EXHIBIT 10.110

                             MEMORANDUM OF AGREEMENT

               THIS MEMORANDUM OF AGREEMENT (this  "MOA") is entered into to
   be effective as  of November 28, 1995, by  and between READING AND BATES,
   INC., an Oklahoma corporation ("Seller"), and DEEP SEA INVESTORS, L.L.C.,
   a Delaware  limited liability  company ("Buyer"),  with reference to  the
   following facts:

         A.    Seller  is  the  sole  owner of  the  whole  of the  offshore
               drilling  unit  "M.G.  HULME,  JR.,"  Official  No.   651644,
               together with  all related  equipment (but  excluding  leased
               equipment owned by third parties), machinery, spare parts and
               other  property and  each  part thereof,  whether  onboard or
               ashore,  including,   without   limitation,   any   and   all
               attachments,  accessories  and  additions  thereto,  and  all
               substitutions, replacements,  products and  proceeds  thereof
               (the "Vessel"), as more particularly described herein.

         B.    Seller wishes to  sell the Vessel to Buyer, and  Buyer wishes
               to  purchase  the Vessel  from  Seller,  upon  the  terms and
               subject to the conditions set forth herein.

         C.    Immediately upon  the transfer  of title to  the Vessel  from
               Seller to Buyer,  Reading &  Bates Drilling Co., an  Oklahoma
               corporation ("Charterer") wishes  to charter the  Vessel from
               Buyer, and Buyer wishes  to charter the Vessel  to Charterer,
               upon the terms and subject to the conditions set forth in the
               Bareboat Charter to be entered into by and between Buyer  and
               Charterer. 

               NOW,  THEREFORE,  for  and  in  consideration of  the  mutual
   benefits accruing and expected to accrue hereunder, Seller hereby  agrees
   to sell, and Buyer hereby agrees to purchase, the  Vessel, subject to the
   following terms and conditions:

         1.    Vessel.  The Vessel is a semi-submersible drilling unit built
   in  1983 by  Daewoo Shipbuilding  at  Koje Island,  South  Korea, and  is
   documented under the laws and flag of the United States  of America.  The
   Vessel is classed by the American Bureau of Shipping ("ABS") as a Maltese
   Cross A-1 AMS column stabilized  drilling unit.  The Vessel currently  is
   located at  Garden Banks  Block  387, Outer  Continental Shelf,  Gulf  of
   Mexico, and will  remain at  that location at  least through  the Closing
   Date (as defined below).

          2.   Price.  The total  purchase price for the sale of  the Vessel
   shall be FIFTY MILLION U.S. Dollars ($50,000,000) (the "Purchase Price").

          3.   Closing.  Closing for the  sale of the Vessel from  Seller to
   Buyer ("Closing") shall occur on a date mutually agreed upon by Buyer and
   Seller promptly after the satisfaction of all of the conditions  required
   to be  satisfied under Section 6 below (the "Closing Date").  The Closing
   shall  be held  at a  location to  be mutually  agreed upon by  Buyer and
   Seller.  Upon Closing, Seller  shall have provided for  the deletion from
   the  Registry  of Vessels  of Seller s  name as  designated owner  of the
   Vessel.

           4.  Payment.  Buyer agrees to pay Seller the total Purchase Price
   at Closing, net of all  costs, fees and expenses payable  or reimbursable
   by  Seller pursuant to Section 10 below,  by wire transfer in immediately
   available, same-day funds  to such accounts as Seller shall  notify Buyer
   in writing at or prior to Closing.

           5.  Equipment; Spares.   The Purchase Price  includes, and Seller
   shall  convey the Vessel to  Buyer with,  all spare parts,  equipment and
   other items belonging to her (but excluding all leased equipment owned by
   third parties).    All spare  parts  and  equipment,  including,  without
   limitation, all  items set forth  in Schedule  A attached hereto and  all
   broached and unbroached stores and provisions belonging to the Vessel  at
   the time of Closing,  used or  unused, whether onboard  or ashore,  shall
   become Buyer's property.

           6.  Conditions Precedent.  The  obligation of Buyer to consummate
   the purchase of the  Vessel is subject to (i) receipt by Buyer of each of
   the documents described in  subsections a. through z. below,  in form and
   substance  satisfactory to  Buyer and  each Investor  (as defined  in the
   Bareboat Charter), and (ii) satisfaction of each of the other  conditions
   set forth in subsections  aa. through gg. below in a  manner satisfactory
   to Buyer and each Investor (as defined in the Charter) in all respects.

                 a.  A  Bareboat  Charter,  substantially  in  the  form  of
                     Exhibit A (the "Charter"), duly executed by Charterer.

                 b.  A  Guaranty, substantially  in the  form of  Exhibit B,
                     duly  executed  by   Reading  &  Bates  Corporation,  a
                     Delaware corporation  ("Parent"), the parent of  Seller
                     and Charterer, guaranteeing  the respective obligations
                     of Seller  and Charterer  under this MOA,  the Charter,
                     the Mortgages, the Security Agreement  (each as defined
                     herein)  and  all  other  documents   related  thereto,
                     together  with  any and  all  amendments,  supplements,
                     renewals  or  substitutions  of  all  or  any  of  such
                     documents (collectively, the  Charter Documents ).

                 c.  A Preferred  Mortgage,  substantially  in the  form  of
                     Exhibit C-1 (the "Cunningham Mortgage"),  duly executed
                     by Charterer,  mortgaging to Wilmington Trust  Company,
                     Trustee for the benefit of Buyer (in such capacity, the
                     "Trustee"),  a   second   drilling   unit,   the    Jim
                     Cunningham  (the  "Cunningham"), and a First  Preferred
                     Mortgage, substantially in the form of Exhibit C-2 (the
                     "Yost   Mortgage"),   duly   executed   by   Charterer,
                     mortgaging to  the Trustee  a third drilling  unit, the
                     Randolph  Yost  (the  "Yost"),  to  secure  Charterer's
                     obligations under the Charter Documents (the Cunningham
                     and the  Yost, together,  the  "Collateral Vessels" and
                     the   Cunningham  Mortgage   and  the   Yost  Mortgage,
                     together, the "Mortgages"). 

                 d.  A  Security  Agreement  substantially  in  the form  of
                     Exhibit D (the "Security Agreement"), duly  executed by
                     Charterer.

                 e.  Duly executed Officers   Certificates, dated as  of the
                     Closing  Date,  in the  form  of  Exhibit  E,  from  an
                     executive   officer  and  the  Secretary  or  Assistant
                     Secretary  of  each  of  Seller,  Charterer and  Parent
                     (collectively, the "R&B Companies").

                 f.  A Consent  to Preferred Mortgage, substantially  in the
                     form  of  Exhibit F,  duly  executed  by  ABC Equipment
                     Leasing,  Inc., the mortgagee under the First Preferred
                     Mortgage encumbering the Cunningham.

                 g.  Certified  copies of  resolutions  of each  of  the R&B
                     Companies approving this MOA, the Charter, the Guaranty
                     and  the other  Charter Documents  to which  each  is a
                     party  and  authorizing  the  transactions contemplated
                     herein and therein, duly adopted at a meeting of, or by
                     the  unanimous  written  consent   of,  the  Board   of
                     Directors of each corporation.

                 h.  An  original executed  opinion dated  the  Closing Date
                     from  Wayne K.  Hillin,  General  Counsel  to  the  R&B
                     Companies, setting forth  customary opinions  regarding
                     (i)   the  R&B   Companies   due   organization,  valid
                     existence,   good   standing,   corporate   power   and
                     authority, (ii) the legal,  valid and binding nature of
                     this  MOA,  the Charter,  the  Guaranty  and  the other
                     Charter Documents, (iii)  the absence of violations of,
                     or conflicts  with, laws,  corporate organizational and
                     governance documents  or  other  agreements,  (iv)  the
                     absence of  any required  consents, and (v)  such other
                     matters as Buyer may  reasonably require be  addressed.
                     In  addition, such  opinion  shall also  opine  that no
                     consent  or   approval  of  the   U.S.  Department   of
                     Transportation  Maritime   Administration,  the  United
                     States Coast Guard ("USCG")  or any other entity having
                     jurisdiction over the Vessel, the Collateral Vessels or
                     any  of  the R&B  Companies  is required  in  order  to
                     consummate the transactions contemplated  hereby or  by
                     any of the other Charter Documents.

                 i.  An  original  executed  opinion  from  Baker  &  Botts,
                     L.L.P.,  counsel  to  Buyer, regarding  (i)  the legal,
                     valid  and binding nature of this MOA, the Charter, the
                     Guaranty and certain  other Charter Documents and  (ii)
                     certain tax matters.

                 j.  UCC financing statements, duly  executed by  Charterer,
                     as required  by Buyer to perfect  the security interest
                     granted under the Security  Agreement, to be filed with
                     the appropriate filing offices. 

                 k.  An  appraisal report  for each  of the  Vessel and  the
                     Cunningham, indicating the fair market value of each to
                     be   no  less   than  $50,000,000,   and   satisfactory
                     completion of the environmental assessment with respect
                     to  the Vessel, as more  fully described in  the Letter
                     Agreement   dated  October  10,  1995,  among  Pilko  &
                     Associates,  Inc.,  AT&T  Capital Corporation  and GATX
                     Capital Corporation.

                 l.  A  certificate  of  insurance  for  the  Vessel  and  a
                     detailed written report signed by an independent marine
                     insurance  broker,  evidencing   compliance  with   the
                     insurance requirements set forth in the Charter.

                 m.  A certificate  of insurance for each  of the Collateral
                     Vessels  and a  detailed  written report  signed  by an
                     independent   marine   insurance   broker,   evidencing
                     compliance with the insurance requirements set forth in
                     the Mortgages.

                 n.  A  certificate  of  insurance  evidencing  that  Parent
                     maintains   commercial   general  liability   insurance
                     coverage  for liability arising from  all operations of
                     the Parent.  Such  insurance shall include coverage for
                     premises   and  operations,   independent  contractors,
                     completed  operations  and  contractual  liability  (or
                     their equivalents) and shall name Buyer and each member
                     of the  Owner  Group (as  defined in  the  Charter)  as
                     additional  insureds (except  with respect  to workers'
                     compensation and employer's liability  coverage).   The
                     minimum policy  limit shall  be U.S.  $1,000,000 single
                     limit per occurrence.

                 o.  Duly executed  Officers  Certificates from (i)  Seller,
                     certifying that  all representations  and warranties of
                     Seller herein  and in  any other Charter  Documents are
                     true  and   correct  as  of  the   Closing  Date;  (ii)
                     Charterer,  certifying  that  all  representations  and
                     warranties  of Charterer  contained in the  Charter and
                     any other Charter Documents are  true and correct as of
                     the Closing Date; and (iii) Parent, certifying that, as
                     of the Closing Date, all representations and warranties
                     in  the   Guaranty  are   true  and  correct   and  all
                     information  provided (including,  but not  limited to,
                     the Reading  &  Bates  Corporation/GATX  Due  Diligence
                     Confidential Binder, dated July 20, 1995, as previously
                     provided to the Investors  (as defined in the Charter),
                     and all budgets, financial statements,  descriptions of
                     contracts,  debt  schedules,   projections  and   other
                     information  therein)  were  true,  correct and  fairly
                     presented in all respects when made.

                 p.  A Bill  of Sale (USCG Form  CG-1340) in duplicate, duly
                     executed by Seller,  transferring title  to the  Vessel 
                     from  Seller  to  Buyer  with  warranties of  good  and
                     marketable  title  and  freedom  from  all   liens  and
                     encumbrances; the warranties in such Bill of Sale shall
                     survive the Closing.

                 q.  A Certificate of Ownership (USCG Form CG-1330) for each
                     of the  Vessel  and  the  Collateral  Vessels,  showing
                     Seller as the owner of the Vessel and Charterer as  the
                     owner of each of the Collateral Vessels, free and clear
                     of all liens and encumbrances of record, other than (i)
                     the First Preferred Mortgage encumbering the Cunningham
                     and (ii) mortgages which  will be released or satisfied
                     at or prior to Closing.

                 r.  An ABS  Certificate of  Classification for each  of the
                     Vessel  and  the Collateral  Vessels, dated  no earlier
                     than  fifteen  (15) days  prior  to  the  Closing Date,
                     indicating  that  each  vessel  is  in  class  free  of
                     outstanding recommendations.

                 s.  The  most recent Certificate  of Inspection  (USCG Form
                     CG-841)  for  each of  the  Vessel  and  the Collateral
                     Vessels.

                 t.  A Certificate of Documentation (USCG Form CG-1270)  for
                     each of the Vessel  and the Collateral Vessels, showing
                     Seller as the owner of the Vessel and Charterer as  the
                     owner  of the Collateral  Vessels, and  evidencing that
                     all three  vessels are  duly documented under  the laws
                     and  flag of  the  United  States of  America,  and are
                     qualified solely in foreign trade.

                 u.  A Certificate of Admeasurement  (USCG Form CG-1414) for
                     each of the Vessel and the Collateral Vessels.

                 v.  The most recent ABS Summary Report  of Class Survey for
                     each of the Vessel and the Collateral Vessels.

                 w.  A Certificate  of Marking (USCG Form  CG-1322) for each
                     of the Vessel and the Collateral Vessels.

                 x.  A  Declaration of  Citizenship for  Vessel  Recordation
                     Purposes (Maritime Administration Form MA-899) for each
                     of the  Vessel and the  Collateral Vessels,  evidencing
                     that both Seller and Charterer are U.S. citizens within
                     the  meaning of  the Documentation  of Vessels  Act, 46
                     U.S.C.  12102 et seq., as amended.

                 y.  A copy of  the fully executed Ship  Repair Agreement by
                     and between  Charterer and Amfels,  Inc., providing for
                     certain installations, repairs and modifications to the
                     Vessel, together  with a Consent to  Assignment of Ship
                     Repair Agreement duly executed by Amfels, Inc. 

                 z.  Satisfactions   or   releases    of   mortgage,   UCC-3
                     termination  statements and  such other  instruments as
                     may be  required by  Buyer in  order to  extinguish all
                     liens  on  or security  interests  in  the  Vessel, the
                     Collateral Vessels or  the Collateral (as  defined both
                     in the Mortgages and  in the Security Agreement), other
                     than  the  lien of  the  First  Preferred  Mortgage (as
                     defined  in the  Cunningham  Mortgage)  encumbering the
                     Cunningham.

                aa.  No loss, constructive loss or requisitioning for use by
                     any  governmental  authority  of   the  Vessel  or  the
                     Collateral Vessels shall have occurred.

                bb.  No  change shall  have  occurred in  applicable  law or
                     regulations thereunder or in interpretations thereof by
                     any regulatory  authority which  would make  it illegal
                     for Seller, Buyer or  any Investor (as  defined in  the
                     Charter)  to  enter   into  any  of   the  transactions
                     contemplated in  the Charter  Documents or which  would
                     subject Seller,  Buyer or  any Investor (as  defined in
                     the Charter) to  any penalty  or other  liability as  a
                     result of  any transaction  contemplated in any  of the
                     Charter Documents.

                cc.  No material  adverse change shall have  occurred in the
                     physical  condition  of   either  the  Vessel  or   the
                     Collateral Vessels.

                dd.  All governmental and regulatory approvals, licenses and
                     authorizations necessary  or, in the  opinion of Buyer,
                     the  Investors (as  defined  in the  Charter)  or their
                     respective  counsel, advisable  in connection  with the
                     transactions  contemplated  in  the  Charter  Documents
                     shall have been duly received or obtained.

                ee.  Buyer shall have received evidence that, upon filing of
                     the Bill  of Sale  and related documents with  the USCG
                     National Vessel  Documentation  Center,  title  to  the
                     Vessel will be transferred to Buyer, that Buyer will be
                     the owner of the Vessel free and clear of all  recorded
                     liens, charges or other encumbrances of record and that
                     no other action is  necessary or advisable in order  to
                     establish and perfect Buyer s  title to and interest in
                     the Vessel as against  Seller or any  third parties  in
                     any jurisdiction.

                ff.  Buyer shall have received evidence that (i) upon filing
                     of  the  Mortgages  with   the  USCG  National   Vessel
                     Documentation Center, the  Trustee will possess a valid
                     and perfected lien on and security interest in both the
                     Collateral Vessels  for the  benefit of  Buyer, subject
                     and subordinate to no other lien, charge or encumbrance
                     other than the lien in favor of the First Mortgagee (as 
                     defined  in  the  Cunningham Mortgage)  encumbering the
                     Cunningham  and  (ii)  that  upon  filing of  such  UCC
                     financing statements as may be necessary to perfect the
                     security  interest granted under the Security Agreement
                     with the appropriate  filing offices, the  Trustee will
                     possess a valid  and perfected first priority  security
                     interest in the Collateral  (as defined in the Security
                     Agreement) for the benefit of Buyer.

                gg.  Buyer's determination that, since December 31, 1994, no
                     material  adverse charge  has occurred with  respect to
                     the financial or  other condition of  Seller, Charterer
                     or Parent.

           7.  Representations, Warranties, and Covenants of Seller.  Seller
   represents and warrants to Buyer as follows:

               a.    Corporate Existence and Authority.   Seller and each of
   the  other R&B  Companies (i) is  a corporation  duly organized,  validly
   existing  and in  good  standing under  the  law of  its  jurisdiction of
   incorporation and  is in  good  standing in  all jurisdictions  in  which
   failure to  be or remain in  good standing would have  a material adverse
   effect upon the Vessel or upon its ability to pay, observe or perform its
   liabilities,  duties or  obligations  under this  MOA, the  Charter,  the
   Guaranty and the other Charter Documents to which it is a party, and (ii)
   has all requisite corporate power  to conduct its business and to execute
   and deliver and perform its obligations under  this MOA, the Charter, the
   Guaranty and the other Charter Documents to which it is a party.

                b.   Authorization;  Binding  Obligations.    The execution,
   delivery and performance by Seller and each of the other R&B Companies of
   this MOA and/or each of  the other Charter Documents to which each  is or
   will  be a party,  and the transactions contemplated  hereby and thereby,
   have been duly authorized and approved by all necessary corporate  action
   on  the part of each.  This  MOA constitutes the legal, valid and binding
   obligation of Seller, each of the other Charter Documents to which any of
   the R&B  Companies  is or  will be  a party  will be,  when executed  and
   delivered,  the legal, valid  and binding obligation of  such company and
   each of this MOA and the other Charter Documents to  which any of the R&B
   Companies has  or will  become a party will  be enforceable  against such
   company  in accordance with its  terms, except insofar  as enforceability
   may be  limited by  applicable debtor relief  laws or  subject to general
   principles  of  equity  (regardless  of  whether such  enforceability  is
   considered in a proceeding in equity or at law).

                  c. Compliance with  Laws and Documents; No  Default.  None
   of the R&B Companies is in breach or violation of or in default under (i)
   any  contractual  obligation  or  any  applicable  law  other  than  such
   breaches, violations or  defaults that individually  or in  the aggregate
   could not be reasonably expected to have a material adverse effect on the
   obligation of  each under the  Charter Documents, or  (ii) its  corporate
   organizational  or  governance   documents.    The  execution,  delivery,
   performance, or compliance with the terms of this MOA or any of the other
   Charter Documents by any of the  R&B Companies does not, and consummation
   of  the transactions contemplated  by this MOA and  the Charter Documents
   does not and will not:   (i) conflict with, breach, violate or constitute
   a default under (A) any applicable law, (B) the corporate  organizational
   or governance  documents of any of  the R&B Companies,  or (C)  any other
   contractual obligation of any  of the R&B  Companies; (ii) result in  the
   mandatory acceleration or prepayment  of any debt owed by any of  the R&B
   Companies or afford any holder of  any such debt the right to require any
   of the R&B Companies to purchase, redeem or otherwise acquire,  reacquire
   or repay  any such debt; or (iii) result in the imposition of any lien or
   encumbrance upon the assets, properties, revenues or rights of any of the
   R&B Companies (other than liens or encumbrances imposed  or created or to
   be  imposed or created under or pursuant to the Mortgages or the Security
   Agreement).

                 d.  No  Consents.   No order,  consent,  approval, license,
   permit, franchise, waiver, exemption,  authorization of or validation of,
   or  filing, recording or  registration with (except those  that have been
   heretofore obtained or  made) or exemption by, any person  or tribunal is
   required to authorize, or is required in connection with, the  execution,
   delivery,   performance,   legality,    validity,   binding   effect   or
   enforceability  of  this  MOA  and the  other  Charter  Documents or  the
   transactions contemplated hereby or thereby except for the filing of  the
   UCC financing  statements, the Bill of Sale   and the Mortgages described
   herein  and other actions expressly required to be taken pursuant to this
   MOA and the other Charter Documents.

                 e.  Disclosure.    All information  that  has  been  (or is
   hereafter) made  available to Buyer or  any Investor  (as defined in  the
   Charter) by or  on behalf of any of the R&B  Companies in connection with
   this  MOA,  any  of the  other  Charter  Documents  or  the  transactions
   contemplated hereby or thereby was  (and will be) complete and correct in
   all material  respects and  did not  (and will  not)  contain any  untrue
   statement of a material  fact or omit to state a material  fact necessary
   in  order  to  make  the  statements  contained  therein  not  materially
   misleading in light of the circumstances under which such statements were
   (or will be) made.  Without limiting the generality of the foregoing, the
   Buyer and the Investors have been provided with the financial  statements
   (including balance sheet and related statements of income and cash flows)
   for the year ended December 31, 1994 and  for the nine  (9) month  period
   ended  September 30,  1995 for  the Seller, Charterer  and Parent.   Such
   financial statements are  complete, true and correct in all  respects and
   fairly present the financial condition of the Seller, Charterer or Parent
   (as the case may be) as of the dates thereof and their respective results
   of operations for the periods then ended.  Since December 31, 1994, there
   has been  no material  adverse change with  respect to  the financial  or
   other condition of the Seller, Charterer or Parent.

                 f.  No Encumbrances.  The Vessel and each of the Collateral
   Vessels shall, on the  Closing Date,  be free from  all encumbrances  and
   liens, maritime or  otherwise, or any other debts whatsoever,  other than
   (i) the  liens and security interests  in favor of the  Trustee under the
   Mortgages and  the Security Agreement and (ii) the lien created under the
   existing First Preferred Mortgage encumbering the Cunningham. 

                g.   Taxes.  The R&B Companies have caused to be duly  filed
   in  a timely manner  with the appropriate federal,  foreign, state, local
   and  other  governmental  authorities  all  tax returns,  statements  and
   reports required  to be filed  on or before  the Closing Date  by or with
   respect to  the  Vessel  or  either of  the  Collateral  Vessels  or  the
   ownership  or operation thereof, and have caused  to be paid or deposited
   all  taxes, including  estimated  taxes,  required to  be shown  on  such
   returns, statements or  reports.  No extension of  time is in effect with
   respect to the date on which any tax return, statement or report is to be
   filed with respect to the Vessel or  either of the Collateral Vessels  or
   the ownership or operation thereof.  No tax liens exist or will arise, on
   or with respect to the Vessel or either of the Collateral Vessels, except
   for liens imposed by law and incurred in the  ordinary course of business
   for obligations  not yet  due.   There are  no outstanding agreements  or
   waivers  extending the period  for assessment or collection  of any taxes
   relating  to the  Vessel  or either  of  the  Collateral Vessels  or  the
   ownership  or  operation  thereof  and  the  R&B Companies  have  neither
   received  nor have  knowledge or  notice of any  notice of  deficiency or
   assessment or proposed deficiency or assessment from any taxing authority
   relating  to  the Vessel  or  either  of the  Collateral  Vessels  or the
   ownership or operation thereof nor is there any basis for any such notice
   of deficiency or assessment.

                h.   Litigation.  No litigation, investigation or proceeding
   of or  before any  governmental  authority or  arbitrator is  pending  or
   threatened by  or against any  of the  R&B Companies with  respect to the
   Vessel, either of the Collateral Vessels or  the Charter Documents or any
   of  the  transactions  contemplated   thereby,  nor  is  any  litigation,
   investigation or  proceeding of  or before any governmental  authority or
   arbitrator pending or threatened by  or against any of the R&B  Companies
   or any of their respective properties or revenues which could  reasonably
   be expected to  have a material adverse effect  on the financial or other
   condition of any of the R&B Companies.

                i.   ERISA.   None  of the  R&B  Companies has  received any
   notice or  otherwise acquired any notice  or knowledge that it  is not in
   full compliance with  any of the requirements of the  Employee Retirement
   Income Security Act of 1974,  as amended ( ERISA ).  No  Reportable Event
   (as defined  in Title IV of  ERISA) or other fact  or circumstance exists
   which  may have  an adverse  effect on  the tax  qualified status  of any
   employee benefit  plan maintained by any  of the R&B Companies.   None of
   the  R&B Companies  has  any accumulated  funding deficiency  within  the
   meaning of ERISA  or has any liability or knows  of or has notice  of any
   fact or circumstances which could result in any  liability to the Pension
   Benefit  Guaranty   Corporation,  the   Internal  Revenue   Service,  the
   Department  of Labor or  any participant in connection  with any employee
   benefit  plan (other than accrued benefits  which are or which may become
   payable  to participants or  beneficiaries in the ordinary  course of any
   such plan).

                j.   Patents.    The R&B  Companies own  or possess  (or are
   licensed or  otherwise have the full  right to use) all  United States or
   foreign  patents or  patent  applications ( Patents )  necessary  for the
   ownership or operation of the Vessel and the Collateral Vessels as of the 
   Closing Date, without any conflict with the rights of other persons.  The
   consummation of  the transactions  contemplated by the  Charter Documents
   will not alter  or impair the validity  of any of such  Patents or any of
   such rights of such persons.

                k.   Valid Title.   Upon  filing  of the  Bill of  Sale  and
   related documents with the USCG National Vessel Documentation Center, (i)
   title to the Vessel will  have been transferred to Buyer, (ii) Buyer will
   be the owner  of the Vessel free and clear of all recorded liens, charges
   or other encumbrances  of record,  (iii) the Vessel  will have  been duly
   documented in  the name of Buyer  under the laws and  regulations and the
   flag of the  United States and (iv) no other  action will be necessary or
   advisable in order to establish and perfect Buyer s title to and interest
   in the Vessel as against Seller or any third parties in any jurisdiction.

                l.   Validity of Security Documents.   The Mortgages and the
   Security Agreement  are effective to create  in favor of  the Trustee for
   the benefit of Buyer a legal, valid and enforceable security interest  in
   the collateral described therein, and proceeds thereof (subject to debtor
   relief laws and  general equitable principles), and, after the  filing of
   the   Mortgages  and   UCC  financing   statements  in   the  appropriate
   governmental  offices,   the  Mortgages  and   Security  Agreement  shall
   constitute fully perfected liens on and security interests in, all right,
   title and  interest of  Charterer  in such  collateral and  the  proceeds
   thereof, as  security for  the  Secured Obligations  (as defined  in  the
   Mortgages and the Security Agreement), in each case prior and superior in
   right to any person  other than, in the case of the  Cunningham Mortgage,
   the First Mortgagee (as defined in the Cunningham Mortgage).

                m.   Validity  of  Contracts.    All   contracts  previously
   presented to Buyer and the  Investors (as defined in the Charter), remain
   in full force and effect  as of the Closing Date, have not  been altered,
   modified or amended in any manner  and are valid and enforceable  against
   all  parties thereto,  and no  event has  occurred which  is an  event of
   default, or  with the passing  of time  or the  giving of notice or  both
   would be  an event of default, under any of such  contracts.  There is no
   drilling contract on the Vessel other than the Offshore Drilling Contract
   dated July 25,  1995 between the Charterer and Enserch  Exploration, Inc.
   (The "Old Enserch Contract").

                n.   Environmental,  Health and  Safety  Requirements.   The
   operations of Parent, Seller and Charterer, the Vessel and the Collateral
   Vessels  comply  in  all  material  respects  with  all  applicable  laws
   (including  all environmental,  health and  safety requirements  of law);
   neither the Vessel nor either of the Collateral Vessels is the subject of
   any  environmental   property  transfer  act;  neither   Parent,  Seller,
   Charterer, the  Vessel, nor  either  of the  Collateral Vessels  are  the
   subject of  any actual  or  threatened investigation  by, order  from  or
   agreement with any  governmental or  private entity  respecting any  laws
   (including all environmental, health or safety requirements  of law), any
   remedial action or  any claims or liabilities and costs  arising from the
   release or threatened release  of a contaminant, including petroleum  and
   fractions  thereof, into  the environment;  none of  the present  or past
   operations undertaken on  the Vessel or either of the  Collateral Vessels 
   are  the subject of  any actual or threatened  judicial or administrative
   proceeding, order, judgment, decree  or settlement alleging or addressing
   a violation of or a liability under any law (including all environmental,
   health  or  safety  requirement  of  law);  neither  Parent,  Seller  nor
   Charterer  has filed any  notice under any applicable  requirement of law
   reporting  a release  of a contaminant  from the Vessel or  either of the
   Collateral Vessels,  including petroleum and fractions  thereof, into the
   environment or  reporting a  violation of  any applicable  law (including
   environmental,  health or  safety  requirements of  law);  and  no  liens
   arising under  any environmental  laws  have attached  to the  Vessel  or
   either of the Collateral Vessels.

                o.   Other  Matters.   (i)  No loss,  constructive  loss, or
   requisitioning for  use by any  governmental authority of  the Vessel  or
   either  of  the  Collateral  Vessels has  occurred;  (ii)  no change  has
   occurred   in   applicable   law   or   regulations  thereunder   or   in
   interpretations thereof  by any regulatory authority  which would make it
   illegal  for Seller, Buyer or any Investor (as defined in the Charter) to
   enter  into any  of the  transactions contemplated  in or  by any  of the
   Charter  Documents or which  would subject Seller, Buyer  or any Investor
   (as defined in the Charter) to any penalty or other liability as a result
   of  any of  the transactions  contemplated in  or by  any of  the Charter
   Documents; and  (iii) no  material  adverse change  has occurred  in  the
   physical  condition of the Vessel or either of the Collateral Vessels and
   each  of the Vessel and the  Collateral Vessels is tight, staunch, strong
   and well and sufficiently  tackled, appareled, furnished and equipped and
   in every respect seaworthy,  in accordance with  specifications, in  good
   working order, condition  and repair (normal wear and tear  excepted) and
   without defect in condition, design, operation or fitness for use.

                p.   Enserch Contract.  No earlier  than the first day after
   the Closing Date but  not later than 30 days  thereafter, Charterer shall
   deliver to Buyer a copy of the fully  executed Offshore Drilling Contract
   by  and between Charterer  and Enserch Exploration, Inc.  with respect to
   the Vessel (the "New  Enserch Contract") with no material changes  to the
   New Enserch Contract draft dated August 17, 1995, other than such changes
   previously requested by Buyer.

