalGas
Corporation. For more than 14 years prior, he held various positions with
VanGas, Inc. ('VanGas'), the western subsidiary of Suburban Propane Gas (then a
division of Quantum Chemical Corporation), the third largest U.S. propane
company. He last served as Senior Vice President/General Manager, the top
executive officer at VanGas.

Willis G. Ryckman III has been a director of the Managing General Partner
since September 25, 1996. Mr. Ryckman has served as the Chairman of Tri-Tech
Labs, Inc., a holding company, since June 1992, Chairman of Irma Shorell, Inc.,
a cosmetics company, since April 1993, and Managing Director and Chief Operating
Officer of Associated Capital, a hedge fund, since April 1995 and Chairman of
Omni Capital, a finance company, since January 1996. Mr. Ryckman is a director
of Banyan Hotel Management Corporation, Krasdale Foods, Inc. and Panavision Inc.

Ronald R. Rominiecki has served as President and Chief Operating Officer of
the Managing General Partner since November 1, 1997. Prior to November 1, 1997,
Mr. Rominiecki served as Senior Vice President and Chief Financial Officer after
joining the Managing General Partner on December 1, 1995. From April 1994 to
November 1995, he served as Vice President and Chief Financial Officer of
O'Brien Environmental Energy, Inc. ('O'Brien'), a publicly-owned company engaged
in cogeneration and other energy related businesses. In September 1994 O'Brien
filed a petition in bankruptcy under Chapter 11 of the United States Code. From
June 1988 to March 1994, Mr. Rominiecki was Corporate Controller at Westmoreland
Coal Company, a NYSE listed company.

C. David Watson has been Senior Vice President, Administration, General
Counsel and Assistant Secretary of the Managing General Partner since December
19, 1996. From December 2, 1996 to December 18, 1996 he was Senior Vice
President. He is responsible for legal matters, real estate, fleet management,
plant engineering, safety, risk management, human resources, insurance and
public relations. Prior to his employment with the Managing General Partner, he
was with the law firm of Jenner & Block in Chicago, Illinois, as a partner from
January 1, 1993 to November 30, 1996, and as an associate from September 25,
1986 to December 31, 1992.

R. Brooks Sherman, Jr. has served as Vice President, Chief Financial
Officer of the Managing General Partner since November 1, 1997. Prior to
November 1, 1997, Mr. Sherman served as Controller and Chief Accounting Officer
after joining the Managing General Partner on November 12, 1996. From August 12,
1995 to November 11, 1996, he served as Chief Financial Officer of Berthel
Fisher & Company Leasing, Inc, the General Partner of two publicly-owned
equipment leasing limited partnerships. From October, 1990 to August 12, 1995 he
served in various audit capacities with Ernst & Young, LLP, lastly as an Audit
Manager.

Martin A. Woods has served as Vice President, Supply and Distribution of
the Managing General Partner since June 30, 1997. From 1996 to June, 1997, he
was Sales Coordinator, Northeast for Conoco, Inc. and more than 13 years prior
he held various other positions with Conoco, Inc.

Each director has been elected to serve until the Managing General
Partner's next annual meeting of stockholders and until such director's
successor is duly elected and qualified or until his death, resignation or
removal. The term of office of each executive officer is until the next annual
meeting of the Board of Directors of the Managing General Partner and until his
successor is elected and qualified or until his death, resignation or removal.

REIMBURSEMENT OF EXPENSES OF THE MANAGING GENERAL PARTNER

In general, the management and employees of National Propane who managed
and operated the propane business and assets of National Propane prior to the
IPO continue to manage and operate the Partnership's business as officers and
employees of the Managing General Partner and its Affiliates. The Partnership
does not have any officers or employees of its own. The Operating Partnership's
corporate subsidiary, NSSI, does, however, have its own employees to manage and
operate its business. The Managing General Partner does not receive any
management fee or other compensation in connection with its management of the
Partnership, but is reimbursed at cost for all direct and indirect expenses
incurred on behalf of the Partnership, including the costs of compensation and
employee benefit plans described herein properly allocable to the Partnership,
and all other expenses necessary or appropriate to the conduct of the business
of, and allocable to, the Partnership. The Partnership Agreement provides that
the Managing General Partner shall determine the expenses that are allocable to
the Partnership in any reasonable manner determined by the Managing General
Partner in its sole discretion. Affiliates of the Managing General Partner
(including Triarc) may perform certain administrative services for the Managing
General Partner on behalf of the Partnership. Such Affiliates will not receive a
fee for such services performed for or on behalf of the Partnership, but will be
reimbursed for all direct and indirect expenses incurred in connection
therewith. In addition, the General Partners and their Affiliates may provide
additional services to the Partnership, for which the Partnership will be
charged reasonable fees as determined by the Managing General Partner.

In addition, in connection with the Partnership Conveyance, the Managing
General Partner received an aggregate 2% unsubordinated General Partner Interest
and a 40.6% interest (at that date)

as holder of the Subordinated Units as consideration for its contribution to the
Partnership of its limited partner interest in the Operating Partnership, which
was received as consideration for its contribution to the Operating Partnership
of the propane business of National Propane. Such Subordinated Units currently
represent a 38.7% interest in the Partnership. The Managing General Partner will
be entitled to distributions on such Units, and the Managing General Partner
will be entitled to incentive distributions as holder of the Incentive
Distribution rights.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the annual salaries, bonuses and all other
compensation awards and payouts earned by the President and Chief Executive
Officer and by certain named executive officers of the Managing General Partner
(collectively, the 'Named Officers') for services rendered to the Managing
General Partner and its subsidiaries during the fiscal years ended December 31,
1997, 1996 and 1995.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
---------------------------------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
- ----------------------------- ---- ------------ -------- ---------------
<S> <C> <C> <C> <C>
Ronald R. Rominiecki ........ 1997 173,333 45,000 102
President and Chief 1996 165,000 100,000(3) 571
Operating Officer 1995 13,750(7) -- --
C. David Watson ............. 1997 125,000 15,000 66
Senior Vice President, 1996 10,417(9) -- --
Administration, General 1995 -- -- --
Counsel and Assistant
Secretary
R. Brooks Sherman, Jr. ..... 1997 75,461 10,000 50
Vice President, Chief 1996 7,808(14) -- --
Financial Officer 1995 -- -- --
Martin A. Woods ............. 1997 77,000(15) 15,000 --
Vice President, Supply and 1996 -- -- --
Distribution 1995 -- -- --
Ronald D. Paliughi .......... 1997 300,000 51,784 288
Former Chief Executive 1996 277,083 500,000(3) 5,621
Officer 1995 250,000 -- 2,592

<CAPTION>
LONG-TERM COMPENSATION
AWARDS
------------------------------------------------------------
NUMBER OF
RESTRICTED SECURITIES LTIP
STOCK UNDERLYING PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION AWARD(S)(#) OPTIONS/SARS(#)(2) ($)(1) COMPENSATION($)
- ----------------------------- --------------- ------------------ ------- ---------------
<S> <C> <C> <C> <C>
Ronald R. Rominiecki ........ -- 40,000(10) -- 54,380(11)
President and Chief -- -- -- 63,000(8)
Operating Officer -- 20,000(4) -- --
C. David Watson ............. -- 27,000(10) -- 39,520(12)
Senior Vice President, -- 18,000(4) -- --
Administration, General -- -- -- --
Counsel and Assistant --
Secretary
R. Brooks Sherman, Jr. ..... -- 16,000(10) -- --
Vice President, Chief -- -- -- --
Financial Officer -- -- --
Martin A. Woods ............. -- 18,000(10) -- 8,244(13)
Vice President, Supply and -- -- -- --
Distribution -- -- -- --
Ronald D. Paliughi .......... -- -- -- --
Former Chief Executive -- 30,000(5) 57,500 --
Officer -- 51,000(5) -- 96,178(6)
</TABLE>

- ------------
(1) On January 16, 1996, the restrictions on all previously granted restricted
stock awards of Triarc Class A Common Stock, par value $.10 per share, made
pursuant to Triarc's 1993 Equity Participation Plan,lapsed.

(2) All option grants were made either pursuant to Triarc's 1993 Equity
Participation Plan (described below under 'Option/SAR Grants in Last Fiscal
Year, Individual Grants') (the 'Triarc Plan') or pursuant to National's
1996 Unit Option Plan (described below under 'Unit Option Plan Grants in
Last Fiscal Year, Individual Grants') (the 'Unit Option Plan'), as noted.

(3) Paid by Triarc in connection with activities related to the monetization of
its propane business.

(4) Represents stock option grants made pursuant to the Triarc Plan: one-third
of the options granted will vest on each of the first, second and third
anniversaries of the date of grant and the options will be exercisable at
any time between the date of vesting and the tenth anniversary of the date
of grant.

(5) Represents Mr. Paliughi's options to acquire Triarc Class A Common Stock,
which vested as of January 2, 1998 and may be exercised on or before
January 1, 1999.
(footnotes continued on next page)

(footnotes continued from previous page)

(6) Includes $33,333 for certain salary allowances and $60,829 of reimbursed
moving expenses in connection with Mr. Paliughi's relocation to Cedar
Rapids, Iowa.

(7) Mr. Rominiecki began his employment with the Managing General Partner on
December 1, 1995. The amount reported is based on his 1995 annual salary of
$165,000.

(8) Represents a one-time bonus payable in connection with Mr. Rominiecki's
employment by the Managing General Partner.

(9) Mr. Watson began his employment with the Managing General Partner on
December 2, 1996. The amount reported was based on his 1996 annual salary
of $125,000.

