Exhibit 10.134


                          LETTER OF CREDIT AGREEMENT

                                     among

                         READING & BATES CORPORATION,

                         READING & BATES DRILLING CO.,

                                      and

                       CHRISTIANIA BANK OG KREDITKASSE,
                                NEW YORK BRANCH

                     ____________________________________

                         Dated as of December 30, 1996

                     ____________________________________

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                               TABLE OF CONTENTS

                                                                          Page

SECTION 1.  Letters of Credit . . . . . . . . . . . . . . . . . . . . . .    1
      1.01  Letters of Credit . . . . . . . . . . . . . . . . . . . . . .    1
      1.02  Letter of Credit Requests; Request for Issuance of Letter of
              Credit  . . . . . . . . . . . . . . . . . . . . . . . . . .    2
      1.03  Agreement to Repay Letter of Credit Payments  . . . . . . . .    2
      1.04  Increased Costs . . . . . . . . . . . . . . . . . . . . . . .    3
      1.05  Indemnities . . . . . . . . . . . . . . . . . . . . . . . . .    4

SECTION 2.  Fees; Commitments . . . . . . . . . . . . . . . . . . . . . .    4
      2.01  Fees; Commitments . . . . . . . . . . . . . . . . . . . . . .    4
      2.02  Voluntary Reduction of Commitments  . . . . . . . . . . . . .    5
      2.03  Mandatory Adjustments of Commitments, etc.  . . . . . . . . .    5

SECTION 3.  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . .    5
      3.01  Mandatory Prepayments . . . . . . . . . . . . . . . . . . . .    5
      3.02  Method and Place of Payment . . . . . . . . . . . . . . . . .    5
      3.03  Net Payments  . . . . . . . . . . . . . . . . . . . . . . . .    5

SECTION 4.  Conditions Precedent  . . . . . . . . . . . . . . . . . . . .    7
      4.01  Execution of Agreement  . . . . . . . . . . . . . . . . . . .    7
      4.02  No Default; Representations and Warranties  . . . . . . . . .    7
      4.03  Officer's Certificate . . . . . . . . . . . . . . . . . . . .    7
      4.04  Opinions of Counsel . . . . . . . . . . . . . . . . . . . . .    8
      4.05  Corporate Proceedings . . . . . . . . . . . . . . . . . . . .    8
      4.06  Adverse Change, etc.  . . . . . . . . . . . . . . . . . . . .    8
      4.07  Litigation  . . . . . . . . . . . . . . . . . . . . . . . . .    8
      4.08  Approvals . . . . . . . . . . . . . . . . . . . . . . . . . .    9
      4.09  Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    9

SECTION 5.  Representations, Warranties and Agreements  . . . . . . . . .    9
      5.01  Corporate Status  . . . . . . . . . . . . . . . . . . . . . .    9
      5.02  Corporate Power and Authority . . . . . . . . . . . . . . . .   10
      5.03  No Violation  . . . . . . . . . . . . . . . . . . . . . . . .   10
      5.04  Litigation  . . . . . . . . . . . . . . . . . . . . . . . . .   10
      5.05  Use of Credit; Margin Regulations . . . . . . . . . . . . . .   10
      5.06  Governmental Approvals  . . . . . . . . . . . . . . . . . . .   11
      5.07  Investment Company Act  . . . . . . . . . . . . . . . . . . .   11
      5.08  Public Utility Holding Company Act  . . . . . . . . . . . . .   11
      5.09  True and Complete Disclosure  . . . . . . . . . . . . . . . .   11
      5.10  Financial Condition; Financial Statements; Projections  . . .   12
      5.11  Tax Returns and Payments  . . . . . . . . . . . . . . . . . .   12
      5.12  Compliance with ERISA . . . . . . . . . . . . . . . . . . . .   13
      5.13  Subsidiaries  . . . . . . . . . . . . . . . . . . . . . . . .   13
      5.14  Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . .   13
      5.15  Pollution and Other Regulations . . . . . . . . . . . . . . .   14
      5.16  Properties  . . . . . . . . . . . . . . . . . . . . . . . . .   14
      5.17  Labor Relations . . . . . . . . . . . . . . . . . . . . . . .   15
      5.18  Existing Indebtedness . . . . . . . . . . . . . . . . . . . .   15

SECTION 6.  Affirmative Covenants . . . . . . . . . . . . . . . . . . . .   15
      6.01  Information Covenants . . . . . . . . . . . . . . . . . . . .   16
      6.02  Books, Records and Inspections  . . . . . . . . . . . . . . .   17
      6.03  Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .   17
      6.04  Payment of Taxes  . . . . . . . . . . . . . . . . . . . . . .   17
      6.05  Consolidated Corporate Franchises . . . . . . . . . . . . . .   18
      6.06  Compliance with Statutes, etc.  . . . . . . . . . . . . . . .   18
      6.07  Good Repair . . . . . . . . . . . . . . . . . . . . . . . . .   18
      6.08  End of Fiscal Years; Fiscal Quarters  . . . . . . . . . . . .   18
      6.09  Use of Credit . . . . . . . . . . . . . . . . . . . . . . . .   18
      6.10  ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .   18

SECTION 7.  Negative Covenants  . . . . . . . . . . . . . . . . . . . . .   19
      7.01  Changes in Business . . . . . . . . . . . . . . . . . . . . .   19
      7.02  Consolidation, Merger or Sale of Assets, etc. . . . . . . . .   20
      7.03  Liens on Assets . . . . . . . . . . . . . . . . . . . . . . .   20
      7.04  Dividends; Restrictions on Subsidiaries, etc. . . . . . . . .   20
      7.05  Transactions with Affiliates  . . . . . . . . . . . . . . . .   22
      7.06  Vessel Management; Registry . . . . . . . . . . . . . . . . .   22
      7.07  Coverage Ratio  . . . . . . . . . . . . . . . . . . . . . . .   23
      7.08  Working Capital . . . . . . . . . . . . . . . . . . . . . . .   23
      7.09  Leverage Ratio  . . . . . . . . . . . . . . . . . . . . . . .   23

SECTION 8.  Events of Default . . . . . . . . . . . . . . . . . . . . . .   23
      8.01  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . .   23
      8.02  Representations, etc. . . . . . . . . . . . . . . . . . . . .   23
      8.03  Covenants . . . . . . . . . . . . . . . . . . . . . . . . . .   23
      8.04  Default Under Other Agreements  . . . . . . . . . . . . . . .   23
      8.05  Bankruptcy, etc.  . . . . . . . . . . . . . . . . . . . . . .   24
      8.06  Guaranty  . . . . . . . . . . . . . . . . . . . . . . . . . .   24
      8.07  Judgments . . . . . . . . . . . . . . . . . . . . . . . . . .   24
      8.08  Employee Benefit Plans  . . . . . . . . . . . . . . . . . . .   25
      8.09  Change of Control . . . . . . . . . . . . . . . . . . . . . .   25

SECTION 9.  Definitions . . . . . . . . . . . . . . . . . . . . . . . . .   25

SECTION 10.  Miscellaneous  . . . . . . . . . . . . . . . . . . . . . . .   37
      10.01  Payment of Expenses, etc.  . . . . . . . . . . . . . . . . .   37
      10.02  Right of Setoff  . . . . . . . . . . . . . . . . . . . . . .   39
      10.03  Notices  . . . . . . . . . . . . . . . . . . . . . . . . . .   39
      10.04  Benefit of Agreement . . . . . . . . . . . . . . . . . . . .   39
      10.05  No Waiver; Remedies Cumulative . . . . . . . . . . . . . . .   40
      10.06  Calculations; Computations . . . . . . . . . . . . . . . . .   41
      10.07  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
              JURY TRIAL  . . . . . . . . . . . . . . . . . . . . . . . .   41
      10.08  Counterparts . . . . . . . . . . . . . . . . . . . . . . . .   42
      10.09  Effectiveness  . . . . . . . . . . . . . . . . . . . . . . .   42
      10.10  Headings Descriptive . . . . . . . . . . . . . . . . . . . .   42
      10.11  Amendment or Waiver  . . . . . . . . . . . . . . . . . . . .   42
      10.12  Survival . . . . . . . . . . . . . . . . . . . . . . . . . .   43
      10.13  Domicile of Letters of Credit  . . . . . . . . . . . . . . .   43
      10.14  Confidentiality  . . . . . . . . . . . . . . . . . . . . . .   43
      10.15  Registry . . . . . . . . . . . . . . . . . . . . . . . . . .   43

SECTION 11.  Holdings Guaranty  . . . . . . . . . . . . . . . . . . . . .   43
      11.01  The Guaranty . . . . . . . . . . . . . . . . . . . . . . . .   44
      11.02  Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . .   44
      11.03  Nature of Liability  . . . . . . . . . . . . . . . . . . . .   44
      11.04  Independent Obligation . . . . . . . . . . . . . . . . . . .   44
      11.05  Waiver of Notice, etc. . . . . . . . . . . . . . . . . . . .   45
      11.06  Authorization  . . . . . . . . . . . . . . . . . . . . . . .   45
      11.07  Reliance . . . . . . . . . . . . . . . . . . . . . . . . . .   46
      11.08  Subordination  . . . . . . . . . . . . . . . . . . . . . . .   46
      11.09  Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . .   46


ANNEX I       --  Existing Letters of Credit
ANNEX II      --  Subsidiaries
ANNEX III     --  Rigs and Vessels
ANNEX IV      --  Existing Indebtedness

EXHIBIT A     --  Form of Letter of Credit Request
EXHIBIT B     --  Form of Opinion of Wayne Hillin, Esq.
EXHIBIT C     --  Form of Officers' Certificate
EXHIBIT D     --  Form of Compliance Certificate 

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            LETTER OF CREDIT AGREEMENT,  dated as of December 30,  1996, among
READING & BATES  CORPORATION ("Holdings"), a  Delaware corporation, READING  &
BATES DRILLING  CO. (the "Obligor"),  an Oklahoma corporation  and CHRISTIANIA
BANK OG  KREDITKASSE, NEW YORK BRANCH (the  "Bank").  Unless otherwise defined
herein, all  capitalized terms used herein  and defined in Section  9 are used
herein as so defined.


                             W I T N E S S E T H :


            WHEREAS, the  Obligor desires to  execute this  Agreement for  the
purpose  of (i) refinancing outstanding  letters of credit  under that certain
credit agreement, dated as of November 13, 1996,  among Holdings, the Obligor,
various financial institutions,  Banque Indosuez and Credit  Lyonnais New York
Branch,  as documentation  agents and  the Bank,  as administrative  agent (as
amended,  modified or  supplemented from  time to  time, the  "Existing Credit
Agreement") and (ii) supporting the issuance  of new letters of credit for its
account;

            WHEREAS, subject to and  upon the terms and conditions  herein set
forth,  including,  without  limitation,  the  guaranty  by  Holdings  of  all
obligations of the Obligor under this Agreement, the Bank agrees to issue from
time to time at the request and for the account of the Obligor the  Letters of
Credit described herein; and

            WHEREAS,  Holdings  will  obtain  benefits from  the  issuance  of
Letters  of Credit  to  the Obligor  under  this Agreement  and,  accordingly,
desires to execute this Agreement in order to satisfy the conditions described
in the preceding paragraph and to  induce the Bank to issue Letters of  Credit
for the account of the Obligor;


            NOW, THEREFORE, IT IS AGREED:


            SECTION 1.  Letters of Credit.

            1.01  Letters of  Credit.  (a)  Subject to and upon  the terms and
conditions herein set forth, the Obligor may request that the Bank at any time
and from time to time on or after the Effective Date and prior to the Business
Day immediately  preceding the Maturity  Date issue,  for the  account of  the
Obligor and in support of L/C Supportable Obligations, and subject to and upon
the terms and conditions herein set forth, the  Bank agrees to issue from time
to time, irrevocable standby  letters of credit denominated  in US Dollars  or
any  other currency  acceptable  to the  Bank (subject  to  the provisions  of
Section 1.01(b)) and in such  form as may be  approved by the Bank (each  such
standby letter of credit, a "Letter of Credit" and collectively,  the "Letters
of Credit").  Annex I contains  a description of all letters of  credit issued
under the Existing Credit Agreement prior to the Effective Date and which will
remain  outstanding on  the  Effective  Date.   Each  such  letter of  credit,
including  any extension thereof (each  an "Existing Letter  of Credit") shall
constitute a "Letter of Credit"  for all purposes of this Agreement  and shall
be deemed issued for purposes of Section 2.01 on the Effective Date.

            (b)  Whenever the Bank  issues a  Letter of Credit  in a  currency
other than US  Dollars, the  Letter of  Credit Outstandings  relating to  such
Letter  of Credit  at such time  shall be  calculated on  the basis of  the US
Dollar Equivalent  of the  Stated Amount  of such  Letter of  Credit.   Any US
Dollar Equivalent established according to the preceding sentence shall remain
in  effect until  such date  as the  calculation of  the US  Dollar Equivalent
determined as above, if made on such date, would  yield a US Dollar Equivalent
which  varies by  greater than  10.0% from  the US  Dollar Equivalent  then in
effect, at which  time the Letter of Credit Outstandings  shall be adjusted to
reflect the current US Dollar  Equivalent of the Stated Amount of  such Letter
of Credit.  Subsequent adjustments shall then be made on any date on which the
current calculation  of the US  Dollar Equivalent  would yield a  result which
varies by greater than 10.0% from the US Dollar Equivalent then in effect.

            (c)  Notwithstanding the foregoing, (i)  no Letter of Credit shall
be issued,  the Stated Amount  of which,  when added to  the Letter  of Credit
Outstandings (exclusive of Unpaid  Drawings which are repaid  on the date  of,
and prior  to the issuance of, the respective Letter  of Credit) at such time,
would  exceed $20,000,000 and  (ii) no Letter  of Credit shall  have an expiry
date later than the Business Day immediately preceding the Maturity Date.

            1.02  Letter of Credit Requests; Request for Issuance of Letter of
Credit.  (a)  Whenever  it  desires that  a Letter  of  Credit be  issued, the
Obligor shall give the Bank written notice (including by way of telecopier) in
the  form of  Exhibit A  prior to  1:00 P.M.  (New York  time) at  least three
Business Days (or such shorter period as may be acceptable to the Bank)  prior
to the  proposed date  of issuance  (which shall  be a  Business Day) (each  a
"Letter of Credit Request"),  which Letter of Credit Request shall include any
documents that the Bank customarily requires in connection therewith.

            (b)  The Bank shall, on the  date of each issuance of a  Letter of
Credit by it, give the Obligor written or telephonic notice of the issuance of
such Letter of Credit.

            1.03  Agreement  to Repay  Letter  of  Credit  Payments.  (a)  The
Obligor hereby agrees to reimburse the  Bank, by making payment at the Payment
Office, for any payment or disbursement  made by the Bank under any Letter  of
Credit  (each such  amount so paid  or disbursed until  reimbursed, an "Unpaid
Drawing") immediately after, and in any event on the date on which the Obligor
is notified  by the Bank of such payment  or disbursement with interest on the
amount so paid or disbursed by the Bank, to the extent not reimbursed prior to
1:00 P.M.  (New York time) on  the date of such payment  or disbursement, from
and  including the date  paid or disbursed  to but not including  the date the
Bank is reimbursed therefor  at a rate per annum which shall  be the Base Rate
as  in effect on the date of such  notice of payment or disbursements (plus an
additional 2% per annum if not reimbursed by the third Business  Day after the
date of  such notice of  payment or  disbursement), such interest  also to  be
payable on demand.

            (b)  The Obligor's obligation under this Section 1.03 to reimburse
the Bank with  respect to Unpaid Drawings  (including, in each case,  interest
thereon) shall be absolute  and unconditional under any and  all circumstances
and irrespective of  any setoff, counterclaim or defense  to payment which the
Obligor may  have or have had against the Bank, including, without limitation,
any defense based upon the failure of any drawing  under a Letter of Credit to
conform to the terms  of the Letter of Credit  (other than the failure  of the
Bank to  determine  that any  documents required  to be  delivered under  such
Letter of Credit  have been delivered  and that they  substantially comply  on
their  face  with  the   requirements  of  such  Letter  of   Credit)  or  any
non-application or misapplication by  the beneficiary of the proceeds  of such
drawing;  provided,  however,  that the  Obligor  shall  not  be obligated  to
reimburse the Bank for any wrongful payment made by the Bank under a Letter of
Credit as  a result of  acts or omissions  constituting willful  misconduct or
gross negligence on the part of the Bank.

