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                     [LETTERHEAD OF ROYAL BANK OF CANADA]

                                               

      October 16, 1996


      Superior Propane Inc. 
      425 - 1st Street S.W. 
      PO Box 2595, Station M 
      Calgary, AB T2P 4V4

      Attention:   Mr. W. Mark Schweitzer
                   Vice President Finance & CFO
      -----------------------------------------

      Dear Sirs:

      Royal Bank of Canada (the "Bank) is pleased to offer Superior Propane Inc.
      (the "Borrower") a revolving demand facility (the "Credit Facility")
      through its branch at 339 - 8th Avenue S.W., Calgary, Alberta T2P 1C4 (the
      "Branch of Account"), subject to the terms and conditions below:

      SCHEDULES:    The attached Schedules are incorporated in this agreement by
                    reference as if set out in full herein; collectively this
                    Agreement and all Schedules are referred to as the
                    "Agreement".

      AMOUNT:       The amount available under the Credit Facility shall not
                    exceed $1O,5OO,OOO.OO, or the Equivalent Amount in US
                    Dollars (the "Amount").

      PURPOSE:      The Borrower shall use the Credit Facility to finance its
                    general operating requirements. The Borrower shall not use
                    the Credit Facility to finance a Hostile Take-Over Bid
                    without the prior written consent of the Bank.

      CREDIT        
      FACILITY:     The Credit Facility is available by way of:

                    (a)  RBP based loans and overdrafts in Canadian Dollars 
                         ("RBP Loans").
                    (b)  RBUSBR based loans and overdrafts in US Dollars 
                         ("RBUSBR Loans").
                    (c)  L/C's and/or L/G's.

                    Each use of the Credit Facility by way of any of the
                    foregoing methods is referred to as a "Borrowing". The
                    face amount of each Borrowing


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      Superior Propane Inc.                                               Page 2
      October 16, 1996

                    outstanding shall be used to determine the amount of
                    Borrowings outstanding under the Credit Facility at any
                    time.

      INTEREST 
      RATES AND 
      FEES:         The following rates of interest and fees shall apply to the
                    Credit Facility:

                    RBP Loans             -  RBP + 0% per annum 
                    RBUSBR Loans          -  RBUSBR + 0% per annum 
                    L/C's and/or L/G's    -  1/2% per annum.
                                             Minimum $75.00

      AVAILABILITY/
      REPAYMENT:    The Credit Facility is available at the sole discretion of
                    the Bank. The Bank may, at any time and from time to time
                    without notice, cancel any undrawn portion of the Amount.
                    All Borrowings outstanding shall be due and payable on
                    demand by the Bank and upon such demand, the Bank shall
                    have no obligation to honour cheques or other orders for
                    payment.

      CALCULATION
      AND PAYMENT
      OF INTEREST
      AND FEES:     (a)  RBP and RBUSBR Loans 
                         --------------------
                         Interest on each RBP Loan and on each RBUSBR Loan will
                         accrue daily on the basis of a year of 365 days, and
                         will be calculated, payable and compounded monthly on
                         such day of the month as the Bank shall specify. Any
                         change in RBP or RBUSBR shall be effective as of the
                         opening of business on the day such change takes place.

                    (b)  L/C's and/or L/G's 
                         ------------------
                         L/C or L/G fees will be calculated and payable in the
                         manner set forth in Schedule B.

                    (c)  Interest Act (Canada)
                         ---------------------
                         The annual rates of interest or fees to which the rates
                         calculated in accordance with this Agreement are
                         equivalent, are the rates so calculated multiplied by
                         the actual number of days in the calendar year in which
                         such calculation is made and divided by 365. In no
                         event will interest exceed the rate permitted by law.


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      Superior Propane Inc.                                               Page 3
      October 16, 1996

      TIME AND 
      PLACE OF 
      PAYMENT:      All amounts due by the Borrower pursuant to this Agreement
                    shall be paid at the Branch of Account in immediately
                    available funds for value on the day such amount is due in
                    Canadian Dollars or US Dollars in the case of Borrowings
                    denominated in US Dollars, or as otherwise provided herein.
                    If a day on which an amount is due is not a Business Day
                    such amount shall be deemed for all purposes of this
                    Agreement to be due on the Business Day next following such
                    day and all interest and other fees shall continue to accrue
                    until payment. Interest and fees payable under this
                    Agreement are payable both before and after any or all of
                    default, demand and judgement.