(10) Represents unit option grants made pursuant to the Unit Option Plan: 60% of
the options vest one-third per year over the three-year period commencing
two years from date of grant and 40% of the options vest upon, and in the
same proportion as, the conversion of the outstanding Subordinated Units of
the Partnership into Common Units in accordance with the terms of the
Partnership Agreement but, in any event, no later than March 2007 and the
options will be exercisable at any time between the date of vesting and the
tenth anniversary of the date of grant. The unit option grants were
initially issued with an exercise price of $17.30 (80% of the closing price
on September 17, 1997).

(11) Includes $54,380 of reimbursed moving expenses in connection with Mr.
Rominiecki's relocation to Cedar Rapids, Iowa.

(12) Includes $39,520 of reimbursed moving expenses in connection with Mr.
Watson's relocation to Cedar Rapids, Iowa.

(13) Includes $8,244 of reimbursed moving expenses in connection with Mr. Woods'
relocation to Cedar Rapids, Iowa.

(14) Mr. Sherman began his employment with the Managing General Partner on
November 12, 1996. The amount reported is based on his 1996 annual salary
of $70,000.

(15) Mr. Woods began his employment with the Managing General Partner on June
30, 1997. The amount reported is based on an annual salary of $130,000.

CASH INCENTIVE PLANS

National Propane has implemented an annual cash incentive plan (the 'Annual
Incentive Plan') and a mid-term cash incentive plan (the 'Mid-Term Incentive
Plan') for executive officers and key employees of National Propane.

The Annual Incentive Plan is designed to provide annual incentive awards to
participants which are based on (i) whether National Propane has met certain
pre-determined financial goals and (ii) the performance of the participant
during the preceding year. Under the Annual Incentive Plan, participants may
receive awards of a specified percentage of their then current base salaries,
which percentage varies depending upon the level of seniority and responsibility
of the participant. Such percentage is set by National Propane's management in
consultation with the Compensation Committee of the Board of Directors of
National Propane (the 'Compensation Committee'). The Compensation Committee may
elect to adjust awards on a discretionary basis to reflect the relative
individual contribution of the executive or key employee, to evaluate the
'quality' of National Propane's earnings or to take into account external
factors that affect performance results. The Compensation Committee also may
decide that multiple performance objectives related to National Propane's
and/or the individual's performance may be appropriate and, in such event,
such factors would be weighted in order to determine the amount of the annual
incentive awards. The Annual Incentive Plan is administered by the Compensation
Committee and may be amended or terminated by such Compensation Committee at
any time.

Under the Mid-Term Incentive Plan, incentive awards will be granted to
participants if National Propane achieves an agreed upon profit over a three
year performance cycle. During each plan year, an

amount will be accrued for each participant based upon the amount by which
National Propane's profit for such year exceeds a certain minimum return. A new
three-year performance cycle begins each year, such that after the third year
the annual cash amount paid to participants pursuant to the Mid-Term Incentive
Plan should equal the target award if National Propane's profit goals have been
achieved for the full three-year cycle. Except as may otherwise be set forth in
a participant's employment agreement, the Compensation Committee may adjust,
upward or downward, an individual's award based upon an assessment of the
individual's relative contribution to National Propane's longer-term profit
performance. The Compensation Committee may amend or terminate the Mid-Term
Incentive Plan at any time.

TRIARC'S 1993 EQUITY PARTICIPATION PLAN

Certain executive officers of the Managing General Partner have
participated in the Triarc Companies, Inc. 1993 Equity Participation Plan which
was adopted on April 24, 1993, and which provides that awards may be made
thereunder until April 24, 1998. The plan provides for, among other things, the
grant of options to purchase Triarc's Class A Common Stock, Stock Appreciation
Rights ('SARs') and restricted shares of Class A Common Stock. Directors,
selected officers and key employees of, and key consultants to, Triarc and its
subsidiaries, including the Managing General Partner, are eligible to
participate in the plan. The plan is being administered by the Compensation
Committee of the Triarc Board of Directors, which may determine from time to
time to grant options, SARs and restricted stock.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR, INDIVIDUAL GRANTS

No options to purchase shares of Triarc Class A Common Stock or SARs have
been granted to any of the Named Officers in respect of 1997 except for the
grant of 18,000 options granted to Mr. Watson on June 16, 1997.

OPTION/SAR EXERCISES IN 1997 AND YEAR-END OPTION/SAR VALUES

The following table sets forth certain information concerning options to
purchase shares of Triarc Class A Common Stock, and the values at the end of
1997 of unexercised in-the-money options to purchase shares of Triarc Class A
Common Stock granted to the Named Officers outstanding as of the end of 1997. No
Named Officer exercised any options to purchase Triarc Class A Common Stock in
1997.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FISCAL 1997 AT FISCAL 1997
YEAR-END YEAR-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald R. Rominiecki.................................... 13,334 6,666 $ 228,345 $ 114,155
C. David Watson......................................... -- 18,000 -- 148,140
R. Brooks Sherman, Jr. ................................. -- -- -- --
Martin A. Woods......................................... -- -- -- --
Ronald D. Paliughi...................................... 80,999(2) 40,001 1,070,242 398,758
</TABLE>

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

(1) On December 31, 1997, the last day of Fiscal 1997, the closing price of the
Triarc Class A Common Stock was $27.25 per share.

(2) All Mr. Paliughi's options vested as of January 2, 1998 and may be exercised
on or before January 1, 1999.

UNIT OPTION PLAN GRANTS IN LAST FISCAL YEAR, INDIVIDUAL GRANTS

Effective upon the closing of the IPO, the Managing General Partner adopted
the National Propane Corporation 1996 Unit Option Plan (the 'Option Plan'),
which permits the issuance of options (the 'Options') and Unit appreciation
rights ('UARs') to eligible persons. An aggregate of 1,250,000 Common Units and
Subordinated Units are initially reserved for issuance as of the Option Plan's

effective date. Pursuant to the terms of the Option Plan, an additional number
of Units equal to 1% of the number of Units outstanding as of each December 31
following the Option Plan's effective date will be added to the total number of
Units that may be issued thereafter. Accordingly, as of December 31, 1997, an
additional 134,030 Units have been made available for issuance under the Option
Plan. As of December 31, 1997, a total of 315,000 Options have been granted
under the Option Plan. The number of Units available for issuance pursuant to
the Option Plan is subject to adjustment in certain circumstances.

UNIT OPTION PLAN EXERCISES IN 1997 AND YEAR-END OPTION VALUES

The following table sets forth certain information concerning Options to
purchase Units, and the values at the end of 1997 of unexercised in-the money
Options to purchase Units granted to the Named Officers outstanding at the end
of 1997. No named Officers exercised any Options to purchase Units in 1997.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FISCAL 1997 AT FISCAL 1997
YEAR-END YEAR-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald R. Rominiecki..................................... -- 40,000 $-- $ 155,500
C. David Watson.......................................... -- 27,000 -- 104,963
R. Brooks Sherman, Jr. .................................. -- 16,000 -- 62,200
Martin A. Woods.......................................... -- 18,000 -- 69,975
Ronald D. Paliughi....................................... -- -- -- --
</TABLE>

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

(1) On September 17, 1997, the Units were initially issued at an exercise price
of $17.30, which was 80% of the closing price on September 17, 1997. On
December 31, 1997, the last day of Fiscal 1997, the closing price of the
Units was $21.1875 per Unit.

COMPENSATION OF DIRECTORS

The Managing General Partner pays no additional remuneration to its
employees (or employees of any of its Affiliates) for serving as directors. The
Partnership currently compensates directors who are not employees of the
Managing General Partner or its Affiliates for serving as such with a $15,000
annual stipend and a $750 per meeting fee and reimburses them for out-of-pocket
expenses. Such directors are also eligible to participate in the Unit Option
Plan.

EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS

Mr. Rominiecki has an employment contract with the Managing General
Partner, dated as of March 11, 1997, as amended, pursuant to which (i) the
Managing General Partner agrees to employ Mr. Rominiecki as President and Chief
Operating Officer, (ii) Mr. Rominiecki receives a base salary of $215,000 per
annum during his employment (subject to increase at the discretion of the Board
of Directors), (iii) Mr. Rominiecki is eligible to participate in the Annual
Incentive Plan, enabling him to receive an annual cash bonus of up to 75% of his
base salary based upon the achievement of certain individual and Partnership
performance objectives, (iv) Mr. Rominiecki is eligible to participate in the
Mid-Term Incentive Plan, enabling him to receive an annual bonus award at least
equal to 40% of his base salary based upon the achievement by the Partnership of
certain financial performance objectives over a three-year performance cycle,
(v) Mr. Rominiecki is entitled to severance benefits generally equal to one
year's base salary and bonuses in the event he is terminated other than for good
cause (as defined) during the term of his employment agreement, and (vi) Mr.
Rominiecki is entitled to participate in other generally available compensation
plans and receive various other benefits, including reimbursement of certain
expenses. The agreement also restricts Mr. Rominiecki from competing with the
General Partner for 18 months after the termination of the agreement if such
termination results

from Mr. Rominiecki's voluntary resignation or the Managing General Partner's
termination of Mr. Rominiecki's employment for good cause (as defined in the
agreement).