           8.  Representation and  Warranty of Buyer.   Buyer represents and
   warrants to Seller that the Trustee  is and will be at Closing a  citizen
   of the United States within  the meaning of the Documentation of  Vessels
   Act, 46 U.S.C. Section 12102 et seq., as amended, or otherwise authorized
   to be  a mortgagee  with  respect to  the  Collateral Vessels,  and  will
   deliver to Seller at such Closing a Declaration of Citizenship for Vessel
   Recordation Purposes  (Maritime Administration  Form MA-899) for  each of
   the Collateral Vessels, evidencing same.

           9.  Indemnity.     Whether  or   not  any  of   the  transactions
   contemplated hereby are consummated,  Seller hereby indemnifies Buyer and
   each member  of the  Owner Group  (as defined  in the Charter)  (each, an
   "Indemnitee" and, collectively, the "Indemnitees") and  each Indemnitee s
   successors, assigns,  employees, servants and agents  against, and agrees
   to  protect,  save and  keep  harmless  each thereof  from,  any  and all
   liabilities, obligations, losses, damages (including, without limitation, 
   obligations  based  on  strict  liability  in tort),  penalties,  claims,
   actions, suits,  costs, expenses and disbursements,  including legal fees
   and  expenses, of whatsoever kind and  nature, imposed on, incurred by or
   asserted against  any Indemnitee  or any successors,  assigns, employees,
   servants or agents thereof, even  if such liability or loss may have been
   caused  or contributed to by the negligence of the Indemnitee, in any way
   relating to or arising out  of (i) this MOA  or any of the  other Charter
   Documents,  (ii)  the  purchase  of  the  Vessel  or  mortgaging  of  the
   Collateral Vessels pursuant to this MOA and the other Charter  Documents,
   (iii)   the  ownership,   mortgaging,  delivery,   nondelivery,  charter,
   subcharter, possession,  registration, re-registration,  use,  operation,
   condition,  sale,  return  or  other disposition  of  the  Vessel or  the
   Collateral Vessels  (as the  case may  be) (including, in  each case  and
   without  limitation,  (x)  latent  or  other  defects,   whether  or  not
   discoverable   and  any   claim  for   patent,  trademark   or  copyright
   infringement and  (y) all  liabilities, obligations, losses,  damages and
   claims  in any  way relating  to  or arising  out of  injury  to persons,
   property or  the environment,  or strict liability in  tort) or  (iv) the
   making of the investment of each member of the Owner Group (as defined in
   the  Charter) in the  Vessel in the manner  contemplated hereby, provided
   that the  foregoing indemnity  with regard  to any  particular Indemnitee
   shall not extend  to any  liability, obligation,  loss, damage,  penalty,
   claim, action, suit, cost, expense or disbursement (A) resulting from the
   willful  misconduct  or gross  negligence  of  such  Indemnitee,  or  any
   successors, assigns,  employees, servants,  or agents  thereof or (B)  so
   long  as no  Event of  Default  (as defined  in the  Charter)  shall have
   occurred, (i) to the  extent attributable to  acts or events which  occur
   after  the Vessel  is no  longer owned  by Buyer  or chartered  under the
   Charter  or,  (ii)  if the  Vessel  remains  owned  by  Buyer  after  the
   expiration of  the term of the  Charter, from acts or  events which occur
   after  possession  of the  Vessel  has  been delivered  to  the  Buyer in
   accordance  with  the  applicable  provisions of  the  Charter.   If  any
   Indemnitee has knowledge of any liability hereby indemnified against,  it
   shall  give prompt  written notice thereof to  Seller, or,  if Seller has
   knowledge  of any  liability hereby  indemnified  against, it  shall give
   prompt written notice thereof to the  Indemnitee, provided, however, that
   any failure to give such notice shall not in any manner discharge, waive,
   diminish,  limit or  otherwise affect  any of Seller s  obligations under
   this  Section  9  or  otherwise hereunder.    Without  limitation of  the
   foregoing, and whether or not any of the transactions contemplated hereby
   are consummated, the  Seller agrees to pay the  fees and expenses of each
   Indemnitee, all fees and expenses of such Indemnitees  counsel other than
   as otherwise provided in Section 10 and (iii) all liability and loss with
   respect to  or resulting from any  and all  claims for or  on account  of
   brokers  or finders  fees or commissions (other than with respect  to any
   broker or finder employed by Buyer or any Investor).  So long as no Event
   of Default (as  defined in the Charter)  shall have occurred, Seller,  at
   its  sole cost  and expense,  may contest  in  good faith  by appropriate
   proceedings  and  by   appropriate  persons  (in  the   judgment  of  the
   Indemnitees  in question)  any liability  indemnified against  under this
   Section  9, provided that such contest will not (i) involve any danger of
   the  sale, forfeiture or loss of, or the  creation of any lien, charge or
   encumbrance on, the Vessel, either  of the Collateral Vessels or any part
   thereof or any  interest therein,  or (ii)  cause any  impairment of  the 
   timely  payment of  hire  by the  Charterer under  the  Charter or  (iii)
   adversely  affect the  Vessel, either  of the  Collateral Vessels  or any
   other property, assets  or rights of an  Indemnitee, or (iv) involve  any
   other claim against the Indemnitee in question which is not severable and
   for which Seller is not obligated to indemnify under this Section 9.

          10.  Transaction Expenses.  Any  taxes (including, but not limited
   to,  sales, use,  value-added,  gross receipt,  excise,  stamp, transfer,
   documentary, recording  and similar  taxes), fees and  expenses connected
   with the registration of the Vessel in Buyer s name or sale of the Vessel
   to Buyer, the creation, filing or  perfection of the Mortgages and  other
   security  interests contemplated  by the  Charter  Documents, as  well as
   similar charges connected with the closing of Seller s register, shall be
   for  Seller s account.   Whether or not the  transactions contemplated by
   this MOA  and the other  Charter Documents shall  be consummated,  Seller
   shall, subject to the last sentence of this Section  10, pay or reimburse
   Buyer and the Trustee for all reasonable costs, fees and expenses paid or
   incurred by Buyer, the Trustee, any Investor (as defined in the  Charter)
   or its legal  counsel in  connection with  this MOA or any  of the  other
   Charter  Documents (excluding,  however,  the cost  of  any environmental
   survey performed by  or on behalf  of Buyer or any  Investor), including,
   without  limitation,  all  costs,  fees  and  expenses  relating  to  the
   preparation,   negotiation  and  execution  of   the  Charter  Documents,
   recording and filing fees  and appraisal fees.  All such costs,  fees and
   expenses which  have been paid or  incurred by Buyer, the  Trustee or any
   Investor (as defined in the Charter) as of the Closing Date shall be paid
   or  withheld by Buyer from the Purchase Price payment to be made pursuant
   to Section  4 above.  All  other reimbursements and  payments required by
   this Section  10 shall  be made  by Seller within  10 days  of demand  by
   Buyer, the  Trustee or any Investor (as defined in the Charter) therefor.
   Seller shall  be solely responsible  for the first $75,000  of such legal
   fees and expenses paid or  incurred by Buyer and shall be responsible for
   50% of all  such legal  fees and expenses  paid or  incurred by  Buyer in
   excess of $75,000.

          11.   Title;  Condition at  Closing.   The Vessel,  with everything
   belonging  to her,  shall be  at Seller s  risk  and expense  until title
   passes to  Buyer at the time  of the Closing.   Seller hereby warrants to
   Buyer that there are  no defects in the Vessel s hull or  machinery which
   would materially and  adversely affect  the Vessel s  ABS Certificate  of
   Class or USCG certification.  Notwithstanding the foregoing, at the  time
   title  is transferred  to Buyer,  the Vessel  shall be  in class  free of
   recommendations with classification and USCG certificates clear and valid
   in  accordance with the  terms of the most  recently issued certificates.
   Seller  shall  notify the  ABS of  any  matters coming  to its  notice or
   knowledge prior to Closing  which, upon being reported to the  ABS, would
   lead to the  withdrawal of the Vessel s class  or to the imposition  of a
   recommendation relating  to her class.   All of  the Vessel s  continuous
   survey cycles shall be clear and up-to-date at Closing.

          12.   Seller s Default.    If  Seller  fails  to  execute  a  legal
   transfer  of title to  the Vessel, together with  everything belonging to
   her, in accordance with the terms and conditions of this MOA, for reasons
   within Seller s  control, Buyer shall  have the right to  cancel this MOA
   and  Buyer shall be entitled to claim compensation for its losses and for 
   all  expenses incurred  together with  interest at  the Overdue  Rate (as
   defined in the Charter).

          13.   GOVERNING LAW.   THIS MOA SHALL BE GOVERNED BY AND CONSTRUED
   IN ACCORDANCE WITH THE LAWS OF THE  STATE OF NEW YORK, WITHOUT REGARD  TO
   PRINCIPLES OF CONFLICT OF LAWS.

          14.   VENUE; SERVICE OF PROCESS. SELLER, FOR ITSELF, ITS SUCCESSORS
   AND ASSIGNS,  HEREBY  KNOWINGLY  AND  INTENTIONALLY  AND  IRREVOCABLY AND
   UNCONDITIONALLY  a) SUBMITS,  FOR  ITSELF  AND   ITS  PROPERTY,  TO   THE
   NONEXCLUSIVE  JURISDICTION OF THE STATE  COURTS OF THE  STATE OF NEW YORK
   AND THE  FEDERAL COURTS SITTING IN  THE STATE OF NEW  YORK AND AGREES AND
   CONSENTS THAT  SERVICE  OF PROCESS  MAY BE  MADE  UPON IT  IN  ANY  LEGAL
   PROCEEDING ARISING  OUT OF OR  IN CONNECTION  WITH THIS MOA  OR THE OTHER
   CHARTER DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED  BY NEW  YORK LAW, b)
   WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
   HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR
   IN CONNECTION WITH THIS MOA OR THE OTHER CHARTER DOCUMENTS BROUGHT IN ANY
   NEW YORK STATE COURT OR FEDERAL COURT SITTING IN THE STATE OF  NEW  YORK,
   c) WAIVES  ANY  CLAIMS THAT ANY  LITIGATION BROUGHT IN ANY SUCH COURT HAS
   BEEN  BROUGHT  IN AN  INCONVENIENT  FORUM, d) CONSENTS  TO THE SERVICE OF
   PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY
   THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
   POSTAGE PREPAID, TO SELLER AT THE ADDRESS  SET FORTH HEREIN AND e) AGREES
   THAT ANY LEGAL PROCEEDING AGAINST SELLER ARISING OUT OF, RELATED TO OR IN
   CONNECTION  WITH  THIS  MOA  OR  THE  OTHER  CHARTER  DOCUMENTS  OR   THE
   OBLIGATIONS  HEREUNDER OR  THEREUNDER  MAY  BE BROUGHT  IN ANY  COURT  OF
   COMPETENT JURISDICTION  IN THE STATE OF  NEW YORK.   NOTHING HEREIN SHALL
   AFFECT  THE RIGHT  OF BUYER  TO COMMENCE  LEGAL PROCEEDINGS  OR OTHERWISE
   PROCEED  AGAINST SELLER  OR ANY OF  THE OTHER R&B COMPANIES  IN ANY OTHER
   JURISDICTION  OR TO SERVE  PROCESS IN ANY MANNER  PERMITTED BY APPLICABLE
   LAW.

          15.   WAIVER OF JURY TRIAL.  SELLER, FOR ITSELF AND ITS  SUCCESSORS
   AND  ASSIGNS,  HEREBY KNOWINGLY  AND  INTENTIONALLY  AND  IRREVOCABLY AND
   UNCONDITIONALLY  WAIVES, TO  THE FULLEST  EXTENT  PERMITTED  BY LAW,  ITS
   RIGHTS TO A  JURY TRIAL OF  ANY CLAIM  OR CAUSE OF ACTION  BASED UPON  OR
   ARISING OUT  OF THIS  MOA OR ANY  OF THE  OTHER CHARTER  DOCUMENTS OR ANY
   DEALINGS  WITH BUYER RELATING  TO THE SUBJECT MATTER  OF THE TRANSACTIONS
   CONTEMPLATED HEREBY  AND  THEREBY AND  THE  RELATIONSHIP  THAT  IS  BEING
   ESTABLISHED.    THE  FOREGOING  WAIVER  SHALL  APPLY  TO  ANY  SUBSEQUENT
   AMENDMENTS, MODIFICATIONS, RENEWALS, SUPPLEMENTS OR SUBSTITUTIONS TO THIS
   MOA OR  ANY OF THE OTHER  CHARTER DOCUMENTS WHETHER OR  NOT EXPRESSLY SET
   FORTH HEREIN OR THEREIN.

          16.   Notice.  All notices hereunder shall be in writing and  shall
   be  delivered in person,  given by registered or  certified mail, postage
   prepaid, return receipt requested, or given by facsimile transmission, as
   follows:

         If to Seller:

               Reading and Bates, Inc.         Telecopier No. (713) 496-0285
               901 Threadneedle, Suite 200 
               Houston, Texas 77079
               Attention: Chief Financial Officer

         If to Buyer:

               Deep Sea Investors, L.L.C.       Telecopier No. (212) 880-7158
               c/o Heller Financial, Inc.
               101 Park Avenue
               New York, New York 10178
               Attention: Legal Department

         with a copy to:

               Baker & Botts, L.L.P.            Telecopier No. (713) 229-1522
               One Shell Plaza
               910 Louisiana
               Houston, Texas 77002-4995
               Attention: Stephen Krebs

   Each notice to be given or delivered pursuant to this MOA shall be deemed
   so  given or  delivered  (i) if  sent by  registered  or certified  mail,
   postage  prepaid,  return receipt  requested, on  the third  business day
   after  such  notice,  communication   or  material,  addressed  as  above
   provided,  is delivered  to a  United States  post  office and  a receipt
   therefor is issued thereby,  (ii) if sent by any other means  of physical
   delivery, when such notice, communication or material is delivered to the
   appropriate address  as provided and  (iii) if sent  by telecopier,  when
   such notice, communication or  material is transmitted to the appropriate
   telecopier number as above provided and is received at such number.

          17.   Survival.  All  covenants, representations and  warranties of
   the parties contained in this MOA shall survive the Closing  and transfer
   of title to the Vessel.


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               IN WITNESS WHEREOF,  Buyer and Seller have executed  this MOA
   by  their  respective representatives  thereunto  duly  authorized  to be
   effective as of the date first set forth above.

   DEEP SEA INVESTORS, L.L.C.                      READING AND BATES, INC.

   By:   GATX MARINE INVESTORS                     By:
         CORPORATION, Member                       Name:                     
                                                   Title:                    

         By:                           
         Name:                         
         Title:                              


   By:   HELLER FINANCIAL LEASING, INC.,
         Member


         By:                           
         Name:                         
         Title:                              


   By:   MDFC EQUIPMENT LEASING CORPORATION,
         Member


         By:                           
         Name:                         
         Title:                               

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

                                   Schedule A

                               Equipment Inventory


                                  SEE ATTACHED 

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

                                    EXHIBIT A

                                BAREBOAT CHARTER


                                  SEE ATTACHED 

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

                                    EXHIBIT B

                                    GUARANTY

               THIS GUARANTY (the "Guaranty") dated as of November 28, 1995,
   is  made   by  READING  &  BATES  CORPORATION,   a  Delaware  corporation
   ("Guarantor"),  in favor  of    DEEP SEA  INVESTORS, L.L.C.,  a  Delaware
   limited liability company ("Owner"), the Owner under the Bareboat Charter
   described below.

               WHEREAS, Reading  and  Bates, Inc.,  an Oklahoma  corporation
   ("Seller ),  and  Owner have  entered  into  that  certain  Memorandum of
   Agreement (the "MOA") dated of even date herewith;

               WHEREAS, pursuant to the terms of the MOA, Seller has  agreed
   to sell to Owner the Vessel described therein and immediately  thereafter
   Reading & Bates Drilling  Co., an Oklahoma corporation ( Charterer ), has
   agreed to  charter the Vessel from  Owner, upon the terms  and subject to
   the conditions  set forth in the  Bareboat Charter of even  date herewith
   (the   Charter ) (capitalized terms used herein and not otherwise defined
   herein have the meanings assigned to such terms in the Charter);

               WHEREAS, such transactions between Owner and Seller and Owner
   and Charterer are sometimes referred to collectively herein as the   Sale
   and Lease ;

               WHEREAS, Guarantor directly owns all of  the capital stock of
   Charterer  and indirectly  owns all of  the capital  stock of  Seller and
   shall derive  substantial benefit,  whether directly or  indirectly, from
   the Sale and Lease and from the making of this Guaranty; and

               WHEREAS, as a condition precedent to the  consummation of the
   Sale and Lease, Owner has required that the Guarantor execute and deliver
   this Guaranty;

               NOW, THEREFORE, in consideration of the premises and in order
   to induce Owner to enter into the Sale and Lease, Guarantor hereby agrees
   as follows:

               SECTION 1.      Guaranty.     Guarantor   hereby  absolutely,
   unconditionally, irrevocably, jointly  and severally guarantees the  full
   and  punctual  payment,  observance  and  performance  when  due  of  all
   obligations of Seller  now or  hereafter existing under  the MOA  and all
   other documents  executed in connection therewith  and all obligations of
   Charterer now  or hereafter  existing  under the  Charter and  all  other
   documents  executed in  connection therewith, together  with any  and all
   amendments, supplements, renewals or substitutions of all or any of  such
   foregoing  documents (collectively, the "Charter Documents"), whether for
   rent,  interest,  fees,  expenses,  taxes,  costs,  indemnities,  losses,
   compensation, reimbursements or any other amount payable  under the terms
   of  any such  agreement (all  of the above  being hereinafter  called the
   "Obligations"). 

               SECTION 2.  Guaranty Absolute.  The Guarantor guarantees that
   the  Obligations  will  be  paid,  observed  and  performed  strictly  in
   accordance with the terms  of the MOA, the Charter and the  other Charter
   Documents, regardless of any law, regulation or order now or hereafter in
   effect in any  jurisdiction affecting any of such  terms or the rights of
   Owner with respect thereto.  If any of the Obligations shall not be paid,
   observed or performed in accordance with their terms, the Guarantor shall
   immediately pay,  observe or  perform  the same,  this Guaranty  being  a
   guaranty  of  full  payment,  observance  and   performance  and  not  of
   collectability,  and  is  in no  way  conditional  or  contingent.    The
   liability of Guarantor under this Guaranty shall be absolute, independent
   and  unconditional,  and shall  not  be  diminished,  discharged, waived,
   limited  or  otherwise affected  for  any  reason  whatsoever, including,
   without limitation, the following:

               (a)   any  lack  of validity  or  enforceability of  or
         irregularity, defect or deficiency in the MOA, the Charter or
         any of the other Charter Documents;

               (b)   any change in the time, manner, terms or place of
         payment  of,  or in  any other  term  of, all  or any  of the
         Obligations, or  any other  amendment  or  waiver of  or  any
         restructuring of, or consent to departure from,  the MOA, the
         Charter or any of the other Charter Documents;

               (c)   any sale, exchange,  release or non-perfection or
         impairment of any collateral, including,  without limitation,
         the  offshore drilling units  "Jim Cunningham"  and "Randolph
         Yost" (together, the "Collateral Vessels"), or release of any
         guarantor or any release or amendment or waiver of or consent
         to departure from  any other guaranty, for all  or any of the
         Obligations;

               (d)   any  change   in  the  existence,  structure   or
         ownership  of  Seller  or   Charterer  or  any  other  Person
         (including any  guarantor)  or  any  insolvency,  bankruptcy,
         reorganization or  other similar proceeding affecting  Seller
         or Charterer or any other Person (including any guarantor) or
         any of their assets;

               (e)   the existence  of  any  claim, set-off  or  other
         rights which Guarantor may have at any time against Seller or
         Charterer,  the  obligees of  the  Obligations  or  any other
         Person,  whether  or  not  arising  in connection  with  this
         Guaranty,  the MOA, the  Charter or any of  the other Charter
         Documents;

               (f)   any  other  circumstance  which  might  otherwise
         constitute a defense available to,  or a release or discharge
         of,  Seller or Charterer or  any other Person  (including any
         guarantor) in respect of the Obligations, whether at law,  in
         admiralty or  equity or otherwise, other than payment in full
         by Seller or Charterer of the Obligations. 

   Without limiting the generality of the foregoing, this Guaranty is  in no
   way conditioned upon any requirement that Owner first attempt to  collect
   payment  from,  or  enforce  observance or  performance  of,  any of  the
   Obligations by Seller, Charterer or  any other Guarantor or obligor of or
   for  any of the  Obligations, or  resort to  any collateral  or security,
   including, without limitation, the Collateral Vessels, or any other means
   of obtaining or collecting  payment or seeking observance or  performance
   of any of the Obligations or upon any other contingency whatsoever.  This
   Guaranty shall continue to be effective or be reinstated, as the case may
   be, if at any time any payment of any of the Obligations is annulled, set
   aside, invalidated, declared to  be fraudulent or preferential, rescinded
   or must  otherwise  be  returned, refunded  or  repaid by  Owner  or  the
   proceeds of any collateral are required to be returned  by Owner upon the
   insolvency,  bankruptcy, dissolution,  liquidation  or  reorganization of
   Seller or Charterer, or  any other guarantor or  surety, or upon or  as a
   result of the appointment of a receiver, intervenor or conservator of, or
   trustee  or  similar  officer for,  Seller  or  Charterer  or  any  other
   guarantor or surety or any substantial part of its property or  otherwise
   for any other reason whatsoever,  all as though such payment or  payments
   had not been made.   The obligations of the Guarantor under this Guaranty
   shall not  be subject to  reduction, termination or  other impairment  by
   reason  of any  setoff, recoupment,  counterclaim or  defense or  for any
   other reason. 

               SECTION 3.    Continuing  Guaranty.    This is  a  continuing
   guaranty,  and  all extensions  of  credit  and  financial accommodations
   concurrently herewith or  hereafter made by Owner to Seller  or Charterer
   in  connection with the Sale and Lease  shall be conclusively presumed to
   have been made or acquired in acceptance hereof and in reliance hereon.

               SECTION 4.   Waiver.   Guarantor hereby waives  receipt of  a
   copy of  the MOA,  the Charter  and the  other Charter Documents  and any
   amendment,  supplement,  modification  or   restatement  of  any  of  the
   foregoing,  promptness,  diligence, presentment,  notice  of  acceptance,
   demand  for payment,  protest, notice  of  dishonor or  non-payment, non-
   observance or non-performance  of any of the  terms or conditions of  the
   MOA, the Charter or any of the other Charter Documents, or notice of  any
   default or event of default  under any of the foregoing, or notice of any
   suit  or other action against Seller, Charterer  or any other Person and,
   except as expressly set forth herein and to the fullest extent  permitted
   by  applicable  law,  any  other  notice  with  respect  to  any  of  the
   Obligations or  this Guaranty;  and any requirement  that Owner  protect,
   secure, perfect or insure  any security interest or lien  on any property
   subject thereto or exhaust any right  or take any action against  Seller,
   Charterer or  any other Person or any collateral  (it being the intention
   of the parties hereto  that this Guaranty is to be  a guaranty of payment
   and not of  collection) or that Seller, Charterer  or any other Person be
   joined  in  any action  hereunder.    Should Owner  seek  to  enforce the
   obligations  of the  Guarantor  hereunder  by action  in any  court,  the
   Guarantor  waives  any  necessity,  substantive  or  procedural,  that  a
   judgment  previously be  rendered against Seller, Charterer  or any other
   Person, or  that any action be  brought against Seller, Charterer  or any
   other Person,  or that  Seller, Charterer or  any other  Person should be
   joined in such cause.  Such waiver shall be without prejudice to Owner at 
   its  option to  proceed against  Seller, Charterer  or any  other Person,
   whether  by separate action or  by joinder.  The  Guarantor hereby waives
   marshaling  of   assets  and  liabilities,  sale   in  inverse  order  of
   alienation, notice  by Owner of  any indebtedness or  liability to  which
   Owner applies  or may  apply any  amounts received  by Owner, and  of the
   creation,   advancement,   increase,   existence,   extension,   renewal,
   restructuring,   rearrangement  and/or   modification  of   any  of   the
   Obligations.