            1.04  Increased  Costs.  If  at any  time  after the  date  of the
Agreement,  the adoption  or  effectiveness of  any  applicable law,  rule  or
regulation,  or any change  therein, or  any change  in the  interpretation or
administration  thereof  by  any   governmental  authority,  central  bank  or
comparable agency  charged with the interpretation  or administration thereof,
or compliance by the Bank with any request or directive (whether or not having
the force of law but with which such Bank customarily complies even though the
failure to comply  therewith would  not be  unlawful) by  any such  authority,
central bank  or comparable agency  shall either  (i) impose,  modify or  make
applicable  any  reserve, deposit,  capital  adequacy  or similar  requirement
against Letters of Credit issued by the Bank, or (ii) shall impose on the Bank
any other conditions affecting this Agreement or any Letter of Credit; and the
result of any of the foregoing is to increase  the cost to the Bank of issuing
or  maintaining any  Letter of  Credit, or  to reduce  the amount  of any  sum
received or receivable by the Bank hereunder (other than any increased cost or
reduction in the amount  received or receivable resulting from  the imposition
of or a  change in the rate or basis of  taxes or similar charges), then, upon
demand  to  the Obligor  by  the  Bank,  the  Obligor  shall  (to  the  extent
applicable)  pay  to  the Bank  such  additional  amount  or  amounts as  will
compensate  the Bank  for  such increased  cost or  reduction.   A certificate
submitted  to  the  Obligor  by  the Bank  setting  forth  the  basis  for the
determination of such additional amount or amounts necessary to compensate the
Bank  as  aforesaid shall  be conclusive  and  binding on  the  Obligor absent
manifest error, although the failure to deliver any such certificate shall not
release or diminish any of the Obligor's obligations to pay additional amounts
pursuant to this Section 1.04 upon the subsequent receipt thereof.

            1.05  Indemnities.   The  Obligor hereby  agrees to  reimburse and
indemnify  the  Bank for  and against  any  and all  liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs, expenses
or disbursements  of  whatsoever kind  or  nature  which may  be  imposed  on,
asserted against  or incurred by the Bank  in performing its respective duties
in any way relating to  or arising out of  its issuance of Letters of  Credit;
provided  that  the Obligor  shall  not  be liable  for  any  portion of  such
liabilities,  obligations,  losses,  damages,  penalties,  actions, judgments,
suits,  costs, expenses  or  disbursements  resulting  from the  Bank's  gross
negligence or willful misconduct.

            SECTION 2.  Fees; Commitments.

            2.01  Fees;  Commitments.  (a)  The  Obligor agrees to  pay to the
Bank a fee  in respect of each Letter  of Credit (the "Letter of  Credit Fee")
computed at a rate per annum equal to 1.25% on the daily Stated Amount of such
Letter  of Credit.   Accrued Letter  of Credit  Fees shall be  due and payable
quarterly in arrears on the first day of each January, April, July and October
of each year and on the earlier of  the Maturity Date or the date on which the
Commitment is terminated and no Letters of Credit remain outstanding.

            (b)  The  Obligor agrees to  pay to the  Bank a commitment  fee in
respect  of the Bank's Commitment hereunder (the "Commitment Fee") computed at
the  rate of  .375% per  annum on  the daily  Unutilized Commitment.   Accrued
Commitment Fees shall be due and payable quarterly in arrears on the first day
of  each January, April, July  and October of each year  and on the earlier of
the  Maturity Date or  the date on  which the Commitment is  terminated and no
Letters of Credit remain outstanding.

            (c)  The Obligor agrees to  pay directly to the Bank  upon request
the amount of  any charges or expenses incurred by the Bank in connection with
any confirmation  of Letters of Credit by local banks requested by the Obligor
or any beneficiary of any Letter of Credit.

            (d)  The Obligor shall pay  to the Bank on the Effective Date such
fees as heretofore  agreed in writing by the Obligor and the Bank, when and as
due.

            (e)  All computations of  Fees shall  be made  in accordance  with
Section 10.06(b).

            2.02  Voluntary  Reduction of  Commitments.  Upon at  least thirty
Days' prior written notice (or telephonic notice confirmed in  writing) to the
Bank at its Notice Office,  the Obligor shall have the right,  without premium
or penalty, to terminate or partially reduce the Commitment, provided that (x)
no such reduction  shall reduce the Commitment to an amount  that is less than
the Letter  of Credit Outstandings and  (y) any partial reduction  pursuant to
this Section 2.02 shall be in the amount of at least $1,000,000.

            2.03  Mandatory Adjustments of  Commitments, etc.  The  Commitment
shall  terminate on the  earlier of (i)  the Maturity Date,  (ii) December 31,
1996, unless the Effective Date has occurred  on or before such date and (iii)
unless the  Bank otherwise consents, the  date on which any  Change of Control
occurs.


            SECTION 3.  Payments.

            3.01  Mandatory  Prepayments.  If on any date the aggregate amount
of Letter of Credit  Outstandings exceeds the  Commitment then in effect,  the
Obligor shall pay to the Bank an amount in cash and/or Cash  Equivalents equal
to  such  excess  (up  to  the  aggregate  amount  of  the  Letter  of  Credit
Outstandings at  such time) and the  Bank shall hold such  payment as security
for  the obligations of  the Obligor hereunder  pursuant to  a cash collateral
agreement to be entered into in form and substance reasonably  satisfactory to
the  Bank  (which  shall  permit  certain  investments   in  Cash  Equivalents
satisfactory  to the  Bank, until  the  proceeds are  applied  to the  secured
obligations).

            3.02  Method  and   Place  of   Payment.    Except   as  otherwise
specifically  provided herein, all payments under this Agreement shall be made
to the Bank not later than 1:00 P.M.  (New York time) on the date when due and
shall be made in immediately available funds and in lawful money of the United
States of  America at  the Payment  Office, it  being understood  that written
notice  by the Obligor  to the Bank  to make a  payment from the  funds in the
Obligor's account at  the Payment Office  shall constitute the making  of such
payment to the extent of such funds held in such account.  Any  payments under
this Agreement which  are made later than  1:00 P.M. (New York  time) shall be
deemed to  have been made on the  next succeeding Business Day.   Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day,  the due date thereof  shall be extended to  the next succeeding
Business  Day and, with  respect to payments  of principal, interest  shall be
payable during such  extension at  the applicable rate  in effect  immediately
prior to such extension.

            3.03  Net  Payments.  (a)  All   payments  made  by   the  Obligor
hereunder will be made without setoff, counterclaim or other defense.   Except
as provided in Section  3.03(b), all such payments will be made free and clear
of, and  without deduction  or withholding for,  any present or  future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed  by any jurisdiction or by any  political subdivision
or taxing  authority thereof or  therein with  respect to  such payments  (but
excluding,  except  as provided  in the  second  succeeding sentence,  any tax
imposed  on or measured by the net income  or net profits of the Bank pursuant
to the  laws of  the jurisdiction  in  which it  is organized  or managed  and
controlled or the  jurisdiction in  which the principal  office or  applicable
lending  office of the Bank is located  or any subdivision thereof or therein)
and all interest, penalties  or similar liabilities with respect  thereto (all
such non-excluded taxes, levies,  imposts, duties, fees, assessments or  other
charges  being referred  to collectively  as "Taxes").   If  any Taxes  are so
levied or imposed,  the Obligor agrees to  pay the full amount  of such Taxes,
and such additional amounts, if any, as may be necessary so that every payment
of all amounts due under this Agreement, after withholding or deduction for or
on account of any Taxes, will not be less than the amount provided for herein.
If any amounts are payable by the Obligor in respect of Taxes pursuant  to the
preceding sentence, the Obligor agrees to reimburse the Bank, upon the written
request of the Bank, for taxes imposed on or measured by the net income or net
profits of  the Bank pursuant  to the  laws of the  jurisdiction in  which the
principal office  or applicable lending office of the Bank is located or under
the  laws  of  any  political subdivision  or  taxing  authority  of any  such
jurisdiction in which the principal office or applicable lending office of the
Bank is located and for any  withholding of taxes as the Bank  shall determine
are payable by,  or withheld from, the Bank in respect of such amounts so paid
to or on behalf of the Bank  pursuant to the preceding sentence and in respect
of any amounts  paid to or  on behalf of the  Bank pursuant to  this sentence.
The Obligor will furnish to the Bank within 45 days after the date the payment
of  any Taxes  is  due pursuant  to  applicable law  certified  copies of  tax
receipts  evidencing  such payment  by  the Obligor.   The  Obligor  agrees to
indemnify and hold harmless the Bank, and reimburse the Bank  upon its written
request,  for the  amount of any  Taxes so levied  or imposed and  paid by the
Bank.

            (b)  The Bank agrees to deliver to  the Obligor on or prior to the
date  of this Agreement,  two accurate and complete  original signed copies of
Internal Revenue Service Form 4224 or 1001 (or successor forms)  certifying to
the  Bank's entitlement to a complete exemption from United States withholding
tax with respect  to payments to be  made under this Agreement.   In addition,
the Bank agrees that from time to  time after the date of this Agreement, when
a lapse in time or change in  circumstances renders the previous certification
obsolete or inaccurate in any material respect, it will deliver to the Obligor
two  new  accurate and  complete original  signed  copies of  Internal Revenue
Service Form 4224 or 1001 and such other forms as may be required in  order to
confirm or establish the entitlement of the Bank to a continued exemption from
or reduction in  United States withholding tax with respect  to payments under
this Agreement, or it shall immediately notify the Obligor of its inability to
deliver  any  such  Form or  Certificate.    Notwithstanding  anything to  the
contrary contained in Section 3.03(a), but subject to Section 10.04(b) and the
immediately succeeding  sentence, (x) the Obligor  shall be  entitled, to  the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by  the United States  (or any  political subdivision or  taxing
authority thereof or  therein) from  interest, fees or  other amounts  payable
hereunder for the  account of the Bank for U.S. Federal income tax purposes to
the extent that the Bank has not provided to the Obligor U.S. Internal Revenue
Service  Forms  that establish  a complete  exemption  from such  deduction or
withholding and (y) the  Obligor shall  not be obligated  pursuant to  Section
3.03(a) hereof  to gross-up payments  to be  made to  the Bank  in respect  of
income or similar  taxes imposed by the United States if  (I) the Bank has not
provided to  the Obligor  the Internal  Revenue Service Forms  required to  be
provided to the  Obligor pursuant  to this Section  3.03(b).   Notwithstanding
anything to the  contrary contained in the preceding sentence  or elsewhere in
this Section  3.03 and except  as set forth  in Section 10.04(b),  the Obligor
agrees to pay additional amounts and  to indemnify the Bank in the manner  set
forth in Section 3.03(a)  (without regard to the identity  of the jurisdiction
requiring the deduction  or withholding) in respect of any amounts deducted or
withheld by  it as described in the immediately preceding sentence as a result
of any changes after the date of this Agreement in any applicable law, treaty,
governmental rule,  regulation, guideline or  order, or in  the interpretation
thereof, relating to the deducting or withholding of income or similar  Taxes,
provided  the Bank  shall  provide to  the  Obligor any  reasonably  available
applicable IRS  tax form  (reasonably similar  in its  simplicity and lack  of
detail  to IRS  Form  1001)  necessary or  appropriate  for  the exemption  or
reduction in the rate of such U.S. federal withholding tax.

            SECTION 4.  Conditions Precedent.  The  obligation of the Bank  to
issue Letters of Credit hereunder, is subject, at the time of each such Credit
Event (except as otherwise hereinafter indicated), to the satisfaction of each
of the following conditions:

            4.01  Execution  of  Agreement.  The  Effective  Date  shall  have
occurred as provided in Section 10.09.

            4.02  No Default; Representations and Warranties.  At  the time of
each Credit  Event and also after giving effect thereto, (i) there shall exist
no Default or  Event of Default  and (ii) all  representations and  warranties
contained herein or in the other Credit Documents in effect at such time shall
be true and  correct in all material  respects with the same  effect as though
such representations and  warranties had been  made on and  as of the date  of
such  Credit Event  (except  to  the  extent  that  such  representations  and
warranties expressly  relate to an earlier  date, in which case  they shall be
true and correct in all material respects as of such earlier date).

            4.03  Officer's  Certificate.  On  the  Effective  Date,  the Bank
shall  have received a certificate dated such  date signed by the President or
any Vice  President of  the Obligor  stating that there  has been  no Material
Adverse Change  in the financial condition  of the Obligor or  of Holdings and
its Subsidiaries taken as a whole since the date of the last audited financial
statements provided by Holdings or the Obligor to the Bank and that all of the
applicable conditions  set forth in Sections 4.02 and 4.08(a) exist as of such
date.

            4.04  Opinions of Counsel.  On the  Effective Date, the Bank shall
have received  opinions, addressed to the  Bank and dated  the Effective Date,
from (i)  Wayne Hillin,  Esq., General  Counsel to  the Credit Parties,  which
opinion shall cover the matters contained in Exhibit B.

            4.05  Corporate Proceedings.  (a)  On the Effective Date, the Bank
shall have received from  each Credit Party a certificate, dated the Effective
Date,  signed  by the  President or  any  Vice-President or  other appropriate
representative of such Credit Party in the form  of Exhibit C with appropriate
insertions   and  deletions,  together  with  copies  of  the  certificate  of
formation, the by-laws, or other organizational documents of such Credit Party
and the resolutions,  or such  other administrative approval,  of such  Credit
Party referred to in such certificate and all of the foregoing (including each
such certificate of formation, certificate of incorporation and by-laws) shall
be reasonably satisfactory to the Bank.

            (b)  On the  Effective Date,  all corporate and  legal proceedings
and all instruments and agreements in connection with the transactions contem-
plated by  this Agreement and the  other Credit Documents shall  be reasonably
satisfactory in  form and  substance  to the  Bank, and  the  Bank shall  have
received all information and copies of all certificates, documents and papers,
including good standing certificates  and any other records of  corporate pro-
ceedings  and  governmental  approvals,  if  any,  which  the  Bank  may  have
reasonably requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper corporate or governmental authorities.

            4.06  Adverse  Change,   etc.  From  December  31,   1995  to  the
Effective  Date, nothing  shall have  occurred (and  the  Bank shall  not have
become  aware of any facts or conditions  not previously known) which the Bank
shall determine (a)  has, or is reasonably likely to  have, a material adverse
effect on  the rights or remedies of the Bank,  or on the ability of Holdings,
the Obligor  or any Subsidiary to perform  their respective obligations to the
Bank, or (b) has, or is reasonably likely to have, a Material Adverse Effect.

            4.07  Litigation.  On  the  Effective  Date,  there  shall  be  no
actions, suits or proceedings  pending or threatened (a) with respect  to this
Agreement or any other Credit Document or the transactions contemplated hereby
or thereby or  (b) which the Bank shall determine is  reasonably likely to (i)
have a  Material Adverse Effect or (ii) have  a material adverse effect on the
rights or remedies of the Bank hereunder or under any other Credit Document or
on  the  ability of  Holdings  or  the  Obligor  to perform  their  respective
obligations to the Bank hereunder or under any other Credit Document.

            4.08  Approvals.  On  the Effective  Date, all  material necessary
governmental and  third party approvals  in connection  with the  transactions
contemplated  by  the Credit  Documents and  otherwise  referred to  herein or
therein shall have  been obtained  and remain  in effect,  and all  applicable
waiting  periods shall  have  expired without  any action  being taken  by any
competent authority which restrains or prevents such  transactions or imposes,
in the reasonable judgment of the Bank, materially adverse conditions upon the
consummation of such transactions.

            4.09  Fees.  On the Effective Date, the Obligor shall have paid to
the Bank all Fees  and expenses agreed upon by  such parties to be paid  on or
prior to such date.