Mr. Watson has an employment agreement with the Managing General Partner
pursuant to which (i) Mr. Watson is employed as Senior Vice
President -- Administration and General Counsel effective December 19, 1996,
(ii) Mr. Watson receives a base salary of $125,000 per annum, (iii) Mr. Watson
is eligible to participate in the Annual Incentive Plan, enabling him to receive
an annual cash bonus of up to 50% of his base salary, based upon the achievement
of certain individual and Partnership performance objectives, (iv) Mr. Watson is
eligible to participate in the Mid-Term Incentive Plan, enabling him to receive
an annual bonus award equal to 40% of his base salary, based upon the
achievement by the Partnership of certain financial performance objectives over
a three-year performance cycle, (v) Mr. Watson is entitled to severance benefits
generally equal to one year's base salary and bonuses in the event he is
terminated other than for cause (as defined) during the term of his employment
agreement, and (vi) Mr. Watson is entitled to participate in other generally
available compensation plans and receive various other benefits, including
reimbursement of certain expenses.

Mr. Sherman has an employment agreement with the Managing General Partner
pursuant to which (i) Mr. Sherman is employed as Vice President -- Chief
Financial Officer effective November 1, 1997, (ii) Mr. Sherman receives a base
salary of $100,000 per annum, (iii) Mr. Sherman is eligible to participate in
the Annual Incentive Plan, enabling him to receive an annual cash bonus of up to
50% of his base salary, based upon the achievement of certain individual and
Partnership performance objectives, (iv) Mr. Sherman is eligible to participate
in the Mid-Term Incentive Plan, enabling him to receive an annual bonus award
equal to 40% of his base salary, based upon the achievement by the Partnership
of certain financial performance objectives over a three-year performance cycle,
(v) Mr. Sherman is entitled to severance benefits generally equal to one year's
base salary and bonuses in the event he is terminated other than for cause (as
defined) during the term of his employment agreement, and (vi) Mr. Sherman is
entitled to participate in other generally available compensation plans and
receive various other benefits, including reimbursement of certain expenses.

Mr. Woods has an employment agreement with the Managing General Partner
pursuant to which (i) Mr. Woods is employed as Vice President -- Supply and
Distribution effective June 30, 1997, (ii) Mr. Woods receives a base salary of
$130,000 per annum, (iii) Mr. Woods is eligible to participate in the Annual
Incentive Plan, enabling him to receive an annual cash bonus of up to 50% of his
base salary, based upon the achievement of certain individual and Partnership
performance objectives, (iv) Mr. Woods is eligible to participate in the
Mid-Term Incentive Plan, enabling him to receive an annual bonus award equal to
40% of his base salary, based upon the achievement by the Partnership of certain
financial performance objectives over a three-year performance cycle, (v) Mr.
Woods is entitled to severance benefits generally equal to one year's base
salary and bonuses in the event he is terminated other than for cause (as
defined) during the term of his employment agreement, and (vi) Mr. Woods is
entitled to participate in other generally available compensation plans and
receive various other benefits, including reimbursement of certain expenses.

Mr. Paliughi retired from the Managing General Partner effective January 2,
1998. Pursuant to his employment contract with the Managing General Partner, Mr.
Paliughi is entitled to severance benefits of $200,000 per year for five years.
Mr. Paliughi's Triarc options vested as of January 2, 1998 and may be exercised
on or before January 1, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

OWNERSHIP OF PARTNERSHIP UNITS BY THE DIRECTORS AND EXECUTIVE OFFICERS OF THE
MANAGING GENERAL PARTNER AND THE SELLING UNITHOLDER

The table below sets forth the beneficial ownership as of March 20, 1997,
by each person known by the Managing General Partner to be the beneficial owner
of more than 5% of any class of Units of the Partnership, each director and each
Named Officer of the Managing General Partner and the executive

officers and directors of the Managing General Partner as a group. The Common
Units are traded on the NYSE under the symbol 'NPL'.

<TABLE>
<CAPTION>
AMOUNT AND
CLASS OF NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER UNITS OWNERSHIP(1) CLASS
- ----------------------------------------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
National Propane Corporation .................................... Subordinated 4,533,638 100%
Suite 1700
200 First Street, S.E.
Cedar Rapids, I.A. 52401
Nelson Peltz .................................................... Common 1,210(2) *
280 Park Avenue
New York, N.Y. 10017
Peter W. May .................................................... Common 30,000 *
280 Park Avenue
New York, N.Y. 10017
Frederick W. McCarthy ........................................... -- -- *
222 Lakeview Avenue
West Palm Beach, FL 33401
Willis G. Ryckman III ........................................... -- -- *
208 Dolphin Court
Stamford, CT 06902
Ronald D. Paliughi............................................... -- -- *
Ronald R. Rominiecki............................................. Common 200 *
C. David Watson.................................................. -- -- *
R. Brooks Sherman, Jr. .......................................... -- -- *
Martin A. Woods.................................................. -- -- *
All executive officers and directors as a group (9 persons)...... Common 31,410 *
</TABLE>

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

* Less than 1%

(1) Except as otherwise indicated, each person has sole voting and dispositive
power with respect to such Units.

(2) Includes 1,210 Units owned by minor children of Mr. Peltz. Mr. Peltz
disclaims beneficial ownership of these Units.

OWNERSHIP OF TRIARC COMMON STOCK BY THE DIRECTORS AND EXECUTIVE OFFICERS OF THE
MANAGING GENERAL PARTNER AND CERTAIN BENEFICIAL OWNERS

All of the issued and outstanding shares of common stock of the General
Partner are indirectly owned by Triarc. The table below sets forth the
beneficial ownership as of March 25, 1998, by each person known by the Managing
General Partner to be the beneficial owner of more than 5% of the outstanding
shares of Triarc Class A Common Stock (constituting the only class of voting
capital stock of Triarc), each director and each Named Officer of the Managing
General Partner and the executive officers and directors of the Managing General
Partner as a group. Triarc's Class A Common Stock is traded on the NYSE under
the symbol 'TRY'.

(table continued on next page)

(table continued from previous page)

<TABLE>
<CAPTION>
AMOUNT AND
NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP(1) CLASS
- ------------------------------------------------------------------------ --------------- ----------
<S> <C> <C>
Harris Associates, L.P. ............................................... 1,775,000(7) 7.2%
Harris Associates, Inc.
Harris Associates Investment Trust
Two North LaSalle Street
Suite 500
Chicago, IL 60502
William Ehrman.......................................................... 1,500,793(8) 6.1%
Frederick Ketcher.......................................................
Jonas Gerstl............................................................
Frederic Greenberg......................................................
James McLaren ..........................................................
300 Park Avenue
New York, NY 10022
Frederick W. McCarthy................................................... -- *
Willis G. Ryckman III................................................... -- *
Ronald D. Paliughi...................................................... 121,000(9) *
Ronald R. Rominiecki.................................................... 13,334(10) *
C. David Watson......................................................... -- *
R. Brooks Sherman, Jr. ................................................. -- *
Martin A. Woods......................................................... -- *
All executive officers and directors as a group (9 persons)............. 7,964,767 30.0%
</TABLE>

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

* Less than 1%.

(1) Except as otherwise indicated, each person has sole voting and dispositive
power with respect to such shares.

(2) The Partnership is informed that DWG Acquisition Group, L.P. has pledged
such shares to a financial institution on behalf of Messrs. Peltz and May
to secure loans made to them.

(3) Includes 5,982,867 shares held by DWG Acquisition Group, L.P., of which Mr.
Peltz and Mr. May are the sole general partners.

(4) Includes 200 shares owned by a family trust of which Mr. Peltz is a general
partner and 2,000 shares owned by minor children of Mr. Peltz. Mr. Peltz
disclaims beneficial ownership.

(5) Includes options to purchase 1,073,333 shares of Class A Common Stock which
have vested or will vest within 60 days of March 25, 1998.

(6) Includes options to purchase 718,333 shares of Class A Common Stock which
have vested or will vest within 60 days of March 25, 1998.

(7) The information set forth herein with respect to Harris Associates, L.P.
('Harris'), Harris Associates, Inc. (the sole general partner of Harris),
and Harris Associates Investment Trust, Series Designated The Oakmark
Smallcap Fund (the 'Trust') is based solely on information contained in
their Schedules 13G dated February 12, 1998 filed pursuant to the Exchange
Act. Harris is an investment adviser, and serves as an investment adviser
to the Trust. The Oakmark Smallcap Fund, a series of the Trust,
beneficially owned 1,750,000 shares of Class A Common Stock as of December
31, 1997. These shares are included as shares over which Harris has shared
voting and dispositive power because of Harris' power to manage the Trust's
investments. In addition, Harris serves as investment adviser to other
clients who may own shares of Class A Common Stock but for which Harris
does not have discretionary authority. Such shares have also been included
as shares over which Harris has shared voting and dispositive power.

(8) The information set forth herein with respect to Messrs. Ehrman, Greenberg,
Ketcher, Gerstl and McLaren is based solely on information contained in a
Schedule 13D, dated July 16, 1996, filed pursuant to the Exchange Act. The
shares reflected include an aggregate of 1,365,793 shares of Class A Common
Stock that Messrs. Ehrman, Ketcher, Gerstl, Greenberg and McLaren may be
deemed to beneficially own as general partners of EGS Associates, L.P., a
Delaware limited partnership, EGS Partners, L.L.C., a Delaware limited
liability company, Bev Partners, L.P., a

(footnotes continued on next page)

(footnotes continued from previous page)
Delaware limited partnership, and Jonas Partners, L.P., a Delaware limited
partnership. Also includes (i) 55,150 shares of Class A Common Stock owned
directly by Mr. Ehrman and 39,150 shares of Class A Common Stock owned by
members of Mr. Ehrman's immediate family; (ii) 23,600 shares of Class A
Common Stock owned directly by Mr. Ketcher and 1,100 shares of Class A
Common Stock owned by a member of Mr. Ketcher's immediate family and his
mother-in-law; (iii) 2,500 shares of Class A Common Stock owned directly by
Mr. Gerstl and 8,500 shares of Class A Common Stock owned by a member of
Mr. Gerstl's immediate family; and (iv) 2,000 shares of Class A Common
Stock owned directly by Mr. Greenberg and 3,000 shares of Class A Common
Stock owned by a member of Mr. Greenberg's immediate family.