      EVIDENCE OF
      INDEBTEDNESS: The Bank shall open and maintain at the Branch of Account
                    accounts and records evidencing the principal amount of each
                    Borrowing, the payment of principal and interest and all
                    other amounts owing to the Bank under this Agreement. The
                    Bank's accounts and records constitute, in the absence of
                    manifest error, conclusive evidence of the indebtedness of
                    the Borrower to the Bank.


      EXPENSES:     The Borrower shall pay the reasonable fees, including,
                    without limitation, all documentation fees charged by the
                    Bank for use of its internal legal counsel, and expenses
                    incurred by the Bank in connection with the preparation,
                    negotiation, documentation and operation of the Credit
                    Facility including the enforcement of the Bank's rights
                    hereunder and under any other document delivered pursuant to
                    this Agreement, whether or not any amounts are advanced
                    hereunder.


      NOTICES:      Any notice or demand hereunder shall be given by telecopier
                    or letter. A telecopier communication shall be deemed
                    received on the Business Day following its transmission. A
                    letter shall be deemed received when hand delivered to the
                    receiving party, at the address shown herein. Each party
                    shall be bound by any notice given hereunder and entitled to
                    act in accordance therewith.


      AMENDMENTS
      AND WAIVERS:  No amendment, modification or waiver of any provision of
                    this Agreement or consent to any departure by the Borrower
                    from any provision of this Agreement will in any event be

                    effective unless it is in writing and then the amendment,
                    modification, waiver or consent will be effective only in
                    the specific instance, and for the specific purpose and


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      Superior Propane Inc.                                               Page 4
      October 16, 1996

                    length of time for which it is given by the Bank. No failure
                    to exercise and no delay in exercising on the part of the
                    Bank, any right, power or privilege hereunder shall operate
                    as a waiver thereof nor shall any single or partial exercise
                    of any right, power or privilege preclude any other right,
                    power or privilege.

      SEVERABILITY: If any provision of this Agreement is or becomes prohibited
                    or unenforceable in any jurisdiction, such prohibition or
                    unenforceability shall not invalidate or render
                    unenforceable the provision concerned in any other
                    jurisdiction nor invalidate, affect or impair any of the
                    remaining provisions hereof


      GOVERNING
      LAW:          This Agreement shall be construed in accordance with and
                    governed by the laws of the Province of Alberta and of
                    Canada applicable therein.

      WHOLE
      AGREEMENT:    This Agreement or any agreements delivered pursuant to or
                    referred to in this Agreement constitute the whole and
                    entire agreement between the parties in respect of the
                    Credit Facility.

      SUCCESSORS
      AND ASSIGNS:  This Agreement shall be binding upon and enure to the
                    benefit of the Bank and the Borrower and their respective
                    successors and permitted assigns.


      EFFECTIVE 
      DATE:         The date on which this Agreement becomes effective is the
                    date appearing on the first page hereof.


      EXPIRY DATE:  This offer is open for acceptance until close of business at
                    the Branch of Account on November 15, 1996 unless extended
                    in writing by the Bank.


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      Superior Propane Inc.                                               Page 5
      October 16, 1996

      Please acknowledge your acceptance of the above terms and conditions by
      signing the attached copy of this letter in the space provided below and
      returning it to the undersigned.

      Yours truly,

      ROYAL BANK OF CANADA


      /s/ D.K. MacLaren
      -----------------------------
      D.K. MacLaren
      Senior Account Manager


      Acknowledged and Accepted this
        22  day of  October  , 1996.
      -----        ----------


           SUPERIOR PROPANE INC.               425 - 1st Street S.W.
                                               PO Box 2595, Station M
      By: /s/ Robert J. Waters                 Calgary, Alberta T2P 4V4
         --------------------------

      Title:  Robert J. Waters                 Tel: (403)231-0111
            -----------------------            Fax: (403)231-0187
                 Treasurer


      By: /s/ 
         --------------------------

      Title: Assistant Treasurer
             ----------------------


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      Schedule "A" to the Agreement dated as of the 16th day of October, 1996,
      between Superior Propane Inc. as the Borrower and Royal Bank of Canada as
      the Bank.