            The  acceptance  of  the  benefits  of  each  Credit  Event  shall
constitute a  representation and warranty  by Holding and  the Obligor to  the
Bank  that all  of the  conditions  specified above  which  are applicable  in
accordance with their express terms at the time of such acceptance exist as of
that time.   All of the  certificates, legal opinions and  other documents and
papers referred  to in this  Section 4, unless  otherwise specified,  shall be
delivered to the Bank  at its Notice Office and shall  be satisfactory in form
and substance to the Bank.

            SECTION 5.  Representations, Warranties and  Agreements.  In order
to induce the Bank to enter into this Agreement and to issue Letters of Credit
provided  for herein,  each of Holdings  and the  Obligor makes  the following
representations and warranties to, and agreements with, the Bank, all of which
shall survive the execution and delivery of this Agreement (with the making of
each Credit Event thereafter  being deemed to constitute a  representation and
warranty that the matters specified in this Section 5 are true and correct  in
all material respects  on and as of the date of  each such Credit Event unless
such representation and warranty expressly indicates that it is being made  as
of any  specific date, in which case such representations and warranties shall
be true and correct in all material respects as of such date):

            5.01  Corporate Status.  Each Credit Party (i) is a duly organized
and validly existing corporation in good standing under the laws of the juris-
diction of its  organization and has the corporate power  and authority to own
its property and assets  and to transact the business in  which it is engaged,
except  in such  case where the  failure to  be so duly  organized and validly
existing in good  standing and to have such corporate  power and authority (x)
is not reasonably  likely to  have a Material  Adverse Effect and  (y) is  not
reasonably likely to have a material adverse effect on the  rights or remedies
of  the Bank  or on  the ability  of Holdings  or the  Obligor to  perform its
obligations to  the Bank  hereunder and  under the  other Credit Documents  to
which it is a party, and (ii) has duly qualified and is authorized to do busi-
ness and is in  good standing in all jurisdictions where it  is required to be
so qualified and  where the failure to be  so qualified would have  a Material
Adverse Effect.

            5.02  Corporate  Power and Authority.  Each  Credit Party  has the
corporate power and authority to execute, deliver and carry out  the terms and
provisions of the  Credit Documents to which it  is a party and has  taken all
necessary  corporate   action  to   authorize  the  execution,   delivery  and
performance of the Credit Documents to which it  is a party. Each Credit Party
has duly executed and  delivered each Credit Document to  which it is a  party
and  each  such  Credit Document  constitutes  the  legal,  valid and  binding
obligation  of such Credit Party enforceable against such Person in accordance
with its  terms, except to the  extent that the enforceability  thereof may be
limited by  applicable bankruptcy, insolvency,  reorganization, moratorium  or
similar laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).

            5.03  No   Violation.  Neither   the   execution,   delivery   and
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with  the terms and provisions thereof, nor the consummation of
the  transactions  contemplated therein  (i)  will  contravene any  applicable
provision  of any law, statute,  rule, regulation, order,  writ, injunction or
decree of  any court or  governmental instrumentality of the  United States or
any  State thereof, (ii) will result in any breach of any of the terms, coven-
ants, conditions or provisions of, or constitute a default under, or result in
the creation or imposition of (or the obligation to create or impose) any Lien
upon any of the  property or assets of Holdings,  the Obligor or any  of their
respective  Subsidiaries pursuant  to the  terms of,  any  material indenture,
mortgage, deed of trust, agreement or other instrument to which  Holdings, the
Obligor  or any of their respective Subsidiaries is  a party or by which it or
any of its  property or assets are  bound or to which  it is subject or  (iii)
will violate any  provision of the Certificate of Incorporation  or By-Laws of
Holdings, the Obligor or any of their respective Subsidiaries.

            5.04  Litigation.  There  are  no  actions, suits  or  proceedings
pending  or, to  the best of  Holding's or the  Obligor's knowledge threatened
with respect to Holdings,  the Obligor or any of their respective Subsidiaries
(i)  that are  likely to  have  a Material  Adverse Effect  or  (ii) that  are
reasonably likely  to have a material adverse effect on the rights or remedies
of the Bank or on the  ability of any Credit Party to perform  its obligations
to the Bank hereunder  and under the other Credit  Documents to which it  is a
party.

            5.05  Use  of  Credit;  Margin Regulations.  (a)  All  Letters  of
Credit issued hereunder shall be utilized to provide for the general corporate
purposes of Holdings, the Obligor and their respective Subsidiaries.

            (b)  Neither the issuance of any  Letter of Credit hereunder,  nor
the  use of  any proceeds thereof,  will violate  or be  inconsistent with the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System and  no part of  the proceeds of any  Letter of Credit  will be
used  to purchase or carry any Margin Stock in violation of Regulation U or to
extend credit for the purpose of purchasing or carrying any Margin Stock.

            5.06  Governmental  Approvals.  Except  for the  orders, consents,
approvals,  licenses,  authorizations, validations,  recordings, registrations
and exemptions that have already been duly made or obtained and remain in full
force and  effect, no  order,  consent, approval,  license, authorization,  or
validation of, or filing, recording or registration with, or exemption by, any
foreign  or  domestic  governmental  or  public  body  or  authority,  or  any
subdivision thereof, is  required to  authorize or is  required in  connection
with (i) the  execution, delivery and  performance of any  Credit Document  or
(ii)  the legality, validity, binding  effect or enforceability  of any Credit
Document.

            5.07  Investment Company Act.  None  of Holdings,  the Obligor  or
any of  their respective Subsidiaries is an  "investment company" or a company
"controlled"  by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.

            5.08  Public Utility  Holding Company Act.  None of  Holdings, the
Obligor or any  of their respective Subsidiaries is a  "holding company," or a
"subsidiary company" of  a "holding company," or an  "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the mean-
ing of the Public Utility Holding Company Act of 1935, as amended.

            5.09  True  and  Complete  Disclosure.  All   factual  information
(taken as  a whole) heretofore or contemporaneously  furnished by or on behalf
of Holdings, the Obligor or any of their respective Subsidiaries in writing to
the  Bank for  purposes  of  or  in  connection with  this  Agreement  or  any
transaction  contemplated herein  is, and  all other such  factual information
(taken as a whole) hereafter furnished  by or on behalf of any such  Person in
writing to the Bank will be, true and accurate in all material respects on the
date as of which such information is dated or certified  and not incomplete by
omitting to  state any material fact necessary to make such information (taken
as a whole)  not misleading at such  time in light of  the circumstances under
which such information was provided.   The Projections and pro forma financial
information contained in such materials are based on  good faith estimates and
assumptions believed by  such Persons to  be reasonable at  the time made,  it
being recognized by the Bank that such Projections as to future events are not
to be  viewed as facts  and that actual results  during the period  or periods
covered by any such Projections may differ from the projected  results.  There
is no fact known to Holdings or the Obligor which is reasonably likely to have
a Material  Adverse Effect, which  has not  been disclosed herein  or in  such
other documents, certificates and statements furnished to the Bank for use  in
connection with the transactions contemplated hereby.

            5.10  Financial Condition; Financial Statements; Projections.  (a)
On and as  of the Effective Date, on a pro  forma basis after giving effect to
all Indebtedness  incurred, and to be  incurred, and Liens created,  and to be
created, by Holdings and its Subsidiaries in connection therewith, (x) the sum
of the assets, at a fair valuation, of Holdings  and its Subsidiaries taken as
a  whole will exceed its  debts, (y) Holdings and its  Subsidiaries taken as a
whole will not have incurred or intended  to, or believe that they will, incur
debts  beyond their  ability to pay  such debts  as such debts  mature and (z)
Holdings and  its Subsidiaries  taken as a  whole will  not have  unreasonably
small capital with which to conduct its business.  

            (b)  (i)  The  consolidated  balance  sheet of  Holdings  and  its
Subsidiaries at December 31,  1995 and the related consolidated  statements of
operations  and cash  flows of Holdings  and its  Subsidiaries for  the fiscal
year, as the  case may be, ended as of said  date, which have been examined by
Arthur Andersen  LLP, independent certified public  accountants, who delivered
an unqualified opinion in respect therewith, and (ii) the consolidated balance
sheet of  Holdings and its  Subsidiaries as of  September 30, 1996,  copies of
which have heretofore been furnished to the Bank, present fairly the financial
position of such entities at the dates of  said statements and the results for
the period  covered thereby in  accordance with GAAP  (or, in the  case of the
balance  sheet, presents a good  faith estimate of  the consolidated financial
condition of Holdings and its Subsidiaries at the date thereof), except to the
extent provided  in the notes to said financial statements and, in the case of
the  September 30, 1996 statements,  subject to normal  and recurring year-end
audit adjustment.   All such  financial statements (other  than the  aforesaid
balance sheet)  have  been  prepared  in accordance  with  generally  accepted
accounting  principles and practices consistently applied except to the extent
provided  in the notes  to said  financial statements.   Nothing  has occurred
since  December 31,  1995 that  has  had or  is  reasonably likely  to have  a
Material Adverse Effect.

            (c)  Except as reflected in the financial statements and the notes
thereto described in Section 5.10(b),  there were as of the Effective  Date no
liabilities or  obligations with respect  to Holdings, the  Obligor or  any of
their  respective  Subsidiaries  of   a  nature  (whether  absolute,  accrued,
contingent or  otherwise and whether or not due) which, either individually or
in aggregate,  would be material to  Holdings and its Subsidiaries  taken as a
whole, except  as incurred  subsequent to  December 31,  1995 in  the ordinary
course of business consistent with past practices.  

            5.11  Tax Returns and Payments.  Each of Holdings, the Obligor and
each of their respective Subsidiaries has filed all federal income tax returns
and all other material tax returns, domestic and foreign, required to be filed
by it and has paid all material taxes and assessments payable by it which have
become due, other than those not yet delinquent and except for those contested
in  good faith.   Holdings, the  Obligor and  each of  their respective Subsi-
diaries has paid, or has  provided adequate reserves with respect  thereto, in
accordance  with GAAP,  for the  payment of,  all federal,  state  and foreign
income taxes applicable for all prior fiscal years and for  the current fiscal
year to the date hereof.

            5.12  Compliance  with  ERISA.   (a) Each  Plan is  in substantial
compliance  with ERISA  and the  Code; no  Reportable Event has  occurred with
respect to a Plan; no Plan  is insolvent or in reorganization; no Plan  has an
accumulated or waived  funding deficiency or has  applied for an extension  of
any amortization  period within the  meaning of Section  412 of the  Code; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan  have been  timely  made;  neither  Holdings  nor  the  Obligor  nor  any
Subsidiary of the Obligor  nor any ERISA Affiliate  has incurred any  material
liability to or on account  of a Plan pursuant to Section 409, 502(i), 502(l),
4062, 4063, 4064,  4069, 4201, 4204  or 4212 of  ERISA or Section  401(a)(29),
4971, 4975  or 4980 of the  Code or expects to incur  any liability (including
any indirect, contingent, or  secondary liability) under any of  the foregoing
Sections with  respect to  any Plan;  no proceedings  have been instituted  to
terminate or  appoint a trustee  to administer  any Plan; no  condition exists
which presents a  material risk to Holdings, the Obligor  or any Subsidiary of
the Obligor or any ERISA Affiliate  of incurring a liability to or on  account
of a Plan  pursuant to  the foregoing  provisions of  ERISA and  the Code;  or
except as would  reasonably be expected to have a  Material Adverse Effect, no
lien imposed  under the Code  or ERISA  on the  assets of the  Obligor or  any
Subsidiary  of  the Obligor  or any  ERISA Affiliate  exists or  is reasonably
likely to  arise on account of  any Plan; and Holdings, the  Obligor and their
respective  Subsidiaries do not maintain or contribute to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) which  provides benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2)
of ERISA) the obligations with respect to which are not properly recognized or
disclosed in such entity's consolidated financial statements and notes related
thereto.

            (b)   Each Foreign Pension Plan has been maintained in substantial
compliance with  its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations  and orders and has been  maintained, where
required,  in good standing with  applicable regulatory authorities.   None of
Holdings, the Obligor or any of their respective Subsidiaries has incurred any
obligation  in connection  with  the termination  of  or withdrawal  from  any
Foreign Pension Plan.

            5.13  Subsidiaries.  Annex  II lists  each Subsidiary  of Holdings
(and  the direct and indirect ownership interest of Holdings therein), in each
case existing on the Effective Date. 

            5.14  Patents, etc.  Holdings  and each  of  its Subsidiaries  has
obtained  all  material  patents,  trademarks,  service  marks,  trade  names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are  necessary for  the operation  of  their businesses  taken as  a whole  as
presently conducted.

            5.15  Pollution and Other  Regulations.  (a)  Each of Holdings and
its   Subsidiaries  is   in   substantial  compliance   with  all   applicable
Environmental  Laws  governing its  business for  which  failure to  comply is
reasonably likely to  have a Material Adverse Effect, and neither Holdings nor
any  of its  Subsidiaries  is  liable for  any  material  penalties, fines  or
forfeitures for  failure to comply with  any of the foregoing.   All licenses,
permits,  registrations or approvals required for the business of Holdings and
each  of its Subsidiaries,  as conducted as  of the Effective  Date, under any
Environmental Law  have been secured and Holdings and each of its Subsidiaries
is in  substantial compliance therewith, except such licenses, permits, regis-
trations or  approvals the failure  to secure  or to comply  therewith is  not
likely to  have a Material  Adverse Effect.   Neither Holdings nor any  of its
Subsidiaries is in  any respect in  noncompliance with, breach  of or  default
under any  writ, order, judgment, injunction,  or decree to  which Holdings or
such  Subsidiary is a party  or which would affect the  ability of Holdings or
such Subsidiary to  operate any Real Property, offshore drilling  rig or other
facility and no  event has occurred and is continuing  which, with the passage
of time  or the  giving  of notice  or both,  would constitute  noncompliance,
breach of or default thereunder, except in each such case, such noncompliance,
breaches or defaults  as are not likely to, in the  aggregate, have a Material
Adverse Effect.   There are as  of the Effective Date  no Environmental Claims
pending or, to  the best knowledge  of Holdings  and the Obligor,  threatened,
against Holdings or any  of its Subsidiaries wherein an  unfavorable decision,
ruling or  finding  would be  reasonably  likely to  have  a Material  Adverse
Effect.  There are no  facts, circumstances, conditions or occurrences  on any
Real Property, offshore drilling  rig or other facility  owned or operated  by
Holdings or any of its Subsidiaries that is reasonably  likely (i) to form the
basis of an Environmental Claim  against Holdings, any of its Subsidiaries  or
any Real  Property, offshore drilling rig or  other facility owned by Holdings
or any  of its Subsidiaries,  or (ii)  to cause such  Real Property,  offshore
drilling rig  or other  facility  to be  subject to  any  restrictions on  its
ownership,  occupancy, use  or  transferability under  any Environmental  Law,
except in each such  case, such Environmental Claims or restrictions  that in-
dividually or  in the aggregate are  not reasonably likely to  have a Material
Adverse Effect.

            (b)  Hazardous Materials have  not at any time been (i) generated,
used, treated  or stored  on, or  transported to or  from, any  Real Property,
offshore  drilling rig  or other  facility at  any time  owned or  operated by
Holdings or any of its Subsidiaries, or (ii) released on or from any such Real
Property, offshore drilling rig or other  facility, in each case where, to the
best  of  Holdings'  or the  Obligor's  knowledge,  such  occurrence or  event
individually  or in  the aggregate  is reasonably  likely to  have a  Material
Adverse Effect.

            5.16  Properties.  (a)  Holdings  and each of its Subsidiaries has
title  to all  material  properties  owned  by  them  including  all  property
reflected in the consolidated  balance sheet of Holdings and  its Subsidiaries
as referred to in Section 5.10(b), free and clear of all Liens, other than (i)
as referred to  in the consolidated balance  sheet or in the  notes thereto or
(ii) Permitted Liens.