(9) Represents Mr. Paliughi's options to acquire Triarc Class A Common Stock,
which vested as of January 2, 1998 and may be exercised on or before
January 1, 1999.

(10) Represents options to purchase 13,334 shares of Class A Common Stock which
have vested or will vest within 60 days of March 25, 1998.
------------------------
The foregoing table does not include 5,997,622 shares of Triarc's
non-voting Class B Common Stock owned by Victor Posner ('Posner') and an entity
controlled by Posner (together with Posner, the 'Posner Entities'). All such
shares of Class B Common Stock can be converted without restriction into an
equal number of shares of Class A Common Stock if they are sold to a third party
unaffiliated with the Posner Entities. Triarc, or its designee, has certain
rights of first refusal if such shares are sold to an unaffiliated third party.
If the 5,997,622 currently outstanding shares of the Class B Common Stock were
converted into shares of Class A Common Stock, such shares would constitute
approximately 19.6% of the then outstanding shares of Class A Common Stock as of
March 25, 1998. None of the directors of Triarc or the Named Officers
beneficially owned any Class B Common Stock as of March 25, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RIGHTS OF THE GENERAL PARTNERS

The Partnership and the Managing General Partner have extensive ongoing
relationships with Triarc and its Affiliates. Affiliates of the Managing General
Partner, including Triarc, perform certain administrative services for the
Managing General Partner on behalf of the Partnership. Such Affiliates do not
receive a fee for such services, but are reimbursed for all direct and indirect
expenses incurred in connection therewith. See Item 10. 'Directors and Executive
Officers of the Registrant -- Partnership Management.' Effective December 28,
1997 certain amendments to the partnership agreements of the Partnership and the
Operating Partnership were adopted such that Triarc no longer has substantial
control over the Partnership to the point where it now exercises only
significant influence.

TRANSACTIONS INVOLVING TRIARC AND ITS AFFILIATES

The Managing General Partner receives from Triarc certain management
services including legal, accounting, tax, insurance, financial and other
management services. Effective April 23, 1993 the Managing General Partner
entered into a management services agreement with Triarc, which was amended as
of July 2, 1996 (as so amended, the 'Management Services Agreement'), pursuant
to which Triarc is entitled to certain management fees from the Managing General
Partner for services which do not relate to the business or operations of the
Partnership or its subsidiaries and to (i) reimbursement of expenses incurred by
it from the Partnership or the Operating Partnership regarding administrative
services performed with respect to the business or operations of the Partnership
and its subsidiaries and (ii) such reasonable fees as may be agreed to by Triarc
and the Partnership for the performance by Triarc of any other services provided
by it that relate to the business of the Partnership and its subsidiaries. For
further discussion, see Note 19 to the accompanying consolidated financial
statements included elsewhere herein.

An affiliate of the Managing General Partner holds an intercompany note of
Triarc's in the aggregate principal amount of approximately $30.0 million as of
December 31, 1997. The note is payable on demand, and bears interest,
semi-annually, at the rate of 13.5% per annum.

PART IV

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

(A) 1. Financial Statements:

See Index to Financial Statements (Item 8)

2. Financial Statement Schedules:

None -- all schedules have been omitted since they are either not
applicable or the information is contained elsewhere in 'Item
8 -- Financial Statements and Supplementary Data.'

3. Exhibits:

Copies of the following exhibits are available at a charge of $.25
per page upon written request to the Assistant Secretary of National
Propane Corporation at Suite 1700, 200 1st St. SE, Cedar Rapids, Iowa
52401-1409.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -------------------------------------------------------------------------------------------------------
<S> <C>
3.1(1) -- Amended and Restated Agreement of Limited Partnership of National Propane Partners, L.P. dated as of
July 2, 1996
3.2(1) -- Amended and Restated Agreement of Limited Partnership of National Propane, L.P. dated as of July 2,
1996
3.3(3) -- Amendment No. 1 dated November 1, 1996 to the Amended and Restated Agreement of Limited Partnership
of National Propane, L.P. dated as of July 2, 1996
10.1(3) -- Purchase Agreement, dated as of November 7, 1996, among National Propane Corporation, National
Propane SGP, Inc., National Propane Partners, L.P., National Propane, L.P. and Merrill Lynch & Co.
10.2(3) -- Registration Agreement, dated as of November 7, 1996, between National Propane Partners, L.P. and
Merrill Lynch & Co.
10.3(1) -- Credit Agreement, dated as of June 26, 1996, among National Propane, L.P., The First National Bank
of Boston, as administrative agent and a lender, Bank of America NT & SA, as a lender, and BA
Securities, Inc., as syndication agent
10.4(1) -- Note Purchase Agreement, dated as of June 26, 1996, among National Propane, L.P. and each of the
Purchasers listed in Schedule A thereto relating to $125 million aggregate principal amount of 8.54%
First Mortgage Notes due June 30, 2010
10.5(1) -- Conveyance, Contribution and Assumption Agreement, dated as of July 2, 1996, by and among National
Propane, L.P., National Propane Partners, L.P., National Propane Corporation and National Propane
SGP, Inc.
10.6(1) -- Contribution and Assumption Agreement, dated as of July 2, 1996, by and among National Propane,
L.P., National Propane Corporation, National Propane SGP, Inc. and National Sales & Service, Inc.
10.7(1) -- Note, in the principal amount of $40.7 million, issued by Triarc Companies, Inc. to National
Propane, L.P.
10.8(1) -- National Propane 1996 Unit Option Plan
10.9(1) -- Amendment to Employment Agreement of Ronald D. Paliughi, dated as of June 10, 1996
10.10(2) -- Employment Agreement, dated as of April 24, 1993, between National Propane Corporation and Ronald D.
Paliughi (including Amendment No. 1, dated as of December 7, 1994 and Amendment No. 2, dated as of
March 27, 1995)
10.11(2) -- Severance Agreement, dated as of December 1, 1995, between National Propane Corporation and Ronald
R. Rominiecki
10.12(2) -- Severance Agreement, dated as of March 27, 1997, between National Propane Corporation and Laurie B.
Crawford
10.13(4) -- Employment Agreement, dated November 20, 1996, between National Propane Corporation and C. David
Watson
10.13(2) -- Triarc's 1993 Equity Participation Plan
10.14(2) -- Form of Non-Incentive Stock Option Agreement under Triarc's 1993 Equity Participation Plan
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.15(6) -- Consent, waiver and amendment dated November 5, 1996 with respect to (1) the Credit Agreement dated
as of June 26, 1996 among National Propane, L.P., The First National Bank of Boston, as
administrative agent and as a lender, Bank of America NT & SA, as a lender, and BA Securities, Inc.,
as syndication agent and (2) the Note Purchase Agreement, dated as of June 26, 1996, among National
Propane, L.P. and each of the Purchasers listed in Schedule A thereto relating to $125 million
aggregate principal amount of 8.54% First Mortgage Notes due June 30, 2010.
10.16(6) -- Second consent, waiver and amendment dated January 14, 1997 with respect to (1) the Credit Agreement
dated as of June 26, 1996 among National Propane, L.P., The First National Bank of Boston, as
administrative agent and a lender, Bank of America NT & SA, as a lender, and BA Securities, Inc., as
syndication agent and (2) the Note Purchase Agreement, dated as of June 26, 1996, among National
Propane, L.P. and each of the Purchasers listed in Schedule A thereto relating to $125 million
aggregate principal amount of 8.54% First Mortgage Notes due June 30, 2010.
10.17(6) -- First Amendment dated as of March 27, 1997 to the Credit Agreement dated as of June 26, 1996 among
National Propane, L.P., The First National Bank of Boston, as administrative agent and a lender, Bank
of America NT & SA, as a lender, and BA Securities, Inc. as syndication agent.
10.18(7) -- Employment Agreement, dated as of June 17, 1997, between National Propane Corporation and Martin A.
Woods.
10.19(7) -- Amendment to Employment Agreement between National Propane Corporation and Ronald R. Rominiecki,
dated as of March 11, 1997.
*10.20 -- Employment Agreement, dated as of December 10, 1997, between National Propane Corporation and R.
Brooks Sherman.
*10.21 -- Amendment No. 1 dated December 28, 1997 to the Amended and Restated Agreement of Limited Partnership
of National Propane Partners, L.P., dated as of July 2, 1996.
*10.22 -- Amendment No. 2 dated December 28, 1997 to the Amended and Restricted Agreement of Limited
Partnership of National Propane, L.P., dated as of July 2, 1996.
10.23 -- Second Amendment dated as of April 22, 1997 to the National Propane Credit Agreement among National
Propane, L.P., the Lenders (as defined therein), The First National Bank of Boston, as Administrative
Agent and a Lender, Bank of America NT&SA, as a Lender, and BA Securities, Inc. as Syndication Agent,
incorporated herein by reference to Exhibit 10.1 to National Propane Partners, L.P.'s Current Report
on Form 8-K dated May 15, 1997.
10.24(8) -- Third Amendment dated as of March 23, 1998 to the National Propane Credit Agreement among National
Propane, L.P., the Lenders (as defined therein), BankBoston, N.A., as Administrative Agent and a
Lender, and BancAmerica Robertson Stephens, as Syndication Agent.
10.25(8) -- Agreement dated as of March 23, 1998 among National Propane Corporation, National Propane Partners,
L.P., Triarc Companies, Inc., the Lenders (as defined therein), BankBoston, N.A., as Administrative
Agent and a Lender, and BancAmerica Robertson Stephens, as Syndication Agent.
*10.26 -- Amendment to Employment Agreement between National Propane Corporation and Ronald R. Rominiecki,
dated as of March 19, 1998.
*10.27 -- Fourth Amendment dated as of March 30, 1998 to the National Propane Credit Agreement among National
Propane, L.P., the Lenders (as defined therein). BankBoston, N.A., as Administrative Agent and a
Lender, and BancAmerica Robertson Stephens, as Syndication Agent.
*21.1 -- List of Subsidiaries
*24.1 -- Powers of Attorney (included on signature page)
*27.1 -- Financial Data Schedule for the year ended December 31, 1997, submitted to the Securities and
Exchange Commission in electronic format.
</TABLE>

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

* Filed herewith

(1) Filed with the Partnership's Current Report on Form 8-K dated August 16,
1996 and incorporated herein by reference.