                                           DEFINITIONS
                                           -----------

      For purposes of the foregoing agreement and the Schedules attached
      thereto, the following terms and phrases shall have the following
      meanings:

      "Business Day" means a day, excluding Saturday, Sunday and any other day

      which is a legal holiday in the City of Calgary or on a day on which
      banking institutions are closed.

      "Canadian Dollars", "Cdn $" and "Cdn Dollars" each means lawful money of
      Canada.

      "Equivalent Amount" means, with respect to any given amount of any
      currency, the amount of any other currency required to purchase that
      amount of the first currency through the Bank in Calgary at the Bank's
      noon spot rate, in accordance with normal banking procedures, only needed
      if Borrowing is in currency other than Cdn$.

      "Hostile Take-Over Bid" means a take-over bid, as defined by applicable
      law, by the Borrower or in which the Borrower is involved, in respect of
      which the board of directors of the target company has not recommended
      acceptance of such take-over bid to the target company's shareholders.

      "L/C" means a documentary credit issued by the Bank on behalf of the
      Borrower for the purpose of paying suppliers of goods pursuant to the
      terms and conditions of Uniform Customs and Practice for Documentary
      Credits, 1993 revision, International Chamber of Commerce Publication No.
      500 or successor publication;

      "L/G" means a letter of guarantee and/or standby letter of credit issued
      by the Bank on behalf of the Borrower for the purpose of providing
      security to a third party that the Borrower will perform a contractual or
      financial obligation owed to such third party.

      "RBP" and "Royal Bank Prime" means the annual rate of interest announced
      by the Bank from time to time as being a reference rate then in effect for
      determining interest rates on Canadian Dollar commercial loans made in
      Canada.

      "RBUSBR" and "Royal Bank US Base Rate" means the annual rate of interest
      announced by the Bank from time to time as being a reference rate then in
      effect for determining interest rates on US Dollar commercial loans made
      in Canada.

      "US Dollars" and "US$" each means lawful money of the United States of
      America in same day immediately available funds or, if such funds are not
      available, the form of money of the United States of America that is
      customarily used in the settlement of international banking transactions
      on the relevant date.


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      Schedule "B" to the Agreement dated as of the 16th day of October 1996,
      between Superior Propane Inc. as the Borrower and Royal Bank of Canada as
      the Bank.


                             L/C AND L/C CONDITIONS
                             ----------------------


      The Borrower may borrow by way of L/C's and/or L/G's subject to the
      following conditions:

      (a)  the Bank may, in its sole discretion, refuse to issue L/C's or L/G's
           at any time;

      (b)  each L/C and/or L/G shall expire on a Business Day and shall have a
           term of not more than 365 days;

      (c)  prior to the issue of an L/C and/or L/G, the Borrower shall execute a
           duly authorized application and/or indemnity with respect to such L/C
           or L/G in form and substance satisfactory to the Bank, and each L/C
           and L/G shall be governed by the terms and conditions of the relevant
           application and/or indemnity for such instrument;

      (d)  the Borrower shall pay an L/C fee on the date of any payment made by
           the Bank pursuant to a drawing under such L/C in the currency in
           which such payment is made. If the total amount available under any
           L/C has not been drawn prior to the expiry date of such L/C the
           Borrower shall pay an L/C fee calculated on the undrawn portion of
           such L/C on the expiry date thereof in the currency in which such L/C
           was issued;

      (e)  the Borrower shall pay an L/G fee on the date of issuance of such L/G
           in Canadian Dollars. The fee shall be calculated on the face amount
           of the L/G issued (converted into the equivalent Amount thereof in
           Canadian Dollars) and based on the number of days in the term thereof
           and a year of 365 days;

      (f)  the Borrower shall, by not later than 12:00 noon on any day on which
           a drawing is made under an L/C or L/G, pay to the Bank at the Branch
           of Account an amount equal to the face amount of such drawing, and if
           the Borrower fails to make such payment, the face amount of such
           drawing shall be converted into an RBP Loan if the drawing is in
           Canadian Dollars and into an RBUSBR Loan if the drawing is in US
           Dollars; and

      (g)  in the event that there is any inconsistency at any time between the
           terms of this Agreement and the terms of the application and/or
           indemnity for L/C's or L/G's, the terms thereof shall govern.