            (b)  Annex III sets forth all the offshore drilling rigs and other
vessels  owned or chartered  by Holdings and  each of its  Subsidiaries on the
Effective  Date, and identifies the registered owner, flag, official or patent
number,  as the  case may  be, the  home port,  class, location  and operating
status on the Effective Date, and,  if chartered-in by Holdings or any of  its
Subsidiaries, the name and address of the owner of such chartered-in vessel. 

            5.17  Labor  Relations.  Neither Holdings nor  its Subsidiaries is
engaged  in any  unfair labor  practice that  is reasonably  likely to  have a
Material  Adverse Effect.   There is  (i) no  unfair labor  practice complaint
pending against  Holdings or any of its Subsidiaries or threatened against any
of  them,  before the  National Labor  Relations  Board, and  no  grievance or
arbitration  proceeding  arising out  of  or under  any  collective bargaining
agreement is so pending against Holdings or any of its Subsidiaries or, to the
best of Holdings' or the Obligor's knowledge, threatened against any  of them,
(ii) no strike, labor  dispute, slowdown or stoppage pending  against Holdings
or  any of  its Subsidiaries  or, to the  best of  Holdings' or  the Obligor's
knowledge, threatened against Holdings or any of its Subsidiaries and (iii) no
union  representation petition  existing  with  respect  to the  employees  of
Holdings or  any of its  Subsidiaries and no  union organizing  activities are
taking place,  except with respect to any matter specified in clause (i), (ii)
or (iii)  above, either  individually  or in  the aggregate,  such  as is  not
reasonably likely to have a Material Adverse Effect.

            5.18  Existing  Indebtedness.   Annex  IV  sets forth  a  true and
complete list of all Indebtedness of  Holdings and each of its Subsidiaries on
the Effective Date and which is to remain outstanding after the Effective Date
(excluding the Letters of  Credit, the "Existing Indebtedness"), in  each case
showing the aggregate principal amount thereof  and the name of the respective
borrower  (or  issuer)  and any  other  entity  which  directly or  indirectly
guaranteed such debt.

            SECTION  6.  Affirmative  Covenants.  Holdings  and   the  Obligor
covenant and agree  that on the Effective  Date and thereafter for  so long as
this Agreement  is in effect  (and until  the Commitments have  terminated, no
Letters  of  Credit are  outstanding and  all  Unpaid Drawings,  together with
interest,  Fees  and all  other Obligations  incurred  hereunder, are  paid in
full):

            6.01  Information  Covenants.  Holdings  and/or  the Obligor  will
furnish to the Bank:

            (a)  Annual Financial  Statements.  Within 90 days after the close
      of  each  fiscal year  of Holdings,  the  consolidated balance  sheet of
      Holdings and its Subsidiaries, as at the end of such fiscal year and the
      related consolidated statements of operations and of cash flows for such
      fiscal year,  including the amount of  Consolidated Capital Expenditures
      made during such  fiscal year,  in each case  setting forth  comparative
      consolidated  figures  for the  preceding fiscal  year, and  examined by
      independent certified public accountants of recognized national standing
      whose opinion shall not be qualified as to the  scope of audit and as to
      the status of Holdings and its Subsidiaries as a going concern, together
      with a certificate of such accounting firm stating that in the course of
      its  regular audit of  the business of  Holdings and the  Obligor, which
      audit  was  conducted in  accordance  with  generally accepted  auditing
      standards, such accounting firm has obtained no knowledge of any Default
      or Event  of Default which has occurred and  is continuing or, if in the
      opinion  of such accounting firm such a  Default or Event of Default has
      occurred and is continuing, a statement as to the nature thereof.

            (b)  Quarterly Financial Statements.  As soon as available and  in
      any  event within 45  days after  the close of  each of  the first three
      quarterly  accounting  periods in  each  fiscal  year, the  consolidated
      balance sheet  of Holdings and its  Subsidiaries, as at the  end of such
      quarterly period  and the related consolidated  statements of operations
      and of cash flows for such quarterly period and for  the elapsed portion
      of the  fiscal year ended  with the last  day of such  quarterly period,
      including the  amount of  Consolidated Capital Expenditures  made during
      such  period, and  in each case  setting forth  comparative consolidated
      figures for  the related period in  the prior fiscal year,  all of which
      shall  be unaudited,  but certified  by the  chief financial  officer or
      controller  of  Holdings, subject  to changes  resulting from  audit and
      normal year-end audit adjustments.

            (c)  Compliance Certificate.  At  the time of the  delivery of the
      financial  statements  provided  for  in Sections  7.01(a)  and  (b),  a
      certificate of Holdings and/or the Obligor signed by its chief financial
      officer, controller or other Authorized Officer in the form of Exhibit D
      to the effect  that no  Default or Event  of Default exists  or, if  any
      Default or Event of Default does exist, specifying the nature and extent
      thereof, which certificate shall set forth  the calculations required to
      establish whether Holdings and its Subsidiaries were in  compliance with
      the provisions of Section 7 as at the end of such fiscal period or year,
      as the case may be.

            (d)  Notice of Default or  Litigation.  Promptly, and in any event
      within (x) three  Business Days  after Holdings or  the Obligor  obtains
      knowledge  thereof,   notice  of  the  occurrence  of  any  event  which
      constitutes a Default or Event of Default which notice shall specify the
      nature thereof, the period of existence thereof and what action Holdings
      or  the  Obligor proposes  to  take  with respect  thereto  and  (y) ten
      Business Days after the Obligor obtains knowledge thereof, notice of the
      commencement  of or  any significant  development in  any  litigation or
      governmental proceeding pending  against Holdings or the  Obligor or any
      of  their respective  Subsidiaries which  is likely  to have  a Material
      Adverse Effect or  is likely to  have a material  adverse effect on  the
      ability  of Holdings or the Obligor to perform its obligations hereunder
      or under any other Credit Document.

            (e)  Other Information.  From time to time, such other information
      or documents  (financial  or  otherwise)  as  the  Bank  may  reasonably
      request.

            6.02  Books, Records  and  Inspections.  Holdings will,  and  will
cause each of its Subsidiaries to, permit, upon reasonable notice to the chief
financial officer, controller or  any other Authorized Officer of  Holdings or
the  Obligor,  officers and  designated representatives  of  the Bank,  to the
extent necessary, to examine the books of  account of Holdings and any of  its
Subsidiaries and discuss the affairs, finances and accounts of Holdings and of
any of its Subsidiaries with, and be advised as to the same by, its  and their
officers  and independent accountants, all at such reasonable times and inter-
vals and to such reasonable extent as the Bank may desire.

            6.03  Insurance.  Holdings  will,  and  will  cause  each  of  its
Subsidiaries  to, at all times maintain in  full force and effect insurance in
such amounts with carriers  of such insurance industry ratings,  covering such
risks  and liabilities and with such deductibles or self-insured retentions as
are  in  accordance  with  normal  industry  practice  for  similarly situated
insureds.

            6.04  Payment of Taxes.  Holdings will pay and discharge, and will
cause each of its  Subsidiaries to pay and  discharge, all taxes,  assessments
and  governmental charges  or levies  imposed upon  it or  upon its  income or
profits,  or upon any properties  belonging to it, prior to  the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become
a  Lien or charge upon any properties of  Holdings or any of its Subsidiaries,
provided that neither Holdings nor any Subsidiary shall be required to pay any
such tax, assessment,  charge, levy or claim which is  being contested in good
faith and by  proper proceedings if it  has maintained adequate reserves  with
respect thereto in accordance with GAAP.

            6.05  Consolidated  Corporate  Franchises.  Holdings will  do, and
will cause each  of its Subsidiaries  to do, or cause  to be done,  all things
necessary  to preserve  and  keep  in full  force  and  effect its  existence,
material rights and authority, unless  the failure to do so is  not reasonably
likely  to have  a  Material Adverse  Effect,  provided that  any  transaction
permitted by Section 7.02 will not constitute a breach of this Section 6.05.

            6.06  Compliance  with Statutes,  etc.  Holdings  will,  and  will
cause  each of  its  Subsidiaries to,  comply  with all  applicable  statutes,
regulations and orders  of, and  all applicable restrictions  imposed by,  all
governmental  bodies, domestic or  foreign, in respect  of the conduct  of its
business  and the  ownership  of  its  property  other  than  those  the  non-
compliance with  which would not have  a Material Adverse Effect  or would not
have a material adverse effect  on the ability of any Credit Party  to perform
its obligations under any Credit Document to which it is party.

            6.07  Good  Repair.  Except for  offshore drilling  rigs currently
under or scheduled to be repaired or which have  been damaged or have suffered
a casualty  as to which (within  a reasonable period of  time) Holdings and/or
the Obligor have not made a determination  whether to replace or repair, or if
the  determination to  replace  or repair  has  been made,  as  to which  such
replacement  or  repairs  are  being undertaken,  subject  to  availability of
equipment, materials  and/or repair facilities, Holdings will,  and will cause
each of its Subsidiaries to, keep  its properties and equipment used or useful
in  its business,  in whomsoever's  possession they  may be,  in good  repair,
working  order and condition,  normal wear and tear  excepted, and, subject to
Section 7.02, see that from time to time there are made in such properties and
equipment   all  necessary   and   proper  repairs,   renewals,  replacements,
extensions, additions, betterments and improvements  thereto to the extent and
in the manner useful or customary for companies in similar businesses.

            6.08  End of  Fiscal Years;  Fiscal Quarters.  Holdings will,  for
financial reporting purposes,  cause (i) each  of its fiscal  years to end  on
December 31 of each year and (ii) each of its fiscal quarters to end  on March
31, June 30, September 30 and December 31 of each year.

            6.09  Use  of Credit.  All  Letters  of Credit  shall  be used  as
provided in Section 5.05.

            6.10   ERISA.  As soon  as possible and,  in any event,  within 10
days after Holdings, the Obligor  or any of  their respective  Subsidiaries or
any ERISA Affiliate  knows or has reason to  know of the occurrence of  any of
the following, Holdings or the Obligor  will deliver to the Bank a certificate
of  the Chief  Financial  Officer of  Holdings  or the  Obligor  setting forth
details  as to  such occurrence  and the  action, if  any, that  Holdings, the
Obligor, such  Subsidiary or such ERISA  Affiliate is required or  proposes to
take, together with  any notices required or proposed to be  given to or filed
with or  by Holdings, the  Obligor, such Subsidiary, the  ERISA Affiliate, the
PBGC, or a Plan  participant or the  Plan administrator with respect  thereto:
that a Reportable Event  has occurred; that an accumulated  funding deficiency
has  been incurred or an application may be  or has been made to the Secretary
of the Treasury  for a waiver or modification of  the minimum funding standard
(including  any  required  installment  payments)  or  an   extension  of  any
amortization period under Section 412 of the Code or Section 302 of ERISA with
respect  to a  Plan; that  a contribution  required to  be made  to a  Plan or
Foreign Pension Plan has  not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or  declared insolvent under Title  IV of
ERISA;  that a Plan has  an Unfunded Current  Liability giving rise  to a lien
under ERISA or the  Code; that proceedings may  be or have been  instituted to
terminate or appoint  a trustee to  administer a Plan,  that a proceeding  has
been  instituted pursuant  to Section  515 of  ERISA  to collect  a delinquent
contribution to a Plan;  that Holdings, the Obligor,  any of their  respective
Subsidiaries or any ERISA Affiliate will or may incur any liability (including
any indirect  contingent  or secondary  liability)  to or  on account  of  the
termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069,
4201, 4204  or  4212  of  ERISA  or with  respect  to  a  Plan  under  Section
401(a)(29), 4971 or 4975  of the Code  or Section 409 or  502(i) or 502(l)  of
ERISA; or  that Holdings, the Obligor or any Subsidiary may incur any material
unrecognized  liability  pursuant to  any  employee welfare  benefit  plan (as
defined in Section 3(1) of ERISA) that provides benefits  to retired employees
or other former  employees (other than as required by Section 601 of ERISA) or
any employee pension benefit plan (as defined in Section 3(2) of ERISA).  Upon
request, Holdings or  the Obligor will deliver to the Bank  a complete copy of
the annual  report (Form 5500) of each Plan (including to the extent required,
the  related  financial  and  actuarial  statements  and  opinions  and  other
supporting statements, certifications, schedules  and information) required to
be filed with  the Internal Revenue Service.  In  addition to any certificates
or notices delivered to the Bank pursuant to the first sentence hereof, copies
of annual reports, and any material  notices received by Holdings, the Obligor
or any  of  their respective  Subsidiaries  or any  ERISA Affiliate  from  any
governmental agency with respect to any Plan shall be delivered to the Bank no
later than 10 days after the date such report has been filed with the Internal
Revenue Service or such notice has been received by Holdings, the Obligor, the
Subsidiary or the ERISA Affiliate, as applicable.

            SECTION 7.  Negative  Covenants.  Holdings and the  Obligor hereby
covenant and agree that as of the Effective Date and thereafter for so long as
this Agreement  is in  effect  and until  the  Commitment has  terminated,  no
Letters  of Credit are outstanding and all  Unpaid Drawings, together with in-
terest, Fees and all other Obligations incurred hereunder, are paid in full:

            7.01  Changes in Business.  Holdings and the Obligor will not, and
will  not permit any of their respective Subsidiaries to, materially alter the
character of  the business of Holdings  and its Subsidiaries taken  as a whole
from  that conducted at the  Effective Date (including  any material expansion
outside of the  offshore contract drilling and  production business), provided
that  this Section 7.01 shall not  restrict the engaging in business ancillary
to the offshore contract drilling and production business.

            7.02  Consolidation,  Merger  or Sale  of  Assets,  etc.   Neither
Holdings nor the  Obligor will wind up, liquidate or  dissolve its affairs, or
enter  into  any transaction  of merger  or  consolidation, sell  or otherwise
dispose of all or substantially all  of its property or assets or agree  to do
any  of the foregoing at  any future time, except that  the following shall be
permitted:

            (a)  Holdings may  liquidate or  dissolve or consolidate  or merge
      into  another entity, provided (i) Holdings is the successor or survivor
      in respect of such merger, and after giving effect thereto Holdings will
      be in full compliance with the terms of this Agreement and (ii) Standard
      &  Poor's shall have affirmed in writing  that such transaction will not
      impair Holdings'  implied senior debt rating  as such debt rating  is in
      effect  immediately prior  to the  announcement or consummation  of such
      liquidation, dissolution, consolidation or merger;

            (b)   other sales or dispositions of assets provided that (x) each
      such sale or  disposition shall be  in an amount  at least equal  to the
      fair market value  thereof (as determined by  the Board of Directors  of
      the Borrower  in the  case of  sales in excess  of $20,000,000)  and for
      proceeds  consisting solely of  not less than  100% cash in  the case of
      assets constituting Collateral and (y) no such sale or disposition shall
      constitute the sale or  disposition of all or  substantially all of  the
      combined assets of Holdings and its Subsidiaries taken together; and 

            (c)  other sales or  dispositions of  assets in each  case to  the
      extent the Bank  has consented  in writing thereto  and subject to  such
      conditions as may be set forth in such consent.

            7.03  Liens  on Assets.  Holdings  and the  Obligor will  not, and
will not permit any of their respective Subsidiaries to, create, incur, assume
or suffer to exist any Lien other than Permitted Liens.  