(footnotes continued on next page)

(footnotes continued from previous page)

(2) Filed with the Partnership's Registration Statement of Form S-1 filed March
26, 1996 (Registration No. 333-2768) and incorporated herein by reference.

(3) Filed with the Partnership's Current Report on Form 8-K dated November 14,
1996 and incorporated herein by reference.

(4) Filed with the Partnership's Registration Statement on Form S-1 filed
January 10, 1997 (Registration No. 333-19599) and incorporated herein by
reference.

(5) Filed with the Partnership's Current Report on Form 8-K dated January 29,
1997 and incorporated herein by reference.

(6) Filed with the Partnership's Current Report on Form 8-K dated March 31, 1997
and incorporated herein by reference.

(7) Filed with the Partnership's Current Report on Form 8-K dated June 13, 1997
and incorporated herein by reference.

(8) Filed with the Partnership's Current Report on Form 8-K dated March 25, 1998
and incorporated herein by reference.

(B) 1. Reports on Form 8-K:

During the period from October 1, 1997 to December 31, 1997, the
Registrant did not file any reports on Form 8-K.

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.

NATIONAL PROPANE PARTNERS, L.P.

By: National Propane Corporation
as Managing General Partner

By: /s/ RONALD R. ROMINIECKI
...................................
PRESIDENT AND CHIEF OPERATING
OFFICER

Dated: March 31, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below on March 30, 1998 by the following persons
on behalf of the Registrant in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLES
- ------------------------------------------ ---------------------------------------------------------------------
<C> <S>
/s/ RONALD R. ROMINIECKI President and Chief Operating Officer
.........................................
(RONALD R. ROMINIECKI)

/s/ R. BROOKS SHERMAN, JR. Vice President and Chief Financial Officer (Principal Financial and
......................................... Accounting Officer)
(R. BROOKS SHERMAN)

/s/ NELSON PELTZ Director
.........................................
(NELSON PELTZ)

/s/ PETER W. MAY Director
.........................................
(PETER W. MAY)

/s/ FREDERICK W. MCCARTHY Director
.........................................
(FREDERICK W. MCCARTHY)

/s/ WILLIS G. RYCKMAN III Director
.........................................
(WILLIS G. RYCKMAN III)

/s/ RONALD D. PALIUGHI Director
.........................................
(RONALD D. PALIUGHI)
</TABLE>

STATEMENT OF DIFFERENCES

The trademark symbol shall be expresssed as .................'tm'

<PAGE>

[NATIONAL PROPANE LOGO]

Ronald R. Rominlecki
President and COO

National Propane
Suite 1700, IES Tower
200 1st Street SE
Cedar Rapids, Iowa 52401-1409
(319) 365-1550
(319) 365-6084 Fax

December 10, 1997

Mr. Brooks Sherman
National Propane
200 1st Street S.E.
Suite 1700 IES Tower
Cedar Rapids, IA 52401-1409

Dear Brooks:

It is with great pleasure that we hereby confirm your employment as Vice
President -- Chief Financial Officer of National Propane Corporation ("NPC"),
the general partner of National Propane Partners, L.P. (the "MLP"), on the
terms and conditions set forth in this letter and in the attached term sheet
(the "Term Sheet").

You will report to the President of NPC and your duties will be performed
primarily at the corporate headquarters of NPC in Cedar Rapids, Iowa. You will
be responsible for all financial and accounting functions of the company and
will be part of the senior management team involved in the strategic planning
for the company.

In the event of termination by NPC of your employment without good cause, NPC
shall (i) within 30 days after the date of such termination, pay to you a lump
sum equal to one-half (1/2) your annual rate of salary in effect at the date of
termination, (ii) commencing 6 months after the date of termination of your
employment, pay to you a sum equal to your annual rate of salary in effect at
the date of termination, payable in semi-monthly installments for a period of
six (6) months; provided, however, that if you have secured full-time employment
during the period of the semi-monthly payments, the semi-monthly payments
required to be made by NPC after you begin receiving payments from your new
employer will be offset by the compensation you earn from any such new employer
during the period in which you receive semi-monthly payments hereunder, (iii)
within 30 days after date of such termination, pay to you a lump sum equal to
annual target incentive and any funds accumulated as part of your Mid-Term cash
performance plan, and (iv) any unit options granted to you (a) which have not
vested on the termination date shall terminate and become null and void as of
such date and (b) which have vested on the termination date must be exercised
within 90 days or be forfeited.

For purposes of this agreement termination by NPC "for good cause" means: (i)
commission of any act of fraud or gross negligence by you in the course of your
employment hereunder which, in the case of gross negligence, has a materially
adverse effect on the business or financial condition of NPC or any of its
affiliates; (ii) voluntary termination by you of your employment or failure,
refusal or neglect by you to comply with any of your material obligations
hereunder or failure by you to comply with a reasonable instruction of any
superior officer of NPC or its Board of Directors, which failure, refusal or
neglect, if curable, is not fully and completely cured to the reasonable
satisfaction of NPC as soon as reasonably possible upon written notice to you;
(iii) engagement by you in any conduct or the commission by you of any act which
is, in the reasonable opinion of the President or Chief Executive Officer or NPC
or its Board of Directors is materially injurious or detrimental to the
substantial interest of otherwise, which is in violation of the criminal laws of
the United States or any state thereof or any similar foreign law to which you
may be subject; (v) any failure substantially to comply with any written rules,
regulations, policies

or procedures of NPC or any of its affiliates which, if not complied with, could
have a material adverse effect on NPC or any of its affiliates; or (vi) any
willful failure to comply with NPC or any of its affiliates' internal policies
regarding insider trading.

You acknowledge that as an executive officer of NPC you will be involved, at the
highest level, in the development, implementation, and management of NPC's and
the MLP's business strategies and plans, including those which involve NPC and
the MLP's finances, marketing operations, industrial relations, operations and
acquisitions. By virtue of your unique and sensitive position, your employment
by a competitor of NPC and the MLP represents a serious competitive danger to
NPC and the MLP and the use of your talent, knowledge, and information about
NPC's and the MLP's business, strategies, and plans can and would constitute a
valuable competitive advantage over NPC and the MLP. In view of the foregoing,
if either your employment with NPC ends by reason of your resignation, or your
employment is terminated by NPC for good cause, then you covenant and agree that
in either case for a period of eighteen (18) months following the termination of
your employment you will not engage or be engaged in any capacity, directly or
indirectly, including, but not limited to as an employee, agent, consultant,
manager, executive, owner, or stockholder (except as a passive investor owning
less than two percent interest in a publicly held company) in the propane
industry.

You agree to treat such as confidential and not to disclose to anyone other than
NPC and its subsidiaries and affiliated companies, and you agree that you will
not at any time during your employment and for a period of four years
thereafter, without the prior written consent of NPC, its subsidiaries furnish,
or make known or accessible to, or use for the benefit of anyone other than NPC,
its subsidiaries and affiliated companies, any information of the confidential
nature relating in any way to the business of NPC or its subsidiaries or
affiliated companies, or any of their respective direct business customers,
unless (i) you are required to disclose such information by requirements of law,
(ii) such information is in the public domain through no fault of yours, or
(iii) such information has been lawfully acquired by you from other sources
unless you know that such information was obtained in violation of an agreement
of confidentiality.

You agree that in addition to any other remedy provided at law or in equity, (a)
NPC shall be entitled to a temporary restraining order, and both preliminary and
permanent injunctive relief restraining you from violating the provision of the
two preceding paragraphs (b) you will indemnify and hold NPC harmless from and
against any and all damages or loss incurred by NPC or any of its affiliates
(including attorneys' fees and expenses) as a result of any such violation; and
(c) NPC's remaining obligations of this agreement, if any, shall cease (other
than payment of your base salary through the date of such violation and any
earned but unpaid vacation or bonus or except as may be required by law).

This agreement shall be governed by the laws of the State of Iowa applicable to
agreements made and to be performed entirely within such State.

If you agree with the terms outlined above and in the Employment Term Sheet,
please date and sign the copy of this letter enclosed for that purpose and
return it to us.