               SECTION  5.    Several   Obligations.    The  obligations  of
   Guarantor hereunder are several from the obligations of Seller, Charterer
   or  any  other  Person,  and  are  primary obligations  concerning  which
   Guarantor is the principal obligor.  Guarantor agrees that this  Guaranty
   shall not be  discharged except by the complete and  irrevocable payment,
   observance  and  performance of  all Obligations  and the  obligations of
   Guarantor hereunder.  The obligations of Guarantor hereunder shall not be
   affected in any way by any receivership, insolvency, bankruptcy or  other
   proceedings affecting Seller, Charterer or any other Person or any of the
   assets  of Seller,  Charterer  or any  other  Person, or  the release  or
   discharge (other than by the complete and irrevocable performance of  all
   Obligations)  of   Seller,  Charterer  or  any   other  Person  from  the
   performance of any  obligation contained in any promissory note  or other
   instrument  issued  in  connection   with,  evidencing  or  securing  any
   indebtedness guaranteed  by this instrument, whether  occurring by reason
   of  law,  admiralty,  equity or  any  other  cause,  whether  similar  or
   dissimilar to the foregoing.

               SECTION 6.  No Subrogation.  Notwithstanding anything  to the
   contrary in this Guaranty, Guarantor hereby irrevocably waives any rights
   which may  have arisen  in  connection with  this Guaranty  or the  other
   Charter  Documents  to  be subrogated  to  any  of  the  rights  (whether
   contractual,  under  the  United  States  Bankruptcy  Code,  as  amended,
   including  Section 509 thereof,  under common law or  otherwise) of Owner
   against Seller, Charterer  or any other Person or against  any collateral
   security or  guaranty or right of  offset held by Seller  or Charterer or
   any other Person  for the payment of  the Obligations.  Guarantor  hereby
   further  irrevocably waives  all  contractual, common  law,  statutory or
   other rights of reimbursement, contribution, exoneration or indemnity (or
   other similar  right) from  or  against Seller,  Charterer or  any  other
   Person  which may  have arisen  in connection with  this Guaranty  or the
   other Charter Documents.  So long as the Obligations remain  outstanding,
   if any amount shall be paid by or on behalf of Seller or Charterer or any
   other Person to Guarantor on  account of any of the rights waived in this
   paragraph,  such amount shall  be held by Guarantor  in trust, segregated
   from other funds of such Guarantor, and shall, forthwith upon  receipt by
   such Guarantor,  be turned over to  Owner in the  exact form  received by
   Guarantor (duly  endorsed by  Guarantor  to Owner,  if required),  to  be
   applied against  the Obligations, whether  matured or  unmatured, in such
   order as Owner may in its sole discretion determine.

               SECTION 7.   Stay of  Acceleration.  If  acceleration of  the
   time for payment of any amount payable  by Seller or Charterer under  the
   Charter  Documents   is  stayed   upon  the  insolvency,   bankruptcy  or
   reorganization of Seller or Charterer all  such amounts otherwise subject
   to   acceleration  under  the  terms  of   the  Charter  Documents  shall
   nonetheless be payable by Guarantor hereunder forthwith on demand.

               SECTION 8.     Representations  and   Warranties.   Guarantor
   represents and warrants to Owner as follows:

               (a)   Guarantor  has received,  or will  receive, substantial
         direct or indirect benefit from the making of this Guaranty.

               (b)   Guarantor  (i) is a corporation duly organized, validly
         existing and in good standing under the law  of its jurisdiction of
         incorporation and is in good standing in all jurisdictions in which
         failure to  be or  remain in  good standing would  have a  material
         adverse  effect upon  its ability  to pay,  observe or  perform its
         duties,  obligations  or liabilities  hereunder  and  (ii)  has all
         requisite corporate power  to conduct  its business and to  execute
         and deliver and perform its obligations under this Guaranty.

                (c)  The execution, delivery and performance by Guarantor of
         this  Guaranty  has  been  duly  authorized  and  approved  by  all
         necessary corporate action on the part of Guarantor.  This Guaranty
         constitutes the  legal, valid  and binding obligation  of Guarantor
         and is enforceable against Guarantor in accordance  with its terms,
         except  insofar  as enforceability  may  be  limited  by applicable
         debtor  relief  laws  or subject  to  general principles  of equity
         (regardless  of  whether such  enforceability  is  considered  in a
         proceeding in equity or at law).

                (d)  No   order,   consent,   approval,   license,   permit,
         franchise, waiver, exemption, authorization of or validation of, or
         filing, recording or registration with (except those that have been
         heretofore obtained or  made and of which the Owner  has heretofore
         been given written notice) or exemption by, any Person or  tribunal
         is  required to authorize,  or is required in  connection with, the
         execution,  delivery,  performance,   legality,  validity,  binding
         effect or enforceability of this Guaranty.

                (e)  All  information that  has  been or  is  hereafter made
         available to Owner by or on behalf of Guarantor  in connection with
         this Guaranty or the Sale and Lease was (and  will be) complete and
         correct in all material respects and did not (and will not) contain
         any untrue statement of a material fact or omit to state a material
         fact necessary in  order to  make the statements contained  therein
         not materially misleading in light of the circumstances under which
         such statements  were (or  will  be) made.   Without  limiting  the
         generality of the foregoing, the Owner and the Investors have  been
         provided with the financial statements (including balance sheet and
         related statements of  income and cash flows) of Guarantor  and its
         consolidated subsidiaries for the  year ended December 31, 1994 and
         for the  nine (9)  month  period ended  September 30, 1995.    Such
         financial statements are true, complete and correct in all respects
         and fairly  present the  financial condition  of Guarantor and  its
         consolidated subsidiaries  as of the dates  thereof and the results 
         of operations  of Guarantor  and its consolidated  subsidiaries for
         the periods then ended.

                (f)  Guarantor  has   a  direct  and  substantial   economic
         interest in Seller and Charterer, and expects to derive substantial
         benefits therefrom  and from  the transactions contemplated  by the
         MOA, the Charter and the other Charter Documents.  Owner shall have
         no duty  to  inquire  into  or  confirm the  receipt  of  any  such
         benefits, and this Guaranty  shall be effective and  enforceable by
         Owner without regard  to the receipt,  nature or value of  any such
         benefits.

                (g)  No bankruptcy, insolvency, reorganization, arrangement,
         readjustment   of  debt,   dissolution,   liquidation   or  similar
         proceeding with respect to Guarantor or any of its Subsidiaries (as
         defined in the Charter) has been commenced in any jurisdiction.

               (h)   Guarantor  and  its Subsidiaries  (as  defined  in  the
         Charter) are not in default under or  with respect to any of  their
         contractual obligations  in any  respect which could  reasonably be
         expected to have a material adverse effect on the business, assets,
         operations or  condition, financial  or otherwise, of  Guarantor or
         its  Subsidiaries (as  defined in  the Charter)  or the  ability of
         Guarantor to perform its obligations under this Guaranty.

                (i)  No litigation, investigation or proceeding of or before
         any governmental  authority or arbitrator is  pending or threatened
         by  or against  Guarantor or  its Subsidiaries  (as defined  in the
         Charter) with respect to the Vessel, the Collateral Vessels or  the
         Charter Documents or any  of the transactions contemplated thereby,
         nor is any litigation, investigation or proceeding of or before any
         governmental authority  or arbitrator  pending or threatened  by or
         against Guarantor  or its Subsidiaries (as defined  in the Charter)
         or  any  of  their respective  properties  or revenues  which could
         reasonably be  expected to have  a material adverse  effect on  the
         financial  or  other  condition   of  any  of   Guarantor  or   its
         Subsidiaries (as defined in the Charter).

               (j)   Guarantor  and  its Subsidiaries  (as  defined  in  the
         Charter) have not  received any notice  nor otherwise  acquired any
         knowledge that it is or they are not in full compliance with any of
         the requirements of the Employee Retirement Income Security Act  of
         1974, as  amended ("ERISA").   No Reportable Event  (as defined  in
         Title IV of ERISA) or other  fact or circumstance exists which  may
         have an adverse effect on the tax qualified status of  any employee
         benefit  plan  maintained  by  Guarantor  or its  Subsidiaries  (as
         defined  in  the  Charter).    Guarantor and  its  Subsidiaries (as
         defined  in the  Charter)  have no  accumulated  funding deficiency
         within the meaning of ERISA and have  no liability or know or  have
         notice  of no  fact  or  circumstances which  could result  in  any
         liability to the Pension Benefit Guaranty Corporation, the Internal
         Revenue  Service, the  Department  of Labor  or any  participant in
         connection  with  any employee  benefit  plan  (other  than accrued 
         benefits which are  or which may become payable to  participants or
         beneficiaries in the ordinary course of any such plan).

                (k)  The  operations of  Guarantor and its  Subsidiaries (as
         defined  in the Charter)  comply in all material  respects with all
         applicable  laws (including  any  environmental, health  and safety
         requirements of law); Guarantor and its Subsidiaries (as defined in
         the  Charter) are  not  the  subject of  any actual  or  threatened
         investigation by, order from or agreement  with any governmental or
         private entity  respecting any  laws (including  any environmental,
         health or safety  requirements of law), any remedial action  or any
         claims  or  liabilities  and  costs  arising  from the  release  or
         threatened  release  of  a  contaminant,  including  petroleum  and
         fractions thereof,  into the environment;  none of  the present  or
         past  operations  undertaken  on  the  Vessel  or  either  of   the
         Collateral  Vessels are  the  subject of  any actual  or threatened
         judicial or  administrative proceeding, order,  judgment, decree or
         settlement  alleging or addressing  a violation  of or  a liability
         under  any  laws (including  any  environmental,  health  or safety
         requirement  of law); neither Guarantor nor any of its Subsidiaries
         (as  defined  in  the Charter)  has  filed  any  notice  under  any
         applicable requirement of law reporting  a release of a contaminant
         from the  Vessel or  either of  the Collateral  Vessels,  including
         petroleum and fractions thereof,  into the environment or reporting
         a violation  of any  applicable laws (including  any environmental,
         health or safety  requirements of law); and no liens  arising under
         any environmental laws have attached to the Vessel or either of the
         Collateral Vessels.

               (l)   Since December 31, 1994, no material adverse change has
         occurred with  respect  to the  financial  or  other  condition  of
         Guarantor or its Subsidiaries (as defined in the Charter).

               (m)   None of  Guarantor or  its Subsidiaries (as  defined in
         the Charter) is  in breach or violation of  or in default under (i)
         any contractual obligation or  any applicable law, other  than such
         breaches,  violations  or  defaults  that  individually or  in  the
         aggregate  could  not reasonably  be  expected to  have a  material
         adverse  effect  on  the  obligation  of  each  under  the  Charter
         Documents,  or  (ii)  its  corporate  organizational  or governance
         documents.   The  execution,  delivery, performance,  or compliance
         with  the  terms of  this  Guaranty  or any  of  the  other Charter
         Documents  by any of  Guarantor or its Subsidiaries  (as defined in
         the  Charter)  does  not,  and  consummation  of  the  transactions
         contemplated by this Guaranty  and the Charter  Documents does  not
         and will not:   (i) conflict with, breach, violate or  constitute a
         default   under   (A) any   applicable   law,   (B) the   corporate
         organizational or  governance documents of any  of Guarantor or its
         Subsidiaries  (as   defined  in  the  Charter)   or  (C) any  other
         contractual obligation of any of the Guarantor  or its Subsidiaries
         (as  defined   in  the   Charter)  (ii) result  in   the  mandatory
         acceleration or prepayment of any debt owed by any of the Guarantor
         or its  Subsidiaries (as  defined  in the  Charter) or  afford  any
         holder of any such  debt the right to require any of  the Guarantor
         or its Subsidiaries (as defined in the Charter) to purchase, redeem
         or  otherwise  acquire,  reacquire  or  repay  any  such  debt;  or
         (iii) result in the imposition of any lien or encumbrance upon  the
         assets, properties, revenues  or rights of any of the  Guarantor or
         its Subsidiaries (as  defined in the Charter) (other than  liens or
         encumbrances imposed or  created or to be imposed or  created under
         or pursuant to the Mortgages or the Security Agreement).

               (n)   Guarantor   presently   maintains  commercial   general
         liability  insurance  coverage   for  liability  arising  from  all
         operations  of the Guarantor.  Such insurance includes coverage for
         premises  and   operations,  independent   contractors,   completed
         operations  and contractual  liability  (or their  equivalents) and
         names Owners and each member  of the Owner Group (as defined in the
         Charter) as  additional insureds  (except with respect  to workers 
         compensation  and employer s  liability  coverage).    The  minimum
         policy limit is U.S. $1,000,000 single limit per occurrence.

               (o)   Guarantor is  not insolvent  within the meaning  of any
         applicable law and the execution and delivery of this Guaranty  and
         the performance of Guarantor s obligations  hereunder (i) shall not
         cause  Guarantor to  be, or  otherwise render  Guarantor, insolvent
         within the meaning of any applicable law; (ii) shall not result  in
         Guarantor  being  unable  to pay  its  debts  as  they  mature  and
         Guarantor  will be  able  to  make all  scheduled payments  on  its
         indebtedness due  in the next  twelve (12)  months; (iii) shall not
         leave Guarantor  with property remaining in  its hands constituting
         unreasonably small  capital with which to  conduct its business  or
         any business  in which  Guarantor is currently planning  to engage;
         and (iv) results  in material and substantial  benefit to Guarantor
         and such  benefit constitutes reasonably equivalent  value and fair
         consideration for the execution and  delivery of this Guaranty  and
         the performance  by Guarantor  of its obligations  hereunder within
         the  meaning of  any applicable law.   Guarantor has  not taken any
         actions with  respect to this  Guaranty, the  execution or delivery
         hereof or the performance of Guarantor s obligations hereunder with
         actual intent to hinder, delay or defraud either present or  future
         creditors.

               SECTION 9.  Certain Covenants of Guarantor.  Guarantor agrees
   that, so long as any  of the Obligations shall be outstanding,  Guarantor
   shall:

               (a)   Furnish  and  deliver, or  cause  to  be  furnished and
         delivered, to Owner and each Investor (as defined in the Charter):

                     (i)   within 45 days after the end of each of the first
               three fiscal quarters during each fiscal year of Guarantor, a
               consolidated balance sheet of Guarantor  and its consolidated
               subsidiaries as  of the close  of each  such fiscal  quarter,
               together   with   a   consolidated   income   statement   and
               consolidated statement  of cash  flows of Guarantor  and such
               subsidiaries for  such fiscal  quarter, in each  case setting
               forth in  comparative  form  the  corresponding  consolidated
               figures  for the  same period  of the  next preceding  fiscal
               year,  all in  reasonable detail  and certified by  the chief
               financial officer  of Guarantor  as being true,  complete and
               correct and as fairly  presenting the financial condition and
               the results  of  operations of  the  respective  corporations
               covered thereby, subject to year end adjustment;

                     (ii)  within  90 days  after the  close of  each fiscal
               year   of  Guarantor   (A) consolidated  balance   sheets  of
               Guarantor and  its consolidated subsidiaries as  of the close
               of such  fiscal year,  together with consolidated  profit and
               loss statements and consolidated  statements of cash flows of
               Guarantor  and  such   subsidiaries  for  such  fiscal   year
               certified by Arthur Andersen &  Co. or by independent  public
               accountants of comparable national standing and reputation as
               being true, complete and correct and as fairly presenting the
               consolidated  financial   position  of   Guarantor  and  such
               subsidiaries  as of  the  end  of such  fiscal year  and  the
               consolidated results of their operations for such fiscal year
               in conformity  with generally  accepted accounting principles
               applied on  a basis consistent  with prior  fiscal years with
               such  adjustments or  changes  as to  which  such independent
               public accountants concur; and (B) an update  of the Contract
               Data Sheet previously submitted  to the Investors (as defined
               in  the  Charter)  (including, but  not  limited to,  rig and
               contract  status and  updated  annual budget),  in  each case
               true,  complete  and   correct  and  fairly  presenting   the
               information  contained   therein  as  of  the   date  of  its
               submission to  Owner  and the  Investors (as  defined in  the
               Charter); and

                     (iii) within 30 days after  the filing thereof with the
               Securities and  Exchange Commission,  a copy of  each report,
               form  or   prospectus  filed  by  Guarantor  or  any  of  its
               subsidiaries with the Securities and Exchange Commission, and
               within   5   days of  their issuance,  any press releases  or
               similar  materials   issued  by  Guarantor  or   any  of  its
               subsidiaries; and

                     (iv)  such  other   financial  or   other   information
               relating to the affairs of Guarantor and  its subsidiaries or
               affiliates  as the Owner  or any Investor (as  defined in the
               Charter) may from time to time reasonably request.

               (b)   Immediately  after  the  commencement  thereof,  notify
         Owner  in writing of  all litigation and of  all proceedings before
         any  governmental  or   regulatory  agency  which,   if  determined
         adversely  to Guarantor or  any of its Subsidiaries  (as defined in
         the Charter), could  have a material adverse effect on  the assets,
         operations or  condition (financial  or otherwise) of  Guarantor or
         any of its Subsidiaries (as defined in the Charter).

               (c)   (i) Immediately upon  receiving notice  or knowledge of
         the same, Guarantor shall notify Owner  in writing of any breach or 
         violation  of  or  default by  Guarantor  or its  Subsidiaries  (as
         defined in the Charter) under (A) any contractual obligation or any
         applicable  law other  than such  breaches, violations  or defaults
         that individually  or in  the  aggregate  could not  be  reasonably
         expected to  have a material  adverse effect on  the obligation  of
         each   under  the   Charter   Documents,  or   (B)   its  corporate
         organizational or  governance documents; and (ii) immediately  upon
         receiving  notice or  knowledge of  the  occurrence of  any default
         (which has not been remedied or waived) in the payment,  observance
         or performance of any  of the terms or provisions  of this Guaranty
         or any of the other Charter Documents or any Event of Default under
         the  Charter, Guarantor  shall deliver  to  Owner a  certificate of
         either  the Chairman,  the President  or a  Vice President  and the
         Chief  Financial Officer  of  Guarantor describing  the  default or
         Event of Default and stating the date of commencement thereof, what
         action  is  proposed  to  be taken  with  respect  thereto and  the
         estimated date when it will be remedied.

               (d)   Guarantor will at all times maintain commercial general
         liability   insurance  coverage  for  liability  arising  from  all
         operations of the Guarantor.  Such insurance shall include coverage
         for  premises  and  operations, independent  contractors, completed
         operations  and  contractual liability  (or their  equivalents) and
         shall  name Owner and each member of the Owner Group (as defined in
         the  Charter)  as  additional  insureds  (except  with  respect  to
         workers' compensation  and  employer's liability  coverage).    The
         minimum  policy limit  shall be  U.S. $1,000,000  single  limit per
         occurrence.

               SECTION 10.  INTENTIONALLY DELETED.

               SECTION 11.  Amendments, Etc.  No amendment or waiver of  any
   provision  of this  Guaranty nor  consent to  any departure  by Guarantor
   therefrom shall  in any event be  effective unless the  same shall  be in
   writing and  signed by Owner,  and each  such waiver or  consent shall be
   effective only in  the specific instance and for the specific purpose for
   which given.

               SECTION 12.      Notices, Etc.   All   notices    and   other
   communications provided for  herein shall be given or made  in the manner
   and  with  the  effect described  in  Section 19.1  of  the  Charter  and
   addressed, if to Owner, as stipulated therein or, if to Guarantor, to its
   address set forth under its signature below.

               SECTION 13.  No Waiver; Remedies.  No failure on the  part of
   Owner  to exercise, and no delay in exercising, any right hereunder shall
   operate as a waiver thereof;  nor shall any single or partial exercise of
   any right hereunder preclude any other or further exercise thereof or the
   exercise of  any other right.   No course of  dealing between  Seller and
   Owner or Charterer and Owner  or any other Person and Owner shall operate
   as a  waiver of  any right of  Owner.   The remedies  herein provided are
   cumulative and not exclusive of any remedies provided by law,  admiralty,
   equity or otherwise. 

               SECTION  14.   Separability.   Should  any  clause, sentence,
   paragraph, sub-section or Section of this Guaranty be judicially declared
   to be  invalid, unenforceable or  void, such  decision will not have  the
   effect of  invalidating or voiding  the remainder of  this Guaranty,  and
   Guarantor  agrees that the part or  parts of this Guaranty  so held to be
   invalid, unenforceable  or void  will  be deemed  to have  been  stricken
   herefrom and the remainder will have the same force and effectiveness  as
   if such part or parts had never been included herein.

               SECTION  15.  Captions.   The captions in  this Guaranty have
   been  inserted for  convenience only  and shall  be given  no substantive
   meaning or  significance whatever in construing  the terms and provisions
   of this Guaranty.

               SECTION 16.    Successors  and  Assigns;  Assignment.    This
   Guaranty  shall (a)  remain in  full  force and  effect  until final  and
   irrevocable  payment,   observance  and   performance  in  full   of  the
   Obligations and all other  amounts payable under  the Charter  Documents;
   (b) be binding upon Guarantor, its successors and assigns; provided  that
   Guarantor's  rights and obligations hereunder may not be assigned without
   the prior  written consent of Owner; and (c) inure  to the benefit of and
   be  enforceable by Owner and  its successors and  assigns.  This Guaranty
   may be assigned by Owner at any time without the prior written consent of
   or notice to Guarantor or any other Person.

               SECTION  17.     Conditions  of   Consolidation  or   Merger.
   Guarantor shall not consolidate with or merge into any other  corporation
   to  the extent  that (a)  Guarantor is  not the  surviving entity  or (b)
   Guarantor is the surviving entity and will not have, after giving  effect
   to such consolidation or merger, and maintain, for a period of six months
   thereafter, a rating for its long term unsecured senior  debt of at least
   B1 or higher by Moody's  Investor Service, Inc. or at least B+  or higher
   by  Standard &  Poor's Ratings  Group  or  (c) the  successor corporation
   formed by such  consolidation or into which Guarantor is  merged (i) will
   not  have, after  giving  effect  to such  consolidation or  merger,  and
   maintain, for  a period of six  months thereafter, a rating  for its long
   term unsecured senior debt of at least  B1 or higher by Moody's  Investor
   Service, Inc. or at least B+ or higher by Standard & Poor's Ratings Group
   or  (ii) shall not  succeed to,  and be  substituted for,  Guarantor with
   respect to  all  obligations and  liabilities  of  Guarantor  under  this
   Guaranty with the same effect  as if such successor corporation had  been
   named  as Guarantor herein or (d) any Event of Default (as defined in the
   Charter) shall have occurred and be continuing.

               SECTION 18.   Limitation by  Law.  All  rights, remedies  and
   powers provided in this Guaranty may be exercised only to the extent that
   the  exercise thereof does  not violate any applicable  provision of law,
   and all the provisions of this Guaranty are intended to be subject to all
   applicable mandatory provisions of law which may be controlling and to be
   limited to the extent necessary so that they will not render the Guaranty
   invalid,  unenforceable,  in whole  or  in part,  or not  entitled  to be
   recorded, registered or filed under the provisions of any applicable law. 

               SECTION  19.    Survival  of  Covenants, Representations  and
   Warranties.   All covenants, representations and  warranties contained in
   this Guaranty shall  survive the execution and delivery of  this Guaranty
   and shall continue  until final and irrevocable  payment and satisfaction
   of all obligations and  the termination  of the Charter  Documents.   Any
   investigation by Owner  shall not diminish in any respect  whatsoever its
   right to rely on such covenants, representations and warranties.

               SECTION  20.   Fees and  Expenses.   Guarantor shall  pay all
   costs, fees  and  expenses (including,  but not  limited  to,  reasonable
   attorneys  fees and  disbursements) incurred by Owner or the  Trustee (as
   defined in the MOA) in collecting or enforcing Guarantor s obligations or
   Owner s  or Trustee's rights or remedies under this Guaranty and all such
   amounts shall be part of the Obligations guaranteed hereby.

               SECTION 21.  GOVERNING LAW.  THIS GUARANTY SHALL BE  GOVERNED
   BY AND  CONSTRUED IN ACCORDANCE WITH  THE LAWS OF THE  STATE OF NEW YORK,
   WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

               SECTION  22.   VENUE;  SERVICE  OF PROCESS.   GUARANTOR,  FOR
   ITSELF, ITS  SUCCESSORS AND  ASSIGNS, HEREBY KNOWINGLY  AND INTENTIONALLY
   AND  IRREVOCABLY  AND  UNCONDITIONALLY a) SUBMITS,  FOR  ITSELF  AND  ITS
   PROPERTY, TO  THE NONEXCLUSIVE JURISDICTION  OF THE STATE  COURTS OF  THE
   STATE OF NEW YORK AND THE FEDERAL COURTS SITTING IN THE STATE OF NEW YORK
   AND AGREES  AND CONSENTS THAT SERVICE  OF PROCESS MAY BE  MADE UPON IT IN
   ANY LEGAL PROCEEDING ARISING OUT  OF OR IN CONNECTION WITH THIS GUARANTY,
   THE MOA, THE CHARTER, THE  OTHER CHARTER DOCUMENTS OR THE  OBLIGATIONS BY
   SERVICE OF  PROCESS AS PROVIDED BY NEW YORK LAW, b) WAIVES, TO THE EXTENT
   PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
   LAYING OF  VENUE OF ANY LITIGATION  ARISING OUT OF OR  IN CONNECTION WITH
   THIS GUARANTY, THE OTHER CHARTER DOCUMENTS OR THE OBLIGATIONS BROUGHT  IN
   ANY NEW YORK STATE COURT OR FEDERAL  COURT  SITTING IN  THE  STATE OF NEW
   YORK, c) WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN  ANY SUCH COURT
   HAS  BEEN  BROUGHT  IN AN  INCONVENIENT FORUM, d) CONSENTS TO THE SERVICE
   OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION
   BY  THE MAILING  OF  COPIES  THEREOF BY  CERTIFIED MAIL,  RETURN  RECEIPT
   REQUESTED, POSTAGE PREPAID, TO GUARANTOR AT THE ADDRESS  SPECIFIED HEREIN
   AND e) AGREES THAT ANY LEGAL PROCEEDING ARISING OUT OF, RELATED  TO OR IN
   CONNECTION  WITH THIS GUARANTY,  THE MOA, THE CHARTER,  THE OTHER CHARTER
   DOCUMENTS OR  THE OBLIGATIONS  MAY BE BROUGHT IN  ANY COURT  OF COMPETENT
   JURISDICTION IN THE  STATE OF NEW YORK.   NOTHING HEREIN SHALL AFFECT THE
   RIGHT OF OWNER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
   GUARANTOR IN ANY  OTHER JURISDICTION  OR TO SERVE  PROCESS IN  ANY MANNER
   PERMITTED BY APPLICABLE LAW.