            7.04  Dividends; Restrictions on Subsidiaries, etc.  (a)  Holdings
will  not, and will not permit any of  its Subsidiaries to, declare or pay any
dividends  (other  than  dividends (i)  payable  solely  in  capital stock  of
Holdings  or rights  in  respect thereof  or  (ii) constituting  spin-offs  of
divisions or direct or indirect operating subsidiaries of Holdings (other than
Arcade and  the Obligor and their  direct or indirect Subsidiaries)  or return
any capital  to, the stockholders of  Holdings or authorize or  make any other
distribution, payment  or delivery of property or  cash to the stockholders of
Holdings as such, or  redeem, retire, purchase or otherwise  acquire, directly
or indirectly, for  a consideration, any  shares of any  class of the  capital
stock of Holdings now or hereafter outstanding (or any warrants for or options
or stock appreciation  rights in respect of any of such  shares), or set aside
any funds for any of the foregoing purposes, or permit any of its Subsidiaries
to purchase or otherwise acquire for  consideration any shares of any class of
the capital stock of Holdings, now or hereafter outstanding (or any options or
warrants  or stock appreciation rights issued by  Holdings with respect to its
capital stock) (all of the foregoing "Dividends"), except that:

           (i)  Holdings may redeem or repurchase common stock of Holdings (or
      options  to purchase  such  common stock)  from  (1) present  or  former
      officers,  employees and directors of  Holdings, the Obligor,  or any of
      their Subsidiaries (or their estates) upon the death, permanent disabil-
      ity,  retirement  or termination  of employment  of  any such  Person or
      otherwise in accordance with any stock option plan or any employee stock
      ownership plan, or  (2) stockholders of Holdings so  long as the purpose
      of such purchase is to  acquire common stock of Holdings  for reissuance
      to new officers, employees and directors (or their estates) of Holdings,
      the Obligor  or any of  their respective  Subsidiaries to the  extent so
      reissued  within 12 months  of any such  purchase, provided  that in all
      such cases (x)  no Default or Event of  Default is then in  existence or
      would  arise therefrom,  (y) the  aggregate amount of  all cash  paid in
      respect of all  such shares so redeemed  or repurchased in  any calendar
      year does not exceed $15,000,000 plus proceeds of key man life insurance
      used for the  purpose of repurchasing  such common  stock owned by  such
      Person  and,  provided further,  that in  the  event that  Holdings sub-
      sequently  resells to any member of its, or any Subsidiary's management,
      any  shares redeemed  or repurchased  pursuant to  this clause  (i), the
      amount  of repurchases  Holdings may  make from officers,  employees and
      directors pursuant  to this clause (i)  shall be increased by  an amount
      equal to any cash received by Holdings upon the resale of such shares;

          (ii)  Holdings may pay  or make  Dividends on (i)  existing Class  A
      common stock (up to  a maximum of $100 per annum) and  (ii) any issue of
      preferred stock whether now existing or hereafter issued; and

         (iii)  so  long as  no Default or  Event of  Default exists  or would
      result therefrom, Holdings shall  be permitted to pay or  make Dividends
      in an  amount not to exceed  50%, in the aggregate,  of Consolidated Net
      Income on a cumulative basis beginning October 1, 1996.

            (b)  Holdings and the Obligor will not, and will not permit any of
the Subsidiary Guarantors to, create or otherwise cause or suffer to exist any
encumbrance  or  restriction which  prohibits or  otherwise restricts  (A) the
ability of  any Subsidiary Guarantor to  (a) pay dividends or  make other dis-
tributions  or pay  any Indebtedness  owed to  the Obligor  or any  Subsidiary
Guarantor,  or (b)  make loans or  advances to  the Obligor  or any Subsidiary
Guarantor, (c) transfer any of its properties  or assets to the Obligor or any
Subsidiary Guarantor or (B) the ability of the Obligor or any other Subsidiary
Guarantor of the  Obligor to create, incur, assume or suffer to exist any Lien
upon its property or assets to secure the Obligations, other than prohibitions
or restrictions existing under or by reason of:

           (i) this Agreement and the other Credit Documents;

          (ii) applicable law;

         (iii) customary   non-assignment  provisions  entered   into  in  the
      ordinary course of business and consistent with past practices;

          (iv) any restriction  or encumbrance  with respect  to a  Subsidiary
      Guarantor imposed pursuant to  an agreement which has been  entered into
      for the sale  or disposition of all or substantially  all of the capital
      stock or  assets of such Subsidiary  Guarantor, so long as  such sale or
      disposition is permitted under this Agreement; and 

           (v) Permitted Liens and any documents  or instruments governing the
      terms  of  any Indebtedness  or other  obligations  secured by  any such
      Liens, provided that such prohibitions or restrictions apply only to the
      assets subject to such Liens.

            7.05  Transactions with Affiliates.  Holdings and the Obligor will
not, and will not permit  any of their respective Subsidiaries to,  enter into
any transaction or series of transactions after  the Effective Date whether or
not in the ordinary course of business, with any Affiliate other than on terms
and  conditions substantially as favorable  to Holdings or  such Subsidiary as
would be obtainable by Holdings or such Subsidiary at the time in a comparable
arm's-length  transaction with a Person other than an Affiliate, provided that
the  foregoing restrictions  shall not  apply to  (i) employment  arrangements
entered into in the ordinary course of business with officers  of Holdings and
its  Subsidiaries, (ii)  customary  fees  paid  to members  of  the  Board  of
Directors  of Holdings  and of  its Subsidiaries, (iii)  capital contributions
made  by  Holdings to  the Obligor,  (iv)  all transactions  between  or among
Holdings  and  its  Subsidiaries, (v)  all  immaterial  transactions with  the
officers or members of the Board  of Directors of Holdings or its Subsidiaries
and (vi) all immaterial transactions with Affiliates.

            7.06  Vessel Management; Registry.   Holdings and the Obligor will
not, and will not permit  any of their Subsidiaries to, (i) change the overall
management of any  drilling rig from  Holdings or any  of its Subsidiaries  or
(ii) change the national registry of any drilling rig.

            7.07  Coverage Ratio.  Holdings  will not permit the  ratio of (i)
Consolidated EBITDAR to  (ii) the  sum of Consolidated  Interest Expense  plus
Consolidated Rent Expense for any  fiscal quarter of Holdings to be  less than
4.00:1.00.

            7.08  Working  Capital.  Holdings will not  permit Working Capital
on the last  day of  any fiscal  quarter of  Holdings to  be less  than $0  if
Working Capital was less than $0 on the  last day of the immediately preceding
fiscal quarter.

            7.09  Leverage Ratio.  Holdings will not permit the Leverage Ratio
at the  end of  any fiscal  quarter ending prior  to the  Maturity Date  to be
greater than 0.50:1.00.

            SECTION 8.  Events of Default.  Upon the occurrence of  any of the
following specified events (each an "Event of Default"):

            8.01  Payments.  The Obligor shall default, and such default shall
continue  for three  or more Business  Days after  notice by the  Bank, in the
payment when due of any Unpaid Drawing or any Fees or  any other amounts owing
hereunder or under any other Credit Document; or

            8.02  Representations,   etc.  Any  representation,   warranty  or
statement made by any Credit Party herein  or in any other Credit Document  or
in any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or

            8.03  Covenants.  Holdings or the Obligor shall (a) default in the
due  performance or  observance  by  it of  any  term,  covenant or  agreement
contained in Section 6.08  or Section 7 or (b) default  in the due performance
or  observance by  it of  any term,  covenant or  agreement (other  than those
referred  to in Section 8.01,  8.02 or clause  (a) of this  Section 8.03) con-
tained in  this Agreement  and such  default shall continue  unremedied for  a
period of at least 30 days after notice to the Obligor by the Bank; or

            8.04  Default Under Other Agreements.  (a)  Holdings,  the Obligor
or any of their respective Subsidiaries  shall (i) default in any payment with
respect to any Indebtedness (including, without limitation, the Obligations as
defined in  the Existing Credit Agreement) beyond the period of grace, if any,
applicable thereto  or (ii) default  in the  observance or performance  of any
agreement or condition relating to  any such Indebtedness or contained in  any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur  or condition exist,  the effect of  which default or  other
event  or  condition  results in  acceleration  or  the  renegotiation of  the
material  payment terms of  any such Indebtedness  to become due  prior to its
stated maturity;  or (b)  any  such Indebtedness  of Holdings  or  any of  its
Subsidiaries  shall be  declared to  be  due and  payable, or  required to  be
prepaid other than by a regularly scheduled required prepayment, prior to  the
stated  maturity thereof,  provided that it  shall not constitute  an Event of
Default pursuant to this Section 8.04 unless the aggregate principal amount of
such Indebtedness in default exceeds $5,000,000 at any one time; or

            8.05  Bankruptcy,  etc.  Holdings, the  Obligor  or  any of  their
respective  Subsidiaries shall  commence  a voluntary  case concerning  itself
under  Title 11  of the United  States Code  entitled "Bankruptcy,"  as now or
hereafter in effect,  or any successor thereto (the "Bankruptcy  Code"); or an
involuntary case is  commenced against Holdings, the  Obligor or any of  their
respective Subsidiaries and the  petition is not controverted within  10 days,
or is  not dismissed within  60 days,  after commencement  of the  case; or  a
custodian  (as defined  in the  Bankruptcy Code)  is  appointed for,  or takes
charge  of, all or substantially all of  the property of Holdings, the Obligor
or any  of their respective Subsidiaries;  or Holdings, the Obligor  or any of
their  respective  Subsidiaries  commences  any  other  proceeding  under  any
reorganization,  arrangement,  adjustment of  debt,  relief  of debtors,  dis-
solution, insolvency or liquidation or similar law of any jurisdiction whether
now or hereafter in  effect relating to Holdings, the Obligor  or any of their
respective Subsidiaries; or there  is commenced against Holdings,  the Obligor
or any of  their respective  Subsidiaries any  such case  or proceeding  which
remains undismissed for a period  of 60 days; or Holdings, the  Obligor or any
of  their respective Subsidiaries is adjudicated insolvent or bankrupt; or any
order  of relief  or other  order  approving any  such case  or proceeding  is
entered; Holdings, the Obligor or any of their respective Subsidiaries suffers
any appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed  for a period of 60 days; or
Holdings, the Obligor or any of their respective Subsidiaries makes  a general
assignment  for the benefit of creditors; or  any corporate action is taken by
Holdings, the Obligor  or any of their respective Subsidiaries for the purpose
of effecting any of the foregoing; or

            8.06  Guaranty.  The Guaranty or any provision thereof shall cease
to be in full force and effect, or the Guarantor or any Person acting by or on
behalf of such  Guarantor shall deny  or disaffirm all or  any portion of  the
Guarantor's  obligation thereunder,  or  the Guarantor  shall  default in  the
observance of  any term, covenant or agreement on  its part to be performed or
observed pursuant thereto  and such  default (other than  any default  arising
from a failure to make any payment thereunder) shall continue unremedied for a
period of at least 30 days after notice to the Obligor by the Bank; or

            8.07  Judgments.  One  or  more  judgments  or  decrees  shall  be
entered against Holdings or the Obligor involving a liability of $1,000,000 or
more in the case of any one such judgment  or decree and $5,000,000 or more in
the aggregate for all such judgments  and decrees for Holdings and the Obligor
(not paid or to the extent not covered by insurance) and any such judgments or
decrees shall not  have been vacated, discharged  or stayed or bonded  pending
appeal within 60 days from the entry thereof; or

            8.08  Employee Benefit Plans. (a)(i) A contribution required to be
made with  respect to  any (x)  employee pension benefit  plan (as  defined in
Section 3(2) of ERISA) maintained or  contributed to by (or to which  there is
an obligation to contribute of) Holdings or a Subsidiary or an ERISA Affiliate
or (y) Foreign Pension  Plan has not been timely made or  (ii) Holdings or any
Subsidiary has incurred or is  likely to incur liabilities pursuant to  one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that
provide benefits to retired employees or other former employees (other than as
required  by  Section 601  of  ERISA) or  employee pension  benefit  plans (as
defined in Section 3(2) of  ERISA); (b) there shall result from any such event
or events the  imposition of a lien, the granting of a security interest, or a
liability  or a material  risk of incurring  a liability; and  (c) which lien,
security  interest or liability, individually, and/or in the aggregate, in the
opinion of the Bank, will have a Material Adverse Effect; or

            8.09  Change of Control.  A Change of Control shall occur; 

then, and  in any such  event, and  at any  time thereafter, if  any Event  of
Default shall then  be continuing, the  Bank shall, by  written notice to  the
Obligor, take  any or all of  the following actions, without  prejudice to the
rights of the Bank to  enforce its claims against any Credit  Party, except as
otherwise  specifically provided for in  this Agreement (provided  that, if an
Event of  Default specified in  Section 8.05 shall  occur with respect  to the
Obligor, the result which would occur upon the giving of written notice by the
Bank as  specified in  clauses (i)  and (ii)  below shall  occur automatically
without the  giving of any  such notice):   (i) declare the  Commitment termi-
nated, whereupon the Commitment shall terminate immediately and any Commitment
Commission  or any other Fees  shall forthwith become  due and payable without
any other  notice of  any kind; (ii)  declare all obligations  owing hereunder
(including, without  limitation, Unpaid  Drawings) to be,  whereupon the  same
shall  become, forthwith due and  payable without presentment, demand, protest
or other  notice of any  kind, all of which  are hereby waived  by each Credit
Party;  (iii)  terminate  any Letter  of  Credit which  may  be  terminated in
accordance with its  terms; (iv) direct  the Obligor to  pay (and the  Obligor
hereby agrees upon receipt of such notice, or upon the occurrence of any Event
of Default  specified in Section 8.05 in respect  of the Obligor, it will pay)
to the Bank at the Payment Office such additional  amounts of cash, to be held
as  security for the Obligor's reimbursement obligations in respect of Letters
of Credit then outstanding equal to the aggregate Stated Amount of all Letters
of Credit  then outstanding; and (v) apply any amounts held as cash collateral
pursuant to Section 3.01 or this Section 8 to repay Obligations.

            SECTION  9.  Definitions.  As  used  herein,  the  following terms
shall  have  the  meanings  herein  specified  unless  the  context  otherwise
requires.   Defined terms  in this  Agreement shall  include  in the  singular
number the plural and in the plural the singular:

            "Affiliate" shall  mean, with  respect to  any  Person, any  other
Person  directly or indirectly controlling  (including but not  limited to all
directors and  officers of  such Person),  controlled by, or  under direct  or
indirect common control with such Person.  A Person shall be deemed to control
a corporation if such Person possesses,  directly or indirectly, the power (i)
to vote 10%  or more of  the securities having  ordinary voting power  for the
election  of directors  of such  corporation or  (ii) to  direct or  cause the
direction  of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.

            "Agreement" shall  mean this  Letter of  Credit Agreement,  as the
same may be from time to time modified, amended and/or supplemented.

            "Approved  Bank" shall have the meaning provided in the definition
of "Cash Equivalents."

            "Approved  Company"  shall  have   the  meaning  provided  in  the
definition of "Cash Equivalents."

            "Arcade" shall mean Arcade Drilling AS, a Norwegian Corporation.

            "Authorized Officer"  shall mean any  officer of  Holdings or  the
Obligor designated as such in writing to the Bank by Holdings or the Obligor.

            "Bank" shall have the  meaning provided in the first  paragraph of
this Agreement and shall  include any successor to the Bank appointed pursuant
to Section 10.04.

            "Bankruptcy Code" shall have the meaning provided in Section 8.05.

            "Base Rate" shall mean the rate  which CBK announces from time  to
time as its prime lending rate, the Base Rate to change when and as such prime
lending rate changes.

            "Business  Day"  shall mean  (i) for  all  purposes other  than as
covered  by clause (ii) below, any day  excluding Saturday, Sunday and any day
which shall be in  the Cities of New York  and/or London a legal holiday  or a
day on which banking institutions are  authorized by law or other governmental
actions to  close and (ii) with  respect to all notices  and determinations in
connection  with, and  payments on,  Letters  of Credit,  any day  which is  a
Business Day described  in clause (i) and which  is also a day for  trading by
and between banks in U.S. dollar deposits in the interbank Eurodollar market.

            "Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such  Person which  should be capitalized  in accordance  with
GAAP,  including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with generally accepted accounting princi-
ples) and the amount of Capitalized Lease Obligations incurred by such Person.

            "Capital Lease" as  applied to any Person shall  mean any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP,  is accounted for as  a capital lease on the  balance
sheet of that Person.

            "Capitalized Lease  Obligations" shall mean all  obligations under
Capital Leases  of Holdings or any of  its Subsidiaries in each  case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.