Best Regards,

RONALD R. ROMINIECKI

Ronald R. Rominiecki
President and COO

RRR/ld
Enclosure

BROOKS SHERMAN 12/17/97
_____________________ _______________________
Brooks Sherman Date

BROOKS SHERMAN
EMPLOYMENT TERM SHEET

Provision Term Comments
- --------- ---- ---------
<S> <C> <C>

Base Salary ......................... $100,000 Subject to increase at
discretion of NPC Board

Annual Incentive ................... $50,000/cycle target Company and individual
(50% of salary) performance assessed for
each fiscal year relative to
objectives agreed in
advance between
executive and CEO
of NPC.

Mid-Term Cash ...................... $40,000/cycle target The CEO of NPC will
(40% of salary) develop a mid-term cash
performance plan
calibrated to deliver the
target award for
delivering agreed upon
profit over a three-year
performance cycle.
During each year of the
three-year cycle an
amount will be accrued
based upon a share of
the minimum return; a new
three-year cycle begins
each year so that after the
third year the annual cash
pay-out should equal or
exceed the target; no cap
on potential award.

Unit Options ....................... To be determined by NPC
Compensation
Committee.

Health, Medical,
Insurance Benefits ................. Participation in NPC
Plans.

Vacation ........................... Consistent with other
executive officers.

</TABLE>

<PAGE>

AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
NATIONAL PROPANE PARTNERS, L.P.

This Amendment No. 1 to the Amended and Restated Agreement of Limited
Partnership of National Propane Partners, L.P. (the "Partnership") is hereby
made and is effective as of this 28th day of December, 1997, by and among
National Propane Corporation, a Delaware corporation, as the Managing General
Partner of the Partnership and as holder of all outstanding Subordinated Units,
National Propane SGP, Inc., a Delaware corporation, as the Special General
Partner, and the Common Unitholders.

WITNESSETH:
-----------
WHEREAS, the Partnership was heretofore formed and now exists pursuant
to the Amended and Restated Agreement of Limited Partnership of National Propane
Partners, L.P., dated as of July 2, 1996 (the "Partnership Agreement"); and

WHEREAS, Section 13.1 of the Partnership Agreement provides procedures
for the amendment of the Partnership Agreement by the Managing General Partner
without obtaining the approval of any Partner; and

WHEREAS, the Managing General Partner proposes to adopt amendments to
the Partnership Agreement pursuant to the authority granted in such Section
13.1.

AGREEMENT
----------

NOW, THEREFORE, it is agreed as follows:

1. Capitalized terms used herein but not defined shall have the meanings
assigned to them in the Partnership Agreement.

2. Section 1.1 of the Partnership Agreement is hereby amended by deleting
the definition of "Outstanding" in its entirety and substituting in lieu thereof
the following:

"Outstanding" means, with respect to Partnership
Securities, all Partnership Securities that are
issued by the Partnership and reflected as
Outstanding on the Partnership's books and records
as of the date of determination.

3. Section 11.2 of the Partnership Agreement is hereby amended by
deleting the first and second sentences thereof in their entirety and
substituting in lieu thereof the following:

The Managing General Partner may be removed if
such removal is approved by the Unitholders
holding 66 2/3% of the Outstanding Units (excluding
Units held by the General Partners and their Affiliates).
Any such action by such holders for removal of the
Managing General Partner must also provide for the
election of a successor General Partner by the
Unitholders holding at least a majority of the
Outstanding Units (excluding Units held by the
General Partners and their Affiliates).

4. Section 11.4 of the Partnership Agreement is hereby amended by
deleting the reference to "and Units held by the General Partners and their
Affiliates are not voted in favor of such removal."

5. Section 1.1 of the Partnership Agreement is hereby amended by deleting
in clause (b) of the definition of "Subordination Period" the reference to "and
Units held by the Managing General Partner and its Affiliates are not voted
in favor of such removal."

6. Section 11.3(a) of the Partnership Agreement is hereby amended by
adding at the end thereof the following new paragraph:

Notwithstanding any other provision of this Section
11.3, if the Managing General Partner is removed as
a General Partner by the holders of Outstanding Units
in circumstances where (Cause does not exist, then,
unless the Managing General Partner shall elect (in
its sole discretion) prior to the effective date of
such removal not to have the provisions of this
paragraph apply to all or any portion of the Managing
General Partner's general partner interest in the
Operating Partnership (the "Retained OLP Interest"),
the Retained OLP Interest shall not be purchased for
cash or converted into Common Units as provided in this
Section 11.3(a) or in Section 11.3(b) but shall instead,
as provided in the Operating Agreement, be converted into
a non-voting limited partner interest in the Operating
Partnership having an interest in the profits and losses
of the Operating Partnership equal to that attributable
to the Retained OLP Interest. In such event, the term
"Combined Interest" as used in this Section 11.3 shall
(i) exclude the Retained OLP Interest and (ii) include
any portion of the Managing General Partner's general
partner interest in the Operating Partnership not so
retained.

7. Section 13.12 of the Partnership Agreement is hereby amended by
deleting in clause (a) thereof the reference to "(and also subject to the
limitations contained in the definition of 'Outstanding')."

8. Except as set forth above, all provisions of the Partnership Agreement
will remain in full force and effect.

9. This Amendment No. 1 shall be binding upon, and shall enure to the
benefit of, the parties hereto and their respective successors and assigns.

10. This Amendment No. 1 shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by such laws, without regard to principles of conflict of laws.

IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
to the Partnership Agreement as of the date first written above.

MANAGING GENERAL PARTNER

National Propane Corporation

By: /s/ Ronald R. Rominiecki
_________________________
Name: Ronald R. Rominiecki
Title: President and Chief
Operating Officer

SUBORDINATED UNITHOLDERS

National Propane Corporation

By: /s/ Ronald R. Rominiecki
___________________________
Name: Ronald R. Rominiecki
Title: President and Chief
Operating Officer

SPECIAL GENERAL PARTNER

National Propane SGP, Inc.

By: /s/ Ronald R. Rominiecki
_________________________
Name: Ronald R. Rominiecki
Title: President and Chief
Operating Officer

COMMON UNITHOLDERS

The Common Unitholders pursuant
to a Power of Attorney executed
in favor of, and granted and
delivered to, the Managing
General Partner.

BY: National Propane Corporation,
the Managing General Partner,
as attorney-in-fact for
all Common Unitholders
pursuant to the Power of
Attorney granted pursuant
to Section 2.6 of the
Partnership Agreement.

By: /s/ Ronald R. Rominiecki
___________________________
Name: Ronald R. Rominiecki
Title: President and Chief
Operating Officer

<PAGE>

AMENDMENT NO. 2 TO THE
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
NATIONAL PROPANE, L.P.

This Amendment No. 2 to the Amended and Restated Agreement of Limited
Partnership of National Propane, L.P. (the "Partnership") is hereby made and is
effective as of this 28th day of December, 1997, by and among National Propane
Corporation, a Delaware corporation, as the Managing General Partner, National
Propane SGP, Inc., a Delaware corporation, as the Special General Partner, and
the limited partner of the Partnership.

W1TNESSETH:
----------

WHEREAS, the Partnership was heretofore formed and now exists pursuant to
the Amended and Restated Agreement of Limited Partnership of National Propane,
L.P., dated as of July 2, 1996, as amended (the "Partnership Agreement"); and

WHEREAS, Section 13.1 of the Partnership Agreement provides procedures for
the amendment of the Partnership Agreement by the Managing General Partner
without obtaining the approval of any Partner; and

WHEREAS, the Managing General Partner proposes to adopt amendments to the
Partnership Agreement pursuant to the authority granted in such Section 13.1.

AGREEMENT
---------

NOW, THEREFORE, it is agreed as follows:

1. Capitalized terms used herein but not defined shall have the meanings
assigned to them in the Partnership Agreement.

2. Section 11.3 of the Partnership Agreement is hereby amended by deleting
the current Section 11.3 in its entirety and substituting in lieu thereof the
following:

11.3 Interest of Departing Partner and Successor General Partner.

(a) If the Managing General Partner is removed as Managing General Partner
of the MLP pursuant to the provisions of Section 11.2 of the MLP Agreement,
then. unless the Managing General Partner makes the election provided in the
last paragraph of Section 11.3(a) of the MLP Agreement with respect to all or
any portion of its Partnership Interest as a General Partner of the Partnership,
that portion of the Partnership Interest of the Managing General Partner as to
which no

such election is made (the "Converted GP Interest") shall be converted into a
non-voting limited partner interest in the Partnership (the "Retained LP
Interest") having an interest in the profits and losses of the Partnership equal
to that attributable to the Converted GP Interest. For purposes of this
Agreement, conversion of the Converted GP Interest will be characterized as if
the Managing General Partner contributed the Converted GP Interest in the
Partnership to the Partnership in exchange for the Retained LP Interest.

(b) The Partnership Interest of a Departing Partner departing as a result
of withdrawal or removal pursuant to Section 11.1 or 11.2 (other than the
Retained LP Interest) shall (unless it is otherwise required to be converted
into Common Units pursuant to Section 11.3(b) of the MLP Agreement or 11.1(d)
of this Agreement) be purchased by the successor to the Departing Partner
for cash in the manner specified in the MLP Agreement. Such purchase (or
conversion into Common Units, as applicable) shall be a condition to the
admission to the Partnership of the successor as the General Partner.

(c) Any successor General Partner shall, except to the extent that it is
inconsistent with the provisions of Section 11.4, indemnify the Departing
Partner as to all debts and liabilities of the Partnership arising on or after
the effective date of the withdrawal or removal of the Departing Partner.

(d) The Departing Partner, including the Managing General Partner upon
removal, shall be entitled to receive all reimbursements due such Departing
Partner pursuant to Section 7.4, including any employee-related liabilities
(including severance liabilities), incurred in connection with the termination
of any employees employed by such Departing Partner for the benefit of the
Partnership.