               SECTION 23.  WAIVER OF JURY TRIAL.  GUARANTOR, FOR ITSELF AND
   ITS  SUCCESSORS  AND  ASSIGNS,  HEREBY  KNOWINGLY AND  INTENTIONALLY  AND
   IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
   LAW ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
   OR  ARISING OUT OF  THIS GUARANTY, THE MOA,  THE CHARTER,   OR ANY OF THE
   OTHER  CHARTER DOCUMENTS  OR  ANY  DEALINGS WITH  OWNER RELATING  TO  THE
   SUBJECT MATTER OF  THE TRANSACTIONS  CONTEMPLATED HEREBY AND THEREBY  AND
   THE RELATIONSHIP THAT  IS BEING ESTABLISHED.  THE FOREGOING  WAIVER SHALL
   APPLY TO ANY SUBSEQUENT  AMENDMENTS, MODIFICATIONS, RENEWALS, SUPPLEMENTS 
   OR SUBSTITUTIONS  TO THIS GUARANTY, THE  MOA, THE CHARTER, OR  ANY OF THE
   OTHER  CHARTER DOCUMENTS  WHETHER OR  NOT EXPRESSLY  SET FORTH  HEREIN OR
   THEREIN.

               SECTION 24.  Final Agreement.   This Guaranty, together  with
   the other written documents,  instruments, agreements and papers executed
   in connection  herewith, represents the final agreement between Owner and
   Guarantor with respect to the  subject matter hereof.  This Guaranty  and
   such writings supersede all prior proposals, negotiations, agreements and
   understandings related  to such subject  matter.  Each  of Guarantor  and
   Owner  hereby  represents and  warrants that  it  is not  relying  on any
   statement, representation,  warranty, covenant  or agreement of  any kind
   except for those  set forth  in this Guaranty and  such other  documents,
   instruments, agreements and papers.

               IN WITNESS  WHEREOF, Guarantor has caused this Guaranty to be
   duly executed  by its officer thereunto  duly authorized, as  of the date
   first above written.

                                           READING & BATES CORPORATION


                                           By:                             
                                           Name:                           
                                           Title:                          

                                           901 Threadneedle, Suite 200
                                           Houston, Texas  77079
                                           Attention: Chief Financial Officer
                                           Telecopier No. (713) 496-0285 

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                                   EXHIBIT C-1

                               PREFERRED MORTGAGE


               PREFERRED   MORTGAGE  ("Mortgage"),  made  the  28th  day  of
   November, 1995, by READING & BATES DRILLING CO., an Oklahoma  corporation
   ("Mortgagor"),   to  WILMINGTON   TRUST  COMPANY,   a   Delaware  banking
   corporation,  not in its  individual capacity, but solely  as Trustee (in
   such  capacity,  "Mortgagee")  for the  benefit  of DEEP  SEA  INVESTORS,
   L.L.C., a Delaware limited liability company ("Beneficiary").

               WHEREAS:

         A.    Mortgagor  is the  sole owner  of the  whole of  that certain
   vessel  known  as  the "JIM  CUNNINGHAM ,  official number  651643, gross
   tonnage 7977,  net tonnage 5866, built  at Okpo  Island, South Korea,  in
   1982, duly documented in the name of Mortgagor under the laws and flag of
   the United States of America (the "Collateral Vessel").

         B.    This Mortgage  is being  executed and delivered  by Mortgagor
   pursuant  to that certain Memorandum  of Agreement (the  "MOA") dated  of
   even  date herewith  by and  between Beneficiary  and Reading  and Bates,
   Inc., an Oklahoma corporation ("R&B, Inc."), a subsidiary of  Mortgagor s
   parent corporation,  Reading & Bates Corporation,  a Delaware corporation
   (the "Parent").  Under the MOA, R&B, Inc. agreed to  sell a certain other
   vessel  to Beneficiary  and Beneficiary  agreed to  lease that  vessel to
   Mortgagor under the terms and subject to the conditions  set forth in the
   Bareboat Charter  (the "Charter")  dated  of even  date herewith  by  and
   between Mortgagor  and Beneficiary (the  MOA, the  Charter, this Mortgage
   and all other  documents executed in connection  therewith, together with
   any and all amendments, supplements, renewals or substitutions of all  or
   any of such  documents, are sometimes referred to collectively  herein as
   the "Charter Documents").

         C.    Beneficiary requires that  Mortgagor execute and deliver this
   Mortgage  to  secure  the prompt  and  complete payment,  observance  and
   performance  of  all   representations,  warranties,  covenants,  duties,
   liabilities and obligations of Mortgagor under the Charter Documents (the
   "Secured Obligations").

         D.    The Board  of Directors  of Mortgagor having  determined that
   Mortgagor will  derive substantial benefit, directly  or indirectly, from
   the  sale   and  lease  transaction   among  R&B,   Inc.,  Mortgagor  and
   Beneficiary,  Mortgagor wishes to  execute and  deliver this  Mortgage as
   required by Beneficiary.

               NOW, THEREFORE, THIS MORTGAGE WITNESSETH:

               That in consideration  of the premises and of other  good and
   valuable consideration,  the receipt whereof is  hereby acknowledged, and
   in  order to  secure  the payment,  observance   and  performance of  the
   Secured  Obligations according to  the terms thereof, and  the payment of
   all such other sums  as may hereafter become secured by this  Mortgage in 
   accordance with  the terms hereof, and to secure  the performance and ob-
   servance   of  and  compliance  with   the  representations,  warranties,
   covenants,  terms and  conditions  herein  and in  the  Charter Documents
   contained,  Mortgagor does  by  these presents  GRANT,  CONVEY, MORTGAGE,
   PLEDGE,  ASSIGN, TRANSFER, SET  OVER and CONFIRM unto  the Mortgagee, its
   successors and assigns, for the benefit of Beneficiary, the  whole of the
   Collateral Vessel,  together with all of the boilers, engines, machinery,
   masts, spars,  rigging, boats, anchors, chains,  cables, tackle, apparel,
   furniture, fittings  and equipment (but excluding  leased equipment owned
   by  third parties) and  all other appurtenances to  the Collateral Vessel
   appertaining  or  belonging, whether  now  owned  or  hereafter acquired,
   whether on  board or not  and all  additions, substitutions, improvements
   and  replacements hereafter made in  or to the Collateral  Vessel, or any
   part  thereof, or in or to  the equipment and appurtenances aforesaid and
   all  products,  rentals  and  proceeds (including,  but  not limited  to,
   insurance  proceeds)   of  any   of  the  foregoing   (collectively,  the
    Collateral ).

               TO  HAVE  AND  TO HOLD  the  same  unto  the  Mortgagee,  its
   successors and assigns, forever, upon  the terms herein set forth for the
   enforcement of the payment and performance of the Secured Obligations and
   to secure  the performance  and  observance of  and compliance  with  the
   covenants, terms  and conditions  in  this Mortgage  and in  the  Charter
   Documents.

               PROVIDED,  ONLY, and  the  conditions of  these  presents are
   such,  that if  the  Secured  Obligations shall  be paid,  performed  and
   discharged as  and  when the  same shall  become  payable or  are  to  be
   performed  in  accordance with  the  terms of  this Mortgage  and  of the
   Charter  Documents, and if  all other  such sums as may  hereafter become
   secured by  this Mortgage are  paid in accordance with  the terms hereof,
   and  if  Mortgagor  shall  perform,  observe  and  comply  with  all  the
   covenants,  terms and  conditions in  the Charter  Documents and  in this
   Mortgage, expressed  or implied,  to be  performed, observed or  complied
   with by  and on the  part of  Mortgagor, and the  Charter Documents shall
   have  terminated pursuant to  the terms thereof, then  these presents and
   the rights hereunder shall cease,  determine and be void, otherwise to be
   and remain in full force and effect.

               A copy  of  the Charter  is annexed  hereto and  made a  part
   hereof as Exhibit A.

               IT  IS  HEREBY  COVENANTED,  DECLARED  AND  AGREED  that  the
   property above described is to be held subject  to the further covenants,
   conditions, provisions, terms and uses hereinafter set forth.

                                   ARTICLE I.

                             COVENANTS OF MORTGAGOR

               Mortgagor covenants and agrees with Mortgagee as follows: 

               1.    Mortgagor will  observe, perform  and comply  with each
   and every one of the covenants, terms and conditions herein, expressed or
   implied, on its part to be observed, performed or complied with.

               2.    Mortgagor was duly organized and  is now existing as  a
   corporation under the laws  of the State of Oklahoma and shall  so remain
   during the life of this Mortgage;  it is now, and shall remain during the
   life  of this  Mortgage, a  citizen of  the United  States as  defined in
   Section 2 of the Shipping Act,  1916, as at any time amended; it is  duly
   authorized  to mortgage  the Collateral  Vessel and  the Collateral;  all
   corporate  action necessary  and required  by law  for the  execution and
   delivery of this  Mortgage, and the good faith affidavit  filed herewith,
   has  been duly and effectively taken; and the Secured Obligations will be
   the valid  and enforceable obligations  of Mortgagor  in accordance  with
   their terms.

               3.    Mortgagor lawfully  owns and is  lawfully possessed of,
   and has good title to, the Collateral Vessel and the Collateral free from
   (i) any security interest, lien, charge or encumbrance  whatsoever, other
   than, with respect to the Collateral Vessel (a) for current crew s wages,
   general average  and salvage,  in  each case,  incurred in  the  ordinary
   course of business  and that are  not yet  overdue and  (b) that  certain
   First  Preferred Mortgage  dated January 28,  1987, securing  a principal
   amount of not more  than $11,000,000 which is payable in  accordance with
   the  amortization schedule  annexed  hereto  and made  a part  hereof  as
   Exhibit B (the  "First Preferred  Mortgage"), in  favor of  ABC Equipment
   Leasing,  Inc.  (the  "First  Mortgagee"),  recorded  March  4,  1987, as
   Instrument No. 1,  Book No. PM149,  in the  records of  the Eighth  Coast
   Guard District, Port of  Houston, Texas, or (ii)  any commitment to  make
   the  Collateral  Vessel  available   for  charter,  other  than  drilling
   contracts  that comply  with the  terms of  this  Mortgage and  the other
   Charter  Documents  and  charters   or  subcharters  (whether  demise  or
   otherwise)  to  the  Parent and  its  Subsidiaries  (as  defined  in  the
   Charter), or (iii) sale or use by any governmental authority, and it will
   warrant and defend  the title  and possession thereto and  to every  part
   thereof  for the benefit of the  Mortgagee against the claims and demands
   of  all persons whomsoever.   This Mortgage constitutes  the legal, valid
   and  binding obligation of Mortgagor, is enforceable against Mortgagor in
   accordance with its terms,  and when filed of record with the  U.S. Coast
   Guard National  Vessel Documentation  Center,  will  create a  valid  and
   perfected preferred mortgage  upon, security interest in and lien  on the
   Collateral  Vessel  and the  Collateral,  subject  and  subordinate (with
   respect to the Collateral Vessel) only to the lien of the First Preferred
   Mortgage (to  the extent that such  remains in effect).   Upon payment of
   the obligations secured by  the First Mortgage, Mortgagor  shall promptly
   cause the First Mortgagee  to execute and deliver to the  Beneficiary for
   filing,  at Mortgagor s sole  cost and expense, with  each filing officer
   with  which  the  First   Mortgage,  any  financing  statement  or  other
   instrument covering the  Collateral Vessel  or any  other Collateral  was
   filed, all  satisfactions of  mortgage, satisfaction  pieces, termination
   statements and similar instruments,  and take or cause  to be taken  such
   other or further action, as Beneficiary may deem necessary or appropriate
   to terminate  the First Mortgagee's mortgage,  lien and security interest
   in the Collateral Vessel or any other Collateral. 

               4.    Mortgagor  will   comply  with  and   satisfy  all  the
   provisions of Chapter 313 of Title 46, United States Code, as at any time
   amended  (the "Ship  Mortgage  Act"),  and shall  execute,  deliver, file
   and/or record, or cause the  execution and delivery and the filing and/or
   recordation of, such documents or instruments, and shall take or cause to
   be  taken such actions as may be necessary or desirable in the opinion of
   the Beneficiary or the Mortgagee, in order to establish and maintain this
   Mortgage as a valid and perfected preferred mortgage upon the  Collateral
   Vessel and upon all renewals, improvements and replacements made in or to
   the same, subject and subordinate only to the lien of the First Preferred
   Mortgage (to the extent that such remains in effect).

               5.    Mortgagor  will  not  cause or  permit  the  Collateral
   Vessel to be operated in any manner contrary to law, will not abandon the
   Collateral Vessel  in a  foreign port,  will not  engage in  any unlawful
   trade  or  violate  any law  or  carry any  cargo  that  will expose  the
   Collateral Vessel  or the Collateral  to penalty,  forfeiture or capture,
   and  will not do, or suffer or  permit to be done,  anything which can or
   may injuriously or adversely affect the registration or enrollment of the
   Collateral Vessel under the laws  and regulations of the United States of
   America and will at all times  keep the Collateral Vessel duly documented
   thereunder.  Neither  Mortgagor nor the Collateral Vessel is  the subject
   of  any pending  or threatened  environmental enforcement  proceedings or
   investigations,  nor  any  other  pending  or threatened  proceedings  or
   investigations with  respect to any other environmental, health or safety
   matters.    Mortgagor  is  in compliance  with  all  applicable laws  and
   regulations with respect to  the Collateral Vessel or  otherwise relating
   to pollution control and other environmental, health or safety matters in
   all jurisdictions in which Mortgagor is doing business.  Mortgagor  shall
   assume  all responsibility  for  the  control and  removal of,  and  hold
   Mortgagee, Beneficiary and every member of the Owner Group (as defined in
   the Charter) harmless from loss or damage, liabilities or claims  arising
   from, directly or indirectly, pollution or contamination by any liquid or
   non-liquid waste material whatsoever found that is discharged, spilled or
   leaked   from  the   Collateral  Vessel,   and  for   noncompliance  with
   environmental,  health and  safety laws.    To the  extent that  any law,
   regulation or governmental entity  acting within its jurisdiction imposes
   on Mortgagee, Beneficiary or any member of the Owner Group (as defined in
   the  Charter)  liability for  any  such  pollution,  notwithstanding such
   imposition of direct liability, Mortgagor shall have designated Mortgagee
   (both  in its individual  capacity and as Trustee),  Beneficiary and each
   member of  the Owner Group (as  defined in the Charter)  as an additional
   insured under its insurance  policies and Mortgagor shall hold  Mortgagee
   (both  in its individual  capacity and as Trustee),  Beneficiary and each
   member  of the Owner Group (as defined in the Charter) harmless from such
   loss, damage  or  claims and  reimburse  any of  Mortgagee (both  in  its
   individual capacity  and as Trustee),  Beneficiary or any  member of  the
   Owner Group  (as  defined  in the  Charter)  for any  amounts it  may  be
   required to pay.  This indemnity is  valid irrespective of the negligence
   or fault, whether sole, joint, active or passive of the indemnified party
   and whether  predicated on strict liability,  statutory duty, contractual
   indemnity or any other theory of liability of the indemnified party. 

               6.    Mortgagor will pay and  discharge when due and payable,
   from time  to time,  all taxes, assessments, governmental  charges, fines
   and penalties lawfully imposed on the Collateral Vessel or the Collateral
   or any income therefrom.

               7.    Neither  Mortgagor, any  charterer,  the Master  of the
   Collateral Vessel or any other person has or shall  have any right, power
   or  authority to  create, incur  or  permit to  be placed  or  imposed or
   continued  upon  the  Collateral  Vessel  or  the  Collateral,  any  lien
   whatsoever  other than  this Mortgage, the  First Preferred  Mortgage and
   liens for  current crew's wages,  general average, and  salvage, in  each
   case, incurred  in the ordinary course  of business and that  are not yet
   overdue.

               8.    Mortgagor will place, and at all times and places  will
   retain,  a  properly  certified  copy  of  this  Mortgage  on  board  the
   Collateral Vessel with her papers and will cause such  certified copy and
   such  papers  to be  exhibited  to any  and all  persons  having business
   therewith which might give rise to any lien thereon  other than liens for
   current crew's wages, general average and salvage, in each case, incurred
   in the  ordinary course of business and that are  not yet overdue, and to
   any representative of  Mortgagee or Beneficiary; and will place  and keep
   prominently displayed in the chart  room and in the Master's cabin of the
   Collateral Vessel a framed printed notice in plain type of such size that
   the  paragraph of  reading matter  shall cover  a space  not less  than 6
   inches wide by 9 inches high, reading as follows:

                               "NOTICE OF MORTGAGE

                     This vessel is covered by a Preferred Mortgage to
               Wilmington Trust  Company, Trustee, under authority  of
               Chapter 313 of Title 46, United States Code, as at  any
               time  amended.    Under  the  terms of  said  Mortgage,
               neither  the owner,  any charterer,  nor the  Master of
               this  vessel  has  any  right,  power or  authority  to
               create, incur or permit to be  imposed upon this vessel
               any  lien whatsoever  other  than  for  current  crew's
               wages,  general  average  and  salvage,  in each  case,
               incurred in  the ordinary  course of business  and that
               are not yet overdue."

               9.    Except for the  lien of this Mortgage and of  the First
   Preferred Mortgage, Mortgagor  will not create or suffer to  be continued
   any  security interest,  lien, encumbrance  or  charge on  the Collateral
   Vessel  or the Collateral  and in due  course and in any  event within 30
   days after the  same becomes  due and  payable will  pay or  cause to  be
   discharged or make adequate provision for the payment or discharge of all
   claims or demands which,  if not paid or discharged, might result  in the
   creation of  such a security  interest, lien, encumbrance  or charge  and
   will cause  the Collateral Vessel  or the  Collateral  to  be released or
   discharged from each such security interest, lien, encumbrance or  charge
   therefor;  provided, however,  that  the undertaking  of  such corrective
   action shall in no event be deemed a cure of  any breach of this Mortgage
   or be  deemed a waiver by Mortgagee or Beneficiary of any of their rights
   or remedies hereunder with respect thereto.

               10.   If a libel is filed against the Collateral Vessel or if
   the Collateral Vessel  is otherwise attached, levied upon, or  taken into
   custody  or detained by any proceeding in any court or tribunal or by any
   Government  or  other  authority,  Mortgagor  will  promptly  notify  (i)
   Mortgagee  thereof by telecopier,  confirmed by letter, at  its office at
   1100  North  Market Street,  Rodney  Square  North,  Wilmington, Delaware
   19890, Attention:  Corporate Trust  Administration, Telecopier  No. (302)
   651-8882  and (ii) notify Beneficiary thereof by telecopier, confirmed by
   letter,  at  its office  c/o  Heller  Financial,  Inc.,  Attention: Legal
   Department, 101  Park Avenue, New  York, New York  10178, Telecopier  No.
   (212)  880-7158, and within 15 days  will cause such Collateral Vessel to
   be  released and all valid liens thereon other than this Mortgage and the
   First Mortgage to  be discharged, and will promptly notify  Mortgagee and
   Beneficiary thereof in the  manner aforesaid; provided, however, that the
   undertaking  of such corrective action shall in no event be deemed a cure
   of any breach  of this  Mortgage or  be deemed a waiver  by Mortgagee  or
   Beneficiary of  any of their  rights or remedies  hereunder with  respect
   thereto.

               11.   Mortgagor hereby  acknowledges and confirms  as of  the
   Closing  Date (as defined in the MOA) that (a) no loss, constructive loss
   or requisitioning for use by any governmental authority of the Collateral
   Vessel (and, where applicable,  the Collateral) has occurred; and (b) the
   Collateral  Vessel  (and, where  applicable,  the  Collateral)  is tight,
   staunch, strong  and well and sufficiently  tackled, appareled, furnished
   and   equipped  and  in  every  respect  seaworthy,  in  accordance  with
   specifications, in good working  order, condition and repair (normal wear
   and tear excepted) and without defect in condition, design, operation  or
   fitness for use.  Mortgagor will at all times and without cost or expense
   to  Mortgagee  or  Beneficiary  maintain and  preserve,  or  cause to  be
   maintained and  preserved, the Collateral Vessel  (and, where applicable,
   the  Collateral) in good running order and repair, so that the Collateral
   Vessel  shall  be, at  all  times, tight,  staunch,  strong and  well and
   sufficiently tackled, appareled, furnished, equipped and in every respect
   seaworthy  and  in  good  operating  condition  and  in  accordance  with
   specifications;  and   will  keep  the  Collateral   Vessel  (and,  where
   applicable,  the  Collateral)  in  such  condition  as  will entitle  the
   Collateral Vessel to the highest classification and rating for vessels of
   the same  age  and  type by  the  American Bureau  of Shipping  or  other
   classification society  of like  standing, and  annually will furnish  to
   Mortgagee and Beneficiary a  certificate by such Bureau or classification
   society  (if applicable)  that such  classification is  maintained.   The
   Collateral Vessel  shall, and Mortgagor  covenants that it  will, at  all
   times  comply with all  applicable laws, treaties and  conventions of the
   United States  of America, and  rules and  regulations issued thereunder,
   and shall have on board  as and when required thereby  valid certificates
   showing  compliance therewith.  Mortgagor will not  make, or permit to be
   made,  any  change  in the  structure,  character  or  type  of,  or  any
   modifications or  improvements to,  the Collateral Vessel  which diminish
   the value, utility, useful life or seaworthiness of the Collateral Vessel
   without  first receiving the  written approval  thereof by  Mortgagee and 
   Beneficiary  (such approval  not to be  unreasonably withheld)  and, upon
   request,  shall  promptly  provide  Mortgagee  and Beneficiary  with  all
   designs, drawings, plans and specifications relating to any such changes,
   modifications  or  improvements.   Mortgagor  will  notify  Mortgagee and
   Beneficiary of (i) any damage to the Collateral  Vessel requiring repairs
   reasonably expected  to cost  $1,000,000 or more  promptly following  the
   occurrence thereof and (ii) any changes, modifications or improvements to
   the  Collateral Vessel  reasonably expected  to  cost $5,000,000  or more
   prior to commencing such changes, modifications or improvements.

               Mortgagor agrees  to give Mortgagee and  Beneficiary at least
   10 days notice  of the actual date and place  of any survey or drydocking
   in order that Mortgagee and  Beneficiary may have representatives present
   if  desired.   Mortgagor  agrees  that at  Mortgagee's  or  Beneficiary's
   request  it will  satisfy  the  Mortgagee and  the Beneficiary  that  the
   expense of such survey or drydocking or work to be done thereat is within
   Mortgagor's  financial ability  and will not  result in  a claim  or lien
   against the  Collateral Vessel  or  the Collateral  in violation  of  the
   provisions of this Mortgage.

               12.   Mortgagor  at  all  times  will  afford  Mortgagee  and
   Beneficiary or their authorized  representatives full and complete access
   to the Collateral  Vessel for the purpose of  inspecting the same and the
   Collateral  Vessel's cargo and papers and, at the request of Mortgagee or
   Beneficiary, Mortgagor will deliver for inspection copies of any and  all
   contracts and  documents relating  to the  Collateral Vessel,  whether on
   board or not.

               13.   Mortgagor  will not transfer or change the flag or port
   of documentation of the Collateral Vessel without the written consent  of
   Mortgagee  and Beneficiary first  had and obtained, and  any such written
   consent to  any one transfer or  change of flag or  port of documentation
   shall not be construed  to be a waiver of this  provision with respect to
   any  subsequent  proposed   transfer  or  change  of  flag  or   port  of
   documentation.

               14.   Mortgagor will not sell, mortgage, transfer,  demise or
   other charter or change  the management of  the Collateral Vessel or  the
   Collateral,  except,  with respect  to  the  Collateral  Vessel, drilling
   contracts that  comply  with the  terms of  this Mortgage  and the  other
   Charter Documents    and  charters  or  subcharters  (whether  demise  or
   otherwise)  to  the  Parent and  its  Subsidiaries  (as  defined  in  the
   Charter), without  the written consent of Mortgagee and Beneficiary first
   had and obtained, and any such written consent to any one sale, mortgage,
   transfer,  demise or other charter or change shall not be construed to be
   a  waiver of this provision with respect to any subsequent proposed sale,
   mortgage, transfer, demise  or other charter or  change.  Any such  sale,
   mortgage, transfer or charter of the Collateral Vessel or the  Collateral
   (including  any sale  or transfer  to the  Parent or  any  Subsidiary (as
   defined in the Charter) of the Parent) shall be subject to the provisions
   of this Mortgage and the lien it creates.  Mortgagor will not charter the
   Collateral Vessel  to, or permit the Collateral Vessel to serve under any
   contract  with, a person  included within the definition  of " designated
   foreign country" or  "national" of a "designated foreign country"  in the
   Foreign Assets Control Regulations or Cuban Assets Control Regulations of
   the United States Treasury Department, 31 C.F.R., Chapter V, as  amended,
   or  any person included  within the definition of  "Government of Libya,"
   "entity of  the Government  of Libya"  or "Libyan  entity" in  the Libyan
   Sanctions Regulations of the United States Treasury Department, 31 C.F.R.
   Part 550,  as amended, within the  meaning of said Regulations  or of any
   regulation, interpretation or ruling issued thereunder.