            "Cash Equivalents"  shall mean  (i) securities issued  or directly
and fully guaranteed or insured  by the United States of America or any agency
or  instrumentality thereof (provided  that the full  faith and credit  of the
United States of America is  pledged in support thereof) having  maturities of
not more  than six  months  from the  date of  acquisition,  (ii) U.S.  dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) the Bank, (y) any  domestic commercial bank of recognized standing  having
capital and surplus in excess of  $500,000,000 or (z) any bank (or  the parent
company of such bank) whose short-term commercial paper rating from Standard &
Poor's Corporation ("S&P") is at  least A-1 or the equivalent thereof  or from
Moody's Investors Service, Inc. ("Moody's") is  at least P-1 or the equivalent
thereof (any such  bank, an "Approved Bank"), in each  case with maturities of
not  more than  six  months from  the  date of  acquisition, (iii)  repurchase
obligations with a term of not more than seven days  for underlying securities
of the types described in  clause (i) above entered into with any bank meeting
the qualifications  specified  in clause  (ii)  above, (iv)  commercial  paper
issued by any Bank  or Approved Bank or by  the parent company of the  Bank or
any Approved  Bank  and commercial  paper  issued by,  or guaranteed  by,  any
industrial or financial company  with a short-term commercial paper  rating of
at least A-1 or  the equivalent thereof by S&P  or at least P-1 or  the equiv-
alent thereof by Moody's (any such company, an "Approved Company"), or guaran-
teed  by any industrial company  with a long term unsecured  debt rating of at
least A or A2, or the equivalent of each  thereof, from S&P or Moody's, as the
case may  be, and in  each case maturing within  six months after  the date of
acquisition and (v)  investments in  money market funds  substantially all  of
whose assets are comprised of securities of the type described  in clauses (i)
through (iv) above.

            "CBK" shall mean Christiania Bank og Kreditkasse, New York Branch.

            "CERCLA"  shall  mean  the Comprehensive  Environmental  Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.  9601 et seq.

            "Change  of Control"  shall mean  (a) Holdings  shall at  any time
cease to  own  100%  of the  capital  stock of  the  Obligor or,  directly  or
indirectly, any Subsidiary Guarantor,  (b) any "person" (as such  term is used
in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the beneficial
owner (as defined in Rules  13d-3 and 13d-5 under the Exchange  Act), directly
or indirectly, of more than 50% of  the total voting power of the Voting Stock
of Holdings or (c) during any  period of two consecutive years individuals who
at the beginning of such period constituted the Board of Directors of Holdings
(together with any new directors whose election by such Board  of Directors or
whose nomination for election  by the stockholders of Holdings was approved by
a  vote of a majority  of the directors  of Holdings then still  in office who
were either directors  at the beginning  of such period  or whose election  or
nomination for election  was previously so  approved) cease for any  reason to
constitute a majority of the Board of Directors of Holdings then in office.

            "Claims" shall  have the  meaning provided  in  the definition  of
"Environmental Claims."

            "Code"  shall mean the Internal  Revenue Code of  1986, as amended
from  time to  time and  the regulations  promulgated  and the  rulings issued
thereunder.   Section references to the Code are  to the Code, as in effect at
the  Effective  Date and  any subsequent  provisions  of the  Code, amendatory
thereof, supplemental thereto or substituted therefor.

            "Commitment" shall  mean the Bank's Commitment to issue Letters of
Credit to the  extent the Letter of  Credit Outstandings (exclusive  of Unpaid
Drawings which  are repaid on the  date of and  prior to the issuance  of, the
respective Letter of Credit) do not exceed $20,000,000.

            "Consolidated Capital  Expenditures" shall  mean, for any  period,
the  aggregate  of  all  expenditures (whether  paid  in  cash  or accrued  as
liabilities  and including in all  events all amounts  expended or capitalized
under  Capital Leases)  by Holdings  and its  Subsidiaries during  that period
that, in  conformity with  GAAP, are  or are  required to  be included  in the
property,  plant or equipment reflected  in the consolidated  balance sheet of
Holdings and its Subsidiaries, provided that Consolidated Capital Expenditures
shall in  any event  include the  purchase price paid  in connection  with the
acquisition  of any  Person  (including through  the purchase  of  all of  the
capital stock or other ownership interests of such Person or through merger or
consolidation) to  the extent allocable  to  "drilling and  other property and
equipment" provided further, that Consolidated Capital Expenditures shall only
include the amount thereof actually paid in cash during such period.

            "Consolidated Current  Assets" shall  mean, the current  assets of
Holdings and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, including cash and Cash Equivalents.

            "Consolidated  Current   Liabilities"  shall  mean,   the  current
liabilities  of Holdings  and its  Subsidiaries determined  on a  consolidated
basis in accordance with GAAP, but excluding (i) the current portion under the
Holdings Convertible Debentures and (ii) the current liability associated with
the required repayment of "Loans" in connection with the "Scheduled Commitment
Reduction"  occurring on the "Maturity  Date" (all as  defined in the Existing
Credit Agreement).

            "Consolidated EBIT" shall mean, for any period, (A) the sum of the
amounts for  such period of  (i) Consolidated Net Income,  (ii) provisions for
taxes based on income, (iii)  Consolidated Interest Expense, (iv) amortization
or write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) losses  on sales of assets (excluding sales in
the ordinary course  of business) and other extraordinary losses  less (B) the
amount for such  period of gains  on sales of  assets (excluding sales  in the
ordinary  course of business) and other extraordinary gains, all as determined
on a consolidated basis in accordance with GAAP.

            "Consolidated  EBITDAR" shall mean, for any period, the sum of the
amounts for such period  of (i) Consolidated EBIT, (ii)  depreciation expense,
(iii)  amortization  expense  and  (iv)  Consolidated  Rent  Expense,  all  as
determined on a consolidated basis in accordance with GAAP.

            "Consolidated Funded Indebtedness" shall mean, all Indebtedness of
Holdings and its Subsidiaries calculated on a consolidated basis in accordance
with GAAP; provided that with respect to calculations made pursuant to Section
8.10  only,  Funded  Debt  shall  exclude  up  to  $200,000,000  of  unsecured
subordinated debt issued by Holdings in one or more public offerings following
the Effective Date, which shall  (i) mature after the Maturity Date,  (ii) not
have  any  principal payments  prior  to  the Maturity  Date,  and  (iii)   be
explicitly subordinated to this Facility.

            "Consolidated Interest Expense" shall  mean, for any period, total
interest expense (including  that attributable to Capital  Leases) of Holdings
and its  Subsidiaries in  accordance with  GAAP on  a consolidated basis  with
respect to  all outstanding  Indebtedness  of Holdings  and its  Subsidiaries,
including, without limitation, all  commissions, discounts and other fees  and
charges  owed  with  respect to  letters  of  credit  and bankers'  acceptance
financing.

            "Consolidated Net  Income"  shall mean  for  any period,  the  net
income (or loss) of Holdings and its Subsidiaries on a  consolidated basis for
such period taken as a single accounting period determined  in conformity with
GAAP.

            "Consolidated  Net Worth"  shall mean,  at any  time, shareholders
equity  (excluding treasury  stock)  of Holdings  and  its Subsidiaries  on  a
consolidated basis determined in accordance with GAAP.

            "Consolidated Rent  Expense" shall mean  for any period,  the rent
expense of  Holdings and  its Subsidiaries  on a  consolidated basis for  such
period taken as a single accounting period determined in accordance with GAAP.

            "Contingent  Obligations"   shall  mean  as  to   any  Person  any
obligation  of  such   Person  guaranteeing  or  intending  to  guarantee  any
Indebtedness  ("primary  obligations")  of  any  other  Person  (the  "primary
obligor")  in any manner,  whether directly or  indirectly, including, without
limitation, any obligation of  such Person, whether or not contingent,  (a) to
purchase  any such primary obligation  or any property  constituting direct or
indirect  security  therefor,  (b) to  advance  or supply  funds  (i)  for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the  primary obligor or otherwise to maintain the
net  worth or  solvency  of the  primary obligor,  (c)  to purchase  property,
securities or services primarily for the purpose of assuring the  owner of any
such primary obligation of the ability  of the primary obligor to make payment
of  such primary obligation  or (d) otherwise  to assure or  hold harmless the
owner  of such primary obligation  against loss in  respect thereof, provided,
however, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business.  The
amount of  any Contingent Obligation shall be deemed  to be an amount equal to
the stated  or determinable  amount of the  primary obligation  in respect  of
which such  Contingent Obligation is made  or, if not  stated or determinable,
the maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.

            "Credit  Documents" shall  mean this  Agreement and  any documents
executed in connection herewith.

            "Credit Event" shall mean and include the  issuance of a Letter of
Credit.

            "Credit Party" shall mean Holdings and the Obligor. 

            "Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.

            "Dividends" shall have the meaning provided in Section 7.04.

            "Effective Date" shall have the meaning provided in Section 10.09.

            "Eligible Transferee"  shall mean  and include a  commercial bank,
financial institution or other "accredited investor" (as defined by Regulation
D of the Securities Act of 1933).

            "Employee Benefit Plan" shall have the meaning provided in Section
8.08.

            "Environmental   Claims"  means   any   and  all   administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices  of noncompliance  or violation,  investigations (other  than internal
reports prepared by Holdings or any of its Subsidiaries solely in the ordinary
course of such Person's business and not in response to any third party action
or  request  of  any  kind)  or  proceedings  relating  in  any   way  to  any
Environmental Law or any permit issued,  or any approval given, under any such
Environmental  Law  (hereafter,  "Claims"),  including,   without  limitation,
(a) any  and  all  Claims  by  governmental  or  regulatory  authorities   for
enforcement, cleanup,  removal, response, remedial or other actions or damages
pursuant to  any applicable Environmental Law,  and (b) any and  all Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or  injunctive relief resulting from  Hazardous Materials arising
from alleged injury or threat of injury to health, safety or the environment.

            "Environmental Law"  means any applicable Federal,  state, foreign
or  local statute, law, rule,  regulation, ordinance, code,  guide, policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative  interpretation thereof, including any judicial
or  administrative  order,  consent  decree   or  judgment,  relating  to  the
environment, health, safety or Hazardous Materials, including, without limita-
tion, CERCLA; RCRA; the  Federal Water Pollution  Control Act, as amended,  33
U.S.C.  1251 et seq.; the  Toxic Substances Control Act, 15 U.S.C.   7401 et
seq.; the  Clean Air Act,  42 U.S.C.  7401 et  seq.; the Safe  Drinking Water
Act, 42 U.S.C.  3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.  2701
et seq. and any applicable  state and local or foreign counterparts  or equiv-
alents.

            "ERISA" shall mean the Employee  Retirement Income Security Act of
1974,  as amended  from  time to  time, and  the  regulations promulgated  and
rulings issued  thereunder.  Section references  to ERISA are to  ERISA, as in
effect at  the Effective Date  and any subsequent provisions  of ERISA, amend-
atory thereof, supplemental thereto or substituted therefor.

            "ERISA  Affiliate" shall mean  each person (as  defined in Section
3(9) of ERISA) which together with Holdings or any Subsidiary  would be deemed
to be a "single employer" (i) within  the meaning of Sections 414(b), (c), (m)
and (o) of the Code or (ii) as a result of Holdings or any Subsidiary being or
having been a general partner of such person.

            "Event of Default" shall have the meaning provided in Section 8.

            "Existing Credit Agreement" shall have the meaning provided in the
recitals to this Agreement. 

            "Existing Indebtedness" shall have the meaning provided in Section
5.18.

            "Existing  Letter of  Credit" shall  have the meaning  provided in
Section 1.01(a).

            "Facility" shall  mean the  letter of credit  facility established
under this Agreement.

            "Fees"  shall mean all amounts payable pursuant to, or referred to
in, Section 2.01.

            "Foreign Pension  Plan" means  any plan, fund  (including, without
limitation, any superannuation  fund) or other similar  program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the  United States of America, which  plan, fund
or  other  similar  program provides,  or  results  in,  retirement income,  a
deferral of income in contemplation of  retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.

            "GAAP" shall mean generally  accepted accounting principles in the
United States of America as in effect on the  date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section  7, including defined  terms as used  therein, are subject  (to the
extent provided therein) to Section 10.06(a).

            "Guaranteed Obligations" shall mean all obligations of the Obligor
to  the Bank for the  full and prompt payment when  due (whether at the stated
maturity, by  acceleration or otherwise) of all  reimbursement obligations and
Unpaid Drawings with respect to Letters of Credit, together with all the other
obligations and liabilities (including, without limitation, indemnities,  fees
and interest thereon) of the Obligor to the Bank now existing or hereafter in-
curred under, arising out of or in connection with this Agreement or any other
Credit Document  and the due  performance and compliance  with all  the terms,
conditions and agreements contained in the Credit Documents by the Obligor.

            "Guarantor" shall mean Holdings.

            "Guaranty" shall mean the guaranty of Holdings pursuant to Section
11 hereof. 

            "Hazardous  Materials"   means  (a)  any  petroleum  or  petroleum
products, radioactive materials, asbestos in any  form that is or could become
friable, urea  formaldehyde foam  insulation, transformers or  other equipment
that contained, electric fluid containing levels of polychlorinated biphenyls,
and radon  gas;  (b) any  chemicals,  materials or  substances  defined as  or
included  in  the definition  of  "hazardous  substances," "hazardous  waste,"
"hazardous  materials,"  "extremely  hazardous waste,"  "restricted  hazardous
waste,"   "toxic   substances,"   "toxic   pollutants,"   "contaminants,"   or
"pollutants," or words of  similar import, under any  applicable Environmental
Law; and (c)  any other chemical, material or substance,  exposure to which is
prohibited, limited or regulated by any governmental authority.

            "Holdings" shall have the meaning provided in the  first paragraph
of this Agreement.

            "Holdings Convertible  Debentures" shall mean Holdings'  8% Senior
Subordinated Convertible Debentures due December 1998.

            "Indebtedness" of  any Person  shall mean without  duplication (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets  or services which in accordance  with GAAP would be  shown on
the liability side of  the balance sheet of such Person, (iii) the face amount
of all letters of credit  issued for the account  of such Person and,  without
duplication,  all drafts drawn thereunder,  (iv) all Indebtedness  of a second
Person secured by any Lien on any property owned by such first Person, whether
or  not  such  indebtedness  has  been  assumed,  (v)  all  Capitalized  Lease
Obligations  of such  Person, (vi)  all obligations  of such  Person to  pay a
specified purchase  price for goods  or services  whether or not  delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations
of  such Person  under  Interest Rate  Agreements  and (viii)  all  Contingent
Obligations of such Person (other than Contingent Obligations arising from the
guaranty  by such  Person of the  obligations of Holdings,  the Obligor and/or
their respective Subsidiaries  to the extent  such guaranteed obligations  are
permitted under this Agreement); provided  that Indebtedness shall not include
(x) trade  payables and accrued expenses, in each case arising in the ordinary
course of business and (y) Indebtedness of a direct or  indirect Subsidiary of
Holdings  (the "Relevant  Subsidiary"),  of which  neither  Holdings, nor  the
Obligor, nor any of their Subsidiaries  other than the Relevant Subsidiary  is
liable or obligated in any manner.

            "Interest  Rate  Agreement"  shall  mean any  interest  rate  swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect any Credit Party
against interest rate risk.

            "L/C Supportable  Obligations" shall mean such  obligations of the
Obligor,  the Guarantors  or  their Subsidiaries  (other  than obligations  in
respect  of Indebtedness)  as are  not inconsistent with  the policies  of the
Bank.

            "Leasehold"  of any  Person  means all  of  the right,  title  and
interest  of such  Person as lessee  or licensee  in, to  and under  leases or
licenses of land, improvements and/or fixtures.

            "Letter of  Credit" shall  have the  meaning  provided in  Section
1.01(a).

            "Letter  of Credit Fee" shall have the meaning provided in Section
2.01(a).

            "Letter of Credit Outstandings"  shall mean, at any time,  the sum
of,  without duplication, (i) the  aggregate Stated Amount  of all outstanding
Letters  of Credit  and (ii) the  aggregate amount  of all  Unpaid Drawings in
respect of all Letters of Credit.

            "Letter of  Credit Request"  shall  have the  meaning provided  in
Section 1.02(a).

            "Leverage Ratio" shall  mean, at  any date  of determination,  the
ratio of Consolidated Funded Indebtedness on such date to Total Capitalization
on such date.