3. Section 11.4 of the Partnership Agreement is hereby amended by
renumbering it as new Section 11.5 and a new Section 11.4 is added as follows:

11.4 Indemnification and Covenants upon Removal of Managing General
Partner.

(a) Indemnification by Removed Partner. If, following the removal ofthe
Managing General Partner as provided in Section 11.2, all or a portion of the
Partnership Interest of the removed Managing General Partner (the "Removed
Partner") is converted into a non-voting limited partner Partnership Interest as
provided in Section 11.3(a), then, from and after the effective date of removal
of the Removed Partner (the "Removal Date"), the Removed Partner, to the fullest
extent permitted by law, shall indemnify and hold harmless any successor General
Partner (whether one or more) from and against any and all losses, costs,
damages, expenses, liabilities and claims arising or resulting from, or relating
to any payments that any successor General Partner, in its capacity as the
General Partner of the Partnership,

is required to make (and makes) from its own funds (after prior recourse is had
to the assets of the Partnership) with respect to the debt of the Partnership
(including accounts payable or other trade payables) reflected on the books and
records of the Partnership as of the effective time of the Removal Date and any
refinancing, refunding or replacement thereof (the "Indemnified Debt"), due to
the inability of the Partnership to pay or refinance any such Indemnified Debt
from the assets of the Partnership. The indemnity by the Removed Partner
described in this Section 11.4 (the "Removed Partner Debt Indemnity") shall not
exceed the Outstanding Indemnified Debt Amount determined for the Removed
Partner for any fiscal year. Except to the extent otherwise required by law, the
Removed Partner Debt Indemnity shall terminate at the time that the amount of
the Removed Partner's Outstanding Indemnified Debt Amount is reduced to zero.
The Removed Partner shall be subrogated to the rights of a successor General
Partner to the extent that the Removed Partner has made any payment to such
successor General Partner in respect of its Removed Partner Debt Indemnity.

(b) Covenants of Successor General Partner. During the period commencing on
the Removal Date and ending on the fifth anniversary of the Removal Date but
in any event subject to Section 11.4(c):

(i) each successor General Partner, for itself and on behalf of the
Partnership, covenants that it shall not, and shall cause the Partnership or any
other Person not to, do any of the following if it would result in the Allocable
Indemnified Debt being reduced below the Outstanding Indemnified Debt Amount:
(A) prepay, defease, purchase or otherwise retire any of the Indemnified Debt
(unless such Indemnified Debt is simultaneously replaced with an equivalent
amount of new Indemnified Debt), (B) modify any of the Indemnified Debt so as to
eliminate or limit the recourse liability of the Partnership or any successor
General Partner in its capacity as a general partner of the Partnership with
respect thereto, (C) cause the Partnership to merge or consolidate with or
otherwise become a corporation or limited liability company for federal income
tax purposes, (D) cause or permit any other Person (other than the Partnership
or any successor General Partner) to assume, guarantee, indemnify against or
otherwise incur any liability with respect to any Indemnified Debt, or (E) take
or fail to take any other action similar to the foregoing;

(ii) each successor General Partner, for itself and on behalf of the
Partnership, covenants that it shall cause the Partnership or its successor (x)
to not redeem the Retained LP Interest or take similar action and (y) to
continue in existence and to remain subject to Indemnified Debt, and/or use its
reasonable best efforts to cause the Partnership to refinance scheduled
principal payments on the Indemnified Debt with sufficient recourse debt so that
at any time until the termination of the Removed Partner Debt Indemnity pursuant
to Section 11.4(a) hereof, the Allocable Indemnified Debt as of such time will
not be reduced below the

Outstanding Indemnified Debt Amount determined as of such time;

(iii) each successor General Partner, for itself and on behalf of the
Partnership, covenants that it shall use its reasonable best efforts to cause
the Partnership to not take or omit to take any action, if such action or
omission (with the giving of notice or the passing of time, or both) would
constitute a breach of, or give rise to a default or event of default under, any
Indemnified Debt.

(iv) the Removed Partner shall have all remedies available at law and in
equity for a default in the provisions of this Section 11.4(b) and by a
successor General Partner, and any successor General Partner, by executing this
Agreement, acknowledges that specific performance is available as a remedy and
may be the only adequate remedy in the event that such successor General Partner
defaults on its obligations undertaken pursuant to this Section 11.4(b).

(i) a successor General Partner shall not be required to comply with
Section 11.4(b) if the action or event that would otherwise cause a violation
or breach of one or more of the covenants contained in Section 11.4(b) has been
previously approved by holders of 66 2/3%or more of the outstanding Units of the
MLP (including any Units held by the Removed Partner or its Affiliates); and

(ii) nothing contained in Section 11.4(b) shall prevent the Partnership or
the MLP from consummating any acquisition, merger or consolidation or sale or
other transfer of the assets of the Partnership or the MLP unless such
acquisition, merger or consolidation or sale or other transfer is undertaken
with a principal purpose of avoiding the application of Section 11.4(b).

(d) Reports. From and after the Removal Date and until the termination of
the Removed Partner Debt Indemnity pursuant to Section 11.4(a), a successor
General Partner shall furnish to the Removed Partner, (i) within 30 days after
the end of each fiscal quarter, a certificate of the chief financial officer of
such successor General Partner, or equivalent officer, stating that (A) the
Allocable Indemnified Debt as of the end of such fiscal quarter is not, and has
not been during the fiscal quarter, less than the Outstanding Indemnified Debt
Amount as of such time, and (B) no event that constitutes, or with the passing
of time or the giving of notice, or both. would reasonably be expected to
constitute, an event of default under any Indemnified Debt has occurred, or if
any such event has occurred, describing such event and the action such successor
General Partner intends to take with respect thereto, (ii) concurrently with
providing them to the lenders, agents or trustees in respect of the Indemnified
Debt, copies of any compliance certificates, together with

any attachments thereto, required pursuant to any Indemnified Debt, (iii)
promptly upon obtaining knowledge thereof, a description, in reasonable detail,
of any event that constitutes, or with the passing of time or the giving of
notice, or both, would reasonably be expected to constitute, an event of default
under the Indemnified Debt and (iv) such other documents or information as the
Removed Partner may reasonably request relating specifically and primarily to
the Indemnified Debt or the Removed Partner Debt Indemnity. The successor
General Partner shall prepare and file, or cause to be prepared and filed,
applicable tax returns consistent with the allocation of the Indemnified Debt to
the Removed Partner as contemplated herein.

(e) Amendment. Notwithstanding any other provision of this Agreement and
pursuant to the authority granted the Managing General Partner in Section
13.1(g) hereof, the Managing General Partner may, in its sole discretion, at any
time prior to the date that the MLP formally solicits a vote of the holders of
Units to remove the Managing General Partner as provided in Section 11.2 of the
MLP Agreement, amend this Agreement to modify or delete any or all of the
provisions of this Section 11.4 in such manner as the Managing General Partner
shall determine in its sole discretion is necessary or desirable to eliminate or
modify the indemnity set forth in Section 11.4(a), the covenants set forth in
Section 11.4(b) or to make other conforming changes. From and after the Removal
Date this Section 11.4 shall be amended only with the written consent of the
Removed Partner.

4. Section 1.1 of the Partnership Agreement is hereby amended by adding the
following new definitions:

"Allocable Indemnified Debt" means the amount of the Indemnified
Debt that is allocated to the Removed Partner for purposes of
Section 752 of the Code (taking into account the Removed Partner
Debt Indemnity).

"Converted GP Interest" has the meaning assigned to such term in
Section 11.3(a).

"Indemnified Debt" has the meaning assigned to such term in
Section 11.4(a).

"Outstanding Indemnified Debt Amount" means (i) during the fiscal
year in which the Removed Partner has been removed as Managing General
Partner, an amount of Indemnified Debt equal to the difference between
(A) the Allocable Indemnified Debt determined as of the effective time
of the Removal Date and (B) the federal income tax basis of the
Removed Partner in its Retained LP Interest determined as of the
beginning of the fiscal year in which the Removal Date occurs, and
(ii) during each fiscal year thereafter, an amount of Indemnified Debt
equal to the difference between (A) the Allocable Indemnified Debt
determined as of the first

day of such fiscal year and (B) the federal income tax basis of the Removed
Partner in its Retained LP Interest determined as of the first day of such
fiscal year.

"Removal Date" has the meaning assigned to such term in
Section 11.4(a).

"Removed Partner" has the meaning assigned to such term in
Section 11.4(a).

"Removed Partner Debt Indemnity" has the meaning assigned to
such term in Section 11.4(a).

"Retained LP Interest" has the meaning assigned to such term
in Section 11.4(a).

5. Except as set forth above, all provisions of the
Partnership Agreement will remain in full force and effect.

6. This Amendment No. 2 shall be binding upon, and shall
enure to the benefit of, the parties hereto and their respective successors
and assigns.

7. This Amendment No. 2 shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware, all rights
and remedies being governed by such laws, without regard to principles of
conflict of laws.

IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 2 to the Partnership Agreement as of the date first written above.

MANAGING GENERAL PARTNER

National Propane Corporation

By: /s/ Ronald R. Rominiecki
__________________________
Name: Ronald R. Rominiecki
Title: President and Chief
Operating Officer

SPECIAL GENERAL PARTNER

National Propane SGP, Inc.

By: /s/ Ronald R. Rominiecki
___________________________
Name: Ronald R. Rominiecki
Title: President and Chief
Operating Officer

Title:

LIMITED PARTNER

National Propane Partners, L.P.