               15.   (a)   Mortgagor will,  at its own expense,  when and so
   long  as this Mortgage  or any Secured Obligations  shall be outstanding,
   insure the Collateral Vessel and keep her insured, in lawful money of the
   United States, for not  less than the full fair market value  thereof (as
   determined by the appraisal of the Collateral Vessel prepared by  Barnett
   &  Casbarian,  Inc.  and  dated November  1995  (the  "Appraisal").   The
   Collateral Vessel  shall in no event  be insured for an  amount less than
   the agreed valuation as set forth in  the applicable marine and war  risk
   policies.  Such insurance shall cover marine and war risk perils, on hull
   and machinery, and shall be maintained in the broadest forms available in
   the American or British insurance markets for vessels of the same type as
   the Collateral Vessel.  In addition, Mortgagor shall, at its own expense,
   furnish  to  Beneficiary  a mortgagee's single interest  policy (or shall
   cause the  hull and  machine insurance  on the  Collateral Vessel  to  be
   endorsed  to  afford  breach  of warranty  coverage  for  the benefit  of
   Beneficiary  and  the members  of  the  Owner Group  (as  defined in  the
   Charter)) providing coverage in an amount equal to at least the full fair
   market  value of the  Collateral Vessel, as determined  by the Appraisal.
   Such mortgagee's interest insurance  shall be maintained in  the broadest
   form available in the American or British markets for vessels of the same
   type  as  the  Collateral   Vessel  through  underwriters  acceptable  to
   Beneficiary.    In  addition,  Mortgagor  shall maintain  protection  and
   indemnity or  equivalent insurance, through  underwriters or associations
   reasonably acceptable to Beneficiary in an  amount not less than the fair
   market  value of the  Collateral Vessel, as determined  by the Appraisal,
   provided, however, that war risk protection and indemnity insurance shall
   be in an amount not less than the amount of insurance against total loss.
   The Collateral Vessel shall not carry any cargoes or proceed into an area
   then excluded by trading warranties under its marine or war risk policies
   (including expropriation, protection and indemnity) without obtaining all
   necessary additional  coverage, satisfactory  in form and  substance, and
   satisfactory  evidence   of  which   shall  be  promptly   furnished,  to
   Beneficiary.

               (b)   The policy  or policies of insurance  described in this
   Section 15  shall  be  issued  by  responsible   underwriters  reasonably
   acceptable  to Beneficiary  in  all respects,  shall  contain conditions,
   terms, stipulations  and  insuring covenants  reasonably satisfactory  to
   Beneficiary  in all respects  (including, but not limited  to, waivers of
   subrogation  rights of the  insurers against the insureds  and waivers of
   any rights of the  insurers to  any set off,  counterclaim or  deduction,
   whether by attachment  or otherwise) and shall be  kept in full force and
   effect by Mortgagor  so long as this Mortgage or  any Secured Obligations
   shall be  outstanding.   All  such policies,  binders and  other  interim
   insurance contracts shall be executed and issued in the name of Mortgagor
   and shall provide that loss be payable  (i) for so long as the Collateral 
   Vessel  is encumbered  by  the  First Preferred  Mortgage, to  the  First
   Mortgagee for distribution by it to itself, Beneficiary and Mortgagor, as
   their  interests may  appear,  and  (ii) thereafter,  to  Beneficiary for
   distribution  by it  to  itself  and Mortgagor,  as their  interests  may
   appear.  Copies of all such policies, binders and other interim insurance
   contracts shall  be deposited with Beneficiary.   Such insurance policies
   shall provide for at  least 30 days' prior written notice  to be given to
   Beneficiary  by the  underwriters  or  association in  the event  of  (i)
   cancellation (or at  least 7 days  prior written  notice, with respect to
   war risk coverage) or (ii) the failure of Mortgagor to pay any premium or
   call which  would suspend coverage under  the policy or the  payment of a
   claim thereunder.   Mortgagor shall furnish  to Beneficiary annually, not
   later than thirty days prior to expiration, a detailed report signed by a
   firm  of marine insurance  brokers satisfactory to Beneficiary  as to the
   insurance maintained  in respect of  the Collateral Vessel,  as to  their
   opinion as  to  the  adequacy  thereof and  as  to  compliance  with  the
   provisions of this Section 15.

               Unless  otherwise required  by Beneficiary  by notice  to the
   underwriters, although the following insurance is payable to Beneficiary,
   (i) any loss under any insurance on the Collateral Vessel with respect to
   protection and  indemnity risks  may  be paid  directly to  Mortgagor  to
   reimburse it for any loss,  damage or expense actually incurred by it and
   covered  by such insurance or to the person to whom any liability covered
   by such insurance has been actually incurred, and (ii) in the case of any
   loss (other  than a  loss covered  by clause  (i) above  or by  the  next
   paragraph  of this  Section)  under  any insurance  with respect  to  the
   Collateral  Vessel involving  any damage to  such Collateral  Vessel, the
   underwriters  may pay directly  for the repair, salvage  or other charges
   involved or, if Mortgagor shall  have first fully repaired the damage  or
   paid  all  of  the  salvage  or  other  charges,  may  pay  Mortgagor  as
   reimbursement therefor; provided, however, that if such damage involves a
   loss  in excess  of  $1,000,000,  the underwriters  shall not  make  such
   payment  without   first  obtaining   the  written  consent   thereto  of
   Beneficiary.    Any loss  covered  by  this paragraph  which  is paid  to
   Beneficiary  but which  might  have  been paid,  in accordance  with  the
   provisions of this  paragraph, directly to Mortgagor or others,  shall be
   paid  by Beneficiary  to, or  as  directed by,  Mortgagor  and all  other
   payments  to Beneficiary  of losses  covered by  this paragraph  shall be
   applied by Beneficiary in accordance with the Charter Documents.

               In the  event of  an actual or  constructive total  loss or a
   compromised  constructive  total   loss  or  requisition,  all  insurance
   payments  therefor shall  be  paid  toBeneficiary (subject  to  the prior
   rights  of the  First Mortgagee).  Mortgagor  shall not  declare or agree
   with  underwriters that  the  Collateral  Vessel  is  a  constructive  or
   compromised, agreed or arranged constructive total loss without the prior
   written consent of Beneficiary.

               (c)   In the event of an actual or constructive total loss of
   the Collateral Vessel, Beneficiary shall (subject to the prior rights  of
   the First  Mortgagee) retain out  of the insurance  payments received  on
   account of such loss, which shall become the sole property of Beneficiary
   (subject  to the  prior rights of  the First Mortgagee), any  sum or sums
   that shall  be  or  become owing  under  the Charter  Documents  or  this
   Mortgage, whether or not the  same be then due and payable, together with
   accrued  interest and the cost, if  any, of collecting the insurance, and
   pay the balance as in Section 26 hereinafter provided.

               (d)   Mortgagor  will  comply with  and  satisfy  all  of the
   provisions of any  applicable environmental,  health and safety or  other
   law,  regulation, proclamation  or order  including,  without limitation,
   those  concerning  financial responsibility  for  liabilities imposed  on
   Mortgagor  or the Collateral Vessel with  respect to pollution including,
   without limitation, the U.S. Water Pollution Control Act, as amended, and
   the U.S. Oil Pollution Act,  as amended, and will maintain or cause to be
   maintained all certificates or other evidence of financial responsibility
   as may  be required by  any such  law, regulation, proclamation or  order
   with respect to the  trade which the Collateral Vessel from time  to time
   is engaged in and the cargoes carried by it.

               (e)   In  addition  to, and  except  as  otherwise  expressly
   provided  in, this  Section 15, Mortgagor  shall maintain  insurance with
   respect to  the Collateral Vessel  in the amounts and  types specified in
   the  Charter  with  respect to  the  vessel  being  leased  by  Mortgagor
   thereunder.

               (f)   Mortgagor  will  reimburse  Mortgagee  and  Beneficiary
   within 3 business  days after receipt of a demand therefor accompanied by
   a reasonable description of the related expenditures, with interest at  a
   rate per  annum equal to the Overdue Rate (as defined in the Charter) for
   any and all expenditures which Mortgagee or Beneficiary may  from time to
   time make, lay  out or expend in providing  such protection in respect of
   insurance,  discharge  of liens,  taxes, dues,  assessments, governmental
   charges, fines  and penalties lawfully imposed,  repairs, attorneys' fees
   and other matters as Mortgagor is  obligated herein to provide, but fails
   to  provide.   Such obligation  of Mortgagor  to reimburse  Mortgagee and
   Beneficiary  shall  be an  additional  indebtedness  due  from Mortgagor,
   secured  by this Mortgage, and  shall be payable by  Mortgagor on demand.
   Mortgagee  or Beneficiary, though privileged so  to do, shall be under no
   obligation  to Mortgagor  to make  any such  expenditures, nor  shall the
   making thereof relieve Mortgagor of any default in that respect.

               16.   INTENTIONALLY DELETED.

                                   ARTICLE II

                         EVENTS OF DEFAULT AND REMEDIES

               17.   In  case  any  Event of  Default  (as  defined  in  the
   Charter) shall occur and  be continuing, then and in each and  every such
   case Mortgagee, for the benefit of Beneficiary, shall have the right to:

               (a)   Exercise all the rights and remedies in foreclosure and
         otherwise  given  to  mortgagees  by the  provisions  of  the  Ship
         Mortgage Act or any  other jurisdiction where the Collateral Vessel
         may be found; 

               (b)   Bring suit at law, in equity or in admiralty, as it may
         determine  or be  advised,  to  recover judgment  for any  and  all
         amounts due under the Charter Documents or otherwise hereunder, and
         collect the same  out of any and all  property of Mortgagor whether
         covered by this Mortgage or otherwise;

               (c)   Take the Collateral Vessel and any Collateral, wherever
         it may be, without legal process and without being responsible  for
         loss or  damage; and Mortgagor  or any other  person in  possession
         forthwith  upon demand  of Mortgagee  shall surrender  to Mortgagee
         possession of the Collateral Vessel and any Collateral, as demanded
         by Mortgagee, and Mortgagee may, without being responsible for loss
         or damage, hold,  lay up, lease, charter, operate or  otherwise use
         the Collateral  Vessel and any  Collateral for such  time and  upon
         such  terms as it may deem to be for its best advantage, accounting
         only  for the  net  profits, if  any,  arising  from such  use  and
         charging upon  all receipts from such  use or from the  sale of the
         Collateral  Vessel  and  any  Collateral  by court  proceedings  or
         pursuant  to Subsection  (d) next  following, all  costs, expenses,
         charges, damages  or losses by  reason of  such use; and  if at any
         time Mortgagee shall avail  itself of the right herein  given it to
         take the Collateral Vessel and shall take it, Mortgagee shall  have
         the right to dock the Collateral Vessel for a reasonable  time (not
         to  be less than 150  days) at any dock, pier  or other premises of
         Mortgagor without charge, or to dock it  at any other place at  the
         cost and expense of Mortgagor;

               (d)   Without being responsible for  loss or damage, sell the
         Collateral Vessel and any Collateral at any place and at such  time
         as  Mortgagee  may  specify  and in  such  manner  as Mortgagee  or
         Beneficiary may deem advisable free from any claim by Mortgagor  in
         admiralty,  in equity,  at law  or by  statute, after  first giving
         notice  of the time and place of sale with a general description of
         the property in the  following manner (which Mortgagor acknowledges
         and agrees is commercially reasonable in all respects):

                     (i)   By publishing such notice for 10 consecutive days
               in  a daily newspaper of general circulation published in New
               York City;

                     (ii)  If the place of sale should not be New York City,
               then also  by publication  of  a similar  notice in  a  daily
               newspaper, if any, published at the place of sale; and

                     (iii) By sending a similar notice by registered mail to
               Mortgagor on the day of first publication.

               18.   A sale of the  Collateral Vessel or any Collateral made
   in pursuance of this  Mortgage, whether  under the power  of sale  hereby
   granted or any  judicial proceedings, shall operate to divest  all right,
   title  and interest  of any  nature whatsoever  of Mortgagor  therein and
   thereto, and  shall bar Mortgagor,  its successors and  assigns, and  all
   persons claiming by, through or  under them.  No purchaser shall be bound
   to inquire whether notice has been given, or whether any Event of Default
   (as defined in the Charter) has  occurred, or as to the propriety of  the
   sale, or  as to the application of the proceeds thereof.  In case of such
   sale,  any purchaser who is the  obligee of any Secured Obligations shall
   be entitled,  for the  purpose of  making settlement  or payment  for the
   property  purchased,  to  use  and  apply  the  amount  of  the   Secured
   Obligations  owing to such purchaser in order  that there may be credited
   against the amount remaining due and unpaid thereon the sums payable  out
   of  the  net  proceeds  of  such  sale  to  the obligee  of  the  Secured
   Obligations after  allowing for the  costs and expense of  sale and other
   charges;  and thereupon such  purchaser shall be credited,  on account of
   such  purchase  price, with  the net  proceeds  that shall  have  been so
   credited  upon the Secured Obligations.  At such sale, the obligee of the
   Secured  Obligations may  bid for  and purchase  such property,  and upon
   compliance with  the terms of sale  may hold, retain and  dispose of such
   property without further accountability therefor.

               19.   Mortgagee is hereby  irrevocably appointed attorney-in-
   fact of Mortgagor to execute and deliver to any purchaser aforesaid,  and
   is hereby vested with full  power and authority to make, in the  name and
   in behalf of Mortgagor, a  good conveyance of the title to the Collateral
   Vessel  or the  Collateral.   In the event  of a  sale of  the Collateral
   Vessel or any  Collateral, under  any power  herein contained,  Mortgagor
   will, if and when required by Mortgagee, execute such form  of conveyance
   of  the  Collateral  Vessel  or any  Collateral  or  similar document  as
   Mortgagee may direct or approve.

               20.   Mortgagee is hereby  irrevocably appointed attorney-in-
   fact of Mortgagor, in the name, place and stead  of Mortgagor, to demand,
   collect, receive, compromise  and sue for, so far  as may be permitted by
   law,  admiralty,  equity  or  otherwise,  all freights,  hire,  earnings,
   issues,  revenues, income  and profits  of the  Collateral Vessel  or any
   Collateral, and  all amounts due  from underwriters  under any  insurance
   thereon as payment of losses or as return  premiums or otherwise, salvage
   awards and recoveries,  recoveries in  general average or otherwise,  and
   all  other sums due or to become  due in respect of the Collateral Vessel
   or any Collateral, or in respect of any insurance thereon from any person
   whomsoever, and to make, give and execute in the name, place and stead of
   Mortgagor acquittances,  receipts, releases  or other discharges  for the
   same, whether under seal  or otherwise, and to endorse and accept  in the
   name, place and  stead of Mortgagor all checks, notes,  drafts, warrants,
   agreements and  all other  instruments  in writing  with respect  to  the
   foregoing.

               21.   Whenever any right to  enter and take possession of the
   Collateral Vessel or any Collateral accrues to Mortgagee, it may  require
   Mortgagor to deliver, and Mortgagor shall on demand, at  its own cost and
   expense, deliver, to  Mortgagee the Collateral Vessel or  such Collateral
   as demanded.   If  any legal proceedings  shall be taken  to enforce  any
   right under this Mortgage,  Mortgagee shall  be entitled as  a matter  of
   right to the  appointment of a receiver of  the Collateral Vessel or such
   Collateral and the freights, hire, earnings, issues, revenues, income and
   profits due or  to become due  and arising  from the  possession, use  or
   operation thereof. 

               22.   Mortgagor  authorizes and  empowers Mortgagee  or   its
   appointees  or any of  them to  appear in  the name,  place and  stead of
   Mortgagor, its  successors and assigns,  in any  court of any country  or
   nation of the world where a suit is pending against the Collateral Vessel
   or any  Collateral because of or  on account of any  alleged lien against
   the Collateral Vessel or any Collateral from which the Collateral  Vessel
   or any Collateral has not been released  and to take such proceedings  as
   to it as they or any of them may deem proper towards  the defense of such
   suit and  the purchase  or discharge of  such lien,  and all expenditures
   made or incurred by them or  any of them for the purpose of such defense,
   purchase or discharge shall be a debt due  from Mortgagor, its successors
   and  assigns, to  Mortgagee, and  shall be  secured by  the lien  of this
   Mortgage  in like  manner  and extent  as if  the amount  and description
   thereof were written  herein and shall be  payable on demand.   Mortgagee
   shall notify Mortgagor of any circumstances permitting Mortgagee to  take
   action  under this  Section  22  promptly after  becoming aware  of  such
   circumstances.

               23.   Each  and  every  power  and  remedy  herein  given  to
   Mortgagee shall  be cumulative  and shall be  in addition  to every other
   power  and remedy  herein given or  now or hereafter existing  at law, in
   equity, in admiralty, or by statute, and each and  every power and remedy
   whether herein given or otherwise existing may be exercised from  time to
   time  and as  often  and in  such  order as  may be  deemed  expedient by
   Mortgagee, and the exercise or the beginning of the exercise of any power
   or remedy shall not be construed to be a waiver of the right to  exercise
   at the  same  time  or thereafter  any  other power  or remedy.    Unless
   otherwise  agreed to  in writing by  Mortgagee, no  delay or  omission by
   Mortgagee or by the obligee of any Secured Obligations in the exercise of
   any right  or power or in  the pursuance of any  remedy accruing upon any
   Event of Default (as defined in the Charter) shall impair any such right,
   power or remedy  or be construed  to be  a waiver  of any  such Event  of
   Default (as defined in the Charter) or to be an acquiescence therein; nor
   shall the acceptance by Mortgagee of any security or of any payment of or
   on account  of any  part of  any Secured Obligations  maturing after  any
   Event of Default (as defined in the Charter) or of any payment on account
   of any past  default be construed  to be  a waiver of any  right to  take
   advantage of any  future Event of Default (as  defined in the Charter) or
   of any past Event  of Default (as defined in the Charter)  not completely
   cured thereby.

               To  the  fullest  extent  that  it  may  lawfully  so  agree,
   Mortgagor covenants and  agrees it  shall not  at any  time insist  upon,
   claim, plead,  or take  the  benefit or  advantage of  any  appraisement,
   valuation,  stay,  extension,  moratorium,   or  redemption  law  now  or
   hereafter in force in  order to prevent, delay or hinder  the enforcement
   of this Mortgage or the exercise by Mortgagee of any of  the remedies set
   forth in Section 17 hereof or  the taking of possession of the Collateral
   Vessel or  any Collateral by any  purchaser at any sale  held pursuant to
   this Mortgage;  and  Mortgagor, for  itself and  all  who may  claim  by,
   through or under it, as far  as it or they now or hereafter lawfully  may
   do so, hereby waives the benefit of all such laws. 

               Nothing  in  this  Article  II and  none  of  the actions  or
   omissions  to act by Mortgagee  contemplated by this Article  II shall be
   deemed  a waiver by Mortgagee of the preferred status of the Mortgage nor
   of  any of  the  benefits, privileges  or  provisions given  by  the Ship
   Mortgage Act,  no provision  hereof  shall constitute  a waiver  of  such
   preferred  status or of  any of such benefits,  privileges or provisions,
   and in the event that any provision of this Mortgage should be, or should
   be  held by  a court  of competent  jurisdiction to  be, a  waiver of  or
   otherwise prejudicial to  such preferred status, then in such  event such
   provisions  of this Mortgage should  be and shall  be deemed to  be of no
   force and effect.

               24.   If at any time after an Event of Default (as defined in
   the Charter)  and prior to  the actual  sale of the  Collateral Vessel by
   Mortgagee  or prior  to any foreclosure proceedings,  Mortgagor offers to
   cure completely all Events of Default (as defined in  the Charter) and to
   pay  all expenses, advances  and damages to Mortgagee  consequent on such
   Events of  Default (as defined in  the Charter), with interest  at a rate
   per annum  equal to the Overdue  Rate (as defined  in the  Charter), then
   Mortgagee may  accept such  offer, but such  action shall  not affect any
   subsequent Event of  Default (as  defined in the  Charter) or  impair any
   rights consequent thereon.

               25.   In case  Mortgagee shall have proceeded  to enforce any
   right, power  or remedy  under  this Mortgage  by foreclosure,  entry  or
   otherwise, and such proceeding  shall have been discontinued or abandoned
   for any reason or shall have been determined adversely to Mortgagee, then
   and in every such case Mortgagor and Mortgagee shall be restored to their
   former  positions  and  rights  hereunder  with respect  to  the property
   subject or  intended to  be  subject to  this Mortgage,  and all  rights,
   remedies and powers of Mortgagee shall continue as if no such proceedings
   had been taken.

               26.   The proceeds of  sale of  the Collateral Vessel or  any
   Collateral and the  net earnings  of any charter operation  or other  use
   thereof by Mortgagee under any of the powers herein specified and any and
   all other moneys received by Mortgagee pursuant to or  under the terms of
   this Mortgage or  in any proceedings hereunder, the application  of which
   has not elsewhere herein been specifically provided for, shall be applied
   as provided in the Charter and in such order as set forth therein.

               27.   Until  one  or more  Events  of  Default  shall happen,
   Mortgagor (a) shall be suffered and permitted to retain actual possession
   and use of the Collateral Vessel and (b) shall  have the right, from time
   to time,  in its  discretion,  and without  application to  Mortgagee  or
   Beneficiary,  and without  obtaining a  release thereof  by Mortgagee  or
   Beneficiary, to  dispose of,  free  from the  lien hereof,  any  boilers,
   engines,  machinery, bowsprits,  masts,  spars, rigging,  boats, anchors,
   cables, chains, tackle, apparel, furniture,  fittings or equipment or any
   other appurtenances to  the Collateral Vessel that are no  longer useful,
   necessary, profitable or advantageous in the operation of such Collateral
   Vessel  and  that  have  an  aggregate  replacement  cost  not  exceeding
   $10,000,000, first  or simultaneously replacing the  same by new boilers,
   engines, machinery,  bowsprits, masts,  spars, rigging,  boats,  anchors,
   chains, cables, tackle, apparel,  furniture, fittings, equipment or other
   appurtenances  of  substantially equal  value,  utility  and  useful life
   (assuming  such replaced items  were in the working  order, condition and
   state of  repair required under  the terms of this  Mortgage) which shall
   forthwith become subject to  the lien and  other terms and conditions  of
   this Mortgage as a preferred mortgage thereon.

                                   ARTICLE III

                             SECOND LIEN PROVISIONS

               28.   Notwithstanding  anything  contained   herein  to   the
   contrary, this Mortgage is and shall remain secondary and subordinate  to
   the First Preferred Mortgage (to the extent that such remains in effect).
   By  its acceptance of the benefits hereof, so long as the First Preferred
   Mortgage remains a  valid lien  against the Collateral Vessel,  Mortgagee
   acknowledges, stipulates and agrees as follows:

                     (a)   all the terms and provisions of this Mortgage are
         unconditionally  subordinate to  the  terms and  conditions  of the
         First  Preferred  Mortgage (to  the  extent  that  such  remains in
         effect) including, without limitation, the provisions regarding the
         application and use of insurance proceeds;

                     (b)   only  so  long  as the  First  Preferred Mortgage
         remains  in effect,  proceeds  from  the sale  of   the  Collateral
         Vessel, rents  and profits and  any other sums  attributable to  or
         arising from the  use, sale, charter, refinancing or taking  of the
         Collateral  Vessel, if  collected  by  or for  the holder  of  this
         Mortgage,  shall be  applied first  to the  payment of  any amounts
         secured by the First Preferred  Mortgage (if and only to the extent
         that  such First Preferred Mortgage  extends to such  proceeds), in
         such order as is prescribed in  the First Mortgage, prior to  being
         applied to any sums secured by this Mortgage; and

                     (c)   only  so  long as  the  First  Preferred Mortgage
         remains in  effect, written notice of  default under this  Mortgage
         and  written  notice of  the  commencement of  any action  (whether
         judicial or pursuant to a power of sale) to  foreclose or otherwise
         enforce this Mortgage shall be given to the First Mortgagee at  the
         address indicated in the First Preferred Mortgage, unless Mortgagee
         is otherwise  notified by  the First Mortgagee  of a  change in its
         address,  upon the later  to occur of Mortgagee s  delivery of such
         notice to Mortgagor or immediately after the occurrence of any such
         default or commencement.

                                   ARTICLE IV

                                SUNDRY PROVISIONS

               29.   For the purpose of this Mortgage and the endorsement of
   this Mortgage on the documents of the Collateral Vessel, the total amount
   of  the Secured  Obligations is  $60,000,000.00  plus interest,  fees and
   other  expenses and  performance  of  mortgage covenants.   The  date  of
   maturity is February 28, 2006 and the discharge amount is the same as the
   total amount.

               30.   All   the   covenants,   representations,   warranties,
   promises,  stipulations  and agreements  of  Mortgagor  in  this Mortgage
   contained shall bind  Mortgagor and its successors and assigns  and shall
   inure  to  the  benefit of  Mortgagee,  Beneficiary and  their respective
   successors and  assigns and shall  survive termination  of this Mortgage.
   Notwithstanding  the  foregoing,  Mortgagor s   rights  and   obligations
   hereunder  may not  be  assigned  without the  prior written  consent  of
   Mortgagee  and Beneficiary.   This Mortgage may be  assigned by Mortgagee
   without  the  consent of  Mortgagor or  any person  or entity  other than
   Beneficiary (whose consent  shall be required  for any  such assignment).
   Mortgagee agrees to provide Mortgagor with notice of any such  assignment
   by  Mortgagee;  provided, however,  that failure  to provide  such notice
   shall in no way affect the validity or effectiveness of such assignment.

               31.   Wherever  and  whenever  herein  any  right,  power  or
   authority  is  granted  or given  to  Mortgagee,  such  right,  power  or
   authority may  be exercised in  all cases  by Mortgagee or  such agent or
   agents as it may  appoint, and the  act or acts of  such agent or  agents
   when taken shall constitute the act of Mortgagee hereunder.

               IN WITNESS  WHEREOF, Mortgagor has executed  this Mortgage by
   its  officer thereunto  duly  authorized  the day  and year  first  above
   written.

                                             READING & BATES DRILLING CO.


                                             By:                             
                                             Name:                           
                                             Title:                           

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                                 ACKNOWLEDGMENT

   STATE OF                      )
                                 )     ss.
   COUNTY OF                     )


               On this  the _____  day  of November,  1995, before  me  came
   _________________________ to me  known, who, being by me duly  sworn, did
   d e p o s e    a n d     s a y    t h a t    h e    r e s i d e s     a t
   ________________________________________________________; that  he is the
   ___________________  of Reading  &  Bates Drilling  Co.,  the corporation
   described in and which executed the foregoing mortgage; that he knows the
   seal of said corporation; that  the seal affixed to said mortgage is such
   corporate seal; that it was so affixed by order of the Board of Directors
   of said corporation; and that he signed his name to said mortgage by like
   order  and  he  acknowledged to  me  that he  executed  said  mortgage as
   _____________________of said corporation, and  that the same is  the free
   and voluntary  act and deed of  said corporation, and of  himself as such
   officer for the uses and purposes therein expressed.

                                                                             
   My Commission Expires:                    Notary Public

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

                                    Exhibit A

                            Copy of Bareboat Charter


                                  SEE ATTACHED 

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

                                    Exhibit B

                              Amortization Schedule


                                  SEE ATTACHED 

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

                                   EXHIBIT C-2

                            FIRST PREFERRED MORTGAGE

               FIRST PREFERRED  MORTGAGE ("Mortgage"), made the  28th day of
   November, 1995, by READING & BATES DRILLING CO., an Oklahoma  corporation
   ("Mortgagor"),   to  WILMINGTON   TRUST  COMPANY,   a   Delaware  banking
   corporation,  not in its  individual capacity, but solely  as Trustee (in
   such  capacity,  "Mortgagee")  for the  benefit  of DEEP  SEA  INVESTORS,
   L.L.C., a Delaware limited liability company ("Beneficiary").

               WHEREAS:

         A.    Mortgagor  is the  sole owner  of the  whole of  that certain
   vessel  known  as  the  "RANDOLPH YOST",  official  number  601699,  duly
   documented in the name of Mortgagor under the laws and flag of the United
   States of America (the "Collateral Vessel").