            "Lien"  shall  mean  any   mortgage,  pledge,  security  interest,
security  title,  encumbrance,  lien or  charge  of  any  kind (including  any
agreement to  give any of the  foregoing, any conditional sale  or other title
retention agreement  or any lease  in the  nature thereof) other  than arising
from  an event constituting  a Total Loss  (as defined in  the Existing Credit
Agreement).

            "Margin Stock" shall have the meaning provided in Regulation U.

            "Material Adverse Effect" shall mean  a material adverse effect on
the business,  property, assets, liabilities, operations, condition (financial
or otherwise) or  prospects of the  Obligor or Holdings  and its  Subsidiaries
taken as a whole.

            "Maturity Date" shall mean June 30, 1998.

            "Notice Office"  shall mean the office of the Bank at 11 West 42nd
Street, 7th  Floor, New York, New York 10036 or  such other office as the Bank
may designate to the Obligor from time to time.

            "Obligations"  shall   mean  all  amounts,   direct  or  indirect,
contingent  or  absolute,  of  every type  or  description,  and  at  any time
existing,  owing to the  Bank pursuant to  the terms of  this Agreement or any
other Credit Document.

            "Obligor" shall have  the meaning provided in the  first paragraph
of this Agreement.

            "Payment Office" shall mean the office of the Bank at 11 West 42nd
Street,  7th Floor, New York, New York 10036  or such other office as the Bank
may designate to the Obligor from time to time.

            "PBGC"  shall  mean  the  Pension  Benefit   Guaranty  Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.

            "Permitted Liens"  shall mean Liens permitted  pursuant to Section
8.03 of the Existing Credit Agreement. 

            "Person" shall mean  any individual,  partnership, joint  venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.

            "Plan"  shall mean  any multiemployer  or single-employer  plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which  there is an obligation to contribute of) Holdings or a Subsidiary of
Holdings or an ERISA Affiliate.


            "Projections" shall mean the  financial projections, together with
adjustments thereto, previously delivered to the Bank and  prepared on a basis
consistent with the financial statements referred to in Section 5.10(a).

            "RCRA" shall  mean the Resource Conservation and  Recovery Act, as
amended, 42 U.S.C.  6901 et seq.

            "Real  Property" of any Person shall  mean all of the right, title
and  interest  of  such Person  in  and to  land,  improvements  and fixtures,
including Leaseholds.

            "Register" shall have the meaning provided in Section 10.15.

            "Regulation D" shall mean  Regulation D of the Board  of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.

            "Regulation U" shall mean  Regulation U of the Board  of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing margin requirements.

            "Relevant  Subsidiary"  shall have  the  meaning  provided in  the
definition of Indebtedness.

            "Reportable  Event"  shall  mean  an event  described  in  Section
4043(c)  of ERISA with respect to  a Plan other than those  events as to which
the 30-day notice period is waived under subsection .13, .14, .16, .18, .19 or
 .20 of PBGC Regulation Section 2615.

            "SEC" shall  mean the  Securities and  Exchange Commission  or any
successor thereto.

            "Stated  Amount" of each Letter  of Credit shall  mean the maximum
available to be  drawn thereunder  (regardless of whether  any conditions  for
drawing could then be met).

            "Subsidiary"  of  any  Person  shall  mean  and  include  (i)  any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof  ordinary voting power to  elect a majority of  the directors of
such corporation  (irrespective of  whether or  not at the  time stock  of any
class or classes  of such corporation shall have or might have voting power by
reason of the  happening of  any contingency)  is at  the time  owned by  such
Person directly or  indirectly through Subsidiaries and  (ii) any partnership,
association, joint  venture or other entity  in which such Person  directly or
indirectly through Subsidiaries,  has more than a  50% equity interest at  the
time.     Unless  otherwise  expressly  provided,  all  references  herein  to
"Subsidiary" shall mean a Subsidiary of Holdings.

            "Subsidiary  Guarantor" shall  have  the meaning  assigned in  the
Existing Credit Agreement.

            "Taxes" shall have the meaning provided in Section 3.03(a).

            "Total  Capitalization"  shall  mean,  at  any  time,  the  sum of
Consolidated Funded Indebtedness and Consolidated Net Worth at such time.

            "Unfunded Current Liability" of any Plan means the amount, if any,
by which the actuarial  present value of  the accumulated plan benefits  under
the Plan as of  the close of its most recent plan year exceeds the fair market
value  of the  assets allocable  thereto, each  determined in  accordance with
Statement of Financial Accounting  Standards No. 87, based upon  the actuarial
assumptions used  by the Plan's actuary in the most recent annual valuation of
the Plan.

            "Unpaid  Drawing"  shall  have  the meaning  provided  in  Section
1.03(a).

            "Unutilized Commitment"  shall mean  the excess of  the Commitment
over the Letter of Credit Outstandings at such time.

            "US   Dollar  Equivalent"  shall   mean,  at  any   time  for  the
determination  thereof, the  amount of  US Dollars  necessary to  purchase the
amount of the  relevant currency at the spot exchange  rate therefor as quoted
by the Bank as of 11:00 A.M. (London time) on the date two Business Days prior
to the date of any determination thereof for purchase on such date.

            "US  Dollars" shall mean  freely transferable lawful  money of the
United States.

            "Voting  Stock" shall mean,  with respect to  any corporation, the
outstanding stock  of all classes (or equivalent  interests) which ordinarily,
in the  absence of  contingencies, entitles  holders thereof  to vote for  the
election  of  directors (or  Persons  performing  similar functions)  of  such
corporation, even  though the  right  so to  vote has  been  suspended by  the
happening of such a contingency.

            "Wholly-Owned Subsidiary" of any  Person shall mean any Subsidiary
of such  Person to  the extent  all of the  capital stock  or other  ownership
interests  in  such Subsidiary,  other  than directors'  qualifying  shares or
shares held by  a nominee or in  trust for such  Person, is owned directly  or
indirectly by such Person.

            "Working Capital"  shall mean  the excess of  Consolidated Current
Assets  over  Consolidated  Current  Liabilities  exclusive  of  the  Holdings
Convertible Debentures.

            "Written"  or  "in  writing"  shall   mean  any  form  of  written
communication or a communication by means of telex or facsimile transmission.

            SECTION 10.  Miscellaneous.

            10.01  Payment of  Expenses, etc.  The  Obligor  agrees  to:   (i)
whether or not the  transactions herein contemplated are consummated,  pay all
reasonable out-of-pocket costs and expenses of the Bank in connection with the
negotiation, preparation, execution and  delivery of the Credit Documents  and
the documents and instruments referred to therein and any amendment, waiver or
consent relating  thereto (including, without limitation,  the reasonable fees
and disbursements  of White & Case)  and, after the occurrence  and during the
continuance of an Event of  Default, all expenses incurred in  connection with
the  enforcement of  the Credit  Documents and  the documents  and instruments
referred to therein (including, without limitation, the actual reasonable fees
and disbursements  of  counsel for  the  Bank); (ii)  pay  and hold  the  Bank
harmless from and against any and all present and  future stamp and other sim-
ilar taxes  with respect to the  foregoing matters and save  the Bank harmless
from and against any and all liabilities with respect to or resulting from any
delay  or omission (other than to the extent  attributable to the Bank) to pay
such  taxes; and (iii) indemnify the Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all  liabilities, obligations,  losses, damages,  penalties,  claims, actions,
judgments,  suits, costs,  expenses  or disbursements  of  whatsoever kind  or
nature which may be imposed on, asserted against or incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, (a)
any investigation, litigation or other proceeding (whether or  not the Bank is
a party thereto) related to the entering into and/or performance of any Credit
Document or the use of  the proceeds of any Letter of Credit  hereunder or the
consummation of any transactions contemplated in any Credit  Document, whether
initiated by the Obligor  or any other Person, including,  without limitation,
the actual reasonable fees and disbursements of counsel incurred in connection
with any such investigation, litigation or other proceeding (but excluding any
such losses, liabilities, claims,  damages or expenses to the  extent incurred
by reason of the  gross negligence or willful  misconduct of the Person  to be
indemnified)  or (b) the actual or alleged  presence of Hazardous Materials in
the  air,  surface  water, groundwater,  surface  or  subsurface  of any  Real
Property,  offshore drilling rig,  facility or location  at any  time owned or
operated  by Holdings  or any  of its  Subsidiaries, the  generation, storage,
transportation  or  disposal  of Hazardous  Materials  at  any  Real Property,
offshore drilling rig, facility or  location at any time owned or  operated by
Holdings or any of its Subsidiaries,  the non-compliance of any Real Property,
offshore drilling rig,  facility or location at any time  owned or operated by
Holdings  or  any of  its  Subsidiaries with  federal,  state and  local laws,
regulations, and ordinances (including applicable permits  thereunder) applic-
able to any such Real Property,  offshore drilling rig, facility or  location,
or any Environmental Claim asserted against Holdings, any of its Subsidiaries,
or any Real Property, offshore drilling rig, facility or location  at any time
owned or operated  by Holdings or any of its  Subsidiaries, including, in each
case,  without limitation,  the actual  reasonable fees  and disbursements  of
counsel  and  other   consultants  incurred  in   connection  with  any   such
investigation, litigation or other proceeding (but excluding any  losses, lia-
bilities, claims,  damages or expenses to the extent incurred by reason of the
gross  negligence or willful misconduct of the  Person to be indemnified).  To
the extent  that the undertaking to  indemnify, pay or hold  harmless the Bank
set forth  in  the  preceding sentence  may  be unenforceable  because  it  is
violative  of any  law or public  policy, the  Obligor shall  make the maximum
contribution  to the  payment  and satisfaction  of  each of  the  indemnified
liabilities which is permissible under applicable law.

            10.02  Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, if an Event of Default then exists, the Bank is hereby authorized
at any  time or  from time  to time, without  presentment, demand,  protest or
other notice  of any  kind to the  Obligor or  to any  other Person, any  such
notice being hereby expressly waived, to set off and to  appropriate and apply
any and  all deposits (general or  special) and any other  Indebtedness at any
time held or owing by  the Bank (including without limitation by  branches and
agencies of the Bank wherever located) to  or for the credit or the account of
the Obligor against  and on account of the Obligations  and liabilities of the
Obligor to the  Bank under  this Agreement or  under any of  the other  Credit
Documents and all other claims of any nature or description arising out of  or
connected  with this Agreement or  any other Credit  Document, irrespective of
whether or not the Bank shall have made any demand hereunder and although said
Obligations, liabilities  or claims, or  any of  them, shall be  contingent or
unmatured.

            10.03  Notices.  (a)    Except  as  otherwise  expressly  provided
herein, all notices and  other communications provided for hereunder  shall be
in  writing (including telex or telecopier communication) and mailed, telexed,
telecopied or delivered,  if to Holdings or  its Subsidiaries, at the  address
specified  opposite  its  signature below  or  in  the  other relevant  Credit
Documents, as the case  may be; if to the  Bank, at its Notice Office;  or, at
such other address as shall be designated by any party in  a written notice to
the  other  parties hereto.   All  such  notices and  communications  shall be
effective when received.

            (b)  Without  in any way limiting the obligation of the Obligor to
confirm in writing any  telephonic notice permitted to be given hereunder, the
Bank may, prior to receipt of written confirmation, act without liability upon
the basis of such telephonic  notice believed by the Bank in good  faith to be
from  an Authorized Officer of  the Obligor.   In each such  case, the Obligor
hereby waives the  right to  dispute the Bank's  record of the  terms of  such
telephonic notice.

            10.04  Benefit of Agreement.  (a)  This Agreement shall be binding
upon  and  inure to  the  benefit  of and  be  enforceable  by the  respective
successors and assigns of  the parties hereto,  provided that the Obligor  may
not assign or transfer any of its rights or obligations  hereunder without the
prior  written  consent  of the  Bank.    The  Bank  may  at  any  time  grant
participations   in  any  of   its  rights  hereunder   to  another  financial
institution,  provided that  in  the  case  of  any  such  participation,  the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against the Bank in respect of such
participation to be those set forth  in the agreement executed by the Bank  in
favor of  the participant  relating thereto)  and all  amounts payable  by the
Obligor hereunder shall be determined as if the Bank had not sold such  parti-
cipation, except  that the participant  shall be entitled  to the  benefits of
Sections 1.04 and  3.03 of this Agreement to the extent that the Bank would be
entitled to  such benefits if the  participation had not been  entered into or
sold, and, provided further, that the Bank shall not transfer, grant or assign
any participation under which the participant shall have rights to approve any
amendment to or waiver of  this Agreement or any other Credit  Document except
to the extent such amendment or waiver would (i) reduce the rate or extend the
time of payment of interest or Fees (except in connection with a waiver of the
applicability of  any post-default  increase in  interest rates),  or increase
such participant's participating  interest in any  Commitment over the  amount
thereof then in  effect or (ii) consent  to the assignment or transfer  by the
Obligor of any of its rights and obligations under this Agreement.

            (b)  Notwithstanding the foregoing, (x) the Bank may assign all or
a  portion of its outstanding Commitment and  its rights and obligations here-
under to  its Affiliate and (y) with the consent of the Obligor (which consent
shall not be unreasonably  withheld), the Bank may assign all  or a portion of
its outstanding Commitment and its rights and obligations hereunder to  one or
more Eligible Transferees.  If  the Bank so sells or assigns all or  a part of
its rights hereunder, any reference in this Agreement to the Bank shall there-
after refer to the Bank and to the respective  assignee to the extent of their
respective interests and the respective assignee shall  have, to the extent of
such  assignment (unless  otherwise  provided therein),  the  same rights  and
benefits as it  would if it were  the Bank.  Each assignment  pursuant to this
Section 10.04(b) shall be effected by the Bank and the assignee bank executing
an assignment  and assumption agreement.   The Bank  and the Obligor  agree to
execute  such documents  (including,  without limitation,  amendments to  this
Agreement and the other Credit Documents) as shall be necessary  to effect the
foregoing.  

            (c)  Notwithstanding any  other provisions of  this Section 10.04,
no transfer  or  assignment  of  the  interests or  obligations  of  the  Bank
hereunder or  any grant of  participation therein  shall be permitted  if such
transfer, assignment or grant would require  Holdings or the Obligor to file a
registration statement with the SEC.

            (d)  The Bank  hereby represents, and  each Person will,  upon its
becoming party  to this Agreement, represent  that it is a  commercial lender,
other  financial institution or other "accredited" investor (as defined in SEC
Regulation D)  which makes loans  in the ordinary  course of its  business and
that  it will make  or acquire Letters  of Credit for  its own account  in the
ordinary  course  of such  business, provided  that  subject to  the preceding
clauses (a)  and  (b),  the  disposition  of any  promissory  notes  or  other
evidences  of or interests  in Indebtedness held  by such Person  shall at all
times be within its exclusive control.

            10.05  No Waiver; Remedies Cumulative.  No failure or delay on the
part  of the  Bank in exercising  any right,  power or  privilege hereunder or
under any other  Credit Document and no course of  dealing between Holdings or
any of its Subsidiaries  and the Bank shall operate  as a waiver thereof;  nor
shall any  single or partial exercise  of any right, power  or privilege here-
under  or  under  any other  Credit  Document preclude  any  other  or further
exercise thereof  or the exercise of any other right, power or privilege here-
under or thereunder.   The rights and remedies  herein expressly provided  are
cumulative and  not exclusive of any  rights or remedies which  the Bank would
otherwise have.  No notice to or demand on Holdings or any of its Subsidiaries
in any case shall entitle Holdings or any of  its Subsidiaries to any other or
further notice  or demand in  similar or other  circumstances or constitute  a
waiver of the rights  of the Bank to any  other or further action in  any cir-
cumstances without notice or demand.