BY: National Propane Corporation,
the Managing General Partner

By: /s/ Ronald R. Rominiecki
___________________________
Name: Ronald R. Rominiecki
Title: President and Chief
Operating Officer

<PAGE>

C. DAVID WATSON
Senior Vice President - Administration
General Counsel
National Propane
Suite 1700, IES Tower
200 1st Street SE
Cedar Rapids, IA 52401-1409
(319) 365-1550
(319) 298-5639 Fax

March 19, 1998

Ronald R. Rominiecki
1750 42nd Street, SE
Cedar Rapids, IA 52403

Dear Ron:

This will serve to amend your employment agreement dated as of March 11, 1997,
to confirm that as of November 1, 1997, you will no longer serve as Senior Vice
President - Chief Financial Officer, but have been promoted to the position of
President and Chief Operating Officer of National Propane Corporation, the
general partner of National Propane Partners, L.P. You will report to the Board
of Directors and your initial base salary will be $215,000 per year, with an
annual incentive of $161,250/cycle target (75% of salary) and mid-term cash
incentive of $86,000 per target (40% of salary). Except as set forth herein, all
the terms and conditions of the March 11, 1997 letter agreement continue in full
force and effect.

Best regards,

/s/ C. David Watson

National Propane Corporation
By its Senior Vice President of Admin.

Agreed and Accepted

/s/ Ronald R. Rominiecki
- --------------------------
Ronald R. Rominiecki

Dated: March 19, 1998

<PAGE>

EXECUTION COPY

FOURTH AMENDMENT dated as of March 30, 1998 (this "Fourth Amendment"),
to the Credit Agreement dated as of June 26, 1996 (as amended prior to
the date hereof, the "Credit Agreement"), among National Propane,
L.P., a Delaware limited partnership (the "Borrower"), the Lenders (as
defined therein), BankBoston, N.A. (f/k/a The First National Bank of
Boston), as Administrative Agent and a Lender, and BancAmerica
Robertson Stephens, as Syndication Agent.

The parties hereto have agreed, subject to the terms and conditions hereof,
to amend the Credit Agreement as provided herein.

Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement (the Credit Agreement,
as amended by, and together with, this Fourth Amendment, and as hereinafter
amended, modified, extended or restated from time to time, being called the
"Amended Agreement").

Accordingly, the parties hereto hereby agree as follows:

SECTION 1.01. Amendment to Article VI. Section 6.31 of the Credit Agreement
is hereby amended by deleting paragraph (b) of such Section in it's entirety and
substituting in lieu thereof the following:

"The Borrower will not permit Net Working Capital as of September 30
or June 30 in any year to be less than $5,000,000; provided that, for the
fiscal quarter ended September 30, 1998 only, the Borrower shall maintain
positive Net Working Capital."

SECTION 1.02. Representations and Warranties. The Borrower hereby
represents and warrants to the Agents and the Lenders, as follows;

(a) The representations and warranties set forth in Article III of the
Credit Agreement and the representations and warranties of the Borrower and
the other Loan Parties set forth in the other Loan Documents are true and
correct in all material respects on and as of the date hereof and on and as
of the Fourth Amendment Effective Date (as defined below) with the same
effect as though made on and as of the date hereof or the Fourth Amendment
Effective Date, as the case may be, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties are true and correct in all
material respects on and as of such earlier date).

(b) On the date hereof and after giving effect hereto, no Default or
Event of Default has occurred and is continuing.

(c) The execution, delivery and performance by the Borrower of this
Fourth Amendment have been duly authorized by the Borrower.

<PAGE>

(d) This Fourth Amendment constitutes the legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its
terms.

(e) The execution, delivery and performance by the Borrower of this
Fourth Amendment will not (i) violate (A) any provision of law, statute,
rule or regulation, (B) any provision of the certificate of incorporation
or by-laws of the Borrower, (C) any order of any Governmental Authority or
(D) any provision of any indenture, agreement or other instrument to which
the Borrower or any of the Loan Parties is a party or by which any of them
or any of their property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time
or both) a default or give rise to increased, additional, accelerated or
guaranteed rights of any person under any such indenture, agreement or
other instrument or (iii) result in the creation or imposition of any Lien
upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any of the other Loan Parties.

SECTION 1.03. Conditions. This Fourth Amendment shall become effective only
upon satisfaction of the following conditions precedent (the first date upon
which each such condition has been satisfied being herein called the "Fourth
Amendment Effective Date");

(a) The Administrative Agent shall have received duly executed
counterparts of this Fourth Amendment which, when taken together, bear the
authorized signatures of the Borrower and the Lenders.

(b) The representations and warranties set forth in Section 1.02 shall
be true and correct.

(c) The Lenders shall have received such other documents, legal
opinions, instruments and certificates as they shall reasonably request and
such other documents, legal opinions, instruments and certificates shall be
satisfactory in form and substance to the Lenders and their counsel. All
corporate and other proceedings taken or to be taken in connection with
this Fourth Amendment and all documents incidental thereto, whether or not
referred to herein, shall be satisfactory in form and substance to the
Lenders and their counsel.

SECTION 1.04. APPLICABLE LAW. THIS FOURTH AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.

SECTION 1.05. Expenses. The Borrower shall pay all reasonable out-of-pocket
expenses incurred by the Agents and the Lenders in connection with the
preparation, negotiation, execution, delivery and enforcement of this Fourth
Amendment, including, but not limited to, the reasonable fees and disbursements
of counsel, including internal bank counsel. The agreement set forth in this
Section 1.05 shall survive the termination of this Fourth Amendment and the
Amended Agreement.

-2-

<PAGE>

SECTION 1.06. Counterparts. This Fourth Amendment may be executed in any
number of counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one agreement.

SECTION 1.07. Credit Agreement. Except as expressly set forth herein, the
amendments provided herein shall not by implication or otherwise limit,
constitute a waiver of, or otherwise affect the rights and remedies of the
Lenders, the Agent or the other Secured Parties under the Credit Agreement or
any other Loan Document, nor shall they constitute a waiver of any Default or
Event of Default, not shall they alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Loan Document. Each of the amendments provided
herein shall apply and be effective only with respect to the provisions of the
Credit Agreement specifically referred to by such amendment. Except as expressly
amended herein, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof. As used in the Credit Agreement, the
terms "Agreement", "herein", "hereinafter", "hereunder", "hereto" and words of
similar import shall mean, from and after the Fourth Amendment Effective Date,
the Amended Agreement.

-3-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
be duly executed by their duly authorized officers, all as of the date first
above written.

Attest: NATIONAL PROPANE, L.P., as Borrower

By: NATIONAL PROPANE
CORPORATION,
its managing general partner

by /s/ C. David Watson by /s/ R. Brooks Sherman, Jr.
-------------------------- --------------------------
Name: C. David Watson Name: R. Brooks Sherman, Jr.
Title: Assistant Secretary Title: VP and Chief Financial
Officer

Attest: By: NATIONAL PROPANE
SGP, INC.,
its general partner

by /s/ C. David Watson by /s/ R. Brooks Sherman, Jr.
------------------------- --------------------------
Name: C. David Watson Name: R. Brooks Sherman, Jr.
Title: Assistant Secretary Title: VP and Chief Financial
Officer

BANKBOSTON, N.A., as Administrative Agent
and as a Lender

by /s/ Christopher Holmgren
----------------------------------
Name: Christopher Holmgren
Title: Director

BANK OF AMERICA NT & SA,
as a Lender

by /s/ Daryl G. Patterson
----------------------------------
Name: Daryl G. Patterson
Title: Vice President

BANCAMERICA ROBERTSON STEPHENS,
as Syndication Agent

by /s/ Jane E. Rawles
----------------------------------
Name: Jane E. Rawles
Title: Vice President

UINON BANK OF CALIFORNIA, N.A.,
as a Lender

by /s/ Dustin Gaspari
----------------------------------
Name: Dustin Gaspari
Title: Assistant Vice
President

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES OF THE PARTNERSHIP

<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY ORGANIZATION
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
National Propane, L.P.......................................................................... Delaware

National Sales & Service, Inc.................................................................. Delaware

Carib Gas Corporation of St. Croix............................................................. Delaware

Carib Gas Corporation of St. Thomas............................................................ Delaware
</TABLE>

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
National Propane Partners, L.P. condensed consolidated Balance Sheet
as of December 31, 1997 and the condensed consolidated Statement of
Operations for the year ended December 31, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,616
<SECURITIES> 0
<RECEIVABLES> 13,955
<ALLOWANCES> 0
<INVENTORY> 9,599
<CURRENT-ASSETS> 30,160
<PP&E> 168,871
<DEPRECIATION> 88,525
<TOTAL-ASSETS> 177,237
<CURRENT-LIABILITIES> 22,978
<BONDS> 138,131
<COMMON> 0
0
0
<OTHER-SE> 13,454
<TOTAL-LIABILITY-AND-EQUITY> 177,237
<SALES> 165,169
<TOTAL-REVENUES> 165,169
<CGS> 130,680
<TOTAL-COSTS> 130,680
<OTHER-EXPENSES> 24,646
<LOSS-PROVISION> 1,147
<INTEREST-EXPENSE> 12,579
<INCOME-PRETAX> 3,975
<INCOME-TAX> 127
<INCOME-CONTINUING> 3,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,848
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
<FN>
Allowances - Receivables are shown net of an allowance of $1,179.
Total receivable balance is $15,134.
</FN>

</TABLE>