         B.    This Mortgage  is being  executed and delivered  by Mortgagor
   pursuant to that  certain Memorandum of  Agreement (the "MOA") dated   of
   even  date herewith  by and  between Beneficiary  and Reading  and Bates,
   Inc., an Oklahoma corporation ("R&B, Inc."), a  subsidiary of Mortgagor s
   parent corporation,  Reading & Bates Corporation,  a Delaware corporation
   (the "Parent").  Under the  MOA, R&B, Inc. agreed to sell a certain other
   vessel  to Beneficiary  and Beneficiary  agreed to  lease that  vessel to
   Mortgagor  under the terms and subject to the conditions set forth in the
   Bareboat Charter  (the "Charter")  dated  of even  date herewith  by  and
   between Mortgagor  and Beneficiary  (the MOA, the Charter,  this Mortgage
   and all  other documents executed in  connection therewith, together with
   any and all amendments, supplements, renewals or substitutions of all  or
   any of such  documents, are sometimes referred to collectively  herein as
   the "Charter Documents").

         C.    Beneficiary requires that Mortgagor execute  and deliver this
   Mortgage  to secure  the  prompt and  complete  payment,  observance  and
   performance   of  all  representations,  warranties,  covenants,  duties,
   liabilities and obligations of Mortgagor under the Charter Documents (the
   "Secured Obligations").

         D.    The Board  of Directors  of Mortgagor having  determined that
   Mortgagor will  derive substantial benefit, directly  or indirectly, from
   the  sale  and   lease  transaction   among  R&B,  Inc.,  Mortgagor   and
   Beneficiary, Mortgagor  wishes to  execute and  deliver this  Mortgage as
   required by Beneficiary.

               NOW, THEREFORE, THIS MORTGAGE WITNESSETH:

               That in consideration  of the premises and of other  good and
   valuable consideration,  the receipt whereof is  hereby acknowledged, and
   in  order  to secure  the  payment, observance   and  performance  of the
   Secured  Obligations according to  the terms thereof, and  the payment of
   all such other  sums as may hereafter become  secured by this Mortgage in
   accordance with the terms  hereof, and to secure the  performance and ob- 
   servance  of   and  compliance  with   the  representations,  warranties,
   covenants,  terms  and conditions  herein  and in  the Charter  Documents
   contained,  Mortgagor does  by  these presents  GRANT,  CONVEY, MORTGAGE,
   PLEDGE,  ASSIGN, TRANSFER, SET  OVER and CONFIRM unto  the Mortgagee, its
   successors and assigns, for the benefit of  Beneficiary, the whole of the
   Collateral Vessel, together with all of the boilers, engines,  machinery,
   masts, spars,  rigging, boats, anchors, chains,  cables, tackle, apparel,
   furniture, fittings  and equipment (but excluding  leased equipment owned
   by  third parties) and  all other appurtenances to  the Collateral Vessel
   appertaining  or  belonging, whether  now  owned  or  hereafter acquired,
   whether on  board or  not and all additions,  substitutions, improvements
   and replacements hereafter  made in or to  the Collateral Vessel,  or any
   part thereof, or in  or to the equipment and appurtenances  aforesaid and
   all  products,  rentals and  proceeds  (including, but  not  limited  to,
   insurance  proceeds)   of  any   of  the  foregoing   (collectively,  the
   "Collateral").

               TO  HAVE  AND  TO HOLD  the  same  unto  the  Mortgagee,  its
   successors and  assigns, forever, upon the terms herein set forth for the
   enforcement of the payment and performance of the Secured Obligations and
   to secure  the performance  and  observance of  and compliance  with  the
   covenants, terms  and conditions  in  this Mortgage  and in  the  Charter
   Documents.

               PROVIDED,  ONLY, and  the  conditions of  these  presents are
   such,  that if  the  Secured  Obligations shall  be paid,  performed  and
   discharged as  and  when  the same  shall  become payable  or are  to  be
   performed in  accordance  with the  terms of  this  Mortgage and  of  the
   Charter Documents,  and if  all other such sums  as may  hereafter become
   secured by  this Mortgage are paid  in accordance with the  terms hereof,
   and  if  Mortgagor  shall  perform,  observe  and  comply  with  all  the
   covenants,  terms and  conditions in  the Charter  Documents and  in this
   Mortgage, expressed  or implied,  to be performed,  observed or  complied
   with by  and on the part  of Mortgagor, and  the Charter  Documents shall
   have  terminated pursuant to  the terms thereof, then  these presents and
   the rights hereunder  shall cease, determine and be void, otherwise to be
   and remain in full force and effect.

               A  copy of  the Charter  is annexed  hereto and  made a  part
   hereof as Exhibit A.

               IT  IS  HEREBY  COVENANTED,  DECLARED  AND  AGREED  that  the
   property above described is to be  held subject to the further covenants,
   conditions, provisions, terms and uses hereinafter set forth.

                                   ARTICLE I.

                             COVENANTS OF MORTGAGOR

               Mortgagor covenants and agrees with Mortgagee as follows:

               1.    Mortgagor will  observe, perform  and comply  with each
   and every one of the covenants, terms and conditions herein, expressed or
  implied, on its part to be observed, performed or complied with. 

               2.    Mortgagor  was duly organized and is  now existing as a
   corporation under the  laws of the State of  Oklahoma and shall so remain
   during the life of this Mortgage; it is now, and shall remain  during the
   life  of this  Mortgage, a  citizen of  the United  States as  defined in
   Section 2 of the  Shipping Act, 1916, as at any time amended;  it is duly
   authorized  to  mortgage the  Collateral Vessel  and the  Collateral; all
   corporate  action necessary  and required  by law  for the  execution and
   delivery of this  Mortgage, and the good faith affidavit  filed herewith,
   has been duly and effectively  taken; and the Secured Obligations will be
   the  valid and  enforceable obligations of  Mortgagor in  accordance with
   their terms.

               3.    Mortgagor lawfully owns  and is lawfully possessed  of,
   and has good title to, the Collateral Vessel and the Collateral free from
   (i) any security interest, lien, charge or encumbrance whatsoever,  other
   than,  with respect to  the Collateral Vessel, for  current crew s wages,
   general average  and salvage,  in  each case,  incurred in  the  ordinary
   course of business and that are not yet overdue or (ii) any commitment to
   make  the Collateral  Vessel available for  charter, other  than drilling
   contracts  that comply  with the  terms of  this  Mortgage and  the other
   Charter  Documents  and  charters   or  subcharters  (whether  demise  or
   otherwise)  to  the  Parent and  its  Subsidiaries  (as  defined  in  the
   Charter), or (iii) sale or use by any governmental authority, and it will
   warrant and defend  the title  and possession thereto and  to every  part
   thereof  for the benefit of the  Mortgagee against the claims and demands
   of  all persons whomsoever.   This Mortgage constitutes  the legal, valid
   and binding obligation of Mortgagor, is  enforceable against Mortgagor in
   accordance with its terms, and when filed  of record with the U.S.  Coast
   Guard  National  Vessel Documentation  Center,  will create  a valid  and
   perfected first preferred mortgage upon, security interest in and lien on
   the Collateral Vessel and the Collateral.

               4.    Mortgagor  will  comply   with  and  satisfy   all  the
   provisions of Chapter 313 of Title 46, United States Code, as at any time
   amended  (the "Ship  Mortgage  Act"),  and shall  execute,  deliver, file
   and/or record, or  cause the execution and delivery and the filing and/or
   recordation of, such documents or instruments, and shall take or cause to
   be taken such actions as  may be necessary or desirable in the opinion of
   the Beneficiary or the Mortgagee, in order to establish and maintain this
   Mortgage as  a valid  and  perfected first  preferred mortgage  upon  the
   Collateral Vessel  and upon  all renewals, improvements  and replacements
   made in or to the same.

               5.    Mortgagor  will not  cause  or  permit  the  Collateral
   Vessel to be operated in any manner contrary to law, will not abandon the
   Collateral Vessel  in a  foreign port,  will not engage  in any  unlawful
   trade  or  violate any  law  or  carry any  cargo  that  will  expose the
   Collateral Vessel  or the Collateral  to penalty,  forfeiture or capture,
   and will not do, or  suffer or permit to  be done, anything which  can or
   may injuriously or adversely affect the registration or enrollment of the
   Collateral Vessel under the laws and regulations of the United States  of
   America and  will at all times keep the Collateral Vessel duly documented
   thereunder.  Neither  Mortgagor nor the Collateral Vessel is  the subject
   of  any pending  or threatened  environmental enforcement  proceedings or 
   investigations,  nor  any  other  pending  or threatened  proceedings  or
   investigations  with respect to any other environmental, health or safety
   matters.    Mortgagor  is  in compliance  with  all  applicable laws  and
   regulations with respect  to the Collateral Vessel  or otherwise relating
   to pollution control and other environmental, health or safety matters in
   all jurisdictions in which Mortgagor is doing business.  Mortgagor  shall
   assume  all responsibility  for  the  control and  removal of,  and  hold
   Mortgagee, Beneficiary and every member of the Owner Group (as defined in
   the Charter) harmless from loss or damage, liabilities or claims  arising
   from, directly or indirectly, pollution or contamination by any liquid or
   non-liquid waste material whatsoever found that is discharged, spilled or
   leaked   from  the   Collateral  Vessel,   and  for   noncompliance  with
   environmental,  health and  safety  laws.   To the  extent that  any law,
   regulation or governmental entity  acting within its jurisdiction imposes
   on Mortgagee, Beneficiary or any member of the Owner Group (as defined in
   the  Charter)  liability for  any  such  pollution,  notwithstanding such
   imposition of direct liability, Mortgagor shall have designated Mortgagee
   (both  in its individual  capacity and as Trustee),  Beneficiary and each
   member of  the Owner Group (as  defined in the Charter)  as an additional
   insured under its  insurance policies and Mortgagor shall  hold Mortgagee
   (both  in its individual  capacity and as Trustee),  Beneficiary and each
   member of the Owner Group (as defined in the  Charter) harmless from such
   loss,  damage or  claims  and reimburse  any of  Mortgagee  (both in  its
   individual capacity  and as Trustee),  Beneficiary or any  member of  the
   Owner Group  (as  defined in  the Charter)  for  any amounts  it  may  be
   required to pay.  This  indemnity is valid irrespective of the negligence
   or fault, whether sole, joint, active or passive of the indemnified party
   and whether  predicated on strict liability,  statutory duty, contractual
   indemnity or any other theory of liability of the indemnified party.

               6.    Mortgagor will pay and  discharge when due and payable,
   from  time to time, all  taxes, assessments, governmental  charges, fines
   and penalties lawfully imposed on the Collateral Vessel or the Collateral
   or any income therefrom.

               7.    Neither  Mortgagor, any  charterer, the  Master  of the
   Collateral Vessel or any other person has or shall  have any right, power
   or  authority to  create, incur  or  permit to  be placed  or  imposed or
   continued  upon  the  Collateral  Vessel  or  the  Collateral,  any  lien
   whatsoever other than  this Mortgage and liens for current  crew's wages,
   general  average, and  salvage, in  each case,  incurred in  the ordinary
   course of business and that are not yet overdue.

               8.    Mortgagor will place, and  at all times and places will
   retain,  a  properly  certified  copy  of  this  Mortgage  on  board  the
   Collateral  Vessel with her papers and will cause such certified copy and
   such  papers  to be  exhibited  to any  and  all persons  having business
   therewith  which might give rise to any lien thereon other than liens for
   current crew's wages, general average and salvage, in each case, incurred
   in the ordinary course  of business and that are not yet  overdue, and to
   any representative of  Mortgagee or Beneficiary; and will place  and keep
   prominently displayed in the chart room and in the  Master's cabin of the
   Collateral Vessel a framed printed notice in plain type of such size that 
   the  paragraph of  reading matter  shall cover  a space  not less  than 6
   inches wide by 9 inches high, reading as follows:

                               "NOTICE OF MORTGAGE"

                     This  vessel  is  covered by  a  First  Preferred
               Mortgage  to Wilmington  Trust Company,  Trustee, under
               authority  of Chapter  313 of  Title 46,  United States
               Code, as at any time  amended.  Under the terms of said
               Mortgage,  neither the  owner, any  charterer,  nor the
               Master of this vessel has any right, power or authority
               to  create, incur  or permit  to  be imposed  upon this
               vessel  any  lien  whatsoever other  than  for  current
               crew's  wages, general  average  and salvage,  in  each
               case, incurred  in the ordinary course  of business and
               that are not yet overdue."

               9.    Except for the  lien of this Mortgage and of  the First
   Preferred Mortgage, Mortgagor  will not create or suffer to  be continued
   any security  interest,  lien, encumbrance  or charge  on the  Collateral
   Vessel  or the Collateral  and in due course  and in any  event within 30
   days after  the same  becomes due  and payable  will pay  or cause to  be
   discharged or make adequate provision for the payment or discharge of all
   claims or demands which,  if not paid or discharged, might result  in the
   creation of  such a security  interest, lien, encumbrance  or charge  and
   will cause  the Collateral Vessel  or the  Collateral  to  be released or
   discharged from each such security interest,  lien, encumbrance or charge
   therefor;  provided, however,  that  the undertaking  of  such corrective
   action shall in no event be deemed a cure of any breach  of this Mortgage
   or be  deemed a  waiver by  Mortgagee of  any of  its rights  or remedies
   hereunder with respect thereto.

               10.   If a libel is filed against the Collateral Vessel or if
   the Collateral Vessel  is otherwise attached, levied upon, or  taken into
   custody or detained  by any proceeding in any court or tribunal or by any
   Government  or  other  authority,  Mortgagor  will  promptly  (i)  notify
   Mortgagee  thereof by telecopier,  confirmed by letter, at  its office at
   1100  North  Market Street,  Rodney  Square  North,  Wilmington, Delaware
   19890,  Attention: Corporate  Trust Administration, Telecopier  No. (302)
   651-8882 and (ii) notify Beneficiary  thereof by telecopier, confirmed by
   letter,  at  its office  c/o  Heller Financial,  Inc.,  Attention:  Legal
   Department, 101  Park Avenue, New  York, New York  10178, Telecopier  No.
   (212) 880-7158, and within  15 days will cause such  Collateral Vessel to
   be released  and all valid liens  thereon other than this  Mortgage to be
   discharged, and will promptly notify Mortgagee and Beneficiary thereof in
   the  manner aforesaid;  provided, however, that  the undertaking  of such
   corrective  action shall in  no event be deemed  a cure of  any breach of
   this Mortgage or be deemed a waiver by Mortgagee or Beneficiary of any of
   their rights or remedies hereunder with respect thereto.

               11.   Mortgagor hereby  acknowledges and confirms  as of  the
   Closing Date  (as defined in the MOA) that (a) no loss, constructive loss
   or requisitioning for use by any governmental authority of the Collateral
   Vessel (and, where applicable, the Collateral)  has occurred; and (b) the 
   Collateral  Vessel  (and, where  applicable,  the  Collateral)  is tight,
   staunch, strong  and well and sufficiently  tackled, appareled, furnished
   and  equipped  and  in   every  respect  seaworthy,  in  accordance  with
   specifications, in good working order,  condition and repair (normal wear
   and tear excepted) and without defect in condition, design, operation  or
   fitness for use.  Mortgagor will at all times and without cost or expense
   to  Mortgagee  or  Beneficiary  maintain and  preserve,  or  cause to  be
   maintained and  preserved, the Collateral Vessel  (and, where applicable,
   the Collateral) in good running  order and repair, so that the Collateral
   Vessel shall  be, at  all  times, tight,  staunch,  strong and  well  and
   sufficiently tackled, appareled, furnished, equipped and in every respect
   seaworthy  and  in  good  operating  condition  and  in  accordance  with
   specifications;  and   will  keep  the  Collateral   Vessel  (and,  where
   applicable, the  Collateral)  in  such  condition  as  will  entitle  the
   Collateral Vessel to the highest classification and rating for vessels of
   the same  age  and type  by the  American  Bureau of  Shipping  or  other
   classification society  of like  standing, and  annually will  furnish to
   Mortgagee and Beneficiary a certificate by  such Bureau or classification
   society  (if applicable)  that such  classification is  maintained.   The
   Collateral Vessel  shall, and Mortgagor  covenants that it  will, at  all
   times  comply with all  applicable laws, treaties and  conventions of the
   United States of  America, and rules  and regulations  issued thereunder,
   and shall  have on board as and when  required thereby valid certificates
   showing compliance therewith.   Mortgagor will not make, or permit  to be
   made,  any  change  in  the  structure,  character or  type  of,  or  any
   modifications or  improvements to,  the Collateral Vessel  which diminish
   the value, utility, useful life or seaworthiness of the Collateral Vessel
   without  first receiving  the written approval  thereof by  Mortgagee and
   Beneficiary  (such approval  not to  be unreasonably withheld)  and, upon
   request,  shall  promptly  provide  Mortgagee  and Beneficiary  with  all
   designs, drawings, plans and specifications relating to any such changes,
   modifications  or  improvements.   Mortgagor  will  notify  Mortgagee and
   Beneficiary of (i) any damage to the Collateral Vessel requiring  repairs
   reasonably expected  to cost  $1,000,000 or  more promptly following  the
   occurrence thereof and (ii) any changes, modifications or improvements to
   the  Collateral Vessel  reasonably expected  to cost  $5,000,000  or more
   prior to commencing such changes, modifications or improvements.

               Mortgagor agrees  to give Mortgagee and  Beneficiary at least
   10 days notice of the actual  date and place of any survey or  drydocking
   in order that Mortgagee and Beneficiary may  have representatives present
   if  desired.    Mortgagor  agrees that  at  Mortgagee's or  Beneficiary's
   request  it will  satisfy  the  Mortgagee and  the Beneficiary  that  the
   expense of such survey or drydocking or work to be done thereat is within
   Mortgagor's financial  ability and  will not result  in a  claim or  lien
   against the  Collateral Vessel  or  the Collateral  in violation  of  the
   provisions of this Mortgage.

               12.   Mortgagor  at  all  times  will  afford  Mortgagee  and
   Beneficiary or their authorized  representatives full and complete access
   to the Collateral Vessel  for the purpose of inspecting the same  and the
   Collateral Vessel s  cargo and papers and, at the request of Mortgagee or
   Beneficiary, Mortgagor will deliver for inspection copies of any and  all 
   contracts  and documents  relating to the  Collateral Vessel,  whether on
   board or not.

               13.   Mortgagor will not transfer or  change the flag or port
   of documentation of the Collateral Vessel without the written consent  of
   Mortgagee  and Beneficiary first  had and obtained, and  any such written
   consent to  any one transfer or  change of flag or  port of documentation
   shall not  be construed to be a waiver of  this provision with respect to
   any  subsequent  proposed   transfer  or  change  of  flag  or   port  of
   documentation.

               14.   Mortgagor will not sell,  mortgage, transfer, demise or
   other  charter or change the  management of the Collateral  Vessel or the
   Collateral,  except,  with respect  to  the  Collateral  Vessel, drilling
   contracts  that comply  with the  terms of  this  Mortgage and  the other
   Charter  Documents    and  charters or  subcharters  (whether  demise  or
   otherwise)  to  the  Parent and  its  Subsidiaries  (as  defined  in  the
   Charter), without the written consent of  Mortgagee and Beneficiary first
   had and obtained, and any such written consent to any one sale, mortgage,
   transfer, demise or other charter  or change shall not be construed to be
   a waiver of this provision with  respect to any subsequent proposed sale,
   mortgage,  transfer, demise or other  charter or change.   Any such sale,
   mortgage, transfer or charter of the Collateral Vessel or the  Collateral
   (including  any sale  or  transfer to  the Parent  or any  Subsidiary (as
   defined in the Charter) of the Parent) shall be subject to the provisions
   of this Mortgage and the lien it creates.  Mortgagor will not charter the
   Collateral Vessel to, or permit the Collateral  Vessel to serve under any
   contract  with, a person  included within the definition  of " designated
   foreign country" or  "national" of a "designated foreign country"  in the
   Foreign Assets Control Regulations or Cuban Assets Control Regulations of
   the United States Treasury Department, 31 C.F.R., Chapter V, as  amended,
   or  any person included  within the definition of  "Government of Libya,"
   "entity of  the Government of  Libya" or  "Libyan entity"  in the  Libyan
   Sanctions Regulations of the United States Treasury Department, 31 C.F.R.
   Part 550,  as amended, within the  meaning of said Regulations  or of any
   regulation, interpretation or ruling issued thereunder.

               15.   (a)   Mortgagor will,  at its own expense,  when and so
   long  as this Mortgage  or any Secured Obligations  shall be outstanding,
   insure the Collateral Vessel and keep her insured, in lawful money of the
   United States, for not less than the full fair market value thereof.  The
   Collateral Vessel  shall in no event  be insured for an  amount less than
   the agreed valuation as set forth in  the applicable marine and war  risk
   policies.  Such insurance shall cover marine and war risk perils, on hull
   and machinery, and shall be maintained in the broadest forms available in
   the American or British insurance markets for vessels of the same type as
   the Collateral Vessel.  In addition, Mortgagor shall, at its own expense,
   furnish to  Beneficiary a  mortgagee's single  interest policy  (or shall
   cause  the hull  and machine  insurance on  the Collateral  Vessel  to be
   endorsed  to  afford  breach  of warranty  coverage  for  the benefit  of
   Beneficiary  and the  members  of  the Owner  Group  (as defined  in  the
   Charter)) providing coverage in an amount equal to at least the full fair
   market  value  of  the  Collateral  Vessel.   Such  mortgagee's  interest
   insurance shall  be maintained  in  the broadest  form available  in  the 
   American  or  British markets  for  vessels  of  the  same  type  as  the
   Collateral  Vessel through  underwriters acceptable  to Beneficiary.   In
   addition, Mortgagor shall maintain protection and indemnity or equivalent
   insurance, through underwriters or associations reasonably acceptable  to
   Beneficiary  in an  amount not  less than  the fair  market value  of the
   Collateral  Vessel,  provided,  however,  that  war risk  protection  and
   indemnity insurance  shall be in an  amount not less  than the  amount of
   insurance against  total loss.  The Collateral Vessel shall not carry any
   cargoes or proceed into an area then excluded by trading warranties under
   its marine or war risk policies (including expropriation,  protection and
   indemnity)   without  obtaining   all   necessary   additional  coverage,
   satisfactory in  form and substance,  and satisfactory  evidence of which
   shall be promptly furnished, to Beneficiary.

               (b)   The policy  or policies of insurance  described in this
   Section 15  shall  be  issued  by  responsible   underwriters  reasonably
   acceptable  to Beneficiary  in  all respects,  shall  contain conditions,
   terms, stipulations  and  insuring covenants  reasonably satisfactory  to
   Beneficiary  in all respects  (including, but not limited  to, waivers of
   subrogation  rights of the  insurers against the insureds  and waivers of
   any rights of  the insurers  to any set  off, counterclaim  or deduction,
   whether by attachment or otherwise) and shall  be kept in full force  and
   effect by  Mortgagor so long as this Mortgage  or any Secured Obligations
   shall be  outstanding.   All  such policies,  binders and  other  interim
   insurance contracts shall be executed and issued in the name of Mortgagor
   and shall provide that loss be payable to Beneficiary for distribution by
   it to itself and Mortgagor, as their interests may appear.  Copies of all
   such  policies, binders  and other interim  insurance contracts  shall be
   deposited with Beneficiary.  Such insurance policies shall provide for at
   least  30 days'  prior written notice  to be given to  Beneficiary by the
   underwriters or association in the event of (i) cancellation (or at least
   7 days  prior written notice,  with respect to war risk coverage) or (ii)
   the failure of Mortgagor  to pay any premium or call which  would suspend
   coverage  under  the  policy  or  the  payment  of  a  claim  thereunder.
   Mortgagor shall  furnish to Beneficiary  annually, not  later than thirty
   days prior  to expiration, a detailed  report signed by a  firm of marine
   insurance  brokers  satisfactory  to  Beneficiary  as  to  the  insurance
   maintained in respect of the Collateral Vessel, as to their opinion as to
   the adequacy  thereof and as to  compliance with  the provisions of  this
   Section 15.

               Unless  otherwise required  by Beneficiary  by notice  to the
   underwriters, although the following insurance is payable to Beneficiary,
   (i) any loss under any insurance on the Collateral Vessel with respect to
   protection and  indemnity risks  may  be paid  directly to  Mortgagor  to
   reimburse it for any loss, damage or expense actually  incurred by it and
   covered by such insurance or  to the person to whom any liability covered
   by such insurance has been actually incurred, and (ii) in the case of any
   loss (other  than a  loss covered  by clause  (i) above  or  by the  next
   paragraph  of this  Section)  under  any insurance  with respect  to  the
   Collateral Vessel  involving any  damage to such  Collateral Vessel,  the
   underwriters  may pay directly  for the repair, salvage  or other charges
   involved or, if  Mortgagor shall have first fully  repaired the damage or
   paid  all  of  the  salvage  or  other  charges,  may  pay  Mortgagor  as 
   reimbursement therefor; provided, however, that if such damage involves a
   loss  in excess  of  $1,000,000,  the underwriters  shall not  make  such
   payment  without   first  obtaining   the  written  consent   thereto  of
   Beneficiary.    Any loss  covered  by  this paragraph  which  is  paid to
   Beneficiary  but which  might  have  been paid,  in accordance  with  the
   provisions of this  paragraph, directly to Mortgagor or others,  shall be
   paid  by  Beneficiary to,  or  as directed  by, Mortgagor  and  all other
   payments  to Beneficiary  of losses  covered by  this paragraph  shall be
   applied by Beneficiary in accordance with the Charter Documents.

               In  the event of an  actual or  constructive total loss  or a
   compromised  constructive  total  loss   or  requisition,  all  insurance
   payments  therefor shall  be paid  to Beneficiary.   Mortgagor  shall not
   declare  or agree  with  underwriters  that the  Collateral Vessel  is  a
   constructive or  compromised, agreed or arranged  constructive total loss
   without the prior written consent of Beneficiary.

               (c)   In the event of an actual or constructive total loss of
   the  Collateral Vessel,  shall  retain  out  of  the  insurance  payments
   received on account of such loss, which shall become the sole property of
   Beneficiary, any  sum or  sums that shall  be or become  owing under  the
   Charter Documents or this Mortgage, whether or  not the same be then  due
   and payable,  together with  accrued interest and  the cost,  if any,  of
   collecting  the   insurance,  and  pay  the  balance   as  in  Section 26
   hereinafter provided.

               (d)   Mortgagor  will  comply with  and  satisfy  all  of the
   provisions of  any applicable environmental, health  and safety or  other
   law,  regulation, proclamation  or order  including,  without limitation,
   those  concerning  financial responsibility  for  liabilities imposed  on
   Mortgagor or the  Collateral Vessel with respect  to pollution including,
   without limitation, the U.S. Water Pollution Control Act, as amended, and
   the U.S. Oil Pollution Act, as  amended, and will maintain or cause to be
   maintained all certificates or other evidence of financial responsibility
   as may be  required by  any such law, regulation,  proclamation or  order
   with respect to the  trade which the Collateral Vessel from time  to time
   is engaged in and the cargoes carried by it.

               (e)   In  addition  to, and  except  as  otherwise  expressly
   provided  in, this  Section 15, Mortgagor  shall maintain  insurance with
   respect to  the Collateral Vessel in  the amounts and types  specified in
   the  Charter  with  respect  to  the vessel  being  leased  by  Mortgagor
   thereunder.

               (f)   Mortgagor  will  reimburse  Mortgagee  and  Beneficiary
   within 3 business days after receipt of a demand therefor  accompanied by
   a reasonable description of the related expenditures, with interest at  a
   rate per annum equal to the Overdue Rate (as defined in  the Charter) for
   any and all expenditures which  Mortgagee or Beneficiary may from time to
   time make, lay out or expend in  providing such protection in respect  of
   insurance,  discharge of  liens, taxes,  dues,  assessments, governmental
   charges, fines  and penalties lawfully imposed,  repairs, attorneys' fees
   and other  matters as Mortgagor is obligated herein to provide, but fails
   to  provide.   Such obligation  of Mortgagor  to reimburse  Mortgagee and
   Beneficiary  shall  be an  additional  indebtedness  due  from Mortgagor, 
   secured by this  Mortgage, and shall be  payable by Mortgagor  on demand.
   Mortgagee or Beneficiary, though  privileged so to do, shall be  under no
   obligation  to Mortgagor  to make  any such  expenditures, nor  shall the
   making thereof relieve Mortgagor of any default in that respect.

               16.   INTENTIONALLY DELETED.

                                   ARTICLE II

                         EVENTS OF DEFAULT AND REMEDIES

               17.   In  case  any  Event  of  Default  (as  defined in  the
   Charter) shall occur  and be continuing, then and  in each and every such
   case Mortgagee, for the benefit of Beneficiary, shall have the right to:

               (a)   Exercise all the rights and remedies in foreclosure and
         otherwise  given  to  mortgagees  by  the  provisions  of  the Ship
         Mortgage Act or any other jurisdiction where the  Collateral Vessel
         may be found;

               (b)   Bring suit at law, in equity or in admiralty, as it may
         determine  or be  advised,  to  recover judgment  for any  and  all
         amounts due under the Charter Documents or otherwise hereunder, and
         collect  the same out of any  and all property of Mortgagor whether
         covered by this Mortgage or otherwise;

               (c)   Take the Collateral Vessel and any Collateral, wherever
         it may be, without legal process and without being responsible  for
         loss or  damage; and Mortgagor  or any other  person in  possession
         forthwith  upon demand  of Mortgagee  shall surrender  to Mortgagee
         possession of the Collateral Vessel and any Collateral, as demanded
         by Mortgagee, and Mortgagee may, without being responsible for loss
         or damage, hold,  lay up, lease, charter, operate or  otherwise use
         the Collateral  Vessel and any  Collateral for such  time and  upon
         such  terms as it may deem to be for its best advantage, accounting
         only  for  the net  profits,  if  any, arising  from  such  use and
         charging upon  all receipts from such  use or from the  sale of the
         Collateral  Vessel  and  any  Collateral  by court  proceedings  or
         pursuant  to Subsection  (d) next  following, all  costs, expenses,
         charges, damages  or losses by  reason of  such use; and  if at any
         time Mortgagee shall  avail itself of the right  herein given it to
         take the Collateral Vessel and shall take it, Mortgagee shall  have
         the right to dock the Collateral Vessel for  a reasonable time (not
         to be  less than 150 days)  at any dock, pier or  other premises of
         Mortgagor without charge, or to dock it  at any other place at  the
         cost and expense of Mortgagor;

               (d)   Without being responsible for  loss or damage, sell the
         Collateral Vessel and any Collateral at any place and  at such time
         as  Mortgagee  may  specify  and in  such  manner  as Mortgagee  or
         Beneficiary may deem advisable free from any claim by Mortgagor  in
         admiralty,  in equity,  at law  or by  statute, after  first giving
         notice  of the time and place of sale with a general description of 
         the property in the  following manner (which Mortgagor acknowledges
         and agrees is commercially reasonable in all respects):

                     (i)   By publishing such notice for 10 consecutive days
               in a daily newspaper of general circulation  published in New
               York City;

                     (ii)  If the place of sale should not be New York City,
               then also  by publication  of  a similar  notice in  a  daily
               newspaper, if any, published at the place of sale; and

                     (iii) By sending a similar notice by registered mail to
               Mortgagor on the day of first publication.

               18.   A sale of the Collateral Vessel or any Collateral  made
   in pursuance of this  Mortgage, whether  under the power  of sale  hereby
   granted or any  judicial proceedings, shall operate to divest  all right,
   title  and interest  of any  nature whatsoever  of Mortgagor  therein and
   thereto, and  shall bar Mortgagor,  its successors and  assigns, and  all
   persons claiming by, through or  under them.  No purchaser shall be bound
   to inquire whether notice has been given, or whether any Event of Default
   (as  defined in the Charter) has occurred,  or as to the propriety of the
   sale, or  as to the application of the proceeds thereof.  In case of such
   sale, any purchaser who  is the obligee of any Secured  Obligations shall
   be entitled,  for the  purpose of  making settlement  or payment for  the
   property  purchased,  to  use  and  apply  the  amount  of  the   Secured
   Obligations owing to such purchaser  in order that there may  be credited
   against the amount remaining due and unpaid thereon the  sums payable out
   of  the  net  proceeds  of  such  sale  to  the obligee  of  the  Secured
   Obligations after  allowing for the costs  and expense of sale  and other
   charges;  and thereupon such  purchaser shall be credited,  on account of
   such purchase  price, with  the  net proceeds  that  shall have  been  so
   credited  upon the Secured Obligations.  At such sale, the obligee of the
   Secured  Obligations may  bid for  and purchase  such property,  and upon
   compliance with  the terms of sale  may hold, retain and  dispose of such
   property without further accountability therefor.

               19.   Mortgagee is hereby  irrevocably appointed attorney-in-
   fact of Mortgagor to execute and deliver to any  purchaser aforesaid, and
   is hereby vested with full power  and authority to make, in the name  and
   in behalf of Mortgagor, a  good conveyance of the title to the Collateral
   Vessel or  the Collateral.   In  the event of  a sale  of the  Collateral
   Vessel or  any Collateral,  under any  power herein contained,  Mortgagor
   will, if and when required by Mortgagee, execute  such form of conveyance
   of  the  Collateral  Vessel  or any  Collateral  or  similar document  as
   Mortgagee may direct or approve.

               20.   Mortgagee is hereby  irrevocably appointed attorney-in-
   fact of Mortgagor, in the name, place and stead  of Mortgagor, to demand,
   collect, receive, compromise  and sue for, so far  as may be permitted by
   law,  admiralty,  equity  or  otherwise,  all freights,  hire,  earnings,
   issues,  revenues, income  and profits  of the  Collateral Vessel  or any
   Collateral, and  all amounts  due from  underwriters under  any insurance
   thereon as payment of losses or  as return premiums or otherwise, salvage 
   awards and  recoveries, recoveries in general  average or otherwise,  and
   all other sums due or  to become due in respect of  the Collateral Vessel
   or any Collateral, or in respect of any insurance thereon from any person
   whomsoever, and to make, give and execute in the name, place and stead of
   Mortgagor acquittances,  receipts, releases  or other discharges  for the
   same, whether under seal  or otherwise, and to endorse and accept  in the
   name, place and  stead of Mortgagor all checks, notes,  drafts, warrants,
   agreements and  all other  instruments  in writing  with respect  to  the
   foregoing.

               21.   Whenever  any right to enter and take possession of the
   Collateral Vessel or any Collateral accrues to Mortgagee, it may  require
   Mortgagor to deliver, and Mortgagor shall on demand, at  its own cost and
   expense, deliver, to Mortgagee the  Collateral Vessel or such  Collateral
   as demanded.   If  any legal proceedings  shall be taken  to enforce  any
   right under this Mortgage,  Mortgagee shall  be entitled as  a matter  of
   right to the  appointment of a receiver of  the Collateral Vessel or such
   Collateral and the freights, hire, earnings, issues, revenues, income and
   profits due or  to become due  and arising  from the  possession, use  or
   operation thereof.

               22.   Mortgagor  authorizes and  empowers Mortgagee  or   its
   appointees or  any of them  to appear  in the  name, place  and stead  of
   Mortgagor, its successors  and assigns,  in any court of  any country  or
   nation of the world where a suit is pending against the Collateral Vessel
   or any  Collateral because of or  on account of any  alleged lien against
   the Collateral Vessel or any Collateral from which the Collateral  Vessel
   or any Collateral has not been released  and to take such proceedings  as
   to it as they or any of them may deem proper towards  the defense of such
   suit  and the purchase  or discharge  of such lien, and  all expenditures
   made or incurred by them or  any of them for the purpose of such defense,
   purchase or discharge shall be a  debt due from Mortgagor, its successors
   and  assigns, to  Mortgagee, and  shall be  secured by  the lien  of this
   Mortgage  in  like manner  and extent  as if  the amount  and description
   thereof  were written herein and  shall be payable on  demand.  Mortgagee
   shall notify Mortgagor of any circumstances  permitting Mortgagee to take
   action  under this  Section  22  promptly after  becoming aware  of  such
   circumstances.

               23.   Each  and  every  power  and  remedy  herein  given  to
   Mortgagee  shall be cumulative  and shall  be in addition to  every other
   power  and remedy  herein given or  now or hereafter existing  at law, in
   equity, in admiralty, or by statute, and each and  every power and remedy
   whether herein given or otherwise existing may be  exercised from time to
   time and  as often  and  in such  order  as may  be deemed  expedient  by
   Mortgagee, and the exercise or the beginning of the exercise of any power
   or remedy shall not be construed to be a waiver of the right to  exercise
   at the  same  time  or thereafter  any  other power  or remedy.    Unless
   otherwise  agreed to in  writing by  Mortgagee, no  delay or  omission by
   Mortgagee or by the obligee of any Secured Obligations in the exercise of
   any right  or power or in  the pursuance of any  remedy accruing upon any
   Event of Default (as defined in the Charter) shall impair any such right,
   power or remedy  or be construed  to be  a waiver  of any  such Event  of
   Default (as defined in the Charter) or to be an acquiescence therein; nor 
   shall the acceptance by Mortgagee of any security or of any payment of or
   on account  of any  part of  any Secured Obligations  maturing after  any
   Event of Default (as defined in the Charter) or of any payment on account
   of any  past default be construed  to be  a waiver of  any right to  take
   advantage of any  future Event of Default (as  defined in the Charter) or
   of any past Event  of Default (as defined in the Charter)  not completely
   cured thereby.

               To  the  fullest  extent  that  it  may  lawfully  so  agree,
   Mortgagor covenants and  agrees it  shall not  at any  time insist  upon,
   claim, plead,  or take  the  benefit or  advantage of  any  appraisement,
   valuation,  stay,  extension,  moratorium,   or  redemption  law  now  or
   hereafter in force in  order to prevent, delay or hinder  the enforcement
   of this  Mortgage or the exercise by Mortgagee of any of the remedies set
   forth in Section 17 hereof or  the taking of possession of the Collateral
   Vessel or  any Collateral by any  purchaser at any sale  held pursuant to
   this Mortgage;  and  Mortgagor, for  itself and  all  who may  claim  by,
   through or under it, as far as it  or they now or hereafter lawfully  may
   do so, hereby waives the benefit of all such laws.

               Nothing  in  this  Article  II and  none  of  the actions  or
   omissions  to act by Mortgagee  contemplated by this  Article II shall be
   deemed a waiver by Mortgagee  of the preferred status of the Mortgage nor
   of any  of  the benefits,  privileges  or provisions  given by  the  Ship
   Mortgage Act,  no provision  hereof  shall constitute  a waiver  of  such
   preferred  status or of  any of such benefits,  privileges or provisions,
   and in the event that any provision of this Mortgage should be, or should
   be  held by  a court  of competent  jurisdiction to  be,  a waiver  of or
   otherwise prejudicial to  such preferred status, then in such  event such
   provisions of  this Mortgage should  be and shall  be deemed to  be of no
   force and effect.

               24.   If at any time after an Event of Default (as defined in
   the Charter)  and prior to the  actual sale of  the Collateral  Vessel by
   Mortgagee or  prior to any  foreclosure proceedings,  Mortgagor offers to
   cure  completely all Events of Default (as defined in the Charter) and to
   pay  all expenses, advances  and damages to Mortgagee  consequent on such
   Events of  Default (as defined in  the Charter), with interest  at a rate
   per  annum equal  to the Overdue  Rate (as defined in  the Charter), then
   Mortgagee may  accept such  offer, but such action  shall not  affect any
   subsequent  Event of Default  (as defined  in the Charter) or  impair any
   rights consequent thereon.

               25.   In case  Mortgagee shall have proceeded  to enforce any
   right, power  or remedy  under  this Mortgage  by foreclosure,  entry  or
   otherwise, and such proceeding shall have been discontinued  or abandoned
   for any reason or shall have been determined adversely to Mortgagee, then
   and in every such case Mortgagor and Mortgagee shall be restored to their
   former positions  and  rights hereunder  with  respect  to  the  property
   subject  or intended  to be  subject to  this Mortgage,  and all  rights,
   remedies and powers of Mortgagee shall continue as if no such proceedings
   had been taken. 

               26.   The proceeds  of sale of the  Collateral Vessel or  any
   Collateral and the  net earnings  of any charter operation  or other  use
   thereof by Mortgagee under any of the powers herein specified and any and
   all other moneys received by Mortgagee pursuant to or  under the terms of
   this Mortgage or  in any proceedings hereunder, the application  of which
   has not elsewhere herein been specifically provided for, shall be applied
   as provided in the Charter and in such order as set forth therein.

               27.   Until  one  or more  Events  of  Default  shall happen,
   Mortgagor (a) shall be suffered and permitted to retain actual possession
   and use of the Collateral Vessel and (b) shall have the right, from  time
   to time,  in its  discretion,  and without  application to  Mortgagee  or
   Beneficiary, and  without obtaining  a release  thereof  by Mortgagee  or
   Beneficiary, to  dispose of,  free  from the  lien hereof,  any  boilers,
   engines,  machinery, bowsprits,  masts, spars,  rigging,  boats, anchors,
   cables, chains,  tackle, apparel, furniture, fittings or equipment or any
   other appurtenances to  the Collateral Vessel that are no  longer useful,
   necessary, profitable or advantageous in the operation of such Collateral
   Vessel  and  that  have  an  aggregate  replacement  cost  not  exceeding
   $10,000,000, first or  simultaneously replacing the same by  new boilers,
   engines,  machinery, bowsprits,  masts, spars,  rigging, boats,  anchors,
   chains, cables, tackle, apparel,  furniture, fittings, equipment or other
   appurtenances  of  substantially equal  value,  utility  and  useful life
   (assuming  such replaced items  were in the working  order, condition and
   state of repair  required under the terms  of this Mortgage) which  shall
   forthwith become  subject to the  lien and other terms  and conditions of
   this Mortgage as a preferred mortgage thereon.

                                   ARTICLE III

                              INTENTIONALLY DELETED

                                   ARTICLE IV

                                SUNDRY PROVISIONS

               29.   For the purpose of this Mortgage and the endorsement of
   this Mortgage on the documents of the Collateral Vessel, the total amount
   of the  Secured Obligations  is $60,000,000.00  plus  interest, fees  and
   other  expenses and  performance  of  mortgage covenants.   The  date  of
   maturity is February 28, 2006 and the discharge amount is the same as the
   total amount.

               30.   All   the   covenants,   representations,   warranties,
   promises,  stipulations  and agreements  of  Mortgagor  in  this Mortgage
   contained shall bind  Mortgagor and its successors and assigns  and shall
   inure  to the  benefit  of  Mortgagee, Beneficiary  and  their respective
   successors and assigns  and shall survive  termination of  this Mortgage.
   Notwithstanding  the   foregoing,  Mortgagor s   rights  and  obligations
   hereunder  may not  be  assigned  without the  prior written  consent  of
   Mortgagee  and Beneficiary.   This Mortgage may be  assigned by Mortgagee
   without  the consent  of Mortgagor  or any  person  or entity  other than
   Beneficiary (whose consent shall  be required for  any such  assignment). 
   Mortgagee agrees to provide Mortgagor with notice of any such  assignment
   by Mortgagee;  provided,  however, that  failure to  provide such  notice
   shall in no way affect the validity or effectiveness of such assignment.

               31.   Wherever  and  whenever  herein  any  right,  power  or
   authority  is  granted  or given  to  Mortgagee,  such  right,  power  or
   authority may  be exercised in all  cases by Mortgagee  or such  agent or
   agents  as it may  appoint, and the act  or acts of  such agent or agents
   when taken shall constitute the act of Mortgagee hereunder.

               IN WITNESS  WHEREOF, Mortgagor has executed  this Mortgage by
   its  officer thereunto  duly  authorized  the day  and year  first  above
   written.

                                             READING & BATES DRILLING CO.

                                             By:                             
                                             Name:                           
                                             Title:                           

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                                 ACKNOWLEDGMENT

   STATE OF                )
                           )     ss.
   COUNTY OF               )


               On this  the _____  day  of November,  1995, before  me  came
   _________________________ to me  known, who, being by me duly  sworn, did
   d e p o s e    a n d     s a y    t h a t    h e    r e s i d e s     a t
   ________________________________________________________; that  he is the
   ___________________  of Reading  &  Bates Drilling  Co.,  the corporation
   described in and which executed the foregoing mortgage; that he knows the
   seal of said corporation; that  the seal affixed to said mortgage is such
   corporate seal; that it was so affixed by order of the Board of Directors
   of said corporation; and that he signed his name to said mortgage by like
   order  and  he  acknowledged to  me  that he  executed  said  mortgage as
   _____________________of said corporation, and  that the same is  the free
   and voluntary  act and deed of  said corporation, and of  himself as such
   officer for the uses and purposes therein expressed.

                                                                             
   My Commission Expires:                    Notary Public


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

                                    Exhibit A

                            Copy of Bareboat Charter


                                  SEE ATTACHED 

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

                                    EXHIBIT D

                               SECURITY AGREEMENT


               THIS SECURITY AGREEMENT ("Security Agreement") is given as of
   this 28th day  of November, 1995,  by READING  & BATES  DRILLING CO.,  an
   Oklahoma corporation  ("Grantor"), having an office  at 901 Threadneedle,
   Suite 200, Houston, Texas 77079,  in favor of WILMINGTON TRUST COMPANY, a
   Delaware banking corporation, not in its individual capacity,  but solely
   as  Trustee (in such capacity,  "Secured Party") for  the benefit of DEEP
   SEA   INVESTORS,   L.L.C.,   a   Delaware   limited   liability   company
   ("Beneficiary").

               WHEREAS:

         A.    Grantor is  the sole owner of  the whole of  (i) that certain
   vessel  known  as  the  "JIM  CUNNINGHAM ,  official  number  651643 (the
   "Cunningham"), and (ii) that certain vessel known as the "RANDOLPH YOST",
   official number 601699 (the "Yost"),  both duly documented in the name of
   Grantor under  the laws  and flag of  the United States  of America  (the
   Cunningham and the Yost, together, the "Collateral Vessels").

         B.    This Security  Agreement is  being executed and  delivered by
   Grantor  pursuant to  that  certain Memorandum  of Agreement  (the "MOA")
   dated of  even date herewith  by and between Beneficiary  and Reading and
   Bates,  Inc., an  Oklahoma corporation  ("R&B,  Inc."),  a subsidiary  of
   Grantor s  parent corporation,  Reading & Bates  Corporation.   Under the
   MOA, R&B, Inc.  agreed to sell a certain  other vessel to Beneficiary and
   Beneficiary agreed  to lease that vessel  to Grantor under the  terms and
   subject  to  the  conditions set  forth  in  the  Bareboat  Charter  (the
   "Charter")  dated  of  even  date herewith  by  and  between Grantor  and
   Beneficiary (the  MOA, the Charter  and all other  documents executed  in
   connection therewith, together with  any and all amendments, supplements,
   renewals  or substitutions of all or any of such documents, are sometimes
   referred to collectively herein as the "Charter Documents").

         C.    The  Board of  Directors  of Grantor  having  determined that
   Grantor will derive substantial benefit, directly or indirectly, from the
   sale and  lease transaction  among Grantor,  R&B,  Inc. and  Beneficiary,
   Grantor, as required by Beneficiary, is executing and delivering (i) that
   certain  Preferred Mortgage  dated of even date  herewith encumbering the
   Cunningham  (the  "Cunningham  Mortgage")  and  (ii) that  certain  First
   Preferred Mortgage dated of even date herewith encumbering the Yost  (the
   "Yost  Mortgage")  (the  Cunningham   Mortgage  and  the  Yost  Mortgage,
   together, the  "Mortgages"), to secure the  prompt and complete  payment,
   performance and observance of all representations, warranties, covenants,
   duties,  liabilities  and  obligations   of  Grantor  under  the  Charter
   Documents (the "Secured Obligations").

         D.    Beneficiary requires  that Grantor execute  and deliver  this
   Security Agreement in order to further secure the Secured Obligations. 

               NOW, THEREFORE,  in consideration  of the  foregoing recitals
   and  the mutual covenants and obligations contained herein, and intending
   to be legally bound, the parties hereby agree as follows:

         1.    Security Interest.

               As security  for the Secured Obligations  and Grantor's other
   obligations under the Charter Documents, Grantor hereby grants to Secured
   Party for the benefit of Beneficiary a security interest in and lien upon
   (hereinafter  referred  to  as  the  "Security Interest")  the  following
   described personal property (whether now owned by Grantor or existing  or
   hereafter arising or acquired by Grantor) and in all proceeds  (including
   cash proceeds,  insurance proceeds  and  proceeds  of proceeds)  of  such
   property in  any  form  (hereinafter  collectively  referred  to  as  the
   "Collateral"):

               a.    All  engines,  boilers,   machinery,  masts,   anchors,
   cables,  spars,  rigging,  tackle, apparel,  furniture,  fittings, boats,
   chains,  equipment,  fixtures  and  all  other appurtenances  of  Grantor
   appertaining and belonging to either  of the Collateral Vessels or to the
   "M.G. Hulme, Jr.",   the vessel leased  by Grantor under the  Charter (the
   "Charter Vessel"), whether aboard or  removed from the Collateral Vessels
   or the Charter Vessel,  together with all additions, improvements, and/or
   replacements  thereto  or thereof,  and  not  otherwise  subject  to  the
   Mortgages (collectively, the "Appurtenances").

               b.    Grantor's   interest   in   all   casualty,  liability,
   property,  indemnity,  hull, war  risk,  pollution  and  marine insurance
   policies,  and Grantor's  interest in  all proceeds thereof  and payments
   thereunder,  relating to  either  of  the Collateral  Vessels or  to  the
   Charter Vessel.

               c.    All of  Grantor's  accounts,  general  intangibles  and
   contract rights  consisting of  or  relating to  all present  and  future
   drilling contracts, charters, subcharters and  other agreements providing
   for  the possession, use or employment of the Charter Vessel or of either
   of the Collateral  Vessels (any agreements relating to the  foregoing are
   referred to  hereinafter collectively  as "Contracts") and all  rights to
   payment under any of the foregoing, whether for hire, indemnity,  damages
   or otherwise.

               d.    Grantor's interest  in all sums otherwise  earned or to
   be earned of  or from either  of the  Collateral Vessels  or the  Charter
   Vessel.

         2.    Representations and Warranties of Grantor.

               Grantor represents  and warrants and, so  long as the Secured
   Obligations remain outstanding, shall be deemed continuously to represent
   and warrant that (a) Grantor  is the owner of the Collateral Vessels free
   and clear of  all security interests, liens or other  encumbrances except
   the Security  Interest, the  Mortgages, liens  for current crew s  wages,
   general average  and salvage,  in  each case,  incurred in  the  ordinary
   course of business and that are not  yet overdue and, with respect to the 
   Cunningham  only,  the  liens  and security  interests  in  favor of  ABC
   Equipment Leasing, Inc.  (the "First Mortgagee") created by  that certain
   First  Preferred Mortgage  dated January 28,  1987, securing  a principal
   amount of not more than  $11,000,000, which is payable in accordance with
   the  amortization schedule  annexed  hereto  and made  a part  hereof  as
   Exhibit  A (the  "First Preferred Mortgage"), recorded  March 4, 1987, as
   Instrument  No. 1, Book  No. PM149,  in the records  of the  Eighth Coast
   Guard District,  Port of Houston, Texas;  (b) no obligor with  respect to
   any of the Contracts has any defense, setoff, claim or counterclaim which
   can  be asserted  against Secured  Party or  Beneficiary, whether  in any
   proceeding  to enforce  the  Collateral or  otherwise  (hereinafter, with
   respect to  the related  Contract, each such  obligor referred  to as  an
   "Account Debtor"), nor have any amounts payable under such Contracts been
   prepaid, pledged, hypothecated or assigned; (c) Grantor  is authorized to
   enter into this Security Agreement and into the transactions contemplated
   hereby  and  evidenced  by  the Collateral;  (d)  Grantor  is engaged  in
   business operations which are carried on at the address specified  above,
   and Grantor s records  concerning the Collateral are kept at  the address
   specified above; and (e) Grantor  is the sole owner of the whole  of both
   Collateral Vessels and all Appurtenances and other Collateral.

         3.    Covenants of Grantor.

               Grantor (a) will defend the Collateral against the claims and
   demands of  all other  parties, including, without  limitation, defenses,
   set-offs, claims and counterclaims asserted by any Account Debtor against
   Grantor  and/or Secured  Party  and/or Beneficiary;  (b)  will  keep  the
   Collateral  free of  all security  interests or  other liens,  mortgages,
   chattel  mortgages and encumbrances, except (i) the Security Interest and
   the Mortgages  or any other lien  favoring Secured Party, (ii)  the First
   Preferred Mortgage encumbering the Cunningham and (iii) liens for current
   crew's wages, general average and salvage,  in each case, incurred in the
   ordinary course  of business and that  are not yet overdue,  and will not
   sell, transfer, assign, deliver or otherwise dispose of any Collateral or
   any interest therein  without the prior written consent of  Secured Party
   and  Beneficiary; (c) will  keep, in  accordance with  generally accepted
   accounting principles consistently applied, accurate and complete records
   concerning  the  Collateral,  and  at  Secured Party s  or  Beneficiary's
   request,  will mark all or any such records  and all or any Collateral to
   indicate the Security Interest and will permit Secured Party, Beneficiary
   or  their respective agents to  inspect during Grantor s  normal business
   hours  the Collateral and to audit and make extracts from such records or
   any  of  Grantor s  books,  ledgers,  reports, correspondence  and  other
   records;  (d) will  deliver to  Secured Party  and Beneficiary  on demand
   originals of any and all Contracts, bills of lading, invoices, due bills,
   amendments or replacements  to any of the foregoing, and  other documents
   evidencing,  representing  or relating  to  the Collateral,  or any  part
   thereof;  (e)  will notify  Secured  Party  and  Beneficiary  promptly in
   writing, of any change in  the address specified above, at  which records
   concerning the  Collateral are kept;  (f) will notify  Secured Party  and
   Beneficiary immediately of  any default by any Account Debtor  in payment
   or other  performance of its  obligations with respect  to any  Contract;
   (g) all Contracts that are or will be charters or subcharters are subject
   to Secured Party s consent  to the extent required by  the Mortgages, all 
   Contracts that  are or  will be drilling  contracts do  and will  contain
   terms  and  conditions satisfactory  to  Secured  Party  and Beneficiary,
   including, but not  limited to, coverage of  Secured Party and the  Owner
   Group  (as  defined  in  the Charter)  by  all  indemnities and  required
   insurance from the operator thereunder and do or shall expressly disclaim
   any property interest in the Cunningham, the Yost or  the Charter Vessel,
   as  applicable,  and, without  Secured  Party s  and  Beneficiary's prior
   written consent,  will not make or agree to make any material alteration,
   modification  or  cancellation  of,  or  substitution  for,  or  credits,
   discounts, adjustments, offsets or allowances on any of the Contracts  or
   any Collateral; (h) will keep all tangible property in good  maintenance,
   condition  and repair,  and fully insured at  all times  against fire and
   other casualty and  extended coverage risks, and  shall maintain adequate
   public  liability  insurance  with  respect  to  the   operation  of  the
   Collateral,  in each case all as more fully provided in the other Charter
   Documents (including,  without limitation,  the Mortgages); (i)  will not
   pledge, hypothecate, encumber  or assign or permit any prepayment  of any
   of  the Contracts;  and  (j)  in connection  herewith, will  execute  and
   deliver  to  Secured Party  and  Beneficiary  such  financing statements,
   assignments  and other  documents, pay  all costs  of title  searches and
   filing  financing  statements, assignments  and  other  documents  in all
   public offices  requested by Secured  Party or Beneficiary,  and do  such
   other things as Secured Party or Beneficiary may request.

         4.    Verification of Collateral.

               Secured Party and Beneficiary shall have  the right to verify
   the  existence, location  or condition of  all or  any Collateral  in any
   manner and through  any medium Secured Party or Beneficiary  may consider
   appropriate, including by way of audit verifications or estoppel requests
   from  Account Debtors, and  Grantor agrees to furnish  all assistance and
   information and perform  any acts which Secured Party or  Beneficiary may
   require in connection therewith.

         5.    Notification and Payments.

               On  or after  the  occurrence  of any  Event of  Default  (as
   hereinafter defined), Secured Party or Beneficiary may notify all or  any
   Account Debtors of the Security Interest and may also direct such Account
   Debtors to  make  all payments  on or  in respect  to  the Collateral  to
   Secured Party for the benefit of Beneficiary.  All payments on, and other
   proceeds from Collateral (including cash proceeds, insurance proceeds and
   proceeds of proceeds) received by Secured Party directly or from  Grantor
   shall be applied as provided in the Charter and the Mortgages.

         6.    Default.

               a.    Any of  the events or conditions  constituting an Event
   of  Default  under  the  Charter shall  constitute  an  event of  default
   hereunder (herein referred to as an "Event of Default").

               b.    Upon  the happening  of any  Event of  Default, Secured
   Party, at its sole election, may  declare all or any part of the  Secured 
   Obligations to be immediately due and payable without demand or notice of
   any kind.

               c.    Upon  the happening  of any  Event of  Default, Secured
   Party shall  have and may exercise  all rights and remedies  which may be
   available to  it  hereunder or  under any  of  the Charter  Documents  or
   otherwise under applicable law, in admiralty or in equity.

               d.    Without in any way requiring notice to be given in  the
   following  manner, Grantor  agrees that  any notice  by Secured  Party of
   sale,  disposition or  other intended  action hereunder or  in connection
   herewith, whether required by the Uniform Commercial Code as presently in
   effect  in  the  State  of  New  York  or  otherwise,  shall   constitute
   commercially reasonable  notice to Grantor  if such notice  is mailed  by
   regular or certified mail, postage  prepaid, at least five (5) days prior
   to such action, to Grantor at Grantor s address specified above or to any
   other address to which notices hereunder shall be given  to Grantor under
   the Charter.

               e.    Grantor  agrees to pay on demand all costs and expenses
   incurred  by Secured  Party  or  Beneficiary in  enforcing  this Security
   Agreement,  in  realizing  upon  any  Collateral  and  in  enforcing  and
   collecting any of the Secured Obligations, including, without limitation,
   if Secured  Party or Beneficiary  retains counsel for  any such  purpose,
   reasonable  counsel fees and  disbursements.  Any accounts  not paid when
   due shall  bear interest  at the  Overdue Rate  provided therefor  in the
   Charter.

         7.    Miscellaneous.

               a.    Grantor agrees, from time to time and at the expense of
   Grantor, to  promptly execute  and deliver  all further  instruments  and
   documents, and take  all further action that may be  reasonably necessary
   or desirable,  or that the  Secured Party or  Beneficiary may  reasonably
   request, in order  to perfect and protect any security  interests granted
   or  purported to be granted hereby or to enable Secured Party to exercise
   and enforce its rights hereunder.  Without limiting the generality of the
   foregoing, Grantor hereby authorizes Secured Party, at Grantor s expense,
   in  order to  re-perfect or  to prevent  a lapsing  of perfection  of any
   security interest, to  file this  Security Agreement  and such  financing
   statement or statements or other instruments, documents or affidavits, or
   copies thereof,  relating to the Collateral,  without Grantor s signature
   thereon as Secured Party at its option may deem appropriate, and appoints
   Secured Party as  Grantor's attorney-in-fact to execute any such  copy of
   this Security Agreement and/or any such financing statement or statements
   or  other instruments, documents  or affidavits in Grantor s  name and to
   perform   all  other  acts  which  Secured  Party  or  Beneficiary  deems
   appropriate to perfect and continue the Security Interest and to  protect
   and preserve the Collateral.

               b.    Upon and  after an Event of Default,  Secured Party may
   demand, collect and sue on the Collateral (in either Grantor s or Secured
   Party s  name  at  the  latter s  option)  with  the  right  to  enforce,
   compromise, settle or discharge the Collateral, and may indorse  Grantors 
   name on any  and all checks, commercial  paper and any  other instruments
   pertaining to the Collateral.

               c.    Upon  Grantor's failure  to perform  any of  its duties
   under the Collateral, and  if an  Event of Default  shall have  occurred,
   Secured Party may, but shall not be obligated to, perform any or all such
   duties.   The amount  of Secured Party's expense  in connection  with any
   such performance shall  be an additional obligation of Grantor  under the
   Charter  and the  other Charter  Documents and  secured by  this Security
   Agreement, and Grantor  shall pay such amount to Secured  Party forthwith
   upon written demand by Secured Party or Beneficiary.

               d.    No delay or omission by Secured Party in exercising any
   right  or  remedy  hereunder  or  with  respect to  any  of  the  Secured
   Obligations or  any Contract  or  Collateral shall  operate as  a  waiver
   thereof or  of  any other  right or  remedy,  and no  single  or  partial
   exercise  thereof shall  preclude any  other or  further exercise  of any
   other right or remedy.   Secured Party may remedy any default  by Grantor
   hereunder  or with  respect  to any  of  the Secured  Obligations in  any
   reasonable manner without waiving the default by Grantor.  All rights and
   remedies of Secured Party hereunder are cumulative.

               e.    Secured  Party shall  have no  obligation to  take, and
   Grantor  shall have the sole responsibility for taking, any and all steps
   to preserve rights  against any and all  prior parties to any  instrument
   constituting  Collateral whether  or not  in Secured  Party's possession.
   Secured  Party shall not  be responsible  to Grantor  for loss  or damage
   resulting  from Secured Party's  failure to enforce any  Collateral or to
   collect any  monies due  or to become due  thereunder, or  other proceeds
   (including cash  proceeds, insurance  proceeds and proceeds  of proceeds)
   constituting  Collateral  hereunder.    Grantor  waives  protest  of  any
   instrument constituting Collateral  at any time held by Secured  Party on
   which Grantor is in any way liable.

               f.    The  rights and  benefits  of Secured  Party  hereunder
   shall, if Secured Party so agrees, inure to any party lawfully (under the
   laws  applying to  vessels,  the  financing  of  vessels,  or  otherwise)
   acquiring any interest in the  Charter or any other Charter  Documents or
   any part thereof.  This Security Agreement may not be assigned by Grantor
   without the prior written consent of Secured Party, but Secured Party may
   assign  at any time  this Security  Agreement or any rights  or interests
   hereunder  to any  person or entity  without the consent of  or notice to
   Grantor or  any person or  entity other than  Beneficiary (whose  consent
   shall be required for any such assignment).

               g.    Secured Party,  Beneficiary and Grantor as  used herein
   shall include the successors and permitted assigns of those parties.

               h.    Notices  and other communications required or permitted
   hereunder  shall be  in writing and  shall be  deemed sufficient  for all
   purposes if sent by registered or certified letter, nationally recognized
   overnight courier service specifying one-day delivery, facsimile or telex
   to the recipient's  address stipulated below and shall be  effective from
   the date of receipt thereof. 

               Other  addresses  may be  substituted  for  those  below upon
   giving notice thereof in the manner provided above:

   if to the Secured Party:      Wilmington Trust Company
                                 1100 North Market Street
                                 Rodney Square North
                                 Wilmington, Delaware 19890
                                 Attn:  Financial Services
                                 Fax:  (302) 651-1576

         with a copy to:         Deep Sea Investors, L.L.C.
                                 c/o Heller Financial, Inc.
                                 101 Park Avenue
                                 New York, New York  10178
                                 Attn:  Legal Department
                                 Fax:  (212) 880-7158

   if to the Grantor:            Reading & Bates Drilling Co.
                                 901 Threadneedle, Suite 200
                                 Houston, Texas 77079
                                 Attn:  Chief Financial Officer
                                 Fax:  (713) 496-0285

               i.    No  modification,   rescission,  waiver,   release   or
   amendment of  any provision  of  this Security  Agreement shall  be  made
   except by a written agreement signed by the party to be bound.

               j.    THIS  SECURITY  AGREEMENT  SHALL  BE  GOVERNED  BY  AND
   CONSTRUED IN ACCORDANCE  WITH THE LAWS OF THE  STATE OF NEW YORK, WITHOUT
   REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

               k.    GRANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
   KNOWINGLY   AND  INTENTIONALLY   AND  IRREVOCABLY   AND   UNCONDITIONALLY
   a) SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION
   OF  THE STATE  COURTS OF  THE STATE  OF NEW YORK  AND THE  FEDERAL COURTS
   SITTING  IN THE STATE OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF
   PROCESS MAY  BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN
   CONNECTION WITH THIS  SECURITY AGREEMENT, THE OTHER CHARTER  DOCUMENTS OR
   THE SECURED  OBLIGATIONS BY SERVICE OF  PROCESS AS  PROVIDED BY NEW  YORK
   LAW, b) WAIVES TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY
   NOW OR  HEREAFTER HAVE TO THE  LAYING OF VENUE OF  ANY LITIGATION ARISING
   OUT OF OR  IN CONNECTION WITH THIS SECURITY  AGREEMENT, THE OTHER CHARTER
   DOCUMENTS OR THE SECURED OBLIGATIONS BROUGHT  IN ANY NEW YORK STATE COURT
   OR FEDERAL COURT SITTING IN THE  STATE OF NEW YORK, c) WAIVES ANY  CLAIMS
   THAT ANY  LITIGATION BROUGHT  IN ANY SUCH  COURT HAS BEEN  BROUGHT IN  AN
   INCONVENIENT FORUM, d) CONSENTS TO  THE SERVICE OF PROCESS OUT OF  ANY OF
   THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES
   THEREOF BY CERTIFIED MAIL,  RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO
   GRANTOR  AT THE  ADDRESS SPECIFIED  HEREIN AND  e) AGREES THAT  ANY LEGAL
   PROCEEDING ARISING OUT OF, RELATED TO OR IN CONNECTION WITH THIS SECURITY
   AGREEMENT, THE OTHER CHARTER DOCUMENTS OR THE SECURED OBLIGATIONS MAY  BE
   BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE  STATE OF NEW YORK.
   NOTHING HEREIN SHALL AFFECT THE  RIGHT OF SECURED PARTY TO COMMENCE LEGAL
   PROCEEDINGS   OR  OTHERWISE   PROCEED  AGAINST   GRANTOR  IN   ANY  OTHER 
   JURISDICTION  OR TO SERVE  PROCESS IN ANY MANNER  PERMITTED BY APPLICABLE
   LAW.

               l.    GRANTOR, FOR  ITSELF  AND ITS  SUCCESSORS AND  ASSIGNS,
   HEREBY KNOWINGLY AND  INTENTIONALLY AND  IRREVOCABLY AND  UNCONDITIONALLY
   WAIVES  TO THE FULLEST EXTENT PERMITTED BY LAW ITS RIGHTS TO A JURY TRIAL
   OF ANY  CLAIM OR  CAUSE  OF ACTION  BASED UPON  OR  ARISING OUT  OF  THIS
   SECURITY AGREEMENT  OR ANY OF THE OTHER CHARTER DOCUMENTS OR ANY DEALINGS
   WITH SECURED  PARTY RELATING TO  THE SUBJECT MATTER  OF THE  TRANSACTIONS
   CONTEMPLATED  HEREBY  AND  THEREBY AND  THE  RELATIONSHIP THAT  IS  BEING
   ESTABLISHED.    THE  FOREGOING  WAIVER  SHALL  APPLY  TO  ANY  SUBSEQUENT
   AMENDMENTS, MODIFICATIONS, RENEWALS, SUPPLEMENTS OR SUBSTITUTIONS TO THIS
   SECURITY AGREEMENT OR ANY  OF THE OTHER CHARTER DOCUMENTS WHETHER  OR NOT
   EXPRESSLY SET FORTH HEREIN OR THEREIN.

               IN WITNESS WHEREOF, the undersigned has caused these presents
   to  be  duly  executed  and  delivered  by  its  officer  thereunto  duly
   authorized as of the day and year first above written.

                                             READING & BATES DRILLING CO.


                                             By:                             
                                             Name:                           
                                             Title:                           

-----------------------------------------------------------------------------
                                    Exhibit A

                              Amortization Schedule

                                  SEE ATTACHED 

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

                                    EXHIBIT E

                              OFFICERS  CERTIFICATE

               The undersigned, the [Assistant] Secretary  and the
   [__________]  President,  respectively, of  [Reading  & Bates
   Corporation][Reading   and   Bates,  Inc.][Reading   &  Bates
   Drilling  Co.] (the  "Company")  hereby certify  to DEEP  SEA
   INVESTORS,  L.L.C., a  Delaware  limited  liability  company,
   Buyer under the Memorandum of Agreement (the "MOA"), dated as
   of November  ___, 1995,  by and  between [Reading  and Bates,
   Inc.][the  Company] (it  being  understood  that  capitalized
   terms used  and not otherwise  defined herein shall  have the
   respective meanings ascribed thereto in the MOA):

        1.   _______________________  is  the  duly elected  and
             qualified [________] President of the Company; 

        2.   _______________________  is  the  duly elected  and
             qualified [Assistant] Secretary of the Company;

        3.   The   resolutions  of   the   Company's  board   of
             directors,  a true,  correct and  complete  copy of
             which are attached hereto as Exhibit "A" and made a
             part hereof, (i) were duly adopted [at a meeting of
             the directors  of the Company held on ____________,
             1995 at  which the required quorum  was present and
             voting  throughout]  [by   the  unanimous   written
             consent   of  the  directors  of   the  Company  in
             accordance with applicable law on __________, 1995]
             (the date  when such resolutions were  duly adopted
             being referred to herein as  the "Resolution Date")
             in accordance  with applicable law and the articles
             or certificates of incorporation and bylaws  of the
             Company, (ii)  are in full force  and effect, (iii)
             have not  been repealed, amended  or modified,  and
             (iv) authorize the Company  to execute and deliver,
             and  perform the  Company's obligations  under, the
             Charter Documents to which the Company is a party;

        4.   The   individuals   listed   below  (the   "Current
             Officers") have been duly  elected to and qualified
             for, and  validly hold  the offices of  the Company
             set forth opposite their  respective names, and the
             signatures  set  forth  opposite  their  respective
             names are their true and authentic signatures: 


   Name                              Title_________________________
                                          Signature

                            Chief Executive Officer             

                            Chief Financial Officer             

                            President                           

                            Vice President                      


        5.   Each of  the Current Officers has  the authority to
             execute and deliver, on  behalf of the Company, the
             Charter Documents to which the Company is a party.

        6.   The  Certificate of  Incorporation of  the Company,
             and  all amendments  thereto,  as certified  by the
             appropriate   authority   where   the  Company   is
             incorporated, a true, correct  and complete copy of
             which is attached hereto as Exhibit "B" and  made a
             part  hereof,  (i) was  in  full  force and  effect
             (without  further modification or amendment) on the
             Resolution  Date, and  (ii)  is in  full force  and
             effect  as of  the  date  hereof  (without  further
             modification or amendment).

        7.   The  Bylaws  of  the  Company,  and  all amendments
             thereto, a true, correct and complete copy of which
             are attached hereto as Exhibit "C" and made  a part
             hereof, (i) were in  full force and effect (without
             further   modification   or   amendment)   on   the
             Resolution  Date, and  (ii) are  in full  force and
             effect  as  of  the date  hereof  (without  further
             modification or amendment).

        8.   Certificates  of  Existence   and  Good   Standing.
             Attached   hereto   as   Exhibit   D   are   recent
             Certificates  issued  by  appropriate  governmental
             authorities  which evidence the  existence and good
             standing  of the  Company  in  the jurisdiction  in
             which the Company is incorporated.

             The   undersigned   acknowledge   that   (i)   this
   Certificate constitutes the  Officers' Certificate  described
   in Section 6(e) of  the MOA, and (ii) [Investment  Entity] is
   relying   on  this   Certificate,   without   performing   an
   independent investigation, in  entering into the transactions
   contemplated by the Charter Documents. 

             IN   WITNESS  WHEREOF,  the  undersigned  has  duly
   executed and  delivered this Officers' Certificate  as of the
   ____ day of November, 1995.

                                                               
                                      ___________________,
                                      [Assistant] Secretary


             I,  ___________________, hereby  certify that  I am
   now  the  duly  elected, qualified,  and  acting  [_________]
   President of  the Company; that  ____________________ is  the
   duly elected,  qualified and acting  [Assistant] Secretary of
   the Company and the signature set forth above his name is his
   correct  signature;  and that  the  certifications  set forth
   above are true and correct as of the date hereof.

             IN  WITNESS  WHEREOF,  I have  duly  executed  this
   Certificate as of November ___, 1995.

                                                                
                           _______________,  [__________] President 

-----------------------------------------------------------------------------
                             EXHIBIT F

                   CONSENT TO PREFERRED MORTGAGE

        THIS CONSENT  TO PREFERRED MORTGAGE ("Consent") given as
   of  the  ______  day of  November,  1995,  by  ABC  EQUIPMENT
   LEASING, INC.,  a New  York corporation  ("First Mortgagee"),
   with  principal offices at 77 West 66th Street, New York, New
   York 10023, in favor of WILMINGTON TRUST COMPANY, a  Delaware
   banking  corporation,  Trustee  (in  such  capacity,  "Second
   Mortgagee") for the benefit of  DEEP SEA INVESTORS, L.L.C., a
   Delaware limited liability company ("Beneficiary"), both with
   offices  at  c/o  Heller  Financial,  Inc., Attention:  Legal
   Department, 101 Park Avenue, New York, New York 10178.

        A.   Reading   &  Bates   Drilling   Co.,  an   Oklahoma
   corporation ("Mortgagor"), is the sole owner of  the whole of
   those certain vessels known as the "JIM CUNNINGHAM," official
   number 651643, gross tonnage 7977, net tonnage 5866, built at
   Okpo Island,  South Korea,  in 1982,  duly documented  in the
   name  of  Mortgagor under  the laws  and  flag of  the United
   States (the "Collateral Vessel").

        B.   Reading  and Bates,  Inc., an  Oklahoma corporation
   ("R&B, Inc."), and  American Broadcasting Companies,  Inc., a
   New  York   corporation  ("ABC,   Inc.")  entered  into   two
   agreements dated as of  March 22, 1982 (as amended,  the "TBT
   Agreements").  R&B, Inc.  and ABC, Inc. subsequently assigned
   their  respective  rights  and  obligations  under  the   TBT
   Agreements to Mortgagor and First Mortgagee, respectively.

        C.   To secure its obligations under the TBT Agreements,
   Mortgagor  granted   to  First  Mortgagee  a  first  priority
   mortgage on  the Collateral  Vessel pursuant to  that certain
   First Preferred  Mortgage dated January 28,  1987 (the "First
   Preferred  Mortgage"), recorded March 4,  1987, as Instrument
   No.  1, Book No.  PM149, in the  records of  the Eighth Coast
   Guard District, Port of Houston, Texas.

        D.   Pursuant  to that  certain Memorandum  of Agreement
   (the "MOA") dated  as of  November 28, 1995,  by and  between
   Beneficiary and R&B, Inc., a subsidiary of Mortgagor's parent
   corporation, Reading & Bates Corporation, R&B, Inc. agreed to
   sell a  certain other  vessel to Beneficiary  and Beneficiary
   agreed  to lease that vessel to Mortgagor under the terms and
   subject to the conditions  set forth in the Bareboat  Charter
   (the  "Charter")  dated November  28,  1995,  by and  between
   Mortgagor and Beneficiary (the MOA, the Charter and all other
   documents executed in connection  therewith together with any
   and all amendments, supplements, renewals or substitutions of
   all  or  any of  such  documents, are  sometimes  referred to
   collectively herein as the "Charter Documents").

        E.   The   Board  of   Directors  of   Mortgagor  having
   determined  that Mortgagor  will derive  substantial benefit,
   directly or  indirectly, from the sale  and lease transaction
   among  R&B, Inc.,  Mortgagor and  Beneficiary, Mortgagor,  as
   required by Beneficiary, has agreed  to execute and deliver a
   Preferred  Mortgage,  granting to  Second Mortgagee  a second
   priority  mortgage  on  the Collateral  Vessel  (the  "Second
   Mortgage"), secondary  and  subordinate  only  to  the  First
   Mortgage,  to  secure   the  prompt  and   complete  payment,
   observance   and   performance   of    all   representations,
   warranties,   covenants,   liabilities  and   obligations  of
   Mortgagor  under   the   Charter  Documents   (the   "Secured
   Obligations").

        F.   First  Mortgagee wishes to execute and deliver this
   Consent  in  order to  evidence  its  consent to  the  Second
   Mortgage  as  an  additional  lien  and  encumbrance  on  the
   Collateral Vessel.

        NOW,  THEREFORE, with  intent  to be  legally bound,  in
   consideration  of  the  foregoing,  and for  other  good  and
   valuable   consideration,  receipt   of   which   is   hereby
   acknowledged, First Mortgage hereby agrees as follows:

        1.   First  Mortgagee,  on  behalf  of  itself  and  its
   successors  and assigns,  acknowledges receipt  of  notice of
   Mortgagor's intent to execute, deliver and file of record the
   Second  Mortgage,  and  hereby consents  to  such  execution,
   delivery  and  recording, and  to the  placing of  the Second
   Mortgage  as  an  additional  lien  and  encumbrance  on  the
   Collateral Vessel.

        2.   First  Mortgagee represents and  warrants to Second
   Mortgagee and  Beneficiary that  the First Mortgagee  has not
   sold, transferred, assigned, encumbered or otherwise disposed
   of the First Mortgage or any of the rights  thereunder or the
   obligations secured thereby  and is the  sole holder of  such
   First  Mortgage,  each  of  the  rights  thereunder  and  all
   obligations secured thereby.  

        3.   First Mortgagee  agrees that it  shall give  Second
   Mortgagee and Beneficiary written notice of any default under
   the First  Mortgage  simultaneously  with  delivery  of  such
   notice to  Mortgagor.  First Mortgagee shall not exercise any
   of its rights and remedies under the First Mortgage or at law
   or  in equity  unless  Second Mortgagee  or Beneficiary  have
   failed  to cure  the  default described  in  any such  notice
   within  10  days  after   receipt  by  Second  Mortgagee  and
   Beneficiary of notice  of monetary defaults and 30 days after
   receipt by Second Mortgagee and Beneficiary of notice of non-
   monetary  defaults;  provided,  however,  that  if  any  non-
   monetary default  by its nature  cannot be cured  within such
   30-day  period, Second  Mortgagee and Beneficiary  shall have
   such  additional period of time  (not to exceed  60 days from
   the  delivery   of  such  notice  to   Second  Mortgagee  and
   Beneficiary)  as  may  be  necessary  to  cure  the  default,
   provided that Second Mortgagee  or Beneficiary have commenced
   curative  measures   within  such  30-day   period  and   are
   proceeding  diligently thereafter  to complete  such curative
   measures;  provided,   further,  that  First   Mortgagee  may
   immediately enforce  its rights and remedies  under the First
   Mortgage if  Second Mortgagee or Beneficiary  take any action
   (whether  judicial  or  pursuant  to  a  power  of  sale)  to
   foreclose  or otherwise  enforce the  Second Mortgage.   Upon
   payment  of the  obligations secured  by the  First Mortgage,
   First Mortgagee shall promptly  execute and deliver to Second
   Mortgagee and  Beneficiary  for filing,  at Mortgagor's  sole
   cost  and expense,  with each filing  officer with  which the
   First Mortgage, any  financing statement or other  instrument
   covering the  Collateral Vessel  or any other  collateral was
   filed,  all satisfactions  of mortgage,  satisfaction pieces,
   termination  statements and similar instruments,  and take or
   cause to be  taken such  other or further  action, as  Second
   Mortgagee or Beneficiary may deem necessary or appropriate to
   terminate the First  Mortgagee's mortgage, lien  and security
   interest in the Collateral Vessel or any other collateral.

        4.   This Consent (together  with the Charter Documents)
   sets forth the  entire agreement of the  parties with respect
   to its subject matter.  Any  previous or contemporaneous oral
   agreements or  understandings  with  regard  to  the  subject
   matter of this Consent shall be of no force or effect.  First
   Mortgagee, and each  person signing therefor, represents  and
   warrants that it, he or she, respectively, has full power and
   authority  to execute and  deliver this Consent  on behalf of
   First Mortgagee.

        IN WITNESS  WHEREOF, First Mortgagee has  caused the due
   execution hereof by its  officer thereunto duly authorized as
   of the date first set forth above.

                                 ABC EQUIPMENT LEASING, INC.


                                 By:
                                      __________________________________
                                 Name:
                                      __________________________________
                                 Title:
                                      __________________________________