            10.06  Calculations; Computations.  (a)  The financial  statements
to be furnished  to the  Bank pursuant hereto  shall be  made and prepared  in
accordance  with GAAP  consistently  applied throughout  the periods  involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings or the Obligor to the Bank), provided that (x) except as otherwise
specifically  provided herein,  all computations  determining compliance  with
Section  7,  including  definitions  used therein,  shall  utilize  accounting
principles and policies in  effect at the time  of the preparation of, and  in
conformity  with those  used  to prepare,  the  December 31,  1995  historical
financial statements of  Holdings delivered  to the Bank  pursuant to  Section
5.10(b) and (y)  that if at any  time the computations determining  compliance
with  Section 7 utilize accounting principles different from those utilized in
the financial  statements  furnished to  the Bank,  such financial  statements
shall be accompanied by reconciliation work-sheets.

            (b)  All computations of interest and Fees hereunder shall be made
on the actual number of days elapsed over a year of 360 days.

            10.07  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL.  (a)  THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER  AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH  AND BE GOVERNED  BY THE LAW  OF THE STATE  OF NEW YORK.   ANY
LEGAL ACTION  OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT MAY BE  BROUGHT IN  THE COURTS OF  THE STATE  OF NEW YORK  OR OF  THE
UNITED STATES  FOR THE SOUTHERN  DISTRICT OF NEW  YORK, AND, BY  EXECUTION AND
DELIVERY OF THIS AGREEMENT, HOLDINGS AND THE OBLIGOR HEREBY IRREVOCABLY ACCEPT
FOR   THEMSELVES  AND   IN   RESPECT   OF   THEIR  PROPERTY,   GENERALLY   AND
UNCONDITIONALLY, THE JURISDICTION OF  THE AFORESAID COURTS.  HOLDINGS  AND THE
OBLIGOR FURTHER  IRREVOCABLY CONSENT TO THE  SERVICE OF PROCESS OUT  OF ANY OF
THE  AFOREMENTIONED COURTS IN ANY SUCH ACTION  OR PROCEEDING BY THE MAILING OF
COPIES  THEREOF BY  REGISTERED  OR CERTIFIED  MAIL,  POSTAGE PREPAID,  TO  THE
OBLIGOR LOCATED  OUTSIDE NEW YORK  CITY AND  BY HAND  DELIVERY TO  THE OBLIGOR
LOCATED  WITHIN NEW YORK CITY, AT ITS  ADDRESS FOR NOTICES PURSUANT TO SECTION
10.03, SUCH SERVICE  TO BECOME EFFECTIVE 30 DAYS AFTER  SUCH MAILING.  NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
HOLDINGS OR THE OBLIGOR IN ANY OTHER JURISDICTION.

            (b)  HOLDINGS  AND  THE  OBLIGOR   HEREBY  IRREVOCABLY  WAIVE  ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER  HAVE TO THE LAYING OF VENUE OF  ANY
OF THE AFORESAID ACTIONS OR  PROCEEDINGS ARISING OUT OF OR IN  CONNECTION WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE  COURTS REFERRED TO
IN CLAUSE  (A) ABOVE  AND HEREBY  FURTHER IRREVOCABLY WAIVE  AND AGREE  NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

            (c)  EACH  OF THE  PARTIES  TO THIS  AGREEMENT HEREBY  IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,  PROCEEDING OR COUNTERCLAIM
ARISING OUT  OF OR RELATING TO  THIS AGREEMENT, THE OTHER  CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

            10.08  Counterparts.  This Agreement may be executed in any number
of  counterparts and by the different parties hereto on separate counterparts,
each of which  when so executed and delivered shall be an original, but all of
which  shall together  constitute  one and  the  same instrument.    A set  of
counterparts executed  by all  the  parties hereto  shall be  lodged with  the
Obligor and the Bank.

            10.09  Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which Holdings, the Obligor and  the Bank shall
have signed  a copy hereof  (whether the same  or different copies)  and shall
have delivered the same to the Bank at the Payment Office of the Bank.

            10.10  Headings Descriptive.  The headings of the several sections
and subsections of this Agreement are  inserted for convenience only and shall
not in  any way affect  the meaning or  construction of any provision  of this
Agreement.

            10.11  Amendment  or Waiver.  (a) Neither  this Agreement  nor any
other Credit  Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change,  waiver, discharge or termination
is in writing signed by the Obligor and the Bank.

            10.12  Survival.  All indemnities  set  forth   herein  including,
without limitation,  in Section  1.04, 1.05, 3.03  or 10.01 shall  survive the
execution and delivery of this  Agreement and the making and repayment  of the
Letters of Credit.

            10.13  Domicile of Letters of  Credit.  The Bank may  transfer and
carry  its Letters of Credit  at, to or for the  account of any branch office,
subsidiary or  Affiliate of the Bank,  provided that the Obligor  shall not be
responsible for  costs arising under Section  1.04 or 3.03 resulting  from any
such transfer  (other  than a  transfer pursuant  to Section  1.12(a)) to  the
extent not otherwise applicable to the Bank prior to such transfer.

            10.14  Confidentiality.  Subject to Section 10.04, the Bank  shall
hold  all non-public information obtained pursuant to the requirements of this
Agreement in accordance with its customary procedure for handling confidential
information of this nature and in accordance with safe and sound banking prac-
tices and  in any event  may make disclosure  reasonably required by  any bona
fide transferee or participant in connection with the contemplated transfer of
any Letters of Credit or participation therein (so long as  such transferee or
participant agrees to be bound by the provisions of this Section 10.14)  or as
required  or requested by any governmental agency or representative thereof or
pursuant to legal  process, provided that,  unless specifically prohibited  by
applicable  law or  court order,  the  Bank shall  notify the  Obligor of  any
request by any governmental  agency or representative thereof (other  than any
such request in  connection with an examination of the  financial condition of
the Bank by  such governmental agency) for  disclosure of any such  non-public
information prior to disclosure of such information, and provided further that
in no event shall  the Bank be obligated or  required to return any  materials
furnished by Holdings or any Subsidiary.

            10.15  Registry.  The Obligor hereby designates the  Bank to serve
as the Obligor's agent, solely for purposes of this Section 10.15, to maintain
a register  (the "Register")  on  which it  will record  the Commitments,  the
Letters  of  Credit issued  and outstanding  hereunder  and each  repayment in
respect of  Unpaid Drawings.   Failure  to make any  such recordation,  or any
error  in such  recordation  shall not  affect  the Obligor's  obligations  in
respect of  such Letters of  Credit.  The transfer  of the Commitments  of the
Bank and the rights to the fees  and interest on, any Letter of Credit  issued
pursuant to  such Commitment  shall not be  effective until  such transfer  is
recorded  on the Register maintained by the  Bank with respect to ownership of
such  Commitment  and  prior to  such  recordation  all amounts  owing  to the
transferor  with  respect  to  such  Commitment  shall  remain  owing  to  the
transferor.  

            SECTION 11.  Holdings Guaranty.

            11.01  The Guaranty.  In order  to induce  the Bank to  enter into
this Agreement and to extend credit hereunder and in recognition of the direct
benefits  to  be received  by Holdings  from the  issuance  of the  Letters of
Credit,  Holdings hereby  agrees with  the Bank as  follows:   Holdings hereby
unconditionally and irrevocably  guarantees as primary obligor  and not merely
as surety  the full and  prompt payment  when due, whether  upon maturity,  by
acceleration or otherwise, of any and all of the Guaranteed Obligations of the
Obligor to the Bank.  If any or all of the Guaranteed Obligations of  the Obl-
igor to the Bank  becomes due and payable hereunder,  Holdings unconditionally
promises  to pay such indebtedness to the  Bank, on order, or demand, together
with any and all reasonable expenses which may be incurred by the Bank in col-
lecting any of the Guaranteed Obligations.

            11.02  Bankruptcy.   Additionally,  Holdings  unconditionally  and
irrevocably   guarantees  the  payment  of  any  and  all  of  the  Guaranteed
Obligations of the Obligor to  the Bank whether or not then due  or payable by
the Obligor upon the occurrence in respect of the Obligor of any of the events
specified in Section 8.05, and unconditionally and irrevocably promises to pay
such Guaranteed Obligations to the Bank, on order, or demand,  in lawful money
of the United States.  Holdings' guaranty of the payment of any and all of the
Guaranteed Obligations hereunder  shall constitute a guaranty of  payment, and
not of collection.

            11.03  Nature of Liability. The liability of Holdings hereunder is
exclusive  and  independent of  any  security for  or  other  guaranty of  the
Guaranteed  Obligations of the Obligor whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder shall
not be affected or impaired by (a) any direction as to  application of payment
by the Obligor  or by any  other party, or (b)  any other continuing  or other
guaranty, undertaking  or maximum liability  of a  guarantor or  of any  other
party as to  the Guaranteed Obligations of the Obligor, or  (c) any payment on
or in reduction of any  such other guaranty or undertaking, or (d) any dissol-
ution, termination or increase,  decrease or change in  personnel by the  Obl-
igor, or (e) any payment made to  the Bank on the indebtedness which the  Bank
repay the Obligor pursuant  to court order in any  bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and Holdings waives
any right to the deferral or modification of its obligations hereunder by rea-
son of any such proceeding.

            11.04  Independent  Obligation.    The  obligations  of   Holdings
hereunder are  independent of the  obligations of any  other guarantor  or the
Obligor, and  a  separate action  or  actions may  be  brought and  prosecuted
against Holdings  whether or not action is brought against any other guarantor
or the Obligor and whether or not any other guarantor or the Obligor be joined
in any such action or actions.  Holdings waives, to the fullest extent permit-
ted by law, the benefit of any statute of limitations  affecting its liability
hereunder or  the enforcement thereof.   Any payment  by the Obligor  or other
circumstance which operates to toll any  statute of limitations as to the Obl-
igor shall operate to toll the statute of limitations as to Holdings.

            11.05  Waiver of  Notice, etc.   Holdings hereby waives notice  of
acceptance of this Guaranty and notice of any liability to which it may apply,
and  waives promptness,  diligence, presentment,  demand of  payment, protest,
notice of  dishonor or nonpayment of  any such liabilities, suit  or taking of
other  action by the Bank  against, and any other  notice to, any party liable
thereon (including Holdings, any other guarantor or the Obligor).

            11.06  Authorization.  Holdings authorizes the Bank without notice
or demand (except  as shall be  required by applicable  statute and cannot  be
waived), and without affecting or impairing its liability hereunder, from time
to time to:

            (a)  change  the manner,  place  or terms  of  payment of,  and/or
      change  or extend the time of payment of, renew, increase, accelerate or
      alter, any  of the  Guaranteed  Obligations (including  any increase  or
      decrease in the rate of interest thereon), any security therefor, or any
      liability incurred  directly or indirectly  in respect thereof,  and the
      Guaranty herein made  shall apply  to the Guaranteed  Obligations as  so
      changed, extended, renewed or altered;

            (b)  take  and hold  security for  the payment  of  the Guaranteed
      Obligations  and sell,  exchange,  release, surrender,  realize upon  or
      otherwise  deal with  in any  manner and  in any  order any  property by
      whomsoever  at any  time pledged  or mortgaged  to secure,  or howsoever
      securing, the  Guaranteed Obligations or any  liabilities (including any
      of those hereunder)  incurred directly or indirectly  in respect thereof
      or hereof, and/or any offset thereagainst;

            (c)  exercise or  refrain from  exercising any rights  against the
      Obligor or others or otherwise act or refrain from acting;

            (d)  release or substitute any  one or more endorsers, guarantors,
      the Obligor or other obligors;

            (e)  settle or  compromise any of the  Guaranteed Obligations, any
      security therefor or  any liability (including  any of those  hereunder)
      incurred  directly or indirectly in  respect thereof or  hereof, and may
      subordinate the payment of all or any part thereof to the payment of any
      liability (whether due  or not) of  the Obligor  to its creditors  other
      than the Bank;

            (f)  apply any sums  by whomsoever paid  or howsoever realized  to
      any liability or liabilities  of the Obligor to  the Bank regardless  of
      what liability or liabilities of Holdings or the Obligor remain unpaid;

            (g)  consent to or  waive any breach  of, or any act,  omission or
      default  under, this Agreement or  any of the  instruments or agreements
      referred to  herein,  or  otherwise amend,  modify  or  supplement  this
      Agreement or any of such other instruments or agreements; and/or

            (h)  take any other action which would, under otherwise applicable
      principles of common law, give rise to a legal or equitable discharge of
      Holdings from its liabilities under this Section 13.

            11.07  Reliance.  It is not necessary for the Bank to inquire into
the capacity or  powers of the  Obligor or its  Subsidiaries or the  officers,
directors, partners or  agents acting or purporting to act  on its behalf, and
any  Guaranteed Obligations  made or  created in  reliance upon  the professed
exercise of such powers shall be guaranteed hereunder.

            11.08  Subordination.   Any of  the  indebtedness  of the  Obligor
relating to the Guaranteed Obligations  now or hereafter owing to  Holdings is
hereby subordinated to the  Guaranteed Obligations of the Obligor owing to the
Bank; and if the Bank so requests at  a time when an Event of Default  exists,
all such indebtedness relating to the Guaranteed Obligations of the Obligor to
Holdings shall be collected, enforced and received by Holdings for the benefit
of  the  Bank and  be  paid over  to  the Bank  on  account of  the Guaranteed
Obligations of the Obligor to the Bank, but without affecting  or impairing in
any manner the liability of Holdings  under the other provisions of this Guar-
anty.  Prior to the transfer by Holdings of any note or negotiable  instrument
evidencing any of the  indebtedness relating to the Guaranteed  Obligations of
the  Obligor  to  Holdings,  Holdings  shall  mark  such  note  or  negotiable
instrument with a legend that the same is subject to this subordination.

            11.09  Waiver.  (a) Holdings waives  any right (except as shall be
required by  applicable statute and cannot  be waived) to require  the Bank to
(i) proceed against the Obligor, any other guarantor or any  other party, (ii)
proceed against  or exhaust  any security  held  from the  Obligor, any  other
guarantor or any  other party or (iii)  pursue any other remedy  in the Bank's
power whatsoever.  Holdings waives any defense based on or arising  out of any
defense of  the Obligor, any  other guarantor or  any other party,  other than
payment in full of the Guaranteed Obligations, based  on or arising out of the
disability  of the  Obligor, any other  guarantor or  any other  party, or the
unenforceability  of the Guaranteed Obligations  or any part  thereof from any
cause, or the cessation from any cause  of the liability of the Obligor  other
than payment  in full of  the Guaranteed  Obligations.  The  Bank may,  at its
election, foreclose on any  security held by the Bank by  one or more judicial
or  nonjudicial  sales, whether  or  not  every aspect  of  any  such sale  is
commercially  reasonable (to the extent  such sale is  permitted by applicable
law),  or exercise any  other right  or remedy the  Bank may have  against the
Obligor or any other party, or any security, without affecting or impairing in
any  way  the  liability  of  Holdings  hereunder except  to  the  extent  the
Guaranteed  Obligations have been paid.   Holdings waives  any defense arising
out of any  such election by the  Bank, even though such election  operates to
impair or  extinguish any right of reimbursement or subrogation or other right
or remedy of Holdings against the Obligor or any other party or any security.

            (b)  Holdings  waives all  presentments, demands  for performance,
protests   and   notices,   including,    without   limitation,   notices   of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of  this Guaranty, and notices of the  existence, creation or incurring of new
or additional Guaranteed Obligations.  Holdings assumes all responsibility for
being and keeping  itself informed  of the Obligor's  financial condition  and
assets, and  of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
Holdings assumes and incurs hereunder, and  agrees that the Bank shall have no
duty to  advise Holdings  of  information known  to them  regarding such  cir-
cumstances or risks.


                         *             *            *



            (c)   IN  WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.

Address:                      READING & BATES CORPORATION

901 Threadneedle
Suite 200
Houston, Texas  77079         By                                   
Attn:  General Counsel           Name:  
Telephone:  (713) 496-5000       Title: 
Facsimile:  (713) 496-0285


                              READING & BATES DRILLING CO.



                              By                                   
                                  Name:  
                                  Title: 


11 West 42nd Street           CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
7th Floor                     BRANCH
New York, NY  10036
Attn:  Hans Chr. Kjelsrud
Tel. No.:  (212) 827-4800
Fax No.:   (212) 827-4888     By                                   
                                  Name:  
                                  Title: 



                              By                                   
                                  Name:
                                  